**Exhibit 10.11**

 

STOCK PURCHASE AGREEMENT

 

BETWEEN

 

CONTINENTAL CASUALTY COMPANY, AS SELLER

 

AND

 

OCTAGON RISK SERVICES, INC., AS PURCHASER

 

RELATING TO

 

MANAGED CARE HOLDINGS CORPORATIONand its Subsidiary, CARONIACORP.

 

DATED MARCH        ,2005

 

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TABLE OF CONTENTS

 
| ARTICLE I   | DEFINITIONS                                               |   |
|------------------|-----------------------------------------------------------|--------|
|             |                                                      |   |
| ARTICLE II  | PURCHASE  OF SHARES AND CLOSING                           |   |
|             |                                                      |   |
| 2.1              | Purchase of the  Shares                                   |   |
| 2.2              | Cash Consideration  for Purchase of the Shares            |   |
| 2.3              | The Closing                                               |   |
| 2.4              | Closing Adjustment                                        |   |
| 2.4.1            | Prototype  Financial Information                          |   |
| 2.4.2            | Closing  Financial Information                            |   |
| 2.4.3            | Closing  Working Capital Adjustment                       |   |
| 2.4.4            | Preliminary  Pro Forma Balance Sheet and Income Statement |   |
| 2.4.5            | Mutual Right  to Review                                   |   |
| 2.4.6            | Dispute  Resolution                                       |   |
| 2.4.7            | Accounting  Firm’s Determination                     |   |
| 2.4.8            | Final  Adjustment                                         |   |
|             |                                                      |   |
| ARTICLE III | REPRESENTATIONS  AND WARRANTIES OF SELLER                 |   |
|             |                                                      |   |
| 3.1              | Organization and  Good Standing                           |   |
| 3.1.1            | Parent                                                    |   |
| 3.1.2            | The Company                                               |   |
| 3.1.3            | Seller                                                    |   |
| 3.2              | Capitalization of  the Company; Title to Shares           |   |
| 3.2.1            | Parent                                                    |   |
| 3.2.2            | Company                                                   |   |
| 3.2.3            | Claims Against  the Company                               |   |
| 3.3              | Enforceability                                            |   |
| 3.3.1            | Enforceability  of this Agreement                         |   |
| 3.3.2            | Enforceability  of the Related Agreements                 |   |
| 3.4              | Financial  Statements                                     |   |
| 3.4.1            | Delivery of  Financial Statements                         |   |
| 3.4.2            | Parent  Financial Statements                              |   |
| 3.4.3            | Contingent  Liabilities                                   |   |
| 3.5              | Assets                                                    |   |
| 3.5.1            | Company Assets                                            |   |
| 3.5.2            | CNA  Transferred Assets                                   |   |
| 3.5.3            | Tax Basis of  Transferred Assets                          |   |
| 3.6              | Litigation                                                |   |

 

