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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
PHH CORPORATION,
PHH HOLDINGS CORPORATION,
AVIS RENT A CAR, INC.
AND
AVIS FLEET LEASING AND MANAGEMENT CORPORATION
DATED AS OF MAY 22, 1999
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TABLE OF CONTENTS
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ARTICLE I THE MERGER...................................................2
1.1 The Merger.......................................................2
1.2 Effective Time...................................................2
1.3 Merger Consideration.............................................2
1.4 Effects of the Merger............................................2
1.5 Transferred Assets...............................................3
1.6 Holdings Retained Assets.........................................3
1.7 Transferred Liabilities..........................................3
1.8 Holdings Retained Liabilities....................................3
1.9 Acquiror Sub Retained Assets.....................................4
1.10 Acquiror Sub Retained Liabilities...............................4
1.11 Unallocated or Contingent Assets or Liabilities.................4
1.12 Charter and By-Laws.............................................4
1.13 Directors; Officers.............................................5
1.14 Effect on Capital Stock.........................................5
ARTICLE II CLOSING; FURTHER ASSURANCES.................................6
2.1 Closing Date.....................................................6
2.2 Escrowed Funds...................................................6
2.3 Deliveries at the Closing........................................6
2.4 Simultaneous Transactions........................................8
2.5 Tax Treatment....................................................9
2.6 Further Assurances...............................................9
2.7 Subsequent Closing...............................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF PARENT AND HOLDINGS....................................11
3.1 Organization....................................................12
3.2 Authorization...................................................12
3.3 Transferred Companies...........................................12
3.4 Capitalization; Ownership of Shares.............................13
3.5 Consents and Approvals; No Violation............................14
3.6 Financial Information; Absence of Undisclosed Liabilities.......14
3.7 Absence of Certain Changes or Events............................15
3.8 Tax Matters.....................................................15
3.9 Litigation......................................................16
3.10 Permits; Compliance with Laws..................................17
3.11 Material Contracts.............................................17
3.12 Labor Relations................................................18
3.13 Employee Benefit Plans; ERISA..................................19
3.14 Intellectual Property..........................................21
3.15 Year 2000 Compliance...........................................21
3.16 Environmental Matters..........................................22
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3.17 Real Property..................................................23
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3.18 Insurance......................................................23
3.19 Acquisition of Shares for Investment...........................23
3.20 Sufficiency of Assets..........................................23
3.21 Customers......................................................24
3.22 Brokers; Finders and Fees......................................24
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF ACQUIROR AND ACQUIROR SUB...............................24
4.1 Organization....................................................24
4.2 Authorization...................................................24
4.3 Capitalization..................................................25
4.4 Consents and Approvals; No Violation............................26
4.5 Acquiror SEC Documents..........................................27
4.6 Financial Information; Absence of Undisclosed Liabilities.......27
4.7 Litigation......................................................27
4.8 Compliance with Laws............................................28
4.9 Availability of Funds...........................................28
4.10 Amortization of Goodwill.......................................28
4.11 No Registration................................................28
4.12 Investigation by Acquiror; Parent's and Holdings' Liability....28
4.13 Brokers; Finders and Fees......................................29
ARTICLE V COVENANTS OF THE PARTIES....................................29
5.1 Conduct of the Business.........................................29
5.2 Conduct of Business by Acquiror.................................31
5.3 Conduct of Business by Acquiror Sub.............................31
5.4 Access to Information...........................................31
5.5 Books and Records; Furnishing Information.......................33
5.6 Consents and Approvals..........................................33
5.7 Commercially Reasonable Efforts.................................34
5.8 Financing.......................................................34
5.9 Employees; Employee Benefits....................................34
5.10 No Solicitation................................................37
5.11 Indemnification................................................38
5.12 Trademark License Agreements...................................38
5.13 Stockholders' Agreement and Registration Rights Agreement......38
5.14 Transition Services Agreement and IT Agreement.................38
5.15 Escrow Agreement...............................................38
5.16 Transitional License Agreement.................................38
5.17 Intercompany Obligations; Affiliate Agreements.................39
5.18 Supplements to Disclosure Schedules............................40
5.19 Public Announcements...........................................40
5.20 Non-Competition................................................41
5.21 Preferred Alliance Agreements..................................41
5.22 License Amendment Agreement....................................41
5.23 No Other Representations.......................................41
ARTICLE VI TAX MATTERS................................................41
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6.1 Tax Returns.....................................................41
6.2 Indemnification.................................................43
6.3 Computation of Tax Liabilities..................................44
6.4 Contest Provisions..............................................44
6.5 Transfer Taxes..................................................45
6.6 Refunds.........................................................46
6.7 Certain Post-Closing Settlement Payments........................46
6.8 Tax-Free Reorganization Covenants; Other Covenants..............50
6.9 Resolution of All Tax-Related Disputes..........................51
6.10 Post-Closing Actions Which Affect Cendant's Liability for
Taxes .........................................................51
6.11 Termination of Existing Tax Sharing Agreements.................51
6.12 Assistance and Cooperation.....................................51
6.13 Adjustment to Merger Consideration.............................52
6.14 Certain Definitions............................................53
6.15 Cendant Options; Holdings Plan.................................53
ARTICLE VII CONDITIONS TO ACQUIROR'S AND ACQUIROR SUB'S OBLIGATIONS...54
7.1 Representations and Warranties..................................55
7.2 Performance.....................................................55
7.3 No Injunction...................................................55
7.4 H-S-R Act.......................................................55
7.5 Required Approvals..............................................55
7.6 Opinion of Parent and Holdings' Counsel........................55
7.7 Financing.......................................................55
ARTICLE VIII CONDITIONS TO PARENT'S AND HOLDINGS' OBLIGATIONS.........56
8.1 Representations and Warranties..................................56
8.2 Performance.....................................................56
8.3 No Injunction...................................................56
8.4 H-S-R Act.......................................................56
8.5 Required Approvals..............................................56
8.6 Opinion of Acquiror and Acquiror Sub's Counsel..................56
ARTICLE IX SURVIVAL; INDEMNIFICATION..................................56
9.1 Survival Periods................................................56
9.2 Parent's and the Holdings Surviving Corporation's Agreement to
Indemnify ......................................................57
9.3 Acquiror's and the Acquiror Sub Surviving Corporation's
Agreement to Indemnify..........................................58
9.4 Third-Party Indemnification.....................................60
9.5 Insurance.......................................................60
9.6 No Duplication; Sole Remedy.....................................61
9.7 Indemnification of Certain Litigation...........................61
ARTICLE X TERMINATION AND ABANDONMENT.................................61
10.1 Termination....................................................61
10.2 Procedure For, and Effect of, Termination......................62
ARTICLE XI MISCELLANEOUS PROVISIONS...................................63
11.1 Fees and Expenses..............................................63
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11.2 Amendment......................................................63
11.3 Entire Agreement...............................................63
11.4 Execution in Counterparts......................................63
11.5 Notices........................................................63
11.6 Waivers........................................................64
11.7 Applicable Law.................................................65
11.8 Headings.......................................................65
11.9 Assignments....................................................65
11.10 Severability..................................................65
11.11 Specific Performance..........................................65
11.12 Interpretation................................................65
11.13 No Third-Party Beneficiaries..................................66
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of
May 22, 1999, is by and among PHH CORPORATION, a Maryland corporation
("Parent"), PHH HOLDINGS CORPORATION, a Texas corporation and a wholly owned
subsidiary of Parent ("Holdings"), AVIS RENT A CAR, INC., a Delaware corporation
("Acquiror"), and AVIS FLEET LEASING AND MANAGEMENT CORPORATION, a Texas
corporation and a wholly owned subsidiary of Acquiror ("Acquiror Sub").
WHEREAS, Acquiror desires to acquire, and Holdings desires to
transfer to Acquiror Sub, all of the vehicle management and fuel card businesses
of Holdings (collectively, the "Business"), in exchange for the Merger
Consideration (as hereinafter defined);
WHEREAS, the Boards of Directors of Holdings and Acquiror Sub have
each approved this Agreement and the merger (the "Merger") of Holdings and
Acquiror Sub in accordance with the provisions of Article Five of the Texas
Business Corporation Act (the "TBCA"), upon the terms and subject to the
conditions set forth herein;
WHEREAS, Acquiror, as the sole stockholder of Acquiror Sub, and
Parent, as the sole stockholder of Holdings, each have approved this Agreement
and the Merger upon the terms and subject to the conditions set forth herein;
WHEREAS, the Merger will result in, among other things, (i) the
survival of each of Holdings and Acquiror Sub, (ii) the allocation to and
vesting in Acquiror Sub of the Transferred Assets, the Transferred Liabilities,
the Acquiror Sub Retained Assets and the Acquiror Sub Retained Liabilities
(each, as hereinafter defined) and (iii) the allocation to and vesting in
Holdings of the Holdings Retained Assets and Holdings Retained Liabilities
(each, as hereinafter defined); and
WHEREAS, for U.S. Federal income tax purposes, the parties intend
that the Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and that
this Agreement be adopted as a plan of reorganization under Section 368 of the
Code.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof,
at the Effective Time (as hereinafter defined), Holdings and Acquiror Sub shall
be merged in accordance with the provisions of Article Five of the TBCA.
Following the Effective Time, each of Holdings and Acquiror Sub shall survive
the Merger and, subject to Sections 1.4 and 1.14 hereof, shall maintain its
separate corporate existence and shall continue to be governed by the laws of
the State of Texas.
1.2 Effective Time. The Merger shall become effective on the date
and at the time that a certificate of merger (the "Certificate of Merger") is
issued by the Secretary of State of the State of Texas. As used in this
Agreement, the term "Effective Time" shall mean the date and time at which the
Certificate of Merger is issued.
1.3 Merger Consideration. At the Closing, Acquiror shall cause
Acquiror Sub to deliver or cause to be delivered to Parent or Holdings, as the
case may be, the following (collectively, the "Merger Consideration"), in
consideration of the Merger and the allocation to Acquiror Sub of the
Transferred Assets:
(a) Acquiror shall cause Acquiror Sub to deliver to Parent, an
aggregate of 7,200,000 shares of series A cumulative participating redeemable
convertible preferred stock, par value $0.01 per share, of Acquiror Sub (the
"Acquiror Sub Series A Preferred Stock"), having an aggregate liquidation
preference of $360,000,000, the terms of which are set forth in Exhibit A
hereto;
(b) Acquiror shall cause Acquiror Sub to deliver to Parent, an
aggregate of 40,000 shares of series C cumulative redeemable preferred stock,
par value $0.01 per share, of Acquiror Sub (the "Acquiror Sub Series C Preferred
Stock" and, together with the Acquiror Sub Series A Preferred Stock, the
"Acquiror Sub Preferred Stock"), having an aggregate liquidation preference of
$2,000,000, the terms of which are set forth in Exhibit B hereto; and
(c) Acquiror shall cause Acquiror Sub to deliver to Parent and
Holdings the Instrument of Assumption and the Undertaking (each, as hereinafter
defined) evidencing the assumption of the Transferred Liabilities allocated to,
assumed by and vested in Acquiror Sub, which includes the outstanding
indebtedness of Holdings to Parent which, on the Closing Date, shall not exceed
an aggregate principal amount of $1,438,000,000 (the "Holdings Indebtedness").
1.4 Effects of the Merger. At the Effective Time, by virtue of the
Merger and without any further act or deed on the part of Parent, Holdings,
Acquiror or Acquiror Sub, the
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Merger shall have the following effects in accordance with the applicable
provisions of the TBCA:
(a) each of Holdings and Acquiror Sub shall survive the Merger
and shall maintain its separate corporate existence; Holdings shall continue as
a surviving corporation under its same name ("Holdings Surviving Corporation");
and Acquiror Sub shall continue as a surviving corporation under its same name
("Acquiror Sub Surviving Corporation");
(b) the Transferred Assets shall be allocated to and vested in
Acquiror Sub and the Transferred Liabilities shall be allocated to, assumed by
and vested in Acquiror Sub;
(c) the Acquiror Sub Retained Assets and the Acquiror Sub
Retained Liabilities shall be allocated to, retained by and vested in Acquiror
Sub; and
(d) the Holdings Retained Assets and the Holdings Retained
Liabilities shall be allocated to, retained by and vested in Holdings.
1.5 Transferred Assets. The rights, properties and assets of
Holdings to be allocated to and vested in Acquiror Sub in the Merger pursuant to
Section 1.4 hereof (the "Transferred Assets") shall be all of Holdings' right,
title and interest in and to those assets of Holdings set forth on Schedule II
hereto.
1.6 Holdings Retained Assets. The rights, properties and assets of
Holdings to be allocated to, retained by and vested in Holdings in the Merger
pursuant to Section 1.4 hereof (the "Holdings Retained Assets") shall be all of
Holdings' right, title and interest in and to all of the properties, assets,
rights, claims, contracts and businesses of Holdings immediately prior to the
Effective Time, other than the Transferred Assets, and shall include, without
limitation, those assets set forth on Schedule III hereto, which are not to be
allocated to or vested in Acquiror Sub by virtue of the Merger or otherwise in
connection with this Agreement or the transactions contemplated hereby.
1.7 Transferred Liabilities. The liabilities and obligations of
Holdings to be allocated to, assumed by and vested in Acquiror Sub in the Merger
pursuant to Section 1.4 hereof (the "Transferred Liabilities") shall be those
liabilities and obligations of Holdings set forth on Schedule IV hereto, whether
direct or indirect, known or unknown, absolute or contingent.
1.8 Holdings Retained Liabilities. The liabilities and obligations
of Holdings to be allocated to, retained by and vested in Holdings in the Merger
pursuant to Section 1.4 hereof (the "Holdings Retained Liabilities") shall be
all liabilities and obligations of Holdings and its Affiliates and subsidiaries
immediately prior to the Effective Time, other than the Transferred Liabilities,
and shall include, without limitation, the liabilities and obligations set forth
on Schedule V hereto, which are not to be allocated to, assumed by or vested in
Acquiror Sub by virtue of the Merger or otherwise in connection with this
Agreement or the transactions contemplated hereby.
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1.9 Acquiror Sub Retained Assets. The rights, properties and assets
of Acquiror Sub to be allocated to, retained by and vested in Acquiror Sub in
the Merger pursuant to Section 1.4 hereof (the "Acquiror Sub Retained Assets")
shall be all of Acquiror Sub's right, title and interest in and to all of the
properties, assets, rights, claims, contracts and businesses of Acquiror Sub
immediately prior to the Effective Time. No properties, assets, rights, claims,
contracts or businesses of Acquiror Sub shall be allocated to or vested in
Holdings by virtue of the Merger or otherwise in connection with this Agreement
or the transactions contemplated hereby.
1.10 Acquiror Sub Retained Liabilities. The liabilities and
obligations of Acquiror Sub to be allocated to, retained by and vested in
Acquiror Sub in the Merger pursuant to Section 1.4 hereof (the "Acquiror Sub
Retained Liabilities") shall be all liabilities and obligations of Acquiror Sub
immediately prior to the Effective Time. No liabilities or obligations of
Acquiror Sub shall be allocated to, assumed by or vested in Holdings by virtue
of the Merger or otherwise in connection with this Agreement or the transactions
contemplated hereby.
1.11 Unallocated or Contingent Assets or Liabilities. It is the
intention and agreement of the parties that all assets and liabilities of
Holdings and Acquiror Sub be allocated between them pursuant to Sections 1.4
through 1.10 hereof. Nevertheless, to the extent that there exist any
unallocated or contingent assets or liabilities of Holdings or Acquiror Sub that
are not allocated pursuant to this Agreement, upon consummation of the Merger,
such assets or liabilities shall be allocated as follows:
(a) to the extent such unallocated or contingent assets or
liabilities of Holdings or Acquiror Sub relate to or arise out of the
Transferred Assets, the Transferred Liabilities, the Acquiror Sub Retained
Assets or the Acquiror Sub Retained Liabilities, such unallocated or contingent
assets or liabilities shall be allocated to, assumed by and vested in Acquiror
Sub; and
(b) to the extent such unallocated or contingent assets or
liabilities of Holdings relate to or arise out of the Holdings Retained Assets
or the Holdings Retained Liabilities, such unallocated or contingent assets or
liabilities shall be allocated to, retained by and vested in Holdings.
1.12 Charter and By-Laws.
(a) The Articles of Incorporation and By-Laws of Holdings, as
in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation and By-Laws of the Holdings Surviving Corporation following the
Merger until amended as provided by the TBCA and such Articles of Incorporation
and By-Laws.
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(b) The Articles of Incorporation and By-Laws of Acquiror Sub,
as in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation and By-Laws of the Acquiror Sub Surviving Corporation following
the Merger until amended as provided by the TBCA and such Articles of
Incorporation and By-Laws.
1.13 Directors; Officers.
(a) The directors of Holdings immediately prior to the
Effective Time shall be the initial directors of the Holdings Surviving
Corporation following the Merger and shall hold office from the Effective Time
until their successors are duly elected or appointed and qualified in the manner
provided in the Articles of Incorporation or By-Laws of the Holdings Surviving
Corporation or as otherwise provided by the TBCA.
(b) The directors of Acquiror Sub immediately prior to the
Effective Time shall be the initial directors of the Acquiror Sub Surviving
Corporation following the Merger and shall hold office from the Effective Time
until their successors are duly elected or appointed and qualified in the manner
provided in the Articles of Incorporation or By-Laws of the Acquiror Sub
Surviving Corporation or as otherwise provided by the TBCA.
(c) The officers of Holdings immediately prior to the
Effective Time shall be the initial officers of the Holdings Surviving
Corporation following the Merger and shall hold office from the Effective Time
until their successors are duly elected or appointed and qualified in the manner
provided in the Articles of Incorporation or By-Laws of the Holdings Surviving
Corporation or as otherwise provided by the TBCA.
(d) The officers of Acquiror Sub immediately prior to the
Effective Time shall be the initial officers of the Acquiror Sub Surviving
Corporation following the Merger and shall hold office from the Effective Time
until their successors are duly elected or appointed and qualified in the manner
provided in the Articles of Incorporation or By-Laws of the Acquiror Sub
Surviving Corporation or as otherwise provided by the TBCA.
1.14 Effect on Capital Stock. At the Effective Time, by virtue of
the Merger and without any act or deed on the part of Parent, Holdings,
Acquiror, Acquiror Sub or any holder of any of the following securities:
(a) Each issued and outstanding share of class A common stock,
par value $.01 per share, of Holdings ("Holdings Class A Common Stock") shall
remain issued and outstanding and shall become and thereafter represent one
fully paid and nonassessable share of class A common stock, par value $.01 per
share, of the Holdings Surviving Corporation ("HSC Class A Common Stock") (which
shall continue to be represented by the certificate representing such share
immediately prior to the Effective Time).
(b) (i) One hundred and thirty (130) issued and outstanding
shares of class B common stock, par value $0.01 per share of Holdings ("Holdings
Class B Common
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Stock") shall be converted into the right to receive an aggregate of 7,200,000
fully paid and nonassessable shares of Acquiror Sub Series A Preferred Stock,
(ii) one (1) issued and outstanding share of Holdings Class B Common Stock shall
be converted into the right to receive 40,000 fully paid and nonassessable
shares of Acquiror Sub Series C Preferred Stock and (iii) each of the remaining
issued and outstanding shares of Holdings Class B Common Stock shall remain
issued and outstanding and shall become and thereafter represent one fully paid
and nonassessable share of class B common stock, par value $.01 per share, of
the Holdings Surviving Corporation ("HSC Class B Common Stock") (which shall
continue to be represented by the certificate representing such share
immediately prior to the Effective Time).
(c) Each issued and outstanding share of common stock, par
value $0.01 per share, of Acquiror Sub shall remain issued and outstanding and
shall become and thereafter represent one fully paid and nonassessable share of
common stock, par value $0.01 per share, of the Acquiror Sub Surviving
Corporation (which shall continue to be represented by the certificate
representing such share immediately prior to the Effective Time).
ARTICLE II
CLOSING; FURTHER ASSURANCES
2.1 Closing Date. The closing of the transactions contemplated by
this Agreement (the "Closing") and all actions specified in this Agreement to
occur at the Closing shall take place at 10:00 a.m. on June 30, 1999; provided,
however, that if the conditions set forth in Articles VII and VIII hereof shall
not have been satisfied or waived on or prior to such date, then the Closing
shall take place on the third business day following satisfaction or waiver of
the conditions set forth in Articles VII and VIII hereof, at the offices of
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, unless the parties shall agree in writing to another time, date or place.
The date on which the Closing occurs is referred to herein as the "Closing
Date." The filing of the Articles of Merger (as hereinafter defined) in
accordance with the TBCA shall be made on the Closing Date.
2.2 Escrowed Funds. At the Closing, Acquiror shall cause Acquiror
Sub to deposit immediately available funds into an escrow account with an escrow
agent mutually agreeable to Acquiror Sub and Holdings (the "Escrow Agent") in an
amount equal to $1,438,000,000 (collectively, the "Escrowed Funds") for
repayment in full the Holdings Indebtedness. Once Acquiror Sub deposits the
Escrowed Funds pursuant to this Section 2.2, it shall have no further
obligations in respect of the Holdings Indebtedness.
2.3 Deliveries at the Closing.
(a) At the Closing, the following documents and agreements
shall be duly executed and delivered by Acquiror, Acquiror Sub, Parent and
Holdings, as applicable, and any other parties thereto:
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(i) the Stockholders' Agreement (as hereinafter
defined);
(ii) the Trademark License Agreement (as hereinafter
defined);
(iii) the Transition Services Agreement (as hereinafter
defined);
(iv) the Escrow Agreement (as hereinafter defined);
(v) the Transitional License Agreement (as hereinafter
defined);
(vi) the Non-Competition Agreement (as hereinafter
defined);
(vii) IT Agreement (as hereinafter defined);
(viii) the License Amendment Agreement (as hereinafter
defined); and
(ix) articles of merger and a plan of merger (together,
the "Articles of Merger"), substantially in the form of Exhibit C hereto.
