Page 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 23, 1997
Transamerica Finance Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-6798 95-1077235
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
600 Montgomery Street
San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 983-4000
Not applicable
(Former name or former address, if changed since last report.)
<PAGE>
Page 2
Item 2. Acquisition or Disposition of Assets
On June 23, 1997, Transamerica Finance Corporation sold substantially all of its
real estate secured lending operations to a subsidiary of Household
International, Inc. for total proceeds of $3.9 billion, or $1.1 billion after
repayment of associated debt. A definitive agreement for the sale was originally
announced on May 21, 1997. The amount of consideration received in the sale was
determined through negotiations with Household.
Proceeds from the transaction, net of expenses, will be used to pay down debt
and pay a dividend to Transamerica Corporation.
As a result of the sale, Transamerica Finance Corporation's second-quarter will
include an after-tax gain of $275 million after taking into account taxes,
write-downs of intangibles and other items.
Item 7. Financial Statements and Exhibits
b) Pro forma financial information.
Unaudited Pro Forma Condensed Balance Sheet
as of March 31, 1997..................................Page F-1
Unaudited Pro Forma Condensed Income Statement
for the year ended December 31, 1996..................Page F-2
Unaudited Pro Forma Condensed Income Statement
for the three months ended March 31, 1997.............Page F-3
The following unaudited pro forma consolidated financial statements as
of March 31, 1997, and for the year ended December 31, 1996 and the three months
ended March 31, 1997, reflect the financial position and results of operations
of Transamerica Finance Corporation after giving effect to the transaction
described in Item 2 of this filing.
These pro forma statements have been prepared by Transamerica Finance
Corporation based upon assumptions identified in the related footnotes. The pro
forma adjustments presented herein are shown for comparative purposes only, and
Transamerica Finance Corporation's financial statements will reflect the
transactions only from the transaction date of June 23, 1997. The statements are
based on the previously reported historical financial statements of Transamerica
Finance Corporation and should be read in conjunction with those financial
statements and the related notes.
The pro forma consolidated balance sheet assumes the transaction took
place on March 31, 1997. The pro forma consolidated income statement for the
year ended December 31, 1996 assumes the transaction took place on January 1,
1996. The pro forma consolidated income statement for the three months ended
March 31, 1997 assumes the transaction took place on January 1, 1997.
<PAGE>
Page 3 F-1
PRO FORMA FINANCIAL INFORMATION
<TABLE>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1997
(Unaudited)
(Amounts in millions)
<CAPTION>
Historical Pro forma Pro forma
Amounts Adjustments Consolidated
<S> <C> <C> <C>
ASSETS
Finance receivables, net
of allowance for losses
and unearned fees $ 4,226.8 $ 4,226.8
Equipment held for lease, net
of accumulated depreciation 3,048.3 3,048.3
Assets held for sale, net of
valuation allowance 3,810.7 a) $ (3,539.6) 289.4
b) 18.3
Other 1,150.3 1,150.3
------------------- ------------------ -----------------
$ 12,236.1 $ (3,521.3) $ 8,714.8
=================== ================== =================
LIABILITIES AND STOCKHOLDER'S EQUITY
Notes and loans payable $ 9,501.0 c) $ (59.6) $ 6,289.5
a) (3,151.9)
Other liabilities 721.2 d) 38.8 760.0
Income taxes payable 366.6 a) 13.1 379.7
------------------- ------------------ -----------------
10,588.8 (3,159.6) 7,429.2
Stockholder's equity 1,647.3 e) 275.0 1,285.6
f) (655.0)
b) 18.3
------------------- ------------------ -----------------
$ 12,236.1 $ (3,521.3) $ 8,714.8
=================== ================== =================
</TABLE>
<PAGE>
Page 4 F-2
PRO FORMA FINANCIAL INFORMATION
<TABLE>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year ended December 31, 1996
(Unaudited)
(Amounts in millions)
<CAPTION>
Historical Pro forma Pro forma
Amounts Adjustments Consolidated
<S> <C> <C> <C>
REVENUES
Finance charges $ 1,152.7 g) $ (598.9) $ 553.8
Leasing revenues 689.1 689.1
Other 87.9 87.9
----------------- ------------------ -------------------
1,929.7 (598.9) 1,330.8
EXPENSES
Interest and debt expense 607.8 c) (3.0) 380.4
g) (224.4)
Depreciation on equipment
held for lease 255.0 255.0
Provision for losses on
receivables and assets
held for sale 280.7 g) (62.7) 218.0
Salaries and other operating
expenses 640.5 g) (144.4) 496.1
----------------- ------------------ -------------------
1,784.0 (434.5) 1,349.5
Income before taxes 145.7 (164.4) (18.7)
Income taxes 51.2 g) (70.3) (18.0)
c) 1.1
----------------- ------------------ -------------------
Net income (loss) $ 94.5 $ (95.2) $ (0.7)
================= ================== ===================
</TABLE>
<PAGE>
Page 5 F-3
<TABLE>
TRANSAMERICA FINANCE CORPORATION AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
Quarter ended March 31, 1997
(Unaudited)
(Amounts in millions)
<CAPTION>
Historical Pro forma Pro forma
Amounts Adjustments Consolidated
<S> <C> <C> <C>
REVENUES
Finance charges $ 256.7 g) $ (132.5) $ 124.2
Leasing revenues 189.0 189.0
Other 24.5 24.5
-------------------- ------------------ ------------------
470.2 (132.5) 337.7
EXPENSES
Interest and debt expense $ 143.9 c) $ (0.8) $ 90.9
g) (52.2)
Depreciation on equipment
held for lease 67.5 67.5
Provision for losses on
receivables and assets
held for sale 35.5 g) (13.0) 22.5
Salaries and other operating
expenses 169.3 g) (32.8) 136.5
-------------------- ------------------ ------------------
416.2 (98.8) 317.4
Income before taxes 54.0 (33.7) 20.3
Income taxes 18.8 g) (13.7) 5.4
c) 0.3
-------------------- ------------------ ------------------
Net income $ 35.2 $ (20.3) $ 14.9
==================== ================== ==================
<PAGE>
Page 6
<FN>
a) Reflects the balance of assets sold and liabilities extinguished as of
March 31, 1997.
b) Reflects the May 1997 capital contribution by Transamerica Corporation of
assets sold.
c) Reflects the lower debt outstanding as a result of using a portion of the
total proceeds to releverage the entity at 6.5:1 debt to equity, and the
related reduction in interest expense using Transamerica Finance
Corporation's average cost of variable debt of 5.0%.
d) Reflects the accruals for expected costs incurred in connection with the
sale.
e) Reflects the after-tax gain recorded on the transaction.
f) Reflects the dividend to Transamerica Corporation.
g) Reflects the elimination of the pro forma operating results of the business
sold.