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| 3.7             | Books and Records                                                    |   |
|-----------------|----------------------------------------------------------------------|--------|
| 3.8             | Contracts                                                            |   |
| 3.8.1           | Company  Contracts                                                   |   |
| 3.8.2           | CNA Assigned  Contracts                                              |   |
| 3.9             | Intellectual  Property                                               |   |
| 3.9.1           | Patents,  Trademarks, Trade Names, Service Marks and Copyrights      |   |
| 3.9.2           | Know-How,  Methods of Operation, Customer Lists and Business Records |   |
| 3.9.3           | Computer  Programs                                                   |   |
| 3.9.4           | Third Party  Infringement                                            |   |
| 3.10            | Customer  Agreements                                                 |   |
| 3.11            | Compliance with  Legal Requirements                                  |   |
| 3.12            | Licenses                                                             |   |
| 3.13            | Taxes and Tax  Returns                                               |   |
| 3.13.1          | Affiliated  Group Taxes                                              |   |
| 3.13.2          | Taxes for  which Either of the Companies is Taxpayer                 |   |
| 3.14            | Employees                                                            |   |
| 3.15            | Employee  Benefits                                                   |   |
| 3.16            | Labor Relations                                                      |   |
| 3.17            | Insurance                                                            |   |
| 3.18            | Brokers or  Finders                                                  |   |
| 3.19            | Absence of  Certain Changes and Events                               |   |
| 3.20            | Seller’s  Approvals                                             |   |
| 3.21            | Sufficiency of  Assets and Contracts                                 |   |
| 3.22            | Real Property                                                        |   |
| 3.22.1          | Owned Real  Property                                                 |   |
| 3.22.2          | Leased Real  Property                                                |   |
| 3.23            | Excluded  Affiliates                                                 |   |
| 3.24            | Deferred Revenue                                                     |   |
| 3.25            | Environmental  Matters                                               |   |
| 3.25.1          | Hazardous  Materials                                                 |   |
| 3.25.2          | Hazardous  Materials Activities                                      |   |
| 3.25.3          | Permits                                                              |   |
| 3.25.4          | Environmental  Liabilities                                           |   |
| 3.26            | Accounts Receivable                                                  |   |
|            |                                                                 |   |
| ARTICLE IV | REPRESENTATIONS  AND WARRANTIES OF PURCHASER                         |   |
|            |                                                                 |   |
| 4.1             | Status of Purchaser                                                  |   |
| 4.2             | Enforceability                                                       |   |
| 4.3.            | Enforceability of  Security Capital Guarantee                        |   |
| 4.4             | Certain Proceedings                                                  |   |
| 4.5             | Financial  Statements                                                |   |
| 4.6             | Brokers or Finders                                                   |   |
| 4.7             | Purchaser’s  Approvals                                          |   |
| 4.8             | Securities Laws                                                      |   |

 

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| 4.9            | Investment Company                                        |   |
|----------------|-----------------------------------------------------------|--------|
| 4.10           | Financing                                                 |   |
|           |                                                      |   |
| ARTICLE V | ADDITIONAL  AGREEMENTS OF SELLER AND PURCHASER            |   |
|           |                                                      |   |
| 5.1            | Closing Adjustments                                       |   |
| 5.2            | Conduct of the  Business                                  |   |
| 5.3            | Expenses                                                  |   |
| 5.4            | Purchaser’s Access  to the Business Prior to Closing |   |
| 5.5            | Performance of  this Agreement                            |   |
| 5.6            | Notification of  Certain Matters                          |   |
| 5.7            | Employee Matters                                          |   |
| 5.8            | Computer Programs                                         |   |
| 5.9            | Communications                                            |   |
| 5.10           | Execution  and Delivery of Documents                      |   |
| 5.11           | Cooperation after  the Closing                            |   |
| 5.11.1         | Further Assurances                                        |   |
| 5.11.2         | Seller’s Access to Records                           |   |
| 5.11.3         | Purchaser’s Access to Records                        |   |
| 5.11.4         | Records of the Business                                   |   |
| 5.11.5         | Storage of Records of the Business                        |   |
| 5.11.6         | Subpoenas of Business Records                             |   |
| 5.12           | Third Party Consents                                      |   |
| 5.12.1         | Obtaining Third  Party Consents                           |   |
| 5.12.2         | Agreements  Affecting the Other Party                     |   |
| 5.13           | Regulatory Compliance                                     |   |
| 5.14           | No Solicitations                                          |   |
| 5.15           | Use of Names                                              |   |
| 5.16           | Non-Competition                                           |   |
| 5.16.1         | Seller                                                    |   |
| 5.16.2         | Restricted Area                                           |   |
| 5.16.3         | Exceptions                                                |   |
| 5.16.4         | Disposition  of Business Activities                       |   |
| 5.16.5         | Due Diligence  Materials                                  |   |
| 5.16.6         | Enforcement                                               |   |
| 5.16.7         | No-Hire                                                   |   |
| 5.16.8         | Confidential Information                                  |   |
| 5.16.9         | Rights Retained by  Seller                                |   |
| 5.17           | Monthly  Financial Statements of the Company              |   |
| 5.18           | Bidder Agreements                                         |   |
| 5.19           | Facilities Plan                                           |   |
| 5.20           | Audit of  Parent Financial Statements                     |   |
| 5.21.          | Confidentiality                                           |   |

 