(b) At the Closing, Acquiror and Acquiror Sub shall deliver or
cause to be delivered to Parent and Holdings:
(i) duly executed stock certificates representing the
shares of Acquiror Sub Series A Preferred Stock and Acquiror Sub Series C
Preferred Stock to be issued in the Merger pursuant to Section 1.14(a) hereof;
(ii) an instrument of assumption, substantially in the
form of Exhibit D hereto (the "Instrument of Assumption"), duly executed by
Acquiror Sub, evidencing the assumption by Acquiror Sub of the Holdings
Indebtedness;
(iii) a payment by wire transfer of immediately
available funds in an amount equal to the Intercompany Indebtedness (as
hereinafter defined) to a bank account designated in writing by Parent at least
two (2) business days prior to the Closing Date;
(iv) an undertaking substantially in the form of Exhibit
E hereto (the "Undertaking") and any other documents and agreements with third
parties as may be reasonably necessary to evidence (a) the assumption by
Acquiror Sub of the Transferred Liabilities (other than the Holdings
Indebtedness and the Intercompany Indebtedness) or (b) the guaranties, letters
of credit and/or letters of comfort referred to in Section 5.17(b) hereof;
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(v) a certificate of Acquiror executed on its behalf by
a duly authorized executive officer of Acquiror, certifying as to the
satisfaction of the conditions set forth in Sections 8.1 and 8.2 hereof; and
(vi) such other instruments or documents as may
reasonably be requested by Holdings in order to effect the transactions
contemplated by this Agreement.
(c) At the Closing, Acquiror and Acquiror Sub shall deliver or
cause to be delivered to the Escrow Agent the wire transfer referred to in
Section 2.2 hereof.
(d) At the Closing, Holdings shall deliver or cause to be
delivered to Acquiror and Acquiror Sub:
(i) (x) stock certificates representing all of the
issued and outstanding shares of capital stock of the Transferred Companies (as
hereinafter defined) together with the books and records of each of the
Transferred Companies (other than books and records located on the premises of
any Transferred Company); and (y) stock powers duly executed in blank as to the
issued and outstanding shares of capital stock of each of the Transferred
Companies that is a direct subsidiary of Holdings (collectively, the "Directly
Transferred Companies");
(ii) evidence in writing reasonably satisfactory to
Acquiror that the Intercompany Agreements set forth in Section 5.17(i) of the
Holdings Disclosure Schedule (other than the Intercompany Agreements listed in
Section 5.17(ii) thereof) shall have been terminated and any liabilities of the
Transferred Companies to any Person with respect thereto shall have been
released;
(iii) a certificate of Holdings executed on its behalf
by a duly authorized executive officer of Holdings, certifying as to the
satisfaction of the conditions set forth in Sections 7.1 and 7.2 hereof;
(iv) written resignations, effective as of the Effective
Time, of each of the officers (except as otherwise agreed by Acquiror) and
directors of the Transferred Companies; and
(v) such other instruments or documents as may
reasonably be requested by Acquiror in order to effect the transactions
contemplated by this Agreement.
(e) At the Closing, immediately following the Effective Time,
Parent shall transfer to a third party not affiliated with Parent or Acquiror
the shares of Acquiror Sub Series C Preferred Stock issued to Parent in the
Merger, pursuant to a binding agreement to be entered into between the date
hereof and the Closing Date.
2.4 Simultaneous Transactions. All of the transactions contemplated
hereby and each of the deliveries at the Closing shall be deemed to occur
simultaneously at the Effective
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Time, and no such transaction shall be deemed to have been consummated until
each and every transaction has been consummated.
2.5 Tax Treatment. The parties intend that the Merger shall qualify
as a reorganization under Section 368(a) of the Code, and that this Agreement
shall constitute a "plan of reorganization" for purposes of Section 368 of the
Code.
2.6 Further Assurances. After the Effective Time, the parties hereto
shall from time to time, at the reasonable request of the other, execute and
deliver such instruments of conveyance and transfer or instruments of assumption
and take such other actions as the other may reasonably request, in order to
more effectively consummate the transactions contemplated hereby and to carry
out the terms hereof. Without limiting the generality of the foregoing, at any
time and from time to time after the Effective Time, (a) at the request of
Acquiror, Parent (to the extent applicable) and Holdings shall take such action
including, without limitation, executing and delivering all such deeds, bills of
sale, assignments and any documents and agreements with third parties as may be
reasonably necessary to more effectively allocate to and vest in the Acquiror
Sub Surviving Corporation all of Holdings' right, title and interest in and to
the Transferred Assets and (b) at the request of Holdings, Acquiror shall, and
shall cause the Acquiror Sub Surviving Corporation to, take such action to more
effectively assume and vest in the Acquiror Sub Surviving Corporation the
Transferred Liabilities, including, without limitation, executing such
documents, instruments and agreements with third parties as may be reasonably
necessary for the Acquiror Sub Surviving Corporation to assume all of Holdings'
obligations under each of the Transferred Liabilities.
2.7 Subsequent Closing.
(a) In the event that (i) all Required Approvals (as
hereinafter defined) of any Governmental Entity having jurisdiction over Xxxxxx
Express Financial Services Corporation, a Utah corporation ("WEX"), have not
been obtained and (ii) all other conditions to Closing set forth in Articles VII
and VIII hereof in respect of the Merger and all of the other Transferred Assets
have been fulfilled or waived in accordance with the terms of this Agreement,
then the parties hereto agree that the Merger shall be consummated and the
Closing shall proceed in respect of all of the Transferred Assets other than the
outstanding shares of capital stock of WEX (the "Deferred Assets"), and that a
subsequent closing ("Subsequent Closing") in respect of the Deferred Assets take
place following the Closing. The Subsequent Closing shall take place at 10:00
a.m., New York City time, on a date (the "Subsequent Closing Date") to be agreed
upon by the parties hereto, which shall be no later than the third business day
following the date on which all Required Approvals of Governmental Entities
having jurisdiction over WEX shall have been obtained, any conditions to the
Required Approvals shall have been satisfied and any statutory waiting periods
in respect thereof shall have expired, at the offices of Skadden, Arps, Slate,
Xxxxxxx & Xxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 or such other
date or place as the parties may agree in writing.
9
(b) Notwithstanding any other provision of this Agreement, if
there is to be a Subsequent Closing, then the following shall apply:
(i) Following the Closing, Holdings (or an Affiliate
thereof) shall retain all right, title and interest in and to the Deferred
Assets and each of Parent, Holdings, Acquiror and Acquiror Sub shall continue to
use their best efforts to obtain the Required Approvals as soon as practicable;
(ii) $15,500,000 of the Escrowed Funds (the "Retained
Escrow Amount") shall remain in escrow with the Escrow Agent following the
Closing and, except as provided in subsection (d) below, shall be released and
delivered to Holdings, together with any interest earned thereon, at the
Subsequent Closing;
(iii) After all Required Approvals are obtained, the
Subsequent Closing shall occur in accordance with Subsection (a) above and, at
the Subsequent Closing, (A) the Escrow Agent shall release and deliver to
Acquiror Sub the Deferred Assets, upon which all of Holdings right, title and
interest in and to the Deferred Assets shall be transferred to Acquiror Sub or,
at the election of Holdings, to Acquiror or such other Affiliate of Acquiror
(other than Acquiror Sub) as may be specified by Acquiror, and (B) the Escrow
Agent shall release and deliver to Holdings the Retained Escrow Amount, together
with all interest earned thereon through the Subsequent Closing Date;
(iv) It is the intention of the parties that, upon the
occurrence of a Subsequent Closing, the acquisition of WEX by Acquiror Sub or
Acquiror, as the case may be, shall be effective as of the Closing Date for
purposes of this Agreement, and the business of WEX shall be run for the benefit
of Acquiror Sub or Acquiror, as the case may be, during the period from the
Closing Date through and including the Subsequent Closing Date; and
(v) During the period from the Closing Date through the
Subsequent Closing, WEX will continue to provide to the Business the credit card
and other services currently provided to the Business on the terms set forth in
the Transition Services Agreement or such other management agreement as may be
mutually agreed upon by the parties hereto and Acquiror shall, and shall cause
the Transferred Companies to, provide to WEX such services as are currently
provided by Xxxxxx Express Corporation, a Delaware corporation and the parent
company of WEX ("Xxxxxx Express").
(c) During the period from the Closing Date to the Subsequent
Closing Date, except as consented to by Acquiror in writing, Parent and Holdings
shall cause WEX:
(i) to conduct its business and operations in the
ordinary course in substantially the same manner as presently conducted and to
use reasonable best efforts to preserve its relationships with customers,
suppliers and others having business with WEX;
10
(ii) provide Xxxxxx Express and Xxxxxx Express Canada,
Inc. with substantially the same services and on the same terms as it provided
to such entities prior to the Closing;
(iii) to provide Acquiror Sub with information
(financial or otherwise) regarding WEX or its services to the Transferred
Companies as may be reasonably requested by Acquiror Sub;
(iv) to take such or omit to take such actions as
may be reasonably requested by Acquiror Sub; and
(v) not to take any action that, if taken during the
period from the date of this Agreement through the Effective Time without the
consent of Acquiror, would constitute a breach of Section 5.1 hereof, assuming
for this purpose that the threshold for capital expenditures in Section
5.1(viii) hereof is $100,000 individually and in the aggregate and "material" in
Section 5.1 shall be measured with regard to WEX as a stand-alone entity.
(d) If the Governmental Entities having jurisdiction over WEX
(i) notify Holdings and/or Acquiror that a final, nonappealable decision has
been made by such Governmental Entities that the Required Approvals will not be
granted or (ii) have failed to provide the Requisite Approval on or prior to
October 31, 1999, then (i) the Subsequent Closing with respect to the Deferred
Assets shall not occur, (ii) Holdings shall retain all right, title and interest
in and to the Deferred Assets and (iii) the Retained Escrow Amount, together
with any interest earned thereon, shall be released and delivered by the Escrow
Agent to Acquiror Sub. All obligations of Parent and Holdings with respect to
delivering the Deferred Assets to Acquiror and Acquiror Sub pursuant to this
Agreement shall thereafter cease and be null and void, and Holdings shall be
free to exercise all rights of ownership over the Deferred Assets, including the
right to freely dispose thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PARENT AND HOLDINGS
Parent and Holdings jointly and severally represent and warrant to
Acquiror and Acquiror Sub as follows (it being understood and agreed that,
notwithstanding anything to the contrary contained in this Article III or in any
other Article of this Agreement, neither Parent nor Holdings makes any
representation or warranty with respect to any direct or indirect subsidiary of
Parent or Holdings that is not a Transferred Company, or with respect to any
properties, assets, liabilities, obligations or businesses of Parent or Holdings
or their respective subsidiaries or Affiliates that are not included in the
Transferred Assets, the Transferred Liabilities or the Business, except as
explicitly set forth herein):
11
3.1 Organization. Each of Parent and Holdings is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate all of its properties and assets and to
carry on its business as it is presently being conducted.
3.2 Authorization. Each of Parent and Holdings has all requisite
corporate power and authority to execute and deliver this Agreement, and to
execute and deliver each of the Stockholders' Agreement, the Trademark License
Agreement, the IT Agreement, the License Amendment Agreement, the
Non-Competition Agreement, the Transition Services Agreement, the Escrow
Agreement, the Transitional License Agreement, the Undertaking and the
Instrument of Assumption (collectively, the "Transaction Agreements") to which
it is a party, and to perform its obligations hereunder and thereunder and
consummate the transactions contemplated hereby and thereby. The execution and
delivery by Parent and Holdings of this Agreement and each of the Transaction
Agreements to which it is a party, and the consummation by Parent and Holdings
of the transactions contemplated hereby and thereby, have been duly authorized
by all requisite corporate action on the part of Parent and Holdings. This
Agreement has been, and, at the Closing, each of the Transaction Agreements will
be, duly executed and delivered by each of Parent and Holdings to the extent it
is a party thereto, and (assuming the valid authorization, execution and
delivery thereof by the other parties thereto) this Agreement constitutes, and
each of the Transaction Agreements, when duly executed and delivered, will
constitute, a valid and binding agreement of Parent and Holdings to the extent
it is a party thereto, enforceable against them in accordance with its terms,
except that (a) such enforcement may be subject to bankruptcy, reorganization,
fraudulent conveyance, moratorium, insolvency and other laws now or hereafter in
effect relating to or affecting creditors' rights and (b) enforcement thereof,
including, among other things, the remedy of specific performance and injunctive
and other forms of equitable relief, may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
3.3 Transferred Companies.
(a) Schedule I hereto sets forth a complete list of all of the
Transferred Companies and their respective jurisdictions of organization. Except
as set forth in Section 3.3 of the disclosure schedule being delivered by Parent
and Holdings to Acquiror concurrently herewith (the "Holdings Disclosure
Schedule"), (i) those direct and indirect subsidiaries of Holdings listed on
Schedule I hereto (the "Transferred Companies") are the only subsidiaries or
Affiliates of Parent or Holdings that presently are actively engaged in the
conduct of the Business and (ii) none of the Transferred Companies owns any
equity interest in any corporation or other entity, other than another
Transferred Company. Each Transferred Company is duly organized, validly
existing and (in the case of those Transferred Companies that are incorporated
in a jurisdiction where such expression has legal significance) in good standing
under the laws of its jurisdiction of organization and has all requisite
corporate or other power and authority to own, lease and operate all of its
properties and assets and to carry on its business as it is presently being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power or authority would not, individually or in the
aggregate, have a Material
12
Adverse Effect on the Business (as hereinafter defined). Each of the Transferred
Companies is duly qualified to do business, and is in good standing, in each
jurisdiction in which the nature of its business or the ownership, operation or
leasing of its properties makes such qualification necessary, except where the
failure to be so qualified and in good standing would not individually or in the
aggregate, have a Material Adverse Effect on the Business.
(b) As used in this Agreement (i), "Affiliate" shall mean,
with respect to any Person, any other Person that directly or indirectly,
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such Person; provided, however, that the term "Affiliate"
shall not include, with respect to any Person, any public corporation in which
such Person owns securities representing less than 50% of the outstanding voting
power; and (ii) "Material Adverse Effect on the Business" means any material
adverse change in, or effect on, the business, assets, liabilities, results of
operation or condition (financial or otherwise) of the Transferred Companies,
taken as a whole; provided, however, that the effects of changes that are
generally applicable to the industries in which the Transferred Companies
operate or to the economy generally shall be excluded from such determination.
3.4 Capitalization; Ownership of Shares.
(a) Section 3.4(a) of the Holdings Disclosure Schedule sets
forth the authorized capital stock of, and the number of issued and outstanding
shares of capital stock or other equity interests in, Holdings and each of the
Transferred Companies. As of the date of this Agreement, except as set forth in
Section 3.4(a) of the Holdings Disclosure Schedule, there are no issued and
outstanding shares of capital stock or other equity interests in any of the
Transferred Companies, or any subscriptions, options, warrants, calls, rights,
convertible securities or other agreements or commitments of any character
obligating Parent, Holdings or any of the Transferred Companies to issue,
transfer or sell, or cause to be issued, transferred or sold, any capital stock
or other equity interests in any of the Transferred Companies, nor are there any
shares of capital stock or other equity interests reserved for issuance pursuant
thereto. Each outstanding share of capital stock of each Transferred Company
that is a corporation is duly authorized, validly issued, fully paid and
nonassessable and (except as otherwise required by applicable Law (as
hereinafter defined)) free of preemptive rights. Each equity interest of each
Transferred Company that is not a corporation is duly authorized, validly issued
and (except as otherwise required by applicable Law) free of preemptive rights.
(b) Except as set forth in Section 3.4(b) of the Holdings
Disclosure Schedule, (i) all of the issued and outstanding shares of capital
stock of, or other equity or membership interests in, the Transferred Companies
(collectively, the "Shares") are owned of record and beneficially by Holdings
either directly or indirectly through a Transferred Company, free and clear of
all liens, pledges, charges, claims, security interests or other encumbrances,
except for liens for current Taxes not yet due and payable (collectively,
"Liens"), (ii) there are no restrictions on the payment of dividends by any of
the Transferred Companies (other than by operation of Law) and (iii) no
Transferred Company is subject to any obligation or requirement to provide funds
for or to make any investment (in the form of a loan, capital contribution or
13
otherwise) in any Person. The consummation of the Merger will convey to Acquiror
Sub good title to the Shares of the Directly Transferred Companies, free and
clear of all Liens, except for those created by Acquiror or the Acquiror Sub
Surviving Corporation or arising out of ownership of the Shares by the Acquiror
Sub Surviving Corporation.
3.5 Consents and Approvals; No Violation. Except for the filing of
the Articles of Merger under the TBCA and the applicable requirements of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "H-S-R
Act"), or as set forth in Section 3.5 of the Holdings Disclosure Schedule,
neither the execution and delivery by Parent or Holdings of this Agreement or
the Transaction Agreements to which it is a party nor the consummation by Parent
or Holdings of the transactions contemplated hereby or thereby will: (i)
conflict with or violate the certificate or articles of incorporation, by-laws
or comparable charter or organizational documents of Parent, Holdings or any of
the Transferred Companies, (ii) violate any statute, law, judgment, decree,
order, regulation or rule (collectively, "Laws") of any Governmental Entity (as
hereinafter defined) applicable to Parent, Holdings or the Transferred Companies
or any of their respective properties or assets, (iii) result in a violation or
breach of, or constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, or result in the termination
of, or accelerate the performance required by, or require any consent of another
party to, any indenture, license, lease, contract, instrument, agreement or
commitment (collectively, "Contracts") to which Parent or Holdings (each, with
respect to the Business) or any of the Transferred Companies is a party or by
which Parent or Holdings (each, with respect to the Business) or any of the
Transferred Companies or any of their respective properties or assets is bound,
(iv) result in the creation of any Lien on any of the assets of Holdings or any
Transferred Company or (v) require any filing with, or the obtaining of any
consent, approval, certificate, license, permit, waiver or authorization of
("Governmental Consent"), any governmental or regulatory authority, court or
agency, whether federal, state, local or foreign (each, a "Governmental
Entity"), other than, in the case of clauses (ii), (iii), (iv) and (v), such
violations, breaches, conflicts, defaults, terminations, accelerations,
third-party consents, Liens and Governmental Consents which, individually or in
the aggregate, would not have a Material Adverse Effect on the Business, would
not adversely affect in any material respect the ability of Parent or Holdings
to consummate the transactions contemplated hereby or would not adversely affect
in any material respect the ability of Acquiror Sub to conduct the Business
after the Closing in substantially the same manner as presently conducted.
3.6 Financial Information; Absence of Undisclosed Liabilities.
(a) Section 3.6(a) of the Holdings Disclosure Schedule sets
forth the audited combined balance sheets of the Transferred Companies as of
December 31, 1998 and the related audited combined statements of income and
changes in cash flows for the year then ended (collectively, the "Audited
Financial Statements"). Except as otherwise noted therein, the Audited Financial
Statements were prepared in conformity with United States generally accepted
accounting principles ("GAAP"), consistently applied, and fairly present in all
material respects the combined financial condition, results of operations and
cash flows of the Transferred Companies as of and for the period indicated
therein.
14
(b) Except as set forth in Section 3.6(b) of the Holdings
Disclosure Schedule, since December 31, 1998, none of the Transferred Companies
has incurred any liabilities or obligations (whether direct or indirect,
accrued, contingent or otherwise) that would be required to be reflected on a
balance sheet or in notes thereto prepared in accordance with GAAP, except for
(i) liabilities and obligations incurred in the ordinary course of business and
(ii) liabilities and obligations that, individually or in the aggregate, would
not have a Material Adverse Effect on the Business.
3.7 Absence of Certain Changes or Events. Except as disclosed in
Section 3.7 of the Holdings Disclosure Schedule, since December 31, 1998, (a)
there has been no action taken by any of the Transferred Companies through the
date hereof that, if taken during the period from the date of this Agreement
through the Effective Time without the consent of Acquiror, would constitute a
breach of Section 5.1 hereof; and (b) there has been no event or development
that has had or would have, individually or in the aggregate, a Material Adverse
Effect on the Business.
3.8 Tax Matters. Except as set forth on Section 3.8 of the Holdings
Disclosure Schedule:
(a) Each of the Transferred Companies (i) has timely filed (or
there has been timely filed on its behalf) with the appropriate taxing
authorities all material Tax Returns (as hereinafter defined) required to be
filed by or with respect to it, and all such Tax Returns are correct in all
material respects, and (ii) has timely paid or accrued and adequately disclosed
and fully provided for on the Audited Financial Statements all material Taxes
(as hereinafter defined) required to be paid;
(b) There are no outstanding waivers in writing or comparable
consents regarding the application of any statute of limitations in respect of
any material Taxes of any of the Transferred Companies nor have any of the
Transferred Companies been requested to enter into an agreement or waiver
extending any statute of limitations relating to the payment or collection of
any material Taxes of the Transferred Companies;
(c) There is no action, suit, investigation, audit, claim or
assessment pending or proposed to any Transferred Company in writing with
respect to Taxes of Holdings or any of the Transferred Companies nor has
Holdings or any of the Transferred Companies received any written notices from
any taxing authority relating to any issue which could affect the Tax liability
of the Transferred Companies;
(d) There are no Liens for Taxes upon any of the Transferred
Assets or any assets of the Transferred Companies, except for Liens relating to
current Taxes not yet due and payable or Liens for Taxes being contested in good
faith which have been fully disclosed and adequately provided for on the Audited
Financial Statements in accordance with GAAP;
15
(e) (i) Since April 30, 1997 and (ii) prior to April 30, 1997,
to the knowledge of all responsible tax officers of Holdings, none of the
Transferred Companies has been included in any "consolidated," "unitary" or
"combined" income Tax Return provided for under the law of the United States,
any foreign jurisdiction or any state or locality with respect to Taxes for any
taxable period for which the statute of limitations has not expired;
(f) All material Taxes which Holdings or any of the
Transferred Companies is (or was) required by law to withhold or collect have
been duly withheld or collected, and have been timely paid over to the proper
authorities to the extent due and payable;
(g) (i) Since April 30, 1997 and (ii) prior to April 30, 1997,
to the knowledge of all responsible tax officers of Holdings, no claim has been
made in writing by any taxing authority in a jurisdiction where Holdings or any
of the Transferred Companies does not file Tax Returns that Holdings or any of
the Transferred Companies is or may be subject to taxation by that jurisdiction;
(h) None of the Transferred Companies is a party to any
agreement that, as a result of the consummation of the transactions contemplated
by this Agreement, would require any of the Transferred Companies to make any
payment that would constitute an "excess parachute payment" for purposes of
Sections 280G and 4999 of the Code;
(i) No indebtedness of any of the Transferred Companies
consists of "corporate acquisition indebtedness" within the meaning of Section
279 of the Code; and
(j) There are no Tax sharing, allocation, indemnification or
similar agreements in effect as between any of the Transferred Companies or any
predecessors or Affiliates thereof and any other party (including Holdings or
any predecessor or Affiliate thereof) under which Acquiror or Acquiror Sub or
any of the Transferred Companies could be liable after the Closing Date for any
Taxes or other claims of any party.
