Exhibit 2.1
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STOCK AND ASSET PURCHASE AGREEMENT
between
WASHINGTON MUTUAL, INC.,
GREAT WESTERN SERVICE CORPORATION TWO
and
CITIFINANCIAL CREDIT COMPANY
for the purchase and sale
of
the outstanding capital stock
WASHINGTON MUTUAL FINANCE CORPORATION
and certain assets of
WASHINGTON MUTUAL FINANCE GROUP, LLC
Dated as of November 24, 2003
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS.............................................................................................1
ARTICLE II PURCHASE AND DELIVERY OF STOCK
AND
ASSETS.............................................................10
2.1 Delivery
of Stock and FG Transferred
Assets..........................................................10
2.2 Closing;
Payment of Purchase Price; Assumption of FG Assumed
Liabilities.............................10
2.3 Purchase
Price
Allocation............................................................................10
2.4
Post-Closing Adjustments of Purchase
Price...........................................................11
ARTICLE III CLOSING
DATE.........................................................................................13
3.1 Closing
Date; Insurance Subsidiary
Purchase..........................................................13
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF
SELLER..............................................................14
4.1
Organization, Power
etc..............................................................................14
4.2 Authority
Relative to
Agreement......................................................................15
4.3
Non-Contravention....................................................................................15
4.4 Consents,
etc........................................................................................16
4.5 Title to
Stock and FG Transferred
Assets.............................................................16
4.6 Capital
Stock of the Subject
Companies...............................................................16
4.7 SEC
Filings; Financial
Statements....................................................................17
4.8
Litigation...........................................................................................18
4.9 Compliance
with Laws; Permits and
Licenses...........................................................19
4.10 Absence of
Certain Changes; No Undisclosed
Liabilities...............................................19
4.11 Personnel and
Employee Benefits
Matters..............................................................20
4.12
Taxes................................................................................................21
4.13
Properties...........................................................................................22
4.14 Certain Labor
Matters................................................................................22
4.15 Material
Agreements; Agreements with
Affiliates......................................................22
4.16 Intellectual
Property................................................................................23
4.17 Environmental
Matters................................................................................24
4.18
Brokers..............................................................................................24
4.19 Non-Competition
and Non-Solicitation
Agreements......................................................24
4.20
Insurance............................................................................................25
4.21
Guarantees...........................................................................................25
4.22
Receivables..........................................................................................25
4.23 No Regulatory
Impediment.............................................................................26
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
PURCHASER............................................................26
5.1
Organization.........................................................................................26
5.2 Authority
Relative to
Agreement......................................................................26
5.3
Non-Contravention....................................................................................26
5.4 Consents,
etc........................................................................................27
5.5
Brokers..............................................................................................27
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5.6 Available
Funds......................................................................................27
5.7 Investment
Intent....................................................................................27
5.8 No
Regulatory
Impediment.............................................................................27
ARTICLE VI
COVENANTS.............................................................................................27
6.1 Conduct of
Business..................................................................................27
6.2 Access;
Confidentiality..............................................................................31
6.3 Reasonable
Best Efforts; Taking of Necessary
Action..................................................31
6.4
[RESERVED]...........................................................................................33
6.5 Insurance;
Risk of
Loss..............................................................................33
6.6
[RESERVED]...........................................................................................34
6.7
Reorganization.......................................................................................34
6.8 Seller
Name and
Mark.................................................................................35
6.9
Post-Closing Cooperation and Retention of
Records....................................................36
6.10 Public
Announcements.................................................................................37
6.11 Transition
Services..................................................................................37
6.12 Non-Compete; Non
Solicitation........................................................................37
6.13 No
Shop..............................................................................................38
6.14 Further
Assurances...................................................................................38
6.15 First Community
Industrial
Bank......................................................................39
ARTICLE VII EMPLOYEE
MATTERS.....................................................................................39
7.1
General..............................................................................................39
7.2 Offers of
Employment.................................................................................39
7.3
Termination and
Severance............................................................................40
7.4 Welfare
Plans........................................................................................40
7.5 Variable
Pay
Plans...................................................................................40
7.6 Accrued
Vacation.....................................................................................40
7.7 Profit
Sharing
Contribution..........................................................................41
7.8
WARN.................................................................................................41
ARTICLE VIII CONDITIONS TO THE
CLOSING...........................................................................41
8.1 Conditions
to Obligations of Each
Party..............................................................41
8.2 Additional Conditions
to the Obligations of
Purchaser................................................42
8.3 Additional
Conditions to the Obligations of Seller and Seller
Parent.................................42
ARTICLE IX TERMINATION, AMENDMENT AND
WAIVER.....................................................................43
9.1
Termination..........................................................................................43
9.2 Effect of
Termination................................................................................43
ARTICLE X TAX
MATTERS............................................................................................44
10.1 Indemnification
for
Taxes............................................................................44
10.2 Apportionment of
Taxes...............................................................................44
10.3 Tax Returns and
Payment of
Taxes.....................................................................45
10.4
Carrybacks...........................................................................................45
10.5 Cooperation;
Audits..................................................................................45
10.6 Transfer
Taxes.......................................................................................46
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10.7 Section
338(h)(10)
Election..........................................................................47
10.8
Refunds..............................................................................................48
10.9
Confidentiality......................................................................................48
10.10
Miscellaneous........................................................................................48
ARTICLE XI
INDEMNIFICATION.......................................................................................49
11.1 Indemnification
by Seller and Seller
Parent..........................................................49
11.2 Indemnification
by
Purchaser.........................................................................50
11.3 Indemnification
Procedures...........................................................................51
11.4
General..............................................................................................53
ARTICLE XII GENERAL
PROVISIONS...................................................................................54
12.1
Survival.............................................................................................54
12.2
Notices..............................................................................................54
12.3
Interpretation.......................................................................................56
12.4 Amendment and
Modification;
Waiver...................................................................56
12.5 Entire
Agreement.....................................................................................56
12.6 Fees and
Expenses....................................................................................56
12.7 Disclosure
Schedules.................................................................................56
12.8 Third Party
Beneficiaries............................................................................56
12.9 Specific
Performance.................................................................................56
12.10 Assignment; Binding
Effect...........................................................................57
12.11 Governing
Law........................................................................................57
12.12
Jurisdiction.........................................................................................57
12.13 Waiver of Jury
Trial.................................................................................57
12.14
Severability.........................................................................................57
12.15
Counterparts.........................................................................................57
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Seller Disclosure Schedule
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STOCK AND ASSET PURCHASE AGREEMENT
STOCK AND ASSET PURCHASE AGREEMENT, dated as of November 24,
2003 (this "Agreement"), between WASHINGTON
MUTUAL, INC., a Washington
corporation ("Seller Parent"), GREAT
WESTERN SERVICE CORPORATION TWO, a
California corporation ("Seller"), and
CITIFINANCIAL CREDIT COMPANY, a Delaware
corporation ("Purchaser").
WITNESSETH
WHEREAS, Seller owns 1,000 shares of the common stock, par
value $1.00 per share (the "Stock"), of
Washington Mutual Finance Corporation, a
Delaware corporation (the "Company"),
constituting all of the issued and
outstanding shares of capital stock of the
Company;
WHEREAS, Seller is an indirect wholly owned Subsidiary of
Seller Parent;
WHEREAS, on the terms and subject to the conditions set forth
herein, Seller Parent and Seller desire to
sell, and Purchaser desires to
purchase, the Stock;
WHEREAS, the Company owns all of the membership interests of
Washington Mutual Finance Group, LLC, a
Delaware limited liability company
("FG"), and Washington Mutual Finance, Inc.
of Mississippi, LLC, a Delaware
limited liability company ("Washington
Mutual Mississippi" and, together with
FG, the "Excluded Subsidiaries"), and
Seller Parent, Seller and Purchaser desire
that the membership interests of the
Excluded Subsidiaries be transferred by the
Company to Seller Parent or its designee
prior to the sale of the Stock; and
WHEREAS, on the terms and subject to the conditions set forth
herein, Seller Parent and Seller desire
that FG sell certain of its assets and
transfer certain of its liabilities to
Purchaser, and Purchaser desires to
purchase such assets and assume such
liabilities.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements hereinafter
set forth, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
The following terms when used in this Agreement shall have the
following meanings:
"Affected Employees" means the FG Employees and employees of
any of the Subject Companies immediately prior to the Closing
Date
(other than employees of any of the Subject Companies who are
on
long-term disability leave).