</FN>
</TABLE>
<PAGE>
Page 7
Exhibits
10.1 Stock Purchase Agreement by and among Transamerica Corporation,
Transamerica Finance Corporation, Transamerica Financial Services Holding
Company, Household Acquisition Corp. and Household International, Inc.
dated as of May 20, 1997.
<PAGE>
Page 8
Signatures
Pursuant to the requirements 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.
TRANSAMERICA FINANCE CORPORATION
(Registrant)
Burton E. Broome
Vice President and Controller
Date: July 7, 1997
EXECUTION COPY
================================================================================
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>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS............................................................................................2
Section 1.1 Definitions..................................................................................2
Section 1.2 Accounting Terms............................................................................13
Section 1.3 Interpretation..............................................................................13
ARTICLE II PURCHASE PRICE AND PAYMENT...........................................................................14
Section 2.1 Purchase and Sale of TFS Stock..............................................................14
Section 2.2 Terms and Method of Payment of Purchase Price...............................................14
Section 2.3 Calculation of Purchase Price...............................................................14
Section 2.4 Repurchase of Excluded Assets...............................................................16
Section 2.5 Interest on Purchase Price..................................................................17
ARTICLE III CLOSING.............................................................................................17
Section 3.1 The Closing.................................................................................17
Section 3.2 Parent's, Seller's and TFS's Deliveries.....................................................17
Section 3.3 Purchaser's Deliveries......................................................................18
Section 3.4 Further Assurances..........................................................................19
Section 3.5 Arcadia Companies...........................................................................19
Section 3.6 TFS BC......................................................................................20
Section 3.7 Closing with Less Than All Loan Regulatory Approvals........................................21
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT, SELLER AND TFS.............................................21
A. REPRESENTATIONS AND WARRANTIES REGARDING PARENT, SELLER AND THE TFS COMPANIES........................21
Section 4.1 Corporate Status............................................................................21
Section 4.2 Corporate Authority.........................................................................22
Section 4.3 Non-Contravention...........................................................................22
Section 4.4 Ownership of Stock..........................................................................22
Section 4.5 Regulatory Authorizations...................................................................23
Section 4.6 Title, Liens, etc. .........................................................................23
Section 4.7 Employees...................................................................................23
Section 4.8 Brokers.....................................................................................25
Section 4.9 Approvals and Consents......................................................................26
Section 4.10 Trademarks and Other Intellectual Property.................................................26
Section 4.11 Contracts..................................................................................26
Section 4.12 Taxes......................................................................................26
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<PAGE>
Section 4.13 Financial Information......................................................................27
Section 4.14 Environmental..............................................................................27
Section 4.15 Compliance with Laws.......................................................................27
Section 4.16 Non-Competition and Non-Solicitation Agreements............................................27
Section 4.17 Insurance..................................................................................28
Section 4.18 Guarantees.................................................................................28
Section 4.19 No Illegal or Improper Transactions........................................................28
B. REPRESENTATIONS AND WARRANTIES REGARDING PORTFOLIO OF LOANS..........................................28
Section 4.20 Characteristics of Loan Portfolio..........................................................28
C. REPRESENTATIONS AND WARRANTIES AS TO THE INSURANCE BUSINESS..........................................29
Section 4.21 Qualification..............................................................................29
Section 4.22 Statutory Statements.......................................................................29
Section 4.23 Investments/Defaults.......................................................................30
Section 4.24 Reserves...................................................................................30
Section 4.25 Reinsurance Treaties.......................................................................31
Section 4.26 Certain Business Practices.................................................................31
Section 4.27 Limitation on Representations and Warranties...............................................31
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER AND HOUSEHOLD INTERNATIONAL...............................32
Section 5.1 Corporate Status............................................................................32
Section 5.2 Corporate Authority.........................................................................32
Section 5.3 Non-Contravention...........................................................................32
Section 5.4 Brokers.....................................................................................33
Section 5.5 Qualification as a Licensee.................................................................33
Section 5.6 Litigation..................................................................................33
Section 5.7 Funds.......................................................................................33
