ASSET PURCHASE AGREEMENT

Exhibit 10.60

ASSET PURCHASE AGREEMENT

dated as of

OCTOBER 7, 2009

by and among

TRIAD GUARANTY INSURANCE CORPORATION,

TRIAD GUARANTY INC.

and

ESSENT GUARANTY, INC.

 

 

		Page
ARTICLE I  SALE AND PURCHASE OF ASSETS		1
1.1	CERTAIN TERMS	1
1.2	SALE AND PURCHASE OF PURCHASED ASSETS.	1
1.3	ASSUMPTION OF CERTAIN LIABILITIES.	4
ARTICLE II  PURCHASE PRICE, CLOSING AND RELATED MATTERS		4
2.1	PURCHASE PRICE	4
2.2	CLOSING	6
2.3	CLOSING DELIVERIES.	6
2.4	CLOSING EXPENSES.	7
2.5	PURCHASE PRICE ALLOCATION	8
2.6	WITHHOLDING TAXES	8
ARTICLE III  REPRESENTATIONS AND WARRANTIES OF TGIC		8
3.1	ORGANIZATION AND GOOD STANDING	8
3.2	AUTHORIZATION; ENFORCEABILITY	9
3.3	NO CONFLICT.	9
3.4	GOVERNMENTAL CONSENTS	9
3.5	LEGAL COMPLIANCE	10
3.6	LICENSES, PERMITS AND ORDERS	10
3.7	LITIGATION	10
3.8	COMMISSION REPORTS	11
3.9	TITLE TO ASSETS; CONDITION	11
3.10	ABSENCE OF CERTAIN CHANGES OR EVENTS	11

3.11	INTELLECTUAL PROPERTY.	11
3.12	SUBLEASE PROPERTY	14
3.13	ASSUMED CONTRACTS	14
3.14	EMPLOYEES AND CONSULTANTS.	15
3.15	EMPLOYEE BENEFITS PLANS.	16
3.16	TAX RETURNS AND PAYMENTS	16
3.17	INSURANCE.	17
3.18	SOLVENCY, ADEQUACY OF CONSIDERATION, OTHER ASSET SALES AND STATUS	17
3.19	SECURITY PROGRAMS	17
3.20	BROKERS’ FEES	18
3.21	RIGHT TO PURCHASE PRICE	18
3.22	DISCLOSURE	18
ARTICLE IV  REPRESENTATIONS AND WARRANTIES OF THE BUYER		18
4.1	ORGANIZATION AND GOOD STANDING	18
4.2	AUTHORIZATION; ENFORCEABILITY	18
4.3	NO CONFLICT.	18
4.4	GOVERNMENTAL CONSENTS	19
4.5	LITIGATION	19
4.6	BROKERS’ FEES	19
4.7	FINANCING	19
ARTICLE V  COVENANTS		19
5.1	ACCESS AND INVESTIGATION	19

 

 

		Page
5.2	OPERATION OF THE BUSINESS.	20
5.3	EMPLOYMENT MATTERS.	21
5.4	EFFORTS TO CONSUMMATE.	23
5.5	EFFORTS TO OBTAIN CONSENTS FROM THIRD PARTIES.	24
5.6	NOTIFICATION.	25
5.7	NO NEGOTIATION.	26
5.8	NON-SOLICITATION.	26
5.9	CONFIDENTIAL INFORMATION.	27
5.10	ACKNOWLEDGMENT	27
5.11	TAX MATTERS.	28
5.12	CERTAIN LIMITATIONS ON RESALE	29
5.13	RELEASE	29
ARTICLE VI  CONDITIONS PRECEDENT TO THE BUYER’S OBLIGATION TO CLOSE		29
6.1	ACCURACY OF REPRESENTATIONS	29
6.2	PERFORMANCE	29
6.3	CONSENTS	29
6.4	FANNIE MAE; FREDDIE MAC	29
6.5	NO PROCEEDINGS OR ILLEGALITY	30
6.6	NO BANKRUPTCY OR RECEIVERSHIP	30
6.7	NO MATERIAL ADVERSE CHANGE	30
6.8	CLOSING DELIVERIES	30
ARTICLE VII  CONDITIONS PRECEDENT TO THE SELLERS’ OBLIGATION TO CLOSE		30

7.1	ACCURACY OF REPRESENTATIONS	30
7.2	PERFORMANCE	30
7.3	CONSENTS	31
7.4	NO PROCEEDINGS OR ILLEGALITY	31
7.5	NO BANKRUPTCY OR RECEIVERSHIP	31
7.6	CLOSING DELIVERIES	31
ARTICLE VIII  TERMINATION		31
8.1	TERMINATION EVENTS	31
8.2	EFFECT OF TERMINATION	32
ARTICLE IX  INDEMNIFICATION; REMEDIES		32
9.1	SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS	32
9.2	INDEMNIFICATION.	32
9.3	DEFENSE OF CLAIMS	34
ARTICLE X  DEFINITIONS		35
10.1	CERTAIN DEFINITIONS	35
10.2	GENERAL INTERPRETATION	42
ARTICLE XI  MISCELLANEOUS		43
11.1	EXPENSES	43
11.2	PRESS RELEASES AND PUBLIC ANNOUNCEMENTS	43
11.3	NOTICES; CERTAIN CONSENTS.	43
11.4	MANDATORY AND BINDING ARBITRATION.	45
11.5	FURTHER ASSURANCES	46

 

 

		Page
11.6	AMENDMENTS AND WAIVERS	46
11.7	ENTIRE AGREEMENT	46
11.8	ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS	46
11.9	SEVERABILITY	46
11.10	NO MERGER OR CONTINUATION	46
11.11	GOVERNING LAW	47
11.12	COUNTERPARTS; FACSIMILE	47
11.13	GUARANTY	47

 

 

ASSET PURCHASE AGREEMENT

 

This Asset Purchase Agreement (this “ Agreement ”) is entered into as of October 7, 2009 by and among Triad Guaranty Insurance Corporation, an Illinois domiciled insurance company (“ TGIC ”), and Triad Guaranty Inc., a Delaware corporation (“ TGI ” and, together with TGIC, the “ Sellers ”) and Essent Guaranty, Inc., a Pennsylvania stock insurance company (the “ Buyer ”).

 

RECITALS

 

WHEREAS, the Sellers wish to sell and the Buyer wishes to purchase the Purchased Assets upon the terms and subject to the conditions set forth in this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual representations, covenants and agreements hereinafter set forth, the adequacy and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

 

ARTICLE I

 

SALE AND PURCHASE OF ASSETS

 

1.1            Certain Terms .  Certain capitalized terms used in this Agreement have the definitions assigned to them in Article X .