"affiliate" of a specified Person means a Person who, directly
or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such specified
Person.
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2
"Agreement" has the meaning set forth in the introductory
paragraph hereof.
"Applicable Law" has the meaning set forth in Section 4.3.
"Appraiser" has the meaning set forth in Section 2.3(a).
"Banko Database" has the meaning set forth in Section 6.7(e).
"Benefit Plans" has the meaning set forth in Section 4.11(a).
"Business Day" means any day which is not a Saturday, Sunday
or a day on which banks in Seattle, Washington, or New York, New
York,
are authorized or obligated by law or executive order to be
closed.
"C3 Lease" has the meaning set forth in Section 4.13(a).
"Charged-Off Receivables" has the meaning set forth in Section
6.7(e).
"CITI Names and Marks" has the meaning set forth in Section
6.8(a).
"Claim Notice" has the meaning set forth in Section 11.3(a).
"Closing" has the meaning set forth in Section 3.1(a).
"Closing Date" has the meaning set forth in Section 3.1(a).
"Closing Date Receivables" means the Receivables of the
Subject Companies and the FG Transferred Business, excluding
the
Charged-Off Receivables, shown on the Statement of Closing Date
Receivables as "net consumer finance receivables", as finally
determined in accordance with Section 2.4(b).
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor thereto.
"Company" has the meaning set forth in the preamble to this
Agreement.
"Company Asset-Backed Commercial Paper Program" means the
asset-backed commercial paper program of the Company governed by
(i)
the Receivables Transfer Agreement dated as of July 31, 2002 by
and
among Paradigm Funding LLC and each of the other commercial
paper
conduits party thereto from time to time, Washington Mutual
Acceptance,
LLC, the Company and the several financial institutions and agent
banks
party thereto from time to time and (ii) the Purchase and Sale
Agreement dated as of July 31, 2002 by and among the various
sellers
party thereto and Washington Mutual Acceptance, LLC, as
amended,
modified or supplemented from time to time.
"Company Credit Agreement" means the Three-Year Credit
Agreement dated as of August 12, 2002 between Seller Parent and
the
Company, as borrowers, the lenders party thereto and JPMorgan
Chase
Bank, as administrative agent, as amended, modified or
supplemented
from time to time.
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3
"Company Intellectual Property" means all Intellectual
Property owned or used by (i) the Subject Companies' respective
businesses (the "SC Intellectual Property") and (ii) the FG
Transferred
Business (the "FG Intellectual Property").
"Company Reports" has the meaning set forth in Section 4.7(b).
"Company SAP Statements" has the meaning set forth in Section
4.7(d).
"Company Specified Debt" means the aggregate amount of the
principal of, accrued and unpaid interest on and any premium in
respect
of, all indebtedness of the Subject Companies under (i) the
Company
Credit Agreement, (ii) the Company Asset-Backed Commercial
Paper
Program, (iii)
any other outstanding commercial paper of the Company
issued pursuant to the programs described in Section 1(a) of the
Seller
Disclosure Schedule, and (iv) borrowing arrangements with Seller
Parent
and/or its affiliates (other than the Subject Companies) described
in
Section 1(b) of the Seller Disclosure Schedule.
"Confidential Memorandum" means the Confidential Descriptive
Memorandum, dated October 2003, provided to Purchaser on behalf
of
Seller Parent by Lehman Brothers Inc.
"Confidentiality Agreement" means the Confidentiality
Agreement, dated September 22, 2003, between Seller Parent and
CitiFinancial Credit Corporation relating to, among other things,
the
confidentiality of certain information provided by or on behalf
of
Seller Parent to CitiFinancial Credit Corporation with respect to
the
Company and its Subsidiaries.
"Contract" has the meaning set forth in Section 4.3.
"Conveyance Taxes" has the meaning set forth in Section
10.6(a).
"Damages" has the meaning set forth in Section 11.1(a).
"Deductible" has the meaning set forth in Section 11.1(b).
"Deferred Transfer" has the meaning set forth in Section
3.1(c).
"De Minimis Claim" has the meaning set forth in Section
11.1(b).
"Election(s)" has the meaning set forth in Section 10.7(a).
"Environment" means surface waters, groundwaters, soil,
subsurface strata, sediment, and indoor and outdoor air.
"Environmental Claim" means any written claim, notice,
complaint,
proceeding or litigation by any third person alleging any
violation of, or any liability under, any Environmental Laws.
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4
"Environmental Laws" means all applicable federal, state and
local statutes, rules, regulations, ordinances, codes, common law
and
orders relating to pollution or protection of natural resources or
the
environment or exposure to Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
"Excluded Liability" means any liabilities arising out of or
in connection with (i) the Reorganization or (ii) the Company's
sale of
First Community Industrial Bank and any assets or liabilities
sold,
assigned or otherwise transferred as part of that transaction.
"Excluded Litigation" means any litigation, action, suit,
proceeding or claim (i) in which the Excluded Subsidiaries are
named as
defendants, except to the extent arising out of or related to the
FG
Transferred Assets, FG Transferred Business or FG Assumed
Liabilities
or (ii) that relates to or arises out of the business or operations
of
the Subject Companies or the Excluded Subsidiaries in or with
respect
to the State of Mississippi.
"Excluded Names" has the meaning set forth in Section 6.8(a).
"Excluded Subsidiaries" has the meaning set forth in the
preamble to this Agreement.
"FG" has the meaning set forth in the preamble to this
Agreement.
"FG Assumed Liabilities" means any and all liabilities and
obligations of FG of any kind or nature, whether such liabilities
or
obligations are known or unknown, disclosed or undisclosed, matured
or
unmatured, accrued, absolute, contingent or otherwise, that relate
to
the FG Transferred Business or the FG Transferred Assets,
including,
without limitation, litigation described in Section 1(c) of the
Seller
Disclosure Schedule. Notwithstanding anything to the contrary in
this
Agreement, the term "FG Assumed Liabilities" shall not include (i)
any
liabilities with regard to Taxes for the Pre-Closing Period or (ii)
the
Pre-Closing FG Employee Related Liabilities.
"FG Employees" has the meaning set forth in Section 7.2.
"FG Transferred Asset Purchase Price" has the meaning set
forth in Section 2.3(a).
"FG Transferred Assets" means any and all assets, rights,
properties, claims, Permits and Contracts (in each case, to the
extent
transferable) of FG which relate to the FG Transferred
Business,
including branch offices and personnel located outside Mississippi
and
loans to Persons resident in a state other than Mississippi.
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5
"FG Transferred Business" means, collectively, the consumer
finance, insurance, financial services and other businesses of
FG,
other than any portion of such businesses conducted in or with
respect
to the State of Mississippi.
"Form 8023" has the meaning set forth in Section 10.7(b).
"GAAP" means generally accepted accounting principles in the
United States.
"Governmental Approval" has the meaning set forth in Section
4.4(a).
"Governmental Authority" has the meaning set forth in Section
4.3.
"Hazardous Materials" means all materials defined as
"hazardous" or "toxic" or any other term of similar import under
any
Environmental Law, including petroleum, friable asbestos,
polychlorinated biphenyls, mold and urea formaldehyde foam
insulation.
"HSR Act" has the meaning set forth in Section 4.4(a).
"Included Subsidiary" means any Subsidiary of the Company
which is not an Excluded Subsidiary.
"Indemnified Entity" has the meaning set forth in Section
11.3(a).
"Indemnified Purchaser Entities" has the meaning set forth in
Section 11.1(a).
"Indemnified Seller Entities" has the meaning set forth in
Section 11.2(a).
"Indemnifying Party" has the meaning set forth in Section
11.3(a).
"Independent Accounting Firm" has the meaning set forth in
Section 2.4(b).
"Insurance Regulatory Approvals" means those Governmental
Approvals required for the consummation of the Insurance
Subsidiary
Purchase.
"Insurance Subsidiaries" means Aristar Insurance Company and
City Holdings Reinsurance Life Company.
"Insurance Subsidiary Purchase" has the meaning set forth in
Section 3.1(b).