Section 5.8 Approvals and Consents......................................................................33
Section 5.9 Investment Representation...................................................................33
Section 5.10 Purchaser's or Household International's Qualified Plans...................................34
ARTICLE VI COVENANTS OF PARENT, SELLER AND TFS PENDING THE CLOSING..............................................34
Section 6.1 Excluded Assets and Excluded Liabilities....................................................34
Section 6.2 Operation of the Business...................................................................35
Section 6.3 Access to Facilities, Files and Records.....................................................37
Section 6.4 Consents....................................................................................37
Section 6.5 Notice of Proceedings.......................................................................38
Section 6.6 Hart-Scott-Rodino Filing....................................................................38
Section 6.7 Application for Regulatory Approvals........................................................38
Section 6.8 No Shop.....................................................................................39
Section 6.9 Financial Statements........................................................................39
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<PAGE>
Section 6.10 Affiliate Receivables and Intercompany Contracts...........................................39
Section 6.11 Intercompany and Third Party Debt..........................................................39
Section 6.12 Insurance Certificates and Worker's Compensation...........................................40
Section 6.13 Accounts and Powers of Attorney............................................................40
Section 6.14 Other Confidentiality Agreements...........................................................40
ARTICLE VII COVENANTS OF PURCHASER PENDING THE CLOSING..........................................................40
Section 7.1 Application for Regulatory Approvals........................................................40
Section 7.2 Notice of Proceedings.......................................................................41
Section 7.3 Hart-Scott-Rodino Filing....................................................................41
Section 7.4 Financial Information.......................................................................41
Section 7.5 Non-Solicitation of Borrowers and Policy Holders............................................41
ARTICLE VIII POST-CLOSING COVENANTS.............................................................................42
Section 8.1 Cooperation; Record Retention...............................................................42
Section 8.2 Insurance...................................................................................42
Section 8.3 No Use of Transamerica Marks................................................................42
Section 8.4 Non-Solicitation Agreement..................................................................43
Section 8.5 Consumer Finance Business...................................................................43
Section 8.6 Services Support Agreement..................................................................43
Section 8.7 Releases....................................................................................44
Section 8.8 Transfer of Property........................................................................44
Section 8.9 Claims relating to Excluded Assets..........................................................44
Section 8.10 Redirection of Responses to Mailings.......................................................44
ARTICLE IX EMPLOYEES............................................................................................44
Section 9.1 Employee Relations Matters..................................................................44
Section 9.2 TC Pension Plan.............................................................................46
Section 9.3 Employee Welfare Benefit Plans..............................................................47
Section 9.4 Employee Communication......................................................................48
Section 9.5 No Other Restrictions.......................................................................49
ARTICLE X CONDITIONS TO THE OBLIGATIONS OF PARENT, SELLER AND TFS...............................................49
Section 10.1 Representations, Warranties, and Covenants.................................................49
Section 10.2 Proceedings................................................................................49
Section 10.3 Regulatory Approvals.......................................................................50
Section 10.4 Hart-Scott-Rodino..........................................................................50
Section 10.5 Deliveries.................................................................................50
ARTICLE XI CONDITIONS TO THE OBLIGATIONS OF PURCHASER...........................................................50
Section 11.1 Representations, Warranties and Covenants..................................................50
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<PAGE>
Section 11.2 Proceedings................................................................................51
Section 11.3 Regulatory Approvals.......................................................................51
Section 11.4 Hart-Scott-Rodino..........................................................................51
Section 11.5 Deliveries.................................................................................51
Section 11.6 Closing Balance Sheet, Closing Tape, Net Funds Report and Excluded Loans Update............52
Section 11.7 Extinguishment of Intercompany Debt........................................................52
ARTICLE XII INDEMNIFICATION.....................................................................................52
Section 12.1 By Parent and Seller.......................................................................52
Section 12.2 By Purchaser...............................................................................53
Section 12.3 Indemnification Procedure..................................................................54
Section 12.4 Survival...................................................................................55
Section 12.5 Exclusivity................................................................................55
ARTICLE XIII TAX MATTERS........................................................................................55
