Exhibit 2.1
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STOCK PURCHASE AGREEMENT
BY AND AMONG
SATELLITE ACQUISITION CORPORATION,
SAFECO CORPORATION,
AND
GENERAL AMERICA CORPORATION
AS THE SOLE SHAREHOLDER
OF
TALBOT FINANCIAL CORPORATION
MARCH 15, 2004
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TABLE OF CONTENTS
PAGE
1. The Closing..............................................................................................1
2. The Purchase.............................................................................................2
3. Purchase Price...........................................................................................2
4. Representations and Warranties of the Sellers............................................................2
4.1 Organization....................................................................................2
4.2 Capitalization..................................................................................2
4.3 Authorization; Validity of Agreement............................................................3
4.4 No Violations; Consents.........................................................................3
4.5 Financial Statements............................................................................4
4.6 Litigation; Compliance with Law; Licenses and Permits...........................................4
4.7 Employee Benefit Plans; ERISA...................................................................5
4.8 Real Property...................................................................................5
4.9 Material Contracts..............................................................................6
4.10 Company Software................................................................................6
4.11 Taxes...........................................................................................6
4.12 Affiliated Party Transactions...................................................................8
4.13 Brokers.........................................................................................8
4.14 Insurance.......................................................................................8
4.15 Absence of Sensitive Payments...................................................................8
5. Representations and Warranties of the Buyer..............................................................9
5.1 Organization of the Buyer.......................................................................9
5.2 Authorization; Validity of Agreement............................................................9
5.3 No Violations; Consents and Approvals...........................................................9
5.4 Financing......................................................................................10
5.5 No Brokers.....................................................................................10
6. Agreements of the Parties...............................................................................10
6.1 No Competition.................................................................................10
6.2 Taxes..........................................................................................12
6.3 Termination of Agreements and the Sellers' Release.............................................14
6.4 Required Consents..............................................................................15
6.5 Conduct of Business............................................................................15
6.6 Access and Information.........................................................................17
6.7 Public Statements..............................................................................17
6.8 Stock Options..................................................................................17
6.9 Other Actions..................................................................................17
6.10 Designated Employees...........................................................................17
6.11 HSR Filings....................................................................................18
6.12 Indemnification Insurance......................................................................18
6.13 No Solicitation................................................................................18
6.14 Interim Financial Statements; Closing Balance Sheet............................................18
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TABLE OF CONTENTS
(continued)
PAGE
7. Conditions Precedent to Closing.........................................................................19
7.1 Conditions Precedent to the Buyer's Obligations to Close.......................................19
7.2 Condition Precedent to the Sellers' Obligations to Close.......................................20
7.3 Deliveries of the Sellers......................................................................21
7.4 Deliveries of the Buyer........................................................................21
8. Indemnification.........................................................................................21
8.1 Survival of Representations and Warranties.....................................................21
8.2 Indemnification by the Sellers.................................................................22
8.3 Indemnification by the Buyer...................................................................22
8.4 Limitations on Liability.......................................................................23
8.5 Indemnification Procedures.....................................................................24
9. Termination.............................................................................................25
9.1 Events of Termination..........................................................................25
9.2 Effects of Termination.........................................................................26
10. Definitions.............................................................................................26
11. Miscellaneous...........................................................................................32
11.1 Transaction Fees and Expenses..................................................................32
11.2 Notices........................................................................................32
11.3 Amendment......................................................................................33
11.4 Waiver.........................................................................................33
11.5 Governing Law; Venue...........................................................................34
11.6 Remedies.......................................................................................34
11.7 Severability...................................................................................34
11.8 Further Assurances.............................................................................34
11.9 Assignment.....................................................................................34
11.10 Binding Effect.................................................................................35
11.11 No Third Party Beneficiaries...................................................................35
11.12 Entire Agreement...............................................................................35
STOCK PURCHASE AGREEMENT
Dated as of March 15, 2004
The parties to this Agreement (this "AGREEMENT") are Satellite Acquisition
Corporation, a Washington corporation (the "Buyer"), Safeco Corporation, a
Washington corporation ("PARENT") and General America Corporation, a Washington
corporation (the "SELLER," and, collectively with Parent, the "SELLERS"). Terms
not otherwise defined herein shall have the meanings given them in SECTION 10.
WHEREAS, the Seller owns all of the issued and outstanding capital stock
(the "SHARES") of Talbot Financial Corporation, a Washington corporation (the
"COMPANY"); and
WHEREAS, Parent owns all of the issued and outstanding capital stock
Seller; and
WHEREAS, Xxxxx Xxxxxx, Xxxxx Xxxxxxxx, Xxx Xxxxxx (the "MANAGEMENT
SHAREHOLDERS") and certain other members of management of the Company and its
Subsidiaries are the shareholders, directors and officers of the Buyer as of the
date hereof; and
WHEREAS, the Buyer desires to purchase all of the Shares, and the Sellers
desire to sell all of the Shares to the Buyer, upon and subject to the terms and
conditions set forth below; and
WHEREAS, the parties intend to continue to work together for their mutual
benefit to build on their long-standing relationship as an insurance agency and
insurance company; and
WHEREAS, attempts to roll, re-market or move to another insurance company,
all or substantially all of the book of insurance policies written through an
agency affiliated with the Buyer and in force with a property-casualty Affiliate
of the Sellers as of the Closing Date would be and are inconsistent with the
intent and purpose of this Agreement and contrary to the parties' understanding;
and
WHEREAS, the Sellers intend to continue to do business with Buyer and its
Affiliates on terms consistent with its past practices with regard to
compensation, support, pricing, underwriting or any other material business
term.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
Buyer and the Sellers hereby agree as follows:
1. THE CLOSING. The closing of the purchase and sale provided for in this
Agreement (the "CLOSING") shall take place at the offices of Xxxxxx, Xxxxxxxxxx
& Xxxxxxxxx, LLP, at 10:00 a.m. (local time) on the earliest practicable
business day after the waiting period under the HSR Act has expired or been
terminated and all other closing conditions set forth in SECTION 7 hereof have
been satisfied or waived by the applicable party hereto, or at such other date,
time or location as the Buyer and the Sellers shall agree (the "CLOSING DATE").
2. THE PURCHASE. Upon the terms and subject to the conditions set forth in
this Agreement, on the Closing Date, the Seller shall sell, assign, transfer,
convey and deliver the Shares to the Buyer, and the Buyer shall purchase the
Shares, free and clear of any Encumbrances.
3. PURCHASE PRICE. As consideration for the Shares, at the Closing the
Buyer shall pay the Seller an aggregate purchase price equal to $90,000,000 by
wire transfer of immediately available funds (the "PURCHASE PRICE"). The parties
acknowledge and agree that the Purchase Price for the Shares specifically does
not include the Designated Employees, who shall be transferred in accordance
with SECTION 6.11.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. The Sellers represent and
warrant to the Buyer that, except as otherwise set forth with appropriate
section references in the Schedule of Exceptions, each of the following
statements is true and correct as of the date hereof
4.1 ORGANIZATION. The Company and each Subsidiary is a corporation
duly organized, validly existing and in good standing (with respect to
jurisdictions that recognize such concept) under the laws of its state of
incorporation and has the requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as it is now being
conducted. The Company and each Subsidiary that is incorporated in the state of
Washington has paid all excise taxes required by the Washington Department of
Revenue. The Company and each Subsidiary is duly qualified or licensed to do
business as a foreign corporation and is in good standing (with respect to
jurisdictions that recognize such concept) in each jurisdiction in which the
nature of the business conducted by it makes such qualification or licensing
necessary, except for those jurisdictions where the failure to be so qualified
or licensed or to be in good standing individually or in the aggregate would not
have a Material Adverse Effect. The Sellers have delivered to the Buyer true,
correct and complete copies of the Articles of Incorporation and Bylaws, as
currently in effect, of the Company and of the organizational documents, as
currently in effect, of each Subsidiary.
4.2 CAPITALIZATION.
(a) All of the Shares and all of the issued and outstanding
capital stock or other equity of each Subsidiary (the "SUBSIDIARY EQUITY") and
the Company is owned of record and beneficially by the Sellers, either directly
or indirectly through the Company or a Subsidiary. The Shares and the Subsidiary
Equity are currently free and clear of all claims, liens, mortgages,
encumbrances, pledges, and other security interests of any kind (collectively,
"ENCUMBRANCES") and upon the Closing, the Buyer shall receive good and
marketable title to the Shares free and clear of all Encumbrances. The Shares
and Subsidiary Equity are duly authorized, validly issued, fully paid and
nonassessable. There are no (i) options, warrants, calls, preemptive rights,
subscriptions or other rights, convertible securities, agreements or commitments
of any character obligating now or in the future, the Company, the Sellers or
any Subsidiary to issue, transfer or sell any Shares, any Subsidiary Equity or
any shares of capital stock, options, warrants, calls or other equity interest
of any kind whatsoever in the Company or any Subsidiary or securities
convertible into or exchangeable for such shares or equity interests, (ii)
contractual obligations of the Company to repurchase, redeem or otherwise
acquire any capital stock or equity interest of the Company or (iii) voting
trusts, proxies or similar Contracts to which the Company, a Subsidiary or the
Sellers are a party with respect to the voting of the capital stock of the
Company or any Subsidiary.
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(b) Except for the Subsidiaries, all of which are listed on
SCHEDULE 4.2(B) to the Schedule of Exceptions, the Company does not own any
outstanding shares of capital stock (or other equity interests of entities other
than corporations) of any partnership, joint venture, trust, corporation,
limited liability company or other entity.
4.3 AUTHORIZATION; VALIDITY OF AGREEMENT. Each of the Sellers has the
requisite corporate power and authority to execute, deliver and perform this
Agreement and each of the other agreements, instruments, documents and
certificates to be executed and delivered by each of the Sellers pursuant to
this Agreement, including but not limited to any item referred to in SECTION 7
(collectively, with this Agreement, the "TRANSACTION DOCUMENTS"), and to assume
and perform any obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. This Agreement has been, and each
of the other Transaction Documents upon the Closing will be, duly executed,
authorized and delivered by the Sellers and this Agreement is, and each of the
Transaction Documents upon the Closing will be, a valid and binding obligation
of each of the Sellers, enforceable against it in accordance with its respective
terms, except that the enforceability of this Agreement and the other
Transaction Documents may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
4.4 NO VIOLATIONS; CONSENTS.
(a) The execution, delivery and performance of each of this
Agreement and the other Transaction Documents by the Sellers do not, and the
consummation by them of the transactions contemplated hereby and thereby will
not: (i) violate any provision of the Articles of Incorporation, Bylaws or other
organizational documents of each of the Sellers, the Company or any Subsidiary,
(ii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, guarantee,
other evidence of indebtedness, license, lease, option, employment agreement,
contract, undertaking, understanding, covenant, agreement or other instrument or
document (each, a "CONTRACT") to which the Sellers, the Company or any
Subsidiary is a party or by which any of their properties or assets may be bound
or otherwise subject, except for any consents listed on SCHEDULE 4.4(A) to the
Schedule of Exceptions (together with the consents listed on Schedule 4.4(b) to
the Schedule of Exceptions, the "REQUIRED CONSENTS"), or (iii) subject to the
expiration or termination of the waiting period under the HSR Act, violate any
Law applicable to the Sellers, the Company or the Subsidiaries or any of their
respective properties or assets.
