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EXHIBIT 10.44
ACQUISITION AGREEMENT
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ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the "Agreement") is entered into as of
September 13, 1995, by and among Fidelity National Financial, Inc., a Delaware
corporation ("Fidelity"), and Nations Holding Group, Inc., a California
corporation ("NHG"), and its wholly owned subsidiary Nations Title Inc., a
Kansas corporation ("NTI"). Fidelity, NHG and NTI are referred to collectively
herein as the "Parties" or singularly "Party".
R E C I T A L S:
A. NHG owns all of the issued and outstanding shares of capital stock
of NTI and Nations Title Company of Bakersfield (formerly Heritage Title
Company), a California corporation ("Heritage").
B. NTI owns all of the issued and outstanding shares of capital stock
of Nations Title Insurance of New York Inc., a New York corporation ("Nations
New York"), National Title Insurance of New York Inc., a New York corporation
("National New York"), Nations Title Insurance Company, a Kansas corporation
("Nations Kansas"), Nations Foreclosure Services, Inc., a Kansas corporation
("Nations Foreclosure"), Nations Appraisal Services, Inc., a Kansas corporation
("Nations Appraisal"), and Nations Post & Pub Services, Inc., a Kansas
corporation ("Nations P & P"), and Nations Kansas owns all of the issued and
outstanding shares of Suds Car Wash, a Nevada corporation ("Suds") (collectively
the foregoing direct subsidiaries of NTI and Suds are sometimes referred to as
the "NTI Subs").
C. This Agreement contemplates the acquisition by Fidelity from NHG of
all of the issued and outstanding shares of capital stock of Heritage and NTI.
D. Fidelity and NHG believe that this Agreement and the transactions
contemplated herein are in their respective best interests and the best
interests of their respective shareholders.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. Definitions.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses, in each case (a)
net of any insurance recoveries (except to the extent such recoveries increase
the cost of insurance, through retrospective adjustments or otherwise), and (b)
net of any tax benefit, after taking into account any tax detriment of any
indemnity.
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"Affiliate" shall mean, with respect to a Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such Person.
"Ancillary Agreements" shall mean the Indemnity Escrow Agreement, the
Registration Rights Agreement and the Underwriting Agreement.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or would reasonably form the
basis for any specified consequence.
"Business Consulting Agreement" shall mean that certain Business
Consulting Agreement, dated of as even date herewith, between Fidelity, NHG, NTI
and certain other NHG Subsidiaries.
"Cash Purchase Price" has the meaning set forth in Section 2(a) below.
"CB" means Creditanstalt Bankverein.
"CB Loan" has the meaning set forth in Section 5(g) below.
"Closing" has the meaning set forth in Section 2(d) below.
"Closing Date" has the meaning set forth in Section 2(d) below.
"Closing Date Intercompany Indebtedness" has the meaning set forth in
Section 2(c)(i) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consent to Acquisition" means that certain Consent to Acquisition
agreement dated the date hereof among Fidelity, NHG, CB and Imperial.
"Colton Property" has the meaning set forth in Section 2(b) below.
"Confidential Information" means any information concerning the
businesses and affairs of any of the Parties that is not already generally
available to the public.
"Deposit" has the meaning set forth in Section 2(c) below.
"Deposit Escrow Agent" shall mean Imperial Bank.
"Deposit Escrow Agreement" shall mean that certain Deposit Escrow
Agreement, dated as of even date herewith, by and among Fidelity, NHG and the
Deposit Escrow Agent, which relates to the Deposit.
"Disbursed Deposit" has the meaning set forth in Section 2(d) below.
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"Disclosure Schedule" has the meaning set forth in Section 3 below.
"Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Section 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Section 3(1).
"Environmental, Health, and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof) concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Extremely Hazardous Substance" has the meaning set forth in Section
302 of the Emergency Planning and Community Right-to-Know Act of 1986, as
amended.
"Fidelity" has the meaning set forth in the preface above.
"Fidelity Common Stock" means shares of common stock, par value $0.0001
per share, of Fidelity.
"Fidelity SEC Reports" means Fidelity's Annual Report on Form 10-K for
the year ended December 31, 1994, Quarterly Reports on Form 10-Q for the
quarterly periods ended March 31, 1995 and June 30, 1995, all proxy statements
relating to Fidelity's meetings of stockholders (whether annual or special) held
since January 1, 1993, all other reports or registration statements (other than
Reports on Form 10-Q not referred to above) filed by Fidelity with the SEC since
January 1, 1993, and all amendments and supplements to all such reports and
registration statements filed by Fidelity with the SEC.
"Fidelity Shares" means the shares of Fidelity Common Stock, either
held in treasury and transferred to NHG or newly issued by Fidelity to NHG, to
which NHG shall become entitled to receive pursuant to this Agreement.
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"GAAP" means, at any particular time, generally accepted accounting
principles, consistently applied on a going concern basis without regard to the
pendency of the transactions contemplated hereby and using audit scope and
materiality standards used in the past and, with respect to interim financial
statements, subject to normal year-end adjustments.
"Heritage" has the meaning set forth in Recital A above.
"Heritage Shares" shall mean the issued and outstanding shares of
capital stock of Heritage, consisting of 3,000 shares of Common Stock, par value
$100 per share.
"Imperial" shall mean Imperial Bank in its capacity as a creditor of
NHG or any NHG Subsidiary.
"Imperial NHG Loan" has the meaning set forth in Section 5(g) below.
"Imperial NTI Loan" has the meaning set forth in Section 5(g) below.
"Indemnity Escrow Agent" shall mean Imperial Bank.
"Indemnity Escrow Agreement" shall mean that agreement by and among
Fidelity, NHG and the Indemnity Escrow Agent in the form attached as Exhibit A.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier lists, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means the actual knowledge of Xxxxx X. Xxx Xxxxxx and the
actual knowledge, after reasonable investigation, of the following persons:
Xxxxxxx Xxxxxxxxx, Xxxxxxxxxxx Xxxxxx, Xxxxx Xxxxx, Xxxxxxx Xxxxxxx, Xxxxx
Xxxxxx, all regional managers and all regional counsel.
"Lease Agreement" shall mean that certain Sublease Agreement dated June
1, 1994 between NHG and Nations Kansas.
"Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
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"Martha's Vineyard Expenditures" shall mean any and all costs, expenses
or other expenditures (whether currently expensed or capitalized) arising out of
or in connection with the ownership, use or disposition of the Vineyard Property
after May 31, 1995 to the extent that such costs, expenses or other expenditures
are actually paid or owed by Fidelity or any Fidelity Affiliate to third
parties, except principal payments subsequent to May 31, 1995 on the current
indebtedness secured by the Vineyard Property or the principal of any
refinancing indebtedness thereof, but including, without limitation, the
following:
(i) all property holding costs, such as real estate taxes and
customary maintenance;
(ii) all sales or other disposition expenses, such as transfer
taxes, attorneys' fees, title insurance premiums, brokerage fees or
escrow charges;
(iii) all amounts paid (including, without limitation, reasonable
attorneys' fees) with respect to third-party claims and/or the defense,
settlement or satisfaction thereof, arising out of or in connection
with the Vineyard Property, including, without limitation, the pending
claims of Xxxxx Xxxxxxxxx;
(iv) all amounts paid to preserve, improve or develop the
Vineyard Property;
(v) all interest and other charges on indebtedness secured by
the Vineyard Property; and
(vi) any other amounts normally incurred in connection with the
ownership, use or disposition of real property.
"Material Adverse Effect" means any event, effect, development,
occurrence or circumstance, individually or when taken together with all other
such events, effects, developments, occurrences or circumstances, causing,
resulting in or having a material adverse effect on (i) the business, assets,
results of operations, business relationships, properties, condition (financial
or otherwise), results of operations or prospects of the NHG Subsidiaries taken
as a whole, (ii) the ability of the Parties to consummate the transactions
contemplated by this Agreement, or (iii) the legal right or authorization of the
NHG Subsidiaries to continue to operate their respective businesses.
"May 31 Intercompany Indebtedness" has the meaning set forth in Section
2(c)(i) below.
"Most Recent Audited Date" has the meaning set forth in Section 3(g)
below.
"Most Recent Financial Statements" has the meaning set forth in Section
3(g) below.
"Most Recent Fiscal Quarter End" has the meaning set forth in Section
3(g) below.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"National New York" has the meaning set forth in Recital B above.
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"Nations Appraisal" has the meaning set forth in Recital B above.
"Nations Foreclosure" has the meaning set forth in Recital B above.
"Nations Kansas" has the meaning set forth in Recital B above.
"Nations New York" has the meaning set forth in Recital B above.
"Nations P & P" has the meaning set forth in Recital B above.
"Network Title" has the meaning set forth in Section 2(b) below.
"NHG" has the meaning set forth in the preface above.
"NHG Martha's Vineyard Profit Share" shall mean an amount equal to
one-half (1/2) of the amount by which (a) the aggregate gross income, proceeds
or revenue derived and collected by Fidelity or any Fidelity Affiliate from the
ownership, use or disposition of the Vineyard Property after May 31, 1995
exceeds (b) the sum of $3,758,446 plus the cumulative aggregate of all Martha's
Vineyard Expenditures plus any reasonable reserve for future losses or Martha's
Vineyard Expenses in excess of the reasonably estimated fair market value of the
Vineyard Property. To the extent (if any) that Fidelity or any Fidelity
Affiliate occupies, or allows others to occupy, for commercial purposes, the
Vineyard Property, or transfers any interest in the Vineyard Property along with
other assets, Fidelity or a Fidelity Affiliate shall be deemed to have received
as gross income under (a) above the greater of the consideration actually
received for such occupancy or interests, or an amount equal to the fair market
value of such occupancy or interests, as the case may be; provided, however, if
the Vineyard Property is transferred with other assets to a party that is not an
Affiliate of Fidelity and the parties thereto in good faith and reasonably
allocate the consideration paid among the assets, including any interest in the
Vineyard Property, the fair market value of the interest in the Vineyard
Property shall be deemed to be the amount so allocated to it.
"NHG Subsidiaries" shall mean, collectively, NTI, Heritage, the NTI
Subs and the NTINY Subs.
"NOLs" has the meaning set forth in Section 8(e) below.
"NTI" has the meaning set forth in the preface above.
"NTI Shares" shall mean the issued and outstanding shares of capital
stock of NTI, consisting of 3,000 shares of Common Stock, no par value per
share.
"NTI Subs" has the meaning set forth in Recital B above.
"NTINY Subs" means Nations Title Agency of Indiana, Inc., Nations Title
Agency of Illinois, Inc., Nations Title Agency, Inc., and Nations Title of
Arizona, Inc.
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"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency and, where appropriate, in accordance with formula).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof), or any other legal
entity.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Policies" has the meaning set forth in Section 3(i) below.
"Pomona Property" has the meaning set forth in Section 2(b) below.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Quality Loan" has the meaning set forth in Section 2(b) below.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement, between NHG and Fidelity, in the form attached hereto as Exhibit B.
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Requisite Regulatory Approvals" has the meaning set forth in Section
6(a)(iii) below.
"Retained Assets" has the meaning set forth in Section 2(b) below.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for Taxes not yet due and payable or for Taxes that
the taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Standstill Period" means the period provided for in Section 1.2 of the
Consent to Acquisition.
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"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock or has the
power to vote or direct the voting of sufficient securities to elect a majority
of the directors.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs, duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax or contribution of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Underwriting Agreements" shall mean the agreements among the parties
indicated thereon in the forms attached hereto as Exhibit C.
"Undisbursed Deposit" has the meaning set forth in Section 2(d) below.
"Vineyard Property" shall mean the real property described on Exhibit H
to this Agreement.