 

1.2            Sale and Purchase of Purchased Assets .

 

(a)            Purchased Assets .  Subject to the terms and conditions of this Agreement, at the Closing, each Seller shall sell, convey, assign, transfer and deliver to the Buyer, and the Buyer shall purchase, free and clear of all Encumbrances, all right, title and interest of such Seller in and to the following Assets (collectively, the “ Purchased Assets ”):

 

(i)           all tangible and intangible Assets included in the systems, data center, core services and data listed in Section 1.2(a)(i) of the Disclosure Schedule;

 

(ii)           all computer program object code, source code, supporting technical and user documentation and media for all software applications of any kind comprising or otherwise part of any proprietary computer programs used in connection with the items described in Section 1.2(a)(i) of the Disclosure Schedule or otherwise used in or necessary to the Sellers’ underwriting, policy administration, billing, customer service, claims handling, risk management, information technology and technology development operations, policies and procedures (including without limitation in the United States and Canada), and all obsolete and unsupported versions as well as all currently-supported versions of any of the foregoing, together with all customizations, enhancements, modifications, updates, upgrades, patches and works-in-progress, and all intellectual property rights therein, including without limitation all of the foregoing described in Section 1.2(a)(ii) of the Disclosure Schedule;

 

 

 

(iii)           all graphical user interfaces and application program interfaces of any kind used in connection with any of the items referenced in subclause (i) or (ii) above, including without limitation all of the foregoing described in Section 1.2(a)(iii) of the Disclosure Schedule;

 

(iv)           except to the extent specifically excluded pursuant to Section 1.2(b) , all servers, routers, desktop computers, laptops, fixed and mobile computer storage devices, network equipment, non-fixed media ( i.e. , CDs, historical backup tapes, USB drives, thumb drives or other storage devices that can be temporarily attached to a computer) (but excluding all data on any historical backup tapes which shall remain Triad’s) and all other computer and electronic equipment of any kind used by any Seller in the operation, maintenance or support of any of the items referenced in subclause (i), (ii) or (iii) above, including without limitation all of the foregoing described in Section 1.2(a)(iv) of the Disclosure Schedule;

 

(v)           all other documentation, forms, records (including maintenance and support records and audit records), procedures, policy documents, system specifications, scripts, logs, programmer notes, databases and other materials of any kind, whether in print or electronic form, used by any Seller in the operation, maintenance or support any of the items referenced in subclause (i), (ii), (iii) or (iv) above, including without limitation all of the foregoing described in Section 1.2(a)(v) of the Disclosure Schedule;

 

(vi)           except to the extent specifically excluded pursuant to Section 1.2(b) , all licenses, leases, proprietary information agreements, confidentiality agreements, consulting agreements, service agreements and other Contracts of any kind (whether written or oral) to which either Seller is a party (or under which either Seller has rights) relating to operating system software, application software, hardware, network services, telecommunications services, data processing or storage services or information security services, and which are used in connection with the ownership, operation, use or maintenance of any of the Assets referred to in subclause (i), (ii), (iii) or (iv) above, including without limitation all of the foregoing described in Section 1.2(a)(vi) of the Disclosure Schedule (the “ Assumed Contracts ”);

 

(vii)           except to the extent specifically excluded pursuant to Section 1.2(b) , all office furniture and fixtures located in the Sublease Property as of the date hereof and all desktop equipment and supplies (other than photographs and art work) used by Transferred Employees in connection with the operation, maintenance and support of any of the Assets referred to in subclause (i), (ii), (iii) or (iv) above, including without limitation all of the foregoing described in Section 1.2(a)(vii) of the Disclosure Schedule;

 

(viii)           a one-half undivided total ownership interest, without limitation on use or disposition (except as set forth in Section 5.12 ), in and to of all underwriting, policy administration, billing, customer service, claims handling, risk management and other policies and procedures related to or associated with the Triad Technology Platform (the “ Copyrighted Underwriting-Related Works ”);

 

(ix)           a one-half undivided total ownership interest, without limitation on use or disposition (except as set forth in Section 5.12 ), in and to all current and future borrower data including without limitation property information, historic, current and future loan

 

 

 

characteristic data and payment history data with respect to the mortgage loan portfolio insured by Sellers or their Affiliates (collectively, “ Borrower Data ”), whether maintained in hard-copy or on any electronic or magnetic media or database, with Personally Identifiable Information redacted;

 

(x)           except to the extent specifically required to be retained pursuant to Section 1.2(b)(iv) , all personnel records and files maintained by the Sellers with respect to the Transferred Employees; provided , that the Sellers may retain copies of such records transferred to the Buyer;

 

(xi)           all insurance claims, benefits and rights thereunder to the extent arising from or related to the Purchased Assets or the Assumed Liabilities;

 

(xii)           all claims against Third Parties to the extent arising from or related to the Purchased Assets or the Assumed Liabilities, whether known or unknown, fixed or contingent;

 

(xiii)           all rights relating to deposits and prepaid expenses, claims for refunds and rights to offset in respect thereof, in each case to the extent arising from or related to the Purchased Assets or the Assumed Liabilities; and

 

(xiv)           all Intellectual Property and other intangible Assets related to or associated with any of the Assets referred to in this Section 1.2(a) .

 

(b)            Excluded Assets .  The following Assets of the Sellers (collectively, the “ Excluded Assets ”) are not part of the sale and purchase contemplated by this Agreement, are excluded from the Purchased Assets and shall remain the property of the Sellers from and after the Closing:

 

(i)           all desktop computers, laptops, fixed and mobile computer storage devices, telephone systems, mobile phones and other computer and electronic equipment specifically listed in Section 1.2(b)(i) of the Disclosure Schedule;

 

(ii)           all licenses, leases, proprietary information agreements, confidentiality agreements, consulting agreements, service agreements and other Contracts specifically listed in Section 1.2(b)(ii) of the Disclosure Schedule;

 

(iii)           all office furniture, fixtures, desktop equipment and supplies specifically listed in Section 1.2(b)(iii) of the Disclosure Schedule;

 

(iv)           all personnel records and files that the Sellers are required by applicable Legal Requirements to retain in their possession and for all employees of Sellers other than the Transferred Employees; provided , that subject to applicable Legal Requirements, the Buyer shall have access to and may make copies of such records retained by the Sellers with respect to the Transferred Employees;

 

(v)           all Intellectual Property and other intangible Assets specifically listed in Section 1.2(b)(v) of the Disclosure Schedule; and

 

 

 

(vi)           all other tangible or intangible Assets of the Sellers not included in the Purchased Assets.

 

1.3            Assumption of Certain Liabilities .

 

(a)            Assumed Liabilities .  The Buyer hereby assumes from the Sellers only the Assumed Liabilities, and does not assume and shall in no event be deemed to have assumed or be liable for any of the Excluded Liabilities.  Except as expressly provided in this Agreement, the Buyer does not assume and shall in no event be deemed to have assumed or be liable for any Liability (including without limitation under any policy of insurance) of any Seller of any nature whatsoever.  Without limiting the generality of the foregoing, the Buyer expressly disclaims all of the Excluded Liabilities.

