<PAGE> 1
FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: June 23, 1997
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HOUSEHOLD FINANCE CORPORATION
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-75 36-1239445
- --------------------------------------------------------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation Number)
2700 Sanders Road, Prospect Heights, Illinois 60070
- ---------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 847/564-5000
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<PAGE> 2
Exhibit Index
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Exhibit Sequentially
No. Description Numbered Page
- ------- ----------- -------------
2.1 Stock Purchase Agreement by
and among Transamerica
Corporation, Transamerica
Financial Corporation,
Transamerica Financial Services
Holding Company, Household
Acquisition Corp. and Household
International, Inc. dated as of
May 20, 1997. ("CE")
2.2 Amendment to Stock Purchase
Agreement by and among Transamerica
Corporation, Transamerica Financial
Corporation, Transamerica Financial
Services Holding Company, Household
Acquisition Corp. and Household
International, Inc. dated as of
June 23, 1997. ("CE")<PAGE>
<PAGE> 3
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
HOUSEHOLD FINANCE CORPORATION
-----------------------------
(Registrant)
By: /s/ John W. Blenke
------------------
John W. Blenke
Assistant Secretary
Dated: July 16, 1997
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U:\LAW\EDGAR\F8KA697.WP
<PAGE> 1
THE FOLLOWING DOCUMENTS ARE COPIES OF EXHIBITS 2.1 AND 2.2
FILED ON OR ABOUT JULY 8, 1997 PURSUANT TO A RULE 201
TEMPORARY HARDSHIP EXEMPTION<PAGE>
<PAGE> 2
STOCK PURCHASE AGREEMENT
By And Among
TRANSAMERICA CORPORATION;
("PARENT")
TRANSAMERICA FINANCE CORPORATION;
("SELLER")
TRANSAMERICA FINANCIAL SERVICES
HOLDING COMPANY;
("TFS")
HOUSEHOLD ACQUISITION CORP.
("PURCHASER")
And
HOUSEHOLD INTERNATIONAL, INC.
("HOUSEHOLD INTERNATIONAL")
Dated As Of
May 20, 1997
<PAGE>
<PAGE> 3
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS 2
Section 1.1 Definitions . . . . . . . . . . . . . . 2
Section 1.2 Accounting Terms. . . . . . . . . . . . 18
Section 1.3 Interpretation. . . . . . . . . . . . . 18
ARTICLE II
PURCHASE PRICE AND PAYMENT. . . . . . . . . . . . . . 18
Section 2.1 Purchase and Sale of TFS Stock. . . . . 18
Section 2.2 Terms and Method of Payment of
Purchase Price. . . . . . . . . . . . 18
Section 2.3 Calculation of Purchase Price . . . . . 19
Section 2.4 Repurchase of Excluded Assets . . . . . 22
Section 2.5 Interest on Purchase Price. . . . . . . 23
ARTICLE III
CLOSING 23
Section 3.1 The Closing. . . . . . . . . . . . . . 23
Section 3.2 Parent's, Seller's and TFS's
Deliveries . . . . . . . . . . . . . 24
Section 3.3 Purchaser's Deliveries . . . . . . . . 24
Section 3.4 Further Assurances . . . . . . . . . . 25
Section 3.5 Arcadia Companies. . . . . . . . . . . 25
Section 3.6 TFS BC . . . . . . . . . . . . . . . . 27
Section 3.7 Closing with Less Than All Loan
Regulatory Approvals . . . . . . . . 28
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT,
SELLER AND TFS . . . . . . . . . . . . . . . . . . . . . 29
A. REPRESENTATIONS AND WARRANTIES REGARDING
PARENT, SELLER AND THE TFS COMPANIES 29
Section 4.1 Corporate Status . . . . . . . . . . . 29
Section 4.2 Corporate Authority. . . . . . . . . . 30
Section 4.3 Non-Contravention. . . . . . . . . . . 30
Section 4.4 Ownership of Stock . . . . . . . . . . 31
Section 4.5 Regulatory Authorizations. . . . . . . 31
Section 4.6 Title, Liens, etc. . . . . . . . . . . 32
Section 4.7 Employees. . . . . . . . . . . . . . . 32
Section 4.8 Brokers. . . . . . . . . . . . . . . . 35
Section 4.9 Approvals and Consents . . . . . . . . 35
Section 4.10 Trademarks and Other Intellectual
Property . . . . . . . . . . . . . . 36
Section 4.11 Contracts. . . . . . . . . . . . . . . 36
Section 4.12 Taxes. . . . . . . . . . . . . . . . . 36
Section 4.13 Financial Information. . . . . . . . . 37
Section 4.14 Environmental. . . . . . . . . . . . . 37
Section 4.15 Compliance with Laws . . . . . . . . . 38
Section 4.16 Non-Competition and Non-Solicitation
Agreements . . . . . . . . . . . . . 38
Section 4.17 Insurance. . . . . . . . . . . . . . . 39
Section 4.18 Guarantees . . . . . . . . . . . . . . 39
Section 4.19 No Illegal or Improper Transactions. . 39
B. REPRESENTATIONS AND WARRANTIES REGARDING
PORTFOLIO OF LOANS. . . . . . . . . . . . . . . 39
Section 4.20 Characteristics of Loan Portfolio. . . 39
C. REPRESENTATIONS AND WARRANTIES AS TO THE
INSURANCE BUSINESS. . . . . . . . . . . . . . . 40
Section 4.21 Qualification. . . . . . . . . . . . . 40
Section 4.22 Statutory Statements . . . . . . . . . 41
Section 4.23 Investments/Defaults . . . . . . . . . 41
Section 4.24 Reserves . . . . . . . . . . . . . . . 42<PAGE>
<PAGE> 4
Section 4.25 Reinsurance Treaties . . . . . . . . . 43
Section 4.26 Certain Business Practices . . . . . . 43
Section 4.27 Limitation on Representations
and Warranties . . . . . . . . . . . 44
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
AND HOUSEHOLD INTERNATIONAL . . . . . . . . . . . . 44
Section 5.1 Corporate Status. . . . . . . . . . . . 44
Section 5.2 Corporate Authority . . . . . . . . . . 45
Section 5.3 Non-Contravention . . . . . . . . . . . 45
Section 5.4 Brokers . . . . . . . . . . . . . . . . 46
Section 5.5 Qualification as a Licensee . . . . . . 46
Section 5.6 Litigation. . . . . . . . . . . . . . . 46
Section 5.7 Funds . . . . . . . . . . . . . . . . . 46
Section 5.8 Approvals and Consents. . . . . . . . . 46
Section 5.9 Investment Representation . . . . . . . 47
ARTICLE VI
COVENANTS OF PARENT, SELLER AND TFS PENDING
THE CLOSING 47
Section 6.1 Excluded Assets and Excluded
Liabilities . . . . . . . . . . . . . 47
Section 6.2 Operation of the Business . . . . . . . 49
Section 6.3 Access to Facilities, Files and Records 52
Section 6.4 Consents. . . . . . . . . . . . . . . . 52
Section 6.5 Notice of Proceedings . . . . . . . . . 53
Section 6.6 Hart-Scott-Rodino Filing. . . . . . . . 53
Section 6.7 Application for Regulatory Approvals. . 53
Section 6.8 No Shop . . . . . . . . . . . . . . . . 54
Section 6.9 Financial Statements. . . . . . . . . . 54
Section 6.10 Affiliate Receivables and
Intercompany Contracts. . . . . . . . 55
Section 6.11 Intercompany and Third Party Debt . . . 55
Section 6.12 Insurance Certificates and Worker's
Compensation. . . . . . . . . . . . . 55
Section 6.13 Accounts and Powers of Attorney . . . . 56
Section 6.14 Other Confidentiality Agreements. . . . 56
ARTICLE VII
COVENANTS OF PURCHASER PENDING THE CLOSING. . . . . . 56
Section 7.1 Application for Regulatory Approvals. . 56
Section 7.2 Notice of Proceedings . . . . . . . . . 57
Section 7.3 Hart-Scott-Rodino Filing. . . . . . . . 57
Section 7.4 Financial Information . . . . . . . . . 57
Section 7.5 Non-Solicitation of Borrowers and
Policy Holders. . . . . . . . . . . . 58
ARTICLE VIII
POST-CLOSING COVENANTS. . . . . . . . . . . . . . . . 58
Section 8.1 Cooperation; Record Retention . . . . . 58
Section 8.2 Insurance . . . . . . . . . . . . . . 59
Section 8.3 No Use of Transamerica Marks. . . . . . 59
Section 8.4 Non-Solicitation Agreement. . . . . . . 60
Section 8.5 Consumer Finance Business . . . . . . . 61
Section 8.6 Services Support Agreement. . . . . . . 61
Section 8.7 Releases. . . . . . . . . . . . . . . 61
Section 8.8 Transfer of Property. . . . . . . . . . 61
Section 8.9 Claims Relating to Excluded Assets. . . 62
ARTICLE IX
EMPLOYEES 62
Section 9.1 Employee Relations Matters . . . . . . 62
Section 9.2 TC Pension Plan. . . . . . . . . . . . 65
Section 9.3 Employee Welfare Benefit Plans . . . . 66
Section 9.4 Employee Communication . . . . . . . . 68
Section 9.5 No Other Restrictions. . . . . . . . . 68<PAGE>
<PAGE> 5
ARTICLE X
CONDITIONS TO THE OBLIGATIONS OF PARENT, SELLER
AND TFS 68
Section 10.1 Representations, Warranties, and
Covenants . . . . . . . . . . . . . . 69
Section 10.2 Proceedings . . . . . . . . . . . . . 69
Section 10.3 Regulatory Approvals. . . . . . . . . . 70
Section 10.4 Hart-Scott-Rodino . . . . . . . . . . . 70
Section 10.5 Deliveries. . . . . . . . . . . . . . . 70
ARTICLE XI
CONDITIONS TO THE OBLIGATIONS OF PURCHASER. . . . . . 70
Section 11.1 Representations, Warranties and
Covenants . . . . . . . . . . . . . . 71
Section 11.2 Proceedings . . . . . . . . . . . . . . 71
Section 11.3 Regulatory Approvals. . . . . . . . . . 72
Section 11.4 Hart-Scott-Rodino . . . . . . . . . . . 72
Section 11.5 Deliveries. . . . . . . . . . . . . . . 72
Section 11.6 Closing Balance Sheet, Closing
Tape, Net Funds Report and
Excluded Loans Update . . . . . . . . 72
Section 11.7 Extinguishment of Intercompany Debt . . 72
ARTICLE XII
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . 73
Section 12.1 By Parent and Seller. . . . . . . . . . 73
Section 12.2 By Purchaser. . . . . . . . . . . . . . 75
Section 12.3 Indemnification Procedure . . . . . . . 75
Section 12.4 Survival. . . . . . . . . . . . . . . . 77
Section 12.5 Exclusivity . . . . . . . . . . . . . . 77
ARTICLE XIII
TAX MATTERS 78
Section 13.1 Section 338 Elections and Forms. . . . 78
Section 13.2 Tax Indemnity by Seller. . . . . . . . 79
Section 13.3 Tax Indemnity by Purchaser . . . . . . 80
Section 13.4 Allocation of Certain Taxes. . . . . . 80
Section 13.5 Filing Responsibility. . . . . . . . . 81
Section 13.6 Refunds. . . . . . . . . . . . . . . . 81
Section 13.7 Cooperation and Exchange of
Information. . . . . . . . . . . . . 82
Section 13.8 Termination of Tax Sharing Agreements. 84
Section 13.9 Coordination . . . . . . . . . . . . . 84
Section 13.10 Survival . . . . . . . . . . . . . . . 84
ARTICLE XIV
GUARANTIES BY PARENT AND HOUSEHOLD INTERNATIONAL 84
Section 14.1 The Guaranties. . . . . . . . . . . . . 84
Section 14.2 Guaranty Unconditional. . . . . . . . . 85
Section 14.3 Discharge Only Upon Performance
in Full; Reinstatement in Certain
Circumstances . . . . . . . . . . . . 86
Section 14.4 Waiver of Presentment . . . . . . . . . 87
Section 14.5 Waiver of Subrogation and
Contribution. . . . . . . . . . . . . 87
ARTICLE XV
TERMINATION 87
Section 15.1 Termination of Agreement . . . . . . . 87
Section 15.2 Effect of Termination. . . . . . . . . 89
<PAGE>
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ARTICLE XVI
MISCELLANEOUS 89
Section 16.1 Amendment and Modification; Waiver
of Provisions. . . . . . . . . . . . 89
Section 16.2 Expenses . . . . . . . . . . . . . . 89
Section 16.3 Successors and Assigns; Assignments. . 90
Section 16.4 Further Assurances . . . . . . . . . . 90
Section 16.5 Public Announcements . . . . . . . . . 90
Section 16.6 No Third Parties Benefited . . . . . . 90
Section 16.7 Notices. . . . . . . . . . . . . . . . 91
Section 16.8 Law Governing. . . . . . . . . . . . . 92
Section 16.9 Counterparts . . . . . . . . . . . . . 92
Section 16.10 Entire Agreement . . . . . . . . . . . 93
Section 16.11 Choice of Forum. . . . . . . . . . . . 93
Section 16.12 Specific Performance . . . . . . . . . 93
Section 16.13 Dispute Resolution . . . . . . . . . . 93
Section 16.14 Waiver of Jury Trial . . . . . . . . . 94
<PAGE>
<PAGE> 7
EXHIBITS
Exhibits Description
Exhibit 3.2 Form of Legal Opinion of Seller's and
TFS Counsel
Exhibit 3.3 Form of Legal Opinion of Purchaser's
Counsel
<PAGE>
<PAGE> 8
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is
entered into as of May 20, 1997 by and among Transamerica Cor-
poration, a Delaware corporation ("Parent"), Transamerica Fi-
nance Corporation, a Delaware corporation ("Seller"), and
Household Acquisition Corp., a Delaware corporation ("Pur-
chaser"), and is joined in, to the extent specifically stated
herein, by Transamerica Financial Services Holding Company, a
Delaware corporation ("TFS") and Household International,
Inc., a Delaware corporation that is the ultimate parent
company of Purchaser ("Household International")
(collectively, the "Parties").
RECITALS
WHEREAS, TFS and its subsidiaries are engaged in
branch-based consumer finance operations, including (a) the
origination, sale, purchase and servicing of (i) real estate
secured loans in the United States and Canada, (ii) personal
lines of credit and consumer finance loans in the United
States, the United Kingdom and Canada, (iii) sub-prime auto
loans in the United States and (b) the offering of certain at-
tendant products to consumers, including certain insurance
products, but in each case excluding the Excluded Assets and
Excluded Liabilities (collectively, the "Acquired Business");
and
WHEREAS, Seller is an indirect wholly-owned subsid-
iary of Parent and is the owner of all of the issued and out-
standing capital stock of TFS; and
WHEREAS, Purchaser desires to purchase from Seller,
and Seller desires to sell to Purchaser, all of the issued and
outstanding capital stock of TFS upon and subject to the
terms, covenants, conditions, warranties and representations
set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing
recitals and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
AGREEMENT
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
As used herein, except as otherwise expressly pro-
vided or unless the context otherwise requires, the following
terms defined in this Section 1.1 shall have the following
meanings:
"ABO" shall have the meaning assigned to the term in
Section 9.2(e).
"Accounts Receivable" shall mean all accounts
receivable other than Loans of the TFS Companies as of a given
date.
"Acquired Business" shall have the meaning set forth
in the preamble.
"Adjustment Factor" shall have the meaning assigned
to the term in Section 2.3.
"Affiliate" shall mean, with respect to any Person,
any other Person directly or indirectly controlling,
controlled by or under common control with such Person. For
purposes of this definition, "control" (including with
correlative meaning, the terms "controlled by" and "under
common control with") as used with respect to any Person shall<PAGE>
<PAGE> 9
mean (a) the ownership of 50% or more of the voting securities
or other voting interests of such Person, or (b) the
possession, directly or indirectly, of the power to direct or
cause the direction of management and policies of such Person,
whether through ownership of voting securities, by contract or
otherwise.
"Affiliate Receivables" shall mean all receivables
included as an asset on the TFS Balance Sheet of which the
Parent, Seller or any Affiliate thereof (that is not a TFS
Company) is the obligor or guarantor.
"Agreement" shall mean this Stock Purchase
Agreement, all ancillary agreements, and all exhibits and
schedules attached hereto, as the same may be amended from
time to time in accordance with the provisions hereof.
"Arcadia Company" shall mean either Arcadia General
Insurance Company, an Arizona corporation, Arcadia National
Life Insurance Company, an Arizona corporation, or
Transamerica Insurance Administrators, a Delaware corporation,
or all of them.
"Arcadia Purchase" shall have the meaning assigned
to the term in Section 3.5(a).
"Arcadia Stock" shall mean all of the issued and
outstanding capital stock of each of the Arcadia Companies.
"Arcadia Termination Date" shall have the meaning
assigned to the term in Section 3.5.
"Audited Financial Statement" shall have the meaning
assigned to the term in Section 6.9.
"Benefit Arrangement" shall mean any benefit
arrangement, obligation, custom, or practice, whether or not
legally enforceable, to provide benefits, other than salary,
as compensation for services rendered, to present or former
directors, employees, agents, or independent contractors,
other than any obligation, arrangement, custom or practice
that is a Benefit Plan, including, without limitation,
employment agreements, severance agreements, executive
compensation arrangements, including but not limited to stock
options, restricted stock rights and performance unit awards,
incentive programs or arrangements, sick leave, vacation pay,
severance pay policies, plant closing benefits, salary
continuation for disability, consulting, or other compensation
arrangements, workers' compensation, retirement, deferred
compensation, bonus, stock purchase, hospitalization, medical
insurance, life insurance, tuition reimbursement or
scholarship programs, employee discounts, any plans subject to
Section 125 of the Code, and any plans providing benefits or
payments in the event of a change of control, change in
ownership, or sale of a substantial portion (including all or
substantially all) of the assets of any business or portion
thereof, in each case with respect to any present or former
employees, directors, or agents. Benefit Arrangements exclude
any employment agreements that would, by their terms,
terminate on or before the Closing Date and those that could
be terminated immediately after the Closing Date without
additional expense to the TFS Companies.
"Benefit Plan" shall have the meaning given in Sec-
tion 3(3) of ERISA and shall include comparable plans subject
to the laws of Canada and the United Kingdom.
"Borg-Warner Litigation" shall mean Garamendi,
Insurance Commissioner of the State of California as
Liquidator of Mission Insurance, et al v. Borg-Warner, et al.
"Borrower" shall mean a person who is obligated to
any of the TFS Companies on account of a Loan.
"Branches" shall mean the branch offices of the TFS
Companies listed on Schedule 1.1A.
<PAGE>
<PAGE> 10
"Business Day" shall mean any day other than a
Saturday, Sunday or day on which the banks in San Francisco,
California or Chicago, Illinois are authorized or obligated by
law or executive order to be closed.
"Canadian Approval" shall have the meaning assigned
to the term in Section 3.6.
"Closing" shall have the meaning assigned to the
term in Section 3.1.
"Closing Balance Sheet" shall have the meaning as-
signed to the term in Section 2.3.
"Closing Date" shall have the meaning assigned to
the term in Section 3.1.
"Closing Tape" shall have the meaning assigned to
the term in Section 2.3.
"COBRA" shall have the meaning assigned to the term
in Section 9.3.
"Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereun-
der.
"Company Employees" shall have the meaning assigned
to the term in Section 9.1.
"Confidentiality Agreement" shall mean that certain
letter agreement entered into between Parent and Household In-
ternational, dated March 18, 1997.
"Consumer Finance Business" shall mean a business
that provides one or more of the following or similar types of
credit facilities to its customers: real estate secured
loans, revolving loans, small loans, automobile finance
contract loans and insurance products relating to the
foregoing types of loans.
"Contracts" shall mean all contracts (other than
Loan Documents and the Excluded Contracts) of the TFS
Companies, including unexpired written contracts, leases,
agreements, indentures, commitments or instruments.
"Covered Employees" shall have the meaning assigned
to the term in Section 9.2.
"Customer List" shall have the meaning assigned to
the term in Section 8.4.
"DP Center" shall mean the data processing center
for the TFS Companies located in Kansas City, Missouri.
"Derby Branch" shall mean the branch office of Tran-
samerica Acceptance, which is located in Derby, England.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, and any
regulation or rule issued thereunder.
"ERISA Affiliate" shall mean any Person that, to-
gether with any of the TFS Companies, is, or was at any time
within the preceding six years, treated as a single employer
under Section 414 of the Code or Section 4001 of ERISA and any
general partnership of which any of the TFS Companies is or
has been a general partner.
"Environmental Laws" shall mean any and all federal,
state, local and foreign statutes, laws, judicial, administra-
tive and regulatory decisions, regulations, ordinances, codes,
licenses, authorizations and approvals, including common law
principles of tort liability, which relate to the protection
of the environment or to emissions, discharges, release or
spills of Hazardous Substances into the environment.
<PAGE>
<PAGE> 11
"Escrow Agent" shall have the meaning assigned to
the term in Section 2.3.
"Estimated Purchase Price" shall have the meaning
assigned to the term in Section 2.3.
"Excluded Assets" shall have the meaning assigned to
the term in Section 6.1.
"Excluded Contracts" shall mean the Purchase Agree-
ments and the contracts, agreements, commitments or
instruments set forth on Schedule 1.1B.
"Excluded Leasehold Improvements" shall mean the
leasehold improvements at the TFS Headquarters, the Derby
Branch, the DP Center, the Resolution Center and the Loss Re-
covery Center.
"Excluded Liabilities" shall have the meaning as-
signed to the term in Section 6.1.
"Excluded Loans" shall mean: (a) all amounts due
with respect to real estate secured loans owned by any of the
TFS Companies that (i) as of the Closing Date: (A) were 90
days or more delinquent as of the end of the month immediately
preceding the month that includes the Closing Date pursuant to
the TFS Policies or (B) have been submitted to and are being
serviced by the Resolution Center or the Loss Recovery Center,
or (C) with respect to which foreclosure proceedings have been
completed, and (ii) constitute part of TFS' core real estate
secured business (as opposed to its revolving loan division,
its small loan division, its automobile finance contract divi-
sion, or its Canadian division); (b) all real estate loans
originated in the United Kingdom held by Transamerica Accep-
tance or the TFS Indirect Subsidiary; (c) all non-real estate
loans originated on or prior to September 30, 1996 and held by
any of the TFS Companies other than such loans made by the re-
volving loan division, the small loan division, the automobile
finance contract division, the United Kingdom division, or the
Canadian division; (d) amounts due with respect to all real
estate secured loans that have been fully charged-off by a TFS
Company prior to the Closing Date; (e) all loans that have
been sold or agreed to be sold by a TFS Company pursuant to
the Purchase Agreements; (f) all loans originated or acquired
by any of the TFS Companies (1) between March 31, 1997 to and
including the date hereof not in accordance with Section
4.20(c) or (2) after the execution of this Agreement in
violation of any provision of Section 6.2; (g) each Loan as to
which the Borrower has declared bankruptcy on or after the
date of origination of such Loan and on or prior to the date
of the Closing Balance Sheet; and (h) all other loans not
described in the foregoing clauses (a) through (g) but which
are specifically described on Schedule 1.1C.
"Excluded Personal Property" shall mean (a) the
Transamerica Marks, including any ownership or other interest
therein or right to the use thereof or any variation thereof,
or any acronym based thereon or any logo incorporating any
such Transamerica Mark or acronym; (b) all signage and
stationery which includes any of the Transamerica Marks, or
any variation thereof, or any acronym based thereon or any
logo incorporating any such Transamerica Mark or acronym; and
(c) the furniture, fixtures and equipment and Personal
Property located at the Excluded Real Property, provided,
however, that, except as set forth on Schedule 1.1D, computer
hardware and software owned, licensed or leased to any TFS
Company, wherever located, shall not be construed to be
Excluded Personal Property.
"Excluded Real Property" shall mean TFS
Headquarters, the DP Center, the Derby Branch, the Resolution
Center, the Loss Recovery Center, all Excluded Leasehold
Improvements and all real property that (a) has been
foreclosed or repossessed by any of the TFS Companies, (b) has
been transferred to a TFS Company in settlement of a
foreclosure proceeding or otherwise in connection with the
settlement of a loan made by such TFS Company or (c) secures
loans submitted to and being serviced by the Resolution Center
or Loss Recovery Center.<PAGE>
<PAGE> 12
"Final" shall have the meaning assigned to the term
in Section 10.3.
"Final Determination" shall mean the last to occur
of (a) a decision by a court of competent jurisdiction that is
not subject to further judicial review, (b) the expiration of
the statute of limitations for both the assessment and refund
of Tax or (c) any other event that is a final and irrevocable
determination of liability for Tax.
"Financial Statements" shall have the meaning as-
signed to the term in Section 6.9.
"Former Employees" shall have the meaning assigned
to the term in Section 9.3.
"Funds Adjustment Amount" shall have the meaning
assigned to the term in Section 2.3.
"GAAP" shall mean United States generally accepted
accounting principles consistently applied, as in effect from
time to time.
"Guaranteed Entity" shall have the meaning assigned
to the term in Section 14.2.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and
regulations promulgated thereunder.
"Hazardous Substances" shall mean any toxic,
radioactive, chemical or otherwise hazardous substance,
pollutant, contaminant, waste, genetically modified organism,
petroleum, or petroleum product, and any substances that are
defined or listed in or otherwise classified pursuant to
applicable local, state or federal Environmental Laws.
"Household International" shall have the meaning set
forth in the preamble hereto.
"Income Tax" shall mean all Taxes based upon, mea-
sured by or calculated with respect to income, profits, gains
or similar items (whether based on a regular or alternative
tax base) including any interest, penalty or addition thereto.
"Indemnified Costs" shall have the meaning assigned
to the term in Section 12.1.
"Insurance Approval" shall have the meaning assigned
to the term in Section 3.5.
