Exhibit 2.2
SUBSCRIPTION AGREEMENT
BY AND AMONG
HUB U.S. HOLDINGS, INC.
SATELLITE ACQUISITION CORPORATION
RANDALL TALBOT
DAVID WEYMOUTH
ROY TAYLOR
AND
TALMAN, LLC
MARCH 15, 2004
TABLE OF CONTENTS
1. Subscription.............................................................................................1
2. Payment for Shares.......................................................................................1
3. Funds....................................................................................................2
4. Representations and Warranties of the Subscriber.........................................................2
5. Representations and Warranties of the Company and Certain Affiliates of the Company......................4
6. Survival and Indemnification............................................................................19
7. Other Agreements of the Parties.........................................................................20
8. Conditions to Closing...................................................................................21
9. Closing.................................................................................................22
10. Notices.................................................................................................22
11. Notification of Changes.................................................................................23
12. Assignability...........................................................................................23
13. Binding Effect..........................................................................................23
14. Entire Agreement........................................................................................23
15. Governing Law...........................................................................................23
16. Severability............................................................................................23
17. Headings................................................................................................24
18. Counterparts............................................................................................24
19. Definitions.............................................................................................24
SUBSCRIPTION AGREEMENT
SATELLITE ACQUISITION CORPORATION
March 15, 2004
THIS SUBSCRIPTION AGREEMENT (this "SUBSCRIPTION AGREEMENT") is made on
March 15, 2004, by and among HUB U.S. Holdings, Inc. (the "SUBSCRIBER"), a
corporation formed under the laws of the State of Delaware, Satellite
Acquisition Corporation (the "COMPANY"), a corporation formed under the laws of
the State of Washington, Randall Talbot ("TALBOT"), David Weymouth ("WEYMOUTH")
and Roy Taylor ("TAYLOR") and TalMan, LLC, a limited liability company formed
under the laws of the State of Delaware ("TALMAN," and, collectively with
Talbot, Weymouth and Taylor, the "FOUNDERS"). Capitalized terms not otherwise
defined herein shall have the meanings set forth in SECTION 19.
WHEREAS, the Company desires to purchase from Safeco, and Safeco
desires to sell to the Company, all of the outstanding stock of Talbot Financial
Corporation, a corporation formed under the laws of the State of Washington
("TFC") pursuant to the terms of the Stock Purchase Agreement;
WHEREAS, the Subscriber desires to purchase and the Company desires to
issue and sell certain shares of Series A Preferred Stock of the Company to the
Subscriber; and
WHEREAS, TFC's Board of Directors has authorized TFC to enter into
employment agreements with Weymouth and Taylor in substantially the form
attached hereto as EXHIBIT B (each, an "EMPLOYMENT AGREEMENT").
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, there parties hereto hereby agree as follows:
1. SUBSCRIPTION.
(a) Subject to the terms and conditions of this Subscription Agreement
(including but not limited to SECTION 1.1(B) and SECTION 8), the Subscriber
agrees to purchase at the Closing and the Company agrees to issue, to Subscriber
at the Closing 18,498,600 shares of Class A Common Stock and 18,498,600 shares
of Series A Preferred Stock for an aggregate amount of $92.5 million (the
"PURCHASE PRICE"). The Subscriber understands that the offering of the Shares is
being made without registration of the Shares under the Securities Act of 1933,
as amended (the "SECURITIES ACT"), or any securities, "blue sky" or other
similar laws of any state or foreign jurisdiction ("STATE SECURITIES LAWS"). The
Subscriber agrees that this Subscription Agreement shall be irrevocable and
shall survive the merger, consolidation, liquidation or dissolution of the
Subscriber.
(b) The Subscriber shall have no obligation to purchase any Shares
under this Subscription Agreement if the total cash consideration paid or to be
paid under the Stock Purchase Agreement exceeds $90 million.
2. PAYMENT FOR SHARES. Upon satisfaction of the conditions set forth in SECTION
8, the Subscriber shall deliver to the Company the Purchase Price. Payment of
the Purchase Price shall be made by
delivery of up to $90 million to Safeco by wire transfer in immediately
available funds in accordance with the terms and conditions set forth in the
Stock Purchase Agreement and the remainder to the Company or its designee by
wire transfer in immediately available funds to an account specified to the
Subscriber by the Company or its designee.
3. FUNDS. If (a) on or prior to September 30, 2004 (i) the Closing shall not
have occurred, or (ii) the conditions to the sale of the Shares specified in
SECTION 8 have not been satisfied (or waived), and (b) if the Stock Purchase
Agreement shall have terminated pursuant to SECTION 7 thereof, the subscription
shall be void, this Subscription Agreement shall terminate and all funds
received from the Subscriber (if any) shall be promptly returned to the
Subscriber.
4. REPRESENTATIONS AND WARRANTIES OF THE SUBSCRIBER. The Subscriber represents
and warrants to and covenants with the Company as follows:
(a) GENERAL.
(i) ORGANIZATION OF THE SUBSCRIBER. The Subscriber is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Subscriber has the requisite corporate power and
authority to carry on its business as now being conducted. The Subscriber is
duly qualified or licensed to do business and is in good standing (with respect
to jurisdictions that recognize such concept) in each jurisdiction in which the
nature of its business or the ownership, leasing or operation of its properties
makes such qualification or licensing necessary, except for those jurisdictions
where the failure to be so qualified or licensed or to be in good standing
individually or in the aggregate would not have a Material Adverse Effect on the
Subscriber
(ii) AUTHORITY. The Subscriber has all of the requisite authority
to enter into the Transaction Documents and to perform all of the obligations
required to be performed by the Subscriber under the Transaction Documents. The
execution, delivery and performance by the Subscriber of the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby have been duly and validly authorized by the board of directors of the
Subscriber and no other corporate proceedings on the part of the Subscriber are
necessary to authorize the execution, delivery and performance of the
Transaction Documents or the consummation of the transactions contemplated
hereby and thereby. This Subscription Agreement has been, and each Ancillary
Agreement at Closing will be, duly executed and delivered by the Subscriber, and
this Subscription Agreement is, and, each of the Ancillary Agreements at the
Closing will be, a valid and binding obligation of the Subscriber, enforceable
against it in accordance with its terms, except that the enforceability of the
Transaction Documents may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to the equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(iii) NO VIOLATIONS; CONSENTS AND APPROVALS.
(A) The execution, delivery and performance by the
Subscriber of this Subscription Agreement does not, the execution, delivery and
performance by the Subscriber of the Ancillary Agreements will not and the
consummation by the Subscriber of the transactions contemplated by the
Transaction Documents will not, (i) violate any provision of the Certificate of
Incorporation or Bylaws of the Subscriber; (ii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any of the terms, conditions or provisions of any material contract to
which the Subscriber is a party or by which the Subscriber or any of its
respective properties or assets may be bound or otherwise subject to; or (iii)
violate any Law applicable to the Subscriber or any of its properties or assets.
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(B) No Consent of any Governmental Entity is required in
connection with the execution, delivery and performance of this Subscription
Agreement or the Ancillary Agreements by the Subscriber, or the consummation by
the Subscriber of the transactions contemplated hereby and thereby.
(iv) The Subscriber is the sole party in interest and is not
acquiring the Shares as an agent or otherwise for any other Person. The
Subscriber has its principal office within the jurisdiction set forth in SECTION
10.
(b) STATUS OF THE SUBSCRIBER.
(i) The Subscriber has such knowledge and experience in financial
and business matters that the Subscriber is capable of evaluating the merits and
risks of an investment in the Shares. The Subscriber is able to bear the
economic risk of this investment. The Subscriber has had the opportunity to
consult with the Subscriber's attorney and accountant regarding the Subscriber's
investment in the Shares and their suitability for purchase by the Subscriber,
and to the extent necessary, the Subscriber has retained, at the Subscriber's
own expense, and relied upon, appropriate professional advice regarding the
investment, tax and legal merits, risks and consequences of this Subscription
Agreement and of purchasing and owning the Shares.
(ii) The Subscriber represents that the Subscriber is not a
corporation that was formed for the specific purpose of acquiring the Shares
offered and that it has total assets in excess of $5,000,000.
(c) RESTRICTIONS ON TRANSFER OR SALE OF THE SHARES.
(i) The Subscriber is acquiring the Shares solely for the
Subscriber's own beneficial account, for investment purposes, and not with view
to, or for resale in connection with, any distribution of the Shares. The
Subscriber understands that the offer and the sale of the Shares has not been
registered under the Securities Act or any State Securities Law by reason of
specific exemptions under the provisions thereof that depend in part upon the
investment intent of the Subscriber and of the other representations made by the
Subscriber in this Subscription Agreement. The Subscriber understands that the
Company is relying upon the representations, covenants and agreements contained
in this Subscription Agreement (and any supplemental information) for the
purposes of determining whether this transaction meets the requirements for
those exemptions.
(ii) The Subscriber understands that the Shares are "restricted
securities" under applicable federal securities laws and that the Securities Act
and the rules of the Securities and Exchange Commission provide in substance
that the Subscriber may dispose of the Shares only pursuant to an effective
registration statement under the Securities Act or an exemption therefrom, and
the Subscriber understands that the Company has no obligation or intention to
register any of the Shares purchased by the Subscriber or to take action so as
to permit sales pursuant to the Securities Act (including Rule 144). As a
consequence, the Subscriber understands that there is no public market for the
Shares and the Subscriber therefore must bear the economic risks of the
investment in the Shares for an indefinite period of time. The Subscriber
understands that the Subscriber may not at any time demand the purchase by the
Company of the Subscriber's Shares.
(iii) The Subscriber agrees: (A) that the Subscriber will not
sell, assign, pledge, give, transfer or otherwise dispose of the Shares or any
interest therein, or make any offer or attempt to do any of the foregoing,
except pursuant to a registration of the Shares under the Securities Act and all
applicable State Securities Laws or in a transaction that is exempt from the
registration provisions of the Securities Act and all applicable State
Securities Laws and except for transfers permitted under the Shareholder
Agreement, (B) that the Company and any transfer agent for the Shares shall not
be required to give effect to any purported transfer of any of the Shares except
upon compliance with the foregoing restrictions, and (C) that a legend in
substantially the following form will be placed on the certificates representing
the Shares:
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"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS OF
THE SHAREHOLDER AGREEMENT DATED __________, 2004 AMONG THE ISSUER
HEREOF AND CERTAIN OTHER PERSONS, A TRUE AND CORRECT COPY OF WHICH IS
ON FILE AT THE ISSUER'S EXECUTIVE OFFICE. UPON WRITTEN REQUEST TO THE
ISSUER, A COPY THEREOF WILL BE MAILED OR OTHERWISE PROVIDED WITHOUT
CHARGE WITHIN TEN (10) DAYS OF RECEIPT OF SUCH REQUEST TO APPROPRIATELY
INTERESTED PERSONS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER ANY SECURITIES LAWS AND THE TRANSFERABILITY OF THE
SECURITIES THEREFORE IS RESTRICTED. THE SECURITIES MAY NOT BE SOLD,
ASSIGNED OR TRANSFERRED, NOR WILL ANY ASSIGNEE, VENDEE, TRANSFEREE, OR
ENDORSEE HEREOF BE RECOGNIZED AS HAVING AN INTEREST IN SUCH SECURITIES
BY THE COMPANY FOR ANY PURPOSE, UNLESS (I) A REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, WITH RESPECT TO SUCH
SECURITIES SHALL THEN BE IN EFFECT AND SUCH TRANSFER HAS BEEN QUALIFIED
UNDER APPLICABLE STATE SECURITIES LAWS, OR UNLESS (II) THE AVAILABILITY
OF AN EXEMPTION FROM REGISTRATION AND QUALIFICATION SHALL BE
ESTABLISHED TO THE SATISFACTION OF COUNSEL FOR THE COMPANY."