 

(b)            Excluded Liabilities .  The Buyer shall not assume or be obligated to pay, perform, honor or otherwise discharge any Liability of the Sellers or their Affiliates other than the Assumed Liabilities, whether or not related to the Purchased Assets.  The Excluded Liabilities shall remain the sole responsibility of and shall be retained, paid, performed, honored and discharged solely by the Sellers.

 

 

ARTICLE II

 

PURCHASE PRICE, CLOSING AND RELATED MATTERS

 

2.1            Purchase Price .  In consideration of the sale and purchase of the Purchased Assets and subject to the terms and conditions of this Agreement (the aggregate amount payable by the Buyer to the Sellers under this Section 2.1 is the “ Purchase Price ”):

 

(a)           The Buyer shall pay to the Sellers by delivery of cash payable by wire transfer of immediately available funds to the Sellers’ Account (i) $10,000,000, less the amount (if any) of Seller Closing Expenses paid by the Buyer on behalf of the Sellers, less the Outside Bonus Amount (the “ Closing Payment ”), on the Closing Date, (ii) $2,500,000 on the first anniversary of the Closing Date and (iii) $2,500,000 on the second anniversary of the Closing Date (each such payment under this Section 2.1(a) , a “ Fixed Payment ”).

 

(b)           The Buyer shall also pay to the Sellers by delivery of cash payable by wire transfer of immediately available funds to the Sellers’ Account up to six (6) equal semi-annual installments of $2,500,000 (each such installment, a “ Contingent Payment ”) commencing thirty (30) months after the Closing Date and ending on the fifth (5 th ) anniversary of the Closing Date, if (i) the Buyer or any Affiliate of the Buyer licensed as a domestic insurance company in any state of the United States have written mortgage insurance policies (other than mortgage reinsurance or other types of credit enhancement) on mortgage loans having an aggregate unpaid principal balance of not less than $500,000,000 in the six (6) month period immediately preceding such Contingent Payment (each such period is a “ Contingent Payment Period ”) and (ii) the Escrowed Material has not been previously released to the Sellers under the License Agreement (other than pursuant to Sections 4(a)-(f) of the Technology Escrow Agreement).  Notwithstanding the foregoing, if (A) clause (i) has not been satisfied for the first Contingent Payment Period and (B) the Buyer or any Affiliate of the Buyer licensed as a domestic insurance company in any state of the United States have written mortgage insurance policies (other than

 

 

 

mortgage reinsurance or other types of credit enhancement) on mortgage loans having an aggregate unpaid principal balance of not less than $1,000,000,000 in the first two (2) Contingent Payment Periods, then the Buyer shall pay to the Sellers an additional $2,500,000 Contingent Payment at the end of the second (2 nd ) Contingent Payment Period.

 

(c)           If (i) the Buyer has not defaulted under Section 2.1(b) and (ii) the Escrowed Materials are released to the Sellers under the License Agreement (other than pursuant to Sections 4(a)-(f) of the Technology Escrow Agreement) at any time after the fifth (5 th ) anniversary of the Closing Date, then the Sellers will pay, by delivery of cash payable by wire transfer of immediately available funds, $2,500,000 to the Buyer upon release of the Escrowed Materials.

 

(d)           The Buyer and its Affiliates may make from time to time such business decisions as they deem appropriate in the conduct of their respective businesses, including actions that may have an impact on the amount of mortgage insurance policies that they write and, in the absence of bad faith or a breach of this Agreement by Buyer, no Seller will have any right to claim any right to any Contingent Payment or other damages as a result of such decisions.

 

(e)           Notwithstanding any other provision in this Agreement to the contrary, the obligations of the Buyer to make any Fixed Payment or Contingent Payment shall be subject to each Seller remaining in compliance with all material terms of each Transaction Document, including making all payments required under the Services Agreement in the manner set forth therein.

 

(f)           Notwithstanding any other provision in this Agreement to the contrary, any party may retain for its own account and as general assets all or a portion of any amount payable by such party to the other party under this Agreement, the Services Agreement or any other Transaction Document, solely to satisfy any amount due or payable to any Indemnified Party under Section 9.2 that, unless arising in connection with a third party Claim, is undisputed or has been adjudicated to be due and owing to an Indemnified Party pursuant to the procedures set forth in Section 11.4 .  Any amount lawfully and properly retained by a party as provided hereby shall be owned by such party free of any pledge, lien, claim or other legal or equitable interest of any other party .   The parties acknowledge and agree that the obligations of each party arising under each of this Agreement, the Services Agreement and the other Transaction Documents form and are part of a single and integrated transaction such that any amount lawfully due and payable to the Buyer, on the one hand, or any Seller, on the other hand, under this Agreement, the Services Agreement or any other Transaction Document may be applied and recouped against any amount lawfully due and payable to the other party under this Agreement, the Services Agreement or any other Transaction Document, and on each date that a payment is lawfully due and payable to such party under this Agreement, the Services Agreement or any other Transaction Document only an amount net of such recoupment shall be paid.  A party that reduces any amount lawfully due and payable to the other party under this Agreement, the Services Agreement or any other Transaction Document under the authority of this Section 2.1(f) will notify the other party promptly of such action, including reasonable details concerning the credit taken and the basis therefor.

 

 

 

2.2            Closing .  The purchase and sale provided for in this Agreement shall take place at a closing (the “ Closing ”) to be held at the offices of Dewey & LeBoeuf LLP located at 1301 Avenue of the Americas, New York, New York at 10:00 a.m. (local time) on the third (3 rd ) Business Day following the date on which all conditions set forth in Article VI and Article VII (other than conditions to be satisfied by the delivery of documents or the payment of money at the Closing) have been satisfied or waived by the party or parties entitled to the benefit thereof in their sole discretion, or at such other time, date and place as the parties may agree.

 

2.3            Closing Deliveries .

 

(a)           At or prior to the Closing, the Sellers shall deliver to the Buyer:

 

(i)           the Purchased Assets;

 

(ii)           evidence that the Sellers have, at the Sellers’ expense and without cost or other adverse consequence to the Buyer, sent all notices, made all filings and obtained all Consents (except for Consents under Third Party Agreements) and Orders required in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby;

 

(iii)           all Ancillary Agreements to which any Seller is a party, dated the Closing Date and duly executed by such Seller;

 

(iv)           evidence of the acceptance of employment with the Buyer of at least ninety percent (90%) of the Identified Employees, including each of the individuals named by the Buyer in writing and delivered to the Sellers on or prior to the date hereof;

 

(v)           restrictive covenant and work made for hire agreements executed by each Transferred Employee in form and substance reasonably satisfactory to the Buyer;

 

(vi)           an opinion of counsel to the Sellers, dated the Closing Date, substantially in the form of Exhibit A ;

 

(vii)           a certificate dated the Closing Date executed by the President or other authorized officer of each Seller certifying as to the satisfaction of each of the conditions set forth in Article VI substantially in the form of Exhibit B ;

 

(viii)           a certificate dated the Closing Date executed by the Secretary of each Seller certifying as to the director, stockholder and other resolutions authorizing the Transaction Documents substantially in the form of Exhibit C ;

 

(ix)           good standing certificates for each Seller dated within ten (10) days prior to the Closing Date from its jurisdiction of organization;

 

(x)           evidence of the release of all Encumbrances on the Purchased Assets;

 

(xi)           all documents obtained by the Sellers pursuant to Section 6.3 ; and

 

 

 

(xii)           such other agreements, certificates, instruments and documents as the Buyer may reasonably request in order to fully consummate the transactions contemplated by and carry out the purposes and intent of this Agreement.