"Insurance Companies" shall have the meaning
assigned to the term in Section 4.21.
"Insurance Policies" shall mean all insurance poli-
cies under which an Arcadia Company is the insurer or reinsur-
ers.
"Insurance Policy Files" shall mean all files main-
tained by an Arcadia Company with respect to the Insurance
Policies.
"Intellectual Property" shall mean all trademarks,
trade names, trade secrets, service marks, software,
demographics modeling and research (including the geo-
demographic cluster model), copyrights, patents, franchises,
whether in the form of a document, computer file, or in some
other form, and other similar rights owned by or licensed to
any TFS Company and other such property set forth on Schedule
4.10; provided, however, that Intellectual Property shall not
include any Transamerica Marks, or any variation thereof, or
any acronym based thereon or any logo incorporating any such
Transamerica Mark or acronym.
"Intercompany Contract" shall mean any Contract be-
tween any TFS Company, on the one hand, and Parent, Seller or
any Affiliate thereof, on the other hand.
<PAGE>
<PAGE> 13
"Intercompany Debt" shall mean all indebtedness of a
TFS Company to Parent, Seller or an Affiliate thereof that is
not a TFS Company, whether or not evidenced by the promissory
notes described on Schedule 1.1E.
"ITT Agreement" shall mean the Asset Purchase Agree-
ment, dated as of March 31, 1995, among Aetna Finance Company,
a Delaware corporation, Aetna Finance Company, a Wyoming
corporation, ITT Equity Services Corporation, a Nevada
corporation, Thorp Credit Company of Kentucky, a Kentucky
corporation, Thorp Loan and Thrift Company, a Minnesota
corporation, ITT Corporation, a Delaware corporation and
Transamerica Financial Services California.
"Landlord Consent" shall have the meaning assigned
to the term in Section 6.4.
"Lien" shall mean any lien, pledge, charge, encum-
brance, security interest, mortgage, lease, option or other
adverse claim of any kind or description, whether or not of
record.
"Loan Documents" shall mean the Note and all other
documents evidencing or securing a Loan.
"Loan Files" shall mean the loan files maintained
with respect to each Loan in the ordinary course of business.
"Loan Receivables" shall have the meaning assigned
to the term in Section 2.3.
"Loans" shall mean all loans, retail installment and
sales finance contracts, and other obligations of Borrowers to
repay amounts owed to any TFS Company; provided, however, that
Loans shall not include Excluded Loans.
"Loss Recovery Center" shall mean the Loss Recovery
Center in Schaumburg, Illinois.
"Material Adverse Effect" shall mean, with respect
to the TFS Companies, a material adverse effect on the busi-
ness, prospects or financial condition of the TFS Companies
(excluding the Excluded Assets and Excluded Liabilities),
taken as a whole, (other than any effect resulting from
changes in (a) prevailing interest rates, (b) general economic
conditions affecting the business of any or all of the TFS
Companies or their competitors, (c) levels of loan delinquency
or charge-offs experienced by any or all of the TFS Companies,
(d) law or applicable regulations, (e) GAAP or (f) departures
or reactions of employees of any TFS Company resulting from
the announcement or the expectation of the consummation of the
transactions contemplated by this Agreement). "Material
Adverse Effect" shall mean, with respect to Purchaser, a
material adverse effect on Purchaser's ability to consummate
the transactions contemplated by this Agreement.
"Material Contracts" shall mean all Contracts (other
than leases with respect to Branches) that (i) individually
call for payments to or by any of the TFS Companies in excess
of $100,000, (ii) that are, in Seller's reasonable judgment,
material to the current operation of the Acquired Business, or
(iii) obligate any TFS Company to sell Loans to, or to perform
Loan servicing for, any Person. Each Material Contract as of
the date hereof is listed on Schedule 4.11.
"Mortgage" shall mean a mortgage, deed of trust,
conditional sales contract or other encumbrance on real
property.
"Mortgage Loan" shall mean a Loan secured by a mort-
gage, deed of trust, conditional sales contract, or other en-
cumbrance on real property.
"Net Funds Contributed" shall have the meaning as-
signed to the term in Section 2.3.
"Net Funds Report" shall have the meaning assigned
to the term in Section 2.3.
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<PAGE> 14
"Net Funds Report Date" shall have the meaning as-
signed to the term in Section 2.3.
"Note" shall mean, as to any Loan, the promissory
note, retail installment sales contract or other evidence of
indebtedness executed by a Borrower in connection with such
Loan.
"Nova Agreement" shall mean the Stock Purchase
Agreement, dated June 7, 1990, by and between Transamerica
Finance Group and First Interstate Bancorp.
"Other Arcadia Condition" shall have the meaning as-
signed to the term in Section 3.5.
"Other Assets" shall have the meaning assigned to
the term in Section 2.3.
"Other Confidentiality Agreements" shall have the
meaning assigned to the term in Section 6.14.
"Other Liabilities" shall have the meaning assigned
to the term in Section 2.3.
"Other Taxes" shall have the meaning assigned to the
term in Section 13.4.
"Other TFS BC Condition" shall have the meaning as-
signed to the term in Section 3.6.
"Parent" shall have the meaning set forth in the
preamble.
"Past Borrower" shall mean any Person who was obli-
gated to any of the TFS Companies in connection with a loan,
retail installment or sales finance contract, or other obliga-
tion since May 31, 1994 and whose obligation has been repaid
or satisfied, provided, however, that Past Borrower shall not
include any Person whose obligation is an Excluded Loan.
"Permitted Liens" shall mean (a) Liens set forth on
Schedule 1.1F, (b) any Liens for Taxes, assessments,
governmental charges or levies not yet due and payable or
being contested by Seller or any of the TFS Companies in good
faith, (c) any Liens on the Real Property that were not
incurred in connection with the borrowing of money or the
extension of credit to Seller or any of the TFS Companies, and
(d) Liens resulting from a filing by a lessor as a
precautionary filing for a true lease.
"Person" shall mean any individual, corporation,
partnership, joint venture, association, joint stock company,
limited liability company, trust, unincorporated organization
or government or any agency or political subdivision thereof.
"Personal Property" shall mean all tangible personal
property and computer software and hardware owned, licensed or
leased by any TFS Company as of the date hereof, less any
items consumed or disposed of plus new items acquired or
obtained in the ordinary course through the close of business
on the Closing Date, including all personal property of any
TFS Company located in the Branches, but excluding the
Excluded Personal Property. Schedule 1.1G lists, as of the
date hereof, all Personal Property having an original cost or
current value in excess of $100,000.
"Policy Holder" shall mean any person other than an
Arcadia Company who is a party to an Insurance Policy.
"Post-Closing Period" shall mean any Taxable period
that begins (or is deemed, pursuant to Section 13.4, to begin)
after the Closing Date; provided, however, that, for Income
Tax purposes, transactions and events occurring on the Closing
Date that are not properly includible in Parent's consolidated
federal income Tax Return shall be considered to occur in any
Post-Closing Period beginning on the day following the Closing
Date.
<PAGE>
<PAGE> 15
"Pre-Closing Period" shall mean any Taxable Period
that ends (or is deemed, pursuant to Section 13.4, to end) on
or before the Closing Date; provided, however, that, for
Income Tax purposes, transactions and events occurring on the
Closing Date that are not properly includible in Parent's
consolidated federal income Tax Return shall not be considered
to occur in a Pre-Closing Period.
"Premium Factor" shall mean _____.
"Purchase Agreements" shall have the meaning
assigned to the term in Section 6.1.
"Purchase Price" shall have the meaning set forth in
Section 2.1.
"Purchaser" shall have the meaning set forth in the
preamble hereto.
"Qualified Plan" shall mean any TFS Plan that meets,
purports to meet, or is intended to meet the requirements of
Section 401(a) of the Code.
"Real Property" shall mean the Branches and other
real property owned or leased by any of the TFS Companies as
listed on Schedule 1.1H, less any such real property sold or
otherwise disposed of and plus any additions, improvements,
replacements and alterations made thereto, between the date
hereof and the Closing Date in the ordinary course of business
with Purchaser's consent, but excluding the Excluded Real
Property.
"Regulatory Approvals" shall mean such approvals,
consents and licenses of any Regulatory Authority necessary to
be obtained for the lawful indirect transfer of the Acquired
Business to Purchaser by virtue of its ownership of the TFS
Stock.
"Regulatory Authority" shall mean any federal,
state, local or other governmental (whether legislative,
judicial, independent or executive) authority or
instrumentality, domestic or foreign.
"Regulatory Authorizations" shall include all per-
mits, licenses, orders, ratings and approvals of all
Regulatory Authorities which are held by any of the TFS
Companies.
"Regulatory Loan Purchase" shall have the meaning
assigned to such term in Section 3.7(a).
"Regulatory Loans" shall have the meaning assigned
to the term in Section 3.7(a).
"Repurchase Price" shall have the meaning assigned
to the term in Section 2.4.
"Resolution Center" shall mean the resolution center
located at Rancho Cucamonga, California.
"RESPA" shall have the meaning assigned to the term
in Section 4.15.
"Restricted Contracts" shall mean all Material Con-
tracts with respect to which a consent or approval is required
by reason of the transactions contemplated by this Agreement,
a list of which as of the date hereof is submitted on Schedule
4.9.
"Retirees" shall have the meaning assigned the term
in Section 9.2.
"Review Period" shall have the meaning assigned to
the term in Section 2.3.
"Section 338 Elections" shall mean both a Section
338(g) Election and a Section 338(h)(10) Election.
<PAGE>
<PAGE> 16
"Section 338(g) Election" shall mean an election de-
scribed in Section 338(g) of the Code with respect to Pur-
chaser's acquisition of the TFS Stock (and by reason thereof,
the stock of the TFS Direct Subsidiaries) from Seller pursuant
to this Agreement. Section 338(g) Election shall include any
corresponding election under any other applicable Tax Laws
that requires a separate election with respect to Purchaser's
acquisition of the TFS Stock (and by reason thereof, the stock
of the TFS Direct Subsidiaries) from Seller under this
Agreement.
"Section 338(h)(10) Election" shall mean an election
described in Section 338(h)(10) of the Code with respect to
Seller's sale of the TFS Stock (and by reason thereof, the
stock of the TFS Direct Subsidiaries) to Purchaser pursuant to
this Agreement. Section 338(h)(10) Election shall include any
corresponding election under any other relevant Tax Laws for
which a separate election is permissible with respect to Pur-
chaser's acquisition of the TFS Stock (and by reason thereof,
the stock of the TFS Direct Subsidiaries) from Seller under
this Agreement.
"Section 338 Forms" shall mean all returns, docu-
ments, statements, and other forms that are required to be
submitted to any federal, state, county, or other local Taxing
Authority in connection with a Section 338(g) election or a
Section 338(h)(10) Election. Section 338 Forms shall include
any "statement of section 338 election" and United States In-
ternal Revenue Service Form 8023-A (together with any
schedules or attachments thereto) that are required pursuant
to Treas. Reg. Section 1.338-1 or Treas. Reg. Section
1.338(h)(10)-1.
"Seller" shall have the meaning set forth in the
preamble hereto.
"Seller's Account" shall mean the account of Seller
maintained at Wells Fargo Bank, N.A., the account number of
which will be contained in wiring instructions delivered by
Seller to Purchaser.
"Services Support Agreement" shall mean the
agreement described in Section 8.6.
"Servicing Agreement" shall mean that certain
Servicing Agreement between MTGLQ Investors, L.P. and the
corporations listed on Schedule I thereto dated as of March
31, 1997.
"SSP" shall mean the Transamerica Corporation
Employees' Stock Savings Plan.
"Statutory Accounting Principles" shall have the
meaning assigned to the term in Section 4.22.
"Statutory Statements" shall have the meaning as-
signed to the term in Section 4.22.
"Straddle Period" shall mean any Taxable period that
begins before and ends after the Closing Date.
"Tax" shall mean all federal, state, local and for-
eign income, gross receipts, license, payroll, employment, ex-
cise, severance, stamp, occupation, premium, windfall profits,
environmental, customs, duties, capital stock franchise, prof-
its, 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 of any kind whatsoever, in-
cluding any interest, penalty or addition thereto, and includ-
ing any transferee or secondary liability in respect of any
Tax (whether by law, contractual agreement or otherwise).
"Taxes" and "Taxable" shall have correlative meanings.
"Tax Audit" shall have the meaning assigned to the
term in Section 13.7.
<PAGE>
<PAGE> 17
"Tax Authority" shall mean any governmental author-
ity, domestic or foreign, having jurisdiction over the assess-
ment, determination, collection, or other imposition of Taxes.
"Tax Laws" shall mean the Code, federal, state,
county, local, or foreign laws relating to Taxes and any regu-
lations or official administrative pronouncements released
thereunder.
"Tax Returns" shall mean all returns, declarations,
reports, estimates and information returns and statements of
any Person required to be filed or sent by or with respect to
it in respect of any Taxes.
"TC Pension Plan" shall mean the Retirement Plan of
Salaried U.S. Employees of Transamerica Corporation and
Affiliates.
"TFS" shall have the meaning set forth in the pre-
amble hereto.
"TFS Balance Sheet" shall have the meaning assigned
to the term in Section 2.3.
"TFS BC" shall have the meaning assigned to the term
in the definition of "TFS Direct Subsidiaries."
"TFS BC Approval" shall have the meaning assigned to
the term in Section 3.6.
"TFS BC Premium" shall have the meaning assigned to
the term in Section 3.6.
"TFS BC Termination Date" shall have the meaning as-
signed to the term in Section 3.6.
"TFS Benefit Arrangement" shall mean any Benefit Ar-
rangement sponsored or maintained by any or all of the TFS
Companies or with respect to which any of the TFS Companies
has or may have any liability (whether actual, contingent,
with respect to any of its assets or otherwise) as of the
Closing Date, in each case with respect to any present or
former directors, employees, or agents of the TFS Companies.
"TFS Companies" shall mean TFS and all of the TFS
Subsidiaries, collectively.
"TFS Direct Subsidiaries" shall mean all of the fol-
lowing corporations which are wholly-owned by TFS: Arcadia
General Insurance Company, an Arizona corporation; Arcadia Na-
tional Life Insurance Company, an Arizona corporation; First
Credit Corporation, a Delaware corporation; Pacific Agency,
Inc., a Nevada corporation; Pacific Finance Loans, a
California corporation; Pacific Service Escrow, Inc., a
Delaware corporation; Transamerica Acceptance Corporation, a
Delaware corporation; Transamerica Credit Corporation, a
Nevada corporation; Transamerica Credit Corporation
(Washington), a Washington corporation; Transamerica Financial
Consumer Discount Company (Pennsylvania), a Pennsylvania
corporation; Transamerica Financial Corporation, a Nevada
corporation; Transamerica Financial Services, a California
corporation; Transamerica Financial Services Company, an Ohio
corporation; Transamerica Financial Services, Inc., a Hawaii
corporation; Transamerica Financial Services, Inc., a
Minnesota corporation; Transamerica Financial Services, Inc.,
an Alabama corporation; Transamerica Financial Services, Inc.,
a British Columbia corporation ("TFS BC"); Transamerica
Financial Services, Inc., a New Jersey corporation;
Transamerica Financial Services, Inc., a Texas corporation;
Transamerica Financial Services, Inc., a West Virginia
corporation; and Transamerica Insurance Administrators, Inc.,
a Delaware corporation.
"TFS Headquarters" shall mean the headquarters of
TFS located at 1150 South Olive Street, Los Angeles,
California.
<PAGE>
<PAGE> 18
"TFS Indirect Subsidiary" shall mean Transamerica
Financial Services, Limited, a UK corporation and a wholly-
owned subsidiary of Transamerica Acceptance Corporation.
"TFS Plan" shall mean, as of the Closing Date, any
Benefit Plan for which any of the TFS Companies is the "plan
sponsor" (as defined in Section 3(16)(B) of ERISA) or any Ben-
efit Plan maintained by any of the TFS Companies or to which
any of the TFS Companies is obligated to make payments, in
each case with respect to any present or former employees of
the TFS Companies. "TFS Plan" shall include any Qualified
Plan terminated within the preceding six years.
"TFS Policies" shall mean the operation of all of
the businesses of each TFS Company in a manner consistent with
such TFS Company's historical practices, including with
respect to credit, underwriting, origination, loan policy,
pricing, collection, accounting, servicing, reserve, charge-
off and other standards, procedures and guidelines of each TFS
Company.
"TFS BC Purchase" shall have the meaning assigned to
such term in Section 3.6.
"TFS Stock" shall mean all of the issued and out-
standing capital stock of TFS.
"TFS Subsidiaries" shall mean all of the TFS Direct
Subsidiaries and the TFS Indirect Subsidiary, collectively.
"TFS Tape" shall have the meaning assigned to the
term in Section 2.3.
"Third Party Debt" shall mean all indebtedness to
any Person other than Parent, Seller or any Affiliate thereof
including any of the TFS Companies.
"Transaction Documents" shall have the meaning as-
signed to the term in Section 14.2.
"Transferred Subsidiaries" shall mean Transamerica
Mortgage Company, a Delaware corporation, Pacific Agency,
Inc., an Indiana corporation, Transamerica Financial
Professional Services, Inc., a California corporation, and
Transamerica Financial Services Mortgage Company, a Delaware
corporation.
"Transamerica Acceptance" shall mean Transamerica
Acceptance Corporation, a Delaware corporation.
"Transamerica Financial Services California" shall
mean Transamerica Financial Services, a California
corporation.
"Transamerica Marks" shall mean (a) the word "Trans-
america", (b) the stylized pyramid logo of Transamerica Corpo-
ration, (c) any representation or other likeness of the Tran-
samerica Building located at 600 Montgomery Street, San Fran-
cisco, California, (d) any trademark, trade name or service
mark using or otherwise incorporating the prefix "Trans" and
(e) any trademark, trade name or service mark using or other-
wise incorporating the word "pyramid".
"Trenton National Litigation" shall mean
Transamerica Commercial Finance Corp. and Arcadia General
Insurance Company v. State of Arizona and The Arizona
Department of Insurance and The Treasurer of the State of
Arizona and Trenton National Insurance Company and Lawrence J.
Warfield, Receiver, Case No. 1 CA-CB 91-0550.
"Unaudited Financial Statements" shall have the
meaning assigned to the term in Section 6.9.
"Welfare Plan" shall have the meaning assigned to
the term in Section 9.2.
<PAGE>
<PAGE> 19
Section 1.2 Accounting Terms.
All accounting terms not otherwise defined herein
shall have the respective meanings assigned to them in accor-
dance with GAAP.
Section 1.3 Interpretation.
The headings preceding the text of Articles, Sec-
tions, subsections, Exhibits and Schedules included in this
Agreement are for convenience only and shall not be deemed
part of this Agreement or be given any effect in interpreting
this Agreement. The use of the terms "including" or "include"
shall, in all cases, mean "including, without limitation," and
"include, without limitation," respectively. The use of the
masculine, feminine or neuter gender herein shall, as appli-
cable, also refer to the other genders. Except as the context
otherwise requires the use of the singular form of any term
shall also refer to the plural, and vice versa. Unless the
context otherwise requires, whenever the terms "hereto,"
"hereunder," "herein" or "hereof" are used in this Agreement,
such terms shall be construed as referring to this Agreement
and reference to "Articles," "Sections," "subsections," "para-
graphs," "subparagraphs," "clauses," "Schedules," "Exhibits"
and "Recitals" shall be construed as referring to those of
this Agreement.
ARTICLE II
PURCHASE PRICE AND PAYMENT
Section 2.1 Purchase and Sale of TFS Stock.
In reliance upon the representations, warranties,
covenants and agreements set forth herein and upon the terms
and subject to the conditions hereinafter set forth, on the
Closing Date, Seller shall sell, convey, assign, transfer and
deliver to Purchaser, and Purchaser shall purchase, accept and
acquire from Seller, all of the TFS Stock for a purchase price
of $__________, as the same may be adjusted pursuant to Sec-
tions 2.3, 3.5 and 3.6 (the "Purchase Price").
Section 2.2 Terms and Method of Payment of Purchase Price.
The Purchase Price shall be paid by Purchaser to
Seller at the Closing by wire transfer of immediately
available funds denominated in U.S. dollars to Seller's
Account.
Section 2.3 Calculation of Purchase Price.
(a) The amount specified in Section 2.1 is an esti-
mate of the Purchase Price ("Estimated Purchase Price"), which
has been calculated for the purposes of signing this Agreement
using (i) a balance sheet for the Acquired Business prepared
by Seller and TFS as of March 31, 1997 (the "TFS Balance
Sheet") and (b) information and data relating to the Loan
Receivables (in the form of one or more magnetic computer
tapes and computer diskettes that are readable by Purchaser)
prepared as of March 31, 1997 (the "TFS Tape").
(b) The Purchase Price shall be calculated for pur-
poses of Closing as provided in this Section 2.3(b).
(i) As soon as it is available (but no
later than five (5) Business Days before the Closing Date),
Seller and TFS shall deliver to Purchaser (A) a balance sheet
for the Acquired Business prepared by Seller and TFS as of the
last day of the month prior to the month that includes the
Closing Date (the "Closing Balance Sheet"), and (B)
information and data relating to the Loan Receivables (in the
form of one or more magnetic computer tapes and computer dis-
kettes that are readable by Purchaser) prepared as of the date
of the Closing Balance Sheet (the "Closing Tape"). In
addition, no earlier than two (2) Business Days before the
Closing Date and no later than one (1) Business Day before the
Closing Date, Seller and TFS shall deliver to Purchaser a<PAGE>
<PAGE> 20
written report (the "Net Funds Report"), prepared as of the
close of business on the Business Day immediately preceding
the date of delivery of such report (the "Net Funds Report
Date"), that sets forth a calculation of Net Funds Contributed
and the Funds Adjustment Amount and includes sufficient detail
and supporting information to enable Purchaser to review and
evaluate such calculations.
(ii) Purchaser shall have three (3)
Business Days after it has received the Closing Balance Sheet
and Closing Tape (the "Review Period") in which to review the
Closing Balance Sheet and Closing Tape and request any and all
information from Seller and TFS reasonably required to
evaluate these calculations. If Purchaser does not notify
Seller and TFS within the Review Period of any issues relating
to the Closing Balance Sheet or Closing Tape, they shall be
deemed to be final and binding on the parties. If there is an
issue to the effect that the Closing Balance Sheet does not
present fairly in all material respects the financial position
of the Acquired Business as of the date of such Balance Sheet
or the Closing Tape does not accurately present the Loan
Receivables of the Acquired Business as of the date thereof,
the parties shall seek to resolve those issues in accordance
with Section 16.14 hereof, and any necessary adjustments shall
be made to the Closing Balance Sheet or Closing Tape;
provided, however, that such dispute shall not delay the
Closing. If such issues have not been resolved by the Closing
Date, the Purchase Price shall be calculated for purposes of
Closing on the basis of the Closing Balance Sheet and Closing
Tape as prepared by Seller and TFS, but the portion of the
Purchase Price affected by disputed issues, but not more than
$ million, shall be held in escrow by a mutually acceptable
escrow agent (the "Escrow Agent") until such issues have been
resolved, at which time the escrowed funds plus any interest
thereon shall be disbursed to Seller and/or Purchaser in
accordance with the resolution of such issues. The up to $
million held in escrow shall not limit the amount that may be
subject to dispute following the Closing, but any such claims
or disputes shall not be subject to or be applied against the
"basket" provisions of Sections 2.4(c) and 12.1(a).
(iii) The Purchase Price shall be equal to
the Estimated Purchase Price plus or minus the following
adjustments:
(A) If the amount of the Other Assets shown on
the Closing Balance Sheet is (x) greater than that shown
on the TFS Balance Sheet, then the Estimated Purchase
Price shall be increased by the amount of such excess; or
(y) less than that shown on the TFS Balance Sheet, then
the Estimated Purchase Price shall be decreased by the
amount of such reduction;
(B) If the amount of the Other Liabilities
shown on the Closing Balance Sheet is (x) greater than
that shown on the TFS Balance Sheet, then the Estimated
Purchase Price shall be decreased by the amount of such
excess; or (y) less than that shown on the TFS Balance
Sheet, then the Estimated Purchase Price shall be in-
creased by the amount of such reduction;
(C) If the amount of the Loan Receivables
indicated on the Closing Tape is (x) greater than the
amount indicated on the TFS Tape, then the Estimated
Purchase Price shall be increased by the product of such
excess multiplied by the Adjustment Factor; or (y) less
than the amount indicated on the TFS Tape, the Estimated
Purchase Price shall be decreased by the product of such
reduction multiplied by the Adjustment Factor; and
(D) If the remainder obtained by subtracting
the Funds Adjustment Amount from Net Funds Contributed is
(x) greater than or equal to zero, the Estimated Purchase
Price shall be increased by the sum of (aa) the product
of (Net Funds Contributed minus the Funds Adjustment
Amount) multiplied by the Adjustment Factor, plus (bb)
the Funds Adjustment Amount; or (y) less than zero, the
Estimated Purchase Price shall be decreased by the sum of
(cc) the product of (Net Funds Contributed (treated as a<PAGE>
<PAGE> 21
positive number) plus the Funds Adjustment Amount
multiplied by the Adjustment Factor, minus (dd) the Funds
Adjustment Amount.
(c) For purposes of this Agreement, the following
terms shall have the meanings set forth below:
(i) "Funds Adjustment Amount" shall mean
the sum of (1) the increase, if any, in cash and cash
equivalents on hand in the TFS Companies as of the Net Funds
Report Date over the amount shown on the Closing Balance
Sheet, plus (2) the amount paid out by the TFS Companies
between the date of the Closing Date Balance Sheet and the Net
Funds Report Date for severance and retention payments.
(ii) "Loan Receivables" shall mean, as of
any date of determination, the aggregate outstanding principal
balances of the Loans.
(iii) "Other Assets" shall mean all assets
other than Excluded Assets and Loan Receivables.