(iv) The Subscriber has not offered or sold any portion of the
Shares subscribed for and has no present intention of dividing the Shares with
others or of reselling or otherwise disposing of any portion of the Shares
either currently or after the passage of a fixed or determinable period of time
or upon the occurrence on nonoccurrence of any predetermined event or
circumstance.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND CERTAIN AFFILIATES OF THE
COMPANY. The parties acknowledge that (i) the Subscriber is investing in the
Shares for the purpose of financing the Company's acquisition of TFC and,
indirectly, its subsidiaries (each, a "SUBSIDIARY," collectively, the
"SUBSIDIARIES"); (ii) each of Talbot, Weymouth and Taylor are executive officers
of TFC or its parent, Safeco, and executive officers of the Company and
beneficial owners of common stock of the Company; (iii) the Founders, by reason
of the relationships described in clause (ii), possess unique knowledge of the
Company and TFC; (iv) the Subscriber is relying upon such knowledge and
experience in entering into this Subscription Agreement; and (v) subject to
Section 6(c) as an inducement to the Subscriber to purchase the Shares to
facilitate the Company's acquisition of TFC and the Subsidiaries, the Company
and the Founders, severally and not jointly, represent and warrant, except as
set forth with appropriate section references in the Schedule of Exceptions, to
the Subscriber that each of the following statements is true and correct as of
the date hereof.
(a) ORGANIZATION. Each of the Company, TFC and any Subsidiary is
a corporation duly organized, validly existing and in good standing (with
respect to jurisdictions that recognize such concept) under the laws of its
state of incorporation and has the requisite corporate power and authority to
own, lease and operate its properties and to carry on its business as it is now
being conducted. Each of the Company, TFC and any Subsidiary is duly qualified
or licensed to do business as a foreign corporation and is in good standing
(with respect to jurisdictions that recognize such concept) in each jurisdiction
in which the nature of the business conducted by it makes such qualification or
licensing
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necessary, except in such jurisdictions where the failure to be so qualified or
licensed or to be in good standing individually or in the aggregate would not
have a Material Adverse Effect on the Company. The Company has delivered to the
Subscriber true, correct and complete copies of the Articles of Incorporation
and Bylaws, as currently in effect, of the Company and has made available to
Subscriber true and correct copies of the organizational documents, as currently
in effect, of TFC and each Subsidiary.
(b) CAPITALIZATION.
(i) All of the Shares will be newly issued and upon payment
by the Subscriber for the Shares, and issuance of the Shares pursuant to the
terms and conditions hereof, the Subscriber shall receive good and marketable
title to the Shares free and clear of all Encumbrances. The issuance of the
Shares has been duly authorized, and upon such issuance pursuant to the terms
and subject to the conditions hereof and upon payment by the Subscriber for the
Shares, the Shares will be validly issued, fully paid and nonassessable. Except
for the this Subscription Agreement and the Shareholder Agreement, there are no
(A) options, warrants, calls, preemptive rights, subscriptions or other rights,
convertible securities, agreements or commitments of any character obligating
now or in the future, the Company to issue, transfer or sell the Shares or to
issue, transfer or sell any shares of capital stock, options, warrants, calls or
other equity interest of any kind whatsoever in the Company, or any securities
convertible into or exchangeable for such shares or equity interests; (B)
contractual obligations of the Company, to repurchase, redeem or otherwise
acquire any capital stock or equity interest of the Company; or (C) voting
trusts, proxies or similar agreements to which the Company is a party with
respect to the voting of the capital stock of the Company.
(ii) All of the issued and outstanding capital stock or
other equity of each Subsidiary (the "SUBSIDIARY EQUITY") is owned of record and
beneficially by TFC, either directly or indirectly through a Subsidiary. All of
the Subsidiary Equity is currently free and clear of any Encumbrances. All of
the Subsidiary Equity is duly authorized, validly issued, fully paid and
nonassessable. There are no (A) options, warrants, calls, preemptive rights,
subscriptions or other rights, convertible securities, agreements or commitments
of any character obligating now or in the future, TFC or any Subsidiary to
issue, transfer or sell any shares of capital stock, options, warrants, calls or
other equity interest of any kind whatsoever in TFC or any Subsidiary or
securities convertible into or exchangeable for such shares or equity interests;
(B) contractual obligations of TFC or any Subsidiary to repurchase, redeem or
otherwise acquire any capital stock or equity interest of TFC or any Subsidiary;
or (C) voting trusts, proxies or similar agreements to which TFC or any
Subsidiary is a party with respect to the voting of the capital stock of TFC or
any Subsidiary. Upon the consummation of the transactions contemplated by the
Stock Purchase Agreement, all of the issued and outstanding capital stock or
other equity of TFC will be owned of record and beneficially by the Company.
(iii) Except for the Subsidiaries, TFC does not own any
outstanding shares of capital stock (or other equity interests of entities other
than corporations) of any partnership, joint venture, trust, corporation,
limited liability company or other entity. The Company does not own any
outstanding shares of capital stock (or other equity interests of entities other
than corporations) of any partnership, joint venture, trust, corporation,
limited liability company or other entity.
(iv) The Company is a newly-formed Washington corporation.
Prior to the date hereof, the Company has had no employees, tangible assets or
obligations or liabilities and has conducted no activity, other than negotiation
of the Stock Purchase Agreement and the Transaction Documents and preparation
for the consummation of the transactions contemplated hereby and thereby.
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(c) AUTHORIZATION; VALIDITY OF AGREEMENT.
(i) Each of TalMan and the Company has all of the requisite
authority to enter into each of the Transaction Documents and to perform all of
the obligations required to be performed it under the Transaction Documents. The
execution, delivery and performance by TalMan and the Company of each of the
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by the board of
managers of TalMan and the board of directors of the Company, as applicable, and
no other proceedings on the part of TalMan or the Company are necessary to
authorize the execution, delivery and performance of the Transaction Documents
or the consummation of the transactions contemplated hereby and thereby. This
Subscription Agreement has been, and each Ancillary Agreement at Closing will
be, a valid and binding obligation of the Company and TalMan, enforceable
against each of them in accordance with its respective terms, except that the
enforceability of the Transaction Documents may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, and that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(ii) Each of the Founders has all of the requisite power and
capacity to enter into each of the Transaction Documents and to perform all of
the obligations required to be performed by him under the Transaction Documents.
This Subscription Agreement has been, and each Ancillary Agreement at Closing
will be, a valid and binding obligation of each Founder, enforceable against
each Founder in accordance with its respective terms, except that the
enforceability of the Transaction Documents may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally, and that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
the equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(d) NO VIOLATIONS; CONSENTS AND APPROVALS.
(i) The execution, delivery and performance of Transaction
Documents by the Company including, but not limited to, the issuance and sale of
the Shares to the Subscriber do not and will not: (A) violate any provision of
the Articles of Incorporation or Bylaws of the Company, or (B) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, guarantee, other evidence of
indebtedness, license, lease, option, employment agreement, contract,
undertaking, understanding, covenant, agreement or other instrument or document
(each a "CONTRACT") to which the Company is a party or by which any of its
properties or assets may be bound or otherwise subject.
(ii) The execution, delivery and performance of Transaction
Documents by the Company or any Subsidiary including, but not limited to, the
issuance and sale of the Shares to the Subscriber do not and will not result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, amendment,
cancellation or acceleration) under any of the terms, conditions or provisions
of any Contract to which any Subsidiary is a party or by which any of their
respective properties or assets may be bound or otherwise subject.
(iii) No consent of any legislative or executive agency or
department or other regulatory service, authority or agency or any court,
arbitration panel or other tribunal or judicial authority of any Governmental
Entity or Person, is required in connection with the execution, delivery and
performance of this Subscription Agreement by the Company or the issuance and
sale of the Shares to the Subscriber, except as required under applicable
federal or State Securities Laws.
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(e) FINANCIAL STATEMENTS.
(i) Attached as SCHEDULE 5(E) to the Schedule of Exceptions,
is the unaudited consolidated balance sheet of TFC as of December 31, 2003 (the
"REFERENCE BALANCE SHEET"), together with the related unaudited consolidated
statements of income for the years ended December 31, 2003, 2002 and 2001
(including the related notes, if any) (collectively, the "REGULAR FINANCIAL
STATEMENTS").
(ii) The Regular Financial Statements have been prepared by
TFC and have been derived from, and agree with, the books and records of TFC,
and fairly present the consolidated financial position of TFC and the
Subsidiaries as of the respective dates thereof and the results of operations of
TFC and the Subsidiaries for the respective periods set forth therein. The
Regular Financial Statements have been prepared in accordance with United States
generally accepted accounting principles ("GAAP"), consistently applied as of
the dates and for the periods involved, subject to the absence of notes and to
normal fiscal year-end adjustments in the ordinary course (none of which,
individually or in the aggregate, will be material to the business or the
operations of TFC and the Subsidiaries on a consolidated basis). The Regular
Financial Statements, together with the cooperation and access to information as
provided in SECTION 7(E), are or will be sufficient to permit the preparation of
audited financial statements to allow compliance with any obligations under
applicable Law (including, but not limited, to Regulation S-X, as promulgated by
the SEC ("REGULATION S-X")).
(iii) Neither the Company, TFC nor any Subsidiary has any
liabilities (whether accrued, contingent, known, or otherwise) other than those
that (i) are set forth or reserved against on the Reference Balance Sheet; (ii)
were incurred in the ordinary course of business after the date of the Reference
Balance Sheet or (iii) arise under the Transaction Documents and the Stock
Purchase Agreement.
(iv) The accounts payable of each of the Company, TFC and
any Subsidiary are set forth on SCHEDULE 5(E) to the Schedule of Exceptions. All
such accounts payable are the result of bona fide transactions in the ordinary
course of business.
(v) The Company has made available to Subscriber, copies of
all certifications executed by any executive of the Company that were intended
to be relied upon by the Chief Executive Officer of Safeco, Chief Financial
Officer of Safeco or any other Person, in complying with Rule
13a-14(a)/15d-14(a) of the Securities and Exchange Act of 1934, as amended.
(f) OPERATION OF BUSINESS.
(i) Since the date of the Reference Balance Sheet, except
for the transactions contemplated by the Transaction Documents and the Stock
Purchase Agreement, the Company, TFC and each Subsidiary have continued to
operate in all material respects in the manner and system of operation employed
immediately prior to the date of the Reference Balance Sheet, and the Company,
TFC and each Subsidiary have used their best efforts to prevent harm or damage
to their respective reputations or reduction of existing customer accounts
(other than in the ordinary course of business).