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| ARTICLE VI   | CONDITIONS PRECEDENT TO THE OBLIGATION OF  PURCHASER TO CLOSE |   |
|-------------------|---------------------------------------------------------------|--------|
|              |                                                          |   |
| 6.1               | Representations,  Warranties and Covenants                    |   |
| 6.2               | Related Agreements                                            |   |
| 6.3               | Secretary’s Certificate                                  |   |
| 6.4               | Approvals and Consents                                        |   |
| 6.5               | Injunction and  Litigation                                    |   |
| 6.6               | Bank Financing                                                |   |
| 6.7               | Companies’ Releases                                      |   |
| 6.8               | Closing Material  Adverse Effect                              |   |
|              |                                                          |   |
| ARTICLE VII  | CONDITIONS PRECEDENT TO THE OBLIGATION OF  SELLER TO CLOSE    |   |
|              |                                                          |   |
| 7.1               | Representations,  Warranties and Covenants                    |   |
| 7.2               | Related Agreements                                            |   |
| 7.3               | Secretary’s Certificate                                  |   |
| 7.4               | Approvals and Consents                                        |   |
| 7.5               | Companies’ Releases                                      |   |
| 7.6               | Injunction and  Litigation                                    |   |
|              |                                                          |   |
| ARTICLE VIII | TAX MATTERS                                                   |   |
|              |                                                          |   |
| 8.1               | Post-Closing  Access to Records; Cooperation                  |   |
| 8.2               | Liability  for Taxes and Related Matters                      |   |
| 8.2.1             | Seller’s  Liability for Taxes                            |   |
| 8.2.2             | Purchaser’s  Liability for Taxes                         |   |
| 8.2.3             | Taxes for Short  Taxable Year                                 |   |
| 8.2.4             | Adjustment  to Cash Consideration Amount                      |   |
| 8.2.5             | Preparation  and Filing of Tax Returns                        |   |
| 8.2.6             | Contest Provisions                                            |   |
| 8.3               | Survival  of Obligations                                      |   |
| 8.4               | Refunds and Tax Benefits                                      |   |
| 8.4.1             | Income Tax Refunds                                            |   |
| 8.4.2             | Carryback of Tax  Attributes                                  |   |
| 8.5               | Tax Sharing Agreements                                        |   |
| 8.6               | Certain Taxes                                                 |   |
| 8.7               | Disclosure  of U.S. Federal Income Tax Treatment              |   |

 

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| ARTICLE IX | TERMINATION                      |   |
|-----------------|----------------------------------|--------|
|            |                             |   |
| 9.1             | Termination                      |   |
| 9.2             | Procedure on Termination         |   |
|            |                             |   |
| ARTICLE X  | INDEMNIFICATION                  |   |
|            |                             |   |
| 10.1            | Seller’s  Indemnification   |   |
| 10.2            | Purchaser’s Indemnification |   |
| 10.3            | Conditions of  Indemnification   |   |
| 10.4            | Indemnification Limits           |   |
| 10.4.1          | Exclusions  from Indemnification |   |
| 10.4.2          | Time Limits                      |   |
| 10.4.3          | Limitations on Amount            |   |
| 10.4.4          | Exclusive Remedy                 |   |
|            |                             |   |
| ARTICLE XI | MISCELLANEOUS PROVISIONS         |   |
|            |                             |   |
| 11.1            | Notices                          |   |
| 11.2            | Sole Agreement                   |   |
| 11.3            | Successors and Assigns           |   |
| 11.4            | Captions                         |   |
| 11.5            | Disputes Resolution              |   |
| 11.6            | Governing Law and  Jurisdiction  |   |
| 11.7            | No Third Party  Beneficiaries    |   |
| 11.8            | Expenses                         |   |
| 11.9            | Counterparts                     |   |
| 11.10           | Severability                     |   |
| 11.11           | Waiver of Jury  Trial; Damages   |   |

 

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STOCK PURCHASE AGREEMENT

 

THISSTOCK PURCHASE AGREEMENT is made and entered into this          day of March, 2005, by and between CONTINENTAL CASUALTY COMPANY, an Illinoisstock insurance company (“Seller”) and OCTAGON RISK SERVICES, INC., a Minnesotacorporation (“Purchaser”).

 

ARTICLE I

 

Definitions

 

Thefollowing terms, when used in this Agreement, shall have the meanings describedin this Section:

 

AAAshall have the meaning given in Section 5.16.4(f).