(b) No consent of any legislative or executive agency or
department or other regulatory service, authority or agency or any court,
arbitration panel or other tribunal or judicial authority of any Governmental
Entity or Person (a "CONSENT"), is required in connection with the execution,
delivery and performance of this Agreement or any of the other Transaction
Documents by the Sellers or the consummation by the Sellers of the transactions
contemplated hereby and thereby, except for the Consents listed on Schedule
4.4(b) to the Schedule of Exceptions and the expiration or termination of the
waiting period under the HSR Act.
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4.5 FINANCIAL STATEMENTS.
(a) Attached as SCHEDULE 4.5(A) to the Schedule of Exceptions is
the unaudited consolidated balance sheet of the Company as of December 31, 2003
(the "REFERENCE BALANCE SHEET"), together with the related unaudited
consolidated statements of income for the year ended December 31, 2003
(including the related notes, if any) (collectively, the "REGULAR FINANCIAL
STATEMENTS").
(b) The Regular Financial Statements fairly present the
consolidated financial position of the Company and the Subsidiaries as of the
respective dates thereof and the results of operations of the Company and the
Subsidiaries for the respective periods set forth therein. The Regular Financial
Statements have been prepared in accordance with United States generally
accepted accounting principles, consistently applied ("GAAP") as of the dates
and for the periods involved, subject to the absence of notes and to normal
fiscal year-end adjustments in the ordinary course (none of which, individually
or in the aggregate, will be material to the business or the operations of the
Company and the Subsidiaries on a consolidated basis). The Regular Financial
Statements and the Interim Financial Statements, together with the cooperation
and access to information as provided in SECTION 6.7, are or will be sufficient
to permit the preparation of audited financial statements for the year ended
December 31, 2003 to allow compliance with any obligations under applicable Law
(including, but not limited, to Regulation S-X, as promulgated by the SEC
("REGULATION S-X")).
(c) Neither the Company nor any Subsidiary has any liabilities
(whether accrued, contingent, known, or otherwise) other than those that (i) are
set forth or reserved against on the Reference Balance Sheet; (ii) were incurred
in the ordinary course of business after the date of the Reference Balance Sheet
or (iii) would not be required to be disclosed in the Company's financial
statements in accordance with GAAP.
(d) Since January 1, 2003, the Company and each Subsidiary has
maintained records that in all material respects accurately reflect transactions
in reasonable detail, and accounting controls, policies and procedures
reasonably designed to ensure that such transactions are recorded in a manner
that permits the preparation of financial statements in accordance with GAAP.
(e) Since the date of the Reference Balance Sheet, no event,
condition or circumstance has occurred that could, or could be reasonably likely
to, have a Material Adverse Effect on the Company or any Subsidiary.
4.6 LITIGATION; COMPLIANCE WITH LAW; LICENSES AND PERMITS.
(a) There is no claim, suit, action, investigation or proceeding
(each, a "Proceeding") pending, nor is there any Proceeding threatened, that
involves or affects either of the Company or any Subsidiary, by or before any
Governmental Entity, court, arbitration panel or any other Person.
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(b) Since January 1, 2000, the Company and each Subsidiary has
complied with all applicable Laws, including but not limited to Laws relating to
zoning, building codes, antitrust, occupational safety and health, industrial
hygiene, environmental protection, water, ground or air pollution, the
generation, handling, treatment, storage or disposal of Hazardous Substances,
Environmental Laws, consumer product safety, product liability, hiring, wages,
hours, employee benefit plans and programs, collective bargaining, except for
any non-compliance that did not have or will not have a Material Adverse Effect.
Tax representations and warranties are exclusively included in Section 4.11.
Since January 1, 2000, neither the Company nor any Subsidiary has received any
notice of any violation of any such Law.
4.7 EMPLOYEE BENEFIT PLANS; ERISA.
(a) The Company has listed on Schedule 4.7 to the Schedule of
Exceptions, and has made available to Buyer copies of, all Employee Benefit
Plans maintained, or contributed to, by the Company or any Subsidiary for the
benefit of any current of former employees, officers or directors of the Company
or any Subsidiary or pursuant to which such current or former employees,
officers or directors are entitled to current or future benefits. Sellers have
made a valid election under section 414(r) of the Code to treat the Company and
its Subsidiaries as a qualified separate line of business for all purposes of
Section 401 of the Code.
(b) Each Assumed Plan covers only employees of the Company or its
Subsidiaries (or former employees or beneficiaries with respect to service with
each such Company or its Subsidiaries). Neither the Company nor any Subsidiary
is liable for any material amount, contingent or otherwise, due under or
relating to any Employee Benefit Plan other than the Assumed Plans and no
condition exists which could result in any material liability associated with
any Employee Benefit Plan, other than the Assumed Plans, that could be assessed
against the Company, it Subsidiaries or the Buyer. On and after the Closing, the
Company, or its Subsidiaries, shall not be responsible for contributions to, or
the administration of, any Employee Benefit Plan, other than those Assumed
Plans.
4.8 REAL PROPERTY. Neither the Company nor any Subsidiary owns any
real property.
4.9 MATERIAL CONTRACTS. There is no Contract (including any amendments
or modifications thereto through the date hereof) to which Parent or the Seller
is a party as a result of which the Company or any Subsidiary (a) guarantees or
indemnifies or is otherwise liable or responsible for the obligations or
liabilities of another or provides for a charitable contribution by the Company
or any Subsidiary, (b) involves an agreement with any bank, finance company or
similar organization; or (c) restricts the Company or any Subsidiary from
engaging in any business or activity anywhere in the world (the "MATERIAL
CONTRACTS"). The Sellers have heretofore made available true, complete and
correct copies of all Material Contracts to the Buyer.
4.10 COMPANY SOFTWARE. Except for standard, royalty-free licenses
available in the ordinary course to any insurance agent representing Sellers'
products, the Company and the Subsidiaries do not require any license, lease,
sub-lease or other agreements or permissions with respect to use rights with or
from any Seller in order to continue to use, practice and exploit the Company
Software in the conduct of their respective businesses as currently conducted
and to grant rights to customers, brokers and others to use, practice and
exploit the same.
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4.11 TAXES.
(a) The Company and each Subsidiary has (A) duly and timely filed
or caused to be filed with the applicable Tax Authorities each Tax Return that
is required to be filed by or on behalf of the Company or each such Subsidiary
or that includes or relates to the Company and each such Subsidiary, their
respective income, sales, assets or businesses, and such Tax Returns are correct
and complete in all material respects (which material limitation shall not be
taken into account for purposes of any rights to indemnification under this
Agreement); (B) duly and timely paid, or caused to be duly and timely paid, all
Taxes due and payable (whether or not shown on any Tax Return), on or prior to
the Closing Date, including any extensions thereto, and (C) properly accrued in
accordance with GAAP on the Closing Balance Sheet a provision for the payment of
all Taxes due or claimed to be due or for which the Company and each such
Subsidiary, as applicable, otherwise is liable, in each case with respect to the
Company's or each such Subsidiary's respective income, sales, assets or
businesses;
(b) Neither the Company nor any Subsidiary currently is the
beneficiary of any extension of time within which to file any Tax Return;
(c) The Company and each Subsidiary has complied in all material
respects (which material limitation shall not be taken into account for purposes
of any rights to indemnification under this Agreement) with all applicable Laws
relating to the payment, collection or withholding of any Tax, and the
remittance thereof to any and all Tax Authorities pursuant to state, local and
foreign sales, use and transfer taxes and pursuant to Code Sections 1441, 1442,
1445, 3102, 3121, 3402, 3403, 3405, 3406 and 3509, and any comparable provision
of state, local or foreign Tax law;
(d) There is no Encumbrance for Taxes upon any asset or property
of the Company or any Subsidiary (except for any statutory Encumbrance for any
Tax not yet due);
(e) There is no outstanding written subpoena or summons from any
Tax Authority with respect to any federal income Tax, or to Sellers' Knowledge
with respect to any other Tax, for which the Company or any Subsidiary is or may
be liable or with respect to the Company's or such Subsidiary's, as applicable,
income, sales, assets or business;
(f) To Sellers' Knowledge, neither the Company nor any Subsidiary
is a party to any agreement with any Tax Authority (including, but not limited
to, any closing agreement within the meaning of Code Section 7121 or any
analogous provision of applicable Law) or has requested or received a private
letter or other ruling or determination from any Tax Authority relating to any
Tax for which the Company or such Subsidiary is or may be liable or with respect
to the Company's or such Subsidiary's, as applicable, income, sales, assets or
business which could affect the Tax liability of the Company or any Subsidiary
after the Closing Date;
(g) Neither the Company nor any Subsidiary is a party to any
contract, agreement or other arrangement that could result, alone or in
conjunction with any other contract, agreement or other arrangement, in the
payment of any amount that would not be deductible by reason of Code Section
162(m) or 280G (or comparable provisions of state, local or foreign Tax law);
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(h) Except as provided in Section 6.3, no election under Code
Section 338 or any similar provision of applicable Law has been made or required
to be made by or with respect to the Company or any Subsidiary;
(i) To the Sellers' Knowledge, no jurisdiction where the Company
or any Subsidiary does not file a Tax Return has made a written claim that the
Company or any such Subsidiary is required to file a Tax Return for such
jurisdiction or is subject to Tax in such jurisdiction, which Tax Return remains
unfiled or Taxes remain unpaid;
(j) The statute of limitations for any Tax Proceeding or the
assessment or collection of any Tax for which the Company or any Subsidiary is
or may be liable or with respect to its income, sales, assets or business has
never been extended or waived, which waiver or extension remains in effect;
(k) The Company and the Subsidiaries shall not be required to
include in a Tax period ending after the Closing Date taxable income
attributable to income that accrued in a prior Tax period but was not recognized
in any prior Tax period as a result of the installment method of accounting, the
long-term contract method of accounting, the cash method of accounting or
Section 481 of the Code or comparable provisions of state, local or foreign Tax
law;
(l) Neither the Company nor any of its Subsidiaries is or has
been a beneficiary or has otherwise participated in any reportable transaction
within the meaning of Treasury Regulation ss. 1.6011-4(b)(1);
(m) Schedule 4.11 to the Schedule of Exceptions sets forth a list
of all jurisdictions (foreign and domestic) in which any Tax Returns have been
filed by or on behalf of the Company and any Subsidiary, or with respect to the
Company's or the Subsidiaries' respective income, sales, assets or businesses
within the three-year period ending on (and including) the Closing Date and a
description of each such Tax Return and the period for which it was filed;
(n) Neither Parent nor the Seller is a "foreign person" for
purposes of Section 1445 of the Code;
(o) Schedule 4.11 to the Schedule of Exceptions sets forth a list
of all jurisdictions (foreign and domestic) in which Taxes or Tax Returns
currently are or have been the subject of Tax Proceedings for which the Company
or any Subsidiary could be liable after the Closing Date and a description of
all such Tax and Tax Returns; and
(p) The Sellers have provided to the Buyer all written audit
reports, closing agreements, letter rulings, technical advice memoranda or
determinations relating to any Taxes for which the Company or any Subsidiary is
or may be liable after the Closing Date with respect to the Company's or such
Subsidiary's respective income, sales, assets or businesses.