3.9 Litigation.
(a) Except as set forth in Section 3.9 of the Holdings
Disclosure Schedule, as of the date of this Agreement, there is no action, suit,
proceeding or investigation by or before any Governmental Entity which is
pending or, to Holdings' Knowledge, threatened, against Parent or Holdings (in
each case, relating to the Business) or any Transferred Company, which, if
adversely determined, individually or in the aggregate, would (a) have a
Material Adverse Effect on the Business, (b) adversely affect in any material
respect the ability of Parent or Holdings to consummate the transactions
contemplated hereby or (c) adversely affect, in any material respect, the
ability of Acquiror Sub to conduct the Business after the Closing in
substantially the same manner as presently conducted.
(b) For purposes of this Agreement, "Holdings' Knowledge"
shall mean, with respect to any representation and warranty, the actual
knowledge of each of Messrs.
16
Xxxx Xxxxxx, President and Chief Executive Officer of PHH Vehicle Management
Services, LLC ("VMS"), Xxxx Xxxxxx, Senior Vice President, Finance and Planning
of VMS, Xxxx Xxxxxx, President, Cendant Business Answers (Europe) PLC ("CBA"),
Xxxxx Xxxx, Managing Director of CBA, and Xxxxxx Xxxxxx, Vice President and
General Counsel of VMS, and Xx. Xxxxxxx XxXxxxx, Legal Services Director of CBA,
after having reviewed the applicable representation and warranty and any
disclosure schedule related thereto.
3.10 Permits; Compliance with Laws.
(a) Holdings (to the extent related to the Business) and each
of the Transferred Companies is in possession of all franchises, authorizations,
licenses, permits, easements, variances, consents, certificates, approvals and
orders of any Governmental Entity necessary for it to own, lease and operate its
properties or to carry on the Business as it is presently being conducted (the
"Permits"), except where the failure to have any of the Permits would not,
individually or in the aggregate, have a Material Adverse Effect on the
Business.
(b) Except (i) as disclosed in Section 3.10(b) of the Holdings
Disclosure Schedule, and (ii) with respect to tax, labor, ERISA and employee
benefit, intellectual property and environmental Laws, which are exclusively
addressed in Sections 3.8, 3.12, 3.13, 3.14 and 3.16 hereof, respectively, the
Business presently is being conducted in compliance in all material respects
with all applicable Laws.
3.11 Material Contracts.
(a) Except for Contracts set forth in Section 3.11(a) of the
Holdings Disclosure Schedule (collectively, the "Material Contracts"), neither
Holdings (with respect to the Business) nor any Transferred Company is a party
to or bound by:
(i) any Contract that provides for payment to a
Transferred Company for the performance of services in an amount in excess of
$1,000,000 annually;
(ii) any Contract to be performed relating to capital
expenditures (other than those provided for in the Capital Expenditure Plans of
the Business for 1999) in excess of $500,000 in any calendar year, or in the
aggregate require expenditures in excess of $2,000,000;
(iii) any Contract not entered into the ordinary course
of business, requiring payments by or to the Transferred Companies in excess of
$1,000,000;
(iv) any Contract which contains restrictions with
respect to payment of dividends or any other distribution in respect of the
capital stock of a Transferred Company;
17
(v) any Contract relating to indebtedness for borrowed
money in an amount in excess of $1,000,000 (excluding trade payables in the
ordinary course of business, intercompany indebtedness and leases for
telephones, copy machines, facsimile machines and other office equipment);
(vi) any lease (or sublease) of Real Property requiring
payments by the Transferred Companies in an amount in excess of $1,000,000
annually;
(vii) any loan or advance to (other than advances to
employees in the ordinary course of business in amounts not exceeding $1,000,000
in the aggregate), or investment in (other than investments in any Transferred
Company), any Person, or any Contract relating to the making of any such loan,
advance or investment;
(viii) any guarantee in respect of any indebtedness or
obligation of any Person in an amount in excess of $1,000,000 (other than in the
ordinary course of business and other than with respect to any indebtedness or
obligation of any Transferred Company);
(ix) any material Contract limiting the ability of any
Transferred Company to engage in any line of business or to compete with any
Person;
(x) any material amendment, modification or supplement
in respect of any of the foregoing.
(b) Except as set forth in Section 3.12(b) of the Holdings
Disclosure Schedule: (i) there is no pending default under or breach of any
Material Contract by Holdings or any Transferred Company party thereto, and no
event has occurred that, with the lapse of time or the giving of notice or both,
would constitute a default thereunder by Holdings or any Transferred Company
party thereto, in any such case in which such default, breach or event,
individually or in the aggregate, would have a Material Adverse Effect on the
Business; and (ii) no party to any such Material Contract has given written
notice to Holdings or any Transferred Company of, or made a written claim
against Holdings or any Transferred Company with respect to, any breach or
default thereunder, in any such case, in which such breach or default,
individually or in the aggregate, would have a Material Adverse Effect on the
Business.
3.12 Labor Relations. Except as set forth in Section 3.12 of the
Holdings Disclosure Schedule, (a) neither Holdings nor any of the Transferred
Companies is a party to any collective bargaining agreement or labor Contract
with respect to any Persons employed by any of the Transferred Companies (the
"Business Personnel"), (b) Holdings is not a party to any employment agreement
with any of the Business Personnel, (c) since January 1, 1998, neither Holdings
nor any of the Transferred Companies has engaged in any unfair labor practice
with respect to the Business Personnel, and there is no unfair labor practice
complaint or grievance against Holdings or any of the Transferred Companies by
the National Labor Relations Board or any comparable state agency pending or, to
Holdings' Knowledge, threatened in writing with respect to the Business
Personnel, except where such unfair labor practice, complaint or
18
grievance would not, individually or in the aggregate, have a Material Adverse
Effect on the Business, and (d) there is no labor strike, dispute, slowdown or
stoppage pending or, to Holdings' Knowledge, threatened against Holdings (with
respect to the Business) or any of the Transferred Companies which may interfere
with the business activities of the Business, except for such disputes, strikes
or work stoppages which would not, individually or in the aggregate, have a
Material Adverse Effect on the Business.
3.13 Employee Benefit Plans; ERISA.
(a) Each "employee benefit plan," within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), maintained by Holdings and/or any of its subsidiaries or any
organization which, together with Holdings and/or any such subsidiary (each, an
"ERISA Affiliate"), would be treated as a "single employer" within the meaning
of Section 414 of the Code or to which Holdings or any such ERISA Affiliate
contributes (or has any obligation to contribute) or is a party and in which any
Business Personnel participates or under which any of them has accrued and
remains entitled to any benefit (collectively, the "Employee Benefit Plans") is
listed on Section 3.13(a) of the Holdings Disclosure Schedule. Except as set
forth on Section 3.13(a) of the Holdings Disclosure Schedule: (i) each Employee
Benefit Plan is in compliance with applicable law and has been administered and
operated in accordance with its terms, except to the extent that any such
noncompliance, administration or operation would not result in a material
liability; (ii) each Employee Benefit Plan which is intended to be "qualified"
within the meaning of Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service, dated after December 31,
1993 and, to Holdings' Knowledge, no event has occurred and no condition exists
which could reasonably be expected to result in the revocation of any such
determination; (iii) neither Holdings (with respect to the Business) or any of
the Transferred Companies is a participant in any "multiemployer plan," within
the meaning of Section 4001(a)(3) of ERISA; (iv) the actuarial present value of
the accumulated plan benefits (whether or not vested) under any Employee Benefit
Plan covered by Title IV of ERISA as of the close of the plan year ended April
30, 1998 did not exceed the fair value of the assets allocable thereto; (v) the
execution of this Agreement and consummation of the transactions contemplated
hereby do not constitute a triggering event under any Employee Benefit Plan,
policy, arrangement, statement, commitment or agreement, which (A) (either alone
or upon the occurrence of any additional or subsequent event) will or may result
in any payment, "parachute payment" (as such term is defined in Section 280G of
the Code) or (B) by itself will result in any material payment, severance,
bonus, retirement, or increase any benefits or accelerate the payment or vesting
of any benefits to any employee or former employee or director of Holdings or
any of its subsidiaries (other than that which would be solely a liability of
Parent); (vi) no Employee Benefit Plan provides for post-employment or retiree
welfare benefits, except to the extent required by Part 6 of Subtitle B of Title
I of ERISA or Section 4980B of the Code or such other similar law; (vii) no
Employee Benefit Plan maintained by Holdings or an ERISA Affiliate which is
covered by Title IV of ERISA has been terminated and no proceedings have been
instituted to terminate or appoint a trustee to administer any such plan; (viii)
no "reportable event" (as defined in Section 4043 of ERISA) has occurred with
respect to any Employee Benefit Plan maintained by Holdings or an ERISA
Affiliate and
19
covered by Title IV of ERISA; (ix) no Employee Benefit Plan maintained by
Holdings or an ERISA Affiliate which is subject to Section 412 of the Code or
Section 302 or ERISA has incurred any "accumulated funding deficiency," within
the meaning of Section 412 of the Code or Section 302 of ERISA, or obtained a
waiver of any minimum funding standard or an extension of any amortization
period under Section 412 of the Code or Section 303 or 304 of ERISA; (x) neither
Holdings nor any ERISA Affiliate has incurred any unsatisfied withdrawal
liability under Part 1 of Subtitle E of Title IV of ERISA to any "multiemployer
plan," within the meaning of Section 4001(a)(3) of ERISA; (xi) full payment has
been timely made of all amounts which Holdings and/or any of its subsidiaries is
required under applicable law or under any Employee Benefit Plan or related
agreement to have paid as of the last day of the most recent fiscal year of such
Employee Benefit Plan ended prior to the date hereof, and Holdings and each of
its subsidiaries have made adequate provisions, in accordance with GAAP, in
their financial statements for all obligations and liabilities under all
Employee Benefit Plans or any related agreement or applicable law, and, to
Holdings' Knowledge, no event has occurred and no condition exists that would
reasonably be expected to result in a material increase in the level of such
amounts paid or accrued for the most recently ended fiscal year; (xii) no
Employee Benefit Plan provides for the payment of severance, termination, change
in control or similar-type payments or benefits; (xiii) neither Holdings nor any
of its subsidiaries, nor, to Holdings' Knowledge, any other "disqualified
person" or "party in interest" (as defined in Section 4975(e)(2) of the Code and
Section 3(14) of ERISA, respectively) has engaged in any transaction in
connection with any Employee Benefit Plan that could reasonably be expected to
result in the imposition of a material penalty pursuant to Section 502 of ERISA,
damages pursuant to Section 409 of ERISA or a tax pursuant to Section 4975 of
the Code; and (xiv) no claim, action or litigation, has been made or commenced
with respect to any Employee Benefit Plan (other than routine claims for
benefits payable in the ordinary course, and appeals of denied such claims).
(b) Each "employee benefit plan," within the meaning of
Section 3(3) of ERISA, which is maintained outside of the United States by
Holdings and/or any of its subsidiaries primarily for the benefit of Business
Personnel substantially all of whom are residing outside of the United States
(collectively, the "Foreign Plans") is listed on Section 3.13(a) of the Holdings
Disclosure Schedule. Except as set forth on Section 3.13(b) of the Holdings
Disclosure Schedule: (i) no event has occurred with respect to any Foreign Plan
that would reasonably be expected to result directly in any material liability
under any applicable law; (ii) Holdings and/or its subsidiaries have complied
with, and each Foreign Plan conforms in form and operation to, all applicable
Laws, except to the extent that any such noncompliance or nonconformance would
not result in a material liability; (iii) all pension and incentive compensation
obligations under any Foreign Plan have been fully funded, accrued on the
Audited Financial Statements or paid by Holdings and/or one of its subsidiaries,
as applicable; and (iv) no liability, claim, action or litigation, has been
made, commenced or, to Holdings' Knowledge, threatened with respect to any
Foreign Plan (other than routine claims for benefits payable in the ordinary
course, and appeals of denied such claims).
20
3.14 Intellectual Property.
(a) The Transferred Companies own or possess valid and
enforceable and adequate licenses or other legal rights to use all Intellectual
Property Rights (as hereinafter defined) as are necessary to permit the
Transferred Companies to conduct the Business as presently conducted, except
where the failure to have such Intellectual Property Rights would not,
individually or in the aggregate, have a Material Adverse Effect on the
Business. Except as set forth in Section 3.14 of the Holdings Disclosure
Schedule, (i) no claims, or, to Holdings' Knowledge, threat of claims, have been
asserted by any Person related to the use in the conduct of the Business of any
Intellectual Property Rights or challenging or questioning the validity or
effectiveness of any license or agreement relating to Intellectual Property
Rights, except for such claims which, individually or in the aggregate, would
not have a Material Adverse Effect on the Business, (ii) the conduct of the
Business as presently conducted does not infringe on the Intellectual Property
Rights of any Person, except for such infringements which, individually or in
the aggregate, would not have a Material Adverse Effect on the Business, and
(iii) to Holdings' Knowledge, all filings, registrations and issuances
pertaining to the Intellectual Property Rights owned by the Transferred
Companies, including any and all patents, registered trademarks and copyright
registrations, are in full force and effect and the Transferred Companies have
good and marketable title thereto.
(b) For purposes of this Agreement, (i) "Person" shall mean an
individual, partnership, limited partnership, limited liability partnership,
limited liability company, foreign limited liability company, trust, estate,
corporation, custodian, trustee, executor, administrator, nominee or any other
entity and (ii) "Intellectual Property Rights" shall mean rights under patents,
trademarks, trade names, service marks, Internet domain names, trade secrets,
copyrights, software, mailing lists and other proprietary intellectual property
rights, whether or not registered, and all registrations thereof and
applications for registration with respect thereto.
3.15 Year 2000 Compliance.
(a) To Holdings Knowledge, the Transferred Companies have
identified substantially all of their internal systems and software that are
subject to Year 2000 Compliance risk and, to Holdings Knowledge, no Material
Adverse Effect on the Business will result from the failure of such systems or
software to be Year 2000 Compliant. As used herein, "Year 2000 Compliant" shall
mean, with respect to all internal computer systems and software, whether
embedded or otherwise, the ability to consistently and accurately handle date
information before, on and after January 1, 2000 without a material loss of
functionality, including, but not limited to, accepting date input, providing
date output, performing calculations on dates or portions of dates and
comparing, sequencing, storing and displaying dates (including all leap year
considerations).
(b) The Transferred Companies have adopted a Year 2000
Compliance program, which consists of four phases: (i) identification of all
mission critical business systems
21
and software subject to Year 2000 Compliance risks; (ii) assessment of such
business systems and software to determine the method of correcting Year 2000
Compliance problems; (iii) implementing the corrective measures; and (iv)
testing and maintaining Year 2000 Compliance. The Transferred Companies have
completed at least phases (i), (ii) and (iii) above with respect to all of their
mission critical internal systems and software.
(c) Parent and Holdings make no representation or warranty
concerning the Year 2000 Compliance of suppliers of products and services to the
Transferred Companies or of the Transferred Companies' customers, or as to
whether the failure of such suppliers or customers to be Year 2000 Compliant
would have a Material Adverse Effect on the Business. The Transferred Companies
are developing contingency plans intended to minimize the effects of any such
failures by crucial third parties.
(d) The above stated representation is a Year 2000 readiness
disclosure statement pursuant to the Year 2000 Readiness and Disclosure Act.
3.16 Environmental Matters. Except as set forth in Section 3.16 of
the Holdings Disclosure Schedule:
(a) The Business presently is being conducted in compliance
with all applicable Environmental Laws (as hereinafter defined), including, but
not limited to, the possession of all Permits and other governmental
authorizations required under applicable Environmental Laws, except where the
failure to comply with such Environmental Laws would not have a Material Adverse
Effect on the Business;
(b) There is no pending or, to Holdings' Knowledge, threatened
Environmental Claim against Holdings (relating to the Business or any Real
Property) or any of the Transferred Companies under any Environmental Laws,
which, if adversely determined, individually or in the aggregate, would have a
Material Adverse Effect on the Business; and
(c) There have been no releases, spills or discharges of
Hazardous Substances (as hereinafter defined) by any of the Transferred
Companies during the period of Parent's (or its Affiliates') ownership of such
Transferred Company or, to Holdings' Knowledge, by any of the Transferred
Companies prior to such period, or by any other Person, on or underneath any of
the properties presently owned, leased or operated by any of the Transferred
Companies that would have a Material Adverse Effect on the Business.
(d) There are no presently existing facts, circumstances,
conditions or occurrences regarding any business or operations of the
Transferred Companies or any Real Property that would reasonably be anticipated
(i) to form the basis of an Environmental Claim against the Transferred
Companies or any Real Property or (ii) to cause such Real Property to be subject
to any restrictions on its ownership, occupancy, use or transferability under
any Environmental Law, which, in either case, would have a Material Adverse
Effect on the Business.
22
(e) For purposes of this Agreement, "Environmental Laws" shall
mean any applicable national, federal, state or local Laws relating to the
environment, pollution or protection of the environment, health, safety or
Hazardous Substances. "Hazardous Substances" means all substances defined as
hazardous, toxic, petroleum or petroleum products, asbestos in any form that is
friable, polychlorinated biphenyls, radon gas and any other restricted pollutant
or a contaminant under the National Oil and Hazardous Substances Pollution
Contingency Plan, 40 C.F.R. ss. 300.5, or defined, limited or prohibited as such
by, or regulated as such under, any Environmental Law. "Environmental Claims"
shall mean any and all administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or violation,
investigations or proceedings relating in any way to any Environmental Law or
any permit issued under any such Environmental Law (for purposes of this
definition, "Claims"), including, without limitation (i) any and all Claims by
governmental or regulatory authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any applicable
Environmental Law and (ii) any and all Claims, by any third party seeking
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Substances or arising from alleged
injury or threat of injury to health or the environment.
3.17 Real Property. With respect to each parcel of real property
owned in fee, leased or subleased by the Transferred Companies (the "Real
Property"), Section 3.17 of the Holdings Disclosure Schedule sets forth a
complete and accurate list setting forth its address and, in the case of owned
Real Property, its legal description. Except as set forth in Section 3.17 of the
Holdings Disclosure Schedule, each of the Transferred Companies has fee simple
title to all Real Property owned by such entity, and has valid leasehold
interests in all Real Property leased by such entity, in each case free and
clear of all Liens except for defects in title or Liens which, individually or
in the aggregate, would not have a Material Adverse Effect on the Business.
3.18 Insurance. Section 3.18 of the Holdings Disclosure Schedule
sets forth an accurate summary of all material insurance policies maintained by
Holdings (with respect to the Business) and the Transferred Companies. Such
insurance policies are in full force and effect on the date hereof, and are in
such amounts, on such terms and covering such risks, including fire and other
risks insured against by extended coverage, as are, in the opinion of Holdings'
management, reasonably prudent for the Business.
3.19 Acquisition of Shares for Investment. Holdings is acquiring the
shares of Acquiror Sub Series A Preferred Stock to be issued by Acquiror Sub
upon consummation of the Merger for investment purposes without any present
intention of distributing or selling any such shares in violation of federal or
state securities laws.
3.20 Sufficiency of Assets. Except as contemplated by the
Intercompany Agreements and the items set forth in Section 3.20 of the Holdings
Disclosure Schedule, the assets of the Transferred Companies constitute all the
assets necessary to conduct the Business in substantially the same manner as
presently conducted.
23
3.21 Customers. Section 3.21 of the Holdings Disclosure Schedule
sets forth the twenty (20) largest customers (each a "Material Customer") of the
Business for the period from January 1, 1999 through March 31, 1999, based on
gross revenues received from each such customer during such period. No
Transferred Company has received written notice, or to Holding's Knowledge, any
oral notice, from any Material Customer that such Material Customer is canceling
or otherwise substantially reducing its usage or purchase of the products and
services of, the Business.
3.22 Brokers; Finders and Fees. Except for Chase Securities Inc.,
whose fees will be paid by Parent, none of Parent, Holdings, any Transferred
Company or any of their respective Affiliates has employed any investment
banker, broker or finder or incurred any liability for any investment banking
fees, brokerage fees, commissions or finders' fees in connection with this
Agreement or the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR AND ACQUIROR SUB
Acquiror and Acquiror Sub jointly and severally represent and
warrant to Parent and Holdings as follows:
4.1 Organization.
(a) Each of Acquiror and Acquiror Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate all of its properties and assets and to
carry on its business as it is presently being conducted. Each of Acquiror and
Acquiror Sub is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
its business or the ownership, operation or leasing of its properties makes such
qualification necessary, except where the failure to be so qualified and in good
standing would not have an Acquiror Material Adverse Effect (as hereinafter
defined).
(b) As used in this Agreement, "Acquiror Material Adverse
Effect" means any material adverse change in, or effect on, the business,
assets, liabilities, results of operations or condition (financial or otherwise)
of Acquiror, Acquiror Sub or Acquiror's other subsidiaries, taken as a whole;
provided, however, that the effects of changes that are generally applicable to
the industries in which such entities operate or to the economy generally shall
be excluded from such determination.