(ii) Since the date of the Reference Balance Sheet, except
for the transactions contemplated by the Transaction Documents and the Stock
Purchase Agreement, neither the Company, TFC nor any Subsidiary has (A) incurred
any material liabilities, except in the ordinary course of business consistent
with past practice; (B) paid any obligation or liability, or discharged or
satisfied any Encumbrance other than those securing current liabilities, in each
case in the ordinary course of business; (C) subjected to any Encumbrances any
of their respective assets, tangible or intangible, except in the ordinary
course of business; (D) sold, transferred or leased any of their respective
assets except the sale of inventory in the ordinary course of business; (E)
suffered any material physical damage, destruction or
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loss (whether or not covered by insurance) affecting their respective
properties, business or prospects; (F) entered into any material transaction
other than in the ordinary course of business; (G) encountered any labor
difficulties or labor union organizing activities; (H) issued or sold any shares
of capital stock or other securities or granted any options, warrants, or other
purchase rights with respect thereto; (I) made any acquisition or disposition of
any material assets except in the ordinary course of business or become involved
in any other material transaction, including, without any limitation, any merger
or consolidation with, purchase of all or part of the assets of, or acquisition
of any business of any proprietorship, firm, association, corporation or other
business organization or division thereof; (J) except in the ordinary course of
business consistent with past practice, increased the compensation payable, or
to become payable, to any of their respective directors or employees, or made
any bonus payment or similar arrangement with any directors or employees or
increased the scope or nature of any fringe benefits provided for their
respective employees or directors; (K) made any capital investment in, any loan
to or any acquisition of the securities or assets of any other Person; (L)
canceled, compromised, waived or released any material right or claim; (M) made
any change in employment terms for any of their respective directors, officers
or employees outside the ordinary course of business; (N) made or pledged to
make any charitable contribution or other capital contribution outside the
ordinary course of business; (O) violated any Law, except for any violation that
has not resulted in a Material Adverse Effect on the Company, TFC and the
Subsidiaries, taken as a whole, or failed to maintain all material governmental
licenses and approvals required to operate their respective businesses as
currently being conducted; (P) entered into any other agreement or made any
other commitment to take any action, other than in the ordinary course of
business; or (Q) agreed or committed, whether in writing or otherwise, to do any
of the foregoing transactions. In addition, since the date of the Reference
Balance Sheets, neither the Company, TFC nor any Subsidiary has accelerated,
terminated, modified or canceled any material agreement, contract, lease or
license to which it is a party or by which it or its assets are bound.
(iii) Since the date of the Reference Balance Sheets, no
event, condition or circumstance has occurred that could, or could be reasonably
likely to, have a Material Adverse Effect on the Company, TFC and the
Subsidiaries, taken as a whole.
(g) LICENSES AND PERMITS. Each of the Company, TFC and any
Subsidiary has every license, permit, certification, qualification or franchise
issued by any Governmental Entity (including, without limitation, all
Environmental Permits) (each, a "LICENSE"), and every Consent by or on behalf of
any Person required for them to conduct their respective businesses as presently
conducted except for those the absence of which has not resulted in a Material
Adverse Effect on the Company, TFC and the Subsidiaries, taken as a whole. All
such Licenses and Consents are in full force and effect and neither the Company,
TFC nor any Subsidiary has received notice of any pending cancellation or
suspension of any thereof nor, to the knowledge of the Company and the Founders,
is any cancellation or suspension thereof threatened. The applicability and
validity of each such License and Consent will not be adversely affected by the
consummation of the transactions contemplated by this Subscription Agreement,
the issuance and sale of the Shares to the Subscriber or by the transactions
contemplated by the Stock Purchase Agreement except for any inapplicability or
invalidity that has not resulted in a Material Adverse Effect on the Company,
TFC and the Subsidiaries, taken as a whole.
(h) EMPLOYEE BENEFIT PLANS; ERISA. For purposes of this
Agreement, "EMPLOYEE BENEFIT PLANS" means, collectively, each bonus, deferred
compensation, pension, retirement, profit-sharing, thrift, savings, employee
stock ownership, stock bonus, stock purchase, restricted stock, stock option,
termination, severance, compensation, medical, health, or other plan, agreement,
policy or agreement which currently is or has been sponsored, maintained,
contributed to, or required to be contributed to, by any of TFC or its
Subsidiaries or an ERISA Affiliate, or for which TFC or its Subsidiaries or an
ERISA Affiliate has or has had any obligation or any liability of any nature,
contingent or otherwise, or for which there is a reasonable expectation of such
obligation or liability, on or before the Closing, for the benefit of any
present or former employees, retirees, directors or independent contractors (or
their beneficiaries,
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dependents or spouses) of TFC or its Subsidiaries or an ERISA Affiliate. There
are no oral Employee Benefit Plans to which TFC or any Subsidiary is a party.
The Company has listed on SCHEDULE 5(H) to the Schedule of Exceptions, and has
made available to Buyer copies of, all "pension benefit plans" (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (sometimes referred to herein as "PENSION PLANS), "welfare benefit
plans" (as defined in Section 3(l) of ERISA) and all other Employee Benefit
Plans maintained, or contributed to, by TFC or any Subsidiary for the benefit of
any current of former employees, officers or directors of the Company, TFC or
any Subsidiary or pursuant to which such current or former employees, officers
or directors are entitled to current or future benefits (collectively referred
to as the "COMPANY BENEFIT PLANS"). In addition, true, complete and correct
copies of the following have also been made available to the Buyer: (1) the most
recent annual report on Form 5500 (including all schedules) filed with the
Internal Revenue Service (the "IRS") with respect to each Company Benefit Plan,
(2) the most recent summary plan description and summary of material
modifications for each Company Benefit Plan, (3) each trust agreement, insurance
contract, group annuity contract or other funding arrangement related to any
Company Benefit Plan, (4) all determination letters issued with respect to any
Pension Pan, (5) the most recent actuarial report and financial statement
prepared or issued with respect to any Company Benefit Plan and (6) any notice
(or any other communication) received from the IRS, the Pension Benefit Guaranty
Corporation or the Department of Labor concerning any Company Benefit Plan or
any other potential liability in connection with any Employee Benefit Plan that
could be assessed against the Company or any Subsidiary. The Company currently
has no, and has not previously had any Company Benefit Plan.
(i) Each of TFC and the Subsidiaries has performed its
obligations under each Company Benefit Plan and each Company Benefit Plan and
each trust or other funding medium, if any, established in connection therewith
has at all times been established, maintained and operated in substantial
compliance with its terms and the requirements prescribed by applicable law,
including, but not limited to, ERISA and the Code. All amendments and actions
required to bring each of the Company Benefit Plans into conformity with all of
the applicable provisions of ERISA and other applicable laws have been made or
taken except to the extent that such amendments or actions are not required by
law to be made or taken until a date after the Effective Time.
(ii) With respect to those Pension Plans that are intended to be
qualified under Section 401(a) of the Code, such Pension Plans are the subject
of determination letters from the IRS to the effect that such Pension Plans are
qualified and exempt from taxes under Sections 401(a) and 501(a), respectively,
of the Code, and no such determination letter has been revoked nor has any event
occurred since the date of its most recent determination letter or application
therefore that would adversely affect its qualification or increase its costs.
None of the Pension Plans are subject to Title IV of ERISA or Section 412 of the
Code. None of TFC or its Subsidiaries has or has had any liability or obligation
of any nature to any Employee Benefit Plan, the Pension Benefit Guaranty
Corporation (the "PBGC") or any other Person, arising directly or indirectly
under Title IV of ERISA or Section 412 of the Code. No transaction has been
entered into by TFC or its Subsidiaries which could reasonably be construed to
be a transaction to avoid or evade any liability under Title IV of ERISA.
(iii) Neither the Company, TFC nor any Subsidiary has maintained,
contributed to or otherwise had any obligation with respect to any
"multiemployer plan (as defined in Section 3(37) of ERISA).
(iv) There are no suits, actions, disputes, claims (other than
routine claims for benefits), arbitrations, administrative or other proceedings
pending or, to the knowledge of the Company, threatened, anticipated or expected
to be asserted with respect to any Company Benefit Plan or any related trust or
other funding medium thereunder or with respect to TFC or any Subsidiary, as the
sponsor or fiduciary thereof or with respect to any other fiduciary thereof. No
Company Benefit Plan or any
-9-
related trust or other funding medium thereunder or any fiduciary thereof is the
subject of an audit, investigation or examination by a governmental or
quasi-governmental agency.
(v) (1) Neither the Company, TFC nor any Subsidiary has any
commitment, intention or understanding to create, terminate or adopt any Company
Benefit Plan; and (2) since the beginning of the current fiscal year of the
Company, no event has occurred and no condition or circumstance has existed that
reasonably would be expected to result in an increase in the benefits under or
the expense of maintaining a Company Benefit Plan from the level of benefits or
expense incurred for the most recently completed fiscal year of the Company.
(vi) All contributions required to be made under the terms of any
Company Benefit Plan as of the date hereof have been timely made.
(vii) The execution of, and performance of the transactions
contemplated by, this Agreement will not (either along with or upon the
occurrence of any additional or subsequent events) constitute an event under any
Company Benefit Plan or agreement that will or may reasonably be expected to
result in any payment (whether severance pay or otherwise), acceleration,
vesting or increase in benefits with respect to any employee, former employee or
director of TFC or any Subsidiary, whether or not any such payment would be an
"excess parachute payment" (within the meaning of Section 280G of the Code).
None of the payments described therein is an excess parachute payment.
(viii) The Company or one or more Subsidiary, as applicable, may
terminate any Company Benefit Plan maintained by the Company or such Subsidiary
or may cease contributions to the Company Benefit Plans without incurring any
liability other than (1) a benefit liability accrued in accordance with the
terms of such Company Benefit Plan immediately prior to such termination or
ceasing of contributions; or (2) expenses attendant to the termination of such
Company Benefit Plan.
(ix) Neither the Company nor any Subsidiary has incurred any
liability for any tax, excise tax, penalty or fee with respect to any Company
Benefit Plan, including, but not limited to, taxes arising under the Code or
penalties arising under ERISA, and no event has occurred and no circumstance has
existed (including the consummation of the obligations set forth in this
Agreement) that reasonably would be expected to give rise to any such liability.
(x) Each Employee Benefit Plan which is legally or otherwise
assumed by the Company, TFC or its Subsidiaries or the Subscriber on or after
the Closing as a result of the consummation of this Agreement as set forth in
SCHEDULE 5(H)(X) of the Schedule of Exceptions (each, an "ASSUMED PLAN") covers
or will cover only employees of the Company, TFC or its Subsidiaries (or former
employees or beneficiaries with respect to service with TFC or its
Subsidiaries), so that the transactions contemplated by this Agreement will
require no spin-off of assets or other division or transfer of rights with
respect to any such plan. Neither TFC nor any Subsidiary is liable for any
amount due under or relating to any Employee Benefit Plan other than the Assumed
Plans and no condition exists which could result in any liability associated
with any Employee Benefit Plan, other than the Assumed Plans, that could be
assessed against the Company, TFC, its Subsidiaries or the Subscriber. On and
after the Closing, the Company, TFC or its Subsidiaries, shall not be
responsible for contributions to, or the administration of, any Employee Benefit
Plan, other than those Assumed Plans.