 

Accounting Firmmeans Price Waterhouse Coopers, or if Price Waterhouse Coopers is disqualifiedor unwilling to serve, a public accounting firm with a United States nationalpractice that is mutually acceptable to the Parties.

 

Accounting Firm’sDispute Work Papers shall have the meaning given in Section 2.4.5(a).

 

Acquisition Datemeans July 23, 1997, the date on which Seller acquired Parent and theCompany through purchase of Parent’s issued and outstanding capital stock.

 

Adjusted WorkingCapital shall have the meaning given in Section 2.4.1(b).

 

Affiliatemeans a Person that directly, or indirectly through one or more intermediaries,controls, or is controlled by, or is under common control with, the personspecified; provided, however, that with respect to CNA Financial, Seller andany other Persons controlled by CNA Financial, “Affiliate” (i) shallinclude only CNA Financial and Persons controlled by CNA Financial, and (ii) shallexclude CNA Surety Corporation, a Delaware corporation, First Insurance Companyof Hawaii, a Hawaii stock insurance company, Accord Underwriting Agency, Ltd.,a Bermuda company, and RVI Guaranty Co., Ltd., a Bermuda insurance company.

 

Affiliated Groupmeans any affiliated group within the meaning of Section 1504(a) ofthe Code or any similar group defined under a similar provision of state, localor foreign law.

 

AlternativeTransaction shall have the meaning given in Section 5.14.

 

Base WorkingCapital shall have the meaning given in Section 2.4.1(b).

 

Bidder Agreementsshall have the meaning given in Section 5.18.

 

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Books and Recordsmeans all records and all other data and information (in whatever formmaintained) in the possession or control of Seller, its Affiliates or theCompanies and relating primarily to the Business as currently conducted,including administrative records, sales records, files and records relating toregulatory matters and accounting records, but excluding any Tax records andall other data and information with respect to Tax; provided, however, that ifany such financial or accounting records contain information which does notrelate to the Business, such information shall not constitute “Books and Records”.

 

Businessmeans all of the business of the Companies.

 

BusinessActivities shall have the meaning given in Section 5.16.3(f).

 

Business Daymeans any day other than a Saturday, Sunday or a day on which commercial banksin New York City or Chicago are authorized or required by law to be closed.

 

Business Employeesmeans each Person having the status of an employee substantially all of whoseworking time is spent serving in the Business as of the Closing Date,including, without limitation, each such Person currently on leave of absence,vacation, sick days, short or long term disability or workers’ compensation,and includes the persons listed on Schedule 1(A).

 

Business Leasesshall have the meaning given in Section 3.22.2.

 

Cash ConsiderationAmount shall have the meaning given in Section 2.2.

 

Closingand Closing Date shall have the meanings given in Section 2.3.

 

ClosingAdjustments shall have the meaning given in Section 5.1.

 

Closing Material Adverse Effect means a material adverse effect on the financialcondition or results of operations of the Business; provided, however, that thefollowing shall be excluded from the definition of “Closing Material AdverseEffect” and from any determination as to whether a Closing Material AdverseEffect has occurred or may occur:  (i) anyadverse change or effect that is caused by or that arises out of the closing ofany securities or financial markets, or conditions affecting the economy orfinancial, banking, currency or capital markets in general; (ii) any adversechange or effect that is caused by or that arises out of conditions affectingthe property and casualty third party claim administration industry, or theinsurance or financial services industries generally; (iii) any adversechange or effect that is caused by or arises out of any downgrade or potentialdowngrade of the financial strength, capital adequacy or other ratings ofSeller or any of its Affiliates, that is not caused by Seller’s breach of therepresentations, warranties, covenants or terms of this Agreement; (iv) anyadverse change or effect that is caused by or arises out of any outbreak orescalation of national or international hostilities or any crisis or calamity,or any attack or act of terrorism; and (v) any adverse change or effectresulting from the announcement or the pendency of the transactions 

 

2

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contemplatedby this Agreement or from Purchaser’s violation of Section 5.9 (including,but not limited to, changes in relations with Business Employees and customersof the Business).

 

Closing Pro Forma Balance Sheet shall have the meaning given in Section 2.4.2.

 

Closing WorkingCapital Adjustment shall have the meaning given in Section 2.4.2.