4.2 Authorization. Each of Acquiror and Acquiror Sub has all
requisite corporate power and authority to execute and deliver this Agreement
and each of the Transaction
24
Agreements to which it is a party and to perform its obligations hereunder and
thereunder and consummate the transactions contemplated hereby and thereby. The
execution and delivery by Acquiror and Acquiror Sub of this Agreement and each
of the Transaction Agreements to which it is a party and the consummation by
Acquiror and Acquiror Sub of the transactions contemplated hereby and thereby
have been duly authorized by all requisite corporate action on the part of each
of Acquiror and Acquiror Sub. This Agreement has been, and, at the Closing, each
of the Transaction Agreements will be, duly executed and delivered by each of
Acquiror and Acquiror Sub to the extent it is a party thereto and (assuming the
valid authorization, execution and delivery thereof by the other parties
thereto) this Agreement constitutes, and each of the Transaction Agreements,
when duly executed and delivered, will constitute, a valid and binding agreement
of Acquiror and Acquiror Sub to the extent it is a party thereto, enforceable
against them in accordance with its terms, except that (a) such enforcement may
be subject to any bankruptcy, reorganization, fraudulent conveyance, moratorium,
insolvency and other Laws, now or hereafter in effect, relating to or limiting
creditors' rights generally and (b) enforcement thereof, including, among other
things, the remedy of specific performance and injunctive and other forms of
equitable relief, may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
4.3 Capitalization.
(a) Section 4.3 of the disclosure schedule being delivered by
Acquiror to Holdings concurrently herewith (the "Acquiror Disclosure Schedule")
sets forth the authorized capital stock of, and the number of issued and
outstanding shares of capital stock in, Acquiror and Acquiror Sub. As of the
date of this Agreement, except as set forth in Section 4.3 of the Acquiror
Disclosure Schedule, there are no issued and outstanding shares of capital stock
or other equity interests in Acquiror or Acquiror Sub or any subscriptions,
options, warrants, calls, rights, convertible securities or other agreements or
commitments of any character obligating Acquiror or Acquiror Sub to issue,
transfer or sell, or cause to be issued, transferred or sold, any capital stock
or other equity interests in Acquiror or Acquiror Sub, nor are there any shares
of capital stock or other equity interests reserved for issuance pursuant
thereto. Each outstanding share of capital stock of Acquiror and Acquiror Sub is
duly authorized, validly issued, fully paid and nonassessable and free of
preemptive rights.
(b) Acquiror Sub is a newly formed company incorporated under
the laws of the State of Texas and has engaged in no activity other than as
provided in, or contemplated by, this Agreement. Acquiror has no present plan or
intention to cause Acquiror Sub to reincorporate out of the State of Texas.
Except as set forth in Section 4.3 of the Acquiror Disclosure Schedule, (i) all
of the issued and outstanding shares of capital stock of Acquiror Sub are, and
immediately prior to the Effective Time, will be, owned of record and
beneficially by Acquiror and are, and immediately prior to the Effective Time,
will be, free and clear of all Liens, (ii) there are no restrictions of any kind
which prevent the payment of dividends by Acquiror Sub and (iii) Acquiror Sub
(except by operation of Law) is not subject to any obligation or requirement to
provide funds for or to make any investment (in the form of a loan, capital
contribution or otherwise) to or in any Person.
25
(c) The shares of Acquiror Sub Preferred Stock to be issued
upon consummation of the Merger pursuant to the terms of this Agreement have
been duly authorized and reserved for issuance and, at the Effective Time, such
shares of Acquiror Sub Preferred Stock will be validly issued, fully paid and
nonassessable shares of preferred stock of Acquiror Sub, free of preemptive
rights, and will be entitled to the rights, preferences and powers set forth in
the Certificate of Designations with respect thereto. The shares of Series B
cumulative PIK preferred stock of Acquiror Sub ("Acquiror Sub Series B Preferred
Stock") have been duly authorized and when issued as paid-in-kind dividends upon
the Acquiror Sub Series A Preferred Stock, such shares will be validly issued,
fully paid and nonassessable shares of Acquiror Sub Series B Preferred Stock,
free of preemptive rights and will be entitled to the rights, preferences and
powers set forth in the Certificate of Designations with respect thereto.
(d) The shares of common stock, par value $0.01 per share, of
Acquiror (the "Acquiror Common Stock"), issuable upon exchange of the non-voting
class B common stock of Acquiror (the "Acquiror Class B Common Stock") which is
issuable upon conversion of the Acquiror Sub Series A Preferred Stock pursuant
to the terms of the Certificate of Designations with respect thereto, have been
duly authorized and reserved for issuance and, upon issuance after such
conversion, such shares of Acquiror Common Stock will be validly issued, fully
paid and nonassessable, and free of preemptive rights. The transactions
contemplated by this Agreement, which includes the issuance of shares of
Acquiror Class B Common Stock upon conversion of the Acquiror Sub Series A
Preferred Stock, have been duly authorized by the board of directors of Acquiror
and, subject to the receipt of the Class B Stockholder Approval (as defined in
the Stockholders' Agreement), when issued upon conversion of the Acquiror Sub
Series A Preferred Stock, such shares of Acquiror Class B Common Stock will be
duly authorized, validly issued, fully paid and nonassessable, and free of
preemptive rights.
4.4 Consents and Approvals; No Violation. Except for the filing of
the Articles of Merger under the TBCA and the applicable requirements of the
H-S-R Act, or as set forth in Section 4.4 of the Acquiror Disclosure Schedule,
neither the execution and delivery by Acquiror or Acquiror Sub of this Agreement
or the Transaction Agreements to which it is a party nor the consummation by
Acquiror and Acquiror Sub of the transactions contemplated hereby or thereby
will (i) conflict with or violate the certificate or articles of incorporation,
by-laws or comparable charter or organizational documents of Acquiror or
Acquiror Sub, (ii) violate any Laws of any Governmental Entity applicable to
Acquiror or Acquiror Sub or any of their respective properties or assets, (iii)
result in a violation or breach of, or constitute a default (or an event which,
with notice or lapse of time or both, would constitute a default) under, or
result in the termination of, or accelerate the performance required by, or
require any consent of another party to, any Contract to which Acquiror or
Acquiror Sub is a party or by which Acquiror or Acquiror Sub or any of their
respective properties or assets is bound, (iv) result in the creation of any
Lien on any of the assets of Acquiror Sub or (v) require any Governmental
Consent of any Governmental Entity, other than, in the case of clauses (ii),
(iii), (iv) and (v), such violations, breaches, conflicts, defaults,
terminations, accelerations, third-party consents, Liens and
26
Governmental Consents, which would not, individually or in the aggregate, have
an Acquiror Material Adverse Effect and would not adversely affect in any
material respect the ability of Acquiror or Acquiror Sub to consummate the
transactions contemplated hereby.
4.5 Acquiror SEC Documents. Acquiror has filed all reports, forms,
registrations, schedules, statements and other documents required to be filed by
it with the Securities and Exchange Commission ("SEC") since January 1, 1998
(the "Acquiror SEC Documents"). As of their respective dates, the Acquiror SEC
Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act") or the Securities
Exchange Act of 1934, as amended, as the case may be, and the applicable rules
and regulations promulgated thereunder. Except to the extent that information
contained in any Acquiror SEC Document has been revised, amended or superseded
by a later Acquiror SEC Document, none of the Acquiror SEC Documents filed prior
to the date hereof, when filed, contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
4.6 Financial Information; Absence of Undisclosed Liabilities.
(a) Except as otherwise noted therein, the consolidated
financial statements of Acquiror included in the Acquiror SEC Documents were
prepared in accordance with GAAP, consistently applied (except, in the case of
the unaudited statements, for normal year-end audit adjustments), and fairly
present in all material respects the consolidated financial condition, results
of operations and cash flows of Acquiror and its consolidated subsidiaries as of
and for the periods indicated therein (subject, in the case of the unaudited
statements, to normal year-end audit adjustments and to any other adjustments
described therein).
(b) Except as set forth in the Acquiror SEC Documents filed
prior to the date hereof or in Section 4.6(b) of the Acquiror Disclosure
Schedule, since the date of the most recent audited financial statements
included in the Acquiror SEC Documents, Acquiror has not incurred any
liabilities or obligations (whether direct or indirect, accrued, contingent or
otherwise) that would be required to be reflected on a balance sheet or in notes
thereto prepared in accordance with GAAP, except for (i) liabilities and
obligations incurred in the ordinary course of business and (ii) liabilities and
obligations that, individually or in the aggregate, would not have a Acquiror
Material Adverse Effect.
4.7 Litigation. Except as set forth in the Acquiror SEC Documents
filed prior to the date hereof or in Section 4.7 of the Acquiror Disclosure
Schedule, as of the date of this Agreement, there is no action, suit, proceeding
or investigation by or before any Governmental Entity which is pending, or, to
the knowledge of Acquiror, threatened against Acquiror, Acquiror Sub or any of
Acquiror's other subsidiaries, which, if adversely determined, individually or
in the aggregate, would (a) have a Acquiror Material Adverse Effect or (b)
adversely affect in any material respect the ability of Acquiror or Acquiror Sub
to consummate the transactions contemplated hereby.
27
4.8 Compliance with Laws. Except as disclosed in the Acquiror SEC
Documents filed prior to the date hereof or as set forth in Section 4.8 of the
Acquiror Disclosure Schedule, the businesses of Acquiror and Acquiror Sub are
presently being conducted in compliance with all applicable Laws, except for
such noncompliance which, individually or in the aggregate, would not have a
Acquiror Material Adverse Effect.
4.9 Availability of Funds. Acquiror has delivered to Holdings, prior
to the date hereof, true, correct and complete copies of commitment letters (the
"Commitment Letters") providing commitments by the financial institutions
issuing such letters ("Lenders") to lend to Acquiror the Financing (as
hereinafter defined). Such Commitment Letters are in full force and effect on
the date hereof. Pursuant to such Commitment Letters, Acquiror has commitments
for, and at the Closing will have available (assuming such Commitment Letters
are honored and the conditions set forth therein are satisfied by the Lenders)
the Financing. As used in this Agreement, "Financing" means immediately
available funds in an amount sufficient to consummate the transactions
contemplated hereby and pay all related fees and expenses.
4.10 Amortization of Goodwill. Acquiror has been advised by Deloitte
& Touche LLP, that as of the date hereof, pursuant to GAAP, the goodwill
generated by the transactions contemplated hereby would be amortized by Acquiror
over forty (40) years.
4.11 No Registration. Assuming the accuracy of Holdings'
representations in Section 3.19, no registration of the shares of Acquiror Sub
Preferred Stock to be issued by Acquiror Sub upon consummation of the Merger,
pursuant to the provisions of the Securities Act or any state securities or
"blue sky" laws, will be required by the issuance of such shares upon
consummation of the Merger.
4.12 Investigation by Acquiror; Parent's and Holdings' Liability.
Acquiror has conducted its own independent review and analysis of the business,
operations, assets, liabilities, results of operations, financial condition, and
prospects of the Business and acknowledges that Acquiror has been provided
access to the personnel, properties, premises and records of the Business for
such purpose. Except for the specific representations and warranties of Parent
and Holdings set forth in Article III of this Agreement (subject to the
limitations and restrictions contained therein) and the indemnities of Parent
and Holdings set forth in Sections 6.2 and 9.2 of this Agreement, in entering
into this Agreement, Acquiror: (a) acknowledges that none of Parent, Holdings,
the Transferred Companies or any of their respective directors, officers,
shareholders, employees, Affiliates, controlling persons, agents, advisors or
representatives makes or has made any representation or warranty, either express
or implied, as to the accuracy or completeness of any of the information
provided or made available to Acquiror or its directors, officers, employees,
Affiliates, controlling persons, agents or representatives; and (b) agrees, to
the fullest extent permitted by Law, that none of Parent, Holdings, the
Transferred Companies or any of their respective directors, officers, employees,
shareholders, Affiliates, controlling persons, agents, advisors or
representatives shall have any liability or responsibility whatsoever to
Acquiror or its directors, officers, employees, Affiliates, controlling persons,
28
agents or representatives on any basis (including, without limitation, in
contract or tort, under federal or state securities Laws or otherwise) based
upon any information provided or made available, or statements made (including,
without limitation, in materials furnished in the Business' data room, in
presentations by the management of the Business or otherwise), to Acquiror or
Acquiror Sub or their directors, officers, employees, Affiliates, controlling
persons, advisors, agents or representatives (or any omissions therefrom).
4.13 Brokers; Finders and Fees. Except for Xxxxxx Brothers Inc. and
XX Xxxxxxxxxx, whose fees will be paid by Acquiror, neither Acquiror nor any of
its Affiliates has employed any investment banker, broker or finder or incurred
any liability for any investment banking, financial advisory or brokerage fees,
commissions or finders' fees in connection with this Agreement or the
transactions contemplated hereby.
ARTICLE V
COVENANTS OF THE PARTIES
5.1 Conduct of the Business. During the period from the date of this
Agreement to the Effective Time, except for the right of Holdings, at its
option, at any time prior to the Effective Time, to convert Xxxxxx Express
Corporation, a Delaware corporation, into a limited liability company, whether
by merger or otherwise, and as otherwise contemplated by this Agreement or the
transactions contemplated hereby or consented to by Acquiror in writing, Parent
and Holdings shall cause each of the Transferred Companies:
(a) to conduct its business and operations in the ordinary
course in substantially the same manner as presently conducted and to use
reasonable best efforts to preserve its relationships with customers, suppliers
and others having business dealings with the Business; and
(b) not to:
(i) sell, license or dispose of any of its material
properties or assets, except (A) to a Transferred Company or (B) in the ordinary
course of business in substantially the same manner as presently conducted;
(ii) make any loans, advances (other than loans or
advances (A) in the ordinary course of business (including to Holdings in
accordance with Holdings' normal cash management policies) in substantially the
same manner as presently conducted and (B) required by the terms of any existing
written agreements), capital contributions to, or investments in, any Person
other than another Transferred Company;
(iii) enter into any new written employment agreement
with any of the Business Personnel providing for annual compensation in excess
of $75,000 (plus
29
customary sales quota payments in the case of sales or similar personnel) or
increase in any manner the compensation of any of the Business Personnel, except
for such renewals of employment agreements and increases as are granted in the
ordinary course of business pursuant to its customary practices (which shall
include normal periodic performance reviews and related compensation and benefit
increases);
(iv) except for the Holdings Plan, adopt, grant, extend
or increase the rate or term of any Plan or any new bonus, insurance, pension or
other employee benefit plan, payment or arrangement made to, for or with any
such Business Personnel, except (A) increases required by any applicable Law,
(B) increases in the ordinary course of business consistent with past practice,
(C) the adoption of the Holdings Plan (as defined below), (D) grants of options
("Cendant Options") to purchase the common stock of Cendant Corporation, a
Delaware corporation and an Affiliate of Holdings ("Cendant"), to Business
Personnel, and (E) any other benefits payable in any form by Holdings;
(v) make any change in any of its present accounting
methods and practices, except as required by changes in GAAP;
(vi) issue, deliver, sell, pledge or otherwise encumber
any shares of its capital stock, any other voting securities or any securities
convertible into, or any options, warrants or rights to acquire, any such
shares, voting securities or convertible securities;
(vii) split, combine or reclassify, or pay any dividend
in respect of, any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock (other than to another Transferred Company and distributions
to repay intercompany indebtedness or to pay Taxes in the ordinary course of
business);
(viii) make or authorize any capital expenditures (in
addition to those provided for in the Capital Expenditures Plans of the Business
for 1999) in excess of $500,000, individually, or $2,000,000 in the aggregate;
(ix) settle or compromise any material Tax liability,
except in the ordinary course of business;
(x) (A) incur any indebtedness for borrowed money other
than in the ordinary course of business to acquire vehicles and/or for ordinary
course of business working capital, relating to current Taxes or for Tax
allocations to Cendant and its Affiliates (including to Holdings or Affiliates
of Holdings), or (B) issue any debt securities or assume, guarantee or endorse
the obligations of any other Person other than in connection with indebtedness
referred to in clause A above;
(xi) amend its respective certificate or articles of
incorporation or by-laws or comparable organizational documents; or
30
(xii) take, or agree to take, any of the foregoing
actions.
5.2 Conduct of Business by Acquiror. During the period from the date
of this Agreement to the Effective Time, except as otherwise contemplated by
this Agreement or the transactions contemplated hereby or consented to by
Holdings in writing:
(a) Acquiror shall not, and shall cause Acquiror Sub and each
of Acquiror's other subsidiaries not to, take any action that would or would be
reasonably likely to result in the disqualification of the Merger as a
"reorganization" for purposes of Section 368 of the Code; and
(b) Acquiror shall cause Acquiror Sub not to:
(i) issue, deliver, sell, pledge or otherwise encumber
any shares of its capital stock, any other voting securities or any securities
convertible into, or any options, warrants or rights to acquire, any such
shares, voting securities or convertible securities;
(ii) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock;
(iii) amend its articles of incorporation or by-laws; or
(iv) take, or agree to take, any of the foregoing
actions.
(c) Acquiror shall not take any action, including, without
limitation, repurchasing any shares of Acquiror Common Stock, that would result
in Cendant owning, directly or indirectly, more than twenty percent (20%) of the
outstanding shares of Acquiror Common Stock.
5.3 Conduct of Business by Acquiror Sub. From the date of this
Agreement to the Effective Time, Acquiror Sub will not engage in any activities
of any nature, acquire any assets or incur any indebtedness or assume any
liabilities or obligations, in each case, except as expressly provided in or
contemplated by this Agreement and as may be related to Acquiror Sub incurring
indebtedness necessary to refinance indebtedness required to be repaid under the
terms of this Agreement.
5.4 Access to Information.
(a) From the date of this Agreement to the Closing, Parent and
Holdings shall, and shall cause each of the Transferred Companies to, (i) except
as set forth in subparagraph (c), give Acquiror and its authorized
representatives reasonable access to all books, records, personnel, offices and
other facilities and properties of the Business, (ii) permit Acquiror
31
to make such copies and inspections thereof as Acquiror may reasonably request
and (iii) cause the officers, independent auditors (subject to Acquiror and
Acquiror Sub executing indemnification letters and waiver letters satisfactory
to such independent auditor) of the Transferred Companies to furnish Acquiror
with such financial and operating data and other information with respect to the
business and properties of the Transferred Companies as Acquiror may from time
to time reasonably request; provided, however, that any such access shall be
conducted at Acquiror's expense, at a reasonable time, under the supervision of
Holdings or the Transferred Companies and in such a manner as to maintain the
confidentiality of this Agreement and the transactions contemplated hereby and
not to interfere unreasonably with the operation of the business of Holdings or
any Transferred Company (iv) take such action, including without limitation,
providing the reasonable use of appropriate officers as Acquiror and Acquiror
Sub may reasonably request in connection with obtaining the Financing; provided
that such action does not unreasonably interfere with such officer's duties in
connection with the conduct of the Business.
(b) From the date of this Agreement to the Closing, Acquiror
shall, and shall cause Acquiror Sub to, (i) give Holdings and its authorized
representatives reasonable access to all books, records, personnel, offices and
other facilities and properties of Acquiror Sub, (ii) permit Holdings to make
such copies and inspections thereof as Holdings may reasonably request and (iii)
cause the officers of Acquiror and Acquiror Sub to furnish Holdings with (x)
such financial and operating data and other information with respect to the
business and properties of Acquiror Sub as Holdings may from time to time
reasonably request and (y) such financial data of Acquiror as Holdings may from
time to time reasonably request; provided, however, that any such access shall
be conducted at Holdings' expense, at a reasonable time, under the supervision
of Acquiror and Acquiror Sub and in such a manner as to maintain the
confidentiality of this Agreement and the transactions contemplated hereby and
not to interfere unreasonably with the operation of the business of Acquiror or
Acquiror Sub.
(c) All information and access provided to Acquiror and its
representatives pursuant to subsection (a) above shall be subject to the terms
and conditions of the letter agreement (the "Confidentiality Agreement"), among
Acquiror, Cendant, Parent and PHH Vehicle Management Services Corporation, dated
March 19, 1999. The Confidentiality Agreement shall survive the execution of
this Agreement and the Closing, without limitation. Notwithstanding anything to
the contrary contained in this Agreement, none of Cendant, Parent, Holdings, any
Transferred Company or any of their respective Affiliates shall have any
obligation to make available or provide to Acquiror or its representatives a
copy of any consolidated, combined or unitary Tax Return filed by Cendant,
Parent, Holdings, or any of their respective Affiliates or predecessors, or any
related materials.
(d) Parent and Holdings shall, and shall cause their
representatives to, keep confidential all information provided by Acquiror and
Acquiror Sub. Such information shall not be used by Parent or Holdings or their
representatives for any purpose other than in connection with analyzing the
transactions contemplated hereby.
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5.5 Books and Records; Furnishing Information.
(a) For a period of three years after the Closing Date, the
Holdings Surviving Corporation shall make available to Acquiror and Acquiror Sub
Surviving Corporation for inspection and copying at Acquiror's expense, at
reasonable times after reasonable request therefor, any records and documents
(or portions thereof) retained by the Holdings Surviving Corporation relating
primarily to the Business which, at the time of said request, are in the
Holdings Surviving Corporation's possession or control. Holdings agrees that it
shall preserve and keep all books and records referred to above for a period of
at least three years from the Closing Date; provided, however, that records
relating to Taxes and Tax Returns shall be kept for the applicable statutory
period (including extensions thereof). After such period, before the Holdings
Surviving Corporation shall dispose of any of such books and records, at least
90 calendar days' prior written notice to such effect shall be given by the
Holdings Surviving Corporation to Acquiror, and Acquiror shall be given an
opportunity, at its cost and expense, to remove and retain all or any part of
such books and records as Acquiror may select.
(b) For a period of three years after the Closing Date,
Acquiror and the Acquiror Sub Surviving Corporation shall make available to the
Holdings Surviving Corporation for inspection and copying at the Holdings
Surviving Corporation's expense, at reasonable times after reasonable request
therefor, any records and documents (or portions thereof) relating primarily to
the Business delivered by Holdings to Acquiror hereunder which, at the time of
said request, are in Acquiror's or the Acquiror Sub Surviving Corporation's
possession or control. Acquiror agrees that it shall preserve and keep all books
and records referred to above for a period of at least three years from the
Closing Date; provided, however, that records relating to Taxes and Tax Returns
shall be kept for the applicable statutory period (including extensions
thereof). After such period, before Acquiror shall dispose of any of such books
and records, at least 90 calendar days' prior written notice to such effect
shall be given by Acquiror to the Holdings Surviving Corporation, and the
Holdings Surviving Corporation shall be given an opportunity, at its cost and
expense, to remove and retain all or any part of such books and records as the
Holdings Surviving Corporation may select.
5.6 Consents and Approvals.
(a) Each of Parent, Holdings, Acquiror and Acquiror Sub shall
cooperate and use best efforts to make all filings and obtain all consents of
Governmental Entities and third parties required to consummate the transactions
contemplated hereby, including, without limitation, under the H-S-R Act and any
mandatory foreign antitrust or competition Laws, and in connection with the
Required Approvals. In furtherance of the foregoing, each of Parent, Holdings,
Acquiror and Acquiror Sub shall file or cause to be filed with the United States
Federal Trade Commission ("FTC") and the United States Department of Justice
("DOJ") a notification and report form under the HSR Act within five (5)
business days following the date hereof.