2. Basic Transactions.
(a) Acquisition of NTI and Heritage by Fidelity. On the Closing
Date, subject to the terms and conditions of this Agreement, Fidelity shall
acquire from NHG, and NHG shall sell to Fidelity, the Heritage Shares and the
NTI Shares, in each case free and clear of all liens, claims, encumbrances,
security interests, pledges, equities, options, charges and restrictions other
than restrictions imposed by a regulatory agency. In consideration for such
acquisition, Fidelity shall (i) pay to NHG the cash sum of $21,000,000, subject
to adjustment as provided below (the "Cash Purchase Price"), and (ii) issue to
NHG an aggregate of 160,000 shares of Fidelity Common Stock (the "Fidelity
Shares"), and (iii) pay to NHG the NHG Martha's Vineyard Profit Share, if any,
within 30 days after its collection by Fidelity or any Fidelity Affiliate, which
payment shall be in cash unless Fidelity or a Fidelity Affiliate has received
property other than cash as part of the gross income, proceeds or revenue used
in making the NHG Martha's Vineyard Profit Share calculation, in which event
such payment shall be made in the proportion of the cash and property used in
making such calculation. If Fidelity is recapitalized through the subdivision or
combination of its outstanding shares of Fidelity Common Stock into a larger or
smaller number of shares, or if Fidelity declares a dividend or distribution on
Fidelity Common Stock payable in Fidelity Common Stock or securities convertible
into Fidelity Common Stock, the number of Fidelity Shares shall be appropriately
increased or reduced, as the case may be.
(b) Pre-Closing Distributions; Retaliatory Refund. On or prior to
the Closing Date, (i) the NHG Subsidiaries shall cancel and write-off the
Closing Date Intercompany Indebtedness, and (ii) Nations New York and NTI shall
distribute to NHG, as a dividend, all of the issued and outstanding shares of
capital stock of Nations Title Insurance of Arizona, Inc.
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(formerly Network Title and Escrow), an Arizona corporation ("Network Title "),
and Quality Loan Service Corp., a California corporation ("Quality Loan"), and
(iii) Nations New York and NTI shall distribute to NHG, as a dividend, those two
real properties described on Exhibit E attached hereto (the "Colton Property"
and the "Pomona Property", respectively) (collectively, Network Title, Quality
Loan, the Colton Property and the Pomona Property are hereinafter sometimes
referred to as the "Retained Assets"). Subsequent to the Closing Date, if
Nations Kansas and/or National New York receive from the California State Board
of Equalization refunds for the overpayment of taxes in the approximate amounts
of $268,970 and $836,899, respectively, plus any interest which the State of
California may pay thereon net of any Tax calculated thereon to Fidelity or an
NHG Subsidiary, Fidelity shall pay to NHG an amount equal to any such refund and
net interest received by Nations Kansas and/or National New York on the
condition that NHG provide to Fidelity a release by TRW, Inc. of all of the NHG
Subsidiaries and Fidelity from any such amount so refunded. In addition, NHG
represents and warrants that such refunds were reported as income in the Federal
and state income tax returns for the tax year ended December 31, 1993 and that
such refunds were not reflected as assets in the Most Recent Financial
Statements.
(c) Adjustments. The Cash Purchase Price shall be subject to
adjustment as follows:
(i) Attached hereto as Exhibit D is a schedule of all amounts
which were owed by NHG or any Affiliate of NHG (other than any of the
NHG Subsidiaries) to the NHG Subsidiaries as of May 31, 1995 (the "May
31 Intercompany Indebtedness"). If, on the Closing Date, the amount so
owed (the "Closing Date Intercompany Indebtedness") exceeds the May 31
Intercompany Indebtedness, the Cash Purchase Price to be paid by
Fidelity, shall be reduced dollar for dollar for any such excess. For
purposes of the foregoing, any management or other fees of any nature
paid or accrued to NHG, or any Affiliate of NHG (other than the NHG
Subsidiaries), by any NHG Subsidiary subsequent to May 31, 1995 shall
be added to and included in the Closing Date Intercompany Indebtedness.
(ii) On or before the Closing Date, the Parties shall determine
if any entity to be acquired by Fidelity will (A) incur a Tax as a
result of any cancellation and write-off or distribution described in
Section 2(b) above and/or (B) retain, incur or otherwise be responsible
for any Liability relating to the Retained Assets or such distribution
thereof and/or (C) incur a Tax as a result of the refunds described in
Section 2(b) above, and, if so, the amount thereof. In the event that
there is such an amount, the Cash Purchase Price to be paid by Fidelity
shall be reduced dollar for dollar for any such amount. Notwithstanding
the foregoing, and the result of any such determination, NHG shall
indemnify and hold harmless Fidelity, and its Affiliates (including the
NHG Subsidiaries), from and against any such Tax in excess of any such
amount so determined, and from and against any Adverse Consequences
resulting from, arising out of or relating to any such Tax. For
purposes hereof, the amount of such Tax shall be determined without
regard to any net operating losses (either of the entity itself or any
other member of the affiliated group), tax reserves reflected in either
the Financial Statements or NHG's Disclosure Schedule or any tax
sharing agreement. NHG further agrees to indemnify and hold harmless
Fidelity and the NHG Subsidiaries from and against any Liability
relating to any of the Retained Assets and any Adverse
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Consequences resulting from, arising out of, or relating to the
Retained Assets or the distribution of the Retained Assets pursuant to
this Agreement.
If, after the Closing Date, Fidelity determines that an adjustment
provided for above is appropriate and was not fully adjusted for at the time of
Closing, Fidelity shall so notify NHG thereof in writing and provide to NHG
documentation supporting such adjustment. NHG shall thereupon pay to Fidelity
the amount of such adjustment, in cash, within five (5) business days after
written notice is given to NHG of such adjustment. If payment is not made within
such five (5) days, the amount of adjustment not so paid shall bear interest at
the rate of 10% per annum, and Fidelity may, at its election, either pursue its
remedies directly against NHG or make a claim under the Indemnity Escrow
Agreement, or both. If NHG, in good faith, disputes any such adjustment by
giving written notice to Fidelity within five (5) business days after receipt by
NHG of notice of such adjustment, the Parties covenant to negotiate in good
faith the resolution of such dispute. If either Party determines in good faith
that such dispute cannot be resolved, such Party can terminate such
negotiations, and each Party will be left with its respective rights and
remedies.
(d) Deposit by Fidelity. Concurrently herewith, (i) Fidelity is
delivering to NHG the sum of $2,000,000, of which Fidelity is hereby authorized
and instructed to wire directly to CB on behalf of NHG the sum of $250,000 plus
accrued interest as designated by CB, and to the Deposit Escrow Agent the sum of
$3,000,000 (collectively, the "Deposit"), which amounts shall be deemed to be
advances by Fidelity to NHG against the Cash Purchase Price, and (ii) Fidelity,
NHG and the Deposit Escrow Agent are entering into the Deposit Escrow Agreement.
All earnings on that portion of the Deposit held by the Deposit Escrow Agent
shall belong to Fidelity except as otherwise provided in the Deposit Escrow
Agreement. Upon the Closing, the portion of the Deposit then held by the Deposit
Escrow Agent shall be disbursed to NHG and, together with the remainder of the
Deposit, shall be retained by NHG and deemed to be partial payments of the Cash
Purchase Price. In the event of a termination of this Agreement, Fidelity shall
be entitled to the return of the entire Deposit from the Deposit Escrow Agent to
the extent of the amount thereof not previously disbursed to NHG (the
"Undisbursed Deposit"), and from NHG to the extent of the amount thereof
received from Fidelity and/or the Deposit Escrow Agent (the "Disbursed
Deposit"), together with simple interest on the Disbursed Deposit at six percent
(6%) per annum; provided, however, that notwithstanding the foregoing, NHG shall
be entitled to receive the Undisbursed Deposit and to retain the Disbursed
Deposit if the Closing fails to occur by reason of the nonfulfillment of any
condition in:
(i) Section 6(c);
(ii) Section 6(a)(i), if such 6(a)(i) failure results from
any agreement, contract or license to which Fidelity is a party or by
or under which it is bound or licensed or otherwise; or
(iii) 6(a)(ii), if such failure results from any action, suit
or proceeding instituted by a Person whose interest in such action,
suit or proceeding derives from Fidelity or an Affiliate of Fidelity.
Each Party shall promptly take such steps as may be necessary to effect the
previous sentence, including, without limitation, issuing such written
instructions and taking such other actions as
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the Deposit Escrow Agent may request. The disposition of the Deposit pursuant to
this Section 2(d) shall not prejudice any rights or remedies which the Parties
may otherwise have pursuant to this Agreement. The Parties acknowledge and agree
that any Undisbursed Deposit shall be the property of Fidelity until NHG is
entitled thereto pursuant to the terms of this Agreement.
The obligations of NHG pursuant to this Section 2(d) shall at all times be and
remain secured, to the extent and in the manner set forth in the Pledge
Agreement, dated as of even date herewith, between NHG and Fidelity.
(e) The Closing. Subject to satisfaction or waiver of all of the
conditions set forth in Section 6(b) and Section 6(c) below, the closing of the
transactions contemplated by this Agreement (the "Closing") shall take place at
Fidelity's offices located at 00000 Xxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx on
such date and at such time as may be mutually designated by Fidelity and NHG
within five (5) business days following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby set forth in Section 6(a) below, or such other date as the
Parties may mutually determine (the "Closing Date"). If the Closing Date has not
occurred on or before March 31, 1996, this Agreement shall terminate on such
date, subject to the terms of Section 2(d) above and Section 7 below; provided,
however, if, on March 31, 1996, the only reason that the Closing has not
occurred is because not all Requisite Regulatory Approvals have been obtained
but the Parties reasonably believe that those not obtained will be obtained in
the near future, either party may extend the March 31, 1996 date to May 31,
1996, if such party has received from CB and Imperial, in writing, the extension
by them of the Standstill Period to May 31, 1996, by giving written notice of
such extension to the other Parties on or before March 31, 1996. At the Closing,
Fidelity shall deliver to NHG, subject to the Indemnity Escrow Agreement and to
the provisions of Section 5(g) below, the following: (i) the Fidelity Shares;
(ii) the remainder of the Cash Purchase Price; (iii) the Ancillary Agreements,
duly executed by Fidelity; and (iv) such other documents and instruments as may
be specified in this Agreement or otherwise reasonably requested by NHG in order
to consummate the transactions contemplated hereby. At the Closing, NHG shall
deliver to Fidelity the following: (i) the stock certificates representing the
NTI Shares and the Heritage Shares, duly endorsed for transfer to Fidelity or
accompanied by duly executed stock assignments separate from certificate; (ii)
the Ancillary Agreements, duly executed by NHG; and (iii) such other documents
and instruments as may be specified in this Agreement or otherwise reasonably
requested by Fidelity in order to consummate the transactions contemplated
hereby. Notwithstanding anything in this Agreement to the contrary, if all
conditions to the Parties' obligations to consummate the transactions in this
Agreement have been satisfied except the obtaining of the Requisite Regulatory
Approval from the State of California to the sale and transfer of Heritage to
Fidelity, the Parties shall close all of the transactions hereunder on the
Closing Date except the sale of Heritage. In such event, there shall be withheld
$500,000 of the Cash Purchase Price from such Closing, which shall be allocated
to the purchase of Heritage. The purchase and sale of Heritage shall be
consummated within three (3) business days after receipt of such Requisite
Regulatory Approval from the State of California. If such Requisite Regulatory
Approval is not obtained on or before November 30, 1996, either party may
terminate the sale of Heritage, in which event Fidelity shall retain the
$500,000 and NHG shall retain Heritage; provided, however, that, if either Party
is in breach of its obligations under this Agreement at the time of such
termination, such termination shall not release the Parties from the rights and
obligations which the Parties then had with respect to such breach. Pending the
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Closing of the sale of Heritage, all representations, warranties and covenants
contained in this Agreement shall continue in effect with respect to Heritage.