 

CNA AssignedContracts means the contracts of Seller and its Affiliatesthat are listed in Schedule 1(B), and that are to be assigned tothe Company on or before the Closing Date pursuant to this Agreement.

 

CNA Assignment andAssumption Agreement shall have the meaning given in Section 2.3(f).

 

CNA Bill of Saleshall have the meaning given in Section 2.3(g).

 

CNA Financialmeans CNA Financial Corporation, a Delaware corporation, and the direct parentcompany of Seller.

 

CNA InterimServices Agreement shall have the meaning given in Section 2.3(j).

 

CNA Releaseshall have the meaning given in Section 2.3(o).

 

CNA Subleasesshall have the meaning given in Section 2.3(i).

 

CNA TransferredAssets means those assets to be transferred to the Company bySeller or Affiliates of Seller on or before the Closing Date pursuant to theterms of this Agreement, a complete list of which, including in each case theidentity of the transferor, is set forth on Schedule 1(C).

 

Codemeans the Internal Revenue Code of 1986 and regulations promulgated thereunder.

 

Companiesmeans Parent and Company.

 

Companymeans Caronia Corp., a corporation organized under the laws of the State ofDelaware.

 

Company Assetsshall have the meaning given in Section 3.5.1.

 

Company Bill ofSale shall have the meaning given in Section 2.3(h).

 

Company CommonStock means the Company’s Common Stock without par value.

 

Company HazardousMaterial Activities shall have the meaning given in Section 3.25.2.

 

Company InterimServices Agreement shall have the meaning given in Section 2.3(k).

 

3

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Companies’ Releaseshall have the meaning given in Section 2.3(o).

 

Company Sharesmeans the 100 shares of the issued and outstanding Company Common Stock thatare owned by Parent.

 

CompanyTransferred Assets means those assets to be transferred toSeller by the Company on or before the Closing Date pursuant to the terms ofthis Agreement, a complete list of which is set forth on Schedule 1(E).

 

Computer Programmeans current versions of existing (i) computer programs, including allobject code, all executables and all available source code, (ii) descriptions,flow-charts and other work product used to design, plan, organize and developany of the foregoing, and (iii) documentation, including user manuals andtraining materials, relating to any of the foregoing.

 

ConfidentialInformation means (i) all confidential or proprietaryinformation concerning the Business, including, but not limited to, BusinessEmployees and (ii) all nonpublic personal information of the Company’scustomers.

 

ConfidentialityAgreement means the Confidentiality Agreement between Sellerand Capital Partners, Inc. dated as of September 22, 2004.

 

Contract InterestRate means the prime rate for money center banks as reportedin the Wall Street Journal from time to time plus 2% per annum.

 

DelayedTransferred Employees shall have the meaning given in Section 5.7(e).

 

Dispute Officershall have the meaning given in Section 10.3(a).

 

Embedded ComputerPrograms means utilities, executables, and other componentsowned by third persons and incorporated into the Owned Principally UsedComputer Programs or the Owned Generally Used Computer Programs.

 

Employee BenefitArrangement means each deferred compensation plan, bonusplan, stock option plan, employee stock purchase plan, incentive compensationplan, executive compensation plan, whether formal or informal, and any otheremployee benefit (including, but not limited to, fringe benefits as defined in Section 132of the Code, and whether or not in writing) that is not salary, an ERISA Plan,or an individual employment or severance agreement.

 

Encumbrancemeans any pledge, security interest, mortgage, community property interest,lien (including but not limited to liens for unpaid taxes), attachment, automaticor other stay in a bankruptcy or insolvency proceeding, trust agreement,constructive or resulting trust, voting trust or agreement, restricted stockagreement, right of first refusal, or option, including any restriction on use,voting, transfer, receipt of income, or exercise of any other attribute ofownership, except such 

 

4

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restrictions as may becontained in the articles of incorporation or the by-laws of the Company andrestrictions on subsequent transfer contained in U.S. federal and statesecurities and insurance laws.

 

EnforceabilityExceptions shall have the meaning given in Section 3.3.1.

 

ERISAmeans the Employee Retirement Income Security Act of 1974.

 

ERISA Groupshall have the meaning given in Section 3.15.