(iv) "Other Liabilities" shall mean all
liabilities other than Excluded Liabilities, Intercompany Debt
and any Third Party Debt.
(v) "Adjustment Factor" shall mean the
sum of 1.0 plus the Premium Factor.
(vi) "Net Funds Contributed" shall mean
the amount of cash or cash equivalents and the fair market
value of marketable securities or other property (A) advanced
or contributed by Seller (in the form of Intercompany Debt or
otherwise) to one or more of the TFS Companies and used by
such TFS Company in the ordinary course of business, minus (B)
the amounts thereof received by Seller from one or more of the
TFS Companies in the case of clauses (A) and (B) during the
period commencing on the first day of the month that includes
the Closing Date and ending on the Net Funds Report Date.
(d) For purposes of determining the Purchase Price,
any Taxes payable or receivable by the TFS Companies shall be
ignored in calculating Other Assets and Other Liabilities.
Section 2.4 Repurchase of Excluded Assets.
(a) In the event that any loan indirectly trans-
ferred to Purchaser through the purchase of the TFS Stock is
an Excluded Loan, or any other asset transferred to Purchaser
pursuant to this Agreement is an Excluded Asset, Purchaser
shall promptly provide Seller with written notice identifying
such Excluded Loan or Excluded Asset, and Seller shall be
obligated to repurchase such Excluded Loan or Excluded Asset
to the extent set forth in this section.
(b) On the fifth (5th) day of each month (or the
following Business Day, if such day is not a Business Day),
Seller shall deliver to Purchaser an amount equal to the ag-
gregate Repurchase Price for all Excluded Loans and Excluded
Assets for which Purchaser has given notice in the preceding
calendar month. The Repurchase Price for any Excluded Loan
shall be (i) the sum of the outstanding principal balance of
such loan as of the date of repurchase, plus (ii) Purchaser's
documented recording or transfer costs of conveying such Ex-
cluded Loan to Seller, plus (iii) up to thirty (30) days of
accrued interest, plus (iv) the product of the outstanding
principal as of the date of repurchase multiplied by the Pre-
mium Factor. The Repurchase Price for any other Excluded
Asset shall be (x) the book value of such Excluded Asset as of
the Closing Date, plus (y) interest on such amount from the
Closing Date until the date such Repurchase Price is received
by Purchaser at the annual rate equal to the average of the
high and low daily federal funds rate as reported from time to
time by The Wall Street Journal plus ____, plus (z) documented
recording or transfer costs of conveying such Excluded Asset
to Seller. Upon payment of the Repurchase Price as set forth
herein, Purchaser shall deliver any and all documentation re-
lating to each repurchased Excluded Loan and shall execute and
deliver such instruments of transfer or assignment, in each<PAGE>
<PAGE> 22
case without recourse, as shall be necessary to vest in Seller
title to such Excluded Loan or other Excluded Asset.
(c) Notwithstanding the provisions of Section
2.4(b), Seller shall have no obligation to repurchase Excluded
Loans or other Excluded Assets unless the aggregate Repurchase
Price of all Excluded Loans and other Excluded Assets for
which Purchaser has given notice pursuant to Section 2.4(a)
exceeds on a cumulative basis an amount equal to ____________
_______________________, in which case Seller's obligation to
repurchase shall be only to the extent of such excess.
(d) The period within which Purchaser may assert
the right to require Seller to repurchase Excluded Loans and
other Excluded Assets as provided in this Section shall expire
________________________ days after the Closing Date,
provided, however, that such expiration shall have no effect
on the obligations of Seller and Parent with respect to any
Excluded Loan or other Excluded Asset that is the subject of a
repurchase demand made prior to such expiration, nor upon any
representation and warranty relating to Excluded Loans or
Excluded Assets and indemnification thereto.
Section 2.5 Interest on Purchase Price.
If the conditions set forth in Article XI hereof
have been satisfied and the Closing has not been consummated
for any reason other than due to the failure or refusal of any
of Seller, Parent, or TFS to fulfill its respective
obligations to close the sale of the TFS Stock hereunder, then
(1) on and after the later of ____________, or the date on
which all of the conditions set forth in Article XI have been
satisfied, an amount equal to the Purchase Price less the
Intercompany Debt and Third Party Debt shall bear interest
from such date, to and including the Closing Date at a rate
per annum equal to the _____; and (2) on and after the later
of _______________, or the date on which all of the conditions
set forth in Article XI have been satisfied, the amount equal
to Purchase Price less the Intercompany Debt and Third Party
Debt shall bear interest from such date, to and including the
Closing Date at a rate per annum equal to _____.
ARTICLE III
CLOSING
Section 3.1 The Closing.
The consummation of the transactions provided for in
this Agreement (the "Closing") shall take place at the offices
of Seller's counsel, Gibson, Dunn & Crutcher LLP, 200 Park
Avenue, New York, New York, at 9:00 a.m., Eastern time: (a)
on the later of (i) such date which is not more than two (2)
Business Days after the satisfaction or waiver of the last of
the conditions required to be satisfied or waived pursuant to
Articles X and XI or, (ii) June 20, 1997, or (b) at such other
place, time or date as the parties shall agree upon in
writing. The date on which the Closing is to occur is
referred to herein as the "Closing Date."
Section 3.2 Parent's, Seller's and TFS's Deliveries.
At the Closing, Parent, Seller, and TFS shall
deliver to Purchaser the following:
(: Certificates evidencing the TFS Stock
registered in the name of Seller, duly endorsed by Seller for
transfer or accompanied by assignments duly executed by
Seller.
(b) The stock books, stock ledgers and minute books
of the TFS Companies.
(c) An opinion of Gibson, Dunn & Crutcher LLP,
counsel to Parent, Seller, and TFS, in substantially the form
attached as Exhibit 3.2.
<PAGE>
<PAGE> 23
(d) Certified copies of resolutions, duly adopted
by the Board of Directors of Parent, Seller, and TFS, respec-
tively, which shall be in full force and effect at the time of
the Closing, authorizing the execution, delivery and perfor-
mance by Parent, Seller and TFS, respectively, of this Agree-
ment and the consummation of the transactions contemplated
hereby.
(e) The officers' certificates referred to in Sec-
tions 11.1(d), (e) and (f).
(f) Letters of resignation, dated as of the Closing
Date, from each director or officer of each TFS Company as
Purchaser may request.
(g) With respect to Intercompany Debt, (i) all
original promissory notes evidencing such debt, marked "can-
celed" and "paid in full" and signed by an appropriate officer
of Parent or Seller, and (ii) a release, in a form reasonably
acceptable to Purchaser, evidencing satisfaction and release
of all Intercompany Debt that is not evidenced by a promissory
note so delivered and marked.
(h) Such other documents as are reasonably required
to be delivered by Parent or Seller to effectuate the transfer
of the TFS Stock to Purchaser and the assumption by Parent or
Seller of all Excluded Liabilities and Excluded Loans, includ-
ing the release of all TFS Companies from any obligations
under the Purchase Agreements as set forth on Part A of
Schedule 6.1.
Section 3.3 Purchaser's Deliveries.
At the Closing, Purchaser shall deliver to Seller
the following:
(a) The Purchase Price as provided in Sections 2.2
and 2.3; provided, however, that any portion of the Purchase
Price up to $[ ] million that is affected by unresolved is-
sues with respect to the Closing Balance Sheet or Closing Tape
shall be delivered to the Escrow Agent at Closing.
(b) An opinion of counsel to Purchaser and
Household International, in substantially the form attached as
Exhibit 3.3.
(c) Certified copies of resolutions, duly adopted
by Purchaser's and Household International's Board of
Directors, which shall be in full force and effect at the time
of the Closing, authorizing the execution, delivery and
performance by Purchaser and Household International of this
Agreement and the consummation of the transactions
contemplated hereby.
(d) The officer's certificates referred to in Sec-
tion 10.1(c) and (d).
(e) Such other documents or payments as are reason-
ably required to be delivered or paid by Purchaser to effectu-
ate the transfer of the TFS Stock to Purchaser.
Section 3.4 Further Assurances.
After the Closing, each of Parent, Seller, TFS and
Purchaser and Household International shall from time to time
execute and deliver at the request of any other party to this
Agreement such additional documents and instruments as may be
reasonably required to carry out the intent of this Agreement
and the transactions contemplated hereby, and to provide what-
ever documents or other evidence of title as may be reasonably
requested by Purchaser to confirm Purchaser's ownership of the
TFS Stock.
<PAGE>
<PAGE> 24
Section 3.5 Arcadia Companies.
(a) If, at the time all other conditions to the
consummation of the transactions contemplated by this
Agreement contained in Articles X and XI have been satisfied
or waived and subject to Section 3.6, Seller and TFS have not
obtained the approval of The Arizona Department of Insurance
or any other state insurance regulatory authority which is
required for the sale of the stock of Arcadia General Insur-
ance Company or Arcadia National Life Insurance Company to
Purchaser indirectly by virtue of TFS's ownership thereof (the
"Insurance Approval"), then the parties agree promptly to take
all actions necessary to (i) consummate pursuant to this
Article III the Closing and all other transactions
contemplated hereby (other than as contemplated by Section
3.6) except the purchase and sale of the Arcadia Stock (the
"Arcadia Purchase"), and reduce the Purchase Price by an
amount equal to the book value of the Arcadia Companies as
reflected on the Closing Balance Sheet, and (ii) delay the
consummation of the Arcadia Purchase until such time as the
Insurance Approval has been obtained. For purposes of the
Closing referred to in clause (i) of the preceding sentence,
if, in addition to the failure to obtain the Insurance Ap-
proval, one or more other conditions to the Closing contem-
plated by this Agreement contained in Article X or XI as they
relate to the Arcadia Companies or the Insurance Policies (an
"Other Arcadia Condition") has not been satisfied as of the
date on which all such other conditions have been satisfied or
waived, the parties shall nevertheless consummate the Closing
and the transactions contemplated hereby other than the
Arcadia Purchase in accordance with this Article III. The
consummation of the Arcadia Purchase shall be conditioned on
the Insurance Approval having been obtained and the satisfac-
tion or waiver of all Other Arcadia Conditions and at such
consummation Purchaser shall pay Seller by wire transfer of
immediately available funds denominated in U.S. dollars to
Seller's Account an amount equal to the book value of the
Arcadia Companies as reflected on a balance sheet of the
Arcadia Companies prepared by Seller as of the last day of the
month immediately preceding the date of such consummation;
provided, however, that if the consummation of the Arcadia
Purchase shall fail to occur on or before December 31, 1997
(the "Arcadia Termination Date"), the parties' obligation to
consummate the Arcadia Purchase shall automatically terminate.
The consummation of the Arcadia Purchase after consummation of
the Closing and other transactions contemplated hereby shall
be subject to the same representations, warranties, covenants
and conditions contained herein as applied on the Closing Date
to Parent, Seller and the TFS Companies, on the one hand, and
Purchaser, on the other hand, applying to Parent, Seller and
the Arcadia Companies and Purchaser, respectively, on the date
on which the Arcadia Purchase is consummated, with only such
modifications as are necessary to reflect the Closing of all
transactions contemplated hereby other than the Arcadia
Purchase.
(b) If the consummation of the Arcadia Purchase is
delayed pursuant to Section 3.5(a), the Arcadia Stock and all
assets and other properties of the Arcadia Companies,
including the Insurance Policies, shall constitute and be
treated as Excluded Assets, and all liabilities and other
obligations of the Arcadia Companies shall constitute and be
treated as Excluded Liabilities, until such time, if ever, as
the Arcadia Purchase is consummated. In such event, as a
condition of Closing, Seller and Parent shall cause the
Arcadia Companies to enter into agreements with the TFS
Companies to enable the current practice of providing in-
surance to customers of any TFS Company to continue on the
same terms and conditions, including commissions payable to
the TFS Companies until such time, if ever, as the Arcadia
Purchase is consummated or as the Arcadia Termination Date
occurs.
(c) The failure of the consummation of the Arcadia
Purchase to occur for any reason shall not affect the Closing
of the other transactions contemplated hereby; nor any rights
or obligations of the parties under Section 12.1, 12.2, 13.2
or 13.3.
<PAGE>
<PAGE> 25
Section 3.6 TFS BC.
(a) If, at the time all other conditions to the
consummation of the transactions contemplated by this
Agreement contained in Articles X and XI have been satisfied
or waived and subject to Section 3.5, Seller and TFS have not
obtained the approval of the Canadian federal, provincial or
local authorities which are required for the sale of the stock
of TFS BC (the "Canadian Approval"), then the parties agree
promptly to take all actions necessary to (i) consummate pur-
suant to this Article III the Closing and all other transac-
tions contemplated hereby (other than as contemplated by
Section 3.5) except the purchase and sale of the outstanding
capital stock of TFS BC (the "TFS Purchase"), and reduce the
Purchase Price by an amount equal to the book value of TFS BC
as reflected on the Closing Balance Sheet, plus an amount
equal to the product of (x) the Loan Receivables held by TFS
BC included on the Closing Tape multiplied by (y) the
Adjustment Factor (the "TFS BC Premium"), and (ii) delay the
consummation of the TFS BC Purchase until such time as the TFS
BC Approval has been obtained. For purposes of the Closing
referred to in clause (i) of the preceding sentence, if, in
addition to the failure to obtain the TFS BC Approval, one or
more other conditions to the Closing contemplated by this
Agreement contained in Article X or XI as they relate to TFS
BC (an "Other TFS BC Condition") has not been satisfied as of
the date on which all such other conditions have been
satisfied or waived, the parties shall nevertheless consummate
the Closing and the transactions contemplated hereby other
than the TFS BC Purchase in accordance with this Article III.
The consummation of the TFS BC Purchase shall be conditioned
on the TFS BC Approval having been obtained and the satisfac-
tion or waiver of all Other TFS BC Conditions and at such
consummation Purchaser shall pay Seller by wire transfer of
immediately available funds denominated in U.S. dollars to
Seller's Account an amount equal to the book value of TFS BC
as reflected on a balance sheet of TFS BC prepared by Seller
as of the last day of the month immediately preceding the date
of such consummation plus an amount equal to the TFS BC
Premium; provided, however, that if the consummation of the
TFS BC Purchase shall fail to occur on or before December 31,
1997 (the "TFS BC Termination Date"), the parties' obligation
to consummate the TFS BC Purchase shall automatically
terminate. The consummation of the TFS BC Purchase after
consummation of the Closing and other transactions con-
templated hereby shall be subject to the same representations,
warranties, covenants and conditions contained herein as ap-
plied on the Closing Date to Parent, Seller and the TFS Compa-
nies, on the one hand, and Purchaser, on the other hand,
applying to Parent, Seller and the TFS BC and Purchaser,
respectively, on the date on which the TFS BC Purchase is con-
summated, with only such modifications as are necessary to re-
flect the Closing of all transactions contemplated hereby
other than the TFS BC Purchase.
(b) If the consummation of the TFS BC Purchase is
delayed pursuant to Section 3.6(a), the outstanding capital
stock of TFS BC and all assets and other properties of TFS BC
shall constitute and be treated as Excluded Assets, and all
liabilities and other obligations of TFS BC shall constitute
and be treated as Excluded Liabilities, until such time, if
ever, as the TFS BC Purchase is consummated or as the TFS BC
Termination Date occurs.
(c) The failure of the consummation of the TFS BC
Purchase to occur for any reason shall not affect the Closing
of the other transactions contemplated hereby; nor any rights
or obligations of the parties under Section 12.1, 12.2, 13.2
or 13.3.
Section 3.7 Closing with Less Than All Loan Regulatory
Approvals.
(a) If, at the time all conditions to the
consummation of the transactions contemplated by this
Agreement contained in Articles X and XI have been satisfied
or waived (other than an contemplated by Sections 3.5 and
3.6), not all of the Regulatory Approvals necessary for the
lawful indirect transfer to Purchaser of one or more classes<PAGE>
<PAGE> 26
of Loans in one or more jurisdictions (such Loans, the
"Regulatory Loans") to Purchaser by virtue of its ownership of
the TFS Stock have been obtained by Purchaser, then the
parties agree (i) to consummate, immediately prior to the
Closing, the sale by the applicable TFS Companies to Purchaser
of the Regulatory Loans, without recourse, representation or
warranty of any kind by Parent, Seller or the TFS Companies
(the "Regulatory Loan Purchase"), and (ii) immediately
thereafter to consummate the Closing of the purchase and sale
of the TFS Stock and the other transactions contemplated by
this Article III, other than as contemplated by Sections 3.5
and 3.6. Payment of the Purchase Price by Purchaser at the
Closing shall be deemed payment in full by Purchaser for the
Regulatory Loans.
(b) If the Regulatory Loan Purchase is consummated
separately from the purchase and sale of the TFS Stock and the
other transactions contemplated hereby pursuant to Section
3.7(a), then (i) delivery of the Loan Files with respect to
the Regulatory Loans and all related assignments and related
loan and security transfer documentation shall occur after the
Closing Date at Purchaser's sole cost and expense, and (ii)
the Regulatory Loans shall constitute and be treated as Loans
for purposes under this Agreement and shall not for any reason
by treated as Excluded Assets for purposes of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT, SELLER AND TFS
In order to induce Purchaser to enter into this
Agreement and to consummate the transactions contemplated
hereby, each of Parent, Seller and TFS jointly and severally
represents and warrants to Purchaser as of the date hereof and
the Closing Date as follows:
A. REPRESENTATIONS AND WARRANTIES REGARDING PARENT, SELLER
AND THE TFS COMPANIES
Section 4.1 Corporate Status.
Each of Parent, Seller and the TFS Companies is a
corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation.
Each of Parent, Seller and the TFS Companies is duly licensed
or qualified to do business in each jurisdiction in which the
nature of the business conducted by it as of the Closing Date
or the nature or location of its properties and assets owned
as of the Closing Date makes such licensing or qualification
necessary, all of which jurisdictions, in the case of the TFS
Companies, are set forth in Schedule 4.1 next to the names of
the applicable TFS Companies. Complete and correct copies of
the articles or certificate of incorporation and by-laws, as
amended, of each TFS Company, have been delivered to
Purchaser. Seller and TFS have made available to Purchaser
the minute books of each TFS Company from date of
incorporation through the date of this Agreement, and such
minute books contain complete and accurate records of all
meetings held by the board of directors and stockholders of
each TFS Company and of all corporate actions authorized at
such meetings since the respective date of the incorporation
of each TFS Company.
Section 4.2 Corporate Authority.
Each of Parent, Seller and TFS has the corporate
power and authority to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. Each of
Parent, Seller and the TFS Companies has the requisite corpo-
rate power and authority to own or lease all of its respective
properties and assets and to conduct its respective businesses
as they are now being conducted. All corporate actions and
proceedings necessary to be taken by or on the part of Parent,
Seller and the TFS Companies in connection with this Agreement
and the transactions contemplated hereby have been duly and
validly taken. This Agreement has been validly executed and
delivered by Parent, Seller and TFS and constitutes the legal,<PAGE>
<PAGE> 27
valid and binding obligation of Parent, Seller and TFS, en-
forceable against Parent, Seller and TFS in accordance with
and subject to its terms, except as such enforceability may be
limited by applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws from time to time in effect
affecting creditors' rights generally or by principles
governing the availability of equitable remedies.
Section 4.3 Non-Contravention.
Neither the execution and delivery by Parent, Seller
and TFS of this Agreement nor the consummation by Parent,
Seller or TFS of the transactions contemplated hereby is an
event that, of itself or with the giving of notice or the pas-
sage of time or both, will (a) conflict with the charter or
bylaws of Parent, Seller or any of the TFS Companies, (b) as-
suming that the consents and approvals described in Schedule
4.9 are obtained, constitute a violation of, or conflict with
or result in any breach of or any default under, or constitute
grounds for termination or acceleration of, any Material Con-
tract to which Parent, Seller or any of the TFS Companies is a
party or by which Parent, Seller or any of the TFS Companies
is bound, (c) assuming receipt of the consents and approvals
described in Schedule 4.9, violate any judgment, decree,
order, statute, rule or regulation, in each such case, applic-
able to Parent, Seller or any of the TFS Companies, (d) result
in the creation or imposition of any Lien on the assets or
equity of any of the TFS Companies or (e) assuming receipt of
the consents and approvals described in Schedule 4.9, cause
the suspension, revocation, termination or modification of any
Regulatory Authorization.
Section 4.4 Ownership of Stock.
(a) Stock of TFS. The authorized capital stock of
TFS consists of 100,000 shares of common stock, $1.00 par
value, of which 1,000 shares are issued and outstanding as of
the date of this Agreement. All shares of TFS Stock have been
duly authorized and validly issued and are fully paid, non-
assessable and free of preemptive rights. TFS is not bound by
any outstanding subscriptions, options, warrants, calls, com-
mitments or agreements of any character calling for the trans-
fer, purchase or issuance of any shares of its capital stock
or any securities representing the right to purchase,
subscribe, or otherwise receive any such shares. Seller is
the owner, beneficially and of record, of all of the TFS
Stock, free of all Liens other than Permitted Liens. Upon
transfer and delivery of the TFS Stock to Purchaser, Purchaser
will receive good and marketable title to the TFS Stock free
and clear of any Liens (other than those arising through
Purchaser).
(b) Stock of TFS Subsidiaries. TFS owns all of the
issued and outstanding capital stock of the TFS Direct Subsid-
iaries, free and clear of all Liens. All of the issued and
outstanding capital stock of the TFS Indirect Subsidiary is
owned by Transamerica Acceptance, free and clear of all Liens
other than Permitted Liens. Except for the TFS Subsidiaries
and the Transferred Subsidiaries, there is no corporation in
which TFS has any direct or indirect equity interest. Except
for the TFS Indirect Subsidiary, there is no corporation in
which any TFS Direct Subsidiary has any direct or indirect eq-
uity interest. All issued and outstanding shares of each TFS
Subsidiary have been duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights.
No TFS Subsidiary is bound by any outstanding subscriptions,
options, warrants, calls, commitments or agreements of any
character calling for the transfer, purchase or issuance of
any share of its capital stock or any securities representing
the right to purchase or otherwise receive any shares of its
capital stock or any securities representing the right to
purchase or subscribe for any such shares. There are no
proxies or voting agreements with respect to any shares of
stock of any TFS Company.
<PAGE>
<PAGE> 28
Section 4.5 Regulatory Authorizations.
As of the date of this Agreement, each TFS Company
holds the Regulatory Authorizations listed opposite its name
on Schedule 4.5, which Regulatory Authorizations constitute
all the material licenses, consents, approvals and
authorizations required for each TFS Company to operate its
business as now conducted. The Regulatory Authorizations
listed on Schedule 4.5 in the aggregate constitute all
material Regulatory Authorizations required to operate the
Acquired Business as now conducted. Each TFS Company's Regu-
latory Authorizations are in full force and effect and, except
as limited by the provisions of applicable law or as otherwise
specified on the face of such Regulatory Authorizations or in
Schedule 4.5, none of the Regulatory Authorizations is subject
to any restriction or condition which would limit in any mate-
rial respect the operations of the applicable TFS Company as
presently conducted. Except as set forth on Schedule 4.5, as
of the date hereof, there is not pending or, to the knowledge
of Seller and TFS, threatened any action by or before any
Regulatory Authority to revoke, cancel, rescind or modify in
any material respect any of the Regulatory Authorizations
listed on Schedule 4.5 (other than proceedings to amend rules
of general applicability) or to refuse to renew or extend any
of such Regulatory Authorizations.
Section 4.6 Title, Liens, etc.
Attached as Schedule 4.6 is a list of all Personal
Property of the TFS Companies with a value over $100,000 and
all Real Property of the TFS Companies. Each TFS Company has
good title to, or in the case of leased property, has a valid
leasehold interest in, or in the case of licensed property,
has a valid license in, all Personal Property owned, leased,
or licensed by it as of the date hereof. Each TFS Company has
good title to, or in the case of leased property has a valid
leasehold interest in, all Real Property owned or leased by it
as of the date hereof. The Personal Property and the Real
Property are free and clear of all Liens except Permitted
Liens.
Section 4.7 Employees.
(a) Schedule 4.7A completely and accurately lists
all TFS Plans and TFS Benefit Arrangements and specifically
identifies any that are Qualified Plans. Seller has made
available or delivered to Purchaser true, correct, and
complete copies of all material documents with respect to each
TFS Plan and TFS Benefit Arrangement.