(f) Taking of Necessary Actions; Further Action. The Parties
shall take all such reasonable and lawful actions (and NHG shall cause each of
the NHG Subsidiaries to take all such reasonable and lawful actions) as may be
necessary or appropriate in order to effectuate the transactions contemplated in
this Agreement as promptly as possible, subject to the limitations set forth in
Section 5(a) below. If, at any time after the Closing Date, any such further
action is necessary or desirable to carry out the purposes of this Agreement,
including to vest Fidelity with full right, title and possession to all of the
issued and outstanding shares of capital stock of Heritage and NTI, and all
assets, property, rights, privileges, powers and franchises of each (except for
the Retained Assets), such Party shall take all such lawful and necessary action
and shall direct its officers and directors to take all such lawful and
necessary action. In addition, neither Party shall, and NHG shall ensure that
none of the NHG Subsidiaries, Quality Loan or Network Title will, through any
reorganization, recapitalization, transfer of assets or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
covenants of the Parties or the NHG Subsidiaries hereunder or otherwise take any
action which is inconsistent or in conflict with the transactions contemplated
hereby.
(g) Election to Restructure. Fidelity may, after the date hereof,
elect to restructure the transactions contemplated in this Agreement, provided,
however, that such restructure (i) preserves for NHG the same economic effect
after the restructure as NHG had prior to the restructure, and (ii) does not
materially and adversely affect the likelihood of obtaining the Requisite
Regulatory Approvals with conditions acceptable to Fidelity.
(h) Tax Election. The Parties agree that the Parties shall not
make an election under Section 338(h)(10) of the Code.
3. Representations and Warranties of NHG.
NHG represents and warrants to Fidelity that the statements contained
in this Section 3 are correct and complete as of the date of this Agreement,
except as set forth in the disclosure schedule of NHG accompanying this
Agreement (the "Disclosure Schedule"). The Disclosure Schedule will be arranged
in paragraphs corresponding to the lettered and numbered paragraphs contained in
this Section 3.
(a) Organization, Qualification, and Corporate Power. NHG and
each of the NHG Subsidiaries is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction in which it is
incorporated. NHG and each of the NHG Subsidiaries is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would not
have a Material Adverse Effect. The Disclosure Schedule sets forth a list of the
jurisdictions in which NHG and each of the NHG Subsidiaries are qualified to
conduct business. NHG and the NHG Subsidiaries each have full corporate power
and authority to carry on the businesses in which it is engaged and to own and
use the properties owned and used by it.
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(b) Capitalization, Subsidiaries.
(i) The entire authorized capital stock of NTI consists of
30,000 shares of Common Stock, and the NTI Shares represent all of the
issued and outstanding shares of capital stock of NTI. All of the NTI
Shares have been duly authorized and are validly issued, fully paid and
nonassessable. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require
NTI to issue, sell, or otherwise cause to become outstanding any
additional shares of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or
similar rights with respect to NTI. All of the NTI Shares are owned of
record and beneficially by NHG, free and clear of any and all liens,
claims, encumbrances, security interests, pledges, equities, options,
charges and restrictions whatsoever.
(ii) The entire authorized capital stock of Heritage
consists of 1,000,000 shares of Common Stock, and the Heritage Shares
represent all of the issued and outstanding shares of capital stock of
Heritage. All of the Heritage Shares have been duly authorized and are
validly issued, fully paid and nonassessable. There are no outstanding
or authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments
that could require Heritage to issue, sell, or otherwise cause to
become outstanding any additional shares of its capital stock. There
are no outstanding or authorized stock appreciation, phantom stock,
profit participation, or similar rights with respect to Heritage. All
of the Heritage Shares are owned of record and beneficially by NHG,
free and clear of any and all liens, claims, encumbrances, security
interests, pledges, equities, options, charges and restrictions
whatsoever.
(iii) The entire authorized capital stock of Nations New York
consists of 181,166 shares of Common Stock, and the Nations New York
Shares represent all of the issued and outstanding shares of capital
stock of Nations New York. All of the Nations New York Shares have been
duly authorized and are validly issued, fully paid and nonassessable.
There are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require Nations New York to
issue, sell, or otherwise cause to become outstanding any additional
shares of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar
rights with respect to Nations New York. All of the Nations New York
Shares are now owned of record and beneficially by NTI, and on the
Closing Date will be owned of record and beneficially by NTI, free and
clear of any and all liens, claims, encumbrances, security interests,
pledges, equities, options, charges and restrictions whatsoever.
(iv) Section 3(b) of the Disclosure Schedule sets forth, for
each of the NTI Subs and each of the NTINY Subs, its authorized capital
stock, the number of shares of each series or class of capital stock
issued and outstanding and the record and beneficial owners thereof,
and the par value of each such series or class of capital stock. Except
as set forth in Section 3(b) of the Disclosure Schedule, all of the
issued and outstanding shares of each of the NTI Subs and the NTINY
Subs are duly authorized, validly issued, fully paid and nonassessable
and are directly or indirectly owned of record
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and beneficially by NTI, free and clear of all liens, claims,
encumbrances, pledges, equities, options, shares and restrictions
whatsoever. Such shares are subject to no options, warrants, rights of
first refusal or other agreements restricting the transfer or voting of
such shares. No rights, options, warrants, conversion rights,
preemptive rights or agreements for the purchase or acquisition from,
or the issuance and sale by, any NTI Sub or NTINY Sub of any shares of
their respective capital stock are outstanding and no authorizations
therefor are in effect, nor are there any proxies outstanding or voting
agreements with respect to any shares of their respective capital
stock.
(v) Other than Nations New York's interests in Network Title
and Quality Loan (which shall be distributed or disposed of pursuant to
Section 2(b)(ii) above), there is no Person in which any of the NHG
Subsidiaries owns, directly or indirectly, any equity or other voting
interest or position.
(c) Authorization of Transaction. Each of NHG and NTI has full
power and authority (including full corporate power and authority) to execute
and deliver this Agreement and the other agreements and instruments to be
executed and delivered by them pursuant hereto and to perform their respective
obligations hereunder and thereunder. This Agreement constitutes the valid and
legally binding obligation of NHG and NTI and is enforceable in accordance with
its terms. The Business Consulting Agreement constitutes a valid and binding
obligation of NHG and each of the NHG Subsidiaries which is a party thereto, and
is enforceable in accordance with its terms.
(d) Noncontravention. Neither the execution and the delivery of
this Agreement by NHG and NTI, nor the consummation of the transactions
contemplated hereby by NHG and NTI, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which NHG or any
of the NHG Subsidiaries is subject or any provision of the charter or bylaws of
NHG or any of the NHG Subsidiaries or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which NHG or any of the NHG Subsidiaries is a party or by which they are
bound or to which any of their assets are subject (or result in the imposition
of any Security Interest upon any of their assets), except where the violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or Security Interest would not have a
Material Adverse Effect. Neither NHG nor any of the NHG Subsidiaries needs to
give any notice to, make any filing with, or obtain any authorization, permit,
certificate, registration, consent, approval or order of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement or for the NHG Subsidiaries to continue operate
their respective businesses following the Closing.
(e) Title to Assets. NHG has good and marketable title to the NTI
Shares and the Heritage Shares, and NTI has good and marketable title to the
Nations New York Shares, in each case free and clear of all liens, claims,
encumbrances, pledges, options and restrictions other than those held by CB (all
of which are described in the Disclosure Schedules). NTI's sole material assets
are the shares of capital stock of the NTI Subs. Each of the NHG Subsidiaries
has good and marketable title to or a valid leasehold interest in, the
properties and assets used by
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it, located on its premises, or shown on the Most Recent Financial Statements or
acquired after the date thereof, free and clear of all Security Interests,
except for properties and assets disposed of in the Ordinary Course of Business
since the date of the Most Recent Financial Statements. All of such properties
and assets are, and require only routine maintenance to keep them, in good
working condition, normal wear and tear excepted.
(f) Corporate Records. NHG has provided to Fidelity the minute
books, stock certificate books and stock record books of each of the NHG
Subsidiaries. The minute books (containing the records of meetings of the
shareholders, the board of directors, and any committees of the board of
directors), the stock certificate books, and the stock record books of the NHG
Subsidiaries are correct and complete. None of the NHG Subsidiaries is in
default under or in violation of any provision of its charter or bylaws.
(g) Financial Statements. Attached to Section 3(g) of the
Disclosure Schedule are true and correct copies of the following financial
statements (collectively, the "Financial Statements"): (i) (A) NTI's audited
consolidated balance sheets as of December 31, 1994 and 1993 and statements of
operations and shareholders' equity (deficit) and cash flow for the three years
ended December 31, 1994 (the "Most Recent Audited Date"), (B) Heritage's audited
balance sheets and statements of operations and shareholders' equity (deficit)
and cash flow as of and for the three years ended December 31, 1994, and (C)
audited statutory financial statements for the years ended December 31, 1994 and
1993 for Nations Kansas, Nations New York and National New York, all the
foregoing, together with the Notes thereto; and (ii) unaudited consolidated
balance sheets and statements of operations (the "Most Recent Financial
Statements") as of and for the seven months ended July 31, 1995, and the six
months ended June 30, 1995 (the "Most Recent Fiscal Quarter End") for each of
NTI and Heritage and statutory financial statements for the six months ended
June 30, 1995 for Nations Kansas, Nations New York and National New York. The
Financial Statements (including the Notes thereto) have been prepared in
accordance with GAAP (except for the referenced unaudited statutory financial
statements, which have instead been prepared in accordance with applicable law)
applied on a consistent basis throughout the periods covered thereby, present
fairly in all material respects the financial condition of NTI and Heritage as
of such dates and the results of operations of NTI and Heritage for such
periods, are correct and complete in all material respects, and are consistent
with the books and records of NTI and Heritage (which books and records are
correct and complete in all material respects).