Section 13.1 Section 338 Elections and Forms............................................................55
Section 13.2 Tax Indemnity by Seller....................................................................56
Section 13.3 Tax Indemnity by Purchaser.................................................................57
Section 13.4 Allocation of Certain Taxes................................................................57
Section 13.5 Filing Responsibility......................................................................57
Section 13.6 Refunds....................................................................................58
Section 13.7 Cooperation and Exchange of Information....................................................58
Section 13.8 Termination of Tax Sharing Agreements......................................................59
Section 13.9 Coordination...............................................................................59
Section 13.10 Survival..................................................................................60
ARTICLE XIV GUARANTIES BY PARENT AND HOUSEHOLD INTERNATIONAL....................................................60
Section 14.1 The Guaranties.............................................................................60
Section 14.2 Guaranty Unconditional.....................................................................60
Section 14.3 Discharge Only Upon Performance in Full; Reinstatement in Certain Circumstances............61
Section 14.4 Waiver of Presentment......................................................................62
Section 14.5 Waiver of Subrogation and Contribution.....................................................62
ARTICLE XV TERMINATION..........................................................................................62
Section 15.1 Termination of Agreement...................................................................62
Section 15.2 Effect of Termination......................................................................63
ARTICLE XVI MISCELLANEOUS.......................................................................................63
Section 16.1 Amendment and Modification; Waiver of Provisions...........................................63
-iv-
<PAGE>
Section 16.2 Expenses...................................................................................63
Section 16.3 Successors and Assigns; Assignments........................................................64
Section 16.4 Further Assurances.........................................................................64
Section 16.5 Public Announcements.......................................................................64
Section 16.6 No Third Parties Benefited.................................................................64
Section 16.7 Notices....................................................................................65
Section 16.8 Law Governing..............................................................................66
Section 16.9 Counterparts...............................................................................66
Section 16.10 Entire Agreement..........................................................................66
Section 16.11 Choice of Forum...........................................................................66
Section 16.12 Specific Performance......................................................................66
Section 16.13 Dispute Resolution........................................................................66
Section 16.14 Waiver of Jury Trial......................................................................67
</TABLE>
-v-
<PAGE>
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
-vi-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered
into as of May 20, 1997 by and among Transamerica Corporation, a Delaware
corporation ("Parent"), Transamerica Finance Corporation, a Delaware corporation
("Seller"), and Household Acquisition Corp., a Delaware corporation
("Purchaser"), 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 attendant 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 subsidiary of
Parent and is the owner of all of the issued and outstanding 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:
<PAGE>
AGREEMENT
ARTICLE I.
DEFINITIONS
Section 1.1. Definitions.
As used herein, except as otherwise expressly provided 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 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
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<PAGE>
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 Section 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.
"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 assigned 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
-3-
<PAGE>
and regulations promulgated thereunder.
"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 International, 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 Transamerica
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, together 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, administrative 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.
"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 Agreements and
the contracts, agreements, commitments or instruments set forth on Schedule
1.1B.
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<PAGE>
"Excluded Leasehold Improvements" shall mean the leasehold
improvements at the TFS Headquarters, the Derby Branch, the DP Center, the
Resolution Center and the Loss Recovery Center.
"Excluded Liabilities" shall have the meaning assigned 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 division, or its
Canadian division); (b) all real estate loans originated in the United Kingdom
held by Transamerica Acceptance 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 revolving 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.
"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.
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"Financial Statements" shall have the meaning assigned 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, measured 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 policies under
which an Arcadia Company is the insurer or reinsurers.
"Insurance Policy Files" shall mean all files maintained 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 between any
TFS Company, on the one hand, and Parent, Seller or any Affiliate thereof, on
the other hand.
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"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 Agreement, 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, encumbrance,
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 business, 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.