 

ERISA Planmeans an employee benefit plan as defined in Section 3(3) of ERISA.

 

Final IncomeStatement shall have the meaning given in Section 2.4.4.

 

Final Pro FormaBalance Sheet shall have the meaning given in Section 2.4.4.

 

Final WorkingCapital Adjustment shall have the meaning given in Section 2.4.7.

 

GAAPmeans United States generally accepted accounting principles.

 

GovernmentalAuthority means any government or political subdivision,board, commission or other instrumentality thereof, whether federal, state,local or foreign.

 

Hazardous Materialshall have the meaning given in Section 3.25.1.

 

Income Taxmeans any federal, state, local or foreign income tax, including any interest,penalty or addition thereto, whether disputed or not.

 

Income Tax Returnmeans any return, declaration, report, claim for refund, or information returnor statement relating to Income Taxes, including any schedule orattachment thereto, and including any amendment thereof.

 

Incurred means the occurrence of anevent, act or omission giving rise to an obligation or liability.

 

Indemnified Partyshall have the meaning given in Section 10.3.

 

Indemnifying Partyshall have the meaning given in Section 10.3.

 

IndividualLicenses shall have the meaning given in Section 3.12.

 

Knowledgemeans actual knowledge, following reasonable inquiry, of those individualslisted in Schedule 1(F).

 

5

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Legal Requirementmeans any law, statute, ordinance, regulation, writ, injunction, rule,established principle of common law, directive, decree, administrative rulingor enforceable supervisory policy of any Governmental Authority or applicablecourt decision.

 

Licensemeans any license, permit, order, approval or non-objection, registration,membership, authorization or qualification under any federal, state or locallaw or with any Governmental Authority or under any industry ornon-governmental self-regulatory organization.

 

Licensed ComputerPrograms shall have the meaning given in Section 3.9.3(b).

 

Lossmeans all losses, costs, obligations, liabilities, settlement payments, awards,judgments, fines, penalties, damages, and expenses (including but not limitedto reasonable and necessary fees of counsel, investigators, expert witnesses,consultants and other professionals, court filing fees, court costs,arbitration fees or costs, witness fees and other similar expenses).

 

Materialmeans (i) with respect to any representation, warranty or covenantcontaining a specific quantitative amount, ratio or other test, suchquantitative amount, ratio or test; (ii) with respect to anyrepresentation, warranty or covenant of any Party under this Agreement relatedto financial condition, financial obligations, or values and not containing aspecific quantitative amount, ratio or test, a change having an adverse impactof $10,000 or more; and (iii) with respect to any representation, warrantyor covenant under this Agreement that is not related to financial condition,financial obligations or values and that does not contain a specificquantitative amount, ratio or test, a change having an impact that materiallyand adversely affects the business, financial condition and prospects of therelevant Person, taken as a whole.

 

Most Recent ParentFinancial Statements means the consolidated GAAP unauditedbalance sheets and statements of income for Parent as of and for the monthended January 31, 2005.

 

Non-Compete Termshall have the meaning given in Section 5.16.1.

 

Outside ClosingDate shall have the meaning given in Section 2.3.

 

Owned GenerallyUsed Computer Programs shall have the meaning given in Section 3.9.3(a).

 

Owned PrincipallyUsed Computer Programs shall have the meaning given in Section 3.9.3(a).

 

Parentmeans Managed Care Holdings Corporation., a corporation organized under thelaws of Delaware.

 

Parent CapitalStock has the meaning given in Section 3.2.1.

 

Parent FinancialStatements shall have the meaning given in Section 3.4.1.

 

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Parent Sharesmeans the 900 issued and outstanding shares of Parent’s Class A CommonStock, par value $0.001 per share, that are owned by Seller.

 

Partiesmeans Seller and Purchaser.

 

Pension Planmeans an employee pension benefit plan within the meaning of Section 3(2) ofERISA.

 

PermittedEncumbrances, as to any asset, means each of the following: (i) Encumbrancesfor Taxes, assessments and governmental charges or levies not yet due andpayable or which are being contested in good faith; (ii) Encumbrancesimposed by law, including without limitation materialmen’s, mechanics’,carriers’, workmen’s and repairmen’s liens and other similar liens arising inthe ordinary course of business, that do not in the aggregate impair the valueof or interfere with or prohibit the current use or operation of such asset bythe Company, and (iii) Encumbrances related to deposits to securepolicyholder obligations as required by the insurance departments of thevarious states.