(h) Absence of Material Adverse Changes. Since the Most Recent
Audited Date, there has not been any changes in the business, condition
(financial or otherwise), operations, title claims, results of operations,
properties, assets or prospects of any of the NHG Subsidiaries which, either
individually or in the aggregate, have been or could reasonably be expected to
have a Material Adverse Effect on the NHG Subsidiaries taken as a whole. Without
limiting the generality of the foregoing, since the Most Recent Audited Date:
(i) none of the NHG Subsidiaries has sold, leased,
transferred, or assigned any of its assets, tangible or intangible,
other than for a fair consideration in the Ordinary Course of Business;
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(ii) none of the NHG Subsidiaries has entered into any
agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) either involving more than
$50,000 or outside the Ordinary Course of Business;
(iii) no party (including any of the NHG Subsidiaries) has
accelerated, terminated, modified, or canceled any agreement, contract,
lease, or license (or series of related agreements, contracts, leases,
and licenses) involving more than $50,000 to which any of the NHG
Subsidiaries is a party or by which any of them is bound;
(iv) none of the NHG Subsidiaries has imposed any Security
Interest upon any of its assets, tangible or intangible;
(v) none of the NHG Subsidiaries has made any capital
expenditure (or series of related capital expenditures) either
involving more than $50,000 or outside the Ordinary Course of Business;
(vi) none of the NHG Subsidiaries has made any capital
investment in, any loan to, or any acquisition of the securities or
assets of, any other Person (or series of related capital investments,
loans, and acquisitions) either involving more than $50,000 or outside
the Ordinary Course of Business;
(vii) none of the NHG Subsidiaries has issued any note,
bond, or other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized lease
obligation either involving more than $50,000 singly or $50,000 in the
aggregate;
(viii) none of the NHG Subsidiaries has delayed or postponed
the payment of accounts payable and other liabilities outside the
Ordinary Course of Business;
(ix) none of the NHG Subsidiaries has canceled,
compromised, waived, or released any right or claim (or series of
related rights and claims) either involving more than $50,000 or
outside the Ordinary Course of Business;
(x) none of the NHG Subsidiaries has granted any license
or sublicense of any rights under or with respect to any Intellectual
Property;
(xi) there has been no change made or authorized in the
charters or bylaws of any of the NHG Subsidiaries;
(xii) none of the NHG Subsidiaries has issued, sold, or
otherwise disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of its capital stock;
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(xiii) none of the NHG Subsidiaries has declared, set aside,
or paid any dividend or made any distribution with respect to its
capital stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
(xiv) none of the NHG Subsidiaries has experienced any
physical damage, destruction, or loss (whether or not covered by
insurance) to its property in excess of $50,000 in the aggregate among
all of the NHG Subsidiaries;
(xv) none of the NHG Subsidiaries has made any loan to, or
entered into any other transaction with, any of its directors,
officers, and employees outside the Ordinary Course of Business;
(xvi) none of the NHG Subsidiaries has entered into any
employment contract or collective bargaining agreement, written or
oral, which are not cancelable at will, or modified the terms of any
existing such contract or agreement;
(xvii) none of the NHG Subsidiaries has granted any increase
in the base compensation of any of its directors, officers, and
employees outside the Ordinary Course of Business;
(xviii) none of the NHG Subsidiaries has adopted, amended,
modified or terminated any bonus, profit-sharing, incentive, severance,
or other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with
respect to any other Employee Benefit Plan);
(xix) none of the NHG Subsidiaries has made any other
material change in employment terms for any of its directors, officers,
and key employees outside the Ordinary Course of Business;
(xx) none of the NHG Subsidiaries has made or pledged to
make any charitable or other capital contribution outside the Ordinary
Course of Business;
(xxi) there has not been any material intercompany transfer
by any NHG Subsidiary of liquid assets to NHG or any Affiliate of NHG
(including, without limitation, Quality Loan or Network Title) other
than any such transfer involving the Retained Assets as contemplated by
this Agreement, and no management or other fees have been charged by
NHG or any Affiliate of NHG (other than the NHG Subsidiaries) to the
NHG Subsidiaries since May 31, 1995;
(xxii) there has not been any other material occurrence,
event, incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving any of the NHG Subsidiaries; and
(xxiii) none of the NHG Subsidiaries has agreed or committed
to any of the foregoing.
(i) Undisclosed Liabilities. None of the NHG Subsidiaries has any
Liability (and, to the Knowledge of NHG, there is no Basis for any present or
future action, suit,
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proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability), except for (i) Liabilities set forth
in the Most Recent Financial Statements; (ii) Liabilities that are not required
by GAAP to be included in the Most Recent Financial Statements; (iii)
Liabilities which have arisen after the Most Recent Fiscal Quarter End in the
Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law); and (iv) obligations or
Liabilities, absolute, contingent or otherwise, relating to the issuance of or
coverage under title insurance policies or other title assurances (collectively,
"Policies"). Notwithstanding the foregoing, no representation is being made by
NHG in any provision of this Agreement with respect to the adequacy of any loss
reserves on Policies.
(j) Legal and Regulatory Compliance.
(i) Each of the NHG Subsidiaries, and their respective
predecessors and affiliates, has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), except where
any failure to comply would not have a Material Adverse Effect, and no
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.
(ii) Each of the NHG Subsidiaries has all material licenses,
certificates, franchises, rights and permits that are necessary for the
conduct of its business, and such licenses are in full force and
effect. No suspension, revocation or non-renewal of any such license,
certificate, franchise, right or permit, or any event which (whether
with notice or the lack of time or both) might result in any such
suspension, revocation or failure to renew, has occurred. Each of the
NHG Subsidiaries has posted all deposits of securities and cash
required by regulatory authorities having jurisdiction over it, and the
Disclosure Schedule sets forth a list of such deposits and the
locations thereof. The properties, assets, operations and businesses of
the NHG Subsidiaries and those of their respective Subsidiaries, are,
and have been maintained and conducted, in compliance with all
applicable licenses, certificates, franchises, rights and permits,
except where failure to do so would not have a Material Adverse Effect.
(iii) Since January 1, 1995, the NHG Subsidiaries have filed
all reports, registrations and statements, together with any amendments
required to be made with respect thereto, that were required to be
filed with (a) all appropriate insurance regulatory agencies; and (b)
any other appropriate federal, state or local governmental or
regulatory authority. All such reports, registrations and filings, as
of their respective filing or mailing dates, (a) were true and complete
in all material respects (or were amended so as to be so promptly
following discovery of any discrepancy); and (b) complied in all
material respects with all of the statutes, rules and regulations
enforced or promulgated by the governmental or regulatory authority
with which they were filed (or were amended so as to be so promptly
following discovery of any such non-compliance) and none contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. True and correct copies of all such reports, registrations
and statements have been provided or made available to Fidelity.
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(iv) The Disclosure Schedules contain a true and complete
list of all reinsurance policies and agreements, and all excess loss
and fidelity insurance policies, of the NHG Subsidiaries and shows the
limits, the reinsurer or insurer, and any pending material claims
against such insurer thereunder with respect to the NHG Subsidiaries.
Such policies and agreements are in full force and effect, subject to
no breach by the NHG Subsidiaries which shall give rise to a right in
the insurer or reinsurer to deny any claim by the NHG Subsidiaries. The
NHG Subsidiaries have committed no breach under any reinsurance
agreements and policies or excess loss and fidelity insurance policies
listed in the Disclosure Schedules, except where any such breaches, in
the aggregate, would not have a Material Adverse Effect. None of the
NHG Subsidiaries has received notice of any breach under any
reinsurance agreements and policies or excess loss and fidelity
insurance policies listed in the Disclosure Schedules. The NHG
Subsidiaries have notified each such reinsurer or insurer of all
claims, known to them, of which they are required to provide notice in
accordance with the terms of such reinsurance and insurance policies
and agreements.
(k) Tax Matters.
(i) NHG and each of the NHG Subsidiaries has filed all Tax
Returns that it was required to file. All such Tax Returns were correct
and complete in all material respects. All Taxes owed by NHG and any of
the NHG Subsidiaries (whether or not shown on any Tax Return) have been
paid. None of NHG or any of the NHG Subsidiaries currently is the
beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction
where NHG or any of the NHG Subsidiaries does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of any of the NHG Subsidiaries
that arose in connection with any failure (or alleged failure) to pay
any Tax.
(ii) NHG and each of the NHG Subsidiaries has withheld and
timely paid to the appropriate governmental entity all Taxes required
by any Tax law to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor,
creditor, shareholder, or other third party.
(iii) Neither NHG nor any of the NHG Subsidiaries, or any
director or officer (or employee responsible for Tax matters) of NHG or
any of the NHG Subsidiaries, expects any authority to assess any
additional Taxes for any period for which Tax Returns have been filed.
There is no dispute or claim concerning any Tax Liability of NHG or any
of the NHG Subsidiaries either (A) claimed or raised by any authority
in writing or (B) as to which any shareholder, director or officer (or
employees responsible for Tax matters) of NHG or any of the NHG
Subsidiaries has knowledge based upon personal contact with any agent
of such authority. Section 3(k) of the Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns filed with
respect to any of the NHG Subsidiaries for taxable periods ended on or
after December 31, 1994, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject
of audit. The NHG Subsidiaries have delivered to Fidelity correct and
complete copies of all federal income Tax Returns,
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examination reports, and statements of deficiencies assessed against or
agreed to by any of them since December 31, 1994.
(iv) None of the NHG Subsidiaries has waived any statute of
limitations in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(v) None of NHG or the NHG Subsidiaries has filed a consent
under Code Sec. 341(f) concerning collapsible corporations. None of the
NHG Subsidiaries has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Code Sec. 280G or Code Sec. 162(m). None of the NHG
Subsidiaries has been a United States real property holding corporation
within the meaning of Code Sec. 897(c)(2) during the applicable period
specified in Code Sec. 897(c)(1)(A)(ii). NHG and each of the NHG
Subsidiaries has disclosed on its federal income tax returns all
positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code Sec.
6662. All obligations owed by or to the NHG Subsidiaries to or from NHG
or any Affiliate of NHG (except the NHG Subsidiaries) under any tax
sharing or tax allocation agreement is reflected in the May 31
Intercompany Indebtedness. None of the NHG Subsidiaries (A) has been a
member of an affiliated group filing a consolidated federal income Tax
Return (other than a group the common parent of which was NHG or TRW
Inc. or a TRW Inc. predecessor) or (B) has any Liability for the Taxes
of any Person (other than any of the NHG Subsidiaries) under Treas.
Reg. ss.1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
(vi) Section 3(k) of the Disclosure Schedule sets forth the
following information with respect to each of the NHG Subsidiaries as
of the most recent practicable date: (A) the basis of the shareholder
of each such NHG Subsidiary in its stock (or the amount of any Excess
Loss Account); (B) the amount of any net operating loss, net capital
loss, unused investment or other credit, unused foreign tax, or excess
charitable contribution allocable to the NHG Subsidiaries; and (C) the
amount of any deferred gain or loss allocable to the NHG Subsidiaries
arising out of any deferred intercompany transaction.
(vii) The unpaid Taxes of the NHG Subsidiaries (A) did not,
as of the Most Recent Fiscal Quarter End, exceed the reserve for Tax
Liability (other than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on
the face of the Most Recent Balance Sheet (other than in any notes
thereto) and (B) do not exceed that reserve as adjusted for the passage
of time through the date hereof in accordance with GAAP.
(l) Real Property.
(i) All of the real property owned by any of the NHG
Subsidiaries (excluding the Colton Property and the Pomona Property),
or in which any of them have an ownership interest, is listed with a
brief description of each such property in Section 3(l)(i) of the
Disclosure Schedule. Each of the NHG Subsidiaries has good and
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marketable title to the real properties that it owns, as described in
such Disclosure Schedule, free and clear of all Security Interests,
agreements, mortgages, covenants, conditions, restrictions, easements,
charges, claims, assessments and encumbrances, except for: (a) rights
of lessees or sublessees in such matters that are reflected in a
written lease or sublease; (b) current taxes (including assessments
collected with taxes) not yet due and payable; (c) encumbrances, if
any, that are not substantial in character, amount or extent and do not
materially detract from the value, or interfere with present use, or
the ability of such NHG Subsidiary to dispose, of the property subject
thereto or affected thereby; and (d) other matters as described in the
Disclosure Schedule. The amount of indebtedness secured by the Vineyard
Property does not exceed $1,755,000. The activities of the NHG
Subsidiaries with respect to all real property owned by them for use in
connection with their operations are, to the Knowledge of NHG, in all
material respects permitted and authorized by applicable zoning laws,
ordinances and regulations and all laws and regulations of any
governmental entity. The buildings and improvements on real properties
owned by the NHG Subsidiaries are in good condition and repair, and do
not require more than normal and routine maintenance to keep them in
such condition, normal wear and tear and latent defects of which NHG
does not have knowledge excepted.