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"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 mortgage, deed
of trust, conditional sales contract, or other encumbrance on real property.
"Net Funds Contributed" shall have the meaning assigned to the
term in Section 2.3.
"Net Funds Report" shall have the meaning assigned to the term
in Section 2.3.
"Net Funds Report Date" shall have the meaning assigned 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 assigned 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 assigned 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 obligated to any
of the TFS Companies in connection with a loan, retail installment or sales
finance contract, or other obligation 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,
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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.
"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 0.187.
"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.
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"Regulatory Authorizations" shall include all permits,
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 Contracts 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.
"Section 338(g) Election" shall mean an election described in
Section 338(g) of the Code with respect to Purchaser'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 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 Forms" shall mean all returns, documents,
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 Internal
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.
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"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 assigned 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 foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs, duties, capital
stock franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty or addition
thereto, and including 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.
"Tax Authority" shall mean any governmental authority,
domestic or foreign, having jurisdiction over the assessment, 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 regulations 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 preamble hereto.
"TFS Balance Sheet" shall have the meaning assigned to the
term in Section 2.3.
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"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 assigned to
the term in Section 3.6.
"TFS Benefit Arrangement" shall mean any Benefit Arrangement
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 following
corporations which are wholly-owned by TFS: Arcadia General Insurance Company,
an Arizona corporation; Arcadia National 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.
"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 Benefit 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,
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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 outstanding
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 assigned 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 "Transamerica",
(b) the stylized pyramid logo of Transamerica Corporation, (c) any
representation or other likeness of the Transamerica Building located at 600
Montgomery Street, San Francisco, 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 otherwise 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.
Section 1.2. Accounting Terms
All accounting terms not otherwise defined herein shall have
the respective meanings assigned to them in accordance with GAAP.
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Section 1.3. Interpretation.
The headings preceding the text of Articles, Sections,
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 applicable, 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,"
"paragraphs," "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
$3,959,353,259, as the same may be adjusted pursuant to Sections 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 estimate 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 purposes 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 diskettes that are readable by Purchaser) prepared as of the date of
the Closing Balance
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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 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 $25 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 $25 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 increased 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
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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 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 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 transferred 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 aggregate Repurchase Price for all Excluded
Loans and Excluded Assets for which Purchaser has given
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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 Excluded 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 Premium 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
.50%, 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 relating to each repurchased
Excluded Loan and shall execute and deliver such instruments of transfer or
assignment, in each 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 Five Million Dollars ($5,000,000.00),
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 one hundred eighty (180) 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 July 1, 1997 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
3.00%; and (2) on and after the later of August 15, 1997 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 5.00%.
ARTICLE III.
CLOSING
Section 3.1. The Closing.
The consummation of the transactions provided for in this
Agreement (the
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"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:
(a) 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.
(d) Certified copies of resolutions, duly adopted by the Board
of Directors of Parent, Seller, and TFS, respectively, which shall be in full
force and effect at the time of the Closing, authorizing the execution, delivery
and performance by Parent, Seller and TFS, respectively, of this Agreement and
the consummation of the transactions contemplated hereby.
(e) The officers' certificates referred to in Sections
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 "canceled" 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, including 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 $25 million that
is affected by unresolved issues 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.
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(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 Section 10.1(c)
and (d).
(e) Such other documents or payments as are reasonably
required to be delivered or paid by Purchaser to effectuate 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 whatever
documents or other evidence of title as may be reasonably requested by Purchaser
to confirm Purchaser's ownership of the TFS Stock.
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 Insurance 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 Approval, one or more
other conditions to the Closing contemplated 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 satisfaction 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
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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 insurance 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.
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 pursuant to this Article III the Closing and all
other transactions 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 satisfaction 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
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 TFS BC and Purchaser,
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respectively, on the date on which the TFS BC Purchase is consummated, with only
such modifications as are necessary to reflect 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 as 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 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 be 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,
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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 corporate 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, valid and binding obligation of
Parent, Seller and TFS, enforceable 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 passage of time or both, will (a) conflict with the charter or
bylaws of Parent, Seller or any of the TFS Companies, (b) assuming 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 Contract
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, applicable 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
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and are fully paid, nonassessable and free of preemptive rights. TFS is not
bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the transfer, 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 Subsidiaries, 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 equity 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.
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 Regulatory
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 material 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.
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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 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 examination (and have not
received notice of a potential audit or examination) 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;
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(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 respect 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, correct, and
complete list of the materials set forth on Schedule 4.7F with respect to
employees.
(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
Companies' 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.
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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 Contracts, no approval or consent of any Person not a
party to this Agreement is legally or contractually required to be obtained 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
connection 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 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.