 

(b)           At or prior to the Closing, the Buyer shall deliver to the Sellers:

 

(i)           the Closing Payment by wire transfer to the Sellers’ Account;

 

(ii)           all Ancillary Agreements to which the Buyer is a party, dated the Closing Date and duly executed by the Buyer;

 

(i)           a certificate dated the Closing Date executed by the President or other authorized officer of the Buyer certifying as to the satisfaction of each of the conditions set forth in Article VII substantially in the form of Exhibit D ;

 

(iii)           a certificate dated the Closing Date executed by the Secretary of the Buyer certifying as to the director, stockholder and other resolutions authorizing the Transaction Documents substantially in the form of Exhibit E ; and

 

(iv)           such other agreements, certificates, instruments and documents as the Sellers may reasonably request in order to fully consummate the transactions contemplated by and carry out the purposes and intent of this Agreement.

 

2.4            Closing Expenses .

 

(a)           The Sellers shall be responsible for and shall pay (i) the fees, commissions or other compensation to any broker, finder, investment banker or other Person engaged by any Seller with respect to the transactions contemplated by this Agreement, (ii) the legal, accounting and audit fees of any Seller paid or incurred in connection with this Agreement, the other Transaction Documents and the transactions contemplated hereby and thereby, (iii) subject to Section 5.3(a) , all compensation, severance and similar amounts payable to any Transferred Employee and attributable to any period on or prior to the Closing Date, and all payroll, employment and similar Taxes thereon, (iv) severance and similar amounts, if any, payable to any officer, director or current or former employee or independent contractor of any Seller (other than any Transferred Employee) and all payroll, employment or similar Taxes thereon, (v) the costs associated with preparing the Purchased Assets for transfer to the Buyer and the costs of the Sellers’ own personnel, counsel and other advisors associated with fulfilling the Sellers’ obligations under Section 5.4 , (vi) fifty percent (50%) of any Transfer Expenses in excess of the Buyer Transfer Expense Cap and (vii) fifty percent (50%) of the Transfer Taxes, if any (collectively, the “ Seller Closing Expenses ”).

 

(b)           The Buyer shall be responsible for and shall pay (i) the fees, commissions or other compensation to any broker, finder, investment banker or other Person engaged by the Buyer with respect to the transactions contemplated by this Agreement (including, without limitation, such amounts payable to financial advisors to the Buyer engaged to render opinions with respect to the fairness of the consideration for the Purchased Assets), (ii) subject to Section 11.1, the legal, accounting and audit fees of the Buyer, (iii) the out-of-pocket costs associated with obtaining, configuring, implementing, testing and launching the Triad Technology Platform

 

 

 

following the Closing, including obtaining, configuring, implementing, testing and launching commercially available “off-the-shelf” software and other Third Party software (including any license for such software) necessary for the use or operation of the Triad Technology Platform and not transferable from the Sellers (including by reason of a Third Party withholding its Consent to such transfer or imposing a transfer fee, up-front license fee or other charge associated with the transfer of a license from the Sellers to the Buyer) (“ Transfer Expenses ”), up to $3,800,000 (excluding any amounts paid by Buyer for optional or discretionary developments or improvements to improve the capacity, functionality or other features of  the Triad Technology Platform from the capacity, functionality and other features in place immediately prior to the Closing Date) (the “ Buyer Transfer Expense Cap ”), (iv) fifty percent (50%) of any Transfer Expenses in excess of the Buyer Transfer Expense Cap, (v) fifty percent (50%) of the Transfer Taxes, if any, and (vi) the costs of Buyer’s own personnel, counsel and other advisors associated with the fulfillment of the Buyer’s obligations pursuant to Section 5.4 (collectively, the “ Buyer Closing Expenses ”).

 

2.5            Purchase Price Allocation .  The Buyer and the Sellers shall allocate the Purchase Price (the “ Allocation ”) among the Purchased Assets in accordance with Schedule I based on the relative fair market values of the Purchased Assets in compliance with Code Section 1060 and the Treasury Regulations thereunder (and any similar provision of state, local or foreign law, as appropriate).  Any subsequent adjustments to the Purchase Price shall be reflected in the Allocation hereunder in a manner consistent with Section 1060 of the Code and the Treasury Regulations thereunder.  The Buyer, the Sellers and their respective Affiliates shall take all actions and file all Tax Returns (including, but not limited to IRS Form 8594 “Asset Acquisition Statement”) consistent with the Allocation.

 

2.6            Withholding Taxes .  Notwithstanding any other provision in this Agreement, the Buyer shall have the right to deduct and withhold Taxes from any payments to be made hereunder if such withholding is required by applicable Legal Requirements.  To the extent that amounts are so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been delivered and paid to the Sellers.

 

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF TGIC

 

TGIC represents and warrants to the Buyer as of the date hereof and as of the Closing Date as follows:

 

3.1            Organization and Good Standing .  TGIC is a stock insurance company duly organized, validly existing and in good standing under the laws of the State of Illinois, and has all requisite corporate power and authority to enter into this Agreement and the other Transaction Documents to which it is a party.  TGI is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all requisite corporate power and authority to enter into this Agreement and the other Transaction Documents to which it is a party.  True, correct and complete copies of the Organizational Documents of each of the Sellers have been delivered to the Buyer.

 

 

 

3.2            Authorization; Enforceability .  Each of the Sellers has full corporate power and authority to execute and deliver this Agreement and each of the Transaction Documents to which it is a party and to perform its obligations hereunder and thereunder.  All corporate action on the part of each Seller, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement and the other Transaction Documents and the performance of all obligations of such Seller hereunder and thereunder has been taken.  This Agreement and the other Transaction Documents each constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of each Seller enforceable in accordance with its terms, except to the extent that enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors’ rights generally and by principles of equity regarding the availability of remedies.