"Intellectual Property" shall mean U.S. and foreign
intellectual property, including patents, inventions,
discoveries,
processes, algorithms, formulae, technology, know-how and
related
improvements; copyrights and copyrightable works (including
software,
code, applications, databases, website content, documentation
and
related items); trademarks, service marks, trade names,
corporate
names, domain names, logos, trade dress and other source
indicators;
trade secrets and confidential or proprietary information; and
any
applications or registrations relating to any of the foregoing.
"Interim Period" has the meaning set forth in Section 10.1.
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6
"IRS" means the Internal Revenue Service or any successor
agency or authority.
"IT Systems" means all computer systems, programs, networks,
software and hardware used to process, store, maintain and
operate
data, information and functions used in connection with the
Subject
Companies' respective businesses or the FG Transferred
Business.
"Knowledge of
Seller" means the actual knowledge of the
individuals named in Section 1(d) of the Seller Disclosure
Schedule.
"Lien" means any mortgage, pledge, lien, charge, security
interest or other encumbrance or any covenant restriction, right of
way
or other matter of record affecting title to real property.
"Loans" means all loans, lines of credit and sales finance
accounts of the Subject Companies or that constitute part of the
FG
Transferred Assets.
"Material Adverse Effect" means any effect on any Subject
Company or FG (with respect to the FG Transferred Business only)
that
is, either individually or in the aggregate, materially adverse to
the
business, assets, liabilities, operations or financial condition of
the
Subject Companies and the FG Transferred Business, taken as a
whole,
other than any such effect attributable to or resulting from (i)
this
Agreement or the transactions contemplated hereby or the
announcement
thereof, (ii) any change in general economic conditions or
interest
rates, except to the extent that those changes or conditions
materially
and disproportionately affect the Subject Companies and the FG
Transferred Business, (iii) any change or condition affecting
the
consumer finance, banking, insurance or financial services
industries
generally, including any change in Applicable Law or GAAP or in
the
official interpretations thereof, except to the extent that
those
changes or conditions materially and disproportionately affect
the
Subject Companies and the FG Transferred Business, or (iv) any act
or
omission by Seller Parent or any of its Subsidiaries taken with
the
prior written consent or at the written direction of Purchaser.
"Material Contract" means, other than contracts and
instruments under which there exists Company Specified Debt, (i)
any
contract that individually calls for payments to or by any of
the
Subject Companies in excess of $250,000 or (ii) any contract to
which
any Subject Company is a party that is a "material contract" (as
such
term is defined in Item 601(b)(10) of Regulation S-K of the SEC
under
the Securities Act and the Exchange Act) with respect to the
Company in
effect on the date of this Agreement.
"Offer" and "Offers" have the respective meanings set forth in
Section 7.2.
"Past Due Receivables" has the meaning set forth in Section
6.7(e).
"Permits" has the meaning set forth in Section 4.9.
"Permitted Liens" means (i) Liens for taxes, assessments or
other governmental charges not yet due or which are being contested
in
good faith by appropriate
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7
proceedings, (ii) carriers', warehousemen's, mechanics',
materialmen's, repairman's or other similar Liens, (iii)
easements,
rights of way, building, zoning and other similar encumbrances
or
title defects, (iv) Liens on assets incurred to finance the
acquisition of such assets, (v) Liens on assets of any of the
Subject
Companies or the assets of the FG Transferred Business incurred in
the
ordinary course of business and (vi) Liens on properties which do
not
materially impair business operations or the use of such properties
in
the ordinary course of business.
"Person" means any individual, corporation, company,
partnership (limited or general), limited liability company,
joint
venture, association, trust, unincorporated organization or
other
business entity.
"Pre-Closing Environmental Liabilities" means all liabilities
relating to an Environmental Claim or Environmental Law and
arising
from or related to any action, event, circumstance or condition
related
to any Subject Company, any of their respective businesses or the
FG
Transferred Business or the premises leased by a Subject Company or
FG
(with respect to the FG Transferred Business only), in each
case
occurring or existing on or before the Closing.
"Pre-Closing FG Employee Related Liabilities" means all
liabilities relating to (i) individuals who are, immediately prior
to
the Closing Date, former employees of FG or (ii) employees of FG
who do
not become FG Employees (including employees of FG, if any, who are
on
long-term disability leave as of the Closing).
"Pre-Closing Period" has the meaning set forth in Section
10.1.
"Purchase Price" has the meaning set forth in Section 2.2.
"Purchase Price Allocation" has the meaning set forth in
Section 2.3(a).
"Purchaser" has the meaning set forth in the introductory
paragraph hereof.
"Receivables" means, as of any date, in the case of interest
bearing Loans, the aggregate outstanding principal balance of
the
Loans, together with any earned but unpaid financing charges or
servicing advances or costs accrued thereon and, in the case of
precomputed Loans, the aggregate unpaid balance thereof less
unearned
finance charges thereon.
"Receivables Downward Adjustment Amount" has the meaning set
forth in Section 2.4(c).
"Receivables Upward Adjustment Amount" has the meaning set
forth in Section 2.4(c).
"Reference Date Receivables" means the Receivables of the
Subject Companies and the FG Transferred Business, as shown on
the
Statement of Reference Date Receivables as "net consumer
finance
receivables".
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"Reorganization" has the meaning set forth in Section 6.7.
"Restructuring" has the meaning set forth in Section 10.7(d).
"Retained Seller Plans" has the meaning set forth in Section
4.11(f).
"SEC" means the Securities and Exchange Commission.
"Section 338 Allocation" has the meaning set forth in Section
10.7(c).
"Section 338 Schedule" has the meaning set forth in Section
10.7(a).
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC thereunder.
"Seller" has the meaning set forth in the introductory
paragraph hereof.
"Seller Disclosure Schedule" means the disclosure schedule
delivered by Seller to Purchaser at the time of execution
hereof.
"Seller Parent" has the meaning set forth in the introductory
paragraph hereof.
"Seller Parent's Group" means any corporation, or group of
corporations, which files a Tax Return together with Seller Parent
on a
consolidated, combined or unitary basis.
"Seller's Insurance Policies" has the meaning set forth in
Section 6.5(b).
"September Tape" has the meaning set forth in Section 4.22(c).
"Statement of Closing
Date Receivables" means the statement of
Closing Date Receivables as of the Closing Date after giving effect
to
the transactions contemplated by Section 6.7, to be prepared
and
delivered pursuant to Section 2.4, as finally determined in
accordance
with Section 2.4(b).
"Statement of Reference Date Receivables" means the statement
of Reference Date Receivables of the Subject Companies and the
FG
Transferred Business, a copy of which is set forth in Section
2.4(a) of
the Seller Disclosure Schedule.
"Stock" has the meaning set forth in the preamble to this
Agreement.
"Subject Companies" means, collectively, the Company and the
Included Subsidiaries.
"Subject Company Claims" has the meaning set forth in Section
6.5(b).
"Subject Company Liabilities" has the meaning set forth in
Section 6.5(b).
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9
"Subsidiary" means, with respect to any entity, a corporation
or other entity of which the outstanding shares of stock or
other
equity interests having ordinary voting power to elect a majority
of
the board of directors (or comparable body) of such corporation
or
other entity are owned, directly or indirectly, through one or
more
intermediaries, by such entity. Ownership through fiduciary,
trust,
custodial or similar arrangements for the account of customers
shall
not constitute ownership of stock or other equity interests for
purposes of this definition.
"Target Closing Receivables" means $4.025 billion less (i) an
amount equal to all Receivables outstanding as of the Closing
Date
constituting Receivables of the Excluded Subsidiaries (other
than
Receivables constituting part of the FG Transferred Business) and
(ii)
an amount equal to the Charged-Off Receivables.
"Tax Returns" means all returns, declarations, reports,
estimates, information returns, statements and other documents
required
to be filed in respect of Taxes, and "Tax Return" means any of
the
foregoing Tax Returns.
"Tax Sharing Agreement" has the meaning set forth in Section
6.7(b).
"Taxes" means any and all (i) federal, state, county,
provincial, local, foreign and other taxes, charges, fees, levies
or
other assessments, including without limitation all net income,
gross
income, gross receipts, premium, estimated, sales, use, ad
valorem,
property, transfer, franchise, profits, license, withholding,
payroll,
employment, excise, severance, stamp, occupation, customs, duties
and
guaranty fund assessments, and any interest, additions to tax
or
penalties imposed under the Code or otherwise by any
Governmental
Authority upon any of the Subject Companies and (ii) written
indemnifications with respect to taxes.