(ii) Section 3(l)(ii) of the Disclosure Schedule
lists and describes briefly all real property leased or subleased to
any of the NHG Subsidiaries. The NHG Subsidiaries have delivered or
made available to Fidelity correct and complete copies of the leases
and subleases listed in Section 3(l)(ii) of the Disclosure Schedule (as
amended to date). With respect to each lease and sublease listed in
Section 3(l)(ii) of the Disclosure Schedule:
(A) the lease or sublease is legal, valid,
binding, enforceable, and in full force and effect, and the NHG
Subsidiary which is a party to such lease or sublease enjoys and
is entitled to quiet possession thereunder;
(B) the lease or sublease will continue to be
legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions
contemplated hereby;
(C) no party to the lease or sublease is in
breach or default, and no event has occurred which, with notice
or lapse of time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(D) no party to the lease or sublease has
repudiated any provision thereof;
(E) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(F) with respect to each sublease, the
representations and warranties set forth in subsections (A)
through (E) above are true and correct with respect to the
underlying lease;
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(G) none of the NHG Subsidiaries has assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered
any interest in the leasehold or subleasehold;
(H) all facilities leased or subleased
thereunder have, to the Knowledge of NHG, received all approvals
of governmental authorities (including licenses and permits)
required in connection with the operation thereof while operated
by NHG and have been operated and maintained by NHG in accordance
with applicable laws, rules, and regulations; and
(I) all facilities leased or subleased
thereunder are supplied with utilities and other services
necessary for the operation of said facilities.
(m) Tangible Assets. The NHG Subsidiaries own or lease, or
otherwise are legally entitled to use, all buildings, equipment, and other
tangible assets necessary for the conduct of their businesses as presently
conducted and as presently proposed to be conducted. Each such tangible asset is
free from material defects (patent and latent, except for latent defects of
which NHG does not have knowledge), has been maintained substantially in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the purposes for
which it presently is used and presently is proposed to be used.
(n) Contracts. Section 3(n) of the Disclosure Schedule lists the
following contracts and other agreements to which any of the NHG Subsidiaries is
a party:
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease
payments in excess of $50,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale personal property, or for the furnishing or receipt of
services, the performance of which will extend over a period of more
than one year, result in a material loss to any of the NHG
Subsidiaries, or involve consideration in excess of $50,000;
(iii) any agreement concerning a partnership or joint venture
agreement;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed, or guaranteed any indebtedness
for borrowed money, or any capitalized lease obligation, in excess of
$50,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement involving any of the NHG Subsidiaries and
NHG or any of NHG's Affiliates;
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(vii) any profit sharing, stock option, stock purchase,
stock appreciation, deferred compensation, severance, or other material
plan or arrangement for the benefit of the current or former directors,
officers, and employees of any NHG Subsidiary;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on
a full-time, part-time, consulting, or other basis providing annual
compensation in excess of $50,000 or any agreement providing severance
benefits;
(x) any agreement under which an NHG Subsidiary has
advanced or loaned any amount to any of its directors, officers, and
employees outside the Ordinary Course of Business;
(xi) any agency agreement between any of the NHG
Subsidiaries, on the one hand, and any title insurance underwriter, on
the other hand, which is currently in effect or which has been in
effect during the last three years;
(xii) any agreement pursuant to which an NHG Subsidiary is
leasing or servicing a title plant;
(xiii) any agreements pursuant to which an NHG Subsidiary
sold assets having a value in excess of $100,000 during the last three
years;
(xiv) any agreements pursuant to which an NHG Subsidiary
assumed obligations in excess of $100,000 during the last three years;
(xv) any agreement under which an NHG Subsidiary is a
guarantor or otherwise is liable for any liability or obligation
(including indebtedness) of any other person or entity in excess of
$50,000;
(xvi) any agreement under which the consequences of a
default or termination could have a Material Adverse Effect; or
(xvii) any other agreement (or group of related agreements)
the performance of which involves consideration in excess of $50,000.
NHG has delivered or made available to Fidelity a correct and complete
copy of each written agreement listed in Section 3(n) of the Disclosure Schedule
(as amended to date) and a written summary setting forth the terms and
conditions of each oral agreement referred to in Section 3(n) of the Disclosure
Schedule. With respect to each such agreement: (A) the agreement is legal,
valid, binding, enforceable, and in full force and effect; (B) the agreement
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) to NHG's Knowledge, no party is in breach or default,
and no event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration, under
the agreement; and (D) no party has repudiated any provision of the agreement.
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(o) Notes and Accounts Receivable. All notes and accounts
receivable of the NHG Subsidiaries are reflected properly on their books and
records, are valid receivables.
(p) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of any of the NHG Subsidiaries.
(q) Insurance. In addition to the matters disclosed pursuant to
Section 3(j)(iv) above, Section 3(q) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which any of the NHG Subsidiaries has been a
party, a named insured, or otherwise the beneficiary of coverage at any time
within calendar years 1994 and 1995:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated
and operate) of coverage; and
(v) a description of any retroactive premium adjustments or
other loss- sharing arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) to NHG's Knowledge, neither the NHG Subsidiary nor any other party
to the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration, under the policy; and (D) no party
to the policy has repudiated any provision thereof. Each of the NHG Subsidiaries
has been covered during the past 5 years by insurance in scope and amount
customary and reasonable for the businesses in which it has engaged during the
aforementioned period. Section 3(q) of the Disclosure Schedule describes any
self-insurance arrangements affecting any of the NHG Subsidiaries.
(r) Litigation. Section 3(r) of the Disclosure Schedule sets
forth each instance in which any of the NHG Subsidiaries:
(i) is subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
(ii) is a party or, to the Knowledge of NHG, is threatened
to be made a party to any action, suit, proceeding, hearing, or
investigation in or before any court or
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quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator; or
(iii) is a party to a settlement agreement pursuant
to which there are obligations or conditional obligations yet to be
performed.
(s) Employees. None of the NHG Subsidiaries is a party to or
bound by any collective bargaining agreement, nor has any of them experienced
any strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. None of the NHG Subsidiaries has committed any unfair labor
practice. None of the directors and officers (and employees with responsibility
for employment matters) of NHG or the NHG Subsidiaries has any Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of any of the NHG Subsidiaries.
(t) Employee Benefits.
(i) Section 3(t) of the Disclosure Schedule lists each
Employee Benefit Plan that any of the NHG Subsidiaries maintains or to
which any of them contributes.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in
operation in all respects with the applicable requirements of
ERISA, the Code, and other applicable laws.
(B) All required reports and descriptions (including
Form 5500 Annual Reports, Summary Annual Reports, PBGC-1's, and
Summary Plan Descriptions) have been filed or distributed
appropriately with respect to each such Employee Benefit Plan.
The requirements of Part 6 of Subtitle B of Title I of ERISA and
of Code Sec. 4980B have been met with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction contributions) which
are due have been paid to each such Employee Benefit Plan which
is an Employee Pension Benefit Plan and all contributions for any
period ending on or before the Closing Date which are not yet due
have been paid to each such Employee Pension Benefit Plan or
accrued in accordance with the past custom and practice of the
NHG Subsidiaries. All premiums or other payments for all periods
ending on or before the Closing Date have been paid with respect
to each such Employee Benefit Plan which is an Employee Welfare
Benefit Plan.
(D) Each such Employee Benefit Plan which is an
Employee Pension Benefit Plan meets the requirements of a
"qualified plan" under Code Sec. 401(a) and has received a
favorable determination letter from the Internal Revenue Service.
(E) The market value of assets under each such Employee
Benefit Plan which is an Employee Pension Benefit Plan (other
than any Multiemployer Plan) equals or exceeds the present value
of all vested and
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nonvested Liabilities thereunder determined in accordance with
PBGC methods, factors, and assumptions applicable to an Employee
Pension Benefit Plan terminating on the date for determination.
(F) NHG has delivered to Fidelity correct and complete
copies of the plan documents and summary plan descriptions, the
most recent determination letter received from the Internal
Revenue Service, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that any of
the NHG Subsidiaries maintains or ever has maintained or to which any
of them contributes, ever has contributed, or ever has been required to
contribute:
(A) No such Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any Multiemployer Plan) has been
completely or partially terminated or been the subject of a
Reportable Event as to which notices would be required to be
filed with the PBGC. No proceeding by the PBGC to terminate any
such Employee Pension Benefit Plan (other than any Multiemployer
Plan) has been instituted or threatened.
(B) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No fiduciary has any
Liability for breach of fiduciary duty or any other failure to
act or comply in connection with the administration or investment
of the assets of any such Employee Benefit Plan. No action, suit,
proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits) is
pending or threatened. To the Knowledge of NHG, there is no Basis
for any such action, suit, proceeding, hearing, or investigation.
(C) None of the NHG Subsidiaries has incurred, and none
of the shareholders, directors or officers (or employees with
responsibility for employee benefits matters) of NHG or the NHG
Subsidiaries has any reason to expect that any of the NHG
Subsidiaries will incur, any liability to the PBGC (other than
PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal Liability) or under the Code with
respect to any such Employee Benefit Plan which is an Employee
Pension Benefit Plan.
(iii) None of the NHG Subsidiaries contributes to, ever has
contributed to, or ever has been required to contribute to any
Multiemployer Plan or has any liability (including withdrawal
Liability) under any Multiemployer Plan.
(iv) None of the NHG Subsidiaries maintains or ever has
maintained or contributes, ever has contributed, or ever has been
required to contribute to any Employee Welfare Benefit Plan providing
medical, health, or life insurance or other welfare-type benefits for
current or future retired or terminated employees, their spouses, or
their dependents (other than in accordance with Code Sec. 4980B).
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(u) Intellectual Property.
(i) Each of the NHG Subsidiaries owns or has the right to
use pursuant to license, sublicense, agreement, or permission all
Intellectual Property necessary for the operation of its business as
presently conducted. Each item of Intellectual Property owned or used
by any of the NHG Subsidiaries immediately prior to the Closing
hereunder will be owned or available for use by such NHG Subsidiary on
identical terms and conditions immediately subsequent to the Closing
hereunder. The NHG Subsidiaries have taken all necessary action to
maintain and protect each item of Intellectual Property that it (or
they) owns or uses.
(ii) None of the NHG Subsidiaries have, to the Knowledge of
NHG, interfered with, infringed upon or misappropriated any
Intellectual Property rights of third parties, and none of the NHG
Subsidiaries has ever received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation,
or violation. No third party has, to the Knowledge of NHG, interfered
with, infringed upon or misappropriated any Intellectual Property
rights of any of the NHG Subsidiaries.
(v) Environment, Health, and Safety.
(i) Each of the NHG Subsidiaries, and, to NHG's Knowledge,
their respective predecessors and affiliates has complied with all
Environmental, Health, and Safety Laws, except where failure to comply
would not have a Material Adverse Effect, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand,
or notice has been filed or commenced against any of them alleging any
failure so to comply. Without limiting the generality of the preceding
sentence, each of the NHG Subsidiaries and their respective
predecessors and affiliates has obtained and been in compliance with
all of the terms and conditions of all permits, licenses, and other
authorizations which are required under, and has complied with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules, and timetables which are
contained in, all Environmental, Health, and Safety Laws, except where
failure to comply would not have a Material Adverse Effect.
(ii) None of the NHG Subsidiaries, or, to NHG's Knowledge,
their respective predecessors and affiliates, has handled or disposed
of any substance, arranged for the disposal of any substance, exposed
any employee or other individual to any substance or condition, or
owned or operated any property or facility in any manner that could
form a reasonable basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of the NHG Subsidiaries giving rise to any Liability,
except where having done so would not have a Material Adverse Effect.
None of the NHG Subsidiaries has any Liability for damage to any site,
location, or body of water (surface or subsurface), for any illness of
or personal injury to any employee or other individual, or for any
reason under any Environmental, Health, and Safety Law which would have
a Material Adverse Effect.
(iii) To NHG's Knowledge, all properties used in the business
of the NHG Subsidiaries, and their respective predecessors and
affiliates, have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-trans-dichloroethylene,
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dioxins, dibenzofurans, and Extremely Hazardous Substances, except
where the existence thereof would not have a Material Adverse Effect.
(w) Certain Business Relationships. None of NHG's shareholders or
their Affiliates has been involved in any business arrangement or relationship
with any of the NHG Subsidiaries within the past 12 months, and none of NHG's
shareholders or their Affiliates owns any asset, tangible or intangible, which
is used in the business of any of the NHG Subsidiaries.