(b) Each Material Contract is in full force and effect 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
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(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 decreased as a result of
increases or decreases in Loan Receivables 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 received 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 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, ordinance, regulation or Regulatory Authorization, including,
without limitation, usury laws, the Real Estate Settlement Procedures
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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 otherwise, 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, directly 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
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.
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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 commercial
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;
(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
description 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.
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(c) Each Insurance Company belongs to all required rating
bureaus, service organizations, insolvency funds, assigned risk pools and
similar organizations necessary to conduct the business as it is now being
conducted.
Section 4.22. Statutory Statements.
Seller previously made available to Purchaser a complete 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 accounting 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 otherwise invested in or
committed to purchase or otherwise invest in any interest in real property
(including, any extension of credit secured by a mortgage
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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 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 Accounting 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 standards 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 Insurance 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 provided 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 agreements
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
accordance 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 become payable
and not subject to a bona fide dispute by any Insurance 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;
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(b) No outstanding insurance policy or annuity contract
issued, reinsured or underwritten by any Insurance Company 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.
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
contemplated 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
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Purchaser and Household International 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 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)
conflict with the certificate of incorporation or by-laws (or 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, regulations and
policies pertaining to the conduct of a consumer finance business and insurance
related thereto, having consulted with counsel knowledgeable as to such matters.
Purchaser hereby affirms that it possesses legal and financial qualifications
consistent with such requirements to be a licensee, 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 Purchaser's
ownership after the Closing Date) as owner and servicer 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
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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 connection 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 connection 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.
Section 5.10. Purchaser's or Household International's Qualified 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 constitute 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;
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(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;
(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.
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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 applicable laws, rules,
regulations, and Regulatory Authorizations including usury laws, 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; 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);
(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;
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(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, investment, actuarial, financial reporting, tax, reserve
or accounting 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 expressly
authorized under this Agreement or as otherwise consented to in writing by
Purchaser, no TFS Company will between the date hereof and the Closing:
(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
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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 consents 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 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 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.
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 Business 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.
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Section 6.7. Application for Regulatory Approvals.
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 (the "Audited Financial Statement") 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 adjustments (consisting of normal recurring accruals)
considered 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 Statement 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.
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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, Parent 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 certificates 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 request each
party to a confidentiality agreement in connection with the exploration of an
acquisition 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.
ARTICLE VII.
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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 Approvals.
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 applications 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 Business 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 having 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 financial and
other information as shall be reasonably requested by the counterparty or
counterparties to any Restricted Contract and the landlords under the Branch
leases in connection with seeking any Landlord Consent as provided for in
Section 6.4.
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Section 7.5. Non-Solicitation of Borrowers and Policy Holders.
On or before the Closing Date, Purchaser and its Affiliates
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 action 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 insurance
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
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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 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, regulatory and other routine 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 themselves 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
Borrower, individually or as a group thereof (whether by use of direct mail
marketing or other means of mass marketing intended 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
Finance Business that includes retail branches which engage in the traditional
branch-based Consumer Finance Business emphasizing in-person contact with
borrowers and prospective borrowers at the branch. Notwithstanding the preceding
sentence, Parent, Seller and their Affiliates shall be permitted (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
solicitations 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
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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 operate a Consumer Finance
Business without any restriction other than that imposed by Section 8.4.
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, Parent and
Seller shall obtain, and shall deliver evidence satisfactory 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 request 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) redirect 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 mailings 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.
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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 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 Purchaser, or the
Purchaser's ERISA Affiliates shall have any liability or responsibility with
respect to contributions to Qualified Plans maintained by Seller and its ERISA
Affiliates.
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 coverage, 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 Benefit Plan or Benefit Arrangement of Purchaser or Household
International that so limits the commencement of participation therein, (i)
in any
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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 benefits 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 practicable after Closing. No later than
May 23, 1997, Purchaser shall provide Seller with summary plan descriptions
and prospectuses 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 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.
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.
Purchaser agrees to provide, to any Company Employee who terminates
employment within six months subsequent to the Closing Date, severance in
accordance with the Separation 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.
TC Pension Plan.
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 Company 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
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shall be known as the "Covered Employees."
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.
The trustee of the TC Pension Plan shall transfer 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 value
of benefits on a termination basis (within the meaning of Treas. Reg. '
1.414l-1(b)(5)), as certified by Seller's actuary.
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 used,
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 calculations, 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.
The total amount of assets to be transferred shall be equal to the "Closing
Covered ABO" calculated as follows: 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.
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.
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Employee Welfare Benefit Plans.
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.
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.
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.
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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.
No Other Restrictions.
Nothing in this Agreement shall (a) restrict or otherwise
inhibit Purchaser's or the TFS Companies' right to terminate 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, policies, 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:
Representations, Warranties, and Covenants.