"1060 Allocation Statement" has the meaning set forth in
Section 10.7(c).
"Texas LP" has the meaning set forth in Section 10.7(d).
"Third Party" has the meaning set forth in Section 11.3(a).
"Third Party Consents" has the meaning set forth in Section
4.4(b).
"Transition Services Agreement" has the meaning set forth in
Section 6.11.
"Vacation Policy" has the meaning set forth in Section 7.6.
"Variable Pay Plan" has the meaning set forth in Section 7.5.
"Variable Plan Payments" has the meaning set forth in Section
7.5.
"WAMU Marks" has the meaning set forth in Section 6.8(a).
"WAMU Names" has the meaning set forth in Section 6.8(a).
<PAGE>
10
"WARN" has the meaning set forth in Section 4.11(g).
"Washington Mutual Mississippi" has the meaning set forth in
the preamble to this Agreement.
ARTICLE II
PURCHASE AND DELIVERY OF STOCK AND ASSETS
2.1 Delivery of Stock and FG Transferred Assets (a) On the
terms and subject to the conditions of this
Agreement, Seller shall, at the
Closing on the Closing Date, transfer,
assign and deliver to Purchaser or its
designee certificates evidencing the Stock,
together with the certificates
evidencing the capital stock or membership
interests of the Included
Subsidiaries and the stock books, ledgers
and minute books of the Subject
Companies. Such certificates evidencing the
Stock shall be duly endorsed in
blank, or be accompanied by stock transfer
powers duly executed in blank, with
all necessary stock transfer tax stamps
affixed thereto and cancelled.
(b) On the terms and subject to the conditions of this
Agreement, Seller Parent shall, at the
Closing on the Closing Date, cause FG to
transfer, assign and deliver to Purchaser
or its designee the FG Transferred
Assets, and shall deliver or cause to be
delivered to Purchaser or its designee
such fully executed endorsements, consents,
assignments and other instruments of
conveyance and assignment as shall be
reasonably necessary and effective to vest
in Purchaser or its designee all right,
title and interest of FG in and to the
FG Transferred Assets.
2.2 Closing; Payment of Purchase Price; Assumption of FG
Assumed Liabilities. On the terms and
subject to the conditions of this
Agreement and against delivery of the
certificates evidencing the Stock as
provided in Section 2.1(a) and the
instruments of conveyance and assignment for
the FG Transferred Assets as provided in
Section 2.1(b), Purchaser shall (a)
pay, at the Closing on the Closing Date, by
wire transfer of immediately
available funds to the account of Seller
and to such other accounts as, in each
case, Seller shall designate in writing to
Purchaser not less than one Business
Day prior to the Closing Date, the sum of
(i) $1.25 billion (the "Purchase
Price") and (ii) the Company Specified Debt
(as calculated on the date
immediately preceding the Closing, but
including interest scheduled to accrue
through (but not including) the Closing
Date, and designated in writing by
Seller to Purchaser on such date), (b) on
and as of the opening of business on
the Closing Date, expressly assume and
agree to thereafter perform, pay and
discharge when due, the FG Assumed
Liabilities and (c) deliver to FG such fully
executed acceptances, consents, instruments
of assumption and other instruments
as shall be reasonably necessary and
effective to vest in Purchaser sole
responsibility to perform, pay and
discharge, when due, the FG Assumed
Liabilities.
2.3 Purchase Price Allocation. (a) The allocation of the total
consideration among the Stock and the FG
Transferred Assets (the "Purchase Price
Allocation") shall be determined pursuant
to an independent appraisal conducted
by Standard & Poor's (the "Appraiser")
and completed within 60 days after the
Closing Date. The portion of the
consideration allocated to the FG Transferred
Assets shall be referred to as the "FG
Transferred Asset Purchase Price." The
costs of the Appraiser shall be borne
equally by Seller and Purchaser.
<PAGE>
11
(b) Purchaser, Seller Parent and Seller shall promptly inform
one another of any challenge by any
Governmental Authority to any allocation
made pursuant to this Section 2.3 and agree
to consult and keep one another
informed with respect to the status of, and
any discussion, proposal or
submission with respect to such challenge.
Notwithstanding the foregoing, in the
event the IRS challenges any position taken
by any of the parties to this
Agreement, such party may settle or
litigate such challenge without the consent
of, or liability to, the other parties.
2.4 Post-Closing Adjustments of Purchase Price. The Purchase
Price shall be subject to adjustment after
the Closing as specified in this
Section 2.4.
(a) Statement of Closing Date Receivables. As promptly as
practicable, but in any event within 30 days following the
Closing,
Purchaser shall deliver to Seller its Statement of Closing Date
Receivables (together with the Receivables "tape" used in
preparing
such Statement of Closing Date Receivables), which shall be
prepared on
the same basis as and utilizing the same principles, practices
and
policies of the Subject Companies (and, with respect to the FG
Transferred Business, FG), as those used in preparing the Statement
of
Reference Date Receivables; provided, however, that the provisions
of
Section 6.7(e) shall govern the treatment of the Charged-Off
Receivables.
(b) Disputes. (i) Subject to clause (ii) of this Section
2.4(b), the Statement of Closing Date Receivables delivered by
Purchaser to Seller shall be final, binding and conclusive on
the
parties hereto.
(ii) Seller may dispute any amounts on the Statement of
Closing Date Receivables, but only on the basis that they were
not
arrived at in a manner consistent with the preparation of the
Statement
of Reference Date Receivables or were arrived at based on
mathematical
or clerical error; provided, however, that the Seller shall
have
notified Purchaser in writing of each disputed item, specifying
the
estimated amount thereof in dispute and setting forth, in
reasonable
detail, the basis for such dispute, within 15 Business Days of
Purchaser's delivery of the Statement of Closing Date Receivables
to
Seller. In the event of such a dispute, Seller and Purchaser
shall
attempt to reconcile their differences, and any resolution by them
as
to any disputed amounts shall be final, binding and conclusive on
the
parties hereto. If Seller and Purchaser are unable to reach a
resolution with such effect within 10 Business Days after the
receipt
by Purchaser of Seller's written notice of dispute, Seller and
Purchaser shall submit the items remaining in dispute for
resolution to
PricewaterhouseCoopers LLP (or, if such firm shall decline or is
unable
to act or is not, at the time of such submission, independent of
Seller
and Purchaser, to another independent accounting firm of
international
reputation mutually acceptable to Seller and Purchaser) (either
PricewaterhouseCoopers LLP or such other accounting firm being
referred
to herein as the "Independent Accounting Firm"), which shall,
within 15
Business Days after such submission, determine and report to Seller
and
Purchaser upon such remaining disputed items, only on the basis
of
whether or not they were arrived at in a manner consistent with
the
preparation of the Statement of Reference Date Receivables or
whether
or not they were arrived at based on mathematical or clerical error
and
such report shall be final, binding and conclusive on Seller
and
<PAGE>
12
Purchaser.
The fees and disbursements of the Independent Accounting
Firm shall be shared equally by Seller and Purchaser.
(c) Purchase Price Adjustments. The Statement of Closing Date
Receivables shall be deemed final for the purposes of this Section
2.4
upon the earliest of (i) the failure of Seller to notify Purchaser
of a
dispute within 15 Business Days of Purchaser's delivery of the
Statement of Closing Date Receivables to Seller, (ii) the
resolution of
all disputes, pursuant to Section 2.4(b), by Seller and Purchaser
and
(iii) the resolution of all disputes, pursuant to Section 2.4(b),
by
the Independent Accounting Firm. Within three Business Days of
the
Statement
of Closing Date Receivables being deemed final, Purchase
Price adjustments shall be made as follows:
(I) In the event that the Target Closing Receivables
is at least $25 million greater than the Closing Date
Receivables reflected on the Statement of Closing Date
Receivables, then the Purchase Price shall be adjusted
downward in an amount (the "Receivables Downward Adjustment
Amount") equal to the product of (x) 0.30 multiplied by (y)
the difference between the Target Closing Receivables minus
$25 million and the Closing Date Receivables; provided that no
adjustment to the Purchase Price shall be made pursuant to
this Section 2.4(c)(I) if the difference between the Target
Closing Receivables and the Closing Date Receivables is less
than $25 million. Seller shall pay the Receivables Downward
Adjustment Amount, if applicable, to Purchaser in cash by wire
transfer of immediately available federal funds to such bank
account(s) as shall be designated in writing by Purchaser to
Seller within one (1) Business Day of the Statement of Closing
Date Receivables being deemed final.