 

3.3            No Conflict .

 

(a)           None of the Sellers is in default under, and the execution, delivery and performance by any Seller of this Agreement and each other Transaction Document to which it is a party and the consummation of the transactions contemplated hereby and thereby do not and will not conflict with or result in any, violation of or default under any provision of (i) any Organizational Documents of such Seller, (ii) any Legal Requirement or any Order or (iii) any Contract to which any Seller is a party or by which it or any of the Purchased Assets is bound, except in the case of this clause (iii) where any such conflict, violation or default has not had and could not reasonably be expected to have a Material Adverse Effect on the Purchased Assets.  The execution, delivery and performance of this Agreement and each other Transaction Document and the consummation of the transactions contemplated hereby and thereby will not result in any such violation or be in conflict with or constitute, with or without the passage of time or giving of notice, a default under any such provision or an event which results in the creation of any Encumbrance upon any of the Purchased Assets (except an Encumbrance created in favor of a Seller by a Transaction Document) or gives rise to any right of termination, cancellation or acceleration of any right or obligation of any Seller or to a loss of any benefit to which any Seller is entitled under any provision of any Contract binding upon any Seller or any of the Purchased Assets, except as provided under the Transaction Documents.

 

(b)           Except as set forth in Section 3.3(b) of the Disclosure Schedule, none of the Sellers is or will be required to give any notice to or make any filing with or obtain any Consent under any Contract to which it is a party or by which it, any of its Assets or any of its employees or independent contractors is bound in connection with the execution and delivery of this Agreement or the other Transaction Documents or the consummation of the transactions contemplated hereby or thereby, except where the failure to do so has not had and could not reasonably be expected to have a Material Adverse Effect on the Purchased Assets.

 

3.4            Governmental Consents .  Except as set forth in Section 3.4 of the Disclosure Schedule, no notice to or filing with or other Consent or Order of any Governmental Body on the part of any Seller is required in connection with the execution, delivery or performance of this Agreement or the other Transaction Documents or the consummation of the transactions contemplated hereby or thereby.

 

 

 

3.5            Legal Compliance .  Each of the Sellers is and has been in compliance in all material respects with all applicable Legal Requirements except as set forth in Section 3.5 of the Disclosure Schedule or where the failure to do so has not had and could not reasonably be expected to have a Material Adverse Effect on the Purchased Assets.  To the Knowledge of the Sellers and except as set forth in Section 3.5 of the Disclosure Schedule, each director, officer, member, manager and employee of each Seller engaged at any time in the development, use or operation of the Purchased Assets, and each independent contractor providing services relating to the Purchased Assets, is and has been in compliance with all applicable Legal Requirements relating to the development, use or operation of the Purchased Assets by them except where the failure to do so has not had and could not reasonably be expected to have a Material Adverse Effect on the Purchased Assets.  Except as set forth in Section 3.5 of the Disclosure Schedule, no Proceeding or notice has been filed, given, commenced or, to the Knowledge of the Sellers threatened against any Seller or any of their respective directors, officers, members, managers, employees or independent contractors alleging any failure to so comply.

 

3.6            Licenses, Permits and Orders .  Except as set forth in Section 3.6 of the Disclosure Schedule, (a) no licenses, approvals, consents, ratifications, waivers, notices, registrations, qualifications, designations, filings, franchises, authorizations, security clearances or other permits of, to, from or with, any Governmental Body (“ Permits ”), are held or required to be held (pursuant to applicable Legal Requirements or otherwise) by any Seller or any of their respective directors, officers, employees or independent contractors applicable to the Purchased Assets or the ownership, operation, use or maintenance thereof except for those the absence or violation of which could not reasonably be expected to have a Material Adverse Effect on the Purchased Assets and (b) to the Knowledge of the Sellers, no Permits are required to be held (pursuant to applicable Legal Requirements or otherwise) by the Buyer or any of its directors, officers, employees or independent contractors from or after the Closing applicable to the Purchased Assets or the ownership, operation, use or maintenance thereof except for those the absence or violation of which could not reasonably be expected to have a Material Adverse Effect on the Purchased Assets.  Except as set forth in Section 3.6 of the Disclosure Schedule, none of the Sellers nor any of the Purchased Assets is subject to the provisions of any Order of any Governmental Body.

 

3.7            Litigation .  There is no Proceeding pending or, to the Knowledge of the Sellers, currently threatened against any Seller that questions the validity of this Agreement or the right of any Seller to enter into or to consummate the transactions contemplated hereby or by any of the Transaction Documents, nor, to the Knowledge of the Sellers, is there any basis for the foregoing.   Section 3.7 of the Disclosure Schedule contains a complete and correct description of all Proceedings existing at any time during the three (3) years prior to the Closing Date (a) involving any Seller which, if determined adversely, could have, individually or in the aggregate, a Material Adverse Effect on any Seller or involving any Purchased Assets or (b) in which any Seller is a plaintiff or claimant and such Proceeding relates to the Purchased Assets.  Except as set forth in Section 3.7 of the Disclosure Schedule, there is no Proceeding pending or, to the Knowledge of the Sellers, currently threatened against or affecting any Seller which, if determined adversely, could have, individually or in the aggregate, a Material Adverse Effect on any Seller or involving any Purchased Assets and, to the Knowledge of the Sellers, no basis for such a Proceeding exists.  The foregoing includes, without limitation, Proceedings pending or threatened involving the prior employment or engagement of any employee or independent

 

 

 

contractor of the Sellers, their use in connection with the Purchased Assets of any information or techniques allegedly proprietary to any of their former employers or Persons for whom they previously provided services as an independent contractor, or their obligations under any agreements with any of them.

 

3.8            Commission Reports .  All registration statements, reports, proxy statements and other materials required to be filed or furnished by TGI with or to the United States Securities and Exchange Commission since December 31, 2008 were filed within the applicable required time periods (or any extensions related thereto), complied in all material respects with applicable requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the applicable rules and regulations of the United States Securities and Exchange Commission promulgated thereunder, and at the time filed did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances in which they were made, not misleading.  TGI has not received any request from the United States Securities and Exchange Commission to file any amendment or supplement to any of the reports described in the preceding sentence except as set forth in Section 3.8 of the Disclosure Schedule, and no Seller has any material Liabilities except as set forth in such filings.  The books and records of TGI have been, and are being, maintained in accordance with applicable legal and accounting requirements.

 

3.9            Title to Assets; Condition .  Except as set forth in Section 3.9 of the Disclosure Schedule, each Seller has good and marketable title in, to and under the Purchased Assets to be sold by it hereunder, free and clear of all Encumbrances.  Except as otherwise set forth in Section 3.9 of the Disclosure Schedule, no Person other than the Sellers has any right, title or interest in or to any of the Purchased Assets.  As of the Closing, the Buyer will have good and valid title to all of the Purchased Assets, free and clear of all Encumbrances, except as otherwise set forth in Section 3.9 of the Disclosure Schedule.  To the Knowledge of the Sellers, the Purchased Assets are free from material defects (patent and latent), have been maintained in accordance with normal industry practice, are in good operating condition and repair (subject to normal wear and tear) and are suitable for the purposes for which they are now used.