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 warranties 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;
Purchaser 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 it prior to or at the Closing Date; and
Purchaser shall have furnished Seller with a certificate dated the Closing
Date and duly executed by an officer 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.
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Household International shall have furnished Seller with a certificate
dated the Closing Date and duly executed by an officer of Household
International authorized by Household International 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 Household International have
been satisfied.
There shall not have occurred since March 31, 1997 any event or
circumstances that have a Material Adverse Effect on Purchaser.
Proceedings.
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.
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.
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. For purposes of this Agreement, "Final" shall mean action by the
applicable Regulatory 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 suspended. 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.
Hart-Scott-Rodino.
The waiting period under the HSR Act shall have expired or
been terminated.
Deliveries.
Seller and TFS shall have received the items to be delivered
by Purchaser pursuant to Sections 3.3(a) through (d), inclusive.
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ARTICLE XI
CONDITIONS TO THE OBLIGATIONS OF PURCHASER
Unless waived in writing by Purchaser, the obligations of
Purchaser and Household International under this Agreement are subject to the
fulfillment of the following conditions by Parent, Seller and TFS, as
applicable, prior to or on the Closing Date:
Representations, Warranties and Covenants.
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;
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;
There shall not have occurred since March 31, 1997 any event or
circumstance that has a Material Adverse Effect with respect to the TFS
Companies taken as a whole.
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;
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
TFS shall have furnished Purchaser with a certificate, dated the Closing
Date and duly executed by an officer of TFS 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 TFS have
been satisfied.
Proceedings.
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.
Except as contemplated by Section 3.5 or 3.6, in the event any restraining
order or injunction
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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.
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.
Hart-Scott-Rodino.
The waiting period under the HSR Act shall have expired or
been terminated.
Deliveries.
Purchaser shall have received the items to be delivered by
Seller and TFS pursuant to Sections 3.2(a) through (h), inclusive.
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.
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
By Parent and Seller.
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),
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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 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 Twenty-five Million Dollars ($25,000,000.00), 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 Four Hundred Fifty Million Dollars
($450,000,000.00);
(ii) litigation or proceeding filed and served on or after the Closing Date
and on or prior to the date that is 18 months after the Closing Date or as
to which any of the TFS Companies has received proper notice from any
Regulatory Authority on and after the Closing Date and on or prior to the
date that is 18 months after the Closing, in either case, with respect to
the conduct, as it relates to Loans, Borrowers and Policyholders, of the
Acquired Business prior to the Closing Date; provided, however, that
Parent's and Seller's obligations under this clause (ii) shall be limited
to 50% of the excess of (x) the amount of the Indemnified Costs described
in this clause (ii) over (y) $10 million; and provided further that neither
Parent nor Seller shall be liable for any amount under this clause (ii)
that, when added to amounts that Parent or Seller has paid pursuant to
clause (i) of this Section 12.1(a), exceeds $450,000,000. 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.
Notwithstanding the foregoing, except with respect to Taxes (which are
provided for in Article XIII exclusively), 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;
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(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.
By Purchaser.
Except for Taxes (which are provided for in Article XIII exclusively),
Purchaser shall indemnify and hold Parent, Seller, and their Affiliates,
officers, directors, employees, agents, successors, and assigns, and
related entities from, and reimburse them for, Indemnified Costs arising or
resulting 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
Twenty-five Million Dollars ($25,000,000.00), 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 Four Hundred Fifty Million
Dollars ($450,000,000.00);
(ii) Purchaser's breach of or failure to perform any of its covenants or
agreements contained in or made pursuant to this Agreement;
(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.
Notwithstanding the foregoing paragraph (a), Purchaser shall not have any
liability to the extent that Parent, 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.
Indemnification Procedure.
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.
The indemnified Person shall have the right to employ separate counsel in
any action or claim and to participate in the defense thereof at the
expense of the indemnifying Party (i) if the retention of such counsel has
been specifically authorized by the indemnifying Party, or
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(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.
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.
If the indemnifying Party does not assume control 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.
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 therefor. Upon the payment in full of any claim
hereunder, the indemnifying Party shall be subrogated to the rights of the
indemnified Person against any person with respect to the subject matter of
such claim.
In the event that the indemnifying Party reimburses 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.
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.
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).
Survival.
Except as provided in Article XIII, the representations 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.
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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 338 Elections and Forms.
With respect to Purchaser's acquisition of the TFS Stock (and indirectly
the stock of the TFS Direct Subsidiaries) 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.
Purchaser shall be responsible for the preparation and filing of all
Section 338 Forms, excluding any information 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 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.
Purchaser 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
excluding 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
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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.