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4.12 AFFILIATED PARTY TRANSACTIONS. Except for obligations arising
under this Agreement and the Transaction Documents, neither the Sellers nor any
Affiliate of the Sellers has, directly or indirectly, any obligation to or cause
of action or claim against the Company or any Subsidiary.
4.13 BROKERS. Sellers have engaged Xxxxxxx, Xxxxx & Co. as their
financial advisor in connection with this transaction, and Sellers and their
Affiliates (other than the Company and its subsidiaries) are solely responsible
for payment of the fees and expenses of such engagement. None of the Sellers nor
any Affiliate of a Seller has employed, or otherwise engaged, any broker or
finder or incurred any liability for any brokerage or investment banking fees,
commissions, finders' fees or other similar fees in connection with the
transactions contemplated by this Agreement on behalf of or for which the
Company is or the Management Shareholders are or will be obligated.
4.14 INSURANCE. All insurance policies of any kind covering the
Company and the Subsidiaries (a) are with insurance companies that are
financially sound and reputable and are in full force and effect; (b) are
sufficient for compliance with all material requirements of law and of all
applicable Material Contracts; and (c) are valid, outstanding and enforceable
policies. Since January 1, 2000, neither the Company nor any Subsidiary has been
denied any insurance coverage which it has requested. The Buyer has been
provided copies of all such policies.
4.15 ABSENCE OF SENSITIVE PAYMENTS. Neither the Company, any
Subsidiary nor any of their respective directors, officers, brokers,
sub-brokers, agents or employees, has made or has agreed to make on behalf of
the Company or any Subsidiary:
(a) any contributions, payments or gifts of funds or property to
any governmental official, employee or agent where either the payment or the
purpose of such contribution, payment or gift was or is illegal under the Laws
of the United States, any state thereof, or any jurisdiction (foreign or
domestic); or
(b) any contribution or expenditure, or has reimbursed any
political gift or contribution or expenditure made by any other Person, to
candidates for public office, whether federal, state or local (foreign or
domestic) where such contributions were or would be a violation of applicable
Law.
Notwithstanding the foregoing, Sellers make no representation
under this Section 4.14 with respect to any Management Shareholder.
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents and
warrants to the Sellers as follows:
5.1 ORGANIZATION OF THE BUYER. The Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Washington. The Buyer has the requisite corporate power and authority to carry
on its business as now being conducted, except, as to subsidiaries, for those
jurisdictions where the failure to be so organized, existing or in good standing
individually or in the aggregate would not have a Material Adverse Effect on the
Buyer. The Buyer is duly qualified or licensed to do business and is in good
standing (with respect to jurisdictions that recognize such concept) in each
jurisdiction in which the nature of its business or the ownership, leasing or
operation of its properties makes such qualification or licensing necessary,
except for those jurisdictions where the failure to be so qualified or licensed
or to be in good standing individually or in the aggregate would not have a
Material Adverse Effect on the Buyer.
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5.2 AUTHORIZATION; VALIDITY OF AGREEMENT. The Buyer has the requisite
corporate power and authority to execute, deliver and perform this Agreement and
each other Transaction Document executed or to be executed by the Buyer pursuant
to the terms of this Agreement and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance by the Buyer of this
Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by the board of directors of the Buyer and no other corporate
proceedings on the part of the Buyer are necessary to authorize the execution,
delivery and performance of this Agreement and the other Transaction Documents
to which the Buyer is a party, or the consummation of the transactions
contemplated hereby and thereby. This Agreement has been, and each other
Transaction Document to which the Buyer is a party at Closing will be, duly
executed and delivered by the Buyer, and this Agreement is, and each other
Transaction Document to which the Buyer is a party at the Closing will be a
valid and binding obligation of the Buyer, enforceable against it in accordance
with its terms, except that the enforceability hereof may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, and that the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
5.3 NO VIOLATIONS; CONSENTS AND APPROVALS.
(a) The execution, delivery and performance by the Buyer of this
Agreement and the other Transaction Documents to which the Buyer is a party do
not, and the consummation by the Buyer of the transactions contemplated hereby
and thereby will not, (i) violate any provision of the Articles of Incorporation
or Bylaws of the Buyer; (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any material Contract to which the Buyer is a party
or by which the Buyer or any of its respective properties or assets may be bound
or otherwise subject to; or (iii) violate any Law applicable to the Buyer, or
any of its properties or assets.
(b) No Consent of any Governmental Entity is required in
connection with the execution, delivery and performance of this Agreement or the
Transaction Documents by the Buyer, or the consummation by the Buyer of the
transactions contemplated hereby and thereby, except for the termination or
expiration period under the HSR Act.
5.4 FINANCING. The Buyer has sufficient funds available to it to pay
the Purchase Price at the Closing and consummate the transactions contemplated
by this Agreement.
5.5 NO BROKERS. Neither the Buyer nor Management Shareholders has
employed, or otherwise engaged, any other broker or finder or incurred any
liability for any brokerage or investment banking fees, commissions, finders'
fees or other similar fees in connection with the transactions contemplated by
this Agreement on behalf of or for which the Sellers are or will be obligated.
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6. AGREEMENTS OF THE PARTIES.
6.1 NO COMPETITION.
(a) The Sellers covenant and agree that, for a period of two (2)
years following the Closing Date (the "PROHIBITED PERIOD"), the Sellers and
their Affiliates will not directly or indirectly, (i) solicit any customer of
the Company or any Subsidiary to terminate his, her or its agency relationship
with the Company or (ii) solicit any employee of the Company or any Subsidiary
to leave his or her employment with the Company or such Subsidiary, except that
Sellers shall not be precluded from soliciting any such employee who (x)
responds to any public advertisement placed by Sellers, (y) was terminated by
the Company or (z) has resigned from employment with the Company or any
Subsidiary, provided that such employee has not been contacted by or engaged in
any discussions with a Seller or any Affiliate of a Seller regarding employment
prior to or within three months after such employee's notifying his or her
employer of his or her intent to resign.
(b) The Buyer covenants and agrees that during the Prohibited
Period, Buyer and its Affiliates (including the Company and its Subsidiaries)
will not directly or indirectly solicit any employee of any Seller or any
Affiliate of a Seller other than the Management Shareholders and any employee of
the Company and its subsidiaries to leave his or her employment with a Seller or
such Affiliate, except that Buyer shall not be precluded from soliciting any
such employee who (x) responds to any public advertisement placed by Buyer, (y)
was terminated by any Seller or any Affiliate of a Seller or (z) has resigned
from employment with the Company or any Subsidiary, provided that such employee
has not been contacted by or engaged in any discussions with the Buyer, the
Company or any Subsidiary regarding employment prior to or within three months
after such employee's notifying his or her employer of his or her intent to
resign.
(c) The Sellers covenant and agree that neither they nor their
Affiliates will, at any time during the Prohibited Period, disclose, directly or
indirectly, or make available to any person any confidential information or
trade secrets relating to the Company or any Subsidiary, or any information
concerning the Buyer's, the Company's or any Subsidiary's financial condition,
prospects, customers, franchisees, licensees, suppliers, sources of leads and
methods of obtaining new business, distribution methods or any other methods of
doing business and operating the Company or any Subsidiary, except to the extent
that such information is or becomes, through no action of the Sellers or any of
its Affiliates, a matter of public knowledge or is required to be disclosed by
Law, stock exchange rule, or in any proceedings involving the Sellers for which
its counsel informs the Sellers that such disclosure is required by Law (in
which case prior to such disclosure the disclosing party shall as promptly as
practicable provide prior written notice of such required disclosure to the
Buyer in order to afford the Buyer the opportunity to seek an appropriate
protective order preventing such disclosure).
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(d) The Buyer covenants and agrees that neither it nor its
Affiliates (including the Company and its Subsidiaries) will, at any time during
the Prohibited Period, disclose, directly or indirectly, or make available to
any person, any confidential information or trade secrets relating to the
Sellers or any of their Affiliates, or any information concerning the Sellers'
or any of their Affiliate's financial condition, prospects, customers,
franchisees, licensees, suppliers, sources of leads and methods of obtaining new
business, distribution methods or any other methods of doing business and
operating the Sellers or any of their Affiliates, except to the extent that such
information is or becomes, through no action of the Buyer, the Company or any of
its Subsidiaries, a matter of public knowledge or is required to be disclosed by
Law, stock exchange rule, or in any proceedings involving the Buyer for which
its counsel informs the Buyer that such disclosure is required by Law (in which
case prior to such disclosure the disclosing party shall as promptly as
practicable provide prior written notice of such required disclosure to the
Sellers in order to afford the Sellers the opportunity to seek an appropriate
protective order preventing such disclosure).
(e) The parties acknowledge and agree that a breach of any of the
provisions of this SECTION 6.1 will cause irreparable harm and damage and that,
in the event of such breach, the non-breaching party shall have, in addition to
any and all remedies at law, the right to an injunction, specific performance or
other equitable relief to prevent the violation of the obligations of the
breaching party hereunder without the necessity of proving such irreparable harm
or damage or the inadequacy of remedies at law and without the necessity of
posting any bond.
(f) The parties acknowledge and agree that each provision of this
SECTION 6.1 shall be treated as a separate and independent clause, and the
unenforceability of any one clause shall in no way impair the enforceability of
any of the other clauses herein. Furthermore, if one or more of the provisions
contained in this SECTION 6.1 shall for any reason be held to be excessively
broad as to geographical scope, duration, activity or otherwise so as to be
unenforceable at law, such provision or provisions shall be construed by the
appropriate judicial body by limiting and reducing it or them, as the case may
be, so as to be enforceable to the maximum extent compatible with the applicable
law as it shall then appear.
6.2 TAXES.
(a) The Company and the Sellers shall join with the Buyer in
making an election under Code Section 338(h)(10) (which must be filed by both
Buyer and Sellers on Form 8023 in the Tax Returns for the period that includes
the Closing Date) and any corresponding election under state, local or foreign
Law with respect to the purchase and sale of the Company's stock and the stock
of each of the Subsidiaries (the "Section 338(h)(10) Election"). The Sellers
will include any income, gain, loss, deduction or other Tax items resulting from
the Section 338(h)(10) Election on its Tax Returns to the extent required by
applicable Law. The Buyer and Seller shall cooperate and jointly agree within 90
days after the Closing Date on the general methodology to be used to determine
the "Aggregate Deemed Sale Price" ("ADSP") as defined in Treasury Regulation ss.
1.338-4 and how such ADSP is to be allocated among the assets of the Company's
assets pursuant to Treasury Regulation ss.1.338-6 (the "Allocation Notice").