 

3.10            Absence of Certain Changes or Events .  Since December 31, 2008, except as otherwise set forth in Section 3.10 of the Disclosure Schedule, (a) each of the Sellers has owned, operated, used and maintained the Purchased Assets only in the ordinary course of business consistent with past practice and (b) there have not been any events, changes, occurrences or state of facts that, individually or in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect with respect to any Seller or the Purchased Assets or prevent the consummation of the transactions contemplated hereby.  Without limiting the generality of the foregoing, since December 31, 2008, and except as set forth set forth in Section 3.10 of the Disclosure Schedule, none of the Sellers has taken any of the actions listed in Section 5.2(b) .

 

3.11            Intellectual Property .

 

(a)           Except as set forth in Section 3.11(a) of the Disclosure Schedule, the Intellectual Property included in the Purchased Assets is comprised only of Owned Intellectual Property and Licensed Intellectual Property (collectively, the “ Purchased Intellectual

 

 

 

Property ”).  The Purchased Intellectual Property constitutes all Intellectual Property that, as of the Closing Date, is necessary in order to own, operate, use and maintain the Triad Technology Platform and contains only those items and rights that are owned by the Sellers or rightfully used by the Sellers pursuant to a valid and enforceable license.

 

(b)            Section 3.11(b)(i) of the Disclosure Schedule contains a true and complete list of the Owned Intellectual Property.   Section 3.11(b)(ii) of the Disclosure Schedule contains a true and complete list of the Licensed Intellectual Property (excluding licenses for computer software that is generally available on nondiscriminatory pricing terms and has an individual acquisition cost of $1,000 or less per seat, user or workstation but including all licenses for computer software that is distributed as “free software”, “open source software” or under a similar licensing or distribution model).  All Owned Intellectual Property and licenses for Licensed Intellectual Property are in good standing, neither any Seller nor, to the Knowledge of the Sellers, any other Person is in breach or default thereunder and all of the fees and filings due as of the Closing Date with respect thereto have been or will be duly made.  Except as set forth in Section 3.11(b)(i) and (ii) of the Disclosure Schedule, none of the Purchased Intellectual Property is subject to any Order or Contract related to or in any manner restricting the licensing, assignment, transfer or conveyance thereof by the Sellers.  None of the Sellers owes any royalties or other payments to Third Parties in respect of the Purchased Intellectual Property as of the Closing Date.

 

(c)           Upon the Closing, (i) the Buyer will be the sole owner of the Owned Intellectual Property, free and clear of all Encumbrances, except as set forth in Section 3.11(c) of the Disclosure Schedule, (ii) no Seller nor any Third Party will have any ownership interest in or to any Owned Intellectual Property or, except as set forth in Section 3.11(c) of the Disclosure Schedule, any right to use or sublicense the Owned Intellectual Property and (iii) the Buyer will have all rights in the Purchased Intellectual Property necessary to own, operate, use and maintain the Triad Technology Platform and to assign and sell the Owned Intellectual Property and, subject to the terms of the applicable license, to assign or sublicense the Licensed Intellectual Property.

 

(d)           To the Knowledge of the Sellers, the ownership, operation, use and maintenance of the Triad Technology Platform by the Sellers has not infringed or misappropriated, and to the Knowledge of the Sellers does not infringe or misappropriate, any Intellectual Property of any Third Party anywhere in the world.  No Proceeding is pending before any Governmental Body in any jurisdiction or, to the Knowledge of the Sellers, is threatened, (i) challenging the validity, enforceability, continuity or ownership by any Seller of any Owned Intellectual Property or (ii) to the effect that the operation, use, maintenance, distribution, licensing, sublicensing, sale or any other exercise of rights in the Owned Intellectual Property by any Seller or their respective directors, officers, employees or independent contractors infringes or will infringe any Intellectual Property of any Third Party, and no such claim has been asserted, by any Person and, to the Knowledge of the Sellers, there is no basis for such a Proceeding or claim.  To the Knowledge of the Sellers, there is no unauthorized use, infringement or misappropriation of any Owned Intellectual Property by any Third Party, including without limitation any director, officer, employee, independent contractor or other service provider of any Seller.

 

 

 

(e)            Section 3.11(e) of the Disclosure Schedule is a copy of the current policy or policies of each Seller relating to the physical and electronic protection of its information assets from unauthorized disclosure, use or modification.  All personal or user information used by or in the possession of any Seller has been collected, stored, maintained and used in material compliance with all applicable Legal Requirements as well as such Seller’s and its customers’ privacy policies.

 

(f)           Except as set forth in Section 3.11(f) of the Disclosure Schedule, to the extent any Owned Intellectual Property included in or relating to the Purchased Assets has been developed or created by employees of any Seller, all such Owned Intellectual Property was developed by employees in the scope of their employment with the Sellers and constitutes “work made for hire” under the United States Copyright Act of 1976, or such Seller has obtained, by written agreement with such employees, sole and exclusive ownership of all right, title and interest in and to all such Intellectual Property.  No current or former employee or independent contractor of any Seller has asserted, whether or not in writing, any claim of ownership of any Intellectual Property rights in or to any part of the Triad Technology Platform and, to the Knowledge of the Sellers, no such claim is threatened, and no Seller is aware of any facts which would support such a claim.  Upon the Closing and except as set forth in the Technology Escrow Agreement and the License Agreement, no Person other than the Buyer will possess any current or contingent rights to any source code that is part of the Owned Intellectual Property.  Except pursuant to the Technology Escrow Agreement and the License Agreement and in accordance with the terms and conditions set forth therein, the transactions contemplated by this Agreement will not result in any Person other than the Buyer gaining a right to access the source code included in the Owned Intellectual Property (as the result of an escrow release or otherwise).

 

(g)           With respect to any software included in the Owned Intellectual Property, (i) the Sellers maintain complete machine-readable master-reproducible copies, source code listings and technical documentation for the most current releases and versions thereof and for all earlier releases or versions thereof currently being supported by them, (ii) in each case, the machine-readable copy conforms to the corresponding source code listing, (iii) it is written in the language set forth in Section 3.11(g) of the Disclosure Schedule for use on the hardware set forth in Section 3.11(g) of the Disclosure Schedule with standard operating systems and (iv) it can be maintained and modified by reasonably competent programmers familiar with such language, hardware and operating systems.

 

(h)           None of the software included in the Owned Intellectual Property or, to the Knowledge of the Sellers, the Licensed Intellectual Property contains any software code (i) designed to harm, disable or impair in any manner the operation of such software, or any other associated software, firmware, hardware, computer system or network (sometimes referred to as “viruses” or “worms” or “time bombs”) or (ii) that would permit any Person to access such software to intentionally cause any harmful, malicious procedures, routines or mechanisms which would cause the software to cease functioning or to damage or corrupt data, storage media, programs, equipment or communications.