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(b) Each of Parent, Holdings, Acquiror and Acquiror Sub shall
promptly inform the other parties hereto of any material communication from the
FTC, DOJ or any other Governmental Entity regarding any of the transactions
contemplated by this Agreement. If any of Parent, Holdings, Acquiror or Acquiror
Sub, or any Affiliate thereof, receives a request for additional information or
documentary material from any such Governmental Entity with respect to the
transactions contemplated by this Agreement, then such party shall use its best
efforts to respond to such request, as promptly as practicable, after
consultation and coordination with the other parties hereto. In addition to the
foregoing, Acquiror agrees to provide, and cause Acquiror Sub to provide, such
assurances as to financial capability, resources and creditworthiness as may be
reasonably requested by any third party whose consent is sought hereunder.
5.7 Commercially Reasonable Efforts. Each of Parent, Holdings,
Acquiror and Acquiror Sub shall cooperate, and use commercially reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable Laws to
consummate the transactions contemplated by this Agreement.
5.8 Financing.
(a) Acquiror and Acquiror Sub shall comply with all terms of
the Commitment Letters and shall take all actions required on their part under
the terms of the Commitment Letters, including without limitation, providing the
Lenders with all information that they may request and entering into appropriate
loan agreements or other agreements in order to obtain the Financing.
(b) In the event that (i) any Lender shall notify Acquiror or
Acquiror Sub that it is withdrawing or terminating the Commitment Letters or
that any of the conditions to the Financing in the Commitment Letters cannot be
satisfied and will not be waived or (ii) Acquiror has agreed to any amendment to
the Commitment Letters that establish additional conditions to the Lenders'
obligations to provide the Financing or otherwise makes it more difficult for
Acquiror to obtain the Financing (unless Holdings has agreed in writing that
Acquiror can effect any such amendment) (each a "Funding Termination Event"),
then Acquiror shall immediately notify Holdings of such Funding Termination
Event. In the event all or any portion of the Financing becomes unavailable for
any reason under the Commitment Letters, Acquiror shall use its commercially
reasonable efforts to secure all or such portion of the Financing on terms no
less favorable in the aggregate to Acquiror than the terms contained in the
Commitment Letters. Acquiror shall immediately notify Holdings if any Lenders
shall notify Acquiror or Acquiror Sub that it is amending the Commitment
Letters.
5.9 Employees; Employee Benefits.
(a) On and after the Closing, until at least the first
anniversary of the Closing Date, Acquiror shall cause the Transferred Companies
to provide such Business Personnel with salaries and benefit plans, programs and
arrangements substantially equivalent in
34
the aggregate (without consideration given to defined benefit pension plans) as
those provided by Parent and its Affiliates as of the date hereof.
(b) If any Business Personnel becomes a participant in any
employee benefit plan, practice or policy of Acquiror or any of its Affiliates,
such employee shall be given credit under such plan for all service prior to the
Closing Date with the Transferred Companies or any predecessor employer or other
Affiliate of Holdings (to the extent such credit was given by the Transferred
Companies, such predecessor or other Affiliate of Holdings), and all service
with the Transferred Companies or Acquiror or any of its Affiliates following
the Closing Date but prior to the time such employee becomes such a participant,
for purposes of determining eligibility and vesting and for all other purposes
for which such service is either taken into account or recognized; provided,
however, such service need not be credited to the extent it would result in a
duplication of benefits including, without limitation, benefit accrual under
defined benefit plans. To the extent allowable under applicable Law, Acquiror
shall, and shall cause the Transferred Companies to, (i) waive all limitations
as to preexisting conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Business Personnel
under any welfare benefit plans in which such Business Personnel may be eligible
to participate after the Closing Date and (ii) provide the Business Personnel
with credit for any co-payments and deductibles paid prior to the Closing Date
in satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans of Acquiror or any of its Affiliates in which the Business
Personnel are eligible to participate after the Closing Date.
(c) In the event that any of the Business Personnel employed
by the Transferred Companies immediately prior to the Closing (each, an
"Affected Employee") is discharged by the Transferred Companies after the
Effective Time, then Acquiror shall be responsible for any and all severance
costs for such Affected Employee, including, without limitation, payments owing
under those agreements, plans or arrangements listed in Section 5.9 of the
Holdings Disclosure Schedule. Acquiror shall be responsible and assume all
liability for all notices or payments due to any Affected Employees, and all
notices, payments, fines or assessments due to any Governmental Entity, pursuant
to any applicable foreign, federal, state or local Law, with respect to the
employment, discharge or layoff of employees by the Transferred Companies after
the Closing, including, but not limited to, the Worker Adjustment and Retraining
Notification Act, COBRA and any rules or regulations as have been issued in
connection therewith.
(d) Prior to the Closing, Parent shall take all such action as
it shall deem necessary or appropriate, including, if necessary, adopting any
amendments, so that, effective as of the Effective Time, each of the Transferred
Companies shall cease to be a participating employer in the PHH Corporation
Pension Plan (the "Pension Plan") and that all Business Personnel shall become
fully vested in their accrued benefits under the Pension Plan. Following the
Effective Time, distribution of benefits under the Pension Plan to employees and
former employees of the Transferred Companies shall be made in accordance with
the terms of the Pension Plan.
35
(e) There shall be established a bonus plan providing for
bonuses to employees of the Transferred Companies substantially in the form of
the bonus plan set forth in Section 5.9(e) of the Holdings Disclosure Schedule
(the "Holdings Plan"). Holdings shall be responsible for all amounts payable
pursuant to the Holdings Plan (other than severance payments due thereunder) and
shall pay all amounts due thereunder (other than severance payments due
thereunder) to the Acquiror Sub Surviving Corporation (which shall immediately
pay or cause to be paid all such amounts to the appropriate employees entitled
thereto) as and when such amounts become due.
(f) Subject to Section 6.15 hereof, Holdings shall remain
fully responsible for, and shall indemnify Acquiror, the Acquiror Sub Surviving
Corporation, the Transferred Companies and their respective Affiliates, and the
officers, directors, employees and agents of Acquiror, the Acquiror Sub
Surviving Corporation, the Transferred Companies and their respective Affiliates
and hold them harmless from and against, any and all claims, losses, damages,
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses) and other liabilities and obligations relating to under or arising
in connection with the Holdings Plan (other than severance payments due
thereunder).
(g) After the Closing, Acquiror shall be responsible for, and
shall indemnify and hold harmless Parent, Holdings and their respective
Affiliates, and the officers, directors, employees and agents of Parent,
Holdings and their respective Affiliates, and the fiduciaries (including plan
administrators) of the Employee Benefit Plans, from and against any and all
claims, losses, damages, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) and other liabilities and obligations
relating to or arising out of (i) all salaries, commissions and vacation
entitlements accrued but unpaid as of the Closing and post-Closing bonuses due
to any Affected Employee (other than those arising under the Holdings Plan,
except for severance payment obligations) and (ii) any claims of, or damages or
penalties sought by, any Affected Employee, or any Governmental Entity on behalf
of or concerning any Affected Employee, with respect to any act or failure to
act by Acquiror to the extent arising from the employment, discharge, layoff,
termination or constructive termination after the Closing of any Affected
Employee who becomes an employee of Acquiror or becomes or remains an employee
of the Transferred Companies on or after the Closing.
(h) Effective as of the Closing, the parties hereto shall take
all action necessary and appropriate to cause the applicable Transferred
Companies to (i) remain or become the sole sponsor of (A) the PHH Europe PLC
Employee Benefits Plan (the "UK DB Plan") and (B) the PHH Flexible Pension
Scheme (the "UK DC Plan and, collectively with the UK DB Plan, the "UK Plans")
and (ii) subject to paragraphs (b) and (c) of this Section 5.9, assume and be
solely responsible for all assets, liabilities and obligations whatsoever under
the UK Plans.
(i) As soon as practicable following the Closing, but in no
event later than required by applicable law (i) Parent or one of its affiliates
shall have in effect a defined contribution plan (the "Parent DC Plan") and a
defined benefit plan (the "Parent DB Plan"), each
36
of which shall fully comply with all applicable laws, (ii) Acquiror shall cause
the UK DB Plan to transfer to the Parent DB Plan all of the assets and
liabilities relating to each of the currently active employees of Parent and its
affiliates who are not also Business Personnel (the "Remaining DB Participants")
and (iii) Acquiror shall cause the UK DC Plan to transfer to the Parent DC Plan
all of the assets and liabilities relating to each of the currently active
employees of Parent and its affiliates who are not also Business Personnel (the
"Remaining DC Participants").
(j) With respect to the transfer described in clause (iii) of
paragraph (b) above, an amount of cash or property reasonably acceptable to the
trustee of the Parent DC Plan shall be transferred which shall equal 100% of the
account balances of the Remaining DC Participants as of the date of such
transfer. With respect to the transfer described in clause (ii) of paragraph (b)
above, an amount of cash or property reasonably acceptable to the trustee of the
Parent DB Plan shall be transferred which shall equal the total fair market
value of assets funded in the UK DB Plan as of the date of transfer, multiplied
by the Pro Rata Fraction. The Pro Rata Fraction shall equal the total
liabilities applicable to the Remaining DB Participants, divided by the total
liabilities under the UK DB Plan, in each case as of the date of transfer.
Further, the Pro Rata Fraction shall be determined (i) in a manner consistent
with all applicable laws, and (ii) based upon accrued service and final
pensionable pay at the date of transfer and, subject to the next sentence
hereof, the actuarial assumptions and methods utilized in connection with the
most recently completed actuarial valuation as of the date of transfer. If the
actuary for the UK DB Plan and the actuary for the Parent DB Plan cannot agree
on the reasonableness of the actuarial assumptions and methods to be used in
connection with the determination of the Pro Rata Fraction, such reasonableness
shall be determined by a third enrolled actuary selected by the parties hereto
which determination shall be binding and final. The costs of such third actuary
shall be borne equally by the parties. Nothing contained in the foregoing shall
in any way adversely impact the accrued benefits or legal rights of any
participant of the UK DB Plan. Immediately following the date hereof, the
parties hereto shall work together in good faith to develop a reasonable and
equitable method of valuation and transfer in respect of the foregoing and shall
effectuate such transfers as soon as practicable.
5.10 No Solicitation. From and after the date hereof, neither Parent
nor Holdings shall, and each shall cause each of the Transferred Companies not
to, nor will they permit any of their respective Affiliates to, nor shall they
authorize any officer, director, employee, investment banker, attorney or
representative of Parent, Holdings or any of their Affiliates to, (a) directly
or indirectly, solicit, initiate or encourage the submission of any proposal or
offer from any Person other than Acquiror or its directors, officers, employees,
Affiliates or representatives, (b) enter into or approve any agreement with
respect to, or (c) directly or indirectly participate in any discussions or
negotiations with, or provide any information to, any Person other than Acquiror
or its directors, officers, employees, Affiliates or representatives, relating
to any (i) merger, consolidation or other business combination involving the
Business or any of the Transferred Companies, (ii) restructuring,
recapitalization or liquidation of the Business or any of the Transferred
Companies, or (iii) acquisition or disposition of any substantial portion of the
assets of the Business or any of the Transferred
37
Companies or any of the securities of the Transferred Companies (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal").
5.11 Indemnification. Following the Closing, Acquiror shall cause
each of the Transferred Companies not to make any changes to its respective
certificate or articles of incorporation or by-laws (or similar document) which
would adversely affect the rights of Persons who are current or former officers
and directors of the Transferred Companies, as applicable, to claim
indemnification from such entity under the terms of such certificate or articles
of incorporation or by-laws (or similar document) as in effect on the date
hereof for acts taken prior to the Effective Time. Acquiror shall make, or cause
the Transferred Companies to make, any payments required under such
indemnification provisions relating to facts or circumstances occurring prior to
the Effective Time.
5.12 Trademark License Agreements. It is understood and agreed that
the Transferred Assets do not include, and Acquiror Sub shall not acquire direct
or indirect ownership of, the items of intellectual property used in the
Business and listed on Schedule VI hereto, which intellectual property is owned
by Holdings (the "Retained Intellectual Property"). At the Closing, Holdings, on
the one hand, and Acquiror and Acquiror Sub, on the other hand, shall enter into
a license agreement with respect to the Retained Intellectual Property
substantially in the form of Exhibit F hereto (the "Trademark License
Agreement").
5.13 Stockholders' Agreement and Registration Rights Agreement. At
the Closing, Holdings, Acquiror and Acquiror Sub shall enter into (i) a
stockholders' agreement, substantially in the form of Exhibit G hereto (the
"Stockholders' Agreement"), and (ii) a registration rights agreement with
respect to the shares of Acquiror Common Stock to be issued to Parent upon
exchange of the Acquiror Class B Common Stock issuable upon conversion of the
Acquiror Sub Series A Preferred Stock, substantially in the form of the existing
registration rights agreement between Acquiror and Cendant.
5.14 Transition Services Agreement and IT Agreement. Parent,
Holdings, Acquiror and Acquiror Sub shall use their reasonable best efforts to
negotiate, on a good faith basis, the terms and conditions of (i) a transition
services agreement which shall set forth the services to be provided between the
Transferred Companies, on the one hand, and Parent and its Affiliates, on the
other hand, as may reasonably be requested by Parent and/or Acquiror Sub, on a
basis to be mutually agreed upon (the "Transition Services Agreement") and (ii)
an Information Technology Services Agreement, to be mutually agreed upon (the
"IT Agreement").
5.15 Escrow Agreement. At the Closing, Acquiror, Acquiror Sub,
Parent, Holdings and the Escrow Agent shall enter into an escrow agreement,
substantially in the form of Exhibit H hereto (the "Escrow Agreement").
5.16 Transitional License Agreement. Parent shall cause Cendant to
grant to Acquiror and Acquiror Sub a limited license to use the marks CENDANT,
CENDANT BUSINESS ANSWERS, the "C" logo and the other items of intellectual
property set forth in
38
Section 5.16 of the Holdings Disclosure Schedule for the sole purpose of selling
off or otherwise disposing of any existing inventory of products or business
materials of the Business in the United Kingdom, which license shall commence at
the Effective Time and end as soon as practicable, but in no event later than
the first anniversary of the Effective Time or the disposal of all such existing
inventory. At the Closing, Parent shall cause Cendant, on the one hand, and
Acquiror and Acquiror Sub, on the other hand, to enter into a transitional
license agreement substantially in the form of Exhibit I hereto (the
"Transitional License Agreement").
5.17 Intercompany Obligations; Affiliate Agreements.
(a) Section 5.17(i) of the Holdings Disclosure Schedule lists
all intercompany accounts, obligations (including indebtedness) and agreements
between Holdings or any of its Affiliates (other than the Transferred Companies)
on the one hand, and the Transferred Companies, on the other hand (the
"Intercompany Agreements"). Except as set forth in Section 5.17(ii) of the
Holdings Disclosure Schedule, as of the Effective Time, Holdings and the
Transferred Companies shall cause all Intercompany Agreements to be terminated
in all respects such that there is no cost or liability thereunder on the part
of the Transferred Companies.
(b) Notwithstanding subsection (a) or any other provision of
this Agreement, but subject to the following sentence of this Section 5.17(b),
all intercompany indebtedness between any of the Transferred Companies, on the
one hand, and Parent, on the other hand, outstanding on the date hereof and not
repaid prior to the Effective Time or incurred after the date hereof as
permitted by Section 5.1(b)(x) and not repaid prior to the Effective Time, which
in any event will not exceed, at the Effective Time, without the agreement of
Acquiror, an aggregate of $425,000,000 (such amount collectively, the
"Intercompany Indebtedness"), shall be repaid at the Effective Time pursuant to
Section 2.3(b)(iii) hereof. From the date of this Agreement to the Effective
Time, the amount of the Intercompany Indebtedness may be increased, either as
permitted by Section 5.1(b)(x) or with the written consent of Acquiror, in
connection with the operation of the Business, and any such increase shall be
included in the amount of the Intercompany Indebtedness that is to be paid
pursuant to Section 2.3(b)(iii) hereof to the extent such increased amount has
not been repaid prior to the Effective Time. If Parent or Holdings requests in
writing to increase the amount of the Intercompany Indebtedness in connection
with operating the Business between the date of this Agreement and the Effective
Time and Acquiror does not consent to such request within two (2) business days
of receiving such request, neither Acquiror or Acquiror Sub shall have any right
under this Agreement resulting or arising from or related to the failure of any
Transferred Company to engage in, or continue, any transaction as a result of
Acquiror's failure to consent to increase the amount of the Intercompany
Indebtedness in connection with such transaction, including without limitation,
any rights under Articles VII or IX hereof. Upon payment of the Intercompany
Indebtedness as required by Section 2.3(b) (iii), Acquiror Sub and the
Transferred Companies shall have no further obligations with respect to
Intercompany Indebtedness and in any event shall have no obligations with
respect to any other such intercompany indebtedness not included in the
Intercompany Indebtedness.
39
(c) Acquiror shall use its commercially reasonable efforts to
cause itself, Acquiror Sub or any other Affiliate of Acquiror to be substituted
in all respects for Parent and/or Holdings, effective as of the Effective Time,
in respect of all obligations of Parent and/or Holdings under each of the
guaranties, letters of credit, letters of comfort and other obligations obtained
by Parent and/or Holdings (including, without limitation, leases of real and
personal property) that are listed on Section 5.17(c)(i) of the Disclosure
Schedule for the benefit of the Business or any of the Transferred Companies or
any extensions or modifications thereto in accordance with this Agreement
(collectively, the "Guaranties"). If Acquiror and Acquiror Sub are unable to
effect such a substitution with respect to any Guaranty after using all
commercially reasonable efforts to do so, Acquiror and Acquiror Sub shall (a)
obtain letters of credit for the benefit of Parent and/or Holdings, as
applicable, on terms and from financial institutions reasonably satisfactory to
Parent and Holdings, with respect to the obligations covered by each of those
Guaranties listed on Section 5.17(c)(ii) of the Disclosure Schedule for which
Acquiror and Acquiror Sub do not effect such substitution and (b) indemnify and
hold harmless Parent and/or Holdings, as the case may be, from and against all
obligations, liabilities, losses, claims, actions and causes of action incurred
by or asserted against Parent and/or Holdings arising out of or relating to such
Guaranties from and after the Effective Time.
5.18 Supplements to Disclosure Schedules. Holdings and Acquiror may
supplement or amend the Holdings Disclosure Schedule and Acquiror Disclosure
Schedule, respectively, prior to the Effective Time with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or otherwise disclosed
therein (the "Updated Information"). No such supplement or amendment to include
the Updated Information shall (i) affect the ability of Parent, Holdings,
Acquiror or Acquiror Sub to rely on the conditions to Closing set forth in
Sections 7.1 and 8.1, respectively, (ii) be deemed to have been set forth or
otherwise disclosed as of the date of this Agreement unless the parties
specifically agree thereto in writing or (iii) affect the ability of Parent,
Holdings, Acquiror or Acquiror Sub to make any claim for indemnification or
otherwise as a result of any breach of any representation or warranty.
5.19 Public Announcements. Prior to the Closing, except as otherwise
agreed to by the parties, the parties and each of their respective Affiliates
shall not issue any report, statement or press release or otherwise make any
public statements with respect to this Agreement and the transactions
contemplated hereby, except as in the reasonable judgment of a party or its
Affiliate may be required by Law or in connection with their obligations as
publicly-held, exchange-listed companies, in which case, the parties and each of
their Affiliates will cooperate to reach mutual agreement as to the language of
any such report, statement or press release. Immediately following the execution
and delivery of this Agreement, Parent, Holdings and Acquiror are each issuing
press releases to be mutually agreed upon with respect to this Agreement and the
transactions contemplated hereby.
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5.20 Non-Competition; Non-Solicitation. At the Closing, Parent,
Holdings, Acquiror and Acquiror Sub shall enter into a non-competition and
non-solicitation agreement, substantially in the form of Exhibit J hereto (the
"Non-Competition Agreement").
5.21 Preferred Alliance Agreements. Between the date hereof and the
Closing Date, the parties shall use best efforts to negotiate in good faith and
enter into preferred alliance agreements and such other joint marketing programs
as the parties deem appropriate and desirable.
5.22 License Amendment Agreement. Between the date hereof and the
Closing Date, the parties shall use commercially reasonable efforts to negotiate
in good faith and enter into as of the Effective Time an amendment to the Master
License Agreement, dated July 30, 1997, among Acquiror, Wizard Co., Inc. and
Cendant Car Rental, Inc. (the "License Amendment Agreement") substantially on
the terms set forth in a letter dated May 21, 1999 from Cendant Car Rental, Inc.
to Acquiror.
5.23 No Other Representations. Acquiror and Acquiror Sub understand
and acknowledge that, except for the representations and warranties contained in
Article III hereof, none of Parent, Holdings or any other Person makes any
representation or warranty, express or implied, on behalf of Parent, Holdings or
any of their respective subsidiaries or Affiliates, including the Transferred
Companies.
ARTICLE VI
TAX MATTERS
6.1 Tax Returns. Subject to Sections 6.1(g) and 6.5.
(a) Parent or an Affiliate of Parent shall file or cause to be
filed when due all Tax Returns that are required to be filed by or with respect
to Holdings and each of the Transferred Companies for taxable years or periods
ending on or before the Closing Date and Parent or an Affiliate of Parent shall
remit (or cause to be remitted), subject to Section 6.2(a) below, any Taxes due
in respect of such Tax Returns and, with respect to recurring items, such
returns shall be prepared in a manner consistent with past practices to the
extent permissible under applicable Laws. Acquiror shall pay to Parent any
Excluded Taxes in respect of such Tax Returns.
(b) Acquiror shall file or cause to be filed when due all Tax
Returns that are required to be filed by or with respect to the Acquiror Sub
Surviving Corporation and each of the Transferred Companies for taxable years or
periods ending after the Closing Date (including Straddle Periods (as
hereinafter defined)) and Acquiror shall remit (or cause to be remitted) any
Taxes due in respect of such Tax Returns.