(II) In the event that the Closing Date Receivables
reflected on the Statement of Closing Date Receivables is at
least $25 million greater than the Target Closing Receivables,
then the Purchase Price shall be adjusted upward in an amount
(the "Receivables Upward Adjustment Amount") equal to the
product of (x) 0.30 multiplied by (y) the difference between
the Closing Date Receivables minus $25 million and the Target
Closing Receivables; provided that no adjustment to the
Purchase Price shall be made pursuant to this Section
2.4(c)(II) if the difference between the Closing Date
Receivables and the Target Closing Receivables is less than
$25 million. Purchaser shall pay the Receivables Upward
Adjustment Amount, if applicable, to Seller in cash by wire
transfer of immediately available federal funds to such bank
account(s) as shall be designated in writing by Seller to
Purchaser within one (1) Business Day of the Statement of
Closing Date Receivables being deemed final.
(d) Interest on Payments. Any payments required to be made by
Seller or Purchaser pursuant to Section 2.4 shall bear interest
from
the Closing through the date of payment at the prime lending
rate
prevailing during such period as published in The Wall Street
Journal.
<PAGE>
13
ARTICLE III
CLOSING DATE
3.1 Closing Date; Insurance Subsidiary Purchase. (a) Unless
this Agreement shall have theretofore been
terminated and the transactions
herein abandoned pursuant to Section 9.1,
subject to the provisions of Article
VIII, the closing (the "Closing") of the
purchase and sale of the Stock, the
transfer of the FG Transferred Assets and
the assumption of the FG Assumed
Liabilities by Purchaser provided for in
Article II shall take place at the
offices of Simpson Thacher & Bartlett
LLP, 425 Lexington Avenue, New York, New
York, at 10:00 a.m., New York City time, on
the first Business Day occurring
after December 31, 2003 that is after the
day on which all conditions set forth
in Article VIII are first satisfied or
waived, other than conditions which by
their terms are to be satisfied at the
Closing (provided that Seller and
Purchaser may mutually agree in writing to
delay the Closing until the last
Business Day of the month during which all
conditions set forth in Article VIII,
other than conditions which by their terms
are to be satisfied at the Closing,
are first satisfied or waived), or at such
other place and time and on such
other date as the parties may agree. The
date on which the Closing occurs is
herein called the "Closing Date".
(b) Notwithstanding Section 3.1(a), if all the conditions to
Closing set forth in Article VIII, other
than conditions which by their terms
are to be satisfied at Closing and other
than the receipt of Insurance
Regulatory Approvals shall have been
satisfied or waived, then the parties shall
promptly take all actions necessary to (i)
consummate the Closing and the other
transactions contemplated hereby (other
than the sale and delivery of the stock
of the Insurance Subsidiaries (the
"Insurance Subsidiary Purchase"), which shall
be transferred to Seller), provided that
the amount payable in respect of the
Purchase Price at the Closing shall be
reduced by an amount equal to the
aggregate book value of the Insurance
Subsidiaries as of their most recent
quarter-end, but in any event not less than
$100 million (which amount shall be
deferred and paid as provided in Section
3.1(d)), and (ii) delay the Insurance
Subsidiary Purchase until such time as the
Insurance Regulatory Approvals shall
have been obtained (at which time the
Insurance Subsidiary Purchase shall take
place in the manner described in Section
3.1(d)). From and after the Closing,
Seller, Seller Parent and Purchaser shall
continue to use their reasonable best
efforts to obtain the Insurance Regulatory
Approvals.
(c) Following the Closing and until such time as each
Insurance Subsidiary has been transferred
to Purchaser pursuant to Section
3.1(d) (each, a "Deferred Transfer"),
Seller and Seller Parent shall cause the
Insurance Subsidiaries not so transferred
to be held for Purchaser's benefit and
shall cause the Insurance Subsidiaries to
be managed and operated for
Purchaser's benefit and account, with all
gains, income, losses, taxes or other
items generated thereby to be for
Purchaser's account. Except as otherwise
provided in this Section 3.1(c), Seller,
Seller Parent and their affiliates
shall have no liability to Purchaser
arising out of the management or operation
of the Insurance Subsidiaries other than
for gross negligence or willful
misconduct, for which gross negligence or
willful misconduct Seller and Seller
Parent will indemnify Purchaser; provided,
that Seller, Seller Parent and their
affiliates will have no liability for
actions taken in accordance with the
request or direction of Purchaser or its
affiliates. Except as set forth in the
immediately preceding sentence, Purchaser
shall reimburse Seller, Seller Parent
and their affiliates and shall hold Seller,
Seller Parent and their affiliates
harmless from and against all liabilities,
incurred or asserted as a result of
the post-Closing direct or indirect
ownership,
<PAGE>
14
management or operation of the Insurance
Subsidiaries, including, without
limitation, the amount of any additional
taxes payable by Seller, Seller Parent
or its affiliates (whether currently or in
the future), after application of the
terms of this Agreement, as a result
thereof in excess of the amount of taxes
which would have been payable by Seller,
Seller Parent or its affiliates, after
application of the terms of this Agreement,
if the Insurance Subsidiaries had
been transferred to Purchaser on the
Closing Date, and Seller and Seller Parent
shall reimburse Purchaser if the amount of
such taxes so payable by Seller and
Seller Parent is less than had the transfer
occurred on the Closing Date.
(d) The Deferred Transfer of any Insurance Subsidiary shall be
effected on the fifth Business Day
following receipt of all Insurance Regulatory
Approvals necessary therefor or at such
other time as the parties may agree, and
shall be effective upon the execution and
delivery of all necessary agreements
required by Applicable Law to effect such
transfer. At the closing of any
Deferred Transfer, Purchaser shall pay the
portion of the Purchase Price
deferred in respect of such Insurance
Subsidiary pursuant to Section 3.1(a),
together with interest thereon at the prime
lending rate prevailing during such
period as published in The Wall Street
Journal, calculated on a daily basis from
the Closing Date until the date of payment,
and Seller or Seller Parent shall
cause the capital stock of the applicable
Insurance Subsidiary, plus or as
offset by all gains, income, losses, taxes
or other items generated thereby for
Purchaser's account (as described in the
first sentence of Section 3.1(c)), to
be delivered to Purchaser.
(e) If the Deferred Transfer of any Insurance Subsidiary shall
not have occurred prior to the one-year
anniversary of the Closing Date, (i) all
obligations of the parties to purchase or
sell such Insurance Subsidiary or
account for gains, income, losses or taxes
with respect thereto shall be
terminated (provided that such termination
shall not affect any party's rights
in respect of any breach of this Agreement,
including with respect to Section
6.3) and (ii) Seller shall retain such
Insurance Subsidiary for its own account
and the provisions set forth in Section
3.1(c) shall thereafter cease to apply.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and Seller Parent, jointly and severally, represent and
warrant to Purchaser that:
4.1 Organization, Power etc. (a) Each of Seller and Seller
Parent is a corporation duly incorporated,
validly existing and in good standing
under the laws of its jurisdiction of
incorporation.
(b) Each of the Subject Companies has been duly incorporated
or organized and is validly existing and in
good standing under the laws of its
jurisdiction of incorporation or
organization. Where applicable, each of the
Subject Companies is duly qualified or
licensed as a foreign corporation or
other entity to do business and is in good
standing in each jurisdiction in
which the nature of its business or
properties makes such qualification or
license necessary, all of which
jurisdictions are set forth in Section 4.1 of
the Seller Disclosure Schedule next to the
names of the applicable Subject
Companies, and each of the Subject
Companies and FG (with
<PAGE>
15
respect to the FG Transferred Business
only) has full power and authority
necessary to own all of its properties and
assets and to carry on its business
as it is now being conducted, except where
failure to be so incorporated,
organized, existing, qualified, licensed or
in good standing would not
reasonably be expected to have a Material
Adverse Effect. True and complete
copies of the certificate of incorporation
and bylaws of each Subject Company,
as in effect as of the date hereof, have
heretofore been delivered or made
available to Purchaser. Seller and Seller
Parent have made available to
Purchaser the minute books of each Subject
Company from January 1, 2000 through
the date of this Agreement and such minute
books contain true and complete
copies of the minutes of all meetings held
by the boards of directors and
stockholders of each Subject Company during
that period.