(b) With respect, as applicable, to Benefit Plans
and Benefit Arrangements:
(i) Parent has received a favorable
determination letter from the Internal Revenue Service (the
"IRS"), covering the Qualified Plans' qualification under Code
Section 401(a), and to knowledge of Parent and the TFS
Companies (including persons directly responsible for employee
benefit matters), nothing has occurred with respect to such
plans and their trusts that could cause the loss of such
qualification or exemption or the imposition of any material
liability, lien, penalty, or tax under ERISA or the Code;
(ii) each TFS Plan and each TFS Benefit
Arrangement has been maintained in accordance with its
constituent documents and in material compliance with all
applicable provisions of the Code, ERISA and other domestic
and foreign laws, including federal, state, and foreign
securities laws and all laws respecting reporting and
disclosure;
(iii) None of the TFS Companies nor any of
their ERISA Affiliates has incurred any liability under Title
IV of ERISA or Code Section 412 that will become, after the
Closing, an obligation of the Purchaser, the TFS Companies or
any of their ERISA Affiliates. All costs of plans subject to
Title IV of ERISA have been provided for on the basis of
consistent methods in accordance with sound actuarial
<PAGE>
<PAGE> 29
assumptions and practices, and except as provided in Section
9.1(d), since the last valuation date for each such plan, no
such plan has been amended or changed to increase the amounts
of benefits thereunder;
(iv) there are no pending claims (other
than routine benefit claims) or lawsuits by, against, or
relating to any non-TFS Benefit Plans or non-TFS Benefit
Arrangements that would, if successful, result in liability
for the TFS Companies, and no claims or lawsuits (other than
routine benefit claims) have been asserted, instituted or, to
the knowledge of the TFS Companies, threatened by, against, or
relating to any TFS Plan or TFS Benefit Arrangement unless the
amounts at issue are not material. The TFS Plans and TFS
Benefit Arrangements are not presently under audit or examina-
tion (and have not received notice of a potential audit or ex-
amination) by any domestic or foreign governmental authority,
and no matters are pending with respect to the Qualified Plans
under any governmental compliance programs, except that the
Department of Labor currently is conducting a routine audit;
(v) no TFS Plan or TFS Benefit
Arrangement contains any provision or is subject to any law
that would give rise to any vesting of benefits, severance
(except as disclosed in Schedule 4.7C), termination, or other
payments or liabilities as a result of the transactions this
Agreement contemplates, and the TFS Companies have not
declared or paid any bonus or other incentive compensation or
established any severance plan, program, or arrangement in
contemplation of the transactions contemplated by this
Agreement (except as disclosed in Schedule 4.7C);
(vi) with respect to each TFS Plan, there
have been no violations of Code Section 4975 or ERISA Sections
404 or 406 as to which successful claims would result in any
post-Closing liability for the TFS Companies or Purchaser or
any Person required to be indemnified by them;
(vii) the TFS Companies have made all
required contributions to the TFS Plans as of the last day of
the each plan's most recent fiscal year; except as provided in
Section 6.1(b)(vii) all benefits accrued under any unfunded
TFS Plan or TFS Benefit Arrangement will have been paid,
accrued, or otherwise adequately reserved in accordance with
GAAP as of the Balance Sheet Date; and all monies withheld
from employee paychecks with respect to TFS Plans have been
transferred to the appropriate plan within the timing required
by governmental regulations;
(viii) no TFS Company has prepaid or
prefunded any Welfare Plan through a trust, reserve, premium
stabilization, or similar account, nor, except as disclosed on
Schedule 4.7D, does any TFS Company provide benefits through
an arrangement defined in Code Section 501(c)(9), and the TFS
Companies and their ERISA Affiliates have complied with Code
Sections 4980B (and its predecessor) and 5000;
(ix) the TFS Companies have no liability
(whether actual, contingent, or otherwise) with respect to any
Benefit Plan or Benefit Arrangement that is not a TFS Benefit
Arrangement or with respect to any Benefit Plan sponsored or
maintained (or which has been or should have been sponsored or
maintained) by any ERISA Affiliate; and no facts exist that
could reasonably be expected to result in such liability, as a
result of a termination, withdrawal or funding waiver with re-
spect to any such plan, program, or arrangement;
(x) no employee or former employee of the
TFS Companies nor beneficiary of any such employee or former
employee is, by reason of such employee's or former employee's
employment, entitled to receive any benefits subject to
reporting under Statement of Financial Accounting Standards
No. 106, other than as required by Code Section 4980B or other
applicable law or as outlined in Schedule 4.7E.
(c) Seller has delivered to Purchaser a true, cor-
rect, and complete list of the materials set forth on Sched-
ule 4.7F with respect to employees.
<PAGE>
<PAGE> 30
(d) With respect to employees of and service
providers to the TFS Companies:
(i) the TFS Companies are and have been
within the preceding three years in compliance in all material
respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment and
wages and hours, including without limitation any such laws
respecting employment discrimination, workers' compensation,
family and medical leave, the Immigration Reform and Control
Act, and occupational safety and health requirements, and have
not and are not engaged in any unfair labor practice;
(ii) the employees of the TFS Companies
are not, and have not, within the preceding three years, been,
represented by any labor union, and no collective bargaining
agreement is binding and in force against, or currently being
negotiated by, any of the TFS Companies, and to the TFS Compa-
nies' knowledge, no labor representation organization effort
exists nor, to the knowledge of Parent or Seller, has there
been any such activity within the past three years;
(iii) with respect to all Persons
classified by the TFS Companies as independent contractors,
the TFS Companies have fully and accurately reported their
compensation on IRS Forms 1099 when required to do so;
(iv) each of the TFS Companies has
complied with all garnishment orders it has received.
Section 4.8 Brokers.
Except for Goldman, Sachs & Co., whose fees shall be
paid by Seller, there is no investment banker, broker or
finder or other person who would have a valid claim against
Purchaser or any of the TFS Companies for a commission,
brokerage fee or similar payment in connection with this
Agreement or the transactions contemplated hereby.
Section 4.9 Approvals and Consents.
Except for the Restricted Contracts set forth on
Schedule 4.9, the Regulatory Approvals and any consents that
may be required under Contracts which are not Material Con-
tracts, no approval or consent of any Person not a party to
this Agreement is legally or contractually required to be ob-
tained by Parent, Seller or any of the TFS Companies in
connection with the consummation of the transactions
contemplated by this Agreement, including, without
limitation, the transfer of the TFS Stock to Purchaser.
Section 4.10 Trademarks and Other Intellectual Property.
Schedule 4.10 sets forth a true and complete list of
all trademarks, trade names and service marks used or employed
by each TFS Company as of the date hereof in connection with
its business. All of the Intellectual Property which is used
or employed by each TFS Company as of the date hereof in con-
nection with its business is owned free and clear of all Liens
by, or validly licensed to, such TFS Company. Each TFS
Company owns or possesses, and has taken all actions necessary
to record, preserve and protect, adequate and enforceable
long-term licenses or other rights to use without payment all
such Intellectual Property. Except as set forth on Schedule
4.10, no royalties or fees in excess of $100,000 are payable
by any of the TFS Companies to any Person by reason of the TFS
Companies' ownership or use of the Intellectual Property.
Section 4.11 Contracts.
(a) Schedule 4.11 lists or describes all Material
Contracts of every nature to which any TFS Company is a party
or to which it or any of its assets or properties are bound as
of the date hereof.
<PAGE>
<PAGE> 31
(b) Each Material Contract is in full force and ef-
fect and is a valid and binding obligation of the respective
TFS Company, enforceable in accordance with its terms except
as such enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other
similar laws from time to time in effect affecting creditors'
rights generally or by principles governing the availability
of equitable remedies. Each Material Contract has been duly
authorized and validly executed by the respective TFS Company.
Neither any TFS Company nor, to the knowledge of Seller or
TFS, any other party to any Material Contract is in violation
thereof or in default thereunder, and no Material Contract is
currently under negotiation or renegotiation.
Section 4.12 Taxes.
(a) The TFS Companies (i) have accurately prepared
and timely filed or caused to be filed with the appropriate
Tax authority all Tax Returns required to have been filed by
them under applicable law, and (ii) have paid or caused to be
paid all Taxes required to have been paid by them, except for
Taxes that are being contested in good faith. No Tax liens
or assessments (other than notices of deficiency with respect
to Income Taxes) have been filed by any Tax authority against
the TFS Companies or any of their respective properties or
assets.
(b) Parent has filed a consolidated federal income
Tax Return including each of the TFS Companies (excluding
Transamerica Financial Services Limited) for the taxable year
immediately preceding the current taxable year, and Parent is
eligible to make an election under Section 338(h)(10) of the
Code (and any comparable election under state, local or
foreign tax law) with respect to each of the TFS Companies
(excluding Transamerica Financial Services Limited).
Section 4.13 Financial Information.
(a) The TFS Balance Sheet and the Closing Balance
Sheet were prepared from the books and records of TFS and
present fairly in all material respects the financial position
of the Acquired Business as of the date thereof in accordance
with GAAP, except that the allowance for bad debts included in
the Closing Balance Sheet will be $67,638,092 increased or de-
creased as a result of increases or decreases in Loan Receiv-
ables within the categories described in Schedule 4.13 between
March 31, 1997 and the date of the Closing Balance Sheet,
based upon the respective reserve percentages for such
categories set forth in Schedule 4.13.
(b) The supplemental financial information or
schedules set forth on Schedule 4.13, the TFS Tape, the
Closing Tape and the Net Funds Report is, as of the date
thereof, true, accurate and complete.
(c) Except as set forth in Schedule 4.13, between
March 31, 1997 and the date hereof, there has been no Material
Adverse Effect.
Section 4.14 Environmental.
Except as disclosed on Schedule 4.14, as of the date
hereof, no notice, demand, request for information, citation,
claim, action, proceeding, summons or complaint has been re-
ceived by or, to the knowledge of TFS, threatened against any
of the TFS Companies, and no penalty has been assessed or, to
the knowledge of Seller and TFS, threatened against any of the
TFS Companies by any Regulatory Authority with respect to any
(i) alleged violation by any TFS Company of, or liability of
any TFS Company under, any Environmental Law in connection
with the conduct of its business, (ii) alleged failure by any
TFS Company to have any permit, certificate, license or
authorization required under any Environmental Law in
connection with the conduct of its business, or (iii) release,
disposal, transportation or storage of any Hazardous Substance
by any TFS Company at, upon, or under the Real Property.
Except as disclosed in Schedule 4.14, there are no past or
present actions, circumstances, conditions, or events that<PAGE>
<PAGE> 32
could reasonably be expected to result in a notice, demand,
request for information, citation, claim, action, proceeding,
summons, or complaint against any of the TFS Companies with
respect to any violation by any TFS Company of, or liability
of any TFS Company under, any Environmental Law in connection
with the conduct of its business.
Section 4.15 Compliance with Laws.
Except as set forth on Schedule 4.15, the businesses
of TFS Companies, including the origination, servicing, and
collection of all Loans, have not been and are not now being
conducted in violation of any material applicable law, ordi-
nance, regulation or Regulatory Authorization, including,
without limitation, usury laws, the Real Estate Settlement
Procedures Act ("RESPA"), the Consumer Credit Protection Act,
and each of their implementing regulations, and all other
insurance, usury, consumer credit laws and equal credit
opportunity and disclosure laws and laws governing the
collection of amounts owing under consumer obligations,
domestic or foreign. Except as set forth on Schedule 4.15, no
TFS Company has received any notice from any Regulatory
Authority that the business of a TFS Company is being
conducted in violation of any material applicable law,
ordinance, regulation or Regulatory Authorization.
Section 4.16 Non-Competition and Non-Solicitation Agreements.
Except as described on Schedule 4.16, none of the
TFS Companies is subject to any contractual prohibition or
restriction on its ability to own, manage or operate any
business, or solicit any current, former or potential
customers, Borrowers, lessees, or Policy Holders that will be
binding on Purchaser or the TFS Companies after Closing. The
consummation of the transactions contemplated by the Agreement
will not (i) conflict with or violate any non-compete
agreement to which Parent, Seller or any TFS Company is a
party; or (ii) subject any TFS Company or Purchaser to any
restrictions with respect to the solicitation of any person
obligated for payment of any Loan held by any TFS Company or
any person who has transferred or assigned any property
interest to any TFS Company to secure payment of such Loan for
financial services.
Section 4.17 Insurance.
The insurance policies maintained by each TFS
Company on its assets, operations and personnel are of the
kinds, covering such risks and in such amounts and with such
deductibles and exclusions as are consistent with past
business practices of each TFS Company. Except as set forth
in Schedule 4.17, no TFS Company has received any notice of
cancellation or termination with respect to any material
insurance policy.
Section 4.18 Guarantees.
Except as set forth in Schedule 4.18, no TFS Company
is directly or indirectly (a) liable, by guarantee or other-
wise, upon or with respect to, (b) obligated by discount or
repurchase agreement or in any other way to provide funds with
respect to, or (c) obligated to guarantee or assume, any debt,
dividend or other obligation of any Person, except
endorsements made in the ordinary course of business in
connection with the deposit of items for collection.
Section 4.19 No Illegal or Improper Transactions.
Neither Parent, Seller, nor any TFS Company has, nor
has any director, officer or employee of any TFS Company, di-
rectly or indirectly, used funds or other assets of any TFS
Company, or made any promise or undertaking in such regard,
for (a) illegal contributions, gifts, entertainment or other
expenses relating to political activity; (b) illegal payments
to or for the benefit of governmental officials or employees,
whether domestic or foreign; (c) illegal payments to or for
the benefit of any Person, or any director, officer, employee,
agent or representative thereof; or (d) the establishment or<PAGE>
<PAGE> 33
maintenance of a secret or unrecorded fund. There have been
no intentionally false or intentionally fictitious entries
made in the books or records of any TFS Company.
B. REPRESENTATIONS AND WARRANTIES REGARDING PORTFOLIO OF
LOANS
Section 4.20 Characteristics of Loan Portfolio.
(a) The total yield (defined as annualized total
revenues for the Acquired Business for the quarterly period
ended March 31, 1997 divided by the average net finance
receivables for such period) for all Loan Receivables as
reflected on the TFS Balance Sheet was not less than 14.8%.
Of the Loan Receivables reflected on the TFS Balance Sheet,
at least 90% of such Loan Receivables are represented by
Mortgage Loans.
(b) All Loans that are secured by Mortgages on com-
mercial properties were made in the ordinary course of
business by the TFS Companies in accordance with the TFS
Policies.
(c) No TFS Company has between March 31, 1997 and
the date hereof:
(i) introduced any new product;
(ii) made any change in the TFS Policies
relating to underwriting standards or pricing of Loans;
or
(iii) acquired any Loans in wholesale, bulk
or flow purchases; or
(iv) carried on its business outside the
ordinary course of business except for actions related to the
sale of the TFS Companies or as otherwise contemplated in this
Agreement.
C. REPRESENTATIONS AND WARRANTIES AS TO THE INSURANCE
BUSINESS
Section 4.21 Qualification.
(a) Attached hereto as Schedule 4.21 is a list of
each TFS Company that is involved in any insurance-related
business (collectively, the "Insurance Companies") and a list
of all licenses and permits held by the Insurance Companies
issued by any state or foreign insurance authority and a de-
scription of the classes and lines of insurance each Insurance
Company is authorized to write in each jurisdiction. Except
as set forth in Schedule 4.21, each Insurance Company's
authority to write the classes and lines of insurance
reflected on Schedule 4.21 is unrestricted and no Insurance
Company is a party to any agreement, formal or informal, with
any state insurance regulatory official limiting the ability
of any Insurance Company to make full use of the licenses or
permits which have been issued to it or requiring any
Insurance Company to comply with regulatory standards,
procedures or requirements different from those applicable to
companies with licenses or permits similar to those issued to
any Insurance Company. The licenses and permits listed on
Schedule 4.21 constitute all licenses and permits material to
the conduct of the Insurance Companies' businesses, as they
are now conducted, and Seller or Parent has received no notice
that any such license or permit will not, in the ordinary
course, be renewed upon its expiration.
(b) Schedule 4.21 contains a complete and accurate
list of all domestic and foreign jurisdictions in which each
Insurance Company currently has applications for licenses,
permits or certificates of authority pending and the status of
all such applications.
<PAGE>
<PAGE> 34
(c) Each Insurance Company belongs to all required
rating bureaus, service organizations, insolvency funds, as-
signed risk pools and similar organizations necessary to con-
duct the business as it is now being conducted.
Section 4.22 Statutory Statements.
Seller previously made available to Purchaser a com-
plete copy of the annual statements of each Insurance Company
for the three most recent years as filed with the department
of insurance of the respective state of domicile of such
company, complete copies of the quarterly statements of each
Insurance Company dated March 31, 1997 as filed with the
department of insurance of the respective state of domicile of
such company, and will deliver as soon as they are filed such
interim financial statements that may be required to be filed
with any state departments of insurance prior to the Closing
Date (collectively, the "Statutory Statements"). Except for
the investments (the "Trenton National Investments") and the
asset (the "Trenton National Asset") which are the subject of
the Trenton National Litigation on the books of Arcadia
General Insurance Company, the Statutory Statements have been
or will be prepared in accordance with the statutory ac-
counting principles and applicable actuarial standards of
practice consistently applied in accordance with the rules of
the National Association of Insurance Commissioners and the
respective states of domicile of such Insurance Company
("Statutory Accounting Principles"). Except for the Trenton
National Investments and the Trenton National Asset, the
Statutory Statements present (and such statements to be
delivered hereafter will present) fairly in all material
respects, in accordance with Statutory Accounting Principles,
the financial position of each Insurance Company presented as
of the dates indicated and the results of its operations for
the periods therein specified.
Section 4.23 Investments/Defaults.
(a) Seller has previously delivered to Purchaser a
complete list of all investments owned, directly or
indirectly, by each Insurance Company as of March 31, 1997.
Except as set forth on Schedule 4.23, no Insurance Company has
received notice of (i) any payment defaults with respect to
any investment or (ii) any other notice of nonperformance of
any investment. Schedule 4.23 also contains a list of all
bankruptcies, nonperforming assets, foreclosures and payment
defaults known to any Insurance Company or Seller with respect
to the investments as of March 31, 1997. Except as disclosed
on Schedule 4.23 and except for the Trenton National Asset,
all of the investments constitute admitted assets on the
Statutory Statements and their carrying values have been
described in conformity with Statutory Accounting Principles
and in accordance with values prescribed by the National
Association of Insurance Commissioners, when appropriate,
consistent with the prior reporting practices of the Insurance
Companies.
(b) No Insurance Company has committed any act or
omitted to take any act which would make any of the
investments not enforceable against the issuer thereof or the
parties thereto in accordance with their terms, except that
(i) such enforcement may be subject to bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally or
the rights of creditors of insurance companies generally and
(ii) the remedy of specific performance and injunctive and
other forms of relief may be subject to equitable defenses and
to the discretion of the court before which any proceeding
therefor may be brought.
(c) Except as set forth on Schedule 4.23, since
March 31, 1997, no Insurance Company has (i) purchased or oth-
erwise invested in or committed to purchase or otherwise
invest in any interest in real property (including, any exten-
sion of credit secured by a mortgage or deed of trust), (ii)
purchased or otherwise invested in or committed to purchase or
otherwise invest in securities which are below investment
grade at the time of purchase, (iii) entered into any<PAGE>
<PAGE> 35
agreement or commitment with respect to the purchase or other
acquisition, sale or other disposition or allocation of any
investment with any Affiliate or other entity in which an
Affiliate owns an equity interest of more than 25% or (iv)
entered into any agreement or commitment with respect to any
foreign investments.
Section 4.24 Reserves.
Except for the Trenton National Investments and the
Trenton National Asset, reserves required under Statutory Ac-
counting Principles reflected in the Statutory Statements and
the reserves required under GAAP with respect to the Insurance
Companies reflected in the Closing Date Balance Sheet were, or
will be, computed in accordance with accepted actuarial stan-
dards as prescribed by the American Academy of Actuaries, are
or will be fairly stated in accordance with sound actuarial
principles in all material respects, and were, or will be,
computed in a manner consistent with the computation of such
items in the preceding corresponding period.
Section 4.25 Reinsurance Treaties.
Schedule 4.25 lists all of the reinsurance
agreements or treaties of each Insurance Company. Each Insur-
ance Company has provided to Purchaser copies of same which
are true, accurate and complete, including all amendments or
modifications thereto. All such reinsurance agreements are in
full force and effect, enforceable in accordance with their
terms, and, except as set forth in Schedule 4.25, neither any
Insurance Company, nor any other party to same is in default
or alleged to be in default under the terms thereof, and there
exists no condition which, after notice or lapse of time or
both, would constitute a default thereunder. Except as pro-
vided for in the Statutory Statements as of and for the year
ended December 31, 1996, or as disclosed in Schedule 4.25
hereto, all reinsurance represented by the reinsurance agree-
ments and treaties represents an admitted asset or reduction
of loss reserves of the Insurance Companies in the Statutory
Statements and their carrying values have been described in
conformity with Statutory Accounting Principles and in accor-
dance with values prescribed by the National Association of
Insurance Commissioners, when appropriate, consistent with the
prior reporting practices of the Insurance Companies. Except
as set forth on Schedule 4.25, no consent from any assuming
reinsurer under any of the reinsurance treaties is required in
order for Seller to effectuate the transactions contemplated
under the Agreement. The consummation of the transactions
contemplated by this Agreement will not affect the rights of
any Insurance Company under the reinsurance treaties and
specifically (i) no reinsurance treaties will be terminable
nor will any commutation or recapture thereunder be required
as a result thereof and (ii) such consummation will not
adversely affect the recapture rights of any Insurance Company
under such reinsurance treaties.
Section 4.26 Certain Business Practices.
Except as set forth on Schedule 4.26:
(a) All insurance or annuity benefits that have be-
come payable and not subject to a bona fide dispute by any In-
surance Company, and are not in the course of settlement in
good faith by such person, have been paid, or provided for, in
accordance with the terms of the insurance, annuity or other
similar contract or agreement under which they arose;
(b) No outstanding insurance policy or annuity con-
tract issued, reinsured or underwritten by any Insurance Com-
pany entitles any person to receive dividends, distributions
or other benefits based on the revenues or earnings of the
contract issuer;
(c) All premiums accrued through the date of this
Agreement have been paid and are not refundable to the
Borrower upon prepayment of the Loan or otherwise.
<PAGE>
<PAGE> 36
Section 4.27 Limitation on Representations and Warranties.
Except as otherwise set forth herein, Seller and TFS
make no representations or warranties as to the businesses of
the TFS Companies, including the credit characteristics of the
Loans, the physical condition of the Real Property (including
the Branches) or the Personal Property or the usefulness or
quality of the Intellectual Property, all of which are being
indirectly transferred to Purchaser by virtue of the transfer
of the TFS Stock "AS IS", "WHERE IS" and with all defects at
the Closing Date. Without limiting the generality of the
foregoing, neither Seller nor TFS makes any representation or
warranty to Purchaser with respect to (a) any projections,
estimates or budgets heretofore delivered to or made available
to Purchaser of future revenues, expenses or expenditures,
future results of operations (or any component thereof),
future cash flows or future financial condition (or any
component thereof) of the TFS Companies; or (b) any other
information or documents made available to Purchaser or its
counsel, accountants or advisors with respect to the TFS
Companies or the business or operations of the TFS Companies,
except as expressly covered by a representation and warranty
contained in Sections 4.1 through 4.26.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND HOUSEHOLD INTERNATIONAL
Purchaser and Household International jointly and
severally hereby represent and warrant to each of Parent,
Seller and TFS as of the date hereof and on the Closing Date
as follows:
Section 5.1 Corporate Status.
Each of Purchaser and Household International is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and Purchaser
and Household International will, on the Closing Date, be duly
qualified to do business, and be in good standing as a foreign
corporation, in all jurisdictions in which the nature of the
business conducted by it or the character or location of its
properties or assets makes such qualification necessary. Each
of Purchaser and Household International has the requisite
corporate power and authority to own or lease all of its
properties and assets and to conduct its business as it is now
being conducted.
Section 5.2 Corporate Authority.
Each of Purchaser and Household International has
the corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated
hereby. All corporate actions and proceedings necessary to be
taken on the part of Purchaser or Household International in
connection with this Agreement and the transactions contem-
plated hereby have been duly and validly taken. This
Agreement has been duly and validly executed and delivered by
Purchaser and Household International and constitutes the
legal, valid and binding obligation of Purchaser and Household
International, enforceable against Purchaser and Household
International in accordance with and subject to its terms, ex-
cept as such enforceability may be limited by applicable bank-
ruptcy, reorganization, insolvency, moratorium or other
similar laws from time to time in effect affecting creditors'
rights generally or by principles governing the availability
of equitable remedies.
Section 5.3 Non-Contravention.
Neither the execution and delivery by Purchaser and
Household International of this Agreement nor the consummation
by Purchaser and Household International of the transactions
contemplated hereby is an event that, of itself or with the
giving of notice or the passage of time or both, will (a) con-
flict with the certificate of incorporation or by-laws (or<PAGE>
<PAGE> 37
similar governing instruments with different names) of
Purchaser or Household International, (b) assuming that the
consents and approvals described in Schedule 5.8 are obtained,
constitute a violation of, or conflict with or result in any
breach of or any default under, or constitute grounds for
termination or acceleration of, any material mortgage,
indenture, lease, contract, agreement or instrument to which
Purchaser or Household International is a party or by which
Purchaser or Household International is bound, or result in
the creation of any Liens upon any assets of Purchaser or
Household International, or (c) assuming receipt of the
consents and approvals described in Schedule 5.8, violate any
judgment, decree or order or statute, rule or regulation
applicable to Purchaser or Household International.
Section 5.4 Brokers.
Except for Morgan Stanley & Co. Incorporated, whose
fee shall be paid by Purchaser, there is no investment banker,
broker or finder or other Person who would have a valid claim
against Purchaser or Household International for a commission
or brokerage fee in connection with this Agreement or the
transactions contemplated hereby.
Section 5.5 Qualification as a Licensee.
Purchaser is familiar with the existing rules, regu-
lations and policies pertaining to the conduct of a consumer
finance business and insurance related thereto, having con-
sulted with counsel knowledgeable as to such matters. Pur-
chaser hereby affirms that it possesses legal and financial
qualifications consistent with such requirements to be a lic-
ensee, or control a licensee, in each of the various states
and other jurisdictions in which Purchaser plans for the TFS
Companies to originate additional consumer loans or insurance
policies or in which the TFS Companies hold and service the
Loans and the Insurance Policies. Purchaser knows of no fact
that would, under the existing rules, regulations and policies
of such states or other jurisdictions, (a) disqualify the TFS
Companies other than the Arcadia Companies (by virtue of Pur-
chaser's ownership after the Closing Date) as owner and ser-
vicer of the Loans or as an originator of consumer loans or
(b) disqualify the Arcadia Companies as owner and service of
the Insurance Policies or as an insurer under insurance
policies.
Section 5.6 Litigation.
There is no litigation, proceeding or investigation
of any nature pending or, to the Purchaser's knowledge,
threatened against or affecting Purchaser or any of its
subsidiaries.
Section 5.7 Funds.
On the Closing Date, Purchaser will have the funds
necessary to pay the Purchase Price and consummate its other
obligations under this Agreement.
Section 5.8 Approvals and Consents.