(c) Any Tax Return required to be filed by Acquiror with
respect to the Transferred Companies relating to any taxable year or period
beginning on or before and
41
ending after the Closing Date (the "Straddle Period") shall be submitted (with
copies of any relevant schedules, work papers and other documentation then
available) to Parent for Parent's approval not less than 30 days prior to the
due date for the filing of such Tax Return, which approval shall not be
unreasonably withheld or delayed. Parent shall have the option of providing to
Acquiror, at any time at least 15 days prior to the Due Date (as hereinafter
defined), written instructions as to how Parent wants any, or all, of the items
for which it may be liable reflected on such Tax Return. Acquiror shall, in
preparing such Tax Return, cause the items for which Parent is liable hereunder
to be reflected in accordance with Parent's instructions (unless, in the opinion
of nationally recognized tax counsel to Acquiror, complying with the Parent's
instructions would likely subject Acquiror to any criminal penalty or to civil
penalties under sections 6662 through 6664 of the Code or similar provisions of
applicable state, local or foreign Laws) and, in the absence of having received
such instructions, in accordance with past practice, if any, to the extent
permissible under applicable Law.
(d) Subject to Section 6.1(c), Parent shall pay to Acquiror
the Taxes for which Parent is liable pursuant to Section 6.2(a)(ii) but which
are payable with any Tax Return to be filed by Acquiror with respect to any
Straddle Period upon the written request of Acquiror, setting forth in detail
the computation of the amount owed, no later than 5 days prior to the Due Date.
(e) Within 120 days after the Closing Date, Acquiror shall
cause the Acquiror Sub Surviving Corporation to prepare and provide to Parent a
package of Tax information materials, including, without limitation, schedules
and work papers (the "Tax Package") required by Parent or an Affiliate of Parent
to enable Parent or an Affiliate of Parent to prepare and file all Tax Returns
required to be prepared and filed by it pursuant to Section 6.1(a). The Tax
Package shall be prepared in good faith in a manner consistent with past
practice.
(f) Parent or an Affiliate of Parent may, in its sole and
absolute discretion, amend any Tax Return filed or required to be filed for any
taxable years or periods ending on or before the Closing Date; provided,
however, that neither Parent nor any Affiliate of Parent shall amend any such
Tax Return that materially and adversely affects or may materially and adversely
affect the Tax liability of the Acquiror, Acquiror Sub Surviving Corporation or
any of the Transferred Companies or any Affiliate of the foregoing for any
period ending after the Closing Date, including the portion of any Straddle
Period that is after the Closing Date, without the prior consent of the
Acquiror, which consent shall not be unreasonably withheld or delayed.
(g) Notwithstanding anything to the contrary contained in this
Section 6.1, Parent shall file or cause to be filed any Forms 5471 with respect
to any of the Transferred Companies (that are incorporated in a foreign
jurisdiction) that are required to be filed for any taxable period that ends on
or before, or that includes, the Closing Date.
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6.2 Indemnification.
(a) Parent shall indemnify, defend and hold Acquiror and
Acquiror's subsidiaries and Affiliates and the successors to the foregoing (and
their respective shareholders, officers, directors, employees and agents)
harmless on an after-Tax basis (subject to Section 6.13) from and against the
following (net of the amount of any Tax Benefit (as hereinafter defined)
Actually Realized (as hereinafter defined) by Acquiror, the Acquiror Sub
Surviving Corporation or any of the Transferred Companies as a result of the
payment or accrual of any of the following:
(i) any liability for Taxes of or attributable to
Holdings or any of the Transferred Companies as members of the "affiliated
group" (within the meaning of Section 1504(a) of the Code) of which Cendant (or
any predecessor or successor) is the common parent that arises under Treasury
Regulation Section 1.1502-6(a) or comparable provisions of foreign, state or
local Law; and
(ii) any liability for Taxes of or attributable to
Holdings or any of the Transferred Companies for any taxable year or period that
ends on or before the Closing Date ("Pre-Closing Period") and, with respect to
any Straddle Period, the portion of such Straddle Period deemed to end on and
include the Closing Date (in the manner set forth in Section 6.3(a));
provided, however, that Parent shall not be liable for and shall not indemnify
Acquiror (and its subsidiaries and Affiliates) for (A) any liability for Taxes
resulting from transactions or actions taken by Acquiror, Acquiror Sub or any of
the Transferred Companies on the Closing Date that are taken after the Closing,
except for transactions or actions undertaken in the ordinary course of
business; (B) any Taxes that result from an actual or deemed election under
Section 338 of the Code (or any similar provisions of state, local or other Law)
with respect to any of the Transferred Companies in connection with any of the
transactions contemplated by this Agreement; and (C) any Transfer Taxes (as
hereinafter defined) for which Acquiror is liable pursuant to Section 6.5 hereof
(collectively, the Taxes described in (A) through (C) above are referred to
hereinafter as "Excluded Taxes").
(b) Acquiror shall indemnify and hold Parent and Parent's
subsidiaries and Affiliates (including Cendant) harmless from and against (net
of the amount of any Tax Benefit Actually Realized by Parent or its subsidiaries
or Affiliates as a result of the payment or accrual of any of the following):
(i) Taxes of or attributable to the Acquiror Sub
Surviving Corporation or any of the Transferred Companies for any taxable year
or period that begins after the Closing Date and, with respect to any Straddle
Period, the portion of such Straddle Period beginning after the Closing Date (in
the manner set forth in Section 6.3(a)); and
(ii) Excluded Taxes.
43
6.3 Computation of Tax Liabilities.
(a) To the extent permitted or required by Law or
administrative practice, (i) the taxable year of Holdings and each of the
Transferred Companies that includes the Closing Date shall be treated as closing
on (and including) the Closing Date and, notwithstanding the foregoing, (ii) all
transactions of or with respect to the Acquiror Sub Surviving Corporation or any
of the Transferred Companies not in the ordinary course of business occurring
after the Closing shall be reported on Acquiror's or the Acquiror Sub Surviving
Corporation's consolidated United States federal income Tax Return to the extent
permitted by Treasury Regulation Section 1.1502-76(b)(1)(ii)(B) and shall be
similarly reported on other Tax Returns of Acquiror or its Affiliates to the
extent permitted by Law. For purposes of Section 6.2(a) and (b), where it is
necessary to apportion between Parent and Acquiror the Tax liability of an
entity for a Straddle Period (which is not treated under the immediately
preceding sentence as closing on the Closing Date), such liability shall be
apportioned between the period deemed to end at the close of the Closing Date,
subject to Sections 6.2(a) and 6.3(a)(ii), and the period deemed to begin at the
beginning of the day following the Closing Date on the basis of an interim
closing of the books, except that Taxes (such as real property Taxes) imposed on
a periodic basis shall be allocated on a daily basis; provided, however, that if
the capital structure of an entity is changed after the Closing Date, the Tax
liability of the entity for a Straddle Period apportioned to the period deemed
to end at the close of the Closing Date shall not exceed the Tax liability which
would have been due if the Tax liability had been calculated as of such date,
based on the income, assets, capital, liability and other attributes of the
entity on the Closing Date.
(b) In determining Parent's liability for Taxes pursuant to
this Agreement, Parent shall be credited with the amount of estimated Taxes paid
by or on behalf of Holdings or any of the Transferred Companies prior to the
Closing. To the extent that Parent's liability for Taxes for a taxable year or
period is less than the amount of estimated income Taxes previously paid by or
on behalf of Holdings or any of the Transferred Companies with respect to all or
a portion of such taxable year or period, Acquiror shall pay Parent the
difference within two days of the earlier of (i) the receipt of a refund
relating to such overpayment or (ii) the filing of a Tax Return in which a
credit attributable to such overpayment is utilized.
6.4 Contest Provisions.
(a) Each of Acquiror, on the one hand, and Parent, on the
other hand (the "Recipient"), shall notify the chief tax officer of the other
party in writing within 15 days of receipt by the Recipient of written notice of
any pending or threatened audits, notice of deficiency, proposed adjustment,
assessment, examination or other administrative or court proceeding, suit,
dispute or other claim (a "Tax Claim") which could affect the liability for
Taxes of such other party. If the Recipient fails to give such prompt notice to
the other party it shall not be entitled to indemnification for any Taxes
arising in connection with such Tax Claim if and to the extent that such failure
to give notice materially and adversely affects the other party's right to
participate in the Tax Claim.
44
(b) Parent shall have the sole right to represent Holdings for
any taxable period, and shall have the sole right to represent any of the
Transferred Companies' interests in any Tax Claim relating to taxable periods
ending on or before the Closing Date and to employ counsel of its choice at its
expense. Parent or any Affiliate of Parent may not settle or otherwise dispose
of any Tax Claim of any of the Transferred Companies relating to such periods if
such settlement or disposition materially and adversely affects or may
materially and adversely affect the Tax liability of the Acquiror, Acquiror Sub
Surviving Corporation or any of the Transferred Companies or any Affiliate of
the foregoing without the prior written consent of Acquiror, which consent may
not be unreasonably withheld or delayed. In the case of a Straddle Period,
Parent shall be entitled to provide comments which shall be considered in good
faith with respect to any Tax Claim relating in any part to Taxes attributable
to the portion of such Straddle Period deemed to end on or before the Closing
Date and, with the written consent of Acquiror, at Parent's sole expense, may
assume the control of such entire Tax Claim. None of Acquiror, any of its
Affiliates, the Acquiror Sub Surviving Corporation or the Transferred Companies
may settle or otherwise dispose of any Tax Claim with respect to any Straddle
Period for which Parent may have a liability under this Agreement without the
prior written consent of Parent, which consent may not be unreasonably withheld
or delayed.
(c) Acquiror shall have the sole right to control any audit or
examination by any taxing authority, initiate any claim for refund or amend any
Return, and contest, resolve and defend against any assessment for additional
Taxes, notice of Tax deficiency or other adjustment of Taxes of, or relating to,
the income, assets or operations of the Transferred Companies for all taxable
periods beginning after the Closing Date ("Post-Closing Period"); provided,
however, that Acquiror shall not initiate any such claim for refund or amend any
such Tax Return or settle or dispose of any Tax Claim with respect to a
Post-Closing Period if such claim for refund, amendment, settlement, or
disposition materially and adversely affects or may materially and adversely
affect the Tax liability of Cendant, Parent, Holdings or any of its Affiliates,
without the prior written consent of Parent, which consent shall not be
unreasonably withheld or delayed.
6.5 Transfer Taxes. All excise, sales, use, privilege, transfer
(including real property transfer or gains), stamp, documentary, filing,
recordation, value added, bulk sales and other similar taxes, together with any
interest, additions or penalties with respect thereto and any interest in
respect of such additions or penalties, arising out of or in connection with or
attributable to the transactions contemplated by this Agreement (collectively,
"Transfer Taxes"), shall be borne one half Acquiror and one half by Parent.
Notwithstanding Section 6.1 of this Agreement, which shall not apply to Tax
Returns relating to Transfer Taxes, any Tax Returns that must be filed in
connection with Transfer Taxes shall be prepared and filed when due by the party
primarily or customarily responsible under the applicable local Law for filing
such Tax Returns, and such party shall pay the Transfer Taxes shown to be due on
such Tax Return, and notify the other party in writing of the Transfer Taxes
shown to be due on such Tax Return and how such Transfer Taxes were calculated,
and if the other party is Acquiror, Acquiror shall, or
45
shall cause the Acquiror Sub Surviving Corporation to, reimburse Parent in
immediately available funds within 10 days of the receipt of such notice.
6.6 Refunds.
(a) Any Tax refund (including any interest in respect thereof)
received by Acquiror, the Acquiror Sub Surviving Corporation or any Transferred
Company, and any amounts of overpayments of Tax credited against Tax which
Acquiror, the Acquiror Sub Surviving Corporation or any of the Transferred
Companies otherwise would be or would have been required to pay that relate to
any taxable period, or portion thereof, ending on or before the Closing Date
shall be for the account of Parent, and Acquiror shall pay over to Parent any
such refund or the amount of any such credit within 15 days after receipt or
entitlement thereto. Acquiror shall pay Parent interest at the rate prescribed
under Section 6621(a)(1) of the Code, compounded daily, on any amount not paid
when due under this Section 6.6. For purposes of this Section 6.6, where it is
necessary to apportion a refund or credit between Acquiror and Parent for a
Straddle Period, such refund or credit shall be apportioned between the period
deemed to end at the close of the Closing Date, and the period deemed to begin
at the beginning of the day following the Closing Date on the basis of an
interim closing of the Company's books, except that refunds or credits of Taxes
(e.g., real property Taxes) imposed on a periodic basis shall be allocated on a
daily basis.
(b) Acquiror shall cooperate, and shall cause the Acquiror Sub
Surviving Corporation and any of the Transferred Companies to cooperate, in
obtaining any refund that Parent reasonably believes should be available with
respect to Pre-Closing Periods, including, without limitation, through filing a
Form 1139 or other appropriate form with the applicable taxing authorities;
provided, however, that Acquiror and Acquiror Sub Surviving Corporation and any
of the Transferred Companies shall not be obligated to carry back any Tax
attribute of a Post-Closing Period to a Pre-Closing Period.
6.7 Certain Post-Closing Settlement Payments.
(a) If the examination of any Federal, state, local or other
Tax Return of Cendant, Parent, Holdings, or any of the Transferred Companies for
any taxable period ending on or before the Closing Date, the pre-closing portion
of any Straddle Period or for any taxable year in which the Merger occurs, shall
result (by settlement or otherwise) in any adjustment which permits Acquiror,
the Acquiror Sub Surviving Corporation or any of the Transferred Companies or
any Affiliate thereof to increase deductions, losses or tax credits or decrease
the income, gains or recapture of tax credits which would otherwise (but for
such adjustments) have been reported or taken into account (including by way of
any increase in basis) by Acquiror, the Acquiror Sub Surviving Corporation or
any of the Transferred Companies or any Affiliate thereof for one or more
periods ending after the Closing Date, in each case in respect of the
Transferred Assets, Parent will notify Acquiror and provide it with adequate
information so that Acquiror (or its Affiliates), the Acquiror Sub Surviving
Corporation or any of the Transferred Companies or any Affiliate thereof, as the
case may be, can reflect on its Tax Returns such
46
increases in deductions, losses or tax credits or decreases in income (including
by way of increase in basis), gains or recapture of tax credits. Upon receipt of
such information and upon the reasonable request of Parent, Acquiror (or its
Affiliates), the Acquiror Sub Surviving Corporation or any of the Transferred
Companies, as the case may be, shall reflect on its Tax Returns (including
amended Tax Returns) the information provided above. Acquiror shall pay to
Holdings the amount of any resulting Tax Benefits Actually Realized by the
Acquiror, the Acquiror Sub Surviving Corporation or any of the Transferred
Companies (or any of their respective Affiliates).
(b) If the examination of any Federal, state, local or other
Tax Return of Acquiror, the Acquiror Sub Surviving Corporation or any of the
Transferred Companies for any taxable period beginning and ending after the
Closing Date or the post-closing portion of any Straddle Period shall result (by
settlement or otherwise) in any adjustment which permits Parent (or its
Affiliates) to increase deductions, losses or tax credits or decrease the
income, gains or recapture of tax credits which would otherwise (but for such
adjustments) have been reported or taken into account (including by way of any
increase in basis) by Parent (or its Affiliates) for one or more periods ending
on or before the Closing Date, in each case in respect of the Transferred
Assets, Acquiror will notify Parent and provide it with adequate information so
that Parent can reflect on its or its Affiliates' Tax Returns (including amended
Tax Returns) such increases in deductions, losses or tax credits or decreases in
income, gains or recapture of tax credits. Upon receipt of such information, and
upon the reasonable request of Acquiror, Parent (or its Affiliates) shall
reflect on its tax returns the information provided above. Parent shall pay to
Acquiror the amount of any resulting Tax Benefits Actually Realized by Parent
(or any of its Affiliates).
(c) Upon (A) the exercise of a Cendant Option by an employee
or former employee of any of the Transferred Companies and the payment of cash
or other property by Cendant (or its designated agent) to the holder of the
Cendant Option or (B) the payment by Holdings of any amount with respect to the
Holdings Plan, as described in Section 5.9, Acquiror shall pay or cause the
Acquiror Sub Surviving Corporation or any of the Transferred Companies to pay,
as the case may be, to Holdings the amount of any Tax Benefit Actually Realized
by Acquiror, Acquiror Sub Surviving Corporation or any of the Transferred
Companies (or any of their respective Affiliates) attributable to any exercise
or payment described in this Section 6.7(c).
(d) Prior to the Closing Date, Acquiror and Holdings shall
negotiate and draft a schedule (the "Allocation Schedule") allocating the Merger
Consideration among the Transferred Assets. Upon completion of the Allocation
Schedule, each of the Acquiror and Holdings shall execute a copy thereof and
return such copy to the other party. For all purposes (including tax and
accounting), the parties shall treat the fair market value of the Transferred
Assets as set forth in the Allocation Schedule.
(e) For purposes of this Agreement, "Tax Benefit" shall mean
the sum of the amount by which the actual Tax liability (after giving effect to
any alternative minimum or
47
similar Tax) of a corporation to the appropriate taxing authority is reduced
(including, without limitation, by or as a result of a deduction, increase in
basis, entitlement to refund, credit or otherwise, whether available in the
current taxable year, as an adjustment to the taxable income in any other
taxable year or as a carryforward or carryback, as applicable) plus any interest
(on an after-Tax basis) from such government or jurisdiction relating to such
Tax liability. For purposes of this Agreement, a Tax Benefit shall be deemed to
have been "Actually Realized" at the time any refund of Taxes is actually
received or applied against other Taxes due, or at the time of the filing of a
Tax Return (including any Tax Return relating to estimated Taxes) on which a
loss, deduction or credit or increase in basis is applied to reduce the amount
of Taxes which would otherwise be payable. In accordance with the provisions of
this paragraph (e), Acquiror and Parent agree that for purposes of this
Agreement, where a Tax Benefit may be realized that may result in the payment
to, or reduce a payment by, the other party hereto, each party will as promptly
as practicable take or cause its Affiliates to take such reasonable or
appropriate steps (including, without limitation, the filing of an amended Tax
Return or claim for refund) to obtain at the earliest possible time any such
reasonable available Tax Benefit.
(f) For purposes of any Tax Benefit Actually Realized
determined under Section 6.7(e) and this Agreement:
(i) No later than 45 days after the filing of a Tax
Return for any taxable period that includes a date (x) upon which any Cendant
Option was exercised or any payment was made or accrued with respect to or in
connection with the Holdings Plan, as described in Section 5.9, (y) after the
Closing Date if there has been an examination of any federal, state, local or
other Tax Return of Cendant, Holdings or any of the Transferred Companies (or
any of their respective Affiliates) which results in an adjustment described in
Section 6.7(a) of this Agreement or (z) upon which any amount was paid or
accrued by Acquiror, the Acquiror Sub Surviving Corporation or the Transferred
Companies in respect of a claim for which Parent is required to indemnify
Acquiror pursuant to this Agreement, Acquiror shall provide Parent a detailed
statement ("Tax Benefit Statement") specifying the amount, if any, of any Tax
Benefit that was Actually Realized by Acquiror, the Acquiror Sub Surviving
Corporation or the Transferred Companies for such Tax period. To the extent that
any deductions or other Tax items (including basis) that could give rise to a
Tax reduction or savings do not result in the actual realization of such a Tax
reduction or savings in the year described in the previous sentence, this
Section 6.7(f)(i) shall apply to each subsequent taxable period of Acquiror, the
Acquiror Sub Surviving Corporation or the Transferred Companies, as the case may
be, until either such Tax savings are Actually Realized (resulting in a Tax
Benefit) or the losses or other carryforwards to which such deductions or other
Tax items (including basis) gave rise expire unused, if applicable. For each
relevant taxable period, Parent shall be provided with full access to the
non-proprietary work papers and other materials and information of Acquiror's
(or the Acquiror Sub Surviving Corporation's or the Transferred Companies')
accountants in connection with the review of the Tax Benefit Statement. If
Parent disagrees in any respect with Acquiror's computation of the amount of the
Tax Benefit Actually Realized, Parent may, on or prior to 45 days after the
receipt of the Tax Benefit Statement from Acquiror, deliver a notice to Acquiror
or the Acquiror Sub Surviving Corporation setting forth in reasonable detail the
basis
48
for Parent's disagreement therewith ("Tax Benefit Dispute Notice"). If no Tax
Benefit Dispute Notice is received by Acquiror or the Acquiror Sub Surviving
Corporation on or prior to the 45th day after Parent's receipt of the Tax
Benefit Statement from Acquiror, the Tax Benefit Statement shall be deemed
accepted by Parent.
(ii) Within 15 days after Acquiror's receipt of a Tax
Benefit Dispute Notice, unless the matters in the Tax Benefit Dispute Notice
have otherwise been resolved by mutual agreement of the parties, Acquiror and
Parent shall jointly select a nationally-recognized independent certified public
accountant (the "Tax Benefit Accountant"); provided, however, if Acquiror and
Parent are unable to agree upon the Tax Benefit Accountant within such 15-day
period, then Acquiror and Parent shall each select a nationally-recognized
independent certified public accountant which shall then jointly choose the Tax
Benefit Accountant within 15 days thereafter. The Tax Benefit Accountant shall
conduct such review of the work papers and such other materials and information,
and the Tax Benefit Dispute Notice, and any supporting documentation as the Tax
Benefit Accountant in its sole discretion deems necessary, and the Tax Benefit
Accountant shall conduct such hearings or hear such presentations by the parties
or obtain such other information as the Tax Benefit Accountant in its sole
discretion deems necessary.
(iii) The Tax Benefit Accountant shall, as promptly as
practicable and in no event later than 45 days following the date of its
retention, deliver to Parent and Acquiror a report (the "Tax Benefit Report") in
which the Tax Benefit Accountant shall, after reviewing disputed items set forth
in the Tax Benefit Dispute Notice, determine what adjustments, if any, should be
made to the amount of the Tax Benefit Actually Realized. The Tax Benefit Report
shall set forth, in reasonable detail, the Tax Benefit Accountant's
determination with respect to the disputed items or amounts specified in the Tax
Benefit Dispute Notice, and the revisions, if any, to be made to the amount of
the Tax Benefit Actually Realized, together with supporting calculations. All
fees and expenses relating to this work of the Tax Benefit Accountant shall be
borne equally by Acquiror and Parent. The Tax Benefit Report shall be final and
binding upon Acquiror and Parent, shall be deemed a final arbitration award that
is binding on each of Acquiror and Parent, and no party shall seek further
recourse to courts, other arbitral tribunals or otherwise. The amount, if any,
of the Tax Benefit Actually Realized set forth in the Tax Benefit Report shall,
in accordance with the provisions of this Section 6.7, be paid to Parent in
immediately available funds no later than five days after delivery of the Tax
Benefit Report to Acquiror.