 

Personmeans any natural person, corporation, partnership, limited liability company,trust, joint venture or other entity.

 

PreliminaryFinancial Statements shall have the meaning given in Section 2.4.3.

 

Preliminary IncomeStatement shall have the meaning given in Section 2.4.3.

 

Preliminary ProForma Balance Sheet shall have the meaning given in Section 2.4.3.

 

Proposalshall have the meaning given in Section 5.14.

 

Prototype ProForma Balance Sheet shall have the meaning given in Section 2.4.1.

 

Purchasershall have the meaning given in the Preamble.

 

PurchaserFinancial Statements shall have the meaning given in Section 4.4.

 

Purchaser Offershall have the meaning given in Section 5.16.4(b).

 

Purchaser’sApprovals shall have the meaning given in Section 4.7.

 

Records of theBusiness shall have the meaning given in Section 5.11.4.

 

Related Agreementsmeans this Agreement, the CNA Assignment and Assumption Agreement, the CNA Billof Sale, the Company Bill of Sale, the CNA Subleases, the CNA Interim ServicesAgreement, the Company Interim Services Agreement, the Software LicenseAgreement, the Company Release and the Seller Release.

 

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Representativeshall have the meaning given in Section 5.14.

 

Restricted Areashall have the meaning given in Section 5.16.2.

 

Retained EmployeeLiabilities shall have the meaning given in Section 5.7(g).

 

Securities Actmeans the federal Securities Act of 1933 and rules, regulations and applicableadministrative rulings and court decisions issued thereunder.

 

Security CapitalGuarantee shall have the meaning given in Section 4.3.

 

Sellershall have the meaning given in the Preamble.

 

Seller’s Approvalsshall have the meaning given in Section 3.20.

 

Service ComputerPrograms means those Computer Programs (other than the OwnedPrincipally Used Computer Programs, the Owned Generally Used Computer Programs,the Licensed Computer Programs and the Shrink Wrap Computer Programs) that areused in the conduct of the Business as of the date of this Agreement.

 

Severance Benefitsmeans payments or benefits extended under any applicable and effective writtenpolicy of any Business Employee’s employer providing for payments or benefitsupon termination of employment (other than qualified or non-qualifiedretirement plans) (including, but not limited to, outplacement services).

 

Sharesmeans the 900 issued and outstanding shares of the Class A Common Stock ofParent, par value $0.001 per share, owned by Seller and that are to be sold toPurchaser pursuant to this Agreement.

 

Shrink WrapComputer Programs shall have the meaning given in Section 3.9.3(c).

 

Software LicenseAgreement shall have the meaning given in Section 2.3(*l*).

 

Straddle Periodshall have the meaning given in Section 8.2.5(b).

 

Subsidiarymeans any corporation, trust, partnership, joint venture or other entity ofwhich 50% or more of the voting interest or ownership interest is owned,legally or beneficially, by any Person and its Affiliates.

 

Taxmeans any federal, state or local income, gross receipts, premium, capitalstock, franchise, profits, withholding, social security, unemployment,disability, real property, ad valorem/personal property, stamp, excise,occupation, sales, use, transfer, value added, alternative minimum, estimatedor other tax, including any interest, penalty or addition thereto, whetherdisputed or not.

 

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Tax Returnmeans any return, report, declaration, claim for refund, or other return orstatement, including any schedule or attachment thereto, filed or requiredto be filed with any Governmental Authority in connection with thedetermination, assessment or collection of any Tax.

 

Title IV Planshall have the meaning given in Section 3.15.

 

TransferredEmployee shall have the meaning given in Section 5.7(a).

 

UnavailableComputer Programs shall have the meaning given in Section 5.8(i).

 

Working Capitalmeans assets (excluding good will) minus liabilities.

 

Working CapitalAdjustment shall have the meaning given in Section 2.4.1(b).

 

ARTICLE II

 

Purchase of Shares and Closing

 

2.1.                              Purchaseof the Shares.  On the terms andconditions set forth herein, Seller shall sell, transfer, convey and assign theShares to Purchaser and Purchaser shall purchase the Shares from Seller.