Seller and Buyer shall cooperate fully with each other and make available to
each other such Tax data and other information as may be reasonably requested by
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the other party. Seller shall complete the ADSP and the Allocation Notice in
accordance with that agreement and deliver a draft of the Form 8023 to Buyer
(together with schedules thereto and supporting documentation) within 150 days
after the Closing Date. In the event that Buyer and Seller are unable to resolve
any disagreements regarding the ADSP, the Allocation Notice or other aspects of
the draft Form 8023 within 180 days of the Closing Date (and a failure to raise
any disagreement by Buyer will be deemed to be considered an acquiescence), the
matter in dispute shall be resolved as soon as practicable by a "Big Four"
independent accounting firm or, if the disagreement involves valuation, to a
nationally recognized appraisal firm mutually satisfactory to the parties (but
in no event longer than 30 days), which resolution shall be binding and
conclusive upon Buyer and Seller without further appeal therefrom. Buyer and
Seller shall bear equally the fees and expenses of such firm. Promptly after
such the resolution of any disagreement, the applicable parties shall execute
the final Form 8023 (and comparable forms for state, local or foreign Tax law)
and Buyer will timely file the forms, and any required supplements thereto, in
the manner prescribed by applicable Treasury Regulations or the corresponding
provisions of applicable foreign, state or local Tax law, and will provide
written evidence to Seller that it has done so. The Buyer and the Sellers shall
file all Tax Returns in a manner consistent with such final form 8023 (and
comparable Forms for state, local or foreign Tax law).
(b) SELLER RESPONSIBILITY.
(i) Seller will timely file the U.S. federal income Tax Returns
of the Affiliated Group and any Combined Returns (taking into account extensions
thereto) for all periods (including any Pre-Closing Period or Straddle Period)
and will timely pay any Taxes with respect thereto. The parties agree that they
will treat the Company and any Subsidiary as if they ceased to be part of the
Affiliated Group, and any comparable or similar provision of state, local or
foreign laws or regulations, as of the close of business on the Closing Date.
(ii) Seller shall prepare and timely file or shall cause to be
prepared and timely filed all other Tax Returns of the Company and the
Subsidiaries for a Pre-Closing Period and a Straddle Period. At least twenty
(20) days prior to the date on which any such Tax Return is due (including any
extensions), the Seller shall deliver such Tax Return to the Buyer for the
purpose of making reasonable changes and revisions to such Tax Return at least
three days prior to filing. Seller shall timely file such Tax Return and duly
and timely pay all Taxes shown on such Tax Return, and the Buyer shall reimburse
Seller for any Taxes attributable to the portion of the Straddle Period after
the Closing Date as soon as practicable after the date paid by the Seller. All
such Tax Returns with respect to a Pre-Closing Period or Straddle Period shall
be prepared and filed on a basis consistent with prior Tax Returns filed with
respect to the Company and the Subsidiaries.
(iii) If possible, Buyer shall use its best efforts to provide
timely and accurate information to Seller for Seller's preparation of such Tax
Returns at least three months before the due date of the filing of such Tax
Returns (including any extensions).
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(c) The Buyer shall prepare and file each Tax Return required for
the Company and each Subsidiary for each Post-Closing Period in accordance with
applicable Law.
(d) In the case of any Taxes that are imposed on a periodic basis
over a Straddle Period, the portion of such Tax that relates to the portion of
the period up to and including the Closing Date shall be deemed to be the amount
of such Tax for the entire Straddle Period multiplied by a fraction the
numerator of which is the number of days in the Tax period ending on (and
including) the Closing Date and the denominator of which is the number of days
in the entire Straddle Period. In the case of any Tax based upon income or
receipts, the portion allocable to the portion of the period up to and including
the Closing Date shall include operations through the Closing Date (i.e., with
respect to operations, based on an interim closing of the books on the Closing
Date). For those states that permit a Section 338(h)(l0) election (or the
specific state counterparts), Seller will file a separate Tax Return for the
Pre-Closing Period and Buyer will file a separate Tax Return for the Post
Closing Period (and not one Tax Return that includes a Straddle Period) unless
prohibited under applicable Tax Law.
(e) REFUNDS AND TAX BENEFITS. Any tax refunds that are received
by Buyer or the Company and Subsidiaries, and any amounts credited against Taxes
to which Buyer or the Company and Subsidiaries become entitled, that relate to
Tax periods or portions thereof ending on or before the Closing Date shall be
for the account of Seller, and Buyer shall pay over to Seller any such refund or
the amount of any such credit within fifteen (15) days after receipt or
entitlement thereto, net of any Taxes imposed upon Buyer by reason of the
receipt of such refund or credit.
(f) AMENDED RETURNS AND REFUND CLAIMS. Buyer shall not file an
amended Tax Return or any claim for refund for any period ending on or prior to
the Closing Date without the written consent of Seller, which consent will not
be unreasonably withheld.
(g) TAX SHARING AGREEMENTS. Any Tax sharing agreement between
Seller and the Company and its Subsidiaries shall be settled and terminated as
of the Closing Date and shall have no further effect for any taxable year
(whether the current year, a future year or a past year).
(h) Seller shall be solely responsible for the audit of the
consolidated federal income Tax Return of the Affiliated Group and any Combined
Returns and Seller shall have the sole discretion to settle any audit of a U.S.
federal income Tax Return of the Affiliated Group or a Combined Return.
(i) If a state income Tax claim is made against Buyer for a
Pre-Closing Period or a Straddle Period (other than with respect to a Combined
Return, which is addressed in Section 6.2(h)) and a Section 338(h)(10) election
(or the state counterpart), Seller shall conduct, and control (through counsel
of its own choosing and at its own expense) the settlement or defense thereof.
The Buyer and the Company and the Subsidiaries shall cooperate and may provide
non-binding advice. Buyer shall have the right to approve a final settlement
(with consent not to be unreasonably withheld) only if such settlement will have
a material adverse effect on a Post-Closing Period.
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(j) The Sellers and the Buyer shall preserve all such
information, records or other documents until the date that is six (6) months
after the expiration of the statute of limitations applicable to such Tax; and
the Seller agrees to give to the Buyer a reasonable written notice prior to
transferring, destroying or discarding any such information, records or
documents and, to the extent the Buyer so requests, the Seller shall permit the
Buyer to take possession of such information, records and documents. Buyer and
the Company and the Subsidiaries, on one hand, and Seller, on the other hand,
shall cooperate fully, as and to the extent reasonably requested by the other,
in connection with the filing of Tax Returns pursuant to this Section 6.2 and
any audit, litigation or other proceeding with respect to Taxes. In that regard,
Seller, Buyer and the Company and the Subsidiaries shall, at their own expense,
maintain such Tax information or Tax records relating to the Company and the
Subsidiaries as are regularly maintained by such party or as may be required by
Law to be maintained. Such Tax records or Tax information shall be made
available upon written request by the Seller or the Buyer or the Company and the
Subsidiaries, as the case may be, within 2 Business Days of such request.
Notwithstanding the foregoing, Seller and Buyer shall only be obligated to
provide that portion of their federal consolidated Tax Returns or Combined Tax
Returns and accompanying Tax records or Tax Returns that directly related to the
Company and the Subsidiaries. In any event, the provisions of access to such Tax
records or Tax information shall not unreasonably interfere with the business
operations of the non-requesting party.
(k) All transfer, documentary, sales, use, stamp, registration
and other similar Taxes and fees (including any penalties and interest) incurred
in connection with this Agreement shall be paid by the Seller and Buyer equally
when due, and the Buyer will file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and if required by applicable law, the
Seller will join in the execution of any such Tax Returns or other
documentation.
6.3 Termination of Agreements and the Sellers' Release.
(a) Effective as of the Closing Date, except for any obligations
arising out of this Agreement and the other Transaction Documents, except for
the agency contracts between affiliates of the Sellers and the Company and its
Subsidiaries and except as set forth on Schedule 6.3(a) to the Schedule of
Exceptions, all Contracts (collectively, the "TERMINATED CONTRACTS") of whatever
nature relating to the sale, licensing, leasing or supply of goods or services,
and whether oral or in writing, between the Sellers or any of their Affiliates
(other than the Company or any Subsidiary), on the one hand, and the Company or
any Subsidiary, on the other hand, shall be terminated automatically without
liability to any party.
(b) Except as otherwise provided in this Agreement, Parent, for
itself, the Seller, for itself, its Affiliates (other than the Company) and
their respective representatives in their capacities as such (together, in each
case, with their successors), effective as of the Closing Date, releases and
discharges the Buyer, the Company, each of their Affiliates and each of their
respective representatives in their capacities as such (together, in each case,
with their respective successors) from any and all liabilities, obligations and
losses (whether by contract, in tort or both, and whether in law, in equity or
both), rights of subrogation and contribution and remedies of any nature
whatsoever, known or unknown, relating to or arising out of: (i) the Terminated
Contracts; and (ii) any other dealings or relationships (other than those
entered into in the ordinary course of business), existing at or prior to the
Closing, between the Company, on the one hand, and the Sellers or any of their
Affiliates (other than the Company), on the other hand.
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6.4 REQUIRED CONSENTS. The Sellers and/or the Company shall have
applied or shall apply for and shall promptly provide copies of, all filings
made with any Governmental Entity or other Person or any other information
supplied in connection with this Agreement and the transactions contemplated
hereby. The Buyer shall use its reasonable commercial efforts to assist the
Sellers and the Company in obtaining the Required Consents.
6.5 CONDUCT OF BUSINESS. From the date hereof through the Closing
Date, except as otherwise contemplated by this Agreement and the other
Transaction Documents, the Seller shall not, in its capacity as sole shareholder
of the Company, and shall cause the director designees of the Sellers (subject
to their fiduciary obligations) to not, cause the Company and the Subsidiaries
to (without the prior written consent of the Buyer, which shall not be
unreasonably withheld):
(a) not conduct their respective businesses in the ordinary
course, consistent with past practice;
(b) amend their respective Articles of Incorporation or Bylaws or
other organizational documents;
(c) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities or securities convertible into
shares of capital stock;
(d) split, combine or reclassify any shares of their capital
stock, declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) to the Sellers or any other
Person or otherwise in respect of its capital stock or redeem or otherwise
acquire any of its securities, or make any payments or distributions to or on
behalf of the Sellers, any of the Sellers' Affiliates, any Person to which the
Company or any Subsidiary has any liability (other than trade accounts payable
and other liabilities incurred in the ordinary course of business and
liabilities incurred in connection with this agreement) or any officer or
director of the Company;
(e) increase the compensation of any officer, employee or agent
of the Company or any Subsidiary (other than in connection with performance
reviews in the ordinary course of business), create any additional Employee
Benefit Plan, amend any existing Employee Benefit Plan or create or amend any
existing severance or retention agreements with employees;
(f) propose or enter into any Contract with any Person, other
than the Buyer, providing for the possible acquisition (whether by way of
merger, purchase of capital stock purchase of assets or otherwise) of any
material portion of the capital stock or assets of another Person;
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(g) enter into any Contract in which the obligation of the
Company or any Subsidiary exceeds $250,000 (other than insurance premium
obligations incurred in the ordinary course of business) or which does not
terminate or is not subject to termination for convenience within 180 days
following execution without the Buyer's consent;
(h) enter into any agreement not in the ordinary course of
business;
(i) except in the ordinary course of business consistent with
past practice, amend, waive, surrender, terminate, exercise any right or option
under or extend or renew any Contract or Lease;
(j) acquire, lease or dispose of any of the Company's or any
Subsidiary's assets, except for the activities carried on by the Designated
Employees or except in the ordinary course of business and consistent with past
practice;
(k) take or suffer any action that would result in the creation,
or consent to the imposition, of any Encumbrance on any of its assets (unless
such Encumbrance is promptly discharged at the sole expense of the Sellers);
(l) (i) incur or assume any indebtedness other than Trade
Payables incurred in the ordinary course of business; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for any obligations of any other Person; or (iii)
except in the ordinary course of business consistent with past practice, make
any loans, advances or capital contributions to, or investments in, any other
Person;
(m) take any action in contravention of Law; or
(n) enter into any Contract to do, or take, or agree in writing
or otherwise to take or consent to, any of the foregoing actions.