(g) In the event that, after the Closing Date, there is a sale,
exchange, transfer or other disposition ("Disposition") of (i) the common stock
of Acquiror Sub Surviving Corporation to a Person other than Acquiror or a
subsidiary thereof, (i) any material assets of Acquiror Sub Surviving
Corporation or (ii) any material Transferred Asset, which Disposition would
materially and adversely affect the Tax Benefits Actually Realized that are then
or thereafter payable to Parent by Acquiror pursuant to this Agreement, Acquiror
shall make appropriate arrangements, reasonably satisfactory to Parent, to
ensure that Parent is paid any Tax Benefits Actually Realized that Parent would
have been entitled to be paid, consistent with the
49
principles of this Agreement, absent such Disposition, it being agreed that
projections of income attributable to the property subject to such Disposition
that are reasonably satisfactory to Parent and Acquiror may be used in making
determinations hereunder as to Tax Benefits Actually Realized that become due.
6.8 Tax-Free Reorganization Covenants; Other Covenants.
(a) Following the Merger, the Acquiror Sub Surviving
Corporation shall, and Acquiror shall cause the Acquiror Sub Surviving
Corporation and the Transferred Companies to, continue the historic business of
the Business or use a significant portion of the Business' historic business
assets in a business, in each case, within the meaning of Section 1.368-1(d) of
the Treasury Regulations.
(b) Acquiror and the Acquiror Sub Surviving Corporation do not
have a current plan or intention to sell or otherwise dispose of the Transferred
Assets or the assets of the Transferred Companies, except for dispositions made
in the ordinary course of business or transfers described in Section
368(a)(2)(C) of the Code.
(c) For a two-year period following the date of the Merger,
the Acquiror Sub Surviving Corporation shall, and Acquiror shall cause the
Acquiror Sub Surviving Corporation to, remain incorporated in the state of
Texas.
(d) Absent a Final Determination to the contrary, the Acquiror
Sub Surviving Corporation shall, and Acquiror shall cause the Acquiror Sub
Surviving Corporation and the Transferred Companies to, (A) report the Merger on
its Tax Returns as a tax-free reorganization described in Section 368(a) of the
Code, (B) treat the Merger as being a tax-free reorganization under Section
368(a) of the Code for all other purposes and (C) not take any action that is
inconsistent with the treatment of the Merger as a tax-free reorganization under
Section 368(a) of the Code. Acquiror shall, and shall cause the Acquiror Sub
Surviving Corporation and the Transferred Companies to, provide commercially
reasonable cooperation to Parent, Cendant and their Affiliates and
representatives with respect to all reasonable requests relating to supporting
and defending the qualification of the Merger as a reorganization described in
Section 368(a) of the Code, including, but not limited to, preparing responses
to information requests by a Tax Authority and making available books, records
and other documentation during normal business hours. For purposes of this
Agreement, "Final Determination" shall mean (i) the entry of a decision of a
court of competent jurisdiction at such time as an appeal may no longer be taken
from such decision or (ii) the execution of a closing agreement or its
equivalent between the particular taxpayer and the relevant taxing authority.
(e) Acquiror, Acquiror Sub, Holdings and Parent acknowledge
and agree that, pursuant to Section 381 of the Code, and subject to other
applicable limitations (including, without limitation, Sections 382 and 383 of
the Code and the separate return limitation year rules of the consolidated
return regulations), the Acquiror Sub Surviving
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Corporation shall succeed to and take into account the items of Holdings
described in Section 381(c) of the Code.
6.9 Resolution of All Tax-Related Disputes. In the event that Parent
and Acquiror cannot agree on the calculation of any amount relating to Taxes or
the interpretation or application of any provision of this Agreement relating to
Taxes (except as provided in Section 6.7(e)), such dispute shall be resolved by
a nationally recognized accounting firm mutually acceptable to each of Parent
and Acquiror, whose decision shall be final and binding upon all persons
involved and whose expenses shall be shared equally by Parent and Acquiror.
6.10 Post-Closing Actions Which Affect Cendant's Liability for
Taxes.
(a) Acquiror shall not, and shall not permit the Acquiror Sub
Surviving Corporation or any of the Transferred Companies to, engage in any
transaction on the Closing Date or take any action on the Closing Date that are
taken after the Closing, except for transactions or actions undertaken in the
ordinary course of business which could increase Parent's (or any Affiliate of
Parent's) liability for Taxes (including any liability of Parent to indemnify
Acquiror for Taxes pursuant to this Agreement).
(b) None of Acquiror, the Acquiror Sub Surviving Corporation
or any Affiliate of Acquiror shall (or shall cause or permit any of the
Transferred Companies to) amend, refile or otherwise modify any Tax Return
relating in whole or in part to any of the Transferred Companies with respect to
any taxable year or period ending on or before the Closing Date (or with respect
to any Straddle Period) without the prior written consent of Parent, which
consent may not be unreasonably withheld.
6.11 Termination of Existing Tax Sharing Agreements. Any and all
existing Tax sharing allocation, indemnification or similar agreements or
arrangements, written or unwritten, between the Transferred Companies and Parent
or any of its subsidiaries, predecessors or Affiliates (other than any of the
Transferred Companies), shall be terminated as of the Closing and there shall be
no continuing obligation to make any payments thereunder.
6.12 Assistance and Cooperation. After the Closing Date, each of
Parent and Acquiror shall, upon request from the other (and shall cause their
respective Affiliates to):
(a) subject to Section 6.5, timely sign and deliver such
certificates or forms as may be reasonably necessary or appropriate to establish
an exemption from (or otherwise reduce), or file Tax Returns or other reports
with respect to Transfer Taxes;
(b) assist the other party in preparing any Tax Returns which
such other party is responsible for preparing and filing in accordance with
Section 6.1;
(c) cooperate fully in preparing for any audits of, or
disputes with taxing authorities regarding, any Tax Returns of the Transferred
Companies;
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(d) make available to the other and to any taxing authority as
reasonably requested in connection with any Tax Return described in Section 6.1
or any proceeding described in Section 6.4, all information relating to any
Taxes or Tax Returns of the Transferred Companies; and
(e) furnish the other with copies of all correspondence
received from any taxing authority in connection with any Tax audit or
information request with respect to any such taxable period.
Notwithstanding the foregoing or any other provision in this Agreement, neither
Acquiror nor any of its Affiliates shall have the right to receive or obtain any
information relating to Taxes of Parent (or any Affiliate of Parent), or any of
its predecessors other than information relating solely to Holdings or the
Transferred Companies for Pre-Closing Periods.
6.13 Adjustment to Merger Consideration. (a) Subject to 6.13(b), for
all Tax purposes, to the extent permitted by applicable law, any payment by
Acquiror or Parent under this Agreement shall be treated as an adjustment to the
consideration payable upon consummation of the Merger.
(b) If the Internal Revenue Service (the "IRS") (or similar
taxing authority) issues a written notice of proposed adjustment (an "Adjustment
Notice") (or similar notice) with respect to characterization of an indemnity
payment as a Purchase Price adjustment (the "Characterization Issue"), the
Acquiror shall notify Parent as soon as practicable but no later than ten
business days after the Acquiror's (or any of its Affiliates) receipt of such
Adjustment Notice. In the event of any IRS or other proceedings related to a
Characterization Issue, Acquiror shall permit Parent to provide comments which
shall be considered in good faith (solely with respect to the Characterization
Issue), provided, however, that Acquiror shall control all such proceedings. At
its sole option, Acquiror may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the IRS in respect of a
Characterization Issue and shall be entitled to settle or contest such
Characterization Issue, as the case may be; provided, however, that if Parent
elects by written notice to Acquiror to fund Acquiror's reasonable expenses with
respect to any IRS or other proceeding, Acquiror shall use reasonable commercial
efforts to uphold the characterization of the indemnity payment as an adjustment
to the Purchase Price, but shall not be required to litigate such treatment
unless Parent provides Acquiror with a written opinion of counsel selected by
Parent, but reasonably acceptable to Acquiror, that the characterization of the
indemnity payment will more likely than not be treated as an adjustment to the
Purchase Price. If and to the extent that the treatment of an indemnification
payment as an adjustment to the Purchase Price is finally determined to be
erroneous pursuant to this Section 6.13, the indemnifying party shall be
required to pay to the indemnified party the liability for any Taxes incurred by
the indemnified party as a result of the receipt of the indemnity payment.
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6.14 Certain Definitions. For purposes of this Agreement, "Due Date"
shall mean, with respect to any Tax Return, the date such return is due to be
filed (taking into account any valid extensions); "Tax" or "Taxes" shall mean
taxes (other than those taxes described in Section 6.5 hereof) of any kind,
levies or other like assessments, customs, duties, imposts, charges or fees, and
shall include any Tax liability for such amounts as a result of either being a
member of a combined, consolidated, unitary or affiliated group or of a
contractual obligation to indemnify any Person for Taxes, including, without
limitation, income, franchise, gross receipts, ad valorem, value added, excise,
real or property, asset, sales, use, license, payroll, transaction, capital, net
worth, withholding, estimated, social security, utility, workers' compensation,
severance, production, unemployment compensation, occupation, premium, windfall
profits, transfer and gains taxes or other governmental taxes imposed or payable
to the United States, or any state, county, local or foreign government or
subdivision or agency thereof, together with any interest, penalties or
additions with respect thereto and any interest in respect of such additions or
penalties; and "Tax Returns" shall mean all returns, reports, statements,
declarations, estimates and forms or other documents (including any related or
supporting information), required to be filed with respect to any Taxes.
6.15 Cendant Options; Holdings Plan.
(a) Promptly after an exercise of a Cendant Option, Parent (or
an Affiliate of Parent) shall provide the Acquiror Sub Surviving Corporation
with a report detailing such exercise. On a monthly basis, Parent (or an
Affiliate of Parent) shall pay over to the Acquiror Sub Surviving Corporation
the amount of all withholding taxes (the "Withholding Taxes") required to be
collected by Cendant under applicable law and one-half of the amount of all
Employment Taxes (as defined below) required to be paid under applicable law, in
each case, in respect of the exercise of such Cendant Options in the preceding
calendar month and shall provide a report (the "Tax Report") confirming the
exercises occurring during such calendar month. With respect to all Cendant
Options outstanding as of the Closing Date held by Affected Employees holding
Cendant Options as of the Closing Date ("Optionholders"), so long as an
Optionholder continues to be employed by a Transferred Company or other
Affiliate of Acquiror, the Cendant Options held by such Optionholder shall
continue to vest in accordance with their stated terms without regard to the
termination of employment provisions of such Cendant Options, and such Cendant
Options shall remain exercisable until the earliest to occur of (i) the date
that is one year after the date on which such Cendant Option becomes vested in
full, (ii) the date which is one year after the termination of the
Optionholder's employment with a Transferred Company or other Affiliate of
Acquiror, or (iii) the original expiration date of such Cendant Option.
Following the Closing, Acquiror shall deliver, or cause to be delivered to
Cendant, (i) on not less than a quarterly basis updated personnel records of all
Optionholders (which records shall include address and name change information,
work location, and any other information relevant to the withholding of Taxes,
and (ii) not less frequently than each pay period, names and dates of
termination of employment of Optionholders who terminated employment with the
Transferred Companies or other Affiliate of Acquiror during the preceding pay
period.
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(b) Acquiror shall cause the Acquiror Sub Surviving
Corporation or any of the Transferred Companies, as the case may be, to pay to
the proper Governmental Entity (A) all Withholding Taxes and Employment Taxes
received from Parent (or its Affiliate) pursuant to Section 6.15(a) and (B)
one-half of the amount of any FICA or FUTA Tax (or any similar employment Taxes
required under state or local law) ("Employment Taxes") required to be paid with
respect to the exercise of any Cendant Options and (c) all Employment Taxes
received from Parent (and its Affiliate) pursuant to Section 6.15(d). In
addition, in connection with any payment by the Acquiror , the Acquiror Sub
Surviving Corporation or any of the Transferred Companies of any amount with
respect to the Holdings Plan, the Acquiror Sub Surviving Corporation or any of
the Transferred Companies, as the case may be, shall (A) withhold the
Withholding Taxes required to be withheld under applicable Law and pay such
Withholding Taxes to the proper Governmental Entity and (B) pay to the proper
Governmental Entity one-half of the amount of any Employment Taxes that are
required to be paid under applicable Law. Acquiror shall cause the Acquiror Sub
Surviving Corporation or any of the Transferred Companies, as the case may be,
to (A) prepare and file any Tax Returns required to be filed in connection with
Withholding Taxes and Employment Taxes within the time and manner prescribed by
applicable Law and (B) prepare and provide to persons who exercised such Cendant
Options or received payments with respect to the Holdings Plan, any statement,
form or other document required to be provided under applicable Law.
(c) Unless otherwise required by applicable Law, the parties
to this Agreement shall treat, with respect to any payment described in Section
6.15(a) or (b), any amount that is required to be included in the gross income
of the holder of any Cendant Option, or a person who receives a payment pursuant
to the Holdings Plan, as an amount that may be properly deductible by the
Acquiror Sub Surviving Corporation or any of the Transferred Companies, as the
case may be, after the Closing Date.
(d) In connection with any payment by the Acquiror, the
Acquiror Sub Surviving Corporation or any of the Transferred Companies of any
amount with respect to the Holdings Plan, Acquiror shall, within a reasonable
period prior to the time that Employment Taxes with respect to any such payments
are due, provide Parent with sufficient information to enable Parent to
determine the total amount of Employment Taxes required to be paid under
applicable law. As promptly as practicable after receipt of such information,
Parent shall pay over to the Acquiror Sub Surviving Corporation one-half of the
amount of all Employment Taxes in respect of any such payments.
ARTICLE VII
CONDITIONS TO ACQUIROR'S AND ACQUIROR SUB'S OBLIGATIONS
The obligation of Acquiror and Acquiror Sub under this Agreement to
consummate the transactions contemplated hereby shall be subject to the
satisfaction of each of the following conditions, unless waived in writing by
Acquiror:
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7.1 Representations and Warranties. The representations and
warranties of Parent and Holdings contained in this Agreement shall be true and
correct as of the date hereof and as of the Closing Date as though such
representations and warranties were made at and as of such date (except that
representations and warranties given as of a specific date need be true and
correct only as of such date), except where the failure of such representations
and warranties to be so true and correct has not had, and is not likely to have,
individually or in the aggregate, a Material Adverse Effect on the Business
(disregarding for this purpose any qualification as to materiality or Material
Adverse Effect on the Business contained in such representations and
warranties).
7.2 Performance. Parent and Holdings shall have performed and
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by them on or prior to the
Closing Date.
7.3 No Injunction. No court of competent jurisdiction shall have
issued any order, decree or ruling, and there shall not be any statute, rule or
regulation, enjoining or prohibiting the consummation of the transactions
contemplated hereby or preventing the conduct of any material portion of the
Business after the Effective Time in substantially the same manner as presently
conducted.
7.4 H-S-R Act. Any waiting periods applicable to the transactions
contemplated by this Agreement under the H-S-R Act shall have expired or been
terminated.
7.5 Required Approvals. Subject to Section 2.7 hereof, the consents
of (a) the Federal Deposit Insurance Corp. and (b) the Utah State Department of
Financial Institutions (together, the "Required Approvals") shall have been
obtained and shall remain in full force and effect and any statutory waiting
periods in respect thereof shall have expired.
7.6 Opinion of Parent and Holdings' Counsel. Parent and Holdings
shall have delivered to Acquiror and Acquiror Sub opinions of counsel to Parent
and Holdings in the form of Exhibit K hereto.
7.7 Financing. Acquiror shall have received the proceeds of the
Financing.
7.8 GoodwillAmortization. Acquiror shall have received advice from
Deloitte & Touche LLP that under GAAP at the Effective Time, the goodwill
generated by the transactions contemplated hereby shall be amortized over forty
(40) years.
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ARTICLE VIII
CONDITIONS TO PARENT'S AND HOLDINGS' OBLIGATIONS
The obligation of Parent and Holdings under this Agreement to
consummate the transactions contemplated hereby shall be subject to the
satisfaction of each of the following conditions, unless waived in writing by
Holdings:
8.1 Representations and Warranties. The representations and
warranties of Acquiror and Acquiror Sub contained in this Agreement shall be
true and correct as of the date hereof and as of the Closing Date as though such
representations and warranties were made at and as of such date (except that
representations and warranties given as of a specific date need be true and
correct only as of such date), except where the failure of such representations
and warranties to be so true and correct has not had, and is not likely to have,
individually or in the aggregate, an Acquiror Material Adverse Effect
(disregarding for this purpose any qualification as to materiality or Acquiror
Material Adverse Effect contained in such representations and warranties).
8.2 Performance. Acquiror and Acquiror Sub shall have each performed
and complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by them on or prior to the
Closing Date.
8.3 No Injunction. No court of competent jurisdiction shall have
issued any order, decree or ruling, and there shall not be any statute, rule or
regulation, enjoining or prohibiting the consummation of the transactions
contemplated hereby.
8.4 H-S-R Act. Any waiting periods applicable to the transactions
contemplated by this Agreement under the H-S-R Act shall have expired or been
terminated.
8.5 Required Approvals. Subject to Section 2.7 hereof, the Required
Approvals shall have been obtained and shall remain in full force and effect and
any statutory waiting periods in respect thereof shall have expired.
8.6 Opinion of Acquiror and Acquiror Sub's Counsel. Acquiror and
Acquiror Sub shall have delivered to Parent and Holdings opinions of counsel to
Acquiror and Acquiror Sub in the form of Exhibit L hereto.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
9.1 Survival Periods. Each of the representations and warranties
made by the parties in this Agreement shall survive the Closing and the
Effective Time until the first
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anniversary of the Closing Date; provided, however, that the representations and
warranties contained in Sections 3.2, 3.3(a), 3.4, 3.8, 3.13, 4.2 and 4.3 hereof
(the "Surviving Representations") shall survive the Closing without limitation
(subject to any applicable statutes of limitations). Except with respect to the
Surviving Representations, the parties intend to shorten the statute of
limitations and agree that no claims or causes of action may be brought against
Parent, the Holdings Surviving Corporation, Acquiror or the Acquiror Sub
Surviving Corporation based upon, directly or indirectly, any of the
representations, warranties or agreements contained in Articles III and IV
hereof after the applicable survival period or, except as provided in Section
10.2 hereof, any termination of this Agreement except, in each case, with
respect to claims asserted prior to and pending at the time of such expiration.
This Section 9.1 shall not limit any covenant or agreement of the parties which
contemplates performance after the Effective Time.
9.2 Parent's and the Holdings Surviving Corporation's Agreement to
Indemnify.
(a) Subject to the terms and conditions set forth herein, from
and after the Effective Time, each of Parent and the Holdings Surviving
Corporation shall indemnify and hold harmless Acquiror and the Acquiror Sub
Surviving Corporation and their respective directors, officers, employees and
Affiliates and their respective successors and permitted assigns (collectively,
the "Acquiror Indemnitees") from and against all liability, demands, claims,
actions or causes of action, assessments, losses, damages, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses)
(collectively, the "Acquiror Damages") asserted against or incurred by any
Acquiror Indemnitee as a result of or arising out of (i) a breach of any
representation or warranty of Parent or Holdings contained in this Agreement
(provided that for purposes of indemnification pursuant to this Section 9.2(a),
any breach of any representation or warranty shall be determined without regard
to any qualification related to materiality or Material Adverse Effect on the
Business); (ii) a breach of any covenant or agreement of Parent, Holdings or the
Holdings Surviving Corporation contained in this Agreement; and (iii) the
Holdings Retained Liabilities and the Holdings Retained Assets.
(b) The obligation of Parent and the Holdings Surviving
Corporation to indemnify the Acquiror Indemnitees pursuant to clause 9.2(a)(i)
hereof is subject to the following limitations:
(i) no indemnification shall be made by Parent or the
Holdings Surviving Corporation unless the aggregate amount of Acquiror Damages
exceeds $30,000,000 and, in such event, indemnification shall be made by Parent
or the Holdings Surviving Corporation only to the extent such Acquiror Damages
exceed $18,000,000; provided, however, that the amount of Acquiror Damages for
any individual Claim must exceed $250,000, it being acknowledged and agreed that
Acquiror Indemnitiees shall not have the right to make a Claim for
indemnification under this Agreement in respect of Acquiror Damages in an amount
less than $250,000 ("De Minimis Acquiror Claims") and such De Minimis Acquiror
Claims shall not count toward the threshold amounts referred to above;
57
(ii) in no event shall the aggregate obligation of
Parent and the Holdings Surviving Corporation to so indemnify the Acquiror
Indemnitees exceed $500,000,000; and
(iii) Parent and the Holdings Surviving Corporation
shall be obligated to indemnify the Acquiror Indemnitees only for those claims
giving rise to Acquiror Damages as to which the Acquiror Indemnitees have given
Parent and the Holdings Surviving Corporation written notice thereof prior to
the end of the applicable survival period (as provided for in Section 9.1
hereof); any written notice delivered by an Acquiror Indemnitee to Parent and
the Holdings Surviving Corporation with respect to Acquiror Damages shall set
forth with as much specificity as is reasonably practicable the basis of the
claim for Acquiror Damages and, to the extent reasonably practicable, a
reasonable estimate of the amount thereof.
(c) The amount of any Acquiror Damages shall be reduced by (i)
any amount received by a Acquiror Indemnitee with respect thereto under any
insurance coverage or from any other party alleged to be responsible therefor
and (ii) the amount of any Tax Benefit Actually Realized by the Acquiror
Indemnitee (or any of its Affiliates) relating thereto. The Acquiror Indemnitees
shall use reasonable efforts to collect any amounts available under such
insurance coverage and from such other party alleged to have responsibility. If
a Acquiror Indemnitee receives an amount under insurance coverage or from such
other party with respect to Acquiror Damages at any time subsequent to any
indemnification provided by Parent or the Holdings Surviving Corporation
pursuant to this Section 9.2, then such Acquiror Indemnitee shall promptly
reimburse Parent or the Holdings Surviving Corporation, as the case may be, for
any payment made or expense incurred by Parent or the Holdings Surviving
Corporation in connection with providing such indemnification up to such amount
received by the Acquiror Indemnitee.