Except as set forth on Schedule 5.8, no approval or
consent of any Person is legally or contractually required to
be obtained by Purchaser or Household International in connec-
tion with the transactions contemplated by this Agreement and,
except as set forth on Schedule 5.8, Purchaser is not required
to obtain any license from any Regulatory Authority in connec-
tion with the consummation of the transactions contemplated by
this Agreement.
Section 5.9 Investment Representation.
Purchaser represents that it is acquiring the TFS
Stock for its own account for investment and not with a view
to the distribution thereof, except with respect to any sale
or distribution for which an exemption from registration under
the Securities Act of 1933, as amended, is or hereafter
becomes available.
<PAGE>
<PAGE> 38
Section 5.10 Purchaser's or Household International's Quali-
fied Plans.
Purchaser or Household International has received
favorable determination letters from the IRS covering the
Purchaser's or Household International's Retirement Income
Plan ("Purchaser's Retirement Income Plan") and Purchaser's or
Household International's Tax Reduction Investment Plan
("Purchaser's Tax Reduction Investment Plan") under Code
Section 401(a), and, to the knowledge of Purchaser and
Household International (including persons directly
responsible for employee benefit matters), nothing has
occurred with respect to such plans and their trusts that
could cause loss of such qualification.
ARTICLE VI
COVENANTS OF PARENT, SELLER AND TFS PENDING THE CLOSING
Each of Seller, Parent and TFS (on behalf of itself
and all of the TFS Subsidiaries) covenants and agrees that
from the date hereof until the completion of the Closing:
Section 6.1 Excluded Assets and Excluded Liabilities.
(a) Seller and TFS shall use reasonable efforts to
ensure that no Excluded Asset or Excluded Liability is
acquired or assumed by Purchaser as a result of the sale of
the TFS Stock which is contemplated hereby. In order to
accomplish this result, Seller and/or TFS may, among other
things, transfer the Excluded Assets and the Excluded
Liabilities to a corporation which is neither a direct nor an
indirect subsidiary of TFS at the Closing Date and change the
corporate name of any of the TFS Companies.
(b) The following assets of the TFS Companies con-
stitute the "Excluded Assets."
(i) The stock and all assets of the
Transferred Subsidiaries;
(ii) The Excluded Loans and the servicing
rights relating thereto and each TFS Company's right, title
and interest in the promissory notes, security instruments,
guarantees, mortgages, deeds of trust, liens and claims
relating to the Excluded Loans;
(iii) The Excluded Real Property;
(iv) The Excluded Personal Property;
(v) The assets and other items set forth
in the column under the heading "Total Retained" in the TFS
Balance Sheet;
(vi) Any and all claims for indemnity
under the ITT Agreement or any Purchase Agreement, and the
rights to receive payment therefor, relating to Excluded
Loans, and the claims pending for (A) the difference in
unearned "points" relating to 14,132 interest-bearing accounts
and (B) the stream of payment accounts, as set forth in the
letter dated June 14, 1995 from R.I. Reich to ITT Corporation;
(vii) all claims under, and rights to
recovery with respect to, the Trenton National Litigation and
the Borg-Warner Litigation.
(c) For Purposes of this Agreement, the following
shall constitute the "Excluded Liabilities":
(i) All obligations and liabilities of
any TFS Company, including litigation, to the extent (and only
to the extent) arising with respect to an Excluded Asset;
(ii) The Intercompany Debt, all Third
Party Debt and all Intercompany Contracts;
<PAGE>
<PAGE> 39
(iii) All obligations and liabilities of
any TFS Company under any lease with respect to the TFS
Headquarters, the Derby Branch, the DP Center, the Resolution
Center or the Loss Recovery Center with respect to periods
from and after the Closing Date, except as provided in the
Services Support Agreement;
(iv) All financial or performance
obligations and liabilities under the Nova Agreement and the
Purchase Agreements listed on Part A of Schedule 6.1 (the
"Purchase Agreements") and all financial obligations and
liabilities under the ITT Agreement (it being understood that
the nonfinancial performance obligations under the ITT
Agreement are not Excluded Liabilities);
(v) All liabilities with respect to the
Trenton National Litigation and the Borg-Warner Litigation;
(vi) All liabilities or obligations under
the Servicing Agreement except as set forth in the Support
Services Agreement;
(vii) Except as expressly assumed in
Article IX, all liabilities for employee benefits for present
or former employees of the TFS Companies (including retiree
welfare benefits to be provided before or after Closing),
whether or not reflected on the TFS Balance Sheet; and
(viii) All liabilities with respect to the
Transferred Subsidiaries; and
(ix) All liabilities with respect to the
Excluded Contracts.
Section 6.2 Operation of the Business.
(a) Except to the extent that Purchaser shall
otherwise consent in writing and except as contemplated by
this Agreement, each TFS Company will between the date hereof
and Closing:
(i) Continue to carry on its business in
the ordinary course in compliance in all respects with all ap-
plicable laws, rules, regulations, and Regulatory Authoriza-
tions including usury laws, RESPA, the Consumer Credit Protec-
tion Act, and each of their implementing regulations, and all
other insurance, usury, consumer credit laws and equal credit
opportunity and disclosure laws and laws governing the col-
lection of amounts owing under consumer obligations; and
(ii) Use best efforts to preserve its
respective business organization and goodwill intact, preserve
and maintain its licenses, keep available the services of its
current officers and key employees, and maintain satisfactory
relationships with licensors, licensees, suppliers,
contractors, distributors, customers and others having
significant relations with the TFS Companies.
(b) Parent, Seller and TFS agree that, between the
date hereof and Closing, except (1) as expressly authorized
under this Agreement, (2) with respect to any Excluded Assets
or any Excluded Liabilities or (3) as otherwise consented to
by Purchaser in writing, no TFS Company will:
(i) Amend in any material respect any
Material Contract (other than insurance Contracts in the
ordinary course of business consistent with past practice) or
enter into any Material Contract (other than insurance
Contracts in the ordinary course of business consistent with
past practice) which is not cancelable on 30 days notice
without penalty;
(ii) Other than in the ordinary course or
to protect the Acquired Business, enter into or amend or
cancel or agree to the amendment or cancellation of any
insurance Contract (excluding those relating to Loans,
collateral or borrowers);
<PAGE>
<PAGE> 40
(iii) Take any action to amend or terminate
any TFS Plan or TFS Benefit Arrangement or adopt any other
plan, program, Contract or practice providing benefits for or
compensation to or on behalf of employees or former employees
of any TFS Company, or permit any Affiliate of TFS to take any
such action if such action could subject any TFS Company to an
obligation or liability in excess of $20,000.00 with respect
to an individual employee or former employee or $500,000.00 in
the aggregate;
(iv) Change any provision of its articles
of incorporation or by-laws or similar governing documents;
(v) Directly or indirectly redeem,
purchase or otherwise acquire, any shares of its outstanding
capital stock, change the number of shares of its authorized
or issued capital stock, permit any shares of its capital
stock held in treasury to become outstanding, or issue any
capital stock or issue or grant any option, warrant, call,
commitment, subscription, right to purchase or contract of any
character relating to its authorized or issued capital stock
or any securities convertible into, relating to or based on
shares of such stock;
(vi) Except in the ordinary course of
business, make any loans or advances (other than Loans or
Excluded Loans) to any other Person;
(vii) Purchase, sell or distribute any Real
Property or Personal Property or purchase or sell any options
to purchase or sell any Real Property or Personal Property,
with a market value in excess of $1,000,000.00 in the
aggregate;
(viii) Permit any insurance policy
(excluding those relating to Loans, collateral or borrowers)
naming it as a beneficiary or a loss payable payee to be
canceled or terminated or any of the coverage thereunder to
lapse unless (1) simultaneously with such termination or
cancellation substantially similar replacement policies
reasonably satisfactory to Purchaser are in full force and
effect, (2) the cost of renewal is commercially unreasonable
or (3) such coverage is not commercially reasonably available;
(ix) Extend, issue or offer pre-approved
credit, teaser rates or live checks or knowingly acquire any
loans from brokers;
(x) Amend any TFS Policy that is material
to the operation of the Acquired Business as in effect on
March 31, 1997 including any change in underwriting, invest-
ment, actuarial, financial reporting, tax, reserve or account-
ing methods or practices;
(xi) Make or agree to make any material
charitable contribution or incur any material nonbusiness
expense in the aggregate in excess of $100,000;
(xii) Communicate in writing with any
Borrower regarding the transactions contemplated by this
Agreement without the prior written consent of Purchaser;
(xiii) Sell or otherwise transfer to any
third party any list of Borrowers, Past Borrowers, Policy
Holders or prospects;
(xiv) Amend or cancel or agree to amend or
cancel any reinsurance agreement, treaty or arrangement; or
(xv) Enter into a Contract to do any of
the things described in clauses (i) through (xiv) above.
(c) Parent, Seller and TFS agree that except as ex-
pressly authorized under this Agreement or as otherwise con-
sented to in writing by Purchaser, no TFS Company will between
the date hereof and the Closing:
<PAGE>
<PAGE> 41
(i) introduce any new product;
(ii) make any change in the TFS Policies
relating to underwriting standards or
pricing of Loans; or
(iii) acquire any Loans in wholesale, bulk
or flow purchases.
Section 6.3 Access to Facilities, Files and Records.
Upon the reasonable request of Purchaser, each TFS
Company will give or cause to be given to the officers,
employees, accountants, counsel and authorized representatives
of Purchaser (a) full access during normal business hours to
all Branches, management personnel, property, Loan Files,
Insurance Policy Files, Contracts, and other records and files
of the TFS Company, except for any of the foregoing relating
to the Excluded Assets or Excluded Liabilities, and (b) all
such other information solely relating to the transactions
contemplated by this Agreement as Purchaser may reasonably
request; provided, however, that the TFS Companies shall not
be required to permit such access or provide such information
to the extent they determine in good faith that such access or
the disclosure of such information would unreasonably
interfere with the respective businesses of the TFS Companies.
Notwithstanding the foregoing, Purchaser shall not have access
to information where such access or disclosure of such
information would, in the good faith determination of Seller,
violate or prejudice the rights of the Borrowers, jeopardize
attorney-client privilege of the TFS Company in possession or
control of such information or contravene any law, rule,
regulation, order, judgment, decree or binding agreement
entered into by Seller or any TFS Company.
Section 6.4 Consents.
(a) To the extent that the consent or approval of
any third person is required under any Restricted Contract by
reason of the transactions provided for in this Agreement, the
TFS Companies will use reasonable efforts to obtain such con-
sents and approvals (which shall not require Seller or any TFS
Company to pay any money or other consideration to any person
or to initiate any claim or proceeding against any person).
If any such consent or approval is not obtained, the TFS
Companies will use reasonable efforts (not involving the
expenditure of money by Seller or the TFS Companies) to secure
an arrangement reasonably satisfactory to Purchaser to provide
the applicable TFS Companies with the benefits under such
Restricted Contract following the Closing. Seller shall
promptly notify Purchaser if a party to any Restricted
Contract notifies any TFS Company in writing of its intention
to withhold its required consent or approval or to condition
its required consent or approval on Purchaser's acceptance of
less favorable terms under the Restricted Contract. Purchaser
shall cooperate with Seller and the TFS Companies in obtaining
all consents and approvals required under the Restricted
Contracts.
(b) To the extent that the consent or approval of
any landlord under a Branch lease is required by reason of the
transactions provided for in this Agreement, the TFS Companies
shall use reasonable efforts to obtain from the landlord under
such lease a landlord consent with respect to such
transactions ("Landlord Consent").
Section 6.5 Notice of Proceedings.
Parent, Seller and TFS will promptly notify
Purchaser in writing upon (a) becoming awareof any order or
decree or any complaint praying for an order or decree
restraining or enjoining the execution of this Agreement or
the consummation of the transactions contemplated hereunder,
or (b) receiving any notice from any court or any Regulatory
Authority of its intention (i) to institute a suit or
proceeding to restrain or enjoin the execution of this
Agreement or the consummation of the transactions contemplated
hereunder, or (ii) to nullify or render ineffective this
Agreement if executed or such transactions if consummated.<PAGE>
<PAGE> 42
Section 6.6 Hart-Scott-Rodino Filing.
As promptly as practicable after the date of this
Agreement (but in no event later than five (5) days (or the
first Business Day thereafter if such fifth day is not a Busi-
ness Day) after the date hereof), Parent, Seller, and the TFS
Companies shall prepare and file all documents with the
Federal Trade Commission and the United States Department of
Justice as are required to comply with the HSR Act, and
Parent, Seller and the TFS Companies will furnish promptly all
materials thereafter requested by any of the Regulatory
Authorities having jurisdiction over such filings. Parent,
Seller and the TFS Companies shall use all reasonable efforts
to cause the waiting period under the HSR Act to be terminated
or expire at the earliest practicable date.
Section 6.7 Application for Regulatory Consent and Licenses.
To the extent that (i) Parent or Seller requires any
Regulatory Approval to consummate the transactions
contemplated hereby, or (ii) Parent, Seller or any Insurance
Company requires any Regulatory Approval with respect to the
Insurance Companies, Seller shall, as promptly as practicable
after the date hereof and in no event later than fifteen (15)
calendar days after the date hereof, file, or arrange with
Purchaser to file, all applications required for such
Regulatory Approvals (as listed on Schedule 6.7), and will use
reasonable best efforts to prosecute such applications to a
favorable conclusion. In addition, Parent and Seller will
diligently cooperate with Purchaser with respect to
Purchaser's actions to obtain the Regulatory Approvals
pursuant to Section 7.1, including by taking all steps that
are reasonably necessary, proper or desirable to assist in the
preparation and filing of all applications for Regulatory
Approvals pursuant to Section 7.1 and their prosecution to a
favorable conclusion; provided, that neither Parent nor Seller
will be required to make any payment or enter into any
arrangement in connection therewith without its consent (other
than customary undertakings and filing or application fees).
Section 6.8 No Shop.
(a) Upon and after execution of this Agreement, and
until this Agreement has been terminated in accordance with
its terms, neither Parent nor Seller will, directly or
indirectly, solicit, or cause any other Person to solicit, any
offer to acquire the Acquired Business, in whole or in part,
of the TFS Companies (whether by merger, purchase of assets or
other similar transaction) other than the acquisition
contemplated by this Agreement. Except as contemplated by
this Agreement, neither Parent nor Seller will, directly or
indirectly, furnish any information concerning the Acquired
Business to any Person which is seeking to acquire the
Acquired Business, in whole or in part, unless and until this
Agreement has been terminated in accordance with its terms.
(b) If Parent, Seller, or any TFS Company receives
any unsolicited inquiry or proposal concerning the
availability of the Acquired Business or any TFS Company for
purchase, Seller agrees to promptly inform Purchaser of the
substance of such inquiry or proposal including the identity
of the Person making such inquiry or proposal.
Section 6.9 Financial Statements.
Immediately after execution of this Agreement,
Parent and Seller shall engage Ernst & Young LLP to prepare
(i) an audited consolidated balance sheet and the related
statements of income, changes in stockholders' equity and cash
flows of the Acquired Business together with all schedules and
notes thereto (collectively, the "Audited Financial
Statements") for the calendar year ended December 31, 1996 and
(ii) the separate company Tax Returns and related workpapers
for the period ended June 30, 1997. Parent and Seller shall
also prepare an unaudited consolidated balance sheet and the
related statements of income, changes in stockholders' equity
and cash flows of the Acquired Business together with all
<PAGE>
<PAGE> 43
adjustments (consisting of normal recurring accruals) consid-
ered necessary for the three-month periods ended March 31,
1997 and March 31, 1996, and (if the Closing occurs after June
30, 1997) the six-month periods ended June 30, 1997 and June
30, 1996 (the "Unaudited Financial Statements" which with the
Audited Financial Statements are referred to herein as the
"Financial Statements"). The Financial Statements and Tax
Returns shall be prepared from the books and records of the
Acquired Business at the sole cost and expense of Purchaser in
the case of Financial Statements and of Seller in the case of
Tax Returns and related workpapers. The Financial Statements
shall be delivered to Purchaser as promptly as practicable but
no later than sixty (60) days after Closing.
Section 6.10 Affiliate Receivables and Intercompany Contracts.
(a) At or prior to the Closing, Parent and Seller
shall cause all Affiliate Receivables to be eliminated.
(b) Except for the Support Services Agreement, Par-
ent and Seller shall cause all Intercompany Contracts to be
terminated as of or prior to the Closing.
Section 6.11 Intercompany and Third Party Debt.
At or prior to the Closing, Seller and Parent shall
cause (a) all Intercompany Debt, including accrued interest,
to be contributed to the capital of the applicable TFS
Company; and (b) all Third Party Debt to be extinguished or
otherwise satisfied such that, following the Closing, no
Intercompany Debt or Third Party Debt will remain outstanding
as a liability of any TFS Company.
Section 6.12 Insurance Certificates and Worker's Compensation.
(a) Prior to the Closing, Seller shall cause the
employees of the TFS Companies to return to Seller and shall
instruct such employees not to issue, all pre-signed certifi-
cates of insurance that have not been issued prior to the
Closing Date.
(b) Seller shall, or shall cause its appropriate
Affiliate to, use reasonable efforts to notify the appropriate
regulatory agencies of the transactions contemplated by this
Agreement within a sufficient period of time prior to the
Closing Date so that any certificates of self-insurance for
workers' compensation issued to Transamerica Corporation, to
the extent that they relate to the TFS Companies, shall be
canceled as of the Closing Date.
Section 6.13 Accounts and Powers of Attorney.
Prior to Closing, Parent shall provide Purchaser
with a complete and correct description of all banking, safe
deposit box and lock-box arrangements maintained at such time
by any TFS Company, all powers of attorney in connection with
such arrangements, and the names of all persons authorized to
draw thereon or to have access thereto. Except as disclosed
to Purchaser in writing prior to Closing, no TFS Company will
enter into any power of attorney that will survive the
Closing.
Section 6.14 Other Confidentiality Agreements.
Promptly following the date hereof, Parent shall re-
quest each party to a confidentiality agreement in connection
with the exploration of an acqusition of TFS (collectively,
the "Other Confidentiality Agreements") to (i) return to
Parent all materials and documents received from Parent,
Seller, TFS or any TFS Company in connection with such
exploration or (ii) destroy such materials and documents and
certify such destruction to Parent in writing. From and after
the Closing, Parent shall, upon the request and at the sole
cost of Household International, use its reasonable efforts to
enforce any covenants relating to confidentiality and
nonsolicitation contained in any Other Confidentiality
Agreement; provided, that Household International shall
indemnify and hold harmless Parent and Seller from any
liability associated with the enforcement of such covenants.<PAGE>
<PAGE> 44
ARTICLE VII
COVENANTS OF PURCHASER PENDING THE CLOSING
Purchaser covenants and agrees that from the date
hereof until the completion of the Closing:
Section 7.1 Application for Regulatory Consent and Licenses.
To the extent that Purchaser, Household
International or any TFS Company (as a result of Purchaser's
acquisition of control of such TFS Company pursuant to this
Agreement) requires any Regulatory Approval to consummate the
transactions contemplated hereby other than with respect to
the Insurance Companies, Purchaser shall, as promptly as
practicable after the date hereof, and in no event later than
fifteen (15) calendar days after the date hereof, file all
applications required for such Regulatory Approvals (as listed
on Schedule 7.1) and will use reasonable best efforts to
prosecute such applications to favorable conclusion. In
addition, Purchaser will diligently cooperate with Parent and
Seller with respect to the actions of Parent and Seller to
obtain the Regulatory Approvals pursuant to Section 6.7,
including by taking all steps that are reasonably necessary,
proper or desirable to assist in the preparation and filing of
the regulatory and license applications and requests for
consent and their prosecution to a favorable conclusion;
provided that Purchaser or Household International will not be
required to make any payment or enter into any agreement in
connection therewith without its consent (other than customary
undertakings and filing or application fees).
Section 7.2 Notice of Proceedings.
Purchaser will promptly notify Seller in writing
upon (a) becoming aware of any order or decree or any
complaint praying for an order or decree restraining or
enjoining the execution of this Agreement or the consummation
of the transactions contemplated hereunder, or (b) receiving
any notice from any court or Regulatory Authority or any
Person of its intention (i) to institute an investigation
into, or institute a suit or proceeding to restrain or enjoin,
the execution of this Agreement or the consummation of the
transactions contemplated hereby, or (ii) to nullify or render
ineffective this Agreement if executed or such transactions if
consummated.
Section 7.3 Hart-Scott-Rodino Filing.
As promptly as practicable after the date of this
Agreement (but in no event later than five (5) days (or the
first Business Day thereafter if such fifth day is not a Busi-
ness Day) after the date hereof), Purchaser shall prepare and
file all documents with the Federal Trade Commission and the
United States Department of Justice as are required to comply
with the HSR Act and shall promptly furnish all materials
thereafter requested by any of the Regulatory Authorities hav-
ing jurisdiction over such filings. Purchaser shall use all
reasonable efforts to cause the waiting period under the HSR
Act to be terminated or expire at the earliest practicable
date and to satisfy any objection to the transactions
contemplated by this Agreement on the part of any Regulatory
Authority.
Section 7.4 Financial Information.
Purchaser shall provide such publicly available fi-
nancial and other information as shall be reasonably requested
by the counterparty or counterparties to any Restricted Con-
tract and the landlords under the Branch leases in connection
with seeking any Landlord Consent as provided for in Section
6.4.
<PAGE>
<PAGE> 45
Section 7.5 Non-Solicitation of Borrowers and Policy Holders.
On or before the Closing Date, Purchaser and its Af-
filiates shall not attempt to directly or indirectly solicit
any Borrowers or Policy Holders, or transact their respective
businesses in such a way that would (a) induce a Borrower to
repay Borrower's Loan and enter into a loan transaction with
Purchaser or any of its Affiliates, or otherwise take any ac-
tion that would result in the transfer of a Loan from any TFS
Company to Purchaser or any of its Affiliates or (b) induce a
Policy Holder to cancel an Insurance Policy and enter into an
insurance contract with Purchaser or any of its Affiliates, or
otherwise take any action that would result in the transfer of
an Insurance Policy from an Arcadia Company to Purchaser or
any of its Affiliates. Notwithstanding the foregoing
sentence, Purchaser and its Affiliates shall be permitted to
(x) engage in advertising, solicitations and marketing
campaigns, programs and other efforts in its ordinary course
of business not primarily directed or targeted at Borrowers or
Policy Holders, including the solicitation of Borrowers and
Policy Holders from lists independently generated or purchased
by Purchaser or its Affiliates, (y) respond to unsolicited
inquiries by Borrowers, and (z) provide notices and
communications relating to the transactions contemplated
hereby in accordance with the provisions hereof.
ARTICLE VIII
POST-CLOSING COVENANTS
Section 8.1 Cooperation; Record Retention.
Except as set forth on Schedule 8.1, no TFS Company
is required by court or regulatory order to retain any records
for any period of time measured by the pendency of a
proceeding or investigation. Purchaser agrees to retain and
preserve in good condition, pursuant to Purchaser's normal
record retention policy, all records of the TFS Companies in
existence as of the Closing Date. Purchaser agrees that
Seller and/or its independent auditors shall have reasonable
access to the books and records of the TFS Companies and their
predecessors and have the assistance and cooperation of the
appropriate personnel of the TFS Companies or their successors
in the review of such books and records consistent with the
assistance and cooperation furnished during the period the TFS
Companies or their predecessors were directly or indirectly
owned by Seller. Purchaser shall provide Seller with such
information requested by Seller, and otherwise cooperate with
Seller as reasonably requested, with respect to matters
relating to the business operations of the TFS Companies or
the status of the Loans prior to the Closing Date, including,
without limitation, to enable Seller or Parent to conduct any
litigation or defend any claim for which Seller or Parent has
agreed to provide indemnification hereunder.
Section 8.2 Insurance.
Effective 11:59 p.m. on the Closing Date, all insur-
ance provided to the TFS Companies through the Transamerica
Corporation "Risk Management Program" shall cease. Purchaser
shall be responsible for obtaining insurance coverage for the
TFS Companies, at Purchaser's expense, from and after the
Closing Date.
Section 8.3 No Use of Transamerica Marks.
As promptly as possible but in no event later than
90 days after Closing, except with respect to the Loan Files,
Purchaser shall completely and permanently obliterate or
remove from all assets used in the Acquired Business all
Transamerica Marks, and in the event that any such mark cannot
be completely and permanently obliterated or removed from any
such asset, Purchaser shall promptly destroy such item. From
and after the Closing, except as set forth in this Section
8.3, Purchaser shall not permit any of the TFS Companies to
(a) use in any manner the Transamerica Marks, or any variation
<PAGE>
<PAGE> 46
thereof, or any acronym based thereon or any logo
incorporating any such Transamerica Mark or acronym or (b) in
any way represent that it is, or otherwise hold itself out as
being, affiliated with Seller or any of Seller's Affiliates.
Notwithstanding the foregoing, in connection with transition
arrangements, Purchaser shall be entitled to use the word
"Transamerica" in customer communications to the extent
necessary to describe the transactions contemplated by this
Agreement. Promptly after the Closing Date, but in all events
not later than thirty (30) Business Days thereafter, Purchaser
shall cause each of the TFS Companies to take all actions
necessary to change its corporate name and any other names
under which it conducts business to names that do not use the
word "Transamerica" or any other Transamerica Mark or any name
confusingly similar to a Transamerica Mark.
Section 8.4 Non-Solicitation Agreement.