6.6 ACCESS AND INFORMATION. After the date hereof through the Closing
Date, the Sellers shall use their commercially reasonable efforts to, and shall
cause its officers, directors, employees, agents, accountants and counsel to use
their commercially reasonable efforts to, upon reasonable notice, (a) afford the
Buyer and its representatives reasonable access, during normal business hours,
to (i) the business and Books and Records of the Company and each Subsidiary,
and (ii) those officers, directors, employees, agents, accountants and counsel
of the Company or any Subsidiary who have any knowledge relating to the business
of the Company or any Subsidiary, and (b) furnish to the Buyer and its
representatives such additional information regarding the Company or any
Subsidiary as the Buyer may reasonably request, including without limitation,
providing such access and furnishing such information as necessary for the
preparation and completion by Buyer and Buyer's auditors of an audit of the
Company's consolidated financial statements as of and for the most recently
completed fiscal year prior to the Closing Date or to comply with applicable Law
(including, without limitation the HSR Act and Regulation S-X).
6.7 PUBLIC STATEMENTS. Neither the Buyer nor the Sellers shall make
any public announcement with respect to, or reveal the terms or status of any
of, the Transaction Documents or the transactions contemplated thereby, except
as required by Law.
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6.8 STOCK OPTIONS. All stock options and stock purchase rights with
respect to securities of the Parent previously granted to any employee of the
Company or any Subsidiary under any of the Parent's stock incentive compensation
plans who is employed by the Company on the day immediately prior to the Closing
Date shall become one hundred percent (100 %) vested and exercisable as of the
Closing Date and shall remain exerciseable for a period of three (3) months
thereafter.
6.9 OTHER ACTIONS. Each of the parties hereto shall use all reasonable
efforts to take, or cause to be taken, all actions, do, or cause to be done, all
things, and execute and deliver all documents, as in each case may be necessary,
proper or advisable under applicable Laws or reasonably required in order to
consummate the transactions contemplated hereby. Each of the Buyer and the
Sellers will, and will each cause its representatives to, deliver all documents
required to be delivered at the Closing by such Persons as required and as set
forth in ARTICLE 7 hereof.
6.10 DESIGNATED EMPLOYEES. The Designated Employees provide certain
services to Safeco Life Insurance Company, a wholly owned subsidiary of Parent
("SAFECO LIFE"), the costs of which are and will continue to be reimbursed to
the Company by Safeco Life in accordance with its existing arrangement with the
Company. The parties understand and agree that the Company will, and the Sellers
(prior to the Closing) and the Buyer (after the Closing) agree to cause the
Company to terminate the employment by the Company of the Designated Employees
upon the earlier of (i) the request of Safeco Life and (ii) the closing of the
sale of Safeco Life by Parent. If Safeco Life has not agreed to hire the
Designated Employees upon such termination by the Company, then notwithstanding
the foregoing, the Company shall have the right (in its sole discretion) to
continue the employment of one or more Designated Employees, in which event the
provisions of Section 8.2(f) shall no longer apply. SCHEDULE 6.10 to the
Schedule of Exceptions sets forth a list of the Designated Employees.
6.11 HSR FILINGS. As promptly as practicable after the date of this
Agreement, each of the Sellers and the Buyer will file or cause to be filed a
notification and report form under the HSR Act with the Federal Trade Commission
and the Department of Justice, will assist the other parties (the Buyer and the
Sellers, respectively) as may be reasonably requested in connection with the
latter's filing under the HSR Act, will request early termination of the HSR Act
waiting period and will furnish, as promptly as practicable, any and all
information and documentary materials properly and reasonably requested by such
antitrust agencies thereunder. The filing fee payable under the HSR Act shall be
shared equally by the Buyer and the Sellers.
6.12 INDEMNIFICATION INSURANCE.
(a) The directors and officers of the Company or any Subsidiary
(the "SEPARATED OFFICERS") shall be entitled to seek indemnification with
respect to any actions or omissions occurring prior to the Closing Date to the
same extent such Persons may seek indemnification as of the date of this
Agreement pursuant to the Articles of Incorporation, Bylaws or other applicable
organizational documents of the Parent, the Company or any Subsidiary or any
indemnification agreement between any such officer or director and the Parent,
the Company, or any Subsidiary.
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(b) For a period of six (6) years after the Closing Date, the
Parent will maintain in effect directors' and officers' liability insurance
covering the Separated Officers for claims arising from acts or omissions
occurring prior to the Closing Date on terms comparable to those maintained for
its then current directors and officers.
6.13 NO SOLICITATION. From the date hereof, neither the Sellers, the
Company nor any Subsidiary (whether directly or indirectly through their
respective advisors, agents, representatives or other intermediaries) shall, and
each of the Sellers, the Company and each Subsidiary shall use its respective
best efforts to cause its respective officers, directors, advisors,
representatives and other agents not to, directly or indirectly, (a) continue
any discussions or negotiations, if any, with any Person, other than the Buyer,
conducted heretofore with respect to any Sale Proposal or which could reasonably
be expected to lead to a Sale Proposal; (b) solicit, initiate or knowingly
encourage any inquiries relating to, or the submission of, any Sale Proposal;
(c) participate in any discussions or negotiations regarding any Sale Proposal,
or, in connection with any Sale Proposal, furnish to any Person any information
or data with respect to or access to the properties of the Company or any
Subsidiary, or (d) enter into any agreement with respect to any Sale Proposal.
6.14 INTERIM FINANCIAL STATEMENTS; CLOSING BALANCE SHEET.
(a) No later than fifteen days after the completion of each
fiscal quarter prior to the Closing Date, the Sellers shall deliver to the Buyer
a consolidated unaudited balance sheet of the Company as of the last day of such
quarter, together with the related unaudited consolidated statement of income
for such quarter (including the related notes, if any) (collectively, the
"INTERIM FINANCIAL STATEMENTS").
(b) No later than two business days prior to the Closing Date,
the Sellers shall deliver to the Buyer a consolidated unaudited balance sheet of
the Company as of such date (the "CLOSING BALANCE SHEET"), which balance sheet
shall be prepared on the same basis as the Reference Balance Sheet and shall
show the Tangible Net Worth of the Company and the Subsidiaries as of such date.
7. CONDITIONS PRECEDENT TO CLOSING.
7.1 CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS TO CLOSE. The
obligation of the Buyer to consummate the transactions contemplated hereby is
subject to the satisfaction prior to or on the Closing of each of the following
conditions:
(a) The representations and warranties of the Sellers contained
in this Agreement shall have been true and correct in all material respects when
made and shall be true and correct as of the Closing Date in all material
respects, with the same force and effect as if made on the Closing Date, except
for such representations and warranties as are made as of a specific date, which
shall be true and correct as of such date.
(b) The covenants and agreements of the Sellers contained in this
Agreement and required to be complied with or performed on or prior to the
Closing Date shall have been complied with or performed in all material
respects.
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(c) The Buyer shall have received a certificate dated the Closing
Date and executed by an officer of the Sellers, certifying the satisfaction of
the conditions set forth in CLAUSES (A), (B) and (F).
(d) The Company shall have a Tangible Net Worth as of the date of
the Closing Balance Sheet equal to or greater than $5,000,000.
(e) The Buyer shall have received an opinion of inhouse counsel
to the Sellers, substantially in the form attached as Exhibit 7.1(e).
(f) No event or events shall have occurred between the date
hereof and the Closing that, individually or in the aggregate, shall have had,
or shall be reasonably likely to have, a Material Adverse Effect.
(g) No Proceeding shall be pending or threatened against, and no
order, decree or judgment of any court, agency or other Governmental Entity
shall have been rendered against, any party hereto which: (i) would render it
unlawful, as of the Closing Date, to effect the transactions contemplated by
this Agreement in accordance with its terms; (ii) questions the validity or
legality of any transaction contemplated hereby; (iii) seeks to enjoin any
transaction contemplated hereby; (iv) seeks material damages on account of the
consummation of any transaction contemplated hereby; or (v) is a petition of
bankruptcy by or against the Sellers, the Company or any Subsidiary, an
assignment by the Company, the Sellers or any Subsidiary for the benefit of its
creditors, or other similar Proceeding.
(h) The expiration or termination of all applicable waiting
periods under the HSR Act with respect to the transactions contemplated by this
Agreement, without the Buyer or the Sellers having been advised by the Federal
Trade Commission or Department of Justice that they will or may seek to enjoin
the consummation of, or otherwise will or may challenge, any such transactions.
(i) In each case, without any waiver or modification, the
representations and warranties of the Management Shareholders contained in
Section 5 of that certain Subscription Agreement by and among Hub U.S. Holdings,
Inc., a Delaware corporation, the Buyer and the Management Shareholders, a true
and correct copy of which has been previously provided to Seller, shall have
been true and correct when made and shall be true and correct as of the Closing
Date in all material respects, with the same force and effect as if made on the
Closing Date, except for such representations and warranties as are made as of a
specific date, which shall be true and correct as of such date.
7.2 CONDITION PRECEDENT TO THE SELLERS' OBLIGATIONS TO CLOSE. The
obligation of the Sellers to consummate the transactions contemplated hereby is
subject to the satisfaction prior to or on the Closing Date of the following
conditions:
(a) The representations and warranties of the Buyer contained in
this Agreement shall have been true and correct when made and shall be true and
correct, in all material respects, as of the Closing Date, with the same force
and effect as if made as of the Closing Date, other than such representations
and warranties as are made as of a specific date, which shall be true and
correct as of such date.
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(b) The covenants and agreements of the Buyer contained in this
Agreement and required to be complied with or performed on or before the Closing
Date shall have been complied with or performed in all material respects.
(c) The Sellers shall have received a certificate dated the
Closing Date and executed by an officer of the Buyer, certifying the
satisfaction of the conditions set forth in clause (a) and (b).
(d) The Sellers shall have received the Management Certificate
and such Management Certificate shall not disclose any items which would result
in a breach of a representation or warranty hereunder.
(e) No Proceeding shall be pending or threatened against, and no
order, decree or judgment of any court, agency or other Governmental Entity
shall have been rendered against, any party hereto which: (i) would render it
unlawful, as of the Closing Date, to effect the transactions contemplated by
this Agreement in accordance with its terms; (ii) questions the validity or
legality of any transaction contemplated hereby; (iii) seeks to enjoin any
transaction contemplated hereby; (iv) seeks material damages on account of the
consummation of any transaction contemplated hereby; or (v) is a petition of
bankruptcy by or against the Buyer, an assignment by the Buyer for the benefit
of its creditors, or other similar Proceeding.
(f) The expiration or termination of all applicable waiting
periods under the HSR Act with respect to the transactions contemplated by this
Agreement, without the Sellers or the Buyer having been advised by the Federal
Trade Commission or Department of Justice that they will or may seek to enjoin
the consummation of, or otherwise will or may challenge, any such transactions.