9.3 Acquiror's and the Acquiror Sub Surviving Corporation's
Agreement to Indemnify.
(a) Subject to the terms and conditions set forth herein, from
and after the Effective Time, Acquiror and the Acquiror Sub Surviving
Corporation shall indemnify and hold harmless Parent, the Holdings Surviving
Corporation and their respective directors, officers, employees and Affiliates
and their respective successors and permitted assigns (collectively, the
"Holdings Indemnitees") from and against all liability, demands, claims, actions
or causes of action, assessments, losses, damages, costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses)
(collectively, "Holdings Damages") asserted against or incurred by any Holdings
Indemnitee as a result of or arising out of (i) a breach of any representation
or warranty of Acquiror or Acquiror Sub contained in this Agreement (provided
that for purposes of indemnification pursuant to this Section 9.3(a), any breach
of any representation or warranty shall be determined without regard to any
qualification related to materiality or "Acquiror Material Adverse Effect");
(ii) a breach of any covenant or agreement on the part of Acquiror, Acquiror Sub
or the Acquiror Sub Surviving Corporation contained in this
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Agreement; (iii) the Transferred Liabilities; (iv) the Acquiror Sub Retained
Liabilities and the Acquiror Sub Retained Assets,
(b) Acquiror's and the Acquiror Sub Surviving Corporation's
obligation to indemnify the Holdings Indemnitees pursuant to clause 9.3(a)(i)
hereof is subject to the following limitations:
(i) no indemnification shall be made by Acquiror or the
Acquiror Sub Surviving Corporation unless the aggregate amount of Holdings
Damages exceeds $30,000,000 and, in such event, indemnification shall be made by
Acquiror or the Acquiror Sub Surviving Corporation only to the extent such
Holdings Damages exceed $18,000,000; provided, however, that the amount of such
Holdings Damages for any individual claim must exceed $250,000; it being
acknowledged and agreed that Seller shall not have the right to make a claim for
indemnification under this Agreement in respect of any Holdings Damages in an
amount less than $250,000 ("De Minimis Holdings Claims"), and such De Minimis
Holdings Claims shall not count toward the threshold amounts referred to above;
(ii) in no event shall the aggregate obligation of
Acquiror and the Acquiror Sub Surviving Corporation to so indemnify the Holdings
Indemnitees exceed $500,000,000; and
(iii) Acquiror and the Acquiror Sub Surviving
Corporation shall be obligated to indemnify the Holdings Indemnitees only for
those claims giving rise to Holdings Damages as to which the Holdings
Indemnitees have given Acquiror and the Acquiror Sub Surviving Corporation
written notice thereof prior to the end of the applicable survival period (as
provided in Section 9.1 hereof); any written notice delivered by a Holdings
Indemnitee to Acquiror and the Acquiror Surviving Corporation with respect to
Holdings Damages shall set forth with as much specificity as is reasonably
practicable the basis of the claim for Acquiror Damages and, to the extent
reasonably practicable, a reasonable estimate of the amount thereof.
(c) The amount of any Holdings Damages shall be reduced by (i)
any amount received by a Holdings Indemnitee with respect thereto under any
insurance coverage or from any other party alleged to be responsible therefor
and (ii) the amount of any Tax Benefit Actually Realized by the Holdings
Indemnitee (or any of its Affiliates) relating hereto. The Holdings Indemnitees
shall use reasonable efforts to collect any amounts available under such
insurance coverage and from such other party alleged to have responsibility. If
a Holdings Indemnitee receives any amount under insurance coverage or from such
other party with respect to Holdings Damages at any time subsequent to any
indemnification provided by Acquiror or the Acquiror Sub Surviving Corporation
pursuant to this Section 9.3, then such Holdings Indemnitee shall promptly
reimburse Acquiror or the Acquiror Sub Surviving Corporation, as the case may
be, for any payment made or expense incurred by Acquiror or the Acquiror Sub
Surviving Corporation in connection with providing such indemnification up to
such amount received by the Holdings Indemnitee.
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9.4 Third-Party Indemnification. The obligations of Parent and the
Holdings Surviving Corporation to indemnify the Acquiror Indemnitees under
Section 9.2 hereof with respect to Acquiror Damages and the obligations of
Acquiror and the Acquiror Sub Surviving Corporation to indemnify the Holdings
Indemnitees under Section 9.3 hereof with respect to Holdings Damages, in either
case, resulting from the assertion of liability by third parties (each, as the
case may be, a "Claim"), will be subject to the following terms and conditions:
(a) Any party against whom any Claim is asserted will give the
indemnifying party written notice of any such Claim promptly after learning of
such Claim, and the indemnifying party may at its option undertake the defense
thereof by representatives of its own choosing. Failure to give prompt notice of
a Claim hereunder shall not affect the indemnifying party obligations under this
Article IX, except to the extent the indemnifying party is materially prejudiced
by such failure to give prompt notice. If the indemnifying party, within 30 days
after notice of any such Claim, or such shorter period as is reasonably
required, fails to assume the defense of such Claim, the Acquiror Indemnitee or
the Holdings Indemnitee, as the case may be, against whom such Claim has been
made will (upon further notice to the indemnifying party) have the right to
undertake the defense, compromise or settlement of such Claim on behalf of, and
for the account and risk, and at the expense, of, the indemnifying party,
subject to the right of the indemnifying party to assume the defense of such
Claim at any time prior to settlement, compromise or final determination
thereof.
(b) Anything in this Section 9.4 to the contrary
notwithstanding, the indemnifying party shall not enter into any settlement or
compromise of any action, suit or proceeding or consent to the entry of any
judgment (i) which does not include as an unconditional term thereof the
delivery by the claimant or plaintiff to the Holdings Indemnitee or the Acquiror
Indemnitee, as the case may be, of a written release from all liability in
respect of such action, suit or proceeding or (ii) for other than monetary
damages to be borne by the indemnifying party, without the prior written consent
of the Holdings Indemnitee or the Acquiror Indemnitee, as the case may be, which
consent shall not be unreasonably withheld.
(c) The indemnifying party and the indemnified party shall
cooperate fully in all aspects of any investigation, defense, pre-trial
activities, trial, compromise, settlement or discharge of any claim in respect
of which indemnity is sought pursuant to this Article IX, including, but not
limited to, by providing the other party with reasonable access to employees and
officers (including as witnesses) and other information.
9.5 Insurance. The indemnifying party shall be subrogated to the
rights of the indemnified party in respect of any insurance relating to Acquiror
Damages or Holdings Damages, as the case may be, to the extent of any
indemnification payments made hereunder.
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9.6 No Duplication; Sole Remedy.
(a) Any liability for indemnification hereunder shall be
determined without duplication of recovery by reason of the state of facts
giving rise to such liability constituting a breach of more than one
representation, warranty, covenant or agreement.
(b) Subject to Section 11.11 hereof, the respective rights to
indemnification of Parent, the Holdings Surviving Corporation, Acquiror and the
Acquiror Sub Surviving Corporation as provided for in Sections 6.2, 9.2 and 9.3,
as applicable, for a breach of this Agreement, shall constitute such party's
sole remedy for such a breach and the breaching party shall have no other
liability or damages to the other party resulting from the breach, except that
nothing herein shall relieve a party from liability for fraud.
9.7 Indemnification of Certain Litigation. From and after the
Effective Time, each of Parent and the Holdings Surviving Corporation shall
continue the defense of, indemnify and hold harmless the Acquiror Indemnitees
and the Transferred Companies from and against any Acquiror Damages asserted
against or incurred by any Acquiror Indemnitee or any Transferred Company as a
result of or arising out of the litigation referred to in item 6 of Section 3.9
of the Holdings Disclosure Schedule, provided that no indemnification shall be
made by Parent or the Holdings Surviving Corporation unless the aggregate amount
of Acquiror Damages exceeds $500,000 and, in such event, indemnification shall
be made by Parent or Holdings Surviving Corporation only to the extent such
Acquiror Damages exceed $500,000. Notwithstanding anything to the contrary
contained in this Agreement, (i) the indemnification obligations of Parent and
Holdings Surviving Corporation provided under this Section 9.7(a) shall not be
subject to the limitations set forth in Section 9.2(b) and (b) shall not be
subrogated in respect of any insurance and (ii) any amounts paid hereunder shall
not be counted against the amounts set forth in Section 9.2(b).
ARTICLE X
TERMINATION AND ABANDONMENT
10.1 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Effective Time:
(a) by mutual written consent of the parties hereto; or
(b) by Parent or Holdings at any time after June 30, 1999;
(c) by Acquiror or Acquiror Sub at any time after July 31,
1999;
(d) by Parent or Holdings if Acquiror shall notify (or be
required under Section 5.8 to notify) Holdings of a Funding Termination Event
(unless any Lender whose
61
commitment has been withdrawn or terminated has been replaced with another
lending institution of comparable funding resources with an equal or greater
commitment on substantially the same terms and subject to substantially the same
conditions); or
(e) by Parent or Holdings if there shall have occurred any
disruption or adverse change, as determined by Parent or Holdings in its sole
discretion, in the financial or capital markets generally, or in the markets for
bank loan or bridge loan syndication, high yield debt, asset-backed securities
or equity securities in particular or affecting the syndication or funding of
bank loans or bridge loans (or the refinancing thereof) (each a "Market Event"),
provided that Parent or Holdings cannot terminate this Agreement if, after
giving written notice to the Lenders of its intent to terminate this Agreement,
the Lenders, within three (3) Business Days, confirm in writing that such Market
Event will not result in their refusing to comply with their obligations under
the Commitment Letters.
10.2 Procedure For, and Effect of, Termination. In the event of
termination of this Agreement and abandonment of the transactions contemplated
hereby by the parties hereto pursuant to Section 10.1 hereof, written notice
thereof shall be given by a party so terminating to the other party and this
Agreement shall forthwith terminate and shall become null and void and of no
further effect, and the transactions contemplated hereby shall be abandoned
without further action by any of the parties hereto. If this Agreement is
terminated pursuant to Section 10.1 hereof:
(a) each party shall redeliver all documents, work papers and
other materials of the other parties relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same, and all confidential information received by any party
hereto with respect to the other party shall be treated in accordance with the
Confidentiality Agreement and Section 5.4(b) hereof;
(b) all filings, applications and other submissions made
pursuant hereto shall, at the option of Holdings, and to the extent practicable,
be withdrawn from the agency or other Person to which made; and
(c) there shall be no liability or obligation hereunder on the
part of Parent, Holdings, Acquiror or Acquiror Sub or any of their respective
directors, officers, employees, Affiliates, controlling persons, agents or
representatives, except that such party may have liability to the other party if
the basis of termination is a willful, material breach by such party of one or
more of the provisions of this Agreement, and except that (i) the obligations
provided for in Sections 5.4 and 11.1 hereof shall survive any such termination
and (ii) all of the rights and obligations of each of the parties pursuant to
the Confidentiality Agreement shall survive the termination of this Agreement
without limitation.
10.3 Alternative Transaction. In the event that a Tax Notification
(as defined in Exhibit M hereto) shall be delivered, then the parties hereto
shall effectuate the transactions set forth in Exhibit M hereto.
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ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Fees and Expenses. Except as otherwise provided in this
Agreement, whether or not the transactions contemplated hereby are consummated,
all fees, costs and expenses incurred in connection with such transactions will
be paid by the party incurring said expenses. Parent, Holdings and the Holdings
Surviving Corporation shall indemnify Acquiror, Acquiror Sub and the Acquiror
Sub Surviving Corporation for the fees of Chase Securities, Inc. and any other
brokerage or similar fees payable in connection with the transactions
contemplated hereby based on agreements made by or on behalf of Parent,
Holdings, any Transferred Company or their respective Affiliates, and Acquiror
and the Acquiror Sub Surviving Corporation shall indemnify Parent, Holdings and
the Holdings Surviving Corporation for the fees of Xxxxxx Brothers Inc. and XX
Xxxxxxxxxx and any other brokerage or similar fees payable in connection with
the transactions contemplated hereby based on agreements made by or on behalf of
Acquiror, Acquiror Sub or any of their respective Affiliates.
11.2 Amendment. This Agreement may be modified, supplemented or
amended only by a written instrument executed by each of the parties hereto.
11.3 Entire Agreement. This Agreement (together with the Transaction
Agreements, the Disclosure Schedules, Schedules and Exhibits expressly
identified or referred to in this Agreement) and the Confidentiality Agreement
constitute the entire agreement of the parties with respect to its subject
matter, and supersede all prior agreements and understandings of the parties,
oral and written, with respect to its subject matter.
11.4 Execution in Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.
11.5 Notices. Unless otherwise provided herein, all notices and
other communications hereunder shall be in writing and may be given by any of
the following methods: (a) personal delivery; (b) facsimile transmission; (c)
registered or certified mail, postage prepaid, return receipt requested; or (d)
overnight delivery service. Such notices and communications shall be sent to the
appropriate party at its address or facsimile number given below or at such
other address or facsimile number for such party as shall be specified by notice
given hereunder (and shall be deemed given upon receipt by such party or upon
actual delivery to the appropriate address, or, in case of a facsimile
transmission, upon transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error; in the case of
notices sent by facsimile transmission, the sender shall contemporaneously mail
a copy of the notice to the
63
addressee at the address provided for above, provided, however, that such
mailing shall in no way alter the time at which the facsimile notice is deemed
received):
If to Parent or Holdings: PHH Corporation
0 Xxxxxx Xxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Telecopy: (000) 000-0000
Attention: General Counsel
Copies to: Cendant Corporation
0 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: General Counsel
and
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxxxxx Xxxxx Chuff, Esq.
If to Acquiror or Acquiror Sub: Avis Rent a Car, Inc.
000 Xxx Xxxxxxx Xxxx
Xxxxxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxxx Xxxxxxxx, Esq.
Copy to: White & Case LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
Attention: Xxxx Xxxxx, Esq.
11.6 Waivers. At any time prior to the Closing, the parties hereto
may (i) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance by the other
parties hereto with any of the agreements or conditions contained herein of the
other party subject to any specific provisions governing the effect of such
extensions or waivers. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party.
64
11.7 Applicable Law. This Agreement shall be governed by and
construed in accordance with the Laws of the State of New York without giving
effect to any of the conflict of law rules thereof; provided, that the Merger
shall be governed by the TBCA. Each party to this Agreement (a) waives, to the
fullest extent permitted by applicable Law, any right it may have to a trial by
jury in respect of any action, suit or proceeding arising out of or relating to
this Agreement, (b) consents to submit itself to the personal jurisdiction of
any federal court located in the State of New York or any New York state court
in the event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (c) agrees that it will not attempt to deny such
personal jurisdiction by motion or other request for leave from any such court
and (d) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
federal or state court sitting in the State of New York.
11.8 Headings. The headings contained in this Agreement are for the
sole purpose of convenience of reference, and shall not in any way limit or
affect the meaning or interpretation of any of the terms or provisions of this
Agreement.
11.9 Assignments. This Agreement may not be assigned, directly or
indirectly, by operation of law or otherwise, by any party hereto without the
prior written consent of the other parties; provided, however, that,
notwithstanding the foregoing, each of the parties hereto shall have the right
to assign any or all of its rights and obligations under this Agreement,
collectively or individually, to any of their respective Affiliates; provided,
however, that no such assignment shall relieve such party from its obligations
under this Agreement.
11.10 Severability. If any provision of this Agreement is held to be
invalid or unenforceable, such a provision shall (so far as invalid or
unenforceable) be given no effect and shall be deemed to be excluded from this
Agreement, but without invalidating any of the remaining provisions of this
Agreement. Upon such determination that any term or other provision is invalid
or unenforceable, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that terms of such provision
be effectuated as originally contemplated to the fullest extent possible.
11.11 Specific Performance. Notwithstanding any other provision of
this Agreement, the parties hereto agree that if any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached, irreparable damage would occur, no adequate remedy at law
would exist and damages would be difficult to determine, and that the parties
shall be entitled to specific performance of the terms hereof and immediate
injunctive relief, without the necessity of proving the inadequacy of money
damages as a remedy, in addition to any other remedy at law or equity.
11.12 Interpretation. All references herein to "$" or "dollars"
shall mean United States dollars. In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by the parties and no presumption or burden of
65
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement.
11.13 No Third-Party Beneficiaries. This Agreement is solely for the
benefit of Parent, Holdings and their respective successors and permitted
assigns, with respect to the obligations of Acquiror and Acquiror Sub under this
Agreement, and for the benefit of Acquiror and Acquiror Sub, and their
respective successors and permitted assigns, with respect to the obligations of
Parent and Holdings, under this Agreement, and this Agreement shall not be
deemed to confer upon or give to any other third party any remedy, claim of
liability or reimbursement, cause of action or other right.
[SIGNATURE PAGE FOLLOWS]
66
IN WITNESS WHEREOF, this Agreement has been executed by duly
authorized officers of each of the parties all as of the date first above
written.
PHH CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
PHH HOLDINGS CORPORATION
By: /s/ Xxxxxx X. Xxxxxxx
-------------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President
AVIS RENT A CAR, INC.
By: /s/ Xxxxx Xxxxxxx
-------------------------------------------
Name: Xxxxx Xxxxxxx
Title: Executive Vice President
AVIS FLEET LEASING AND MANAGEMENT CORPORATION
By: /s/ Xxxxx Xxxxxxx
-------------------------------------------
Name: Xxxxx Xxxxxxx
Title: Executive Vice President
67
The following exhibits and schedules to the foregoing merger
agreement have not been included because they have been deemed to not be
material to investors. However, Avis Rent A Car, Inc. undertakes to provide such
documents to the Commission upon request:
1. Assignment and Modification Agreement dated as of June 30, 1999
by and among Avis Rent A Car System, Inc., Avis Rent A Car, Inc. and Cendant
Corporation.
2. Registration Rights Agreement dated as of June 30, 1999 by and
among Avis Rent A Car, Inc. Avis Fleet Leasing and Management Corporation, PHH
Corporation, and PHH Holdings Corporation.
3. Articles of Merger dated as of May 22, 1999 merging PHH Holdings
Corporation with Avis Fleet Leasing and Management Corporation.
4. Plan of Merger dated as of May 22, 1999, by and among PHH
Corporation, PHH Holdings Corporation, Avis Rent A Car, Inc. and Avis Fleet
Leasing and Management Corporation.
5. Instrument of Assumption, dated as of May 22, 1999 by Avis Fleet
Leasing and Management Corporation in favor of PHH Holdings Corporation.
6. Undertaking dated as of May 22, 1999 by Avis Fleet Leasing and
Management Corporation, in favor of PHH Corporation and PHH Holdings
Corporation.
7. Trademark License Agreement dated as of May 22, 1999 by and among
PHH Holdings Corporation, and Avis Fleet Leasing and Management Corporation.
8. Stockholders' Agreement dated as of May 22, 1999 by and among
Avis Rent A Car, Inc., Avis Fleet Leasing and Management Corporation, and PHH
Corporation.
9. Escrow Agreement dated as of May 22, 1999 by and among PHH
Corporation, Avis Rent A Car, Inc., Avis Fleet Leasing and Management
Corporation and The Chase Manhattan Bank.
10. Transitional License Agreement dated as of May 22, 1999 between
Cendant, Corporation and Avis Fleet Leasing and Management Corporation.
11. Non-Competition Agreement dated as of May 22, 1999 among Avis
Rent A Car, Inc., Avis Fleet Leasing and Management Corporation, PHH Corporation
and PHH Holdings Corporation.
12. Transition Services Agreement dated as of June 30, 1999, by and
between Xxxxxx Express LLC and Xxxxxx Express Financial Services Corporation.
13. Corporate Services Transition Agreement dated as of June 30,
1999 by and between PHH Corporation and Avis Fleet Leasing and Management
Corporation.
14. The Schedules to the Agreement and Plan of Merger and
Reorganization dated as of May 22, 1999 by and among PHH Corporation, PHH
Holdings Corporation, Avis Rent A Car, Inc. and Avis Fleet Leasing and
Management Corporation:
Schedule I Transferred Companies
Schedule II Transferred Assets
Schedule III Holdings Retained Assets
Schedule IV Transferred Liabilities
Schedule V Holdings Retained Liabilities
Schedule VI Retained Intellectual Property
15. The disclosure schedules to the Agreement and Plan of Merger and
Reorganization dated as of May 22, 1999 by and among PHH Corporation, PHH
Holdings Corporation, Avis Rent A Car, Inc. and Avis Fleet Leasing and
Management Corporation:
Schedule 3.3 Subsidiaries and Affiliates
Schedule 3.4(a) Capitalization
Schedule 3.4(b) Ownership of Shares
Schedule 3.5 Consents and Approvals
Schedule 3.6(a) Audited Financial Statements
Schedule 3.6(b) Liabilities and Obligations
Schedule 3.7 Absence of Certain Changes of Events
Schedule 3.8 Tax Matters
Schedule 3.9 Litigation
Schedule 3.10(b) Compliance with Laws
Schedule 3.11(a) Material Contracts
2
Schedule 3.11(b) Material Contracts
Schedule 3.12 Labor Relations
Schedule 3.13(a) ERISA
Schedule 3.13(b) ERISA
Schedule 3.14 Intellectual Property
Schedule 3.16 Environmental Matters
Schedule 3.17 Real Property
Schedule 3.18 Insurance
Schedule 3.20 Sufficiency of Assets
Schedule 3.21 Customers
Schedule 4.3(a) Capitalization
Schedule 4.3(b) Exceptions to Ownership of Shares
Schedule 4.4 Consents and Approvals; Violations
Schedule 4.6(b) Financial Information; Undisclosed Liabilities
Schedule 4.7 Litigation
Schedule 4.8 Non-Compliance with Laws
Schedule 5.9(c) Employee Agreements, Plans or Arrangements
Schedule 5.9(e) Bonus Pool/Holdings Plan
Schedule 5.16 Cendant Marks
Schedule 5.17 Intercompany Obligations
Schedule 5.17(c) Inercompany Obligations; Affiliate
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