(x) Brokers' Fees. Neither NHG nor any of the NHG Subsidiaries
has any liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.
(y) Investment Representations. NHG is acquiring the Fidelity
Shares for its own account, for investment purposes only, and not with a view to
or for resale in connection with any distribution thereof.
(z) Disclosure. The representations and warranties contained in
this Section 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.
4. Representations and Warranties of Fidelity. Fidelity represents
and warrants to NHG that the statements contained in this Section 4 are correct
and complete as of the date of this Agreement and will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4), except as
set forth in the disclosure schedule of Fidelity accompanying this Agreement
(the "Fidelity Disclosure Schedule"). The Fidelity Disclosure Schedule will be
arranged in paragraphs corresponding to the numbered and lettered paragraphs
contained in this Section 4.
(a) Organization. Fidelity is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction in
which it is incorporated, and is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification would not have a material
adverse effect on the financial condition of Fidelity and its Subsidiaries taken
as a whole or the ability of Fidelity to consummate the transactions
contemplated by this Agreement.
(b) Authorization of Transaction. Fidelity has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of Fidelity, enforceable in
accordance with its terms and conditions.
(c) Noncontravention. Neither the execution and the delivery of
this Agreement by Fidelity, nor the consummation of the transactions
contemplated hereby by Fidelity, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which Fidelity
is subject or any provision of the charter or bylaws of Fidelity or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which either Fidelity is a
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party or by which it is bound or to which any of its assets is subject, except
where the violation, conflict, breach, default, acceleration, termination,
modification, cancellation, or failure to give notice would not have a material
adverse effect on the ability of the Parties to consummate the transactions
contemplated by this Agreement. Fidelity does not need to give any notice to,
make any filing with, or obtain any authorization, permit, certificate,
registration, consent, approval or order of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement, except with the New York Stock Exchange regarding the Fidelity
Shares.
(d) Brokers' Fees. Fidelity has no liability or obligation to pay
any fees or commission to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(e) SEC Filings; Financial Statements. Fidelity has filed all
forms, reports and documents required to be filed with the SEC and has
heretofore delivered to or made available to NHG, in the form filed with the
SEC, the Fidelity SEC Reports. The Fidelity SEC Reports (i) were prepared in all
material respects in accordance with the requirements of the Securities Act or
the Securities Exchange Act, as the case may be, and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statement therein, in the light of the
circumstances under which they were made, not misleading. Each of the
consolidated financial statements (including, in each case, any related notes
thereto) contained in the Fidelity SEC Reports and Fidelity's 1994 Annual Report
to Stockholders was prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto) and each fairly presents in all material respects the consolidated
financial position of Fidelity and its subsidiaries as at the respective dates
thereof and the consolidated results of its operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount.
(f) Fidelity Shares. The Fidelity Shares, when issued pursuant to
this Agreement, shall have been duly authorized and shall be validly issued,
fully paid and nonassessable and, upon the Closing, will be owned of record and
beneficially by NHG free and clear of any and all liens, claims or encumbrances
created or suffered by Fidelity or Persons claiming by, under or through
Fidelity, except as provided in the Indemnity Escrow Agreement and the
Registration Rights Agreement.
(g) Disclosure. The representations and warranties contained in
this Section 4 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 4 not misleading.
5. Covenants. The Parties agree as follows with respect to the
period from and after the execution of this Agreement.
(a) General. Upon the terms and subject to the conditions hereof,
each of the Parties hereto shall use, and shall cause their respective
Subsidiaries to use, best efforts to take,
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or cause to be taken, all actions, and to do, or cause to be done, all other
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement, to
obtain in a timely manner all necessary waivers, consents and approvals
(including Requisite Regulatory Approvals) and to effect all necessary
registrations and filings, and otherwise to satisfy or cause to be satisfied all
conditions precedent to its obligations under this Agreement. The foregoing
covenant shall not include the obligation to satisfy any condition which may be
imposed with respect to the obtaining of any Requisite Regulatory Approval if
such condition, in the aggregate with all other such conditions, would (i) be
materially burdensome upon Fidelity, or (ii) cause Fidelity to be in default
under that certain Credit Agreement which Fidelity is currently negotiating with
The Chase Manhattan Bank ("Chase"), a copy of the most current draft of which
has been provided to NHG, or any similar Credit Agreement which Fidelity may
have with another lender, provided that such other Credit Agreement is not
significantly more restrictive than the draft Credit Agreement with Chase
heretofore provided to NHG; provided, however, that if such a default would
occur, Fidelity shall use its best efforts to obtain a waiver thereof from its
lender.
(b) Consents and Approvals. Subject to the limitations set forth
in Section 5(a) above, the Parties shall each use their best efforts to obtain
all consents, waivers, approvals, authorizations or orders (including, without
limitation, all governmental and regulatory rulings and approvals), and the
Parties shall make all filings (including, without limitation, all filings with
governmental or regulatory agencies) required in connection with the
authorization, execution and delivery of this Agreement by the Parties and the
consummation by them of the transactions contemplated hereby. With respect to
the filings for Requisite Regulatory Approvals in the states of Kansas, New York
and California, Fidelity shall make such filings as the proposed new owner and
shall pay all costs incurred by Fidelity in connection therewith, however, any
costs incurred by NHG in connection with fulfilling its obligations to cooperate
in connection with such filings shall be paid by NHG. As promptly as practicable
after the date of this Agreement, the Parties shall file (Fidelity shall pay the
filing fee in connection therewith) notifications under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act") in connection
with the transactions contemplated hereby and to respond as promptly as
practicable to any inquiries received from the Federal Trade Commission and the
Antitrust Division of the Department of Justice for additional information or
documentation and to respond as promptly as practicable to all inquiries and
requests received from any State Attorney General or other governmental
authority in connection with antitrust matters.
(c) Operation of Business. None of the NHG Subsidiaries shall,
prior to the Closing, engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business, except as may be required
by law or except as a result of a recommendation by the Committee under the
Business Consultant Agreement. Without limiting the generality of the foregoing,
the NHG Subsidiaries will not:
(i) authorize or effect any change in their charters or
bylaws;
(ii) grant any options, warrants, or other rights to purchase
or obtain any of their capital stock or issue, sell, or otherwise
dispose of any of their capital stock (except upon the conversion or
exercise of options, warrants, and other rights currently outstanding);
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(iii) except for the distributions of the Retained Assets
contemplated by this Agreement, declare, set aside, or pay any dividend
or distribution with respect to their capital stock (whether in cash or
in kind), or redeem, repurchase, or otherwise acquire any of their
capital stock, in either case outside the Ordinary Course of Business;
(iv) issue any note, bond, or other debt security or
create, incur, assume, or guarantee any indebtedness for borrowed money
or capitalized lease obligation outside the Ordinary Course of
Business;
(v) impose any Security Interest upon any of its assets
outside the Ordinary Course of Business or any lien, claim,
encumbrance, pledge or option on the NTI Shares or the Heritage Shares;
(vi) make any capital investment in, make any loan to, or
acquire the securities or assets of any other person outside the
Ordinary Course of Business;
(vii) make any change in employment terms for any of its
directors, officers, and key employees whose annual level of
compensation in the last preceding fiscal year exceeded $50,000, or
grant any bonuses or other forms of direct or indirect compensation,
except in the Ordinary Course of Business;
(viii) except for dispositions of the Retained Assets
contemplated by this Agreement, dispose of any assets except in the
Ordinary Course of Business;
(ix) increase, terminate, amend or alter or otherwise
modify any Employee Benefit Plan; or
(x) pay any management or other fees of any nature to NHG,
or any Affiliate of NHG (other than the NHG Subsidiaries); or
(xi) commit to any of the foregoing.
(d) Full Access. NHG and the NHG Subsidiaries will permit
representatives of Fidelity to have full access to all premises, properties,
personnel, books, records (including tax records), contracts, and documents of
or pertaining to each of them. Each of the Parties to whom disclosure is made
will treat and hold as such any Confidential Information it receives from any of
the Parties making such disclosure in the course of the reviews contemplated by
this Section 5(d), will not use any of the Confidential Information except in
connection with this Agreement, and, if this Agreement is terminated for any
reason whatsoever, agrees to return to the disclosing Party all tangible
embodiments (and all copies) thereof which are in its possession, or certify to
the disclosing Party that all such not returned have been destroyed.
(e) Notice of Developments. Each Party will give prompt written
notice to the others of any material adverse development of which such Party
becomes aware causing a breach of any of its own representations and warranties
in Section 3 and Section 4 above. No disclosure by any Party pursuant to this
Section 5(e), however, shall be deemed to amend or supplement the respective
Disclosure Schedule of either party or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
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(f) Exclusivity. NHG will not (and will not cause or permit any
of the NHG Subsidiaries or its or their respective officers, directors or
employees to) solicit, initiate, or encourage the submission of or participate
in any negotiations or discussions with respect to any proposal or offer from
any person relating to the acquisition of all or substantially all of the
capital stock, assets or business of any of the NHG Subsidiaries (including any
acquisition structured as a merger, consolidation, or share exchange). NHG and
NTI shall notify Fidelity immediately if any Person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing, and will cooperate
with Fidelity by furnishing any information it may reasonably request.
(g) CB and Imperial Loans. NHG currently has a loan outstanding
with CB in the principal amount of approximately $11,500,000 (the "CB Loan"),
which NHG incurred in connection with its acquisition of NTI. In addition, (i)
NHG currently is indebted to Imperial in the amount of $600,000 and Imperial has
issued a letter of credit for NHG in the amount of $581,005.42 (collectively,
the "Imperial NHG Loan"), and (ii) NHG currently is indebted to Imperial in the
amount of $700,000 which has been guaranteed by NTI (the "Imperial NTI Loan").
NHG shall (i) pay to CB and Imperial hereafter such of the Distributed Deposit
as CB and Imperial shall require at the times requested by CB and Imperial, and
(ii) disburse to CB and Imperial at the Closing whatever of the Cash Purchase
Price is necessary to fully discharge all obligations owed by NHG to CB under
the CB Loan, or otherwise, and all obligations owed by NTI to Imperial under the
Imperial NTI Loan, or otherwise, and NHG hereby authorizes Fidelity to disburse
on NHG's behalf at the Closing such cash amount to CB and Imperial by wire
transfer. In addition, NHG covenants that, on or before the Closing Date, NHG
shall obtain from CB and Imperial all consents from CB and Imperial and all
releases of any interests which CB and Imperial have of any type or nature in
the NTI Shares, the Heritage Shares, or the NHG Subsidiaries and their assets,
properties and businesses, and NHG shall obtain from Imperial confirmation that
none of the NHG Subsidiaries shall have any liability or obligation whatsoever
with respect to the Imperial NHG Loan subsequent to the Closing.
(h) Indemnity Escrow Agreement. On the Closing Date, Fidelity,
Fidelity Sub and NHG shall execute and deliver the Indemnity Escrow Agreement,
and there shall be delivered to, and directly deposited with, the Indemnity
Escrow Agent, for the account and future potential benefit of NHG, 160,000 of
the Fidelity Shares, which shall be held by the Indemnity Escrow Agent pursuant
to the terms and conditions of the Indemnity Escrow Agreement.
(i) Underwriting Agreements. On the Closing Date, the Parties
thereto shall enter into the Underwriting Agreements.
(j) Registration Rights Agreement. On the Closing Date, Fidelity
and NHG shall enter into the Registration Rights Agreement.
(k) Business Consulting Agreement. Each Party shall comply with
and timely perform (and NHG shall cause each of the NHG Subsidiaries which are
parties to the Business Consulting Agreement to comply with and timely perform)
their respective covenants and obligations under the Business Consulting
Agreement.