(xi) None of the Company, TFC or its Subsidiaries has now, nor
has any of them ever had, the obligation to maintain, establish, sponsor,
participate in, or contribute to any Employee Benefit Plan or other similar
arrangement that is subject to any law or applicable custom or rule of any
jurisdiction outside of the United States.
-10-
(i) REAL PROPERTY.
(i) Neither the Company, TFC nor any Subsidiary owns any real
property. The Company does not lease any real property.
(ii) SCHEDULE 5(I) to the Schedule of Exceptions contains a true,
correct and complete list and summary of all Leases under which TFC or any
Subsidiary uses or occupies or has the right to use or occupy, now or in the
future, any Leased Real Property. The Company, TFC and each Subsidiary have
heretofore made available to the Subscriber true and correct copies of all of
the Leases and all other documentation pertaining to the Leased Real Property,
including without limitation, all subordination, non-disturbance and attornment
agreements and memoranda of leases. No Affiliate of the Company, TFC or any
Subsidiary is a landlord or owner of, or has any ownership, economic or similar
interest in, any of the Leases or the Leased Real Property. Each such Lease is
in full force and effect, and is enforceable against TFC or any Subsidiary and,
except as would not have a Material Adverse Effect on TFC and the Subsidiaries,
taken as a whole, the other party thereunder, in accordance with its terms and,
all rent and other sums and charges payable by TFC or any Subsidiary thereunder
are current. Except as would not have a Material Adverse Effect on TFC and the
Subsidiaries, taken as a whole, no termination event or condition or default
which has remained uncured beyond applicable cure periods on the part of TFC or
any Subsidiary or any other Person exists 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 such a default or termination event or
condition. No such Lease has been amended, modified or extended as of the date
hereof. Neither the Company, TFC nor any Subsidiary has entered into any
assignment of any Lease, sublease of all or any portion of any Leased Real
Property and no Person has any right to occupy the Leased Real Property, other
than the Company, TFC or a Subsidiary.
(iii) With respect to the Leased Real Property (A) there is a
right of ingress and egress to public thoroughfares to and from the Leased Real
Property; and (B) the Leased Real Property has adequate water supply and septic
service for the present use thereof and all septic service and water supply
facilities required for the present use of the Leased Real Property are
installed and operating.
(iv) Except as would not have a Material Adverse Effect on TFC
and the Subsidiaries, taken as a whole, all Approvals of all governmental
authorities or from all insurance companies and fire rating and similar boards
and organizations required in connection with the use, occupancy and maintenance
by TFC and each Subsidiary of any Leased Real Property are in full force and
effect in accordance with the respective terms thereof, and none of the
Approvals has been amended, assigned, pledged or otherwise transferred. There is
no material alteration, improvement or change in the use of any building or
other improvement located on the Leased Real Property that would require any new
Approvals or amendment of an existing Approval. The condition and use of the
Leased Real Property conforms to each Approval. The Leased Real Property is in
compliance with all Laws, including all public health, public safety, sewage,
water or sanitation Laws, any Environmental Laws affecting the Leased Real
Property, except as would not result in a Material Adverse Effect to TFC and the
Subsidiaries, taken as a whole, and no notice of any such default or violation
has been received by TFC or any Subsidiary. TFC and each Subsidiary have
obtained all of the approvals necessary for the operation of their respective
businesses on the Leased Real Property. Except as would not have a Material
Adverse Effect on TFC and the Subsidiaries, taken as a whole, the Leased Real
Property and its continued use, occupancy and operation as currently used,
occupied or operated does not constitute a non-conforming use under any Law and
the continued existence, use, occupancy and operation of the Leased Real
Property and the right and ability to repair and/or rebuild any improvements
thereon in the event of a casualty, is not dependent on any special permit
exception approval or variance.
-11-
(v) Except as would not have a Material Adverse Effect on TFC and
the Subsidiaries, taken as a whole, there are no defects in the Leased Property
that would hinder or impair the respective businesses and operations of TFC or
any Subsidiary. Except as would not have a Material Adverse Effect on TFC and
the Subsidiaries, taken as a whole, no extraordinary repair or improvement
expense with respect thereto is anticipated during the one year following the
Closing Date. The electricity, water, gas and telephone service and all other
public or private utilities serving the Leased Real Property are fully installed
and operating, adequate for the conduct of the businesses of TFC and each
Subsidiary as presently conducted.
(vi) There is no pending or, to the Company's and the Founders'
knowledge, threatened (A) annexation, condemnation, eminent domain or similar
proceeding affecting any of the Leased Real Property; (B) proceeding to change
or redefine the zoning classification of any of the Leased Real Property; (C)
imposition of any special or other assessments for public betterments or
otherwise; (D) special assessments affecting any of the Leased Real Property
that are or would be payable by TFC or any Subsidiary and could result in an
Encumbrance against any of the Leased Real Property; (E) change in any
applicable Law relating to the use, occupation or operation of the Leased Real
Property; or (F) changes in road patterns or grades that may adversely affect
access to any roads providing a means of ingress or egress from any of the
Leased Real Property.
(vii) Neither the Company, TFC nor any Subsidiary has received
notice from any insurance company or Board of Fire Underwriters (or organization
exercising functions similar thereto) or from any mortgagee requesting the
performance of any work or alteration in respect of any of the Leased Real
Property, and there are no outstanding requirements or recommendations from any
of the foregoing.
(viii) There has been no material damage to any portion of the
Leased Real Property caused by fire or other casualty that has not been
completely repaired and restored.
(ix) No portion of the Leased Real Property is located in a
special flood hazard area designated by a federal Governmental Entity.
(x) No application or Proceeding is pending with respect to a
reduction of the Taxes on the Leased Real Property.
(xi) Neither TFC nor any Subsidiary owes any monies to any
contractor, subcontractor, materialman or other Person for labor or materials
performed, rendered or supplied in connection with any Leased Real Property for
which such Person could claim a lien against any of the Leased Real Property
other than any current sums due for work in progress or recently completed.
(xii) Neither TFC, any Subsidiary, nor anyone acting on their
behalf has transferred any development rights applicable to the Leased Real
Property.
(xiii) There are no brokerage commissions due and payable by TFC
or any Subsidiary with respect to the Leased Real Property or with respect to
the Leases.
(j) INTELLECTUAL PROPERTY; COMPUTER SOFTWARE.
(i) Prior to the Closing, the Company owns no Intellectual
Property. SCHEDULE 5(J)(I) to the Schedule of Exceptions lists, as to each of
TFC and each Subsidiary, all United States and foreign (A) issued patents and
pending patent applications; (B) trademark registrations and applications
therefor and material, unregistered trademarks; (C) copyright registrations and
applications therefor. The Company, TFC and/or a Subsidiary is listed in the
records of the designated United States, state or foreign registry as the sole
current owner or owners of record for each listed application or registration,
and no third party has any ownership interest, or right to claim any ownership
interest in any listed application, registration or, to the Company's and the
Founders' knowledge, material unregistered work. With respect to the listed
applications and registrations, each such application or registration has been
prosecuted or maintained, as the case may be, in compliance in all material
respects with all applicable rules, policies and procedures of the designated
U.S., state or foreign registry, except as would not have a Material Adverse
Effect on the Company, TFC and the Subsidiaries, taken as a whole.
-12-
(ii) The conduct of the respective businesses of TFC and each
Subsidiary as conducted in the past did not infringe (when conducted) and as
currently conducted does not infringe (either directly or indirectly, such as
through contributory infringement) any Intellectual Property right owned or
controlled by any third party, except where such infringement would not have a
Material Adverse Effect on the Company, TFC and the Subsidiaries, taken as a
whole. There is no pending or, to the Company's and the Founders' knowledge,
threatened claim, suit, arbitration or other adversarial proceeding before any
court, agency, arbitral tribunal, or registration authority in any jurisdiction,
whether against TFC, any Subsidiary or any third party (A) seeking to enforce
any Intellectual Property owned by TFC or any Subsidiary; (B) alleging that the
activities or the conduct of the business of TFC or any Subsidiary, or the use
of any Intellectual Property obtained from TFC or any Subsidiary by any customer
or other licensee of TFC or any Subsidiary, does or will infringe upon, violate
or constitute the unauthorized use of the Intellectual Property rights of any
third party; or (C) challenging the ownership, use, validity, enforceability or
registrability of any Intellectual Property owned by TFC or any Subsidiary, nor,
to the Company's and the Founders' knowledge, is there any reasonable basis for
any such claim, suit, arbitration or proceeding.
(iii) Other than Contracts listed in SCHEDULE 5(L) to the
Schedule of Exceptions or license agreements entered into by TFC and each
Subsidiary in the ordinary course of their respective businesses, there are no
settlements, forbearances to sue, consent judgments or orders or similar
obligations binding upon TFC or any Subsidiary or upon any third party, that (A)
restrict TFC's or any Subsidiary's rights to use any Intellectual Property owned
by TFC or any Subsidiary; (B) restrict the Company's or any Subsidiary's
businesses in order to accommodate a third party's Intellectual Property rights;
or (C) permit a third party to use any Intellectual Property owned by TFC or any
Subsidiary. In addition, (1) all registered, granted or issued patents, mask
works, trademarks and copyrights registered by or assigned to the Company, TFC
or any Subsidiary are valid and enforceable, except where a failure to be valid
and enforceable would not have a Material Adverse Effect on the Company, TFC and
the Subsidiaries, taken as a whole; and (2) there is no pending denial, refusal
or similar action by any Governmental Entity with respect to any patent,
copyright or trademark application filed by or on behalf of the Company, TFC or
any Subsidiary, other than office actions communicated to the Company in the
ordinary course of the prosecution of any patent application or application for
trademark registration. Neither TFC nor any of its Subsidiaries has been advised
of any unauthorized use, infringement or misappropriation of any of the
Intellectual Property owned by TFC or any Subsidiary by any third party,
including any current or former employee or contractor of TFC or any Subsidiary
(or their predecessors in interest) except where such infringement or
misappropriation would not have a Material Adverse Effect on the Company, TFC
and the Subsidiaries, taken as a whole.
(iv) Other than as provided in Contracts listed in SCHEDULE 5(L)
to the Schedule of Exceptions or in license agreements entered into by TFC or
each Subsidiary in the ordinary course of their respective businesses: (A) TFC
and each Subsidiary has rights of ownership (free and clear of all Encumbrances)
of, or rights by license, lease or other agreement to use (free and clear of all
Encumbrances), all websites operated by TFC and each Subsidiary, and all
computer software programs including, without limitation, application software
and the Custom Software (as hereinafter defined), that are used by TFC and each
Subsidiary, that are material to the conduct of their respective businesses as
currently conducted, as are used in the conduct of their respective businesses
as currently conducted; and (B) either TFC or its Subsidiaries owns all right,
title and interest in and to any and all custom software developed by, on behalf
of or at the request of TFC or its Subsidiaries and that is material to the
conduct of their respective businesses as currently conducted, whether such
development was performed by employees of TFC or its Subsidiaries or by third
parties, whether such custom software is used or useful
-13-
in (i) modifying, enhancing or adding functionality to TFC's VRC DIAS agency
management software; (ii) creating or maintaining TFC's or its Subsidiary's
intranet or Internet software products; (iii) any other purpose (the "CUSTOM
SOFTWARE"). Safeco owns no right, including any license rights, to the Custom
Software. None of TFC's or any Subsidiary's ownership rights or rights to use
any of the computer programs referred to above, including the Custom Software,
will be adversely affected by the consummation of any of the transactions
contemplated HEREBY or in connection therewith. TFC and each Subsidiary have
(whether by virtue of ownership, license or otherwise) all rights in the
Intellectual Property necessary to carry out the respective businesses of TFC
and each Subsidiary as currently conducted or contemplated to be conducted.