7.3 DELIVERIES OF THE SELLERS. At the Closing, the Sellers shall
deliver the following items to the Buyer:
(a) The Required Consents;
(b) Stock certificates representing all of the Shares, duly
endorsed in blank or accompanied by stock transfer powers and with all requisite
stock transfer tax stamps attached;
(c) A certificate duly executed by the Secretary of the Sellers,
attesting, with respect to the Sellers, the resolutions duly and validly adopted
by the board of directors of the Sellers evidencing the authorization of its
execution and delivery of this Agreement and the other Transaction Documents and
the consummation of the transactions contemplated hereby and thereby, as to its
Articles of Incorporation and Bylaws, and as to names and signatures of the
officers of the Buyer authorized to sign this Agreement and the other
Transaction Documents to be delivered by the Buyer hereunder;
(d) A certificate with respect to the Sellers and the Company
from the Secretary of their respective states of incorporation, respectively,
attesting as to its valid existence and its good standing (or, as to
jurisdictions that do not recognize such concept, its payment of all taxes
required by the Department of Revenue) as of a date not earlier than two
business days prior to the Closing Date; and
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(e) The documents referred to in SECTIONS 7.1(C) and 7.1(E).
7.4 DELIVERIES OF THE BUYER. At the Closing, the Buyer shall deliver
the following items to the Sellers.
(a) A certificate of the Secretary of the Buyer certifying the
resolutions duly and validly adopted by the board of directors of the Buyer
evidencing the authorization of the execution and delivery of this Agreement and
the other Transaction Documents to which the Buyer is a party and the
consummation of the transactions contemplated hereby and thereby, and the names
and signatures of the officers of the Buyer authorized to sign this Agreement
and the other Transaction Documents to be delivered by the Buyer hereunder; and
(b) The cash payment pursuant to SECTION 3.
8. INDEMNIFICATION.
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding any
right of the Buyer to fully investigate the affairs of the Company and the
Subsidiaries and notwithstanding any knowledge of facts determined or
determinable by the Buyer pursuant to such investigation or right of
investigation, the Buyer has the right to rely fully upon the representations,
warranties, covenants and agreements of the Sellers contained in this Agreement
or in any other Transaction Document. All covenants and agreements of the
Sellers and the Buyer made in this Agreement or in any other Transaction
Document or in any certificate delivered pursuant hereto shall survive the
execution and delivery of this Agreement until all obligations with respect
thereto shall have been performed or satisfied or shall have terminated in
accordance with their terms. All representations and warranties of the Sellers
and the Buyer shall survive the execution and delivery of this Agreement and
shall thereafter continue in full force and effect for a period of one (1) year
from the Closing; PROVIDED, HOWEVER, that the representations and warranties
made in SECTIONS 4.7 and 4.11 hereof shall survive until ninety (90) days after
the expiration of the relevant statutes of limitations and that there shall be
no limitation on the survival of the representations and warranties set forth in
SECTION 4.1, SECTION 4.2 or SECTION 4.3 or any representations or warranties
fraudulently made in this Agreement or any other Transaction Documents or in any
certificate delivered pursuant hereto.
8.2 INDEMNIFICATION BY THE SELLERS. The Sellers shall indemnify and
defend each of the Company, each Subsidiary and the Buyer and each of their
respective successors, transferees, assignees, officers, directors, employees,
shareholders, agents, advisors or representatives (each, a "BUYER INDEMNITEE")
against, and hold each Buyer Indemnitee harmless from any loss, liability,
obligation, deficiency, damage, Tax or expense including, without limitation,
interest, penalties, reasonable attorneys' and consultants' fees and
disbursements (collectively, "DAMAGES"), that any Buyer Indemnitee may suffer or
incur based upon, attributable to, arising from, relating to or in connection
with any of the following (whether or not in connection with any third party
claim):
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(a) The inaccuracy of any representation or warranty made by the
Sellers contained in this Agreement or in any other Transaction Documents;
(b) The Sellers' failure to perform or to comply with any
covenant or agreement required to be performed by the Sellers contained in any
Transaction Document;
(c) Any brokerage, finder's fee or the like incurred as a result
of the actions of the Sellers in connection with the transactions herein
contemplated;
(d) Any liability relating to any Employee Benefit Plan other
than Assumed Plans;
(e) Any Tax Item;
(f) Any Designated Employee Liability; and
(g) The Excluded Liabilities.
8.3 INDEMNIFICATION BY THE BUYER. The Buyer shall indemnify and defend
the Sellers and their successors, transferees, assignees, officers, directors,
employees, shareholders, agents, advisors or representatives (each, a "SELLER
INDEMNITEE") against, and hold each Seller Indemnitee harmless from, any Damages
that any Seller Indemnitee may suffer or incur, based upon, attributable to,
arising from, relating to or in connection with any of the following:
(a) The inaccuracy of any representation or warranty made by the
Buyer contained in any Transaction Document;
(b) The Buyer's failure to perform or to comply with any covenant
or agreement required to be performed by the Buyer contained in any Transaction
Document to which the Buyer is a party;
(c) Any brokerage, finder's fee or the like incurred as a result
of the actions of the Buyer in connection with the transactions herein
contemplated; or
(d) The operation of the businesses of the Company and the
Subsidiaries after the Closing (including the use by the Company of the Talbot
Financial Corporation name after the Closing Date), except as to matters which
emanate from the breach by the Sellers of their representations, warranties,
covenants or agreements hereunder.
8.4 LIMITATIONS ON LIABILITY.
(a) Notwithstanding the foregoing, the Sellers shall not be
obligated to indemnify and hold harmless any Buyer Indemnitee from Damages, (i)
in the case of a claim for Damages under Section 8.2(a) arising from a breach of
representations and warranties relating solely and exclusively to any of the
Subsidiaries, unless and until the aggregate amount of such Damages exceeds
$4,500,000, (ii) in the case of any other claim for Damages under Section
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8.2(a) for breach of any representation or warranty, unless and until the
aggregate amount of such Damages exceeds $1,000,000 or (iii) in the case of any
claim for Damages under Section 8.2(e), unless and until the aggregate amount of
such Damages exceeds $10,000. The Buyer shall not be obligated to indemnify and
hold harmless any Seller Indemnitee from Damages with respect to one or more
claims under Section 8.3(a) for any breach of any representation or warranty,
unless and until the aggregate amount of such Damages exceeds $4,500,000. The
aggregate indemnification liability of the Sellers or the Buyer for Damages
(other than any Damages derived from or attributable to any Employee Benefit
Plan other than an Assumed Plan, any Tax Item, any Excluded Liabilities and any
Designated Employee Liability) under this Agreement shall not exceed twenty-five
percent (25%) of the Purchase Price. The aggregate indemnification liability of
the Sellers for Damages attributable to any Designated Employee Liability under
this Agreement shall not exceed $75,000. Notwithstanding the foregoing, nothing
contained in the Management Certificate shall act to qualify, limit, or reduce
Seller's indemnification obligations pursuant to Section 8.2, except with
respect to those representations qualified by Sellers' Knowledge.
Notwithstanding anything to the contrary contained herein, Sellers shall not be
obligated to indemnify and hold harmless any Buyer Indemnitee against indirect,
special, incidental, consequential or punitive damages, except to the extent any
of the foregoing constitute Damages payable to third parties by Buyer in
connection with any third party claim.
(b) Any indemnification payment made pursuant to this Agreement
in respect of any claim (i) shall be net of any insurance proceeds realized by
and paid to the indemnified party in respect of such claim; and (ii) shall be
reduced by an amount equal to any tax benefits attributable to such claim, and
increased by an amount equal to any taxes attributable to the receipt of such
payment, but only to the extent that such tax benefits are actually realized, or
such taxes are actually paid, as the case may be, by the Sellers or by the Buyer
or by any consolidated, combined, or unitary group of which the Buyer or the
Sellers are a member. The indemnified party shall use its reasonable efforts to
make insurance claims relating to any claim for which it is seeking
indemnification pursuant to this Section. Any indemnity payment under this
Agreement shall be treated as an adjustment to the purchase price.
8.5 INDEMNIFICATION PROCEDURES. Except as otherwise provided in
Sections 6.2(h) and (i):
(a) Promptly after notice to an indemnified party of any claim or
the commencement of any Proceeding, including any Proceeding by a third party,
such indemnified party shall, if a claim for indemnification in respect thereof
is to be made against an indemnifying party pursuant to this ARTICLE 8, give
written notice to the latter of the commencement of such claim or Proceeding,
setting forth in reasonable detail the nature thereof and the basis upon which
such party seeks indemnification hereunder; PROVIDED, HOWEVER, that the failure
of any indemnified party to give such notice shall not relieve the indemnifying
party of its obligations under such section, except to the extent that the
indemnifying party is actually prejudiced by the failure to give such notice.
(b) In the case of any such Proceeding, including any Proceeding
by a third party, with respect to an indemnified party, the indemnifying party
shall, upon notice as provided above, assume the defense thereof, with counsel
reasonably satisfactory to the indemnified party, PROVIDED, HOWEVER, that (i)
the indemnifying party provides the indemnified party with a written
representation to the effect that the indemnifying party has sufficient
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financial resources to satisfy the amount of any adverse monetary judgment that
is reasonably likely to result; and (ii) the indemnifying party expressly agrees
in writing that, as between the indemnifying party and the indemnified party,
the indemnifying party shall be solely obligated to satisfy and discharge the
liability claim in accordance with this Agreement (the conditions set forth in
clauses (i) and (ii) are collectively referred to as the "LITIGATION
CONDITIONS") and, after notice from the indemnifying party to the indemnified
party of its assumption of the defense thereof and compliance with the
Litigation Conditions, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof (but the indemnified
party shall have the right, but not the obligation, to participate at its own
cost and expense in such defense by counsel of its own choice) or for any
amounts paid or foregone by the indemnified party as a result of the settlement
or compromise thereof (without the written consent of the indemnifying party).
Anything in this SECTION 8.5(B) notwithstanding, if both the indemnifying party
and the indemnified party are named as parties or subject to such Proceeding and
either such party determines with advice of counsel that there may be one or
more legal defenses available to it that are different from or additional to
those available to the other party or that a material conflict of interest
between such parties may exist in respect of such Proceeding, then the
indemnifying party may decline to assume the defense on behalf of the
indemnified party or the indemnified party may retain the defense on its own
behalf, and, in either such case, after notice to such effect is duly given
hereunder to the other party, the indemnifying party shall be relieved of its
obligation to assume the defense on behalf of the indemnified party, but shall
be required to pay any legal or other expenses including, without limitation,
reasonable attorneys' fees and disbursements, incurred by the indemnified party
in such defense.
(c) If the indemnifying party assumes the defense of any such
Proceeding, the indemnified party shall cooperate fully with the indemnifying
party and shall appear and give testimony, produce documents and other tangible
evidence, allow the indemnifying party access to the books and records of the
indemnified party and otherwise assist the indemnifying party in conducting such
defense. No indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement or
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or Proceeding and which does not impose any
obligations (including, without limitation, any injunctive relief) upon the
indemnified party. If the indemnifying party shall (x) fail promptly and
diligently to assume the defense of any Proceeding, or (y) the Litigation
Conditions cease to be met, then the indemnified party may respond to, contest
and defend against such Proceeding and may make in good faith any compromise or
settlement with respect thereto, and recover from the indemnifying party the
entire cost and expense thereof including, without limitation, reasonable
attorneys' fees and disbursements and all amounts paid or foregone as a result
of such Proceeding, or the settlement or compromise thereof. The indemnification
required hereunder shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills or invoices
are received or loss, liability, obligation, damage or expense is actually
suffered or incurred.