Tax Indemnity by Seller.
Seller shall be liable for, and shall indemnify, defend and
hold Purchaser and the TFS Companies and any successor corporations thereto or
Affiliates thereof harmless from and against:
any and all Taxes with respect to the TFS Companies 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;
any liability of the TFS Companies under Treasury 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;
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
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.
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.
Allocation of Certain Taxes.
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.
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 period 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
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properly includible in Parent's consolidated federal income Tax Return and
shall otherwise 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, Purchaser shall promptly pay Seller the amount of such excess
(or Seller shall promptly pay Purchaser the amount of such shortfall). 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.
Filing Responsibility.
Seller shall timely prepare and file or shall cause the TFS Companies to
timely prepare and file the following 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 extensions) prior to the Closing Date.
Purchaser and the TFS Companies shall, subject to the provisions of Section
13.5(c), file all other Tax Returns with respect to the TFS Companies.
With respect to any state, local or foreign Income Tax Return for taxable
periods beginning before the Closing 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 Companies 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 reporting practices selected by the
Purchaser, unless otherwise agreed by Seller and Purchaser. The TFS
Companies shall provide Seller a copy of their proposed Tax Return at least
fifteen (15) days prior to the filing of such Tax Return, and Seller may
provide comments to the TFS Companies, which comments shall be delivered to
the TFS Companies within seven (7) days of receiving such copies form the
TFS Companies.
Refunds.
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.
Purchaser and the TFS Companies shall be entitled to any refunds or credits
of Taxes attributable to or arising in taxable periods beginning after the
Closing Date.
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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.
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.
Cooperation and Exchange of Information.
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
thereof has such records and information in its possession or such
employees in its employ.
For a period of ten (10) years after the Closing 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.
Purchaser and Seller and their respective Affiliates 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 furnishing
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 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.
Seller shall have the right, at its own expense, to control any audit or
examination by any
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Taxing Authority ("Tax Audit"), initiate any claim for refund, contest,
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.
Termination of Tax Sharing Agreements.
As of the Closing Date, Seller shall cause all Tax allocation,
Tax sharing, Tax reimbursement and similar agreements 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.
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.
Survival.
The representations, warranties, agreements, covenants 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.
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ARTICLE XIV
GUARANTIES BY PARENT AND HOUSEHOLD INTERNATIONAL
The Guaranties.
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.
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.
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
following 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"):
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;
any modification or amendment of or supplement to this Agreement or any
other Transaction Document;
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;
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any change in the corporate existence, structure or ownership of a
Guaranteed Entity or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting a Guaranteed Entity or its respective assets
or any resulting release or discharge of any obligation of a Guaranteed
Entity contained in this Agreement;
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;
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;
any other act or emission to act or delay of any kind by a Guaranteed
Entity;
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.
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.
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.
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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.
ARTICLE XV
TERMINATION
Termination of Agreement.
This Agreement may be terminated and the transactions
contemplated hereunder abandoned:
At any time prior to the Closing Date by the mutual written agreement of
Seller and Purchaser;
By Seller:
(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 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 permitted 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.
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
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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 impossible 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.
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.
ARTICLE XVI
MISCELLANEOUS
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 require 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.
Expenses.
The parties agree that fees and out-of-pocket expenses shall
be paid as follows:
Fees and disbursements of counsel, consultants and accountants shall be
paid by the party retaining such persons;
Each party shall bear its own expenses incurred with respect to filings
under the HSR Act and obtaining all required Regulatory Approvals;
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Each of Seller and Purchaser shall be responsible for one-half of any sales
or transfer taxes arising from the transfer of the TFS Stock to Purchaser;
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
All other fees and out-of-pocket expenses incurred in connection with the
transactions contemplated hereby shall be paid by the party incurring such
expenses.
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.
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.
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 Agreement contained in the initial press releases to be issued by the
parties with respect to their execution and delivery of this Agreement.
No Third Parties Benefited.
This Agreement is made and entered into for the protection 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; provided, however, that those
Persons expressly set forth in Sections 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.
Notices.
All notices, requests, demands and other communications
hereunder shall be in
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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)
and to:
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Attention: Russell J. Bruemmer
(Telecopy: 202/663-6363)
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or to such other address as a party may from time to time designate 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.
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.
Counterparts.
This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute but one and the same instrument.
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.
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.
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 enforcement of
this Agreement if Parent or Seller fail to perform any of their respective
obligations hereunder.
Dispute Resolution.
Purchaser and Parent shall each designate a representative
(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:
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Step 1: The Representatives shall meet (by conference
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 nationally 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.
Waiver of Jury Trial.
EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED 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.
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IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their duly authorized officers, 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:______________________________________
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