(v) Other than as provided in Contracts listed in SCHEDULE 5(L)
to the Schedule of Exceptions or in license agreements entered into by TFC or
each Subsidiary in the ordinary course of their respective businesses, there are
no royalties, fees, honoraria or other payments payable by TFC or any Subsidiary
to any Person by reason of the ownership, development, use, license, sale or
disposition of any Intellectual Property, other than salaries and sales
commissions payable to employees and sales agents in the ordinary course of
business, except where the obligation to pay such royalties, fees, honoraria or
other payments would not have a Material Adverse Effect on the Company, TFC and
the Subsidiaries, taken as a whole.
(vi) TFC and each Subsidiary have taken reasonable measures to
protect the proprietary nature of the Intellectual Property that is material to
the respective businesses of TFC and each Subsidiary as currently conducted.
Without limitation of the foregoing, the source code and internal technical
documentation (excluding end user documentation) relating to all software
programs, including, without limitation, the Custom Software owned by the
Company, TFC or any Subsidiary that are material to the respective businesses of
TFC and each Subsidiary as currently conducted have to the Company's and the
Founders' knowledge at all times been protected by reasonable measures to
preserve the confidentiality thereof. No third party has made any claim or
delivered any notice that any third party is entitled to access or receive the
source code for any software program owned or licensed by TFC or any Subsidiary
pursuant to any source code escrow agreement.
(vii) Other than pursuant to and in material compliance with
Contracts listed in SCHEDULE 5(L) to the Schedule of Exceptions or standard
license agreements for commercially-available software entered into by TFC or
each Subsidiary in the ordinary course of their respective businesses, to the
Company's and the Founders' knowledge no third-party software has been used in
the business of the Company, TFC or any Subsidiary or sold with, incorporated
into or used in the development of TFC's or any Subsidiary's software programs
or the Custom Software, including, without limitation, TFC's and each
Subsidiary's websites.
(viii) No portion of any of TFC's or any Subsidiary's software
programs, including the Custom Software, (A) contains any "back door," "time
bomb," "Trojan horse," "worm," "drop dead device," "lock-out," "virus" or other
software routines or hardware components designed to permit access not
authorized or instigated by TFC or such Subsidiary; to disable or erase
software, hardware, or data or to perform any other similar actions not
authorized or instigated by TFC or such Subsidiary; or (B) fails to comply in
any material respect with any applicable warranty or other contractual
commitment relating to the use, functionality or performance of such software
programs or any product or system containing or used in conjunction with such
software programs, except where such failure would not have a Material Adverse
Effect on the Company, TFC and the Subsidiaries, taken as a whole.
(ix) None of TFC's or any Subsidiary's software programs or
components thereof, including without limitation the Custom Software, that are
material to the respective businesses of TFC and each Subsidiary as currently
conducted contain any software code that is, in whole or in part, subject to the
provisions of any license to software that is made generally available to the
public without
-14-
requiring payment of fees or royalties (including without limitation any
obligation or condition under any "open source" license such as the GNU General
Public License, GNU Lesser General Public License, Mozilla Public License or BSD
licenses), except where such failure would not have a Material Adverse Effect on
the Company, TFC and the Subsidiaries, taken as a whole.
(k) TANGIBLE PERSONAL PROPERTY.
(i) Each of TFC and any Subsidiary has good, marketable and valid
title to all Personal Property used in their respective businesses or located on
their respective premises, free and clear of all Encumbrances. The Company owns
no personal property.
(ii) The Personal Property conforms to all material requirements of
applicable Laws. All of the material items of machinery and equipment included
within the Personal Property are fully operational and operating in the ordinary
course of TFC's and each Subsidiary's respective businesses, as applicable, are
in good operating condition and in a good state of maintenance and repair,
ordinary wear and tear excepted, and are adequate for use in the conduct of
TFC's and each Subsidiary's respective businesses as presently conducted.
(l) MATERIAL CONTRACTS.
(i) SCHEDULE 5(L) to the Schedule of Exceptions sets forth a
true, complete and correct list of every Contract to which the Company, TFC or
any Subsidiary is a party (including any amendments or modifications thereto
through the date hereof) that: (A) provides for aggregate future payments by the
Company, TFC or any Subsidiary, or to the Company, TFC or any Subsidiary of more
than $250,000; (B) was entered into by the Company, TFC or any Subsidiary with
an officer, director, key employee or Affiliate of the Company, TFC or any
Subsidiary; (C) is a collective bargaining or similar agreement; (D) guarantees
or indemnifies or otherwise causes the Company, TFC or any Subsidiary to be
liable or otherwise responsible for the obligations or liabilities of another
(other than the Company or any Subsidiary) or provides for a charitable
contribution by the Company, TFC or any Subsidiary; (E) involves an agreement
with any bank, finance company or similar organization for the borrowing of
money; (F) restricts the Company or TFC and the Subsidiaries, from engaging in
any business or activity anywhere in the world; (G) is an employment agreement,
consulting agreement, independent sales representative agreement or similar
arrangement; (H) is a Lease; or (I) is otherwise material to the rights,
properties, assets, business or operations of the Company, TFC or any Subsidiary
(the foregoing, collectively, "MATERIAL CONTRACTS"). The Company and the
Founders have heretofore made available true, complete and correct copies of all
Material Contracts to the Subscriber.
(ii) Each of the Material Contracts is in full force and effect
and there is not now and there has not been claimed or alleged by any Person
with respect to any Material Contract, any existing default, or event that with
notice or lapse of time or both would constitute a default or event of default,
on the part of the Company, TFC or any Subsidiary or, to the knowledge of the
Company and the Founders, on the part of any other party thereto. No Consent
from or notice to any Person (other than a Governmental Entity) is currently
required in order to maintain in full force and effect any of the Material
Contracts during their terms, other than such Consents that have been obtained
and are in full force and effect and such notices that have been duly given and,
in each case copies of such Consents and notices have been made available to the
Subscriber.
(m) AFFILIATED PARTY TRANSACTIONS. Neither the Company, TFC nor any
Subsidiary has any loan or advance in excess of $1,000 outstanding to any
stockholder, officer, director or employee thereof and, to the knowledge of the
Company and the Founders, no officer or director of the Company, the Subsidiary
or any Affiliate or "associate" (as such term is defined in Rule 405 of the
Rules and Regulations under the Securities Act) of the Company, TFC or any
Subsidiary or any such Person has, either directly or indirectly:
-15-
(i) an equity interest of five percent (5%) or more in any Person
that purchases from or sells or furnishes to the Company, TFC or any Subsidiary
any goods or otherwise does business with the Company, TFC or any Subsidiary; or
(ii) a beneficial interest in any contract, commitment or
agreement to which the Company, TFC or any Subsidiary is a party or under which
the Company, TFC or any Subsidiary is obligated or bound or to which the
property of the Company, TFC or any Subsidiary may be subject, other than
contracts, commitments or agreements between the Company, TFC or any Subsidiary
and such persons in their capacities as employees, officers or directors of the
Company; PROVIDED, HOWEVER, that such representation and warranty shall not
apply to the ownership, as a passive investment, by any such officer, Affiliate
or "associate" of less than one percent (1%) of a class of securities listed for
trading on a national securities exchange or publicly trade in the
over-the-counter market.
(n) ENVIRONMENTAL MATTERS.
(i) Each of TFC and any Subsidiary is in compliance with, and
their respective businesses have been conducted in compliance with, all
Environmental Laws and Environmental Permits except for any noncompliance which
has not resulted in a Material Adverse Effect to the Company.
(ii) No Site is a treatment, storage or disposal facility, as
defined in and regulated under the Resource Conservation and Recovery Act, 42
U.S.C. ss. 6901 ET SEQ., is on or ever was listed or is proposed for listing on
the National Priorities List pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ss. 9601 ET SEQ., or on any
similar state list of Sites requiring investigation or cleanup.
(iii) Neither TFC nor any Subsidiary has received any notice that
remains pending or outstanding with respect to TFC's or any Subsidiary's
respective businesses or any Site from any Governmental Entity or Person
alleging that TFC or any Subsidiary is not in compliance with any Environmental
Law.
(iv) There has been no Release of a Hazardous Substance by TFC or
any Subsidiary at, from, in, to, on or under any Site and, except as would not
have a Material Adverse Effect on TFC and the Subsidiaries, taken as a whole, no
Hazardous Substances are present in, on, about or migrating to or from any Site
that could give rise to an Environmental Claim against TFC or any Subsidiary.
(v) There are no outstanding or, to the knowledge of the Company
and the Founders, corrective actions requested, required or being conducted by
any Governmental Entity for the investigation, remediation or cleanup of any
Site, and there have been no such corrective actions, whether still pending or
otherwise.
(vi) Except as would not have a Material Adverse Effect on TFC
and the Subsidiaries, taken as a whole, TFC and each Subsidiary have obtained
and hold all necessary Environmental Permits, and those Environmental Permits
will remain in full force and effect after the consummation of the transactions
contemplated hereby.
(vii) There are no past, pending or, to the knowledge of the
Company and the Founders, any threatened Environmental Claims against the
Company, TFC or any Subsidiary and neither the Company nor the Founders are
aware of any facts or circumstances that could be expected to form the basis for
any Environmental Claim against the Company, TFC or any Subsidiary.
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(viii) None of the Company, the Subsidiary, any entity previously
owned by the Company, TFC or any Subsidiary, or any predecessor of the Company,
TFC or any Subsidiary, has transported or arranged for the treatment, storage,
handling, disposal, or transportation of any Hazardous Substance to any off-Site
location that could result in an Environmental Claim against the Company, TFC or
any Subsidiary except as would not have a Material Adverse Effect on the
Company, TFC and the Subsidiaries, taken as a whole.
(ix) At any Site there are no (a) underground storage tanks,
active or abandoned; (b) polychlorinated biphenyl containing equipment; (c)
asbestos containing material; or (d) recognized environmental condition, as
defined by ASTM E1527-97.
(x) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses (which have been reduced to writing)
conducted by, on behalf of, or that are in the possession of the Company, TFC or
any Subsidiary with respect to any Site or any transportation, handling or
disposal of any Hazardous Substance that have not been delivered to the
Subscriber prior to execution of this Subscription Agreement.
(o) NO BROKERS. Neither the Company nor any Affiliate of the Company
has employed, or otherwise engaged, any broker or finder or incurred any
liability for any brokerage or investment banking fees, commissions, finders'
fees or other similar fees in connection with the transactions contemplated by
this Subscription Agreement.