Parent and Seller hereby agree, on behalf of them-
selves and their Affiliates, that neither Parent, Seller, nor
any Affiliate of Parent or Seller shall (a) for a period of
five (5) years after the Closing Date, (x) use any record or
list of applicants (if any list of applicants exists in the
Branches) Borrowers, Policy Holders or Past Borrowers (any
such list, a "Customer List") directly or indirectly to
solicit on a targeted basis any such applicant (as to which a
record or list exists), Borrower, Policy Holder or Past Bor-
rower, individually or as a group thereof (whether by use of
direct mail marketing or other means of mass marketing in-
tended to solicit any such applicant (as to which a record or
list exists), Borrower, Policy Holder or Past Borrower, or
group thereof) or (y) sell or otherwise transfer to any third
party any Customer List or list of prospects; (b) for a period
of five (5) years after the Closing Date, knowingly solicit
directly or indirectly any employee of any of the TFS
Companies to become an employee of Parent, Seller, or any of
its Affiliates; or (c) for a period of two (2) years after
Closing, use the name "Transamerica Finance," "Transamerica
Financial" or any derivation thereof or of the term "Finance"
with the name "Transamerica" in connection with a Consumer Fi-
nance Business that includes retail branches which engage in
the traditional branch-based Consumer Finance Business empha-
sizing in-person contact with borrowers and prospective
borrowers at the branch. Notwithstanding the preceding
sentence, Parent, Seller and their Affiliates shall be permit-
ted (i) to engage in advertising, solicitations and marketing
campaigns, programs and other efforts not primarily directed
or targeted at any Borrower, Policy Holder or Past Borrower,
or group thereof, so long as such efforts are not based on or
derived from a Customer List; (ii) to respond to unsolicited
inquiries by a Borrower, Policy Holder or Past Borrower, or
group thereof; (iii) to provide notices and communications
relating to the transactions contemplated hereby in accordance
with the provisions hereof; (iv) to solicit and/or hire as an
employee any person employed by any of the TFS Companies on
the Closing Date whose employment by the TFS Companies has
been terminated by Purchaser or the TFS Company with whom such
employee was employed or who initiates contact with Seller or
any of its Affiliates regarding his or her employment by
Parent, Seller or any of their Affiliates; (v) to own and
operate the business of Metropolitan Mortgage; (vi) to retain
and use any general mailing list used prior to the Closing
Date by the TFS Companies; and (vii) to make general solicita-
tions and advertisements in any communications medium
regarding employment opportunities with Seller or any of its
Affiliates. Notwithstanding the foregoing, Parent, Seller and
their Affiliates shall not be required to purge the names of
and other information relating to Borrowers, Policy Holders
and Past Borrowers held or maintained in any databases or
other systems of Parent, Seller or any of their Affiliates and
may use such names and information for research, modeling or
any other purpose not prohibited herein.
Section 8.5 Consumer Finance Business.
From and after the Closing Date, Parent, Seller, and
their respective Affiliates may directly own, manage, or oper-
ate a Consumer Finance Business without any restriction other
than that imposed by Section 8.4.<PAGE>
<PAGE> 47
Section 8.6 Services Support Agreement.
For a period of six (6) months after the Closing
Date, Parent and Seller shall continue to provide to all TFS
Companies the support services listed in Schedule 8.6 hereto,
and Purchaser shall cause the TFS Companies to continue to
provide to Seller and its Affiliates the support services
listed in Schedule 8.6 hereto, in accordance with a Services
Support Agreement that the parties shall negotiate in good
faith prior to the Closing Date. The Services Support
Agreement will provide, among other things, for any
arrangements with respect to occupancy of the TFS Headquarters
during a transition period.
Section 8.7 Releases.
Within thirty (30) days after the Closing Date, Par-
ent and Seller shall obtain, and shall deliver evidence satis-
factory to Purchaser of, releases from all third parties of
all guarantees, obligations or liabilities made in favor of
such third parties by any TFS Company in respect of the
performance, payment or assumption of any liability relating
to an Excluded Liability.
Section 8.8 Transfer of Property.
Within thirty (30) days of the Closing, Seller shall
deliver to Purchaser or to a TFS Company, any property of a
TFS Company held or in the possession of Parent, Seller, or
any Affiliate of either of them that is not an Excluded Asset,
including any corporate books and records, together with such
releases and assignments as Purchaser shall reasonably request
to evidence a TFS Company's ownership of such property.
Except as specifically set forth in this Agreement, Parent,
Seller, and their Affiliates shall have no interest in any
such property after the Closing.
Section 8.9 Claims relating to Excluded Assets.
Purchaser agrees that it will furnish to Seller, at
Seller's expense, such assistance as Seller may reasonably re-
quest in order for Seller to obtain the benefits of any claim
Seller is entitled to make under the ITT Agreement or any
claims under the Trenton National LItigation or the Borg-
Warner Litigation.
Section 8.10 Redirection of Responses to Mailings.
Seller shall take all reasonable action to (i) redi-
rect to Purchaser (or as directed by Purchaser prior to the
Closing) all responses received by Seller after the Closing
Date from prospective borrowers pursuant to solicitation mail-
ings made prior to the Closing Date or in progress as of the
Closing Date and (ii) change its toll-free telephone number to
be used for any other solicitations to a number not used by
the TFS Companies prior to the Closing Date.
ARTICLE IX
EMPLOYEES
Section 9.1 Employee Relations Matters.
(a) For purposes of this Section 9.1, the term
"Company Employees" shall mean all persons employed by the TFS
Companies as of the Closing Date (including any person on sick
leave, short-term disability, leave of absence, or vacation);
provided, however, that the term "Company Employees" shall not
include employees of the companies listed in Section 6.1(b)(i)
or of any entity that is not part of the Acquired Business.
"Company Employees" shall include persons employed by the
Arcadia Companies and TFS BC only if and when Purchaser
consummates the Arcadia Purchase and the TFS BC Purchase, as
applicable, and references in this Article IX to "Closing
Date" shall refer to the closing date of the Arcadia Purchase
and the TFS BC Purchase with respect to employees of the<PAGE>
<PAGE> 48
Arcadia Companies and TFS BC, as applicable. Seller shall
assume or retain responsibility for any person employed by the
TFS Companies who, as of the Closing Date, is on long-term
disability; provided, however, that Purchaser shall treat such
person as a Company Employee if and when he returns to work
within six months after the Closing Date.
(b) Seller shall pay, discharge and be responsible
for (i) all salary and wages of Company Employees before the
Closing Date, except to the extent Purchaser expressly assumes
responsibility in this Agreement and (ii) except for accrued
vacation or as provided in Section 9.2 regarding the TC
Pension Plan and Section 9.3 regarding Welfare Plans, any
benefits (including, but not limited to, floating holidays,
annual or long-term incentive program, 401(k) plan, pension
plan, and non-qualified deferred compensation plans) arising
under Benefit Plans or Benefit Arrangements covering Company
Employees prior to the Closing Date, including benefit claims
incurred prior to the Closing Date but reported after the
Closing Date. Except as reflected on the Closing Balance
Sheet, Seller shall be liable for any contributions due to any
Qualified Plans maintained by Seller and its ERISA Affiliates
with respect to compensation and service before the Closing
Date and shall make such contributions no later than 45 days
after the Closing Date (other than with respect to the TC
Pension Plan). Except as reflected on the Closing Balance
Sheet, Seller agrees that none of the TFS Companies, the Pur-
chaser, or the Purchaser's ERISA Affiliates shall have any li-
ability or responsibility with respect to contributions to
Qualified Plans maintained by Seller and its ERISA Affiliates.
(c) From and after the Closing Date, Purchaser
shall pay, discharge and be responsible for claims and
benefits, including benefits with respect to claims incurred
prior to the Closing Date but reported after the Closing Date
arising out of or relating to Purchaser's employment of the
Company Employees on and after the Closing Date. As of the
Closing Date, Purchaser will cover Company Employees and their
dependents under a Purchaser or TFS Companies' group health
plan and under basic company-provided life and disability cov-
erage, subject to the rules applicable to other similarly
situated employees of Purchaser, without regard to any
preexisting condition exclusions or, to the extent the Company
Employee was covered by such a plan before Closing Date, any
waiting periods. In addition, Purchaser shall cause all
Company Employees as of the Closing Date to be eligible to
participate, as of the next "entry date" under any other
applicable Purchaser Benefit Plan or Benefit Arrangement of
Purchaser or Household International that so limits the
commencement of participation therein, (i) in any holiday,
sick leave, vacation pay, leave of absence or similar policy
of Purchaser or Household International in which similarly
situated employees of Purchaser or Household International are
generally eligible to participate without duplication of ben-
efits and (ii) in the Benefit Plans of Purchaser or Household
International in which similarly situated employees of
Purchaser are generally eligible to participate, including the
Purchaser's Tax Reduction Investment Plan. Purchaser's
Retirement Income Plan has daily entry dates, and Purchaser's
Tax Reduction Investment Plan has quarterly entry dates.
Purchaser will use best efforts, to the extent practicable, to
admit employees to the foregoing plans no later than the first
entry date following the Closing Date. Seller will, to the
extent practicable, distribute information pre-Closing to
assist Purchaser in admitting participants as soon as prac-
ticable after Closing. No later than May 23, 1997, Purchaser
shall provide Seller with summary plan descriptions and pro-
spectuses with regard to its Benefits Plans for which
employees of the TFS Companies may be eligible after Closing
and a copy of the current plan documents for the Purchaser's
Retirement Income Plan and the Purchaser's Tax Reduction
Investment Plan. For purposes of any seniority or length of
service requirements, waiting periods, vesting periods, or
differential benefits based on length of service in any such
plan or policy of Purchaser for which a Company Employee may
be eligible after the Closing, Purchaser shall treat service
by such employee with Seller as though it had been service
with Purchaser for all purposes under any such plan or policy
<PAGE>
<PAGE> 48
to the extent Seller credits such service under its similar
plans, including determining benefit accruals under any
defined benefit plan maintained by Purchaser, so long as this
crediting of service does not violate applicable laws and is
consistent with the rules governing Benefit Plans qualified
under Section
401(a) of the Code.
(d) Seller and Purchaser agree that, as of the
Closing Date and except to the extent otherwise provided by a
Benefit Arrangement or Benefit Plan, all Company Employees:
(i) will cease to be active participants
in all Benefit Plans and Benefit Arrangements other than any
TFS Plans or TFS Benefit Arrangements maintained solely by the
TFS Companies; and
(ii) will be fully vested in their accrued
benefits under the SSP and the TC Pension Plan.
(e) Purchaser agrees to provide, to any Company Em-
ployee who terminates employment within six months subsequent
to the Closing Date, severance in accordance with the Separa-
tion Pay Plan applicable to employees of the TFS Companies, a
copy of which has been provided and for Company Employees who
terminate employment between 6 and 12 months subsequent to the
Closing Date, severance that, in the aggregate, they would
have received under the Separation Pay Plan. Purchaser
(directly or through the TFS Companies) assumes all liability
for the Special Retention Incentive Program of TFS, except
with respect to any persons who transfer to or become employed
by Seller or its post-Closing Affiliates.
Section 9.2 TC Pension Plan.
(a) Effective as of the Closing Date (or such other
administratively convenient later date mutually determined by
Seller and Purchaser), Purchaser shall cause TFS to adopt the
Household Retirement Income Plan (RIP) for the benefit of Com-
pany Employees (including their surviving spouses and other
beneficiaries) who immediately prior to the Closing Date were
active participants in the TC Pension Plan. For purposes of
Section 9.2 hereof an active participant shall be determined
as of the Closing Date and shall not include any employees who
have retired or otherwise terminated employment or are on
long-term disability, unless they are reasonably expected to
return to work within six months after the Closing Date even
if they are receiving or are entitled to receive a pension
benefit. Such individuals covered shall be known as the
"Covered Employees."
(b) Effective as of the Closing Date (or such other
administratively convenient later date determined by Seller
and Purchaser), each Covered Employee shall have an accrued
benefit under RIP pursuant to this Section 9.2 that is no less
than the greater of (i) the accrued benefit that he or she had
under the TC Pension Plan as of the date immediately prior to
the Closing Date, or (ii) the accrued benefit to which he or
she is entitled under the RIP benefit formula applicable to
Purchaser's other employees after giving the past service
credit described in Section 9.1(c). Solely for purposes of
(i) above, the term "accrued benefit" shall include any
optional forms of accrued benefits and other rights within the
scope of Section 411(d)(6) of the Code. Effective as of the
date immediately prior to the Closing Date, benefits on behalf
of Covered Employees shall cease to accrue under the TC
Pension Plan.
(c) The trustee of the TC Pension Plan shall trans-
fer to the trustee of the RIP the sum of the assets properly
allocated to the accrued benefits as determined in Section
9.2(b)(i) of each Covered Employee, in cash, or in kind if
such assets are satisfactory to Purchaser. The transfer shall
occur on a date that is mutually agreeable to Parent and
Purchaser but no later than the last day of the 12th month
following the Closing Date and at least 30 days after filing
the appropriate notices with the IRS. The value of assets to
be transferred to the RIP shall be no less than the present
<PAGE>
<PAGE> 50
value of benefits on a termination basis (within the meaning
of Treas. Reg. Section 1.414l-1(b)(5)), as certified by
Seller's actuary.
(d) The calculations described in this section
shall be performed by the actuary for the TC Pension Plan in
accordance with the methodology and assumptions used in
Seller's 1997 actuarial report (unless that has not been
prepared before the date determined under Section 9.2(c) for
the transfer of assets, in which event the 1996 actuarial
report will be sued, and the report used shall be referred to
as the "Latest Actuarial Report") and as reviewed by the
actuary for the RIP. If the actuaries disagree as to the cal-
culations, they shall appoint a third actuary from a
nationally recognized actuarial firm to resolve their
differences (with Seller and Purchaser sharing equally the
costs of the third actuary). The third actuary's
determination of any dispute shall be final. In reaching such
resolution, the third actuary shall consider only the issues
of disagreement between the first two actuaries, rather than
conducting an independent review, and shall resolve specific
differences between the initial actuaries within the range of
such differences.
(e) The total amount of assets to be transferred
shall be equal to the "Closing Covered ABO" calculated as fol-
lows: Seller's actuary shall determine the accumulated
benefit obligation ("ABO") for each Covered Employee as of the
first day of the plan year covered in the Latest Actuarial
Report, based on the methodology and assumptions used in the
Latest Actuarial Report, and projecting forward to the Closing
Date to reflect any actual benefit payments, ABO service cost,
and the discount rate used in determined the ABO. The ABO for
an employee who was included in the Latest Actuarial Report
but was not a Covered Employee as of the Closing Date shall be
excluded from the Closing Covered ABO.
(f) The obligation to provide benefits that accrued
prior to the Closing Date in the case of any Covered Employee
whose employment was terminated prior to the date of the
transfer of assets contemplated herein shall remain that of
the TC Pension Plan until such transfer of assets; provided,
however, that any payments made in the interim from the TC
Pension Plan shall be a credit to the total amount of assets
to be transferred as provided herein. The Parties shall
cooperate in giving any appropriate notices for employees and
former employees and to governmental agencies.
Section 9.3 Employee Welfare Benefit Plans.
(a) Definitions. In addition to terms defined
elsewhere in this Agreement, the following terms shall have
the following meanings for purposes of this Section 9.3:
(i) "COBRA" shall mean the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended.
(ii) "Former Employees" shall mean the
individuals who would have been Company Employees but have
terminated (or terminate) employment with the TFS Companies
prior to and including the Closing Date, and who have made a
prior election, are eligible to elect, or will be eligible to
elect continuation coverage under COBRA after the Closing.
(iii) "Retirees" shall mean all individuals
who left the employ of the TFS Companies on or before the
Closing Date (including any individuals who left employment
with any predecessors to the TFS Companies) and are eligible
for and/or enrolled for post-retirement benefits under one or
more of Parent's or its pre-Closing Affiliates' Welfare Plans.
(iv) "TFS Welfare Plan" shall mean a
Welfare Plan maintained solely by one or more of the TFS
Companies.
(v) "Welfare Plan" shall mean an employee
welfare benefit plan as described in Section 3(1) of ERISA.
<PAGE>
<PAGE> 51
(b) Cessation of Participation in Parent's Welfare
Plans.
(i) Effective on the Closing Date, and
except as otherwise provided in Section 9.1(e), the TFS
Companies in the Acquired Business shall cease participation
in any non-TFS Welfare Plans sponsored by Parent or its
Affiliates, including, but not limited to, all fully insured
Welfare Plans (including Health Maintenance Organization and
Dental Maintenance Organization contracts), all self-insured
coverages and the Parent's Internal Revenue Code Section 125
Plan and any Health or Dependent Care Spending Accounts
thereunder. Purchaser (or TFS) shall give written notice to
all the TFS Welfare Plan participants who are Former Employees
or Covered Employees that the TFS Companies retain full
responsibility for all TFS Welfare Plan benefits in accordance
with clause (ii) below.
(ii) Effective on the Closing Date and
except as otherwise provided in Section 9.1(e), Purchaser
shall assume (or the TFS Companies shall retain) full
responsibility for all TFS Welfare Plan coverages (as they may
be amended or terminated after Closing in Purchaser's sole
discretion), except that, with respect to Retiree Welfare Plan
coverages currently provided under either TFS and non-TFS
Welfare Plans, the Seller shall retain or assume
responsibility for such coverages for any Retiree regardless
of whether the claims are incurred before or after the Closing
Date.
(c) Transitional Matters.
(i) Liabilities under any Welfare Plans
for claims incurred prior to the Closing Date shall remain
with Parent under its Welfare Plans.
(ii) Parent and Purchaser shall mutually
agree upon the method of handling the transitional issues
related to cafeteria plans including the transfer of any
Health or Dependent Care Spending Account credits.
Section 9.4 Employee Communication.
Any communications proposed to be delivered prior to
the Closing to the Company Employees regarding the matters
contained in or the transactions contemplated under this
Agreement, or otherwise respecting any changes or potential
changes in employee benefit plans, practices, or procedures
which may or will occur in connection with the transactions
contemplated by this Agreement, shall be subject to the prior
approval of the Purchaser or Seller, respectively, which
approval shall not be unreasonably withheld and who shall be
deemed to have approved a proposed communication absent
objection provided within 72 hours of receipt of the proposed
communications. Parent and/or Seller agrees to provide
whatever notices Purchaser deems appropriate for compliance
with the Worker Adjustment and Retraining Notification Act
(WARN) and comparable state laws with respect to Company
Employees for terminations on or after the Closing Date.
Section 9.5 No Other Restrictions.
Nothing in this Agreement shall (a) restrict or oth-
erwise inhibit Purchaser's or the TFS Companies' right to ter-
minate the employment of any Company Employee on or after the
Closing Date or (b) be construed or interpreted to restrict
Seller's, any TFS Company's or Purchaser's right or authority
to amend or terminate any of its employee benefit plans, poli-
cies, or programs effective on or after the Closing Date.
ARTICLE X
CONDITIONS TO THE OBLIGATIONS OF PARENT, SELLER AND TFS
Unless waived in writing by Parent, Seller and TFS,
the obligations of Parent, Seller and TFS under this Agreement
are subject to the fulfillment of the following conditions by
Purchaser prior to or on the Closing Date:<PAGE>
<PAGE> 52
Section 10.1 Representations, Warranties, and Covenants.
(a) Except for such breaches as have not had and
would not reasonably be expected to have a Material Adverse
Effect with respect to Purchaser, the representations and war-
ranties of Purchaser contained in this Agreement shall have
been true and correct as of the date when made and shall be
deemed to be made again on and as of the Closing Date and
shall then be true and correct, except to the extent changes
are permitted or contemplated pursuant to this Agreement;
(b) Purchaser shall have performed and complied in
all material respects with the covenants and agreements re-
quired by this Agreement to be performed or complied with by
it prior to or at the Closing Date; and
(c) Purchaser shall have furnished Seller with a
certificate dated the Closing Date and duly executed by an of-
ficer of Purchaser authorized on behalf of Purchaser to give
such a certificate, to the effect that the conditions set
forth in subsections (a) and (b) of this Section 10.1 with
respect to Purchaser have been satisfied.
(d) Household International shall have furnished
Seller with a certificate dated the Closing Date and duly ex-
ecuted by an officer of Household International authorized by
Household International to give such a certificate, to the ef-
fect that the conditions set forth in subsections (a) and (b)
of this Section 10.1 with respect to Household International
have been satisfied.
(e) There shall not have occurred since March 31,
1997 any event or circumstances that have a Material Adverse
Effect on Purchaser.
Section 10.2 Proceedings.
(a) Except as contemplated by Section 3.5 or 3.6,
none of Purchaser, Seller or any of the TFS Companies shall be
subject to any restraining order or injunction restraining or
prohibiting the consummation of the transactions contemplated
hereby.
(b) Except as contemplated by Section 3.5 or 3.6,
in the event any restraining order or injunction restraining
or prohibiting the consummation of the transactions
contemplated hereby is in effect, this Agreement may not be
abandoned by Seller and TFS pursuant to this Section 10.2
prior to September 30, 1997, but the Closing shall be delayed
during such period; provided, however, that this Agreement
shall terminate automatically after September 30, 1997 if such
restraining order or injunction remains in effect on that
date.
Section 10.3 Regulatory Approvals.
All material Regulatory Approvals shall have been
granted and shall have become Final, provided, however, that
if all material Regulatory Approvals other than (i) those
pertaining to the Arcadia Purchase and/or (ii) those
pertaining to the TFS BC Purchase have been obtained prior to
June 30, 1997, the parties shall close the transactions
contemplated by this Agreement to the extent provided in
Section 3.5 and/or 3.6, as applicable. For purposes of this
Agreement, "Final" shall mean action by the applicable Regula-
tory Authority (including action duly taken by such agency's
staff, pursuant to delegated authority), which shall not have
been reversed, stayed, enjoined, set aside, annulled or sus-
pended. For purposes of this Section 10.3 and Section 11.3,
"all material Regulatory Approvals" shall mean such approvals,
consents and licenses of any Regulatory Authority necessary to
be obtained for the lawful indirect transfer to Purchaser (by
virtue of its ownership of the TFS Stock) of such number of
Loans as represents at least 90% of the Loan Receivables.
<PAGE>
<PAGE> 53
Section 10.4 Hart-Scott-Rodino.
The waiting period under the HSR Act shall have ex-
pired or been terminated.
Section 10.5 Deliveries.
Seller and TFS shall have received the items to be
delivered by Purchaser pursuant to Sections 3.3(a) through
(d), inclusive.
ARTICLE XI
CONDITIONS TO THE OBLIGATIONS OF PURCHASER
Unless waived in writing by Purchaser, the obliga-
tions of Purchaser and Household International under this
Agreement are subject to the fulfillment of the following con-
ditions by Parent, Seller and TFS, as applicable, prior to or
on the Closing Date:
Section 11.1 Representations, Warranties and Covenants.
(a) Except for such breaches as have not had and
would not reasonably be expected to have a Material Adverse
Effect with respect to the TFS Companies, the representations
and warranties of Parent, Seller and TFS contained in this
Agreement shall have been true and correct as of the date when
made and shall be deemed to be made again on and as of the
Closing Date and shall then be true and correct except to the
extent that (i) such representations and warranties speak as
of the date hereof or as of a specific date, in which case
they shall be deemed to have been made again on and as of the
Closing Date but speaking only as of the date hereof or such
specific date, and (ii) changes are permitted or contemplated
pursuant to this Agreement;
(b) Parent, Seller and TFS shall have performed and
complied in all material respects with the covenants and
agreements required by this Agreement to be performed or
complied with by each of them prior to or on the Closing Date;
(c) There shall not have occurred since March 31,
1997 any event or circumstance that has a Material Adverse Ef-
fect with respect to the TFS Companies taken as a whole.
(d) Parent shall have furnished Purchaser with a
certificate, dated the Closing Date and duly executed by an
officer of Parent authorized to give such a certificate, to
the effect that the conditions set forth in subsections (a),
(b) and (c) of this Section 11.1 to the extent applicable to
Parent have been satisfied;
(e) Seller shall have furnished Purchaser with a
certificate, dated the Closing Date and duly executed by an
officer of Seller authorized to give such a certificate, to
the effect that the conditions set forth in subsections (a),
(b) and (c) of this Section 11.1 to the extent applicable to
Seller have been satisfied; and
(f) TFS shall have furnished Purchaser with a cer-
tificate, dated the Closing Date and duly executed by an of-
ficer of TFS authorized to give such a certificate, to the ef-
fect that the conditions set forth in subsections (a), (b) and
(c) of this Section 11.1 to the extent applicable to TFS have
been satisfied.
Section 11.2 Proceedings.
(a) Except as contemplated by Section 3.5 or 3.6
none of Purchaser, Parent, Seller or any of the TFS Companies
shall be subject to any restraining order or injunction
restraining or prohibiting the consummation of the
transactions contemplated hereby.
<PAGE>
<PAGE> 54
(b) Except as contemplated by Section 3.5 or 3.6,
in the event any restraining order or injunction restraining
or prohibiting the consummation of the transactions
contemplated hereby is in effect, this Agreement may not be
abandoned by Purchaser pursuant to this Section 11.2 prior to
September 30, 1997, but rather the Closing shall be delayed
during such period; provided, however, that this Agreement
shall terminate automatically after September 30, 1997 if
such restraining order or injunction remains in effect on that
date.
Section 11.3 Regulatory Approvals.
All material Regulatory Approvals shall have been
granted and shall have become Final, provided, however, that
if all material Regulatory Approvals other than (i) those
pertaining to the Arcadia Purchase and/or (ii) those
pertaining to the TFS BC Purchase have been obtained prior to
June 30, 1997, the parties shall close the transactions
contemplated by this Agreement to the extent provided in
Section 3.5 and or 3.6, as applicable, and subject to Section
3.7.
Section 11.4 Hart-Scott-Rodino.
The waiting period under the HSR Act shall have ex-
pired or been terminated.
Section 11.5 Deliveries.
Purchaser shall have received the items to be deliv-
ered by Seller and TFS pursuant to Sections 3.2(a) through
(h), inclusive.
Section 11.6 Closing Balance Sheet, Closing Tape, Net Funds
Report and Excluded Loans Update.
Purchaser shall have received the Closing Balance
Sheet, the Closing Tape, the Net Funds Report and a revised
Schedule 1.1B to reflect the loans of the TFS Companies
constituting Excluded Loans as of the date of the Closing
Tape.