 

(i)           None of the software included in the Owned Intellectual Property or, to the Knowledge of the Sellers, the Licensed Intellectual Property contains any software code (i) that contains, or is derived in any manner (in whole or in part) from, any software that is

 

 

 

distributed under the GNU General Public License, Lesser/Library GPL, Artistic License ( e.g. , PERL), Mozilla Public License, Netscape Public License, Sun Community Source License (SCSL), Sun Industry Standards License (SISL) or any similar licenses or distribution models except as set forth on Section 3.11(i) of the Disclosure Schedule, (ii) that is licensed under any terms or conditions that impose any requirement that any software using, linked with, incorporating, distributed with, based on, derived from or accessing the software code (A) be made available or distributed in source code form, (B) be licensed for the purpose of making derivative works, (C) be licensed under terms that allow reverse engineering, reverse assembly or disassembly of any kind or (D) be redistributable at no charge, (iii) development of which was funded in whole or in part by any Governmental Body or (iv) that uses or incorporates any source or object code that contains, or is derived in any manner (in whole or in part) from, the software or code known as “InfoBytes” or any predecessor or enhancement of the software or code known as “InfoBytes”.

 

3.12            Sublease Property .  Upon the Closing, the Buyer will have a good and valid leasehold interest in the Sublease Property.  Except as set forth in Section 3.12 of the Disclosure Schedule, with respect to the Sublease Property (a) there is no pending or, to the Knowledge of the Sellers, threatened eminent domain or condemnation Proceeding affecting the Sublease Property, (b) the current use by any Seller of the Sublease Property does not violate in any material respect the terms and provisions of any Contracts entered into by any Seller relating thereto, (c) the master lease is valid, binding and enforceable in accordance with its terms and is in full force and effect, (d) all rent and other sums and charges due to date from any Seller under such lease have been paid, (e) neither any Seller nor any other Person is in default under any such lease and no event has occurred and no condition exists which, with the giving of notice or the lapse of time or both, would constitute a default on the part of any Seller or would entitle the lessor or sublessor thereunder to terminate such lease, (f) except for normal wear and tear, the premises included in the Sublease Property are in a good state of maintenance and repair and (g) the Sublease Property is occupied exclusively by the Sellers or their Affiliates, which are entitled to vacant possession thereof.  True, correct and complete copies of all lease agreements in effect with respect to the Sublease Property have been delivered to the Buyer.

 

3.13            Assumed Contracts .  Except as set forth in Section 3.13 of the Disclosure Schedule, with respect to each Assumed Contract, (a) the Contract is legal, valid, binding, enforceable in accordance with its terms and in full force and effect and will continue to be legal, valid, binding, enforceable by the Buyer and in full force and effect on identical terms following the consummation of the transactions contemplated hereby, except to the extent that enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors’ rights generally and by principles of equity regarding the availability of remedies, (b) the Contract is assignable without any Consent of any Person or such Consent has been obtained, (c) neither any Seller nor, to the Knowledge of the Sellers, any other party to such Contract is in material breach or material default and no event has occurred which with the passage of time or giving of notice would constitute a material breach or material default, or permit termination, modification, or acceleration, of or under the Contract and (d) no party has actually repudiated any provision of the Contract or provided notice (whether or not in writing) of repudiation or an intent to terminate the Contract.  The Assumed Contracts are all of the Contracts necessary for the Buyer to own, operate, use and maintain the Purchased Assets in substantially the manner in which the Purchased Assets have been owned, operated, used and

 

 

 

maintained by the Sellers prior to the Closing.  True, correct and complete copies of all Assumed Contracts have been delivered to the Buyer.

 

3.14            Employees and Consultants .

 

(a)            Section 3.14(a) of the Disclosure Schedule sets forth a complete and correct list of all current and, to the Knowledge of the Sellers, former employees of any Seller or their respective Affiliates engaged at any time in the development, operation, use or maintenance of any portion of the Triad Technology Platform including their names, job titles, current or last compensation levels (including base salary, commission, bonus and other incentive compensation), date and amount of last compensation change, employment location, date of hire, date of termination (whether or not voluntary), each Plan in which they participate and each Permit that is held by them.   Section 3.14(a) of the Disclosure Schedule also sets forth a complete and correct list of all independent contractors and other consultants currently and, to the Knowledge of the Sellers, at any time engaged by any Seller or any of their respective Affiliates to provide services relating to the Triad Technology Platform including their names, state or country of residence, payment arrangements and other material terms of engagement and each Permit that is held by them.

 

(b)            Section 3.14(b) of the Disclosure Schedule sets forth a complete and correct list of all employment, independent contractor, consulting or severance agreements or other Contracts between any Seller or any of their respective Affiliates and any current or, to the Knowledge of the Sellers, former employee, independent contractor or other consultant engaged at any time in the development, operation, use or maintenance of any portion of the Triad Technology Platform.  True, correct and complete copies of each such Contract, as amended to date, have been delivered to the Buyer.  Except as set forth in Section 3.14(b) of the Disclosure Schedule or the Sellers’ current severance pay plan (a complete and correct copy of which has been delivered to the Buyer), the employment of each current employee listed in Section 3.14(a) of the Disclosure Schedule is terminable at the will of the Sellers and the Sellers have the right to terminate such employees and the engagement of any of their independent contractors and other consultants, in each case without payment to such employee, independent contractor or consultant other than for services rendered through termination and without incurring any severance obligation, penalty or liability.

 

(c)           No Seller is bound by or subject to (and none of the Purchased Assets is bound by or subject to) any Contract with any labor union and no labor union has requested or, to the Knowledge of the Sellers, has sought to represent any of the employees, representatives or agents of any Seller.  There is no strike or other labor dispute involving any Seller pending or threatened, nor to the Knowledge of the Sellers is there any labor organization activity involving their employees.  No Seller has received any oral or written notice that any current employee or independent contractor listed in Section 3.14(a) of the Disclosure Schedule intends to terminate his or her employment or engagement, nor does any Seller have any present intention to terminate the employment or engagement of any of the foregoing other than in connection with the consummation of the transactions contemplated by this Agreement.

 

(d)           Each Seller is and has been in compliance in all material respects with all federal, state, local and foreign Legal Requirements respecting employment and employment

 

 

 

practices, terms and conditions of employment and wages and hours, safety and health, pay equity and workers’ compensation and collection and payment of withheld Taxes.  Each Seller is and has been in compliance with the requirements of the WARN Act and has no Liabilities or unfulfilled notice obligations pursuant to the WARN Act, and no Seller has taken any action that would cause any Seller, or after the Closing the Buyer, to have any Liability or notice obligation thereunder.