(l) Lease Agreement. On the date hereof, NHG and Nations Kansas
shall enter into a Termination of Sublease Agreement pursuant to which the Lease
Agreement and all
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rights and obligations of the parties thereunder shall be terminated effective
on the date the NTI personnel vacate the premises.
(m) Representations and Warranties True at Closing. All
representations and warranties of NHG in this Agreement will also be true and
correct as of the Closing Date as if made on that date; except to the extent
that any such representation or warranty may become untrue or inaccurate because
of events, occurring after the date of this Agreement, beyond the control of NHG
or any NHG Subsidiary and NHG and the NHG Subsidiaries are unable to make them
true or accurate as of the Closing despite their best efforts to do so.
Notwithstanding the foregoing, any event occurring after the date of this
Agreement shall not be a breach of a representation or warranty on the Closing
Date if either (i) such event was in compliance with the covenants of NHG and
the NHG Subsidiaries set forth in Section 5(c) of this Agreement, or (ii) such
event was a result of a recommendation by the Committee under the Business
Consultant Agreement, or (iii) such event would not have a Material Adverse
Effect.
(n) Retained Assets. Neither NHG nor any NHG Subsidiary shall
take any actions or omit to take any actions with respect to any of the Retained
Assets prior to the Closing which may adversely affect any NHG Subsidiary.
(o) Schedule of Closing Date Intercompany Indebtedness. On the
Closing Date, NHG shall deliver to Fidelity a true, complete and accurate
schedule of the Closing Date Intercompany Indebtedness.
(p) Closing Condition Covenants. Fidelity covenants that it shall
deliver or cause to be satisfied the closing conditions set forth in Section
6(c) below. NHG covenants that it shall deliver or cause to be satisfied the
closing conditions set forth in Section 6(b) below.
(q) Inspection Rights. Until such time as Fidelity and all
Fidelity Affiliates have completely divested themselves of their interests in or
to the Vineyard Property, on or before the thirtieth (30th) day following the
last day of each calendar year, Fidelity shall deliver to NHG a calculation of
NHG's Martha's Vineyard Profit Share certified by Fidelity's Chief Financial
Officer as of the end of such calendar year, which calculation shall itemize in
reasonable detail the components thereof. NHG shall have the right to review,
audit and/or challenge (at NHG's expense) any such calculation, and Fidelity and
Fidelity's Affiliates shall, upon reasonable advance written notice, make
available to NHG, during normal business hours at the principal offices of
Fidelity, such books, records, receipts or other documentation as NHG may
reasonably request in connection with any such review or audit.
(r) Accounting Records. NHG covenants that Fidelity and its
independent auditors may from time to time subsequent to the Closing Date, upon
prior reasonable notice, have access to, and make copies of, the books and
accounting records for any of the Retained Assets which NHG or its Affiliates
may have in their possession subsequent to the Closing Date in order to enable
Fidelity to comply with GAAP or any law, rule or regulation.
(s) Corporate Records. NHG covenants that it will promptly after
the date hereof take such actions as are necessary or appropriate to cause the
corporate minute and stock books of the NHG Subsidiaries to be complete and
accurate in all material respects consistent with the list of deficiencies
provided to NHG by Fidelity concurrently herewith.
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6. Conditions to Obligations to Close.
(a) Conditions to Obligations of the Parties. The obligations of
the Parties to consummate the transactions contemplated by this Agreement are
subject to the satisfaction of the following conditions at or prior to the
Closing:
(i) there shall have been obtained, without the imposition
of any material burden or restriction on any of the Parties not in
existence on the date hereof, each consent to the consummation of the
transactions contemplated by this Agreement which is required to be
obtained from any Person under any agreement, contract or license to
which Fidelity, NHG or any NHG Subsidiary is a party or by or under
which it is bound or licensed, or otherwise, the withholding of which
reasonably would have a Material Adverse Effect (this Section 6(a)(i)
is not applicable to Requisite Regulatory Approvals, which are provided
for in Section 6(a)(iii) below, nor is it applicable to any consents
which may be required from CB, which NHG has covenanted to obtain and
which, if not obtained, will be a material breach by NHG);
(ii) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction or before any
arbitrator wherein an unfavorable injunction, judgment, order, decree,
ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (C) affect adversely the right of Fidelity to own the
capital stock of and control, directly or indirectly, the NHG
Subsidiaries, or (D) affect materially and adversely the right of the
NHG Subsidiaries to own their respective assets and to operate their
respective businesses (and no such injunction, judgment, order, decree,
ruling, or charge shall be in effect);
(iii) All notices or filings required to be made, all
authorizations, permits, certificates, registrations, consents,
approvals or orders required to be obtained, and all waiting periods
required to expire, prior to the consummation of the transactions
contemplated by this Agreement under applicable federal laws of the
United States or applicable laws of any state having jurisdiction over
the transactions contemplated by this Agreement or the businesses
conducted by the Parties or the NHG Subsidiaries (collectively, the
"Requisite Regulatory Approvals") shall have been obtained or expired,
as the case may be, without the imposition of any condition which is
materially burdensome upon Fidelity or any party to be affected by such
condition or their respective Affiliates as determined pursuant to
Section 5(a) above (for purposes hereof, the Parties acknowledge and
agree that Requisite Regulatory Approvals shall not include the
approval of the Insurance Commissioner, the Department of Insurance, or
similar insurance regulator of any state other than Kansas, New York
and California); and
(iv) There shall not be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed
applicable to the transactions contemplated by this Agreement, by any
Persons, which makes the consummation of such transactions illegal.
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(b) Conditions to Obligations of Fidelity. The obligations of
Fidelity to consummate the transactions to be performed by it in connection with
the Closing are subject to satisfaction of the following conditions:
(i) there shall not have been, and there shall not be on
the Closing Date, a breach by NHG or NTI of any representation,
warranty, covenant or agreement set forth in this Agreement, which
breach either has had or may have a Material Adverse Effect and which
shall not have been cured within 30 days of NHG's receipt of written
notice specifying such breach and Fidelity's intention to terminate
this Agreement;
(ii) NHG and NTI shall have delivered to Fidelity a
certificate dated as of the Closing Date and signed by the Chief
Executive Officer and the Chief Financial Officer of NHG and NTI
certifying as to the satisfaction of Section 6(b)(i) above;
(iii) NHG shall have executed and delivered the Ancillary
Agreement(s) to which it is a party;
(iv) NHG shall have obtained full and complete releases and
discharges of and from all liens, claims, encumbrances, pledges,
options or other restrictions (excepted from restrictions, however, are
normal and customary restrictions imposed by law or any regulatory
agency) which may exist against, in or concerning the NTI Shares, the
Heritage Shares, or any shares of capital stock of any other NHG
Subsidiary, so that the NTI Shares, the Heritage Shares and the shares
of capital stock of the other NHG Subsidiaries shall be free and clear
of all such liens, claims, encumbrances, pledges, options or other
restrictions as of the Closing Date;
(v) Fidelity shall have received from NHG or NTI: (A) stock
certificates representing the NTI Shares and the Heritage Shares, duly
endorsed for transfer by NHG or accompanied by duly executed stock
assignments separate from certificate; (B) stock certificates
representing all of the issued and outstanding shares of capital stock
of each of the NTI Subs, issued in the name of NTI, and of each of the
NTINY Subs, issued in the name of Nations New York; (C) copies of the
articles of incorporation, certificate of incorporation or other
similar charter documents, as amended to date, of each of the NHG
Subsidiaries, in each case certified as of a recent date by the
secretaries of state of the appropriate jurisdiction; (D) copies of the
bylaws, as amended to date, of each of the NHG Subsidiaries, in each
case certified as true and correct by the respective corporate
secretaries of such entities;
(vi) all outstanding rights to acquire any stock or other
equity securities of any of the NHG Subsidiaries pursuant to stock
options or otherwise, shall have been canceled with the consent of the
holders thereof and on terms approved by Fidelity;
(vii) Fidelity shall have received from counsel to NHG and
the NHG Subsidiaries an opinion substantially in form and substance as
set forth in Exhibit F attached hereto, addressed to Fidelity, and
dated as of the Closing Date;
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(viii) Fidelity shall have received the resignations,
effective as of the Closing, of each director and officer of the NHG
Subsidiaries other than those whom Fidelity shall have specified in
writing no later than five (5) days prior to the Closing;
(ix) all actions to be taken by NHG and the NHG
Subsidiaries in connection with consummation of the transactions
contemplated hereby and all certificates, opinions, instruments, and
other documents required to effect the transactions contemplated hereby
will be reasonably satisfactory in form and substance to Fidelity; and
(x) no Material Adverse Effect shall have occurred, or is
reasonably likely to occur, by reason of a disapproval or disapprovals
by the NHG Board of Directors of an action or actions recommended by
the Committee under the Business Consultant Agreement.
Fidelity may waive any condition specified in this Section 6(b) if it
executes a writing so stating at or prior to the Closing. The above conditions
are subject to the terms and provisions of Section 2(e) above.
(c) Conditions to Obligations of NHG. The obligations of NHG to
consummate the transactions to be performed by it in connection with the Closing
are subject to satisfaction of the following conditions:
(i) there shall not have been, and there shall not be on
the Closing Date, a breach by Fidelity of any representation, warranty,
covenant or agreement set forth in this Agreement, which breach either
has had or may have a material adverse effect upon NHG and which shall
not have been cured within 30 days of Fidelity's receipt of written
notice specifying such breach and NHG's intention to terminate this
Agreement;
(ii) Fidelity shall have delivered to NHG a certificate
dated as of the Closing Date and signed by the Chief Executive Officer
and the Chief Financial Officer of Fidelity certifying as to the
satisfaction of Section 6(c)(i) above;
(iii) NHG shall have received from Fidelity the Cash
Purchase Price and the Fidelity Shares, except for the portions thereof
which are to be held by the Indemnity Escrow Agent pursuant to the
Indemnity Escrow Agreement or which are to be disbursed to CB for
credit to NHG's account pursuant to Section 5(g) above;
(iv) Fidelity shall have executed and delivered the
Ancillary Agreement(s) to which it is a party;
(v) NHG shall have received from counsel to Fidelity an
opinion in form and substance as set forth on Exhibit G attached
hereto, addressed to NHG, and dated as of the Closing Date;
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(vi) all actions to be taken by Fidelity in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to NHG; and
(vii) The Fidelity Shares issuable pursuant to this Agreement
shall have been duly authorized for listing, subject to notice of
issuance, on the New York Stock Exchange.
NHG may waive any condition specified in this Section 6(c) if it
executes a writing so stating at or prior to the Closing. The above conditions
are subject to the terms and provisions of Section 2(e) above.
7. Termination.
(a) Termination by Fidelity Based on Breach by NHG or NTI or
Committee Disapproval or Cessation of Standstill by CB/Imperial. Fidelity may
terminate this Agreement if (i) a breach referred to in Section 6(b)(i) above is
not cured by NHG as provided therein or (ii) a Material Adverse Effect referred
to in Section 6(b)(x) above has occurred or is reasonably likely to occur or
(iii) the Standstill Period for either CB or Imperial is terminated.
(b) Termination by NHG Based on Breach by Fidelity. NHG may
terminate this Agreement if a breach referred to in Section 6(c)(i) above is not
cured by Fidelity as provided therein.
(c) Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 2(e) above or this Xxxxxxx 0, xxxx of the
Parties shall have any obligation to perform hereunder from and after the date
of such termination, except that (i) Sections 2(d) (the Deposit), 5(d)
(confidentiality) and 9(k) (expenses) shall survive such termination and remain
in full force and effect notwithstanding such termination, and (ii) no
termination hereof shall relieve NHG or NTI, or Fidelity, from liability for any
breach of this Agreement.
8. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties. The
representations and warranties of NHG in Sections 2(b) and 8(e) shall survive
the Closing hereunder. All of the representations and warranties of NHG
contained in Section 3 (other than Section 3(k)) and of Fidelity contained in
Section 4 shall survive the Closing hereunder and continue in full force and
effect for a period of two (2) years thereafter. The representations and
warranties of NHG contained in Section 3(k) shall survive the Closing for a
period of seven (7) years. All covenants and agreements contained in this
Agreement shall survive until they are performed.
(b) Indemnification Provisions for Benefit of Fidelity. In the
event NHG or NTI breaches (or in the event any third party alleges facts that,
if true, would mean NHG or NTI has breached) any of their representations,
warranties, agreements or covenants contained herein, or in the event that any
of the NHG Subsidiaries shall be liable for Taxes for periods ending on (or an
allocable portion of the period that includes) the Closing Date in excess of the
amount reserved therefor as disclosed in Section 3(k) of the Disclosure
Schedule, and provided that
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Fidelity makes a written claim for indemnification pursuant to this Section 8
before any applicable expiration thereof pursuant to Section 8(a) above, then
each of NHG and NTI prior to the Closing jointly and severally agrees to
indemnify Fidelity, and NHG after the Closing agrees to indemnify Fidelity and
the NHG Subsidiaries from and against the entirety of any Adverse Consequences
which Fidelity, or the NHG Subsidiaries, as the case may be, may suffer through
and after the date of the claim for indemnification resulting from, arising out
of, relating to, in the nature of, or caused by the breach (or the alleged
breach). Notwithstanding any other provision of this Agreement, Fidelity may not
make a claim for the breach of any representation or warranty made by NHG in
this Agreement until such time as the aggregate Adverse Consequences of all such
claims exceeds $500,000, in which event NHG shall be responsible for all such
claims in excess of $500,000; provided, however, that the foregoing limit shall
not apply to any claim for a breach of a representation or warranty set forth in
Section 2(b) above or Section 2(e) below.
(c) Indemnification Provisions for Benefit of NHG. In the event
Fidelity or the Fidelity Sub breaches (or in the event any third party alleges
facts that, if true, would mean Fidelity or Fidelity Subs has breached) any of
its representations, warranties, agreements and covenants contained herein, and,
provided that NHG makes a written claim for indemnification against Fidelity
pursuant to this Section 8 before any applicable expiration thereof pursuant to
Section 8(a) above, then Fidelity and Fidelity Sub agree to indemnify NHG from
and against any Adverse Consequences which NHG may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the breach (or the
alleged breach). Fidelity and Fidelity Sub also agree to indemnify NHG from and
against any Adverse Consequences which NHG may suffer resulting from, arising
out of, or relating to claims based on the acts or omissions of the NHG
Subsidiaries subsequent to the Closing Date, provided that any such claim is not
primarily a result of or based upon the breach of any representation, warranty,
covenant or agreement of NHG contained in this Agreement or any Ancillary
Agreement. Notwithstanding any other provision of this Agreement, neither
Fidelity nor Fidelity Sub shall be liable to NHG for the breach of any
representation or warranty made by Fidelity in this Agreement until such time as
the Adverse Consequence of all such claims exceeds $500,000, in which event
Fidelity shall be responsible for all such claims in excess of $500,000.
(d) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against any other
Party (the "Indemnifying Party") under this Section 8, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof
in writing; provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnifying Party shall relieve the
Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice reasonably satisfactory to the Indemnified Party so long as (A)
the Indemnifying Party notifies the Indemnified Party in writing within
15 days after the Indemnified Party has given notice of the Third Party
Claim that the Indemnifying Party will indemnify the Indemnified Party
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from and against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with evidence
reasonably acceptable to the Indemnified Party that the Indemnifying
Party will have the financial resources to defend against the Third
Party Claim and fulfill its indemnification obligations hereunder,
whether through the Indemnity Escrow Agreement or otherwise, (C) the
Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good
faith judgment of the Indemnified Party, likely to establish a
precedential custom or practice materially adverse to the continuing
business interests of the Indemnified Party, and (E) the Indemnifying
Party conducts the defense of the Third Party Claim actively and
diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 8(d)(ii)
above, (A) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the Third Party
Claim, (B) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Indemnifying Party (not
to be withheld unreasonably), and (C) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of
the Indemnified Party (not to be withheld unreasonably).
(iv) In the event any of the conditions in Section 8(d)(ii)
above is or becomes unsatisfied, however, (A) the Indemnified Party may
defend against, and consent to the entry of any judgment or enter into
any settlement with respect to, the Third Party Claim, to the fullest
extent provided in this Section 8, (B) the Indemnifying Party will
reimburse the Indemnified Party promptly and periodically for the costs
of defending against the Third Party Claim (including reasonable
attorneys' fees and expenses) to the fullest extent provided in this
Section 8, and (C) the Indemnifying Party will remain responsible for
any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the
Third Party Claim to the fullest extent provided in this Section 8.
(e) Matters Regarding Net Operating Losses ("NOLs"). It is the
agreement of the Parties that Fidelity either (i) shall have available to it for
utilization after the Closing Date the NOLs generated by the NHG Subsidiaries
for the period January 1, 1995 through the Closing Date and the NOLs generated
by the NHG Subsidiaries prior to January 1, 1995 which were not utilized by NHG
as of December 31, 1994 or (ii) is to be compensated by NHG for such NOLs which
are not so available to it (subject only to the expiration of such NOLs pursuant
to Code Section 172(b) and the limitation provided by Code Section 382). NHG
agrees to indemnify, reimburse and hold harmless Fidelity and its Affiliates
(including the NHG Subsidiaries), from and against any Tax savings that Fidelity
or its Affiliates (including the NHG Subsidiaries) would have realized from such
NOLs if such NOLs are not so available for any reason (an "NOL Reduction"),
including, but not limited to (i) an Internal Revenue Service audit adjustment
(ii) the filing of an amended return by the NHG Group (iii) the use of any such
NOLs by the NHG Group by reason of (A) the transactions described in this
Agreement or (B) any income of the NHG Group (other than the NHG Subsidiaries).
Such indemnification shall be made as follows:
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(i) If and when Fidelity or its Affiliates (including the
NHG Subsidiaries) incurs an out-of-pocket cost by reason of the NOL
Reduction (a "Tax Increase"), Fidelity shall submit a reasonably
detailed calculation with supporting documentation to NHG that
demonstrates the basis for and the amount of the Tax Increase.
(ii) The Tax Increase shall be determined (A) net of related
tax savings to Fidelity or its Affiliates (including the NHG
Subsidiaries) resulting from any reduction in their U.S. federal income
tax on account of deductions for state income and franchise taxes, if
any, or on account of disallowed deductions in prior years for which
Fidelity or any such Affiliate may receive a deduction in future years,
but (B) increased by the loss of use of money by Fidelity or such
Affiliate in the event of any such disallowed deduction which may be
subsequently used by Fidelity or its Affiliates (present valued at a
rate based upon the rate of the 2-year Treasury Note at such time).
(iii) NHG shall have twenty business days from receipt of
Fidelity's calculation ("Review Period") to review and verify
Fidelity's calculation. If NHG agrees with Fidelity's calculation, it
shall pay to Fidelity the amount called for in Fidelity's calculation
within five business days after expiration of the Review Period. If NHG
disagrees with Fidelity's calculation and the parties cannot resolve
the dispute within twenty business days after expiration of the Review
Period, the parties shall submit the calculation for resolution to a
mutually agreed upon "Big Six" accounting firm (excluding any Big Six
accounting firm retained by either party within the three year period
preceding such date and excluding any Big Six Accounting firm that was
involved in preparing any tax return or financial statements related to
the calculation).
(iv) Notwithstanding subparagraphs (i) - (iii) above, if at
the Closing Date, an NOL Reduction is determined, Fidelity may elect,
in lieu of the operation of subparagraphs (i) - (iii) with respect
solely to such NOL Reduction determined as of the Closing Date, to
reduce the Cash Purchase Price or the amount of Fidelity Shares to be
delivered by an amount equal to the NOL Reduction times the highest
combined statutory federal and state income tax rate (taking into
account the deductibility of the state income taxes against federal
income taxes). This subparagraph (iv) shall apply only with respect to
any NOL Reduction determined as of the Closing Date and any election
pursuant to this subparagraph (iv) shall have no effect on NHG's
obligations pursuant to this paragraph (e) for any other NOL Reduction.
NHG covenants and agrees to provide to Fidelity (i) copies of the "pro forma"
income tax returns for the NHG Subsidiaries included within the NHG consolidated
federal income tax returns which NHG files with the Internal Revenue Service for
the years ended December 31, 1995 and the Closing Date, concurrently with the
filing of such returns with the Internal Revenue Service, (ii) access at the
same time, and at subsequent times thereafter as Fidelity reasonably requests,
to the consolidating work papers for such returns and (iii) such other
information as Fidelity reasonably requests with respect to the determination of
such NOLs.
(f) Determination of Adverse Consequences. The Parties shall take
into account the time cost of money (using the prime rate of Chase as the
discount rate) in determining Adverse Consequences for purposes of this Section
8.
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9. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement without the prior written approval of the other Parties;
provided, however, that any Party may make any public disclosure it believes in
good faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the disclosing Party
will use its reasonable best efforts to advise the other Party prior to making
the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of the other Parties, which may be given or withheld in their
respective sole discretion; provided, however, that Fidelity may exercise any or
all rights and/or fulfill any or all obligations under this Agreement in
conjunction with or through one or more direct or indirect wholly-owned
subsidiaries of Fidelity provided that Fidelity provides to NHG a guarantee in
connection therewith reasonably satisfactory to NHG.
(e) Counterparts. This Agreement may be executed in two or more
counterparts, and by different parties on separate counterparts, each of which
shall be deemed an original but all of which together will constitute one and
the same instrument.
(f) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to NHG: Nations Holding Group, Inc.
000 Xxxxxx Xxxxx
Xxx Xxxxxxx, XX 00000
Fax: 000-000-0000
Attention: Xxxxx X. Xxx Xxxxxx, Chief Executive Officer
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With copy to: Xxxxxx & Xxxxxx
000 X. Xxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000-0000
Fax: 000-000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
If to Fidelity: Fidelity National Financial, Inc.
00000 Xxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Executive Vice President
and General Counsel
With copy to: Stradling, Yocca, Xxxxxxx & Xxxxx
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, XX 00000
Fax: (000) 000-0000
Attention: C. Xxxxx Xxxxxxx, Esq.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of California
without giving effect to any choice or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California, except where local law is otherwise applicable. All parties consent
to personal jurisdiction and venue in the County of Orange in the State of
California.
(i) Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective Boards of Directors. No amendment or
waiver of any provision of this Agreement shall be valid unless the same shall
be in writing and signed by all of the Parties. No waiver by any Party of any
default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
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(k) Expenses. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with the
preparation, negotiation and closing of this Agreement and the transactions
contemplated hereby; provided, however, that NHG shall bear all such expenses of
the NHG Subsidiaries.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement and have had competent counsel of
their own choosing. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the Parties and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context otherwise requires. The word "including" shall
mean including without limitation.
(m) Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) Attorneys' Fees. If legal action is instituted on this
Agreement, or the subject matter hereof, the prevailing party shall be entitled
to recover all costs of suit, including reasonable attorneys' fees.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
FIDELITY NATIONAL FINANCIAL, INC.,
a Delaware corporation
By: /S/ Xxxxxx X. Xxxxxx
----------------------------------
Title: Executive Vice President
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NATIONS HOLDING GROUP, INC.,
a California corporation
By: /S/ Xxxxx X. Xxx Xxxxxx
----------------------------------
Title: President/Chief Executive Officer
----------------------------------
NATIONS TITLE, INC.,
a Kansas corporation
By: /S/ Xxxxx X. Xxx Xxxxxx
----------------------------------
Title: Chairman
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