(d) The liability of an indemnifying party to indemnify the
indemnified party for Damages shall be limited to claims as to which the
indemnified party has given written notice on or prior to the expiration of the
applicable survival periods set forth in SECTION 8.1.
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8.6 SOLE REMEDY. Subject to Sections 7.1 and 11.6, the right of
indemnification under this Section 8 shall be the sole and exclusive remedy for
any breach of this Agreement, except with respect to a breach of Section 6.1. In
the event of a breach by either party of its obligations under Section 6.1, the
non-breaching party shall be entitled to pursue its remedies as set forth
therein or to pursue any other remedy, and the right to pursue such remedies
shall not be subject to the limitations set forth in Sections 8.2, 8.3 or 8.4.
9. TERMINATION.
9.1 EVENTS OF TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
(a) by the mutual agreement of the Buyer and the Sellers;
(b) by the Buyer or the Sellers giving written notice to such
effect to the other party hereto if the Closing shall not have occurred on or
before September 30, 2004, or such later date as the parties shall have agreed
upon prior to the giving of such notice; or
(c) by the Sellers or the Buyer, in the event of an inaccuracy of
any representation or warranty of the Buyer or the Sellers, respectively,
contained herein or non-compliance by the Buyer or the Sellers, respectively,
with any of their respective covenants contained herein, which such inaccuracy
or non-compliance causes any of the conditions precedent to the obligations of
the Buyer in SECTION 7.1 or of the Sellers in SECTION 7.2, respectively, to
become incapable of being satisfied, provided that such inaccuracy or
non-compliance is not cured by such respective party within 10 days after
receipt of written notice thereof from the other party.
9.2 EFFECTS OF TERMINATION. Upon termination of this Agreement
pursuant to SECTION 9.1, all obligations of the parties shall terminate,
PROVIDED, HOWEVER, that (a) no such termination shall relieve the Sellers of any
liability to the Buyer, or the Buyer of any liability to the Sellers, by reason
of any breach of or default under this Agreement, and (b) the parties shall not
publicly disclose, and the parties shall cause their Affiliates not to publicly
disclose, the proposed terms and conditions set forth herein or any non-public
information regarding the other party, except as may be required by Law.
10. DEFINITIONS.
10.1 For purposes of this Agreement, the following definitions shall
apply
(a) "AGREEMENT" shall have the meaning given in the introduction.
(b) "AFFILIATE" means, with respect to any Person, any other
Person that controls, is controlled by, or is under common control with the such
Person.
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(c) "AFFILIATED GROUP" means the affiliate group of corporations
within the meaning of Section 1504 of the Code that includes Seller, the Company
and includable Subsidiaries.
(d) "ASSUMED PLANS" shall mean each employee benefit plan (as
defined in Section 3(3) of ERISA, and each bonus, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, restricted stock, stock option, termination,
severance, compensation, medical, health, or other plan, agreement, policy or
agreement which currently is sponsored, maintained, contributed to, or required
to be contributed to, by any of the Company or its Subsidiaries solely for the
benefit of any present or future employees, retirees, directors or independent
contractors (or their beneficiaries, dependents or spouses) of the Company or
its Subsidiaries
(e) "BOOKS AND RECORDS" shall mean all documents, instruments,
agreements and records referred to in this Agreement including the minute and
stock record books of Company and each Subsidiary.
(f) "BUYER" shall have the meaning given in the introduction.
(g) "BUYER INDEMNITEE" shall have the meaning given in SECTION
8.2.
(h) "CLOSING" shall have the meaning given in SECTION 1.
(i) "CLOSING BALANCE SHEET" shall have the meaning given in
SECTION 6.16(B).
(j) "CLOSING DATE" shall have the meaning given in SECTION 1.
(k) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(l) "COMBINED RETURN" means a Tax Return of Seller for any Taxes
imposed by a state, local or foreign Tax authority for which Seller or any
Affiliate of Seller other than the Company and the Subsidiaries files with any
of the Company and the Subsidiaries on a consolidated, combined or unitary
basis.
(m) "COMPANY" shall have the meaning given in the introduction.
(n) "COMPANY SOFTWARE" means and includes: (a) the content and
the applications software used or embodied in all websites operated by any of
the Company or the Subsidiaries and (b) all computer software programs,
documentation, data bases, technical and programmers' manuals and other
supporting materials that are used by the Company or the Subsidiaries in their
respective businesses as currently conducted.
(o) "CONSENT" shall have the meaning given in SECTION 4.4(B).
(p) "CONTRACT" shall have the meaning given in SECTION 4.4(A).
(q) "DAMAGES" shall have the meaning given in SECTION 8.2.
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(r) "DESIGNATED EMPLOYEES" means those employees listed in
Schedule 6.11.
(s) "DESIGNATED EMPLOYEE LIABILITIES" means all liabilities
related to the termination of the employment of the Designated Employees
(including without limitation, all Taxes, COBRA costs, expenses and severance
obligations) and whether arising before or after the Closing date.
(t) "E&O POLICY" shall have the meaning given in SECTION 6.13.
(u) "EMPLOYEE BENEFIT PLANS" means, collectively, each bonus,
deferred compensation, pension, retirement, profit-sharing, thrift, savings,
employee stock ownership, stock bonus, stock purchase, restricted stock, stock
option, termination, severance, compensation, medical, health, or other plan,
agreement, policy or agreement whether or not subject to ERISA and which
currently is or has been sponsored, maintained, contributed to, or required to
be contributed to, by any of the Company or its Subsidiaries or an ERISA
Affiliate, or for which the Company or its Subsidiaries or an ERISA Affiliate
has or has had any obligation or any liability of any nature, contingent or
otherwise, or for which there is a reasonable expectation of such obligation or
liability, on or before the Closing, for the benefit of any present or former
employees, retirees, directors or independent contractors (or their
beneficiaries, dependents or spouses) of the Company or its Subsidiaries or an
ERISA Affiliate.
(v) "ENCUMBRANCES" shall have the meaning given in SECTION
4.2(A).
(w) "ENVIRONMENT" means all air, surface water, groundwater, or
land, including land surface or subsurface, including all fish, wildlife, biota
and all other natural resources.
(x) "ENVIRONMENTAL LAW" means any and all Laws relating to the
protection of health and the Environment, worker health and safety, and/or
governing the handling, use, generation, treatment, storage, transportation,
disposal, manufacture, distribution, formulation, packaging, labeling, or
Release of Hazardous Substances, whether now existing or subsequently amended or
enacted, and the state analogies thereto, all as amended or superseded from time
to time; and any common law doctrine, including, but not limited to, negligence,
nuisance, trespass, Personal injury, or property damage related to or arising
out of the presence, Release, or exposure to a Hazardous Substance.
(y) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(z) "ERISA AFFILIATE" means any entity which with respect to
Safeco, the Seller, the Company or any Subsidiary is or was a member of (i) a
controlled group of corporations (as defined in Section 414(b) of the Code; (ii)
a group of trades or businesses under common control (as defined in Section
414(c) of the Code); or (iii) an affiliated service group (as defined under
Section 414(m) of the Code or the regulations under Section 414(o) of the Code),
any of which includes or included Safeco, the Seller, the Company or any
Subsidiary.
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(aa) "EXCLUDED LIABILITIES" means all liabilities of Sellers
and their Affiliates (other than those of the Company and Subsidiaries), which
may accrue to the Company solely as a result of the Company having been or being
included as part of a common control group with Sellers, as a result of a
contract, guarantee, loan or other obligation incurred by or on behalf of the
Seller or an Affiliate of the Seller, or as result of the operation of law.
(bb) "GAAP" shall have the meaning given in SECTION 4.5(B).
(cc) "GOVERNMENTAL ENTITY" means any legislative or
executive agency or department or other regulatory service, authority or agency
or any court, arbitration panel or other tribunal or judicial authority of any
foreign, federal, state, county, municipal or other local jurisdiction,
political entity, body, organization, subdivision or branch.
(dd) "HAZARDOUS SUBSTANCE" means any chemicals, materials,
substances or wastes in any amount or concentration which are now included in
the definition of "hazardous substances," "hazardous materials," "hazardous
wastes," "extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," "pollutants," "regulated substances," "solid
wastes," or "contaminants" or words of similar import, under any Environmental
Law.
(ee) "HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
(ff) "INTERIM FINANCIAL STATEMENTS" shall have the meaning
given in Section 6.16(a).
(gg) "LAWS" or "LAW" means all applicable criminal, civil or
common laws, statutes, ordinances, orders, codes, rules, regulations, policies,
guidance documents, writs, judgments, decrees, injunctions, or agreements of any
Governmental Entity.
(hh) "LEASE" means all leases, subleases, licenses and other
agreements under which the Company or any Subsidiary uses or occupies or has the
right to use or occupy, now or in the future, any real property, including,
without limitation, any land, buildings and improvements.
(ii) "LITIGATION CONDITIONS" shall have the meaning given in
SECTION 8.5(B).
(jj) "MANAGEMENT CERTIFICATE" shall mean a certificate dated
as of the closing dated executed by the Management Shareholders and the
controller and inhouse counsel of the Company substantially in the form attached
as Exhibit 7.2(d) hereto.
(kk) "MANAGEMENT SHAREHOLDER" shall have the meaning given
in the introduction.
(ll) "MATERIAL ADVERSE EFFECT" means a material adverse
effect on the condition (financial or otherwise), business, assets, results of
operations or prospects of the Company or any Subsidiary taken as a whole.
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(mm) "MATERIAL CONTRACTS" shall have the meaning given in
SECTION 4.9.
(nn) "PARENT" shall have the meaning given in the
introduction.
(oo) "PERSON" means any natural person or legal person
(including, but not limited to, a corporation, joint stock company, limited
liability company, partnership, joint venture, association, estate, trust,
government or governmental authority, agency or instrumentality) or any group of
any of natural or legal persons acting in concert.
(pp) "POST-CLOSING PERIOD" means any Tax period beginning
and ending after the Closing Date.
(qq) "PRE-CLOSING PERIOD" means any Tax period ending on
(and including) or before the Closing Date.
(rr) "PROCEEDING" shall have the meaning given in SECTION
4.6(A).
(ss) "PROHIBITED PERIOD" shall have the meaning given in
SECTION 6.1(A).
(tt) "PURCHASE PRICE" shall have the meaning given in
SECTION 3.
(uu) "REFERENCE BALANCE SHEET" shall have the meaning given
in SECTION 4.5(A).
(vv) "REGULAR FINANCIAL STATEMENTS" shall have the meaning
given in Section 4.5(a).
(ww) "REGULATION S-X" shall have the meaning given in
SECTION 4.5(B).
(xx) "RELEASE" means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing of a Hazardous Substance into the Environment.
(yy) "REQUIRED CONSENTS" shall have the meaning given in
SECTION 4.4(A).
(zz) "SAFECO LIFE" shall have the meaning given in Section
6.10.
(aaa) "SALE PROPOSAL" means any inquiry, proposal or
offer (other than by the Buyer or its Affiliates) relating to, or that could
reasonably be expected to lead to (i) a merger, consolidation, share exchange of
securities, dissolution, recapitalization, liquidation or other business
combination involving the Company; or (ii) the acquisition in any manner,
directly or indirectly, in a single transaction or in a series of related
transactions, of all or substantially all of the assets of the Company.