(p) RECEIVABLES. Except as properly reserved on the Regular Financial
Statements, all of the Accounts Receivable of TFC and each Subsidiary have
arisen from bona fide transactions in the ordinary course of TFC's or any
Subsidiary's respective businesses, consistent with past practice and, to the
knowledge of the Founders, are fully collectable within one hundred twenty (120)
days of the Closing Date. The Company has no Accounts Receivable.
(q) ASSETS UTILIZED IN THE BUSINESS. The assets, properties and rights
owned, leased or licensed by the Company, TFC and each Subsidiary and used in
connection with their respective businesses and all the agreements to which the
Company, TFC or any Subsidiary are a party relating to the businesses,
constitute all of the assets, properties, rights and agreements required in
connection with the operation and conduct by the Company, TFC and each
Subsidiary of their respective businesses as presently conducted.
(r) INSURANCE. All insurance policies of any kind covering TFC and
each Subsidiary (a) are with insurance companies that are financially sound and
reputable; (b) are sufficient for compliance with all material requirements of
law and of all applicable Material Contracts; and (c) are, to the Company's and
the Founders' knowledge, valid, outstanding and enforceable policies. Since
January 1, 2000, neither TFC nor any Subsidiary has been denied any insurance
coverage which it has requested. The Subscriber has been provided copies of all
such policies. The Company has no insurance policies.
(s) AVAILABILITY OF DOCUMENTS; CORPORATE RECORDS. True, correct and
complete copies of all documents, instruments, agreements and records referred
to in this Subscription Agreement and the minute and stock (or other equity)
record books of Company, TFC and each Subsidiary have been made available to the
Subscriber. The minute and stock (or other equity) record books of each of the
Company, TFC and each Subsidiary contain true, correct and complete copies of
the records of all meetings and consents in lieu of meetings of the Company's,
TFC's or any Subsidiary's, as applicable, boards of directors (and all
committees thereof) and the shareholders (or other equity holders) of the
Company, TFC and each Subsidiary since the respective dates of their
organization.
(t) LABOR AND EMPLOYMENT MATTERS.
(i) Set forth on SCHEDULE 5(T)(I) to the Schedule of Exceptions
is a list of all employees of TFC and each Subsidiary as of the date hereof and
their respective positions, hire dates and, stated separately, base wage rates
and the amount of any other compensation. The Company has no and has never had
any employees.
(ii) (A) Neither TFC nor any Subsidiary is party to or bound by
any collective bargaining agreement or similar agreement with any labor
organization, or work rules or practices agreed to with any labor organization
or employee association applicable to employees of TFC or any Subsidiary; (B)
none of the employees of TFC or any Subsidiary are represented by any labor
organization and there are no organizational campaigns, demands, petitions or
proceedings pending or, to the Company's and the Founders' knowledge, threatened
by any labor organization or group of employees seeking recognition or
certification as collective bargaining representative of any group of employees
of TFC or any Subsidiary; (C) there are no union claims to represent the
employees of TFC or any Subsidiary; and (D) there are no strikes, controversies,
slowdowns, work stoppages, lockouts or labor disputes pending or, to the
Company's and the Founders' knowledge, threatened against or affecting the TFC
and the Subsidiaries, taken as a whole, and there has not been any such action
during the past five (5) years.
(iii) Each of TFC and any Subsidiary is, and has at all times
during at least the last three (3) years, been in compliance with all applicable
Laws respecting immigration, employment and employment practices, and the terms
and conditions of employment, including, without limitation, employment
standards, equal employment opportunity, family and medical leave, wages, hours
of work and occupational health and safety, and is not engaged in any unfair
labor practices as defined in the National Labor Relations Act or any other
applicable Law except as would not have a Material Adverse Effect on TFC and the
Subsidiaries, taken as a whole. There are no employment Contracts with any
employees of TFC or any Subsidiary and no restrictive covenants (other than any
restrictive covenants that would not have a Material Adverse Effect on TFC and
the Subsidiaries, taken as a whole), written personnel policies, rules or
procedures applicable to employees of TFC or any Subsidiary, other than those
set forth in SCHEDULE 5(T)(III) to the Schedule of Exceptions, true and correct
copies of which have heretofore been made available to the Subscriber. There are
(A) no complaints, claims, controversies, charges, lawsuits or other proceedings
related to TFC or any Subsidiary pending, or, to the Company's and the Founders'
knowledge, threatened, in any court or with any agency responsible for the
enforcement of federal, state, local or foreign labor or employment Laws
regarding breach of any express or implied contract of employment, any Law or
regulation governing employment or the termination thereof or other illegal,
discriminatory, wrongful or tortious conduct in connection with the employment
relationship, the terms and conditions of employment, or applications for
employment with TFC or any Subsidiary; and (B) except as would not have a
Material Adverse Effect on TFC and the Subsidiaries, taken as a whole, no
federal, state, local or foreign Governmental Entity responsible for the
enforcement of immigration, labor, equal employment opportunity, family and
medical leave, wages, hours of work, occupational health and safety or any other
employment Laws is conducting or, to the knowledge of the Company and the
Founders, intends to conduct an investigation with respect to or relating to TFC
or any Subsidiary.
(iv) Since January 1, 2000, neither TFC nor any Subsidiary has
effectuated (A) a "plant closing" as defined in the Worker Adjustment and
Retraining Notification Act of 1988 ("WARN") affecting any site of employment or
one or more facilities or operating units within any site of employment or
facility of TFC or any Subsidiary; or (B) a "mass layoff" as defined in WARN
affecting any site of employment or facility of TFC or any Subsidiary; nor has
TFC or any Subsidiary been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local law. None of the employees of TFC or any Subsidiary has
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suffered an "employment loss," as defined in WARN, since January 1, 2001. TFC
and each Subsidiary shall be solely and exclusively liable to provide such WARN
or other plant closing or mass layoff notices as may be necessary in connection
with any loss of employment by any employee of TFC or any Subsidiary,
respectively, through and including the Closing Date.
(v) SCHEDULE 5(T)(V) to the Schedule of Exceptions sets forth a
complete list of all foreign national employees on whose behalf TFC or any
Subsidiary has submitted applications and petitions to the U.S. Department of
Labor, U.S. Immigration and Naturalization Service, or U.S. Department of State
for immigration employment and visa benefits; and TFC and each Subsidiary have
provided the Subscriber with copies of all such applications and petitions and
all government notices regarding adjudication of such applications and
petitions. SCHEDULE 5(T)(V) to the Schedule of Exceptions identifies and
describes any pending or threatened actions against TFC or any Subsidiary for
violations under the Immigration Reform and Control Act of 1986 respecting such
employees of TFC and each Subsidiary.
(vi) SCHEDULE 5(T)(VI) to the Schedule of Exceptions sets forth a
complete list of all business and/or assets of TFC and each Subsidiary involving
federal contracts giving rise to any reporting or filing obligations with the
Office of Federal Contract Compliance Programs ("OFCCP"), and each of TFC and
each Subsidiary has complied in all material respects with all hiring and
employment obligations applicable under OFCCP rules and regulations.
(u) RESTRICTIVE COVENANTS. Neither the Company, TFC nor any Subsidiary
is subject to any covenant that would restrict the sale of the Shares to the
Subscriber.
(v) ABSENCE OF SENSITIVE PAYMENTS. No Founder or any Affiliate of a
Founder has made or has agreed to make on behalf of the Company, TFC or any
Subsidiary:
(i) Any contributions, payments or gifts of funds or property to
any governmental official, employee or agent where either the payment or the
purpose of such contribution, payment or gift was or is illegal under the Laws
of the United States, any state thereof, or any jurisdiction (foreign or
domestic); or
(ii) Any contribution or expenditure, or has reimbursed any
political gift or contribution or expenditure made by any other Person, to
candidates for public office, whether federal, state or local (foreign or
domestic) where such contributions were or would be a violation of applicable
Law.
6. SURVIVAL AND INDEMNIFICATION.
(a) All covenants to be performed prior to the Closing Date, and all
representations, warranties and covenants contained in this Subscription
Agreement shall survive the Closing for a period of one (1) year, PROVIDED,
HOWEVER, that if any claims for an EBITA Adjustment (as hereinafter defined)
with respect to any such representations or warranties have been asserted prior
to the expiration of such period, the representations or warranties on which any
such claims are based shall continue in effect until final resolution of any
claims and the representations and warranties set forth in SECTIONS 5(H), and
(N), shall survive until the date of the last payment under SECTION 2.2 of the
Shareholder Agreement. All covenants to be performed after the Closing Date
shall continue indefinitely.
(b) The Company and the Founders acknowledge the meaning and legal
consequences of the representations, warranties and covenants in determining the
Subscriber's willingness to enter into this Subscription Agreement and to
purchase the Shares.
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(c) Notwithstanding anything to the contrary contained herein, the
sole and exclusive remedy for any breach of the representations and warranties
made by the Founders herein shall be an adjustment of the payment to be made to
the Founders under the Shareholder Agreement (an "EBITA ADJUSTMENT"), and no
Founder shall be liable for any amount under this SECTION 6 (except to the
extent of any such EBITA Adjustment), all as provided in the Shareholder
Agreement, provided, however, that prior pursuing any such adjustment based upon
a breach of representations or warranties contained in this Subscription
Agreement, Subscriber agrees to cause the Company to diligently pursue and
exhaust any such a claim it may have for indemnification against Safeco in
accordance with the Stock Purchase Agreement.
7. OTHER AGREEMENTS OF THE PARTIES.
(a) Prior to the Closing, the Company shall amend and restate its
Articles of Incorporation in the form attached hereto as EXHIBIT A. Immediately
thereafter, but in any event prior to the Closing, (i) the Company shall declare
a stock split on its Common Stock (the "STOCK SPLIT") such that following such
stock split, the Founders shall hold an aggregate of 7,927,971 shares of the
Company's Class B Common Stock and (ii) the Founders shall transfer all shares
of the Company's Class B Common Stock held by the Founders to TalMan. Except as
provided in the preceding sentence, no other shares of capital stock of the
Company shall be issued or outstanding prior to the Closing.
(b) Each party hereto shall use its best efforts to take, or cause to
be taken, all actions, and do, or cause to be done, and to assist and cooperate
with the other party or parties in doing, all things necessary, proper or
advisable to consummate the transactions contemplated hereby and by the Stock
Purchase Agreement as soon as reasonably practicable after the date hereof. The
Company, the Founders and the Subscriber shall use their best efforts to (i) as
promptly as practicable, obtain all Consents; (ii) make all filings under
applicable Law required in connection with the authorization, execution and
delivery of this Subscription Agreement and the Stock Purchase Agreement,
including any filings required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT") by the Company, TFC, each
Subsidiary and the Subscriber and the consummation by them of the transactions
contemplated hereby and thereby, in connection with which the parties will
cooperate with each other in connection with the making of all such filings,
including providing copies of all such documents to the non-filing party and its
advisors prior to filings and, if requested, will accept all reasonable
additions, deletions or changes suggested in connection therewith; and (iii)
furnish all information required for any application or other filing to be made
pursuant to applicable Laws, the State Securities Laws or any other Law or any
applicable regulations of any Governmental Entity in connection with the
transactions contemplated by this Subscription Agreement and the Stock Purchase
Agreement.