Section 11.7 Extinguishment of Intercompany Debt.
Seller and TFS will have taken all actions necessary
so that, upon completion of the Closing, all Intercompany
Debt, all Intercompany Contracts and all Third-Party Debt
shall be extinguished and cease to be outstanding as
indebtedness of the obligor with respect thereto.
ARTICLE XII
INDEMNIFICATION
Section 12.1 By Parent and Seller.
(a) Except with respect to Taxes (which are
provided for in Article XIII exclusively), Parent and Seller
jointly and severally shall indemnify and hold harmless
Purchaser, its Affiliates, officers, directors, employees,
agents, successors, and assigns and related entities from and
reimburse them for any loss, cost, expense (including all
legal and expert fees and expenses), damage (including damages
to Persons, property or the environment), liability, fines,
penalties or claims (collectively, the "Indemnified Costs")
arising or resulting from:
(i) (A) Any breach of any representation or
warranty (subject to clause (ii) of this Section 12.1(a)) made
by Parent, Seller or TFS in this Agreement for which
indemnification is claimed in accordance with this Agreement
within the applicable survival period and (B) any litigation
or proceeding filed and served upon any of the TFS Companies
prior to the Closing Date or as to which any of the TFS
Companies has received proper notice from any Regulatory
Authority prior to the Closing Date; provided, however, that<PAGE>
<PAGE> 55
neither Parent nor Seller shall have any liability for such
indemnification pursuant to this subclause (i) unless the
aggregate of all Indemnified Costs under this subclause (i)
for which Parent or Seller would, but for this proviso, be
liable exceeds on a cumulative basis an amount equal to
____________________________________________, in which case
Parent's and Seller's liability shall be only for such excess,
nor shall Parent or Seller be liable for any Indemnified Costs
that, when added to the amounts that Parent or Seller have
paid pursuant to clause (ii) of this Section 12.1(a), exceed
the amount of _________________;
(ii) ___________________________________.
The parties agree that the indemnity provided in this clause
(ii) is the exclusive indemnity for any Indemnified Costs
arising from the litigation described in this clause (ii) and
that no indemnity may be claimed for such Indemnified Costs
under clause (i) of this Section 12.1(a);
(iii) Parent's, Seller's or TFS' breach of
or failure to perform any of its covenants or agreements
contained in or made pursuant to this Agreement;
(iv) any Excluded Liability; and
(v) any action or proceeding to enforce
this Section 12.1 if Purchaser is successful in such action or
proceeding.
(b) Notwithstanding the foregoing, except with re-
spect to Taxes (which are provided for in Article XIII exclu-
sively), neither Parent nor Seller shall have any liability:
(i) to the extent and in the amount of
any provision, reserve or liability in respect of the matter,
action, or proceeding giving rise to any such liability if
such provision, reserve or liability is reflected on the TFS
Balance Sheet or the Closing Balance Sheet or, if (A) Section
3.5 shall apply on any balance sheet of the Arcadia Companies
or (B) Section 3.6 shall apply on any balance sheet of TFS BC;
(ii) to the extent such liability arises
from any act or omission of Purchaser or of a TFS Company at
any time after the Closing Date;
(iii) to the extent of any insurance or
other recovery received by a Person entitled to
indemnification under Section 12.1(a) in respect of an
Indemnified Cost; and
(iv) to the extent that Purchaser, a TFS
Company, or any Affiliate thereof obtains a Tax benefit with
respect to such Indemnified Cost after taking into account the
Tax cost of any indemnification payment.
Section 12.2 By Purchaser.
(a) Except for Taxes (which are provided for in Ar-
ticle XIII exclusively), Purchaser shall indemnify and hold
Parent, Seller, and their Affiliates, officers, directors, em-
ployees, agents, successors, and assigns, and related entities
from, and reimburse them for, Indemnified Costs arising or re-
sulting from:
(i) Any breach of any representation or
warranty made by Purchaser in this Agreement; provided that
Purchaser shall not have any liability for such
indemnification pursuant to this clause (i) unless the
aggregate of all Indemnified Costs under this clause (i) for
which Purchaser would, but for this proviso, be liable exceeds
on a cumulative basis an amount equal to ___________________
________________________, in which case Purchaser's liability
shall be only for such excess, nor shall Purchaser be liable
for any Indemnified Costs that exceed the amount of ____
_______________________________________________;
(ii) Purchaser's breach of or failure to
perform any of its covenants or agreements contained in or
made pursuant to this Agreement;<PAGE>
<PAGE> 56
(iii) Except for any matters subject to
indemnification pursuant to Section 12.1 and Section 13.2, the
operation of the TFS Companies prior to and on or after the
Closing Date; or
(iv) Any action or proceeding to enforce
this Section 12.2 if Seller is successful in such action or
proceeding.
(b) Notwithstanding the foregoing paragraph (a),
Purchaser shall not have any liability to the extent that Par-
ent, Seller or an Affiliate thereof obtains a Tax benefit with
respect to such Indemnified Cost, after taking into account
the Tax cost of the indemnification payment, or receives
insurance or other recovery in respect of an Indemnified Cost.
Section 12.3 Indemnification Procedure.
(a) Any Person claiming indemnification pursuant to
this Agreement shall promptly notify the indemnifying Party in
writing of the occurrence of any event that such Person
asserts is or may be an indemnifiable event pursuant to this
Agreement and shall describe in reasonable detail the facts,
events and circumstances relating to the subject matter of
such claim and the amount (if reasonably calculable) of the
Indemnified Costs in connection therewith. If such event
involves the claim of any third party, the indemnifying Party
shall be entitled to participate in and, to the extent it
shall wish, assume control over (in which case the
indemnifying Party shall assume all expense with respect to)
the defense, settlement, adjustment or compromise of such
claim.
(b) The indemnified Person shall have the right to
employ separate counsel in any action or claim and to partici-
pate in the defense thereof at the expense of the indemnifying
Party (i) if the retention of such counsel has been specifi-
cally authorized by the indemnifying Party, or (ii) if the
counsel is retained because the indemnifying Party does not
notify the indemnified Person within 30 days after receipt of
a claim notice that it elects to undertake the defense
thereof. The indemnified Person shall have the right to
employ counsel at the indemnified Person's own expense and
participate in such action or claim, including settlement or
trial.
(c) The indemnifying Party shall obtain the prior
written approval of the indemnified Person before entering
into any settlement, adjustment, or comprise of such claim or
ceasing to defend against such claim that provides for any
relief other than the payment of monetary damages or which
would have a materially adverse effect on the indemnified
Person or its business or operations.
(d) If the indemnifying Party does not assume con-
trol over the defense of such claim as provided in Section
12.3(a) within 30 days of receipt of notice thereof, the
indemnified Person shall have the right to defend the claim in
such manner as it may deem appropriate and to settle, adjust,
or compromise such claim and shall not thereby waive any right
to indemnification hereunder.
(e) The indemnifying Party shall remit payment for
the amount of a valid and substantiated claim for Indemnified
Costs hereunder promptly upon receipt of a claim notice there-
for. Upon the payment in full of any claim hereunder, the in-
demnifying Party shall be subrogated to the rights of the in-
demnified Person against any person with respect to the sub-
ject matter of such claim.
(f) In the event that the indemnifying Party reim-
burses the indemnified Person for any third party claim, the
indemnified Person shall remit to the indemnifying Party any
reimbursement that the indemnified Person subsequently
receives for such third party claim.
<PAGE>
<PAGE> 57
(g) Any matter as to which a claim has been
asserted by written notice (describing in reasonable detail
the facts, events and circumstances relating to the subject
matter of such claim and the amount (if reasonably calculable)
of the Indemnified Costs in connection therewith) to the
indemnifying Party that is pending or unresolved at the end of
any applicable survival period shall continue, to the extent
permitted by law, to be covered by this Article XII
notwithstanding any applicable statute of limitations (which
the parties hereby waive) or the expiration of such survival
period until such matter is finally terminated or otherwise
resolved by the Parties under this Agreement or by a court of
competent jurisdiction and any amounts payable hereunder are
finally determined and paid.
(h) The parties hereto shall use their respective
best efforts to agree prior to Closing which party shall
assume control over the defense, settlement, adjustment or
compromise of a claim which is the subject of Section
12.1(a)(i)(B).
Section 12.4 Survival.
Except as provided in Article XIII, the representa-
tions and warranties made herein or in any other documentation
delivered pursuant to this Agreement shall survive the Closing
Date for 18 months; provided, however, that (i) expiration of
a representation or warranty shall not affect the obligations
of a Party with respect to claims for indemnification for
which notice has been given to the indemnifying Party in
accordance with Section 12.3 prior to such expiration; and
(ii) all covenants, agreements and indemnification matters,
shall survive indefinitely.
Section 12.5 Exclusivity.
Except with respect to Taxes (which are provided for
in Article XIII exclusively), the indemnification provided in
this Article XII shall be the exclusive remedy for a breach of
any representation or warranty in this Agreement (other than
representations and warranties contained in Section 4.12) or
any claim pursuant to Section 12.1(a)(i)(B) or 12.1(a)(ii)
hereof.
ARTICLE XIII
TAX MATTERS
Section 13.1 Section 338 Elections and Forms.
(a) With respect to Purchaser's acquisition of the
TFS Stock (and indirectly the stock of the TFS Direct Subsid-
iaries) hereunder, Purchaser shall properly make all available
Section 338(g) Elections with respect to each of the TFS
Companies in accordance with applicable Tax Laws. With
respect to Seller's sale of the TFS Stock (and indirectly the
stock of the TFS Direct Subsidiaries) hereunder, Seller and
Purchaser shall jointly make all available Section 338(h)(10)
Elections with respect to each of the TFS Companies in
accordance with applicable Tax Laws and as set forth herein.
Purchaser and Seller agree to report the transfers under this
Agreement consistent with the Section 338 Elections, and shall
take no position contrary thereto unless required to do so by
applicable Tax Laws pursuant to a Final Determination.
(b) Purchaser shall be responsible for the prepa-
ration and filing of all Section 338 Forms, excluding any in-
formation relating to the historical tax basis in assets of
the TFS Companies, in accordance with applicable Tax Laws and
the terms of this Agreement. Seller shall deliver to
Purchaser such documents or forms as are reasonably requested
and are required by any relevant Tax Laws to properly complete
the Section 338 Forms, at least 65 days prior to the date such
Section 338 Forms are required to be filed. Purchaser shall
deliver such documents and forms to Seller in a form suitable
for execution at least 45 days prior to the date such Section
338 Forms are required to be filed, and Seller shall execute<PAGE>
<PAGE> 58
such documents or forms and deliver said executed Section 338
Forms to Purchaser at least 20 days prior to the date such
Section 338 Forms are required to be filed.
(c) Purchase and Seller agree that they shall use
their best efforts to enter into an agreement (the "Allocation
Agreement") as soon as practicable after the Closing Date to
address the computation of the Modified Aggregate Deemed Sale
Price as defined under applicable Treasury Regulations exclud-
ing the term "other relevant items" as that term is described
in Treasury Regulation Section 1.338(h)(10) - 1(f)(4) (the
"Computation") of the assets of the TFS Companies, including
the Loan premium and the allocation of such Modified Aggregate
Deemed Sale Price. Purchaser shall initially prepare the
Computation described in the preceding sentence and shall
submit such Computation to Seller no later than one hundred
twenty (120) days after the Closing Date. If within thirty
(30) days after Seller's receipt of the Computation, Seller
shall not have objected in writing to such Computation, the
Computation shall become the Allocation Agreement. If
Purchaser and Seller do not adopt the Allocation Agreement,
each party shall file its Tax Returns based on its own view of
the items that would have been addressed by the Allocation
Agreement. Purchaser and Seller agree to act in accordance
with the allocations contained in the Allocation Agreement (if
any) in any relevant Tax Returns or similar filings.
Purchaser shall initially prepare for delivery to
Seller for review a completed set of IRS Form 8023-A (and any
comparable forms required to be filed under state, local or
foreign tax law) and, if required, Form 8594, including all
additional data and materials required to be attached to such
Form 8023-A pursuant to the Treasury Regulations under Section
338 of the Code. Such documents and forms shall be delivered
to Seller for review no later than 45 days prior to the date
of any such Section 338 or 1060 forms are to be filed.
Section 13.2 Tax Indemnity by Seller.
Seller shall be liable for, and shall indemnify, de-
fend and hold Purchaser and the TFS Companies and any succes-
sor corporations thereto or Affiliates thereof harmless from
and against:
(a) any and all Taxes with respect to the TFS Com-
panies for any Pre-Closing Period imposed on or with respect
to or otherwise attributable to, the TFS Companies, including
Income Taxes incurred as a result of making the Section 338
Elections and any Taxes resulting from the distribution,
transfer or other disposition of assets in a Pre-Closing
Period;
(b) any liability of the TFS Companies under Trea-
sury regulations section 1.1502-6 or under any comparable or
similar provision under state, local or foreign laws or
regulations for any Pre-Closing Periods;
(c) any and all Indemnified Costs (as that term is
defined in Section 12.1) relating to, arising out of, based
upon, or resulting from any inaccuracy in the representations
and warranties contained in Section 4.12; and
(d) any and all Indemnified Costs relating to,
arising out of, based upon, or resulting from any action or
proceeding to enforce this Section 13.2.
Section 13.3 Tax Indemnity by Purchaser.
Purchaser shall be liable for, and shall indemnify,
defend and hold Seller harmless from and against any and all
Taxes for any Post-Closing Period, due or payable by the TFS
Companies; and any and all Indemnified Costs (as that term is
defined in Section 12.1) relating to, arising out of, based
upon, or resulting from any action or proceeding to enforce
this Section 13.3.
<PAGE>
<PAGE> 59
Section 13.4 Allocation of Certain Taxes.
(a) Purchaser and Seller agree that if any of the
TFS Companies is permitted but not required under applicable
state, local or foreign Tax laws to treat the day before the
Closing Date or the Closing Date as the last day of a taxable
period, Purchaser and Seller shall treat such day as the last
day of the taxable period.
(b) Any Income Taxes for a Straddle Period shall be
apportioned between Seller and Purchaser based on the actual
operations of the TFS Companies during the portion of such pe-
riod ending on the Closing Date and the portion of such period
beginning on the day following the Closing Date (except that
Income Taxes attributable to transactions or events occurring
on the Closing Date shall be apportioned to the Seller only if
such transactions or events are properly includible in
Parent's consolidated federal income Tax Return and shall oth-
erwise be apportioned to Purchaser), and for purposes of the
provisions of Sections 13.2, 13.3, 13.4 and 13.6, each portion
of such period shall be deemed to be a taxable period (whether
or not it is in fact a taxable period). All Taxes other than
Income Taxes ("Other Taxes") relating to a Straddle Period
shall be apportioned between Purchaser and Seller based on the
number of days during the portion of such period occurring on
and before the Closing Date, and the number of days during
such period occurring after the Closing Date and for purposes
of Sections 13.2, 13.3, 13.4 and 13.6 each portion of such
period shall be deemed to be a taxable period (whether or not
it is in fact a taxable period). To the extent estimated
Taxes have been paid prior to the Closing Date with respect to
a Straddle Period, Seller's liability with respect thereto
shall be reduced by that amount; provided, further that if
such payment of Taxes exceeds (or is less than) Seller's
liability as calculated pursuant to this Section 13.4, Pur-
chaser shall promptly pay Seller the amount of such excess (or
Seller shall promptly pay Purchaser the amount of such short-
fall). Upon timely notice from Purchaser, Seller shall pay to
Purchaser at least ten (10) days prior to the date any payment
for Taxes as described in this Section 13.4 is due, Seller's
share of such Taxes as described in this Section 13.4.
Section 13.5 Filing Responsibility.
(a) Seller shall timely prepare and file or shall
cause the TFS Companies to timely prepare and file the follow-
ing Tax Returns with respect to the TFS Companies:
(i) All Income Tax Returns for any
taxable period ending on or before the Closing Date; and
(ii) all other Tax Returns with respect to
Other Taxes required to be filed (taking into account exten-
sions) prior to the Closing Date.
(b) Purchaser and the TFS Companies shall, subject
to the provisions of Section 13.5(c), file all other Tax Re-
turns with respect to the TFS Companies.
(c) With respect to any state, local or foreign In-
come Tax Return for taxable periods beginning before the Clos-
ing Date and ending after the Closing Date, Purchaser shall
cause the TFS Companies to consult with Seller concerning such
Tax Return and to report all items with respect to the period
ending on the Closing Date on a basis consistent with the last
previous such Tax Return filed with respect to the TFS Compa-
nies unless preparing the return on such basis is no longer
permissible under the applicable tax law, in which case the
return shall be prepared in accordance with reasonable tax re-
porting practices selected by the Purchaser, unless otherwise
agreed by Seller and Purchaser. The TFS Companies shall pro-
vide Seller a copy of their proposed Tax Return at least fif-
teen (15) days prior to the filing of such Tax Return, and
Seller may provide comments to the TFS Companies, which com-
ments shall be delivered to the TFS Companies within seven (7)
days of receiving such copies form the TFS Companies.
<PAGE>
<PAGE> 60
Section 13.6 Refunds.
(a) Seller shall be entitled to any refunds or
credits of Taxes attributable to or arising in taxable periods
ending on or before the Closing Date.
(b) Purchaser and the TFS Companies shall be enti-
tled to any refunds or credits of Taxes attributable to or
arising in taxable periods beginning after the Closing Date.
(c) Purchaser shall cause the TFS Companies
promptly to forward to Seller or to reimburse Seller for any
refunds or credits due Seller (pursuant to the terms of this
Article XIII) after receipt thereof, and Seller shall promptly
forward to Purchaser or reimburse Purchaser for any refunds or
credits due Purchaser (pursuant to the terms of this Article
XIII) after receipt thereof.
(d) Notwithstanding any other provision contained
in this Article XIII, neither Seller nor Purchaser shall
request any refund, overpayment or credit which will result in
a tax detriment to the other party without either (i) the
consent of the other party or (ii) reimbursing the other party
for the present value of such tax detriment as determined by
nationally recognized tax counsel or a big six accounting
firm.
Section 13.7 Cooperation and Exchange of Information.
(a) Purchaser shall provide Seller with reasonable
cooperation and shall make available to Seller such
information and data concerning the Pre-Closing Period
operations of the TFS Companies and make available such
knowledgeable employees of the TFS Companies as Seller may
reasonably request, and shall provide Seller with reasonable
access to any relevant tax records or information in the
Purchaser's possession. Such cooperation and information
shall include without limitation promptly forwarding copies of
appropriate notices and forms or other communications received
from or sent to any Taxing Authority which relate to the TFS
Companies and providing copies of all relevant Tax Returns,
together with accompanying schedules and related work papers,
documents relating to rulings or other determinations by any
Taxing Authority and any existing records concerning the
ownership and tax basis of property, which Purchaser and the
TFS Companies may possess. Purchaser and the TFS Companies
shall make its employees and facilities available on a
mutually convenient basis to provide explanation of any
documents or information provided hereunder. Seller and its
Affiliates shall provide Purchaser with similar reasonable
cooperation, information and data to the extent that Seller or
an Affiliate has such records and information in its
possession or such employees in its employ.
(b) For a period of ten (10) years after the Clos-
ing Date, Seller, Purchaser and the TFS Companies shall retain
all Tax Returns, books and records (including computer files)
of, or with respect to the activities of, the TFS Companies
for all taxable periods ending on or prior to the Closing
Date. Thereafter, neither Seller nor Purchaser shall dispose
of any such Tax Returns, books or records unless it first
offers such Tax Returns, books and records to the other party
and the other party fails to accept such offer within sixty
(60) days of its being made.
(c) Purchaser and Seller and their respective Af-
filiates shall cooperate in the preparation of all Tax Returns
relating in whole or in part to taxable periods ending on or
before or including the Closing Date that are required to be
filed after such date. Such cooperation shall include fur-
nishing prior years' Tax Returns or return preparation
packages illustrating previous reporting practices or
containing historical information relevant to the preparation
of such Tax Returns, and furnishing such other information
within such party's possession requested by the party filing
such Tax Returns as is relevant to their preparation. In the
case of any state, local or foreign joint, consolidated,
combined, unitary or group relief system Tax Returns, such<PAGE>
<PAGE> 61
cooperation shall also relate to any other taxable periods in
which one party could reasonably require the assistance of the
other party in obtaining any necessary information.
(d) Seller shall have the right, at its own
expense, to control any audit or examination by any Taxing
Authority ("Tax Audit"), initiate any claim for refund, con-
test, resolve and defend against any assessment, notice of
deficiency, or other adjustment or proposed adjustment
relating to any and all Taxes for any taxable period ending on
or before the Closing Date with respect to the TFS Companies,
provided that, with respect to any Tax item for which
Purchaser or the TFS Companies may have liability hereunder,
Seller shall consult with Purchaser with respect to the
resolution of such issue and shall not settle any such issue,
or file any amended return relating to any such issue, without
the consent of the Purchaser, which consent shall not be
unreasonably withheld. Purchaser shall have the right, at it
own expense, to control any other Tax Audit, initiate any
other claim for refund, and contest, resolve and defend
against any other assessment, notice of deficiency, or other
adjustment or proposed adjustment relating to any and all
Taxes with respect to the TFS Companies provided that, with
respect to any state and local Income Taxes for any taxable
period beginning before the Closing Date and ending after the
Closing Date, Purchaser shall consult with Seller with respect
to the resolution of any issue that would affect Seller, and
not settle any such issue, or file any amended return relating
to any such issue without the consent of Seller, which consent
shall not unreasonably be withheld. Where consent to a
settlement is withheld by the other party pursuant to this
Section 13.7, such other party may continue or initiate any
future proceedings at its own expense, provided that the
liability of the first party, after giving effect to this
Agreement, shall not exceed the liability that would have
resulted from the settlement or amended return.
Section 13.8 Termination of Tax Sharing Agreements.
As of the Closing Date, Seller shall cause all Tax
allocation, Tax sharing, Tax reimbursement and similar agree-
ments and arrangements between Seller and its Affiliates, on
the one hand, and the TFS Companies, on the other, to be
extinguished and terminated with respect to the TFS Companies,
and any rights or obligations existing under any such
agreement or arrangement (including any obligation of the TFS
Companies to make any payment of any kind thereunder) shall be
extinguished and no longer enforceable.
Section 13.9 Coordination.
Notwithstanding anything in this Agreement to the
contrary, in the event there is a conflict between Article
XIII and any provision contained in any other Article of this
Agreement, Article XIII shall control.
Section 13.10 Survival.
The representations, warranties, agreements, cov-
enants and indemnification matters contained in Section 4.12
and Article XIII of this Agreement shall survive the Closing
Date until 30 days after the expiration of the applicable
statutory periods of limitation; provided, however, that
expiration of such representations, warranties, agreements,
covenants and indemnification matters shall not affect the
obligations of a Party with respect to claims for which notice
has been given to the indemnifying Party in accordance with
Section 12.3 prior to such expiration.
<PAGE>
<PAGE> 62
ARTICLE XIV
GUARANTIES BY PARENT AND HOUSEHOLD INTERNATIONAL
Section 14.1 The Guaranties.
(a) Parent hereby unconditionally and irrevocably
guarantees, as primary obligor, to Purchaser the full and
punctual payment of all amounts payable by, and the full and
punctual performance of all other obligations of, Seller and
each TFS Company under this Agreement in each case at the
place of such payment or performance. Upon failure by Seller
or any TFS Company to pay fully and punctually any such amount
or to perform fully and punctually any such other obligation,
Parent shall forthwith on demand pay the amount not so paid
and perform or cause to be performed such other obligation, in
each case at the place, in the manner and at the time
specified in this Agreement. This guarantee is a guarantee of
payment and performance, and not of collectibility.
(b) Household International hereby unconditionally
and irrevocably guarantees, as primary obligor, to Seller the
full and punctual payment of all amounts payable by, and the
full and punctual performance of all other obligations of,
Purchaser under this Agreement in each case at the place of
such payment or performance. Upon failure by Purchaser to pay
fully and punctually any such amount or to perform full and
punctually any such other obligation, Household International
shall forthwith on demand pay the amount not so paid and
perform or cause to be performed such other obligation, in
each case at the place, in the manner and at the time
specified in this Agreement. This guarantee is a guarantee of
payment and performance, and not of collectibility.
Section 14.2 Guaranty Unconditional.
The respective obligations of Parent and Household
International (each of which is referred to as the "Guarantor"
with respect to the obligations that are the subject of its
guaranty) hereunder shall be unconditional and absolute and,
without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by any of the fol-
lowing matters, in the case of Parent's Guaranty, with respect
to Seller or any of the TFS Companies, or, in the case of
Household International's Guaranty, with respect to Purchaser
(each entity whose obligations are guaranteed by Parent or
Household International, as the case may be, is referred to as
a "Guaranteed Entity"):
(a) any extension, renewal, settlement, compromise,
waiver or release in respect of any obligation of a Guaranteed
Entity under this Agreement or any related document in
connection with the transactions contemplated hereby or
thereby (the "Transaction Documents"), whether by operation of
law or otherwise;
(b) any modification or amendment of or supplement
to this Agreement or any other Transaction Document;
(c) any release, non-perfection or invalidity of
any direct or indirect guarantee of or security for any
obligation of a Guaranteed Entity under this Agreement or any
other Transaction Document;
(d) any change in the corporate existence, struc-
ture or ownership of a Guaranteed Entity or any insolvency,
bankruptcy, reorganization or other similar proceeding affect-
ing a Guaranteed Entity or its respective assets or any
resulting release or discharge of any obligation of a
Guaranteed Entity contained in this Agreement;
(e) the existence of any claim, set-off, or other
rights which the Guarantor may have at any time against a
Guaranteed Entity or any other corporation or person, whether
in connection herewith or any unrelated transactions;
provided, however, that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory
counterclaim;<PAGE>
<PAGE> 63
(f) any invalidity or unenforceability relating to
or against a Guaranteed Entity for any reason of this
Agreement or any Transaction Document, or any provision of
applicable law or regulation purporting to prohibit the
performance of any obligation or the payment of any amount
payable by a Guaranteed Entity under this Agreement or any
Transaction Document;
(g) any other act or emission to act or delay of
any kind by a Guaranteed Entity;
(h) any other circumstance whatsoever which might,
but for the provisions of this paragraph, constitute a legal
or equitable discharge of the Guarantor's obligations
hereunder; provided, however, that Parent shall not be deemed
to have waived any counterclaim or defense based on a breach
of representation, warranty, or covenant of Purchaser
hereunder that would have been a defense to the failure of
Seller or any TFS Company to make any payment or perform any
obligation in respect of which a claim is made under this
Article XIV; and provided further that Household International
shall not be deemed to have waived any counterclaim or defense
based on a breach of representation, warranty, or covenant of
Parent, Seller or any of the TFS Companies hereunder that
would have been a defense to the failure of Purchaser to make
any payment or perform any obligation in respect of which a
claim is made under this Article XIV. The guarantee provided
in this Article 14 shall encompass any modification,
supplement or amendment of this Agreement.