4.2 Authority Relative to Agreement. Each of Seller and Seller
Parent has the corporate power and
authority to execute and deliver this
Agreement and the Transition Services
Agreement, to perform its obligations
hereunder and thereunder and to consummate
the transactions contemplated hereby
and thereby. The execution and delivery by
each of Seller and Seller Parent of
this Agreement and the Transition Services
Agreement, the performance of its
obligations hereunder and thereunder and
its consummation of the transactions
contemplated hereby and thereby have been
duly authorized by all necessary
corporate action. This Agreement has been,
and upon its execution and delivery
the Transition Services Agreement shall
have been, duly and validly executed and
delivered by each of Seller and Seller
Parent and, assuming the due
authorization, execution and delivery by
Purchaser, this Agreement constitutes,
and upon its execution and delivery the
Transition Services Agreement shall
constitute, legal and binding obligations,
enforceable against Seller Parent and
Seller in accordance with their respective
terms, except as may be affected by
bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and
other similar laws relating to or affecting
creditors' rights generally and
general equitable principles.
4.3 Non-Contravention. The execution and delivery of this
Agreement and the Transition Services
Agreement by each of Seller and Seller
Parent do not, and its consummation of the
transactions contemplated hereby and
thereby and its performance of the
obligations which it is obligated to perform
or cause to be performed hereunder and
thereunder will not: (a) violate any
provision of its certificate of
incorporation or by-laws or other organizational
documents or those of any Subject Company
or FG; or (b) assuming that all
consents, authorizations, orders or
approvals of, filings or registrations with,
and notices to, each United States federal
and state court, governmental
commission, board or other regulatory
authority or agency or arbitral body
("Governmental Authority") referred to in
Section 4.4(a) and all Third Party
Consents referred to in Section 4.4(b) have
been obtained or made, (i) violate
any law, regulation, rule, order, judgment
or decree of any Governmental
Authority ("Applicable Law") to which
Seller or Seller Parent, any Subject
Company or FG (with respect to the FG
Transferred Business only) or any of their
respective properties (but with respect to
FG, only the FG Transferred Assets)
is subject, (ii) violate, result in the
termination or acceleration of, or
conflict with or constitute a default
under, any mortgage, indenture, lease,
license, permit, agreement or instrument
(each a "Contract") to which Seller,
Seller Parent, any Subject Company or FG
(with respect to the FG Transferred
Business only) is a party or by which any
of their respective properties (but,
with respect to FG, only the FG Transferred
Assets) is bound or (iii) result in
the creation of any Lien on the Stock or
any of the assets or properties of any
Subject Company or the FG Transferred
Assets, except, in the case of clauses (i)
and (ii), for any such
<PAGE>
16
violation, termination, acceleration,
conflict or default as would not
reasonably be expected to have a Material
Adverse Effect or prohibit or
materially impair the ability of Seller
Parent or Seller to consummate the
transactions contemplated hereby and by the
Transition Services Agreement or
perform their respective obligations
hereunder or thereunder on a timely basis.
4.4 Consents, etc. (a) Except for the filing of applications
and notices with and receipt of approvals,
licenses or consents from applicable
state regulatory authorities governing
consumer finance, mortgage lending and
insurance in the various states in which
the Subject Companies and FG (with
respect to the FG Transferred Business
only) operate their respective
businesses, the filing of notice under the
Hart-Scott-Rodino Antitrust
Improvements Act of 1976 ("HSR Act"), and
the expiration or early termination of
the applicable waiting period, and as
described in Section 4.4(a) of the Seller
Disclosure Schedule, no consent,
authorization, license, order or approval of,
filing or registration with, or notice to,
any Governmental Authority
(collectively, "Governmental Approvals")
and (b) except as described in Section
4.4(b) of the Seller Disclosure Schedule,
no consent, authorization, approval or
waiver from any party (other than a
Governmental Authority) to any Contract
(collectively, "Third Party Consents") to
which Seller, Seller Parent, any
Subject Company or FG (with respect to the
FG Transferred Business only) is a
party or by which any of their respective
properties (but, with respect to FG,
only the FG Transferred Assets) are bound
is required for the execution and
delivery of this Agreement or the
Transition Services Agreement by Seller and
Seller Parent, the performance of their
respective obligations hereunder and
thereunder and their consummation of the
transactions contemplated hereby and
thereby, except in any such case for any
such Governmental Approval or Third
Party Consent (A) which is required solely
by reason of the specific regulatory
status of Purchaser or its affiliates or
(B) the failure of which to be obtained
or made would not reasonably be expected to
have a Material Adverse Effect or
prohibit or materially impair the ability
of Seller Parent or Seller to
consummate the transactions contemplated
hereby or perform their respective
obligations hereunder on a timely
basis.
4.5 Title to Stock and FG Transferred Assets. Upon the
delivery and payment for the Stock as
contemplated herein, Seller will transfer
to Purchaser or its designee valid title to
the Stock and the stock of the
Insurance Subsidiaries, free and clear of
any Liens (other than Liens created or
incurred by Purchaser or any of its
affiliates). Upon the delivery and payment
for the FG Transferred Assets as
contemplated herein and assumption of the FG
Assumed Liabilities, FG will transfer to
Purchaser valid title to the FG
Transferred Assets, free and clear of any
Liens (other than Liens created or
incurred by Purchaser or any of its
affiliates and Permitted Liens).
4.6 Capital Stock of the Subject Companies. (a) The authorized
capital stock of the Company consists of
10,000 shares of common stock, par
value $1.00 per share, of which 1,000
shares are issued and outstanding and
owned, beneficially and of record, by
Seller, free and clear of any Liens. All
outstanding shares of the Company's capital
stock have been duly authorized and
validly issued and are fully paid,
nonassessable and free of preemptive rights.
There are no outstanding obligations,
warrants, options or other rights to
subscribe for or purchase from the Company,
or other contracts or commitments
providing for the issuance of or granting
any Person the right to acquire,
shares of any class of stock of the
Company, or any securities or other
instruments convertible into or
exchangeable or exercisable for shares of any
class of stock of the Company. There are no
proxies, voting agreements or other
agreements
<PAGE>
17
with respect to the voting or transfer of
any shares of capital stock or
membership interests of any of the Subject
Companies.
(b) Section 4.6(b) of the Seller Disclosure Schedule sets
forth, as to each Included Subsidiary, its
jurisdiction of organization and the
percentage of its capital stock that is
beneficially owned by the Company. The
outstanding shares of capital stock
beneficially owned by the Company of each
Included Subsidiary are validly issued,
fully paid and nonassessable. All of the
shares shown in Section 4.6(b) of the
Seller Disclosure Schedule as being
beneficially owned by the Company are owned
by the Company either directly or
indirectly through other Included
Subsidiaries, free and clear of any Liens,
except as set forth in Section 4.6(b) of
the Seller Disclosure Schedule. There
are no outstanding obligations, warrants,
options or other rights to subscribe
for or purchase from any Included
Subsidiary, or other contracts or commitments
providing for the issuance of or granting
any Person the right to acquire,
shares of any class of stock of any
Included Subsidiary, or any securities or
other instruments convertible into or
exchangeable or exercisable for shares of
any class of stock of any Included
Subsidiary.
4.7 SEC Filings; Financial Statements. (a) Each Subject
Company has timely filed all material
reports, registrations and statements,
together with any amendments required to be
made with respect thereto, that it
was required to file since January 1, 2001
with any Governmental Authority and
has paid all material fees and assessments
due and payable in connection
therewith. Except for normal and routine
examinations conducted by Governmental
Authorities in the regular course of the
business of the Subject Companies and
FG (with respect to the FG Transferred
Business only), and except as set forth
in Section 4.7(a) of the Seller Disclosure
Schedule, no Governmental Authority
has initiated any proceeding or
investigation or, to the Knowledge of Seller,
threatened or indicated an intention to
initiate any investigation into the
business or operations of the Subject
Companies or FG (with respect to the FG
Transferred Business only) since January 1,
2001.