(c) The Company and the Founders shall use their best efforts to
satisfy or cause to be satisfied all of the conditions precedent that are set
forth in SECTION 8. Each party hereto, at the reasonable request of another
party hereto, shall execute and deliver such other instruments and do and
perform such other acts and things as may be necessary or desirable for the
consummation of this Subscription Agreement and the transactions contemplated
hereby.
(d) From the date hereof until the earliest of (i) the Closing Date,
(ii) the date on which the Stock Purchase Agreement is terminated and (iii)
September 30, 2004, the Company and the Founders (A) shall deal exclusively with
the Subscriber in connection with the sale of the Shares, the transactions
contemplated herein and any material financing transaction, (B) shall not
solicit or accept, or engage others to solicit or accept, offers for the
acquisition of the Shares or the assets of the Company or any of its Affiliates;
(C) shall not negotiate with, or enter into, any agreements or understandings
with any other party respect to any such transaction; and (D) shall immediately
inform the Subscriber of any such solicitation or offer.
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(e) After the date hereof through the Closing Date, the Company and
the Founders shall use their best efforts to, and shall use their best efforts
(subject to their duties as officers of TFC and Safeco) to cause the Company's,
TFC's and each Subsidiary's officers, directors, employees, agents, accountants
and counsel to, upon reasonable notice, (i) afford the Subscriber and its
representatives reasonable access, during normal business hours, to (A) the
business of the Company, TFC and each Subsidiary, and (B) those officers,
directors, employees, agents, accountants and counsel of the Company, TFC or any
Subsidiary who have any knowledge relating to the business of the Company, TFC
or any Subsidiary, and (ii) furnish to the Subscriber and its representatives
such additional information regarding the Company, TFC or any Subsidiary as the
Subscriber may reasonably request, including without limitation, providing such
access and furnishing such information as necessary for the preparation and
completion by the Subscriber and the Subscriber's auditors of an audit of the
Company's, TFC's and each Subsidiary's consolidated financial statements as of
and for the most recently completed fiscal year prior to the Closing Date or to
comply with applicable Law (including, without limitation the HSR Act and
Regulation S-X).
(f) The Company shall not amend or modify the Stock Purchase Agreement
without the prior written consent of the Subscriber.
8. CONDITIONS TO CLOSING. The obligation of the Subscriber to purchase and pay
for the Shares on the Closing Date is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions:
(a) the Company shall have duly authorized and filed the amended and
restated Articles of Incorporation, in substantially in the form attached hereto
as EXHIBIT A, with the Secretary of State of the State of Washington;
(b) the Company shall have effected the Stock Split;
(c) the Founders shall have transferred all shares of the Company's
Class B Common Stock held by the Founders to TalMan;
(d) the Company shall have entered into the Shareholder Agreement and
the Registration Rights Agreement;
(e) all of the covenants and agreements of the Company and the
Founders contained in this Subscription Agreement and required to be complied
with or performed on or prior to the Closing Date shall have been complied with
or performed in all material respects;
(f) all representations of the Company and the Founders in SECTION 5
shall have been true and correct when made and shall be true and correct, in all
material respects, as of the Closing Date with the same force and effect as if
made as of the Closing Date, other than representations and warranties as are
made as of a specific date, which shall be true and correct as of such date and
shall be certified by an officer of the Company to that effect;
(g) each of Weymouth and Taylor shall have signed employment
agreements in substantially the form attached hereto as EXHIBIT B;
(h) the Stock Purchase Agreement shall have been executed and
delivered by the parties thereto, and all of the conditions thereto required to
be satisfied prior to the consummation of the transactions contemplated thereby
(with the exception of such deliveries required upon the consummation of such
transactions) shall have been satisfied, in each case without waiver by any
party of the conditions specified therein; and
(i) the Company shall have delivered to the Subscriber:
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(i) the Articles of Incorporation of the Company and all
amendments and restatements thereto, certified by the Secretary of State of
Washington; and
(ii) (A) copies of the resolutions of the Company's Board of
Directors authorizing and approving this Subscription Agreement and all of the
transactions and agreements contemplated hereby and thereby; (B) the Bylaws of
the Company; and (C) the names of the officer or officers of the Company
authorized to execute this Subscription Agreement and any and all documents,
agreements and instruments contemplated herein, all certified by the Secretary
of the Company to be true, correct, complete and in full force and effect and
unmodified as of the Closing Date.
9. CLOSING. The closing of the purchase and sale of the Shares (the "CLOSING")
is anticipated to occur at the offices of Orrick, Herrington & Sutcliffe, LLP
immediately prior to the closing of the transactions contemplated by the Stock
Purchase Agreement or at such other time and place as the Company and the
Subscriber may mutually determine (the "CLOSING DATE"). It is understood and
agreed by the parties that $90 million of the Purchase Price is to be used
exclusively for the purchase of TFC and the Subsidiaries pursuant to the Stock
Purchase Agreement and that at Closing, such funds shall be wired directly to
Safeco subject to and in connection with the closing of the transactions
contemplated by the Stock Purchase Agreement. At the Closing, the Company shall
deliver a certificate of existence and good standing (as applicable) for each of
the Company, TFC and each Subsidiary dated as of a date no later than 14 days
prior to the Closing Date.
10. NOTICES. All notices and other communications provided for in this
Subscription Agreement shall be in writing and sent (a) by facsimile if the
sender on the same day sends a confirming copy of such communication by a
recognized overnight delivery service (charges prepaid), (b) by a recognized
overnight delivery service (charges prepaid), or (c) by messenger. The
respective addresses of the parties hereto for the purposes of this Agreement
are set forth below. Any party may change its address (or facsimile number) by
notice to each of the other parties in accordance with this SECTION 10. The date
of giving or making of any such communication shall be, in the case of clauses
(a) and (c), the date of the receipt if received during regular business hours
or a business day; otherwise and, in the case of clause (b), the business day
next following the date such communication is sent:
(a) if to the Company or the Founders:
c/o Satellite Acquisition Corporation
3421 Evergreen Point Road
Medina, WA 98039
Attn: Randall H. Talbot
Telecopy: (425) 376-8750
With a copy (not constituting notice) to:
Orrick, Herrington & Sutcliffe, LLP
719 Second Avenue, Suite 900
Seattle, WA 98104
Attn: Stephen M. Graham, Esq.
Telecopy: (206) 839-4320
-22-
(b) if to the Subscriber:
HUB U.S. Holdings, Inc.
55 East Jackson Boulevard
Chicago, IL 60604
Attn: W. Kirk James, Esq.
Telecopy: (312) 279-4981
With a copy (not constituting notice) to:
Jenkens & Gilchrist Parker Chapin LLP
405 Lexington Avenue
New York, New York 10174
Attn: Mark A. Limardo, Esq.
Telecopy: (212) 704-6288
(c) or at such other address as any party shall have specified by
notice in writing to the others.
11. NOTIFICATION OF CHANGES. Each party agrees and covenants to notify the other
parties immediately upon the occurrence of any event prior to the Closing that
would cause any representation, warranty, covenant or other material statement
made by it contained in this Subscription Agreement to be false or incorrect in
any material respect or of any change in any material statement made by it
herein occurring prior to the Closing.
12. ASSIGNABILITY. This Subscription Agreement is not assignable by the Company
or the Subscriber, other than to an Affiliate of the Company or the Subscriber,
as applicable, and may not be modified, waived or terminated except by an
instrument in writing signed by the party against whom enforcement of such
modifications, waiver or termination is sought; provided, however, that no such
assignment will relieve such party of its obligations under this Subscription
Agreement.
13. BINDING EFFECT. Except as otherwise provided in this Subscription Agreement,
this Subscription Agreement shall be binding upon and inure to the benefit of
the parties and their respective heirs, executors, administrators, successors,
legal representatives and permitted assigns, and the agreements,
representations, warranties and acknowledgments contained in this Subscription
Agreement shall be deemed to be made by and be binding upon such heirs,
executors, administrators, successors, legal representatives and permitted
assigns.
14. ENTIRE AGREEMENT. The Transaction Documents constitute the entire agreement
of the Subscriber, the Company and the Founders relating to the matters
contained herein, superseding all prior contracts or agreements, whether oral or
written.
15. GOVERNING LAW. This Subscription Agreement shall be governed and controlled
as to the validity, enforcement, interpretations, construction and effect and in
all other aspects by the substantive laws of the State of Washington, without
reference to conflicts of laws principles.
16. SEVERABILITY. If any provision of this Subscription Agreement or the
application thereof to any party or circumstance shall be held invalid or
unenforceable to any extent, the remainder of this Subscription Agreement and
the application of such provision to other parties or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by Law.
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17. HEADINGS. The headings in this Subscription Agreement are inserted for
convenience and identification only and are not intended to describe, interpret,
define, or limit the scope, extent or intent of this Subscription Agreement or
any provision of this Subscription Agreement.
18. COUNTERPARTS. This Subscription Agreement may be executed in any number of
counterparts of the entire document or of the signature page to this
Subscription Agreement and may be sent by telecopy. Each counterpart, when so
executed and delivered shall be deemed to be an original and all of which
together shall be deemed to be one and the same agreement.
19. DEFINITIONS. For purposes of this Subscription Agreement, the following
definitions shall apply:
(a) "ACCOUNTS RECEIVABLE" means each of TFC's and each Subsidiary's
customer premium and direct bill accounts receivable relating to their
respective business, net of any unearned commission reserves maintained in
accordance with SAB 101.
(b) "AFFILIATE" means, with respect to any Person, any other Person
that controls, is controlled by, or is under common control with the such
Person.
(c) "ANCILLARY AGREEMENTS" means (i) the Shareholder Agreement and
(ii) the Registration Rights Agreement.
(d) "APPROVALS" means all licenses, permits and certificates of
occupancy for any Real Property.
(e) "ASSUMED PLAN" shall have the meaning given in SECTION 5(H)(X).
(f) "CLASS A COMMON STOCK" shall mean the shares of the Company's
Class A Common Stock, no par value.
(g) "CLASS B COMMON STOCK" shall mean the shares of the Company's
Class B Common Stock, no par value.
(h) "CLOSING" shall have the meaning given in SECTION 9.
(i) "CLOSING DATE" shall have the meaning given in SECTION 9.
(j) "COMPANY" shall have the meaning given in the introduction.
(k) "CONSENT" means consents, approvals, orders, authorizations,
notifications, notices, estoppel certificates, releases, registrations,
ratifications, declarations, filings, waivers, exemptions or variances.
(l) "CONTRACT" shall have the meaning given in SECTION 5(D)(I).
(m) "EMPLOYEE BENEFIT PLAN" shall have the meaning given in SECTION
5(H).
(n) "ENCUMBRANCE" means any claim, lien, mortgage, encumbrance,
pledge, or other security interests of any kind.
(o) "ENVIRONMENTAL CLAIM" means any and all administrative or judicial
actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings or other
communications (written or oral), whether criminal or civil pursuant to or
relating to any applicable Environmental Law by any Person (including, but not
limited to, any Governmental Entity, Person and citizens' group) based upon,
alleging, asserting, or claiming any actual or potential: (i) violation of or
liability under any Environmental Law, (ii) violation of any Environmental
Permit, or (iii) liability for investigatory costs, cleanup costs, removal
costs, remedial costs, response costs, natural resource damages, property
damage, personal injury, fines, or penalties arising out of, based on, resulting
from, or related to the presence, Release, or threatened Release into the
Environment, of any Hazardous Substances at any location, including, but not
limited to, any off-Site location to which Hazardous Substances or materials
containing Hazardous Substances were sent for handling, storage, treatment, or
disposal.