Section 14.3 Discharge Only Upon Performance in Full;
Reinstatement in Certain Circumstances.
Each Guarantor's obligations hereunder shall remain
in full force and effect for so long as a corresponding
Guaranteed Entity has any obligations hereunder. If at any
time any payment of any amount payable by a Guaranteed Entity
under this Agreement is rescinded or must be otherwise
restored or returned upon the insolvency, bankruptcy, or
reorganization of such Guaranteed Entity, the corresponding
Guarantor's obligations hereunder with respect to such payment
shall be reinstated as though such payment had been due but
not made at such time.
Section 14.4 Waiver of Presentment.
Each Guarantor irrevocably waives acceptance hereof,
presentment, demand, protest, and any notice not provided for
herein, as well as any requirement that at any time any action
be taken by any Person against the Guaranteed Entity or any
other Person, including without limitation that any action be
taken to pursue other remedies or to mitigate damages
resulting from a failure by the Guaranteed Entity to make any
payment or perform any obligation under this Agreement.
Section 14.5 Waiver of Subrogation and Contribution.
No Guarantor shall enforce or otherwise exercise any
right of subrogation to any of the rights of any other Party
or any indemnified person against the Guaranteed Entity and,
notwithstanding anything to the contrary contained herein,
each Guarantor hereby waives all rights of subrogation
(whether contractual, under Section 509 of the U.S. Bankruptcy
Code, at law or in equity or otherwise) to the claims of
Purchaser (in the case of Parent's Guaranty) or Parent, Seller
or any TFS Company (in the case of Household's Guaranty) or
any indemnified person against the Guaranteed Entity and all
contractual, statutory or legal or equitable rights of
contribution, reimbursement, indemnification and similar
rights and "claims" (as that term is defined in the U.S.
Bankruptcy Code) which the Guarantor might now have or
hereafter acquire against the Guaranteed Entity that arise
from the existence or performance of the Guarantor's
obligations hereunder.
<PAGE>
<PAGE> 64
ARTICLE XV
TERMINATION
Section 15.1 Termination of Agreement.
This Agreement may be terminated and the transac-
tions contemplated hereunder abandoned:
(a) At any time prior to the Closing Date by the
mutual written agreement of Seller and Purchaser;
(b) By Seller:
(i) if the Closing is not consummated on
or before September 30, 1997 unless the failure of such occur-
rence shall be due to the intentional failure of Parent,
Seller or TFS to perform or observe the covenants, agreements
and conditions hereof to be performed or observed by such
entity at or before the Closing Date;
(ii) except as contemplated by Sections
3.5 and 3.6, if events occur which render impossible
compliance with one or more of the conditions set forth in
Article X hereof and such conditions are not waived by Seller;
provided that such events did not result from any action or
omission by Parent, Seller or TFS which was within the control
of such entity and which such entity was not expressly permit-
ted to take or omit by the terms of this Agreement; or
(iii) except as contemplated by Sections
3.5 and 3.6, if Parent, Seller or TFS is enjoined by any
administrative agency, commission or court and such injunction
prevents the performance by such entity of their obligations
hereunder and such injunction shall not have been withdrawn by
September 30, 1997.
(c) By Purchaser:
(i) if the Closing is not consummated on
or before September 30, 1997, unless the failure of such
occurrence shall be due to the intentional failure of
Purchaser or Household International to perform or observe the
covenants, agreements and conditions hereof to be performed or
observed by it at or before the Closing Date;
(ii) if events occur which render impos-
sible compliance with one or more of the conditions set forth
in Article XI hereof and such conditions are not waived by
Purchaser; provided that such events did not result from any
action or omission by Purchaser or Household International
which was within its control and which Purchaser or Household
International was not expressly permitted to take or omit by
the terms of this Agreement; or
(iii) except as contemplated by Sections
3.5 and 3.6, if Purchaser is enjoined by any administrative
agency, commission or court and such injunction prevents the
performance by Purchaser of its obligations hereunder and such
injunction shall not have been withdrawn by September 30,
1997.
Section 15.2 Effect of Termination.
Except for the obligations contained in Sections,
16.2, 16.7, 16.8, 16.11 and 16.14, which shall survive any
termination of this Agreement, upon the termination of this
Agreement pursuant to Section 15.1, this Agreement shall
forthwith become null and void, and no party hereto nor any of
its Affiliates officers, directors, employees, agents,
consultants, stockholders, partners or principals shall have
any rights, liabilities or obligations hereunder or with
respect hereto, except with respect to any breach of a
covenant or obligation contained in this Agreement.
<PAGE>
<PAGE> 65
ARTICLE XVI
MISCELLANEOUS
Section 16.1 Amendment and Modification; Waiver of Provisions.
This Agreement may be amended, modified or waived
only by a written instrument executed by all of the parties
hereto. The failure of any party at any time or times to re-
quire performance of any provision of this Agreement shall in
no manner affect the right of such party at a later date to
enforce the same. No waiver by any party of any condition or
the breach of any provision, terms, covenant, representation
or warranty contained in this Agreement, whether by conduct or
otherwise, in any one or more instances shall be deemed to be
or construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term,
covenant, representation or warranty of this Agreement.
Section 16.2 Expenses.
The parties agree that fees and out-of-pocket ex-
penses shall be paid as follows:
(a) Fees and disbursements of counsel, consultants
and accountants shall be paid by the party retaining such per-
sons;
(b) Each party shall bear its own expenses incurred
with respect to filings under the HSR Act and obtaining all
required Regulatory Approvals;
(c) Each of Seller and Purchaser shall be responsi-
ble for one-half of any sales or transfer taxes arising from
the transfer of the TFS Stock to Purchaser;
(d) Seller shall be solely responsible for the fees
and expenses of Goldman, Sachs & Co. and Purchaser shall be
solely responsible for the fees and expenses of Morgan Stanley
& Co.; and
(e) All other fees and out-of-pocket expenses in-
curred in connection with the transactions contemplated hereby
shall be paid by the party incurring such expenses.
Section 16.3 Successors and Assigns; Assignments.
All terms and provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto
and their respective transferees, successors and assigns. No
party hereto may assign any of its rights or delegate any of
its duties hereunder without the prior written consent of the
other parties, and any such attempted assignment or delegation
without such consent shall be null and void.
Section 16.4 Further Assurances.
From time to time prior to, at and after the Closing
Date, each party hereto will execute all such instruments and
take all such actions as any other parties shall reasonably
request in connection with the consummation of the
transactions contemplated by this Agreement.
Section 16.5 Public Announcements.
Prior to the Closing Date, Parent, Seller and TFS,
on the one side, and Purchaser, on the other side, will, prior
to the issuance thereof, use reasonable efforts to consult
with each other about any description of the transactions
contemplated by this Agreement contained in any press release
or other public statements and provide each other with the
opportunity to review and comment upon any such description,
and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be
required by applicable law, court order or by obligations
pursuant to any listing agreement with any national securities
exchange. The parties shall use reasonable efforts to agree
on the description of the transactions contemplated by this<PAGE>
<PAGE> 66
Agreement contained in the initial press releases to be issued
by the parties with respect to their execution and delivery of
this Agreement.
Section 16.6 No Third Parties Benefited.
This Agreement is made and entered into for the pro-
tection and benefit of the parties hereto and their permitted
successors and assigns, and no other Person shall be a direct
or indirect beneficiary of or have any direct or indirect
cause of action or claim in connection with this Agreement or
any of the documents executed in connection herewith; pro-
vided, however, that those Persons expressly set forth in Sec-
tions 12.1 and 12.2 are intended beneficiaries of Article XII.
The parties hereto expressly agree that no current or former
employee nor any beneficiary or dependent of such current or
former employee of the TFS Companies is intended to have any
third party beneficiary or other rights to rely upon or sue
under or with respect to this Agreement.
Section 16.7 Notices.
All notices, requests, demands and other communi-
cations hereunder shall be in writing and shall be delivered
personally, by courier, by telecopy or by mail (regular,
certified or registered), postage prepaid, addressed as
follows:
If to Seller or TFS:
Transamerica Finance Corporation
c/o Transamerica Corporation
The Transamerica Pyramid
600 Montgomery Street
San Francisco, California 94111
Attention: Richard H. Fearon
(Telecopy: (415)983-4165)
and
Shirley H. Buccieri, Esq.
(Telecopy: (415)983-4164)
and to:
Gibson, Dunn & Crutcher LLP
One Montgomery Street
San Francisco, California 94104
Attention: Todd H. Baker, Esq.
(Telecopy: (415) 986-5309)
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Daniel A. Neff, Esq.
(Telecopy: (212) 403-2000)
If to Purchaser:
Household Acquisition Corp.
c/o Household Finance Corporation
2700 Sanders Road
Prospect Heights, Illinois 60070
Attention: General Counsel
(Telecopy: (847) 564-7447)
Household International, Inc.
2700 Sanders Road
Prospect Heights, Illinois 60070
Attention: General Counsel
(Telecopy: (847) 205-7536)
<PAGE>
<PAGE> 67
and to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Attention: Russell J. Bruemmer
(Telecopy: 202/663-6363)
or to such other address as a party may from time to time des-
ignate in writing in accordance with this section. Each
notice or other communication given to any party hereto in
accordance with the provisions of this Agreement shall be
deemed to have been received (i) on the Business Day it is
sent, if sent by personal delivery, or (ii) on the first
Business Day after sending, if sent by overnight delivery,
properly addressed and prepaid, or (iii) on the third Business
Day after sending, if sent by mail (regular, certified or
registered); provided, however, that notice of change of
address shall be effective only upon receipt.
Section 16.8 Law Governing.
This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of New York,
without giving effect to the choice of law provisions thereof.
Section 16.9 Counterparts.
This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an origi-
nal, but all of which shall constitute but one and the same
instrument.
Section 16.10 Entire Agreement.
This Agreement and the Confidentiality Agreement
constitute the entire Agreement among the parties and
supersede and cancel any and all prior agreements, written or
oral, among them relating to the subject matter hereof. The
provisions of Section 16.5 shall supersede any provision to
the contrary contained in the Confidentiality Agreement.
Section 16.11 Choice of Forum.
Any judicial proceeding brought against any of the
parties hereto with respect to this Agreement shall be brought
in any court of competent jurisdiction in the Southern
District of New York irrespective of where such party may be
located at the time of such proceeding, and by execution and
delivery of this Agreement, each of the parties to this
Agreement hereby consents to the exclusive jurisdiction of any
such court and waives any defense or opposition to such
jurisdiction.
Section 16.12 Specific Performance.
Parent and Seller acknowledge that (a) the TFS Stock
to be transferred to Purchaser pursuant to this Agreement is
unique, (b) Purchaser will not have any adequate remedy at law
if Parent or Seller fail to perform any of their respective
obligations hereunder, and (c) Purchaser shall have the right,
in addition to any other rights it may have, to specific en-
forcement of this Agreement if Parent or Seller fail to per-
form any of their respective obligations hereunder.
Section 16.13 Dispute Resolution.
Purchaser and Parent shall each designate a repre-
sentative (each, a "Representative") to oversee compliance
with each party's respective obligations under this Agreement.
If either Purchaser or Parent disputes the other's
determination under or interpretation of Section 2.3 of this
Agreement (a "Dispute"), the following procedure shall be
followed to resolve such Dispute:
<PAGE>
<PAGE> 68
Step 1: The Representatives shall meet (by confer-
ence telephone call or in person at a mutually agreeable site)
to attempt to resolve the Dispute in a mutually acceptable
manner. If agreement is reached pursuant to this Step 1,
payment shall be made within five days in accordance with such
agreement. If no agreement is reached within a reasonable
time, either or both of the Representatives shall give notice
of an impasse to Household International and Parent, and the
parties shall proceed to Step 2.
Step 2: The chief financial officer of Household
International and the chief financial officer of Parent shall
meet (by conference telephone call or in person at a mutually
agreeable site) within 72 hours after notice of an impasse is
given pursuant to Step 1. The chief financial officers shall
attempt to resolve the Dispute in a mutually acceptable
manner. If agreement is reached pursuant to this Step 2,
payment shall be made within five days in accordance with such
agreement. If no agreement is reached within a reasonable
time, either or both of the chief financial officers shall
give notice of an impasse, and Household International and
Parent shall proceed to Step 3.
Step 3: The chief executive officer of Household
International and the chief executive officer of Parent shall
meet (by conference telephone call or in person at a mutually
agreeable site) within 72 hours after notice of an impasse is
given pursuant to Step 2. The chief executive officers shall
attempt to resolve the Dispute in a mutually acceptable
manner. If agreement is reached under this Step 3, payment
shall be made within five days in accordance with such
agreement. If no agreement is reached within a reasonable
time, either or both of the chief executive officers shall
give notice of an impasse; and Purchaser and Parent shall
proceed to Step 4.
Step 4: Immediately upon notification of an impasse
under Step 3, Purchaser and Parent shall submit the Dispute
involved in such impasse to Price Waterhouse or such other na-
tionally recognized U.S. public accounting firm as Purchaser
and Parent shall mutually agree, for a binding determination
by such firm if such Dispute concerns financial issues.
Section 16.14 Waiver of Jury Trial.
EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT PER-
MITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY.
<PAGE>
<PAGE> 69
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed by their duly authorized offic-
ers, as of the day and year first above written.
TRANSAMERICA FINANCE CORPORATION
By:
Its:
TRANSAMERICA FINANCIAL SERVICES
HOLDING COMPANY
By:
Its:
TRANSAMERICA CORPORATION
By:
Its:
HOUSEHOLD ACQUISITION CORP.
By:
Its:
HOUSEHOLD INTERNATIONAL, INC.
By:
Its:
<PAGE> 1
AMENDMENT
TO
STOCK PURCHASE AGREEMENT
------------------------
THIS AMENDMENT TO STOCK PURCHASE AGREEMENT (this
"Amendment"), dated as of June 23, 1997, is entered into by and
among Transamerica Corporation, a Delaware corporation ("Parent"),
Transamerica Finance Corporation, a Delaware corporation ("Seller"),
Transamerica Financial Services Holding Company, a Delaware corporation
("TFS"), Household Acquisition Corp., a Delaware corporation ("Purchaser"),
and Household International, Inc., a Delaware corporation ("Household
International" and together with Parent, Seller, TFS and Purchaser, the
"Parties").
RECITALS
WHEREAS, the Parties have entered into that certain Stock
Purchase Agreement, dated as of May 20, 1997 (the "Agreement"), pursuant
to which Purchaser has agreed to purchase from Seller all of the issued
and outstanding capital stock of TFS; and
WHEREAS, the Parties now desire to amend the Agreement in
certain respects as reflected herein;
NOW, THEREFORE, in consideration of the premises herein
contained and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Parties agree
as follows:
AGREEMENT
1. Amendments to Section 1.1. Section 1.1 of the Agreement is
hereby amended as follows:
(a) Clause (g) of the definition of "Excluded Loans" is
amended and restated in its entirety to read as follows:
"(g) each loan held by a TFS Company (and not otherwise
described in any of clauses (a) through (f) of this sentence)
as to which a voluntary or involuntary bankruptcy case has been
commenced with respect to the borrower on or after the origination
date of such loan and on or prior to the date of the Closing
Balance Sheet which case has not (i) been dismissed, (ii) resulted
in a plan confirmed by the Bankruptcy Court under Chapter 11,
12 or 13 of the U.S. Bankruptcy Code (the "Bankruptcy Code") or
(iii) resulted in the granting of a discharge under Chapter 7 of
the Bankruptcy Code of such borrower's obligations in respect of
such loan;"
(b) The definition of "TFS Subsidiaries" is amended and
restated in its entirety to read as follows:
""TFS Subsidiaries" shall mean all of the TFS Direct
Subsidiaries."
(c) The definition of "TFS Direct Subsidiaries" shall be
amended by deleting therefrom "Pacific Service Escrow, Inc., a Delaware
corporation;"
(d) The definition of "TFS Indirect Subsidiary" is deleted
in its entirety.
(e) There shall be added to Section 1.1 of the Agreement a new
definition of "Pacific Service" which shall read in its entirety as follows:
""Pacific Service" shall mean Pacific Service Escrow Inc., a
Delaware corporation."
(f) There shall be added to Section 1.1 of the Agreement a new
definition of "Amendment" which shall read in its entirety as follows:
""Amendment" shall mean the Amendment to this Agreement, dated
as of June 23, 1997, by and among Parent, Seller, TFS, Household
International and Purchaser."
<PAGE>
<PAGE> 2
2. Amendment to Section 2.1. Section 2.1 of the Agreement is hereby
amended by (i) deleting therefrom "$3,959,353,259" and substituting therefor
"$3,860,046,666" and (ii) adding a new sentence at the end thereof that reads
in its entirety as follows: "The parties acknowledge and agree that the
$3,860,046,666 Purchase Price reflects all adjustments contemplated by
Section 2.3 and an agreed adjustment of __________ related to the amendment
to clause (g) of the definition of Excluded Loans."
3. Amendment to Section 2.3. Section 2.3(b)(ii) of the Agreement
is hereby amended by deleting therefrom "Section 16.14" and substituting
therefor "Section 16.13".
4. New Section 2.6. There shall be added to the Agreement a new
Section 2.6 which shall read in its entirety as follows:
"Section 2.6 Post-Closing Purchase Price Adjustment. If
within ninety (90) days after the Closing Date Purchaser
determines that the Loan Receivables for all Loans held by the
TFS Companies as of May 31, 1997 which are excluded from the
definition of Excluded Loans pursuant to subclauses (i), (ii)
or (iii) of clause (g) of the definition of Excluded Loans
exceed $___________, and demonstrates this excess to Parent's
and Seller's reasonable satisfaction (after making available
sufficient detail and supporting information to enable Parent
and Seller to review and evaluate Purchaser's calculations),
then promptly thereafter Seller shall pay to Purchaser, by wire
transfer of immediately available funds to an account designated
by Purchaser in writing, an amount equal to (i) the amount in
excess of ____________ multiplied by (ii) ____; provided,
however, that such payment shall not exceed ________.
5. Amendment to Section 3.1. Section 3.1 of the Agreement is hereby
amended by adding a new sentence to the end thereof that reads in its
entirety as follows:
"The Closing shall be effective as of 5:01 p.m., Pacific Time,
on the Closing Date."
6. Amendment to Section 4.7. Section 4.7(c) of the Agreement is
hereby amended and restated in its entirety to read as follows:
"(c) [RESERVED]."
7. New Section 8.11. There shall be added to the Agreement a new
Section 8.11 which shall read in its entirety as follows:
"Section 8.11 Pacific Service. Immediately following the
Closing, Seller shall cooperate with Household International and the
TFS Companies in their efforts to employ the employees of Pacific
Service. Notwithstanding anything to the contrary contained in this
Agreement, all employees of Pacific Service shall, from and after the
date on which such employees cease employment with Pacific Service,
be deemed to be, and shall be treated for all purposes of this
Agreement as, Company Employees. Household International and
Purchaser agree that, if requested by Pacific Service on or before
the date which is the two-year anniversary of the Closing Date, they
shall cause all the former Pacific Service employees who are then
employees of Household International, Purchaser, any of the TFS
Companies or any other Affiliates of Household International to
reasonably cooperate with and assist Pacific Service in connection
with any audit of Pacific Service required under California law and
the servicing and closing of escrow accounts open on the Closing Date."
8. New Section 8.12. There shall be added to the Agreement a new
Section 8.11 which shall read in its entirety as follows:
"Section 8.12 IS Employees.
(a) On or before the Closing Date, Parent shall take all
reasonable actions to cause each of the employees of a TFS Company
employed in the Information Services Department at TFS Headquarters
(collectively, the "IS Employees") to become an employee of Parent
or one of its Affiliates that is not a TFS Company (the "IS
Employer"). Following the Closing, the IS Employees shall perform
such services for TFS and its Affiliates as are necessary for Parent
and Seller to fulfill their obligations to Household International
<PAGE>
<PAGE> 3
and Purchaser under the Services Support Agreement. In consideration
for such services, the fully allocated direct costs to the IS
Employer of IS Employees shall be included in determining the Servicing
Fee pursuant to Section 3.1 of the Services Support Agreement.
(b) Notwithstanding anything to the contrary contained in this
Agreement or the Services Support Agreement, in addition to the
Servicing Fee (as defined in the Services Support Agreement),
Purchaser and Household International shall be responsible for all
direct and indirect costs and expenses incurred by Parent, Seller,
any TFS Company or the IS Employer on or after the Closing Date
relating to the following (the "Additional IS Employee Expenses"):
(i) separation and retention pay (provided, however, that Purchaser
and Household International shall only be required to pay ____ of
such costs and expenses attributable to the 64 IS Employees added
to the Special Retention and Severance Plan for such employees on
June 20, 1997, and (ii) the full cost, on an ongoing or present
value basis, of disability payments and medical claims for any IS
Employee who has incurred on or after the Closing a disability while
an IS Employee. Purchaser and Household International jointly and
severally agree that, within 10 days after delivery by the IS
Employer of any invoice for Additional IS Employee Expenses or
IS Employee Indemnified Costs (defined below), they shall pay to
the IS Employer the amount shown on such invoice as due and payable.
(c) Notwithstanding anything to the contrary contained in
Article XII, Purchaser and Household International shall jointly and
severally indemnify Parent, Seller, and their Affiliates, officers,
directors, employees, agents, successors, and assigns, and related
entities for, and hold each of such Persons harmless against, and
reimburse them promptly upon request for, any and all Indemnified
Costs arising in connection with or resulting from claims based in
any way on the employer-employee relationship (including the
termination of such relationship for any reason or no reason) between
any IS Employee and the IS Employer ("IS Employee Indemnified Costs");
provided, however, that Purchaser and Household shall not be liable
for any Indemnified Costs arising in connection with or resulting
from claims based on: (i) intentional misconduct by any IS
Employer; (ii) wrongful conduct by any IS Employer that occurs on
or before 60 days after the Conversion Date and is unrelated
to employee terminations; and (iii) wrongful conduct by any IS
Employer that occurs after 60 days after the Conversion Date."
9. New Section 8.13. there shall be added to the Agreement a
new Section 8.13 which shall read in its entirety as follows:
"Section 8.13 Special Retention Incentive Program Payments.
Purchaser shall, within two (2) Business Days of the Closing Date,
pay by wire transfer of immediately available funds denominated in
U.S. dollars to Seller's Account _____________ reflecting checks
issued by Parent relating to payments under the Special Retention
Incentive Program."
10 New Section 12.3. Section 12.3(h) of the Agreement is hereby
amended by adding the following to the end of such section:
"or (with respect to claims filed and served upon any of the
TFS Companies prior to the Closing Date) Section 12.1(a)(iv)."
11. Amendment to Section 16.13. Section 16.13 of the Agreement
is hereby amended by deleting therefrom "Section 2.3" and substituting
therefor "Sections 2.3 or 2.6".
12. Purchase and Sale of TFS Software. Notwithstanding anything
to the contrary that may be contained in the Agreement, immediately after
the Closing, Household International and Purchaser agree to cause each of
the TFS Companies to sell, convey, assign, transfer and deliver to Seller
or any of its Affiliates designated by Seller, and Seller and any such
Affiliates agree to purchase, accept and acquire from the TFS Companies
immediately following the Closing all right, title and interest of each TFS
Company to any and all computer software owned or otherwise held by such
TFS Company on the Closing Date (the "TFS Software"), for a purchase price
of _____ pursuant to a Bill of Sale in the form attached as Exhibit A
hereto. The purchase and sale of the TFS Software shall be made without
representation or warranty by Household International or Purchaser of any
kind. Upon payment of said purchase price, Household International and
Purchaser shall cause the applicable TFS Companies to deliver the TFS
Software to Seller or any designated Affiliate of Seller.
<PAGE>
<PAGE> 4
13. Defined Terms. Except as otherwise provided herein, initially
capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Agreement.
14. Governing Law. This Amendment shall be governed by, construed
and enforced in accordance with the laws of the State of New York, without
giving effect to the choice of law provisions thereof.
15. Counterparts. This Amendment may be executed in one or more
counterparts, all of which will constitute one and the same instrument.
16. Effect On Agreement. Except as amended hereby, the Agreement
shall continue unmodified and in full force and effect.
IN WITNESS WHEREOF, the Parties have caused this Amendment to
be duly executed by their duly authorized officers, as of the day and year
first above written.
TRANSAMERICA CORPORATION
By:
----------------------------
Its:
----------------------------
TRANSAMERICA FINANCE CORPORATION
By:
----------------------------
Its:
----------------------------
TRANSAMERICA FINANCIAL SERVICES
HOLDING COMPANY
By:
----------------------------
Its:
----------------------------
HOUSEHOLD INTERNATIONAL, INC.
By:
----------------------------
Its:
----------------------------
HOUSEHOLD ACQUISITION CORP.
By:
----------------------------
Its:
----------------------------