(b) The Company has filed all material reports, schedules,
forms, statements and other documents
required to be filed with the SEC since
January 1, 2001 (collectively, together
with all items incorporated therein by
reference, the "Company Reports"). The
Company Reports, at the time they were
filed (or if amended or superseded by a
filing prior to the date of this
Agreement, then on the date of such
filing), (i) complied in all material
respects with the applicable requirements
of the Securities Act or the Exchange
Act, as the case may be, and (ii) did not
contain any untrue statement of a
material fact or omit to state a material
fact required to be stated therein or
necessary in order to make the statements
therein, in the light of the
circumstances under which they were made,
not misleading.
(c) Each of the consolidated statements of financial condition
and the related consolidated statements of
operations and comprehensive income,
retained earnings and cash flows
(including, in each case, any related notes
thereto) contained in the Company Reports
was prepared in accordance with GAAP
applied on a consistent basis throughout
the periods involved (except as may be
indicated in the notes thereto or in such
documents or, in the case of unaudited
financial statements, as otherwise
permitted by Form 10-Q of the SEC), and each
fairly presents in all material respects
the consolidated financial position of
the Company and its Subsidiaries at the
respective dates thereof and the
consolidated results of its operations and
cash flows for the
<PAGE>
18
periods indicated (subject, in the case of
unaudited statements, to normal
year-end adjustments which have not had and
would not reasonably be likely to
have a Material Adverse Effect).
(d) Each of the Insurance Subsidiaries has filed all annual or
quarterly statements, together with all
exhibits and schedules thereto, required
to be filed with or submitted to the
appropriate regulatory authorities of the
jurisdiction in which it is domiciled on
forms prescribed or permitted by such
regulatory authority (collectively, the
"Company SAP Statements") since January
1, 2001. The financial statements included
in the Company SAP Statements and
prepared on a statutory basis, including
the notes thereto, have been prepared
in all material respects in accordance with
accounting practices prescribed or
permitted by the applicable regulatory
authorities in effect as of the date of
the respective statements and such
accounting practices have been applied in all
material respects on a consistent basis
throughout the periods involved, except
as expressly set forth in the notes or
schedules thereto, and such financial
statements present fairly in all material
respects the respective statutory
financial positions and results of
operations of each of the Insurance
Subsidiaries as of their respective dates
and for the respective periods
presented therein.
(e) The Company has timely filed or supplied all
certifications and statements required by
(i) Rule 13a-14 or Rule 15d-14 under
the Exchange Act or (ii) 18 U.S.C. Section
1350 (Section 906 of the
Sarbanes-Oxley Act of 2002) with respect to
any Company Report. The Company
maintains disclosure controls and
procedures required by Rule 13a-15 or Rule
15d-15 under the Exchange Act; such
controls and procedures are effective to
ensure that all material information
concerning the Company and its Subsidiaries
is made known on a timely basis to the
individuals responsible for the
preparation of the Company's SEC filings
and other public disclosure documents.
(f) The Subject Companies and the FG Transferred Business
maintain a system of internal accounting
controls sufficient to provide
reasonable assurance that (i) transactions
are executed in accordance with
management's general or specific
authorizations, (ii) transactions are recorded
as necessary to permit preparation of
financial statements in conformity with
GAAP and to maintain asset accountability,
(iii) access to assets is permitted
only in accordance with management's
general or specific authorization, and (iv)
the recorded accountability for assets is
compared with the existing assets at
reasonable intervals and appropriate action
is taken with respect to any
differences.
(g) Since January 1, 2001, none of Seller Parent, Seller or
any Subject Company has received any
complaint, allegation or claim regarding
the accounting or auditing practices,
procedures, methodologies or methods of
any Subject Company or their respective
internal accounting controls.
4.8 Litigation. Except (i) for any litigation that may arise
out of the transactions contemplated by
this Agreement and any Excluded
Litigation or (ii) as set forth in Section
4.8 of the Seller Disclosure
Schedule, there is no action, suit or
proceeding pending or, to the Knowledge of
Seller, threatened against Seller, any
Subject Company or FG (with respect to
the FG Transferred Business only) before
any Governmental Authority or
arbitrator that would reasonably be
expected to have a Material Adverse Effect.
Except as set forth in Section 4.8 of the
Seller Disclosure Schedule, there are
no outstanding judgments, decrees,
injunctions or
<PAGE>
19
orders of any Governmental Authority to
which any of the Subject Companies or FG
(with respect to the FG Transferred
Business only) is subject or any of their
respective properties (but, with respect to
FG, only the FG Transferred Assets)
is bound that would reasonably be expected
to have a Material Adverse Effect.
4.9 Compliance with Laws; Permits and Licenses. The operations
of each of the Subject Companies and FG
(with respect to the FG Transferred
Business only) are being, and at all times
since January 1, 2000 have been,
conducted in compliance, in all material
respects, with all Applicable Laws to
which Seller, any Subject Company or FG
(with respect to the FG Transferred
Business only) is subject, including all
state usury, state "high cost" or
"predatory lending" laws, consumer lending
and insurance laws, the Truth in
Lending Act, the Real Estate Settlement
Procedures Act, the Consumer Credit
Reporting Act, the Equal Credit Opportunity
Act, the Fair Credit Reporting Act,
the Homeowners Ownership and Equity
Protection Act, the Fair Debt Collection
Practices Act and other applicable federal
state and local laws regulating
lending, servicing loans or selling credit
or other insurance, and neither the
Subject Companies nor FG (with respect to
the FG Transferred Business only) is
in conflict with, is in default of, or has
since January 1, 2000 been charged in
writing (or, to the Knowledge of Seller,
otherwise been charged) by any
Governmental Authority with a material
violation of any, Applicable Law. Each of
the Subject Companies and FG (with respect
to the FG Transferred Business only)
holds all material permits, certificates,
licenses, approvals and other
authorizations ("Permits") of each
Governmental Authority which are necessary
for the operation of its business (but,
with respect to FG, only the FG
Transferred Business) as presently
conducted and all such material Permits are
in full force and effect. Except as set
forth in Section 4.9 of the Seller
Disclosure Schedule, since January 1, 2000,
none of the Subject Companies or FG
(with respect to the FG Transferred
Business only) has received any written or,
to the Knowledge of Seller, oral
notification from any Governmental Authority
asserting that such Person is not in
compliance with any of the statutes,
regulations or ordinances that such
Governmental Authority enforces or that such
Governmental Authority intends to revoke or
suspend any such Permit.
4.10
Absence of Certain Changes; No Undisclosed Liabilities.
(a) Since December 31, 2002, except as
contemplated by this Agreement or as set
forth in Section 4.10(a) of the Seller
Disclosure Schedule or disclosed in the
Company Reports filed prior to the date of
this Agreement, (i) the business of
the Subject Companies and FG (with respect
to the FG Transferred Business only)
has been conducted only in the ordinary
course of business consistent with past
practice, (ii) there has been no change,
event or development affecting the
Subject Companies or FG (with respect to
the FG Transferred Business only)
which, individually or in the aggregate,
has resulted in or would reasonably be
expected to result in a Material Adverse
Effect and (iii) none of the Subject
Companies or FG (with respect to the FG
Transferred Business only) has taken any
action that, if taken during the period
from the date of this Agreement to the
Closing Date, would constitute a breach of
Section 6.1 hereof.
(b) Section 4.10(b) of the Seller Disclosure Schedule sets
forth all Company Specified Debt and all
other outstanding long-term debt for
borrowed money of the Company outstanding
as of September 30, 2003. Except for
liabilities incurred in connection with
this Agreement and the transactions
contemplated hereby, and except for (i)
liabilities disclosed, reserved for or
otherwise reflected in the unaudited
consolidated statement of financial
condition
<PAGE>
20
of the Company as of September 30, 2003
(including the notes thereto) contained
in the Company Reports and (ii) liabilities
incurred by the Subject Companies
after September 30, 2003 in the ordinary
course of business or as otherwise
disclosed in the Company Reports filed
prior to the date of this Agreement, the
Subject Companies and FG (with respect to
the FG Transferred Business only) do
not have any material liabilities (accrued,
absolute, contingent or otherwise)
that are required to be disclosed on a
consolidated balance sheet in accordance
with GAAP. Reserves are reflected on the
most recent balance sheet contained in
the Company Reports against all liabilities
of the Subject Companies and the FG
Transferred Business in amounts that have
been established on a basis consistent
in all material respects with the past
practices of the Subject Companies and FG
(with respect to the FG Transferred
Business only).