-24-
(p) "ENVIRONMENTAL LAW" means any and all Laws relating to the
protection of health and the Environment, worker health and safety, and/or
governing the handling, use, generation, treatment, storage, transportation,
disposal, manufacture, distribution, formulation, packaging, labeling, or
Release of Hazardous Substances, whether now existing or subsequently amended or
enacted, and the state analogies thereto, all as amended or superseded from time
to time; and any common law doctrine, including, but not limited to, negligence,
nuisance, trespass, personal injury, or property damage related to or arising
out of the presence, Release, or exposure to a Hazardous Substance.
(q) "ENVIRONMENTAL PERMIT" means any Licenses or Consents required by
any Governmental Entity under or in connection with any Environmental Law.
(r) "ERISA" shall have the meaning given in SECTION 5(H).
(s) "ERISA AFFILIATE" means any entity which with respect to TFC or
any Subsidiary is or was a member of (i) a controlled group of corporations
(as defined in Section 414(b) of the Internal Revenue Code of 1986, as
amended (the "CODE")); (ii) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code); or (iii) an affiliated
service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes or
included TFC or any Subsidiary.
(t) "FOUNDERS" shall have the meaning given in the introduction.
(u) "GAAP" shall have the meaning given in SECTION 5(E)(II).
(v) "GOVERNMENTAL ENTITY" means any legislative or executive agency or
department or other regulatory service, authority or agency or any court,
arbitration panel or other tribunal or judicial authority of any foreign,
federal, state, county, municipal or other local jurisdiction, political entity,
body, organization, subdivision or branch.
(w) "HAZARDOUS SUBSTANCE" means any chemicals, materials, substances
or wastes in any amount or concentration which are now included in the
definition of "hazardous substances," "hazardous materials," "hazardous wastes,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "pollutants," "regulated substances," "solid wastes," or
"contaminants" or words of similar import, under any Environmental Law.
(x) "HSR ACT" shall have the meaning given in SECTION 7(B).
(y) "INTELLECTUAL PROPERTY" means (a) trademarks, trade names, service
marks, service names, domain names, uniform resource locators (URLs), keywords,
designs, logos and assumed names; (b) copyrights in original works of
authorship, including in the Custom Software and any computer software programs
or applications (in both source and object code form) and any related
documentation developed by, on behalf of or at the request of TFC or any
Subsidiary; (c) patents and industrial design registrations or applications
(including any continuations, divisionals, continuations-in-part, renewals,
reissues, and applications for any of the foregoing); and (d) know-how, trade
secrets and invention disclosures, that are owned by the Subsidiary or any other
Person and that have been or are used by TFC or any Subsidiary in the operation
of their respective businesses, or that are necessary for the conduct of the
respective businesses of TFC or any Subsidiary as currently conducted or
contemplated to be conducted, together with all registrations and applications
related to any of the foregoing.
(z) "IRS" shall have the meaning given in SECTION 5(H).
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(aa) "LAWS" or "LAW" means all applicable criminal, civil or
common laws, statutes, ordinances, orders, codes, rules, regulations, policies,
guidance documents, writs, judgments, decrees, injunctions, or agreements of any
Governmental Entity.
(bb) "LEASES" or "LEASE" means all leases, subleases,
licenses and other agreements under which TFC or any Subsidiary uses or occupies
or has the right to use or occupy, now or in the future, any real property,
including, without limitation, any land, buildings and improvements.
(cc) "LEASED REAL PROPERTY" means the real property,
including, without limitation, any land, buildings and improvements that TFC or
any Subsidiary uses or occupies or has the right to use or occupy pursuant to a
Lease.
(dd) "LICENSE" shall have the meaning given in SECTION 5(G).
(ee) "MATERIAL ADVERSE EFFECT" means any event, change or
effect that, when taken individually or together with all other adverse changes
and effects, is or is reasonably likely to be materially adverse to the
condition (financial or otherwise), properties, assets, liabilities, business,
operations, results of or prospects of such entity and its subsidiaries, taken
as a whole, or to prevent or materially delay consummation of the transactions
contemplated under this Subscription Agreement or otherwise to prevent such
entity and its subsidiaries from performing their obligations under this
Subscription Agreement.
(ff) "MATERIAL CONTRACTS" shall have the meaning given in
SECTION 5(L)(I).
(gg) "OFCCP" shall have the meaning given in SECTION
5(T)(VI).
(hh) "PBGC" shall have the meaning given in SECTION
5(H)(II).
(ii) "PERSON" means any natural person or legal person
(including, but not limited to, a corporation, joint stock company, limited
liability company, partnership, joint venture, association, estate, trust,
government or governmental authority, agency or instrumentality) or any group of
any of natural or legal persons acting in concert.
(jj) "PERSONAL PROPERTY" means all machinery, equipment,
tooling and other tangible personal property owned or leased by TFC or any
Subsidiary and used in the conduct of their respective businesses (other than
items of inventory), as listed in the fixed assets ledger of TFC.
(kk) "PROCEEDING" shall have the meaning given in SECTION
5(I)(II).
(ll) "PURCHASE PRICE" shall have the meaning given in
SECTION 1(A).
(mm) "REFERENCE BALANCE SHEET" shall have the meaning given
in SECTION 5(E)(I).
(nn) "REGISTRATION RIGHTS AGREEMENT" means that certain
Registration Rights Agreement in the form attached hereto as Exhibit D to be
entered into by TalMan and Hub International Limited, a corporation formed under
the laws of Ontario, Canada.
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(oo) "REGULAR FINANCIAL STATEMENTS" shall have the meaning
given in SECTION 5(E)(I).
(pp) "REGULATION S-X" shall have the meaning given in
SECTION 5(E)(II).
(qq) "RELEASE" means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping, or disposing of a Hazardous Substance into the Environment.
(rr) "SAFECO" means Safeco Corporation, a Washington
corporation.
(ss) "SCHEDULE OF EXCEPTIONS" means the Schedule of
Exceptions to the Company's and the Founders' representations and warranties
contained in Section 5 of this Subscription Agreement, which has been delivered
to the Subscriber concurrent with the execution of this Subscription Agreement.
(tt) "SECURITIES ACT" shall have the meaning given in
SECTION 1(A).
(uu) "SERIES A PREFERRED STOCK" shall mean the shares of the
Company's Series A Preferred Stock, par value $0.001 per share of the Company.
(vv) "SHAREHOLDER AGREEMENT" means the Shareholder Agreement
in the form attached hereto as EXHIBIT C to be entered into by the Company, the
Founders and certain other securityholders of the Company.
(ww) "SHARES" shall mean, collectively, Class A Common Stock
and the Preferred Stock.
(xx) "SITE" means any of the real properties currently or
previously owned, leased, used or operated by TFC or any Subsidiary, any
predecessors of TFC or any Subsidiary or any entities previously owned by TFC or
any Subsidiary, including all soil, subsoil, surface waters and groundwater
thereat.
(yy) "STATE SECURITIES LAW" shall have the meaning given in
SECTION 1(A).
(zz) "STOCK SPLIT" shall have the meaning given in SECTION
7(A).
(aaa) "STOCK PURCHASE AGREEMENT" means that certain
Stock Purchase Agreement of even date herewith between the Company and Safeco
pursuant to which the Company acquired or will acquire all of the outstanding
stock of TFC and the Subsidiaries.
(bbb) "SUBSCRIBER" shall have the meaning given in the
introduction.
(ccc) "SUBSIDIARY" and "SUBSIDIARIES" shall have the
meaning given in SECTION 5.
(ddd) "SUBSIDIARY EQUITY" shall have the meaning given
in SECTION 5(B)(II).
(eee) "TALMAN" shall have the meaning given in the
introduction.
(fff) "TALBOT" shall have the meaning given in the
introduction.
(ggg) "TAXES" or "TAX" means any tax, charge, fee,
levy, deficiency or other assessment of whatever kind or nature including,
without limitation, any net income, gross income, profits, gross receipts,
excise, real or personal property, sales, ad valorem, withholding, social
security (or similar), retirement, excise, employment, unemployment, minimum,
alternative or add-on minimum, estimated, severance, stamp, property (or
similar), occupation, environmental, premium, capital stock, disability,
windfall profits, use, value added, service, net worth, payroll, franchise,
license, gains, customs, transfer, registration, recording and other tax, duty,
fee, assessment or charge of any kind whatsoever, imposed by any Tax Authority,
including any liability therefor as a transferee (including without limitation
under Code Section 6901 or any similar provision of applicable law), as a result
of Treas. Reg.
-27-
(hhh) "TAX AUTHORITY" means any branch, office,
department, agency, instrumentality, court, tribunal, officer, employee,
designee, representative, or other Person that is acting for, on behalf or as a
part of any foreign or domestic government (or any political subdivision
thereof) that is engaged in or has any power, duty, responsibility or obligation
relating to the legislation, promulgation, interpretation, enforcement,
regulation, monitoring, supervision or collection of or any other activity
relating to any Tax or Tax Return.
(iii) "TAX RETURN" means any return, election,
declaration, report, schedule, information return, claim for refund, document,
information, opinion, statement, or any amendment to any of the foregoing
(including without limitation any consolidated, combined or unitary return)
submitted or required to be submitted to any Tax Authority.
(jjj) "TAYLOR" shall have the meaning given in the
introduction.
(kkk) "TRANSACTION DOCUMENTS" means (i) this
Subscription Agreement, and, when duly executed, each of (ii) the Shareholder
Agreement, and (iii) the Registration Rights Agreement.
(lll) "TFC" shall have the meaning given in the
introduction.
(mmm) "WARN" shall have the meaning given in SECTION
5(T)(IV).
(nnn) "WEYMOUTH" shall have the meaning given in the
introduction.
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IN WITNESS WHEREOF, the parties hereto have executed this Subscription
Agreement on the day and year first above written.
HUB U.S. HOLDINGS, INC.
By: /s/ W. KIRK JAMES
----------------------------------------------------------------------
Name:
----------------------------------------------------------------------
Title:
----------------------------------------------------------------------
SATELLITE ACQUISITION CORPORATION
By: /s/ RANDALL TALBOT
----------------------------------------------------------------------
Randall Talbot
President
TALMAN, LLC
By: /s/ RANDALL TALBOT
----------------------------------------------------------------------
Name:
----------------------------------------------------------------------
Title:
----------------------------------------------------------------------
/s/ RANDALL TALBOT
- -------------------------------------------------------------------------------
RANDALL TALBOT
/s/ DAVID WEYMOUTH
- -------------------------------------------------------------------------------
DAVID WEYMOUTH
/s/ ROY TAYLOR
- -------------------------------------------------------------------------------
ROY TAYLOR
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EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
-30-
EXHIBIT B
FORM OF EMPLOYMENT AGREEMENT
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EXHIBIT C
FORM OF SHAREHOLDER AGREEMENT
-32-
EXHIBIT D
FORM OF REGISTRATION RIGHTS AGREEMENT
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