(bbb) "SCHEDULE OF EXCEPTIONS" means the Sellers'
Schedule of Exceptions to the representations and warranties contained in
SECTION 4 of this Agreement, which has been delivered to the Buyer concurrent
with the execution of this Agreement.
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(ccc) "SECTION 338(H)(10) ELECTION" shall have the
meaning given in Section 6.2(a).
(ddd) "SELLER" and "SELLERS" shall have the meanings
given in the introduction.
(eee) "SELLER INDEMNITEE" shall have the meaning given
in SECTION 8.3.
(fff) "SELLERS' KNOWLEDGE" means the actual knowledge
of Xxxxx Xxxxx and Xxxxx Xxxx and Sellers shall be deemed to have knowledge of
those items set forth in the Management Certificate.
(ggg) "SEPARATED OFFICERS" shall have the meaning given
in SECTION 6.13(A).
(hhh) "STRADDLE PERIOD" means any Tax period beginning
before and ending after the Closing Date.
(iii) "SUBSIDIARY" means each of the subsidiaries of
the Company listed on SCHEDULE 4.2(B) to the Schedule of Exceptions.
(jjj) "SUBSIDIARY EQUITY" shall have the meaning set
forth in SECTION 4.2(A).
(kkk) "TANGIBLE NET WORTH" shall mean the tangible
assets of the Company and the Subsidiaries, less the liabilities of the Company
and its Subsidiaries, as calculated under GAAP and consistent with past
practices.
(lll) "TAX" means any tax, charge, fee, levy,
deficiency or other assessment of whatever kind or nature including, without
limitation, any net income, gross income, profits, gross receipts, excise, real
or personal property, sales, ad valorem, withholding, social security (or
similar), retirement, excise, employment, unemployment, minimum, alternative or
add-on minimum, estimated, severance, stamp, property, occupation,
environmental, premium, capital stock, disability, windfall profits, use,
service, net worth, payroll, franchise, license, gains, customs, transfer,
recording, registration and other tax, duty, fee, assessment or charge of any
kind whatsoever, imposed by any Tax Authority, including any liability therefore
as a transferee (including without limitation under Code Section 6901 or any
similar provision of applicable law), as a result of Treas. Reg. ss.1.1502-6 or
any similar provision of applicable law, or as a result of any tax sharing or
similar agreement, together with any interest, penalties or additions to tax
relating thereto.
(mmm) "TAX AUTHORITY" means any branch, office,
department, agency, instrumentality, court, tribunal, officer, employee,
designee, representative, or other Person that is acting for, on behalf or as a
part of any foreign or domestic government (or any political subdivision
thereof) that is engaged in or has any power, duty, responsibility or obligation
relating to the legislation, promulgation, interpretation, enforcement,
regulation, monitoring, supervision or collection of or any other activity
relating to any Tax or Tax Return.
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(nnn) "TAX ITEM" means each of the following items (or
any combination thereof):
(i) any Taxes for any Pre-Closing Period or
attributable to the portion of the Straddle Period up to and including the
Closing Date (including but not limited to, any liability arising under Treas.
Reg. ss. 1.1502-6 or under any Tax allocation, Tax indemnification or Tax
sharing contract or agreement in effect on (and including) or prior to the
Closing Date), to the extent such Taxes exceed the reserve for Taxes (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the Closing Balance Sheet
(rather than in any notes thereto); and
(ii) any Taxes attributable to the inclusion of any
income, gain, loss, deduction or other Tax items resulting from the Section
338(h)(10) Election (in whole or in part) made pursuant to this Agreement
(Sellers do not warrant the validity of the Section 338(h)(10) Election).
(ooo) "TAX PROCEEDING" means any audit, examination,
review, reassessment, litigation or other administrative or judicial proceeding
relating to any Tax for which the Company is (or is asserted to be) or may be
liable, the collection, payment or withholding of any Tax, or any Tax Return
filed by or on behalf of the Company.
(ppp) "TAX RETURN" means any return, election,
declaration, report, schedule, information return, document, information,
opinion, statement, or any amendment to any of the foregoing (including without
limitation any consolidated, combined or unitary return) submitted or required
to be submitted to any Tax Authority.
(qqq) "TERMINATED CONTRACTS" shall have the meaning
given in SECTION 6.3(A).
(rrr) "TRADE PAYABLES" means the normal course accounts
payable of the Company and the Subsidiaries that relate to amounts owing to
insurance carriers for premiums for insurance policies placed on behalf of
customers of the Company or any Subsidiaries.
(sss) "TRANSACTION DOCUMENTS" shall have the meaning
given in SECTION 4.3.
11. MISCELLANEOUS.
11.1 TRANSACTION FEES AND EXPENSES. Except as otherwise expressly
provided herein, each party shall bear such costs, fees and expenses as may be
incurred thereby in connection with this Agreement and the transactions
contemplated hereby.
11.2 NOTICES. Any notice, demand, request or other communication which
is required, called for or contemplated to be given or made hereunder to or upon
any party hereto shall be deemed to have been duly given or made for all
purposes if (a) in writing and sent by (i) messenger or a recognized national
overnight courier service for next day delivery with receipt therefor, or (ii)
certified or registered mail, postage paid, return receipt requested, or (b)
sent by facsimile transmission with a written copy thereof sent on the same day
by postage paid first-class mail, or (c) by personal delivery to such party at
the following address:
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if to the Buyer, to:
Satellite Acquisition Corporation
0000 Xxxxxxxxx Xxxxx Xxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
(000) 000-0000
With a copy to:
Xxxxxx, Xxxxxxxxxx & Xxxxxxxxx, LLP
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
(000) 000-0000
if to Parent or Seller:
Safeco Corporation
Safeco Plaza
Xxxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
(000) 000-0000
With a copy to:
------------------------------------------
------------------------------------------
Attention:--------------------------------
(---) ---------
or such other address as either party hereto may at any time, or from time to
time, direct by notice given to the other party in accordance with this Section.
11.3 AMENDMENT. Except as otherwise provided herein, no amendment of
this Agreement shall be valid or effective unless in writing and signed by or on
behalf of the party against whom the same is sought to be enforced.
11.4 WAIVER. No course of dealing of any party hereto, no omission,
failure or delay on the part of any party hereto in asserting or exercising any
right hereunder, and no partial or single exercise of any right hereunder by any
party hereto shall constitute or operate as a waiver of any such right or any
other right hereunder. No waiver of any provision hereof shall be effective
unless in writing and signed by or on behalf of the party to be charged
therewith. No waiver of any provision hereof shall be deemed or construed as a
continuing waiver, as a waiver in respect of any other or subsequent breach or
default of such provision, or as a waiver of any other provision hereof unless
expressly so stated in writing and signed by or on behalf of the party to be
charged therewith.
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11.5 GOVERNING LAW; VENUE. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Washington, without
regard to conflict of law provisions, except to the extent precluded by federal
law of mandatory application.
11.6 REMEDIES. In the event of any actual or prospective breach or
default by any party hereto, the other parties shall be entitled to equitable
relief, including remedies in the nature of injunction and specific performance.
11.7 SEVERABILITY. The provisions hereof are severable and if any
provision of this Agreement shall be determined to be legally invalid,
inoperative or unenforceable in any respect by a court of competent
jurisdiction, then the remaining provisions hereof shall not be affected, but
shall, subject to the discretion of such court, remain in full force and effect,
and any such invalid, inoperative or unenforceable provision shall be deemed,
without any further action on the part of the parties hereto, amended and
limited to the extent necessary to render such provision valid, operative and
enforceable.
11.8 FURTHER ASSURANCES. Each party hereto covenants and agrees
promptly to execute, deliver, file or record such agreements, instruments,
certificates and other documents and to perform such other and further acts as
the other party hereto may reasonably request or as may otherwise be necessary
or proper to consummate and perfect the transactions contemplated hereby and to
act reasonably and in good faith to effectuate the smooth transfer of the
business of the Company and the Subsidiaries and the inter-relationship of the
parties post-Closing.
11.9 ASSIGNMENT.
(a) This Agreement is binding upon and is for the benefit of the
parties hereto and their respective successors, legal representatives, and
assigns, and no Person who is not a party hereto (or a successor or assignee of
such party) shall have any rights or benefits under this Agreement, either as a
third party beneficiary or otherwise. This Agreement cannot be assigned, except
by a written agreement executed by the parties hereto or their respective
successors and assigns.
(b) Notwithstanding the foregoing, the Buyer (including each
subsequent assignee of the Buyer) shall have the right to assign any or all of
its rights and obligations under this Agreement and the other Transaction
Documents to any other Person who acquires all or substantially all of the
assets and business of the Buyer (or a subsequent assignee of the Buyer) or to
any other Person who is an Affiliate of the Buyer, subject in each case to the
assumption in writing, and in a form reasonably acceptable to the Sellers (which
acceptance by the Sellers shall not be unreasonably withheld, delayed or
conditioned), by such Person of all of the Buyer's obligations hereunder and
delivery of such assumption to the Sellers within five (5) business days of the
execution thereof; provided, HOWEVER, that any such assignment shall not relieve
the assignor from its obligations under this Agreement.
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(c) Notwithstanding any provision of this Agreement to the
contrary, the Sellers hereby acknowledge and agree that all of the covenants,
representations, warranties and indemnities of the Sellers under this Agreement
and under any other Transaction Document, may be collaterally assigned to any
and all lenders to the Buyer or any of its Affiliates, any and all of whom may
enforce their rights and remedies in connection with any such collateral
assignment or realization thereon to the extent provided in the applicable
security agreements and other debt instruments or at law or in equity, subject
to the terms of this Agreement and the other Transaction Documents, and all
counterclaims and defenses the Sellers may have against the Buyer; PROVIDED,
HOWEVER, that any such assignment shall not relieve the assignor from its
obligations under this Agreement.
11.10 BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns.
11.11 NO THIRD PARTY BENEFICIARIES. Nothing contained in this
Agreement, whether express or implied, is intended, or shall be deemed, to
create or confer any right, interest or remedy for the benefit of any Person
other than as otherwise provided in this Agreement.
11.12 ENTIRE AGREEMENT. This Agreement, together with the Schedule of
Exceptions, the Exhibits, certificates and other documentation referred to
herein or required to be delivered pursuant to the terms hereof, contains the
terms of the entire agreement among the parties with respect to the subject
matter hereof and thereof and supersedes any and all prior agreements,
commitments, understandings, discussions, negotiations or arrangements of any
nature relating thereto.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date written above.
SATELLITE ACQUISITION CORPORATION.
By: /S/ XXXXXXX XXXXXX
--------------------------------------
Name:
--------------------------------------
Title: PRESIDENT
--------------------------------------
SAFECO CORPORATION
By: /S/ XXXXXXX X. XXXXXXXX
--------------------------------------
Name:
--------------------------------------
Title: CHAIRMAN, CEO, PRESIDENT
--------------------------------------
GENERAL AMERICA CORPORATION
By: /S/ XXXXXXX X. XXXXXXXX
--------------------------------------
Name:
--------------------------------------
Title: PRESIDENT
--------------------------------------
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