(c) Except as set forth in Section 4.10(c) of the Seller
Disclosure Schedule or as contemplated by
the Reorganization, since December 31,
2002 no Subject Company has declared, set
aside, made or paid any dividend or
other distribution on or in respect of its
capital stock, or repurchased,
redeemed or otherwise reacquired any of its
capital stock, other than any
dividend or other distribution on any
capital stock of any Subject Company paid
or made solely to another Subject Company
and any repurchase, redemption or
reacquisition of any capital stock of any
Subject Company held by another
Subject Company.
4.11 Personnel and Employee Benefits Matters. (a) Section
4.11(a) of the Seller Disclosure Schedule
sets forth a list of each material (i)
"employee benefit plan" (within the meaning
of Section 3(3) of ERISA), (ii)
severance, change in control and employment
plan, program or agreement and (iii)
vacation, incentive, bonus, stock option,
stock purchase, restricted stock or
other benefit or compensation plan,
program, agreement or policy of or sponsored
by Seller Parent, Seller, any of the
Subject Companies or FG, in which present
or former employees or directors of the
Subject Companies or the FG Transferred
Business participate (collectively,
"Benefit Plans").
(b) The Benefit Plans are in compliance in all material
respects with all applicable requirements
of ERISA, the Code, and other
Applicable Laws and have been administered
in all material respects in
accordance with their terms and such laws.
Each Benefit Plan that is intended to
be qualified within the meaning of Section
401 of the Code has received a
favorable determination letter as to its
qualification, and, to the Knowledge of
Seller, nothing has occurred that would
reasonably be expected to adversely
affect such qualification.
(c) Except as set forth in Section 4.11(c) of the Seller
Disclosure Schedule or for ordinary and
usual claims for benefits by
participants and beneficiaries, there are
no pending or, to the Knowledge of
Seller, threatened claims and no pending
or, to the Knowledge of Seller,
threatened litigation with respect to any
Benefit Plan which would reasonably be
expected to result in material liability to
the Subject Companies.
(d) Except as set forth in Section 4.11(d) of the Seller
Disclosure Schedule, nothing has occurred,
and no condition exists, with respect
to any Benefit Plan which would reasonably
be expected to have a Material
Adverse Effect. None of Seller Parent,
Seller, any of the Subject Companies or
FG has incurred any material liability
under, arising out of or by operation of
Title IV of ERISA (other than the payment
of premiums to the Pension Benefit
Guaranty Corporation), and no fact or event
exists which could reasonably be
expected to give
<PAGE>
21
rise to any such material liability. No
Benefit Plan is a multiemployer plan (as
defined in Section 3(37) of ERISA).
(e) Except as set forth in Section 4.11(e) of the Seller
Disclosure Schedule, neither the execution
of this Agreement nor the
consummation of the transactions
contemplated by this Agreement will (i) entitle
any employees of the Subject Companies or
employees of the FG Transferred
Business to severance pay or any increase
in severance pay upon any termination
of employment after the date hereof or (ii)
accelerate the time of payment or
vesting or trigger any payment or funding
of compensation or benefits under, or
increase the amount payable or trigger any
other material obligation pursuant
to, any of the Benefit Plans. None of the
Benefit Plans would result separately
or in the aggregate (including, without
limitation, as a result of this
Agreement or the transactions contemplated
hereby) in the payment of any "excess
parachute payment" within the meaning of
Section 280G of the Code.
(f) Except as set forth in Section 4.11(f) of the Seller
Disclosure Schedule, the Benefit Plans are
sponsored or maintained by the Seller
Parent or an affiliate (other than the
Subject Companies or FG) (the "Retained
Seller Plans"), and the Seller Parent or
such affiliate (or a trust or insured
arrangement maintained by the Seller Parent
or such affiliate) is liable for the
payment of all compensation and benefits
arising under such Retained Seller
Plans (including all claims for such
compensation or benefits, whenever
occurring) to employees of the Subject
Companies and the FG Transferred Business
(except to the extent that the Purchaser or
any of its affiliates participate in
any of the Retained Seller Plans after the
Closing Date).
(g) Each of the Subject Companies and FG (with respect to the
FG Transferred Business only) have timely
given any and all notices and taken
any other actions required with respect to
the Worker Adjustment and Retraining
Notification Act of 1988, as amended, or
other similar laws of any state or
other jurisdiction (collectively,
"WARN").
4.12 Taxes. (a) Except as set forth in Section 4.12 of the
Seller Disclosure Schedule, (i) all
material Tax Returns required to be filed
with respect to the Subject Companies and
the FG Transferred Assets have been
timely filed; (ii) all Taxes shown as due
on such Tax Returns have been timely
paid and all such Tax Returns are true and
complete in all material respects;
(iii) to the Knowledge of Seller, there are
no pending or threatened actions or
proceedings for the assessment or
collection of any material Taxes against the
Subject Companies or the FG Transferred
Assets; (iv) none of the Subject
Companies or FG (with respect to the FG
Transferred Assets only) is a party to
any Tax sharing agreement or arrangement,
other than pursuant to the Tax Sharing
Agreement dated as of August 31, 1999 among
Seller Parent, the Subject Companies
and others; (v) no material Tax Liens or
assessments (other than Liens for Taxes
not yet due and payable or being contested
in good faith by appropriate
proceedings) have been filed by any Tax
authority against the Subject Companies
or any of their respective properties or
assets and (vi) all indebtedness of the
Subject Companies that will remain
outstanding after the Closing Date is
properly treated as "indebtedness" for
federal and state income tax purposes.
(b) Seller Parent and the Seller Parent's Group have filed
consolidated federal income Tax Returns
including each of the Subject Companies
for the taxable year immediately
<PAGE>
22
preceding the current taxable year, other
than City Holdings Reinsurance Life
Company in the event that the taxable year
immediately preceding the current
taxable year is 2002.
(c) Section 4.12(c) of the Seller Disclosure Schedule lists
(i) any Included Subsidiaries that are
treated by Seller Parent as entities
disregarded from their owners for federal
income tax purposes, and (ii) any
Included Subsidiaries that are treated by
Seller Parent as a partnership for
state tax purposes. Washington Mutual
Finance of Texas LLC is the only Included
Subsidiary that paid any material amount of
Texas state income or franchise tax
for the 2002 taxable year.
4.13 Properties. (a) Section 4.13(a) of the Seller Disclosure
Schedule sets forth a true and complete
description of all real property (a)
leased by a Subject Company and (b) leased
by FG (with respect to the FG
Transferred Business only). The Company or
an Included Subsidiary has a valid
and enforceable leasehold interest in each
of the leased premises in which the
Subject Companies currently conduct their
business and FG or one of the other
Subject Companies has a valid and
enforceable leasehold interest in each of the
leased premises in which FG currently
conducts the FG Transferred Business, in
each case except as may be affected by
bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating
to or affecting creditors' rights
generally or general equitable principles.
As of the date hereof, there is no
material default (or event or circumstance
which, with the giving of notice or
lapse of time, would constitute such a
default) by the lessee or, to the
Knowledge of Seller, the lessor under any
such lease and each such lease is in
effect in accordance with its terms, except
to the extent that any failure to be
so in effect would not reasonably be
expected to have a Material Adverse Effect.
The leasehold interest in the leased
premises used by the Subject Companies in
Pensacola, Florida (the "C3 Lease") is held
by a Subject Company free and clear
of all Liens other than Permitted Liens.
None of the Subject Companies and FG
(with respect to the FG Transferred
Business only) owns any real properties in
fee simple for use in the conduct of its
business.
(b) The FG Transferred Assets constitute substantially all the
properties, assets and rights forming a
part of, used, held or intended to be
used in, and all such properties, assets
and rights as are necessary in the
conduct of, the FG Transferred
Business.
4.14 Certain Labor Matters. None of the Subject Companies and
FG (with respect to the FG Transferred
Business only) is a party to any
collective bargaining agreement or
agreement with any labor union. From January
1, 2001 through the date of this Agreement,
(i) there has not occurred or, to
the Knowledge of Seller, been threatened
any strike, slow down, picketing, work
stoppage, concerted refusal to work,
receipt of notice to seek union or other
similar labor activities with respect to
the Affected Employees and (ii) no
labor grievance or arbitration or other
proceeding against a Subject Company or
FG (with respect to the FG Transferred
Business only) is pe