 

3.15            Employee Benefits Plans .

 

(a)            Section 3.15(a) of the Disclosure Schedule contains a list of all “employee benefit plans” within the meaning of Section 3(3) of ERISA and a description of all other employee benefit plans, programs or arrangements, including, without limitation, compensation, deferred compensation, bonus, long term incentive, commission, change in control, retention and severance arrangements, vacation, medical, life insurance, retirement, pension or other welfare or fringe benefit, whether or not in writing, that are maintained, sponsored or contributed to (or with respect to which any Seller or any of their respective Affiliates has any obligation or Liability including, without limitation, any obligation or Liability to contribute) by the Sellers or any of their respective Affiliates with respect to or for the benefit of any of the employees, independent contractors or consultants listed in Section 3.14(a) of the Disclosure Schedule (each, a “ Plan ” and collectively, the “ Plans ”).  True, correct and complete copies of each of the Plans and related documents and governmental filings, or descriptions of any unwritten Plan, have been delivered to the Buyer.

 

(b)           No Seller nor any entity that would be deemed a “single employer” with any Seller under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA (each, an “ ERISA Affiliate ”) has any Liability with respect to any Plan subject to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA, including, without limitation, any “multiemployer plan” (within the meaning of Sections 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code) or any “single employer plan” (within the meaning of Section 4001(a)(15) of ERISA) which is subject to Sections 4063, 4064 and 4069 of ERISA.  None of the Purchased Assets is subject to any Encumbrance under ERISA or Section 412 of the Code.

 

(c)           Except as set forth in Section 3.15(c) of the Disclosure Schedule, the consummation of the transactions contemplated by this Agreement will not, either alone or in combination with any other event, give rise to any Liability with respect to any Plan or any current or former director, officer, employee or consultant of the Sellers, including without limitation Liability for severance pay, unemployment compensation, termination pay or withdrawal liability, or accelerate the time of payment, vesting or funding or increase the amount of compensation or benefits due to any director, officer, employee or consultant of the Sellers (whether current, former or retired) or their beneficiaries solely by reason of such transactions or by reason of a termination in connection with or following such transactions.

 

(d)           No Seller has classified any individual listed in Section 3.14(a) of the Disclosure Schedule as an “independent contractor” or similar status who, under any applicable Legal Requirements or the provisions of any Plan, should have been classified as an employee.

 

3.16            Tax Returns and Payments .  Except as set forth in Section 3.16 of the Disclosure Schedule, (a) all material Tax Returns required to be filed by or on behalf of any Seller on or

 

 

 

before the Closing Date with respect to the use or ownership of Purchased Assets or the Transferred Employees have been duly filed on a timely basis, (b) all Taxes which were shown to be due on such Tax Returns or on subsequent assessments with respect thereto have been paid in full on a timely basis unless otherwise being contested in good faith and (c) no Tax claim has become (or, with the passage of time, could become) an Encumbrance on any of the Purchased Assets, except with respect to Taxes not yet due or payable.

 

3.17            Insurance .

 

(a)            Section 3.17(a) of the Disclosure Schedule sets forth (i) a complete and correct list of each insurance policy (including policies providing property, casualty, liability and worker’s compensation coverage and bond and surety arrangements and including any self-insurance arrangements) providing coverage with respect to the Purchased Assets, the Identified Employees or the Sublease Property to which any Seller or any of their respective Affiliates is a party, a named insured or otherwise the beneficiary of coverage and (ii) for each such policy, the name of the insurer, name of the policyholder, the expiration date of the policy, the type of policy, the amount of premium and a description of all loss sharing arrangements, and a list and description of all claims made thereunder.  True, correct and complete copies of each such policy, as amended to date, have been delivered to the Buyer.

 

(b)           Each of the Sellers or their respective Affiliates has paid or caused to be paid all premiums under, and each has at all times owned, operated and maintained the Purchased Assets in a manner so as to conform in all material respects to the applicable provisions of, all such insurance policies.  Each such policy is in full force and effect and no notice of cancellation or transaction has been received with respect to such policy.

 

3.18            Solvency, Adequacy of Consideration, Other Asset Sales and Status .  No Seller will be rendered insolvent by the consummation of the transactions contemplated by this Agreement.  The Purchase Price, together with any other consideration to be paid by the Buyer pursuant to this Agreement, is reasonably equivalent to the value of the Purchased Assets and the Assumed Liabilities.  The Purchased Assets do not constitute all or substantially all of the Assets of the Sellers or either of them.  No sale or sales of Assets of any Seller has occurred or is contemplated which, taken together with the transactions contemplated by this Agreement, would constitute the sale of all or substantially all of the Assets of such Seller.  The Sellers have experienced an event described in 215 ILCS 35A-25 or 35A-30, as contemplated by 215 ILCS 5/204(m)(C).

 

3.19            Security Programs .  Each Seller is in compliance in all material respects with all privacy and data security policies, procedures and Legal Requirements applicable to its business and the Purchased Assets.  Each Seller maintains and is in compliance in all material respects with a written information security policy that implements commercially reasonable security programs that are designed to protect (a) the security, confidentiality, availability and integrity of transactions executed through its computer systems, including encryption and/or other security protocols and techniques when appropriate and (b) the security, confidentiality and integrity of all non-public personal information and other confidential and proprietary data.  To the Knowledge of the Sellers, no Seller has suffered a security breach with respect to its data or systems and no Seller has notified any customer, policy holder, mortgage borrower or any

 

 

 

employee or independent contractor of any information security breach involving such customer’s, policy holder’s or mortgage borrower’s confidential information or such employee’s or independent contractor’s confidential information.

 

3.20            Brokers’ Fees .  No broker, finder, investment banker or other Person is entitled to any brokerage fee, finders’ fee or other commission in connection with the transactions contemplated by this Agreement based on arrangements made by the Sellers or their Affiliates.

 

3.21            Right to Purchase Price .  No Person other than the Sellers is entitled to any portion of the Purchase Price.

 

3.22            Disclosure .  No representation or warranty set forth in this Article III contains any untrue statement of material fact, or omits to state any material fact necessary, in light of the circumstances under which it was made, in order the make the statements in this Article III not misleading.

 

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF THE BUYER

 

The Buyer represents and warrants to the Sellers as of the date hereof and as of the Closing Date as follows:

 

4.1            Organization and Good Standing .  The Buyer is a stock insurance company duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania and has all requisite corporate power and authority to enter into this Agreement and the other Transaction Documents to which it is a party.  True, correct and complete copies of the Organizational Documents of the Buyer have been delivered to the Sellers.

 

4.2            Authorization; Enforceability .  The Buyer has full corporate power and authority to execute and deliver this Agreement and each of the other Transaction Documents to which it is a party and to perform its obligations hereunder and thereunder.  All stockholder, director and other action on the part of the Buyer necessary for the authorization, execution and delivery of this Agreement and each of the other Transaction Documents to which it is a party and the performance of all obligations of the Buyer hereunder and thereunder has been taken or will be taken prior to the Closing.  This Agreement and the other Transaction Documents each constitutes, or when executed and delivered will constitute, a valid and legally binding obligation of the Buyer enforceable in accordance with its terms, except to the extent that enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting creditors’