 

2.2.                              Cash Consideration for Purchase of theShares.  The cash purchase price for the Sharespayable by Purchaser to Seller at Closing shall equal $16,000,000 (the “CashConsideration Amount”).

 

2.3.                              TheClosing.  Subject to the terms andconditions of this Agreement, the Closing of the purchase and sale under thisAgreement (the “Closing”) shall take place at the offices of Mayer, Brown, Rowe &Maw LLP, Chicago, Illinois, on the Closing Date.  The “ClosingDate” shall be the last Business Day of the month in which all of theconditions set forth in Articles VI and VII have been satisfied; provided thatif such conditions are satisfied in the five Business Day period preceding thelast Business Day of the month, the Closing Date shall be the last Business Dayof the immediately following month. The Closing shall be effective as of the close of business on theClosing Date.  The Parties agree to usereasonable best efforts to satisfy the conditions set forth in Articles VI andVII that are within their respective control on or before March 31, 2005.  Notwithstanding any other provision of thisAgreement, if the Closing Date shall not have taken place on or before May 31,2005 (the “Outside Closing Date”), either Party may terminate this Agreement aspermitted pursuant to Sections 9.1(d) or (e).  At the Closing, the Parties will deliver toone another the following funds, documents and such other agreements,instruments and documents as are required under this Agreement to be executedand delivered by the Parties:

 

(a)                                  Resolutionsof the Boards of Directors of Seller and Purchaser approving the transactionsdescribed in this Agreement and the Related Agreements;

 

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(b)                                 Awire transfer of the Cash Consideration Amount in immediately available fundsto the account designated by Seller;

 

(c)                                  Acertificate or certificates for the Shares, accompanied by a stock power dulyendorsed in blank by Seller;

 

(d)                                 Seller’sApprovals;

 

(e)                                  Purchaser’sApprovals;

 

(f)                                    TheAssignment and Assumption Agreement in the form of Exhibit A,pursuant to which Seller and its Affiliates shall assign certain rights andobligations to the Company (the “CNA Assignment and Assumption Agreement”);

 

(g)                                 TheBill of Sale in the form of Exhibit B, pursuant to which Seller andits Affiliates shall transfer certain assets to the Company (the “CNA Bill ofSale”);

 

(h)                                 TheBill of Sale in the form of Exhibit C, pursuant to which theCompany shall transfer certain assets to Seller and one or more of itsAffiliates (the “Company Bill of Sale”);

 

(i)                                     Licenseagreements in the form of Exhibit D for offices of the Company designatedin the Facilities Plan, and to be occupied after the Closing by the Company(the “CNA Subleases”);

 

(j)                                     TheInterim Services Agreement in the form of Exhibit E, pursuant to whichSeller and one or more of its Affiliates will provide services to the Company(the “CNA Interim Services Agreement”);

 

(k)                                  TheInterim Services Agreement in the form of Exhibit F, pursuant towhich the Company will provide services to Seller and its Affiliates (the “CompanyInterim Services Agreement”);

 

(*l*)                                    TheSoftware License Agreement between Seller and the Company in the form of Exhibit G(the “Software License Agreement”);

 

(m)                               Resignationsof such officers and directors of the Companies as may be requested byPurchaser;

 

(n)                                 Originalminute books and stock record books of the Companies; and

 

(o)                                 Thereleases in the form of Exhibit H (to be delivered by Seller) (the “CNARelease”) and Exhibit I (to be delivered by Purchaser) (the “Companies’Releases”).

 

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Except as otherwiseexpressly provided in this Agreement or in any Related Agreement, all actionsrequired to be taken at the Closing shall be deemed to have occurredsimultaneously, and all documents delivered at the Closing shall be deemed tohave been delivered simultaneously.

 

2.4.                              ClosingAdjustment.

 

2.4.1.                     PrototypeFinancial Information.

 

(a)                                  PrototypePro Forma Balance Sheet.  Seller hasprepared a prototype pro forma balance sheet of the Companies on a consolidatedbasis as of September 30, 2004, illustrating the consolidated balancesheet of the Companies as of September 30, 2004, as if the Closing hadoccurred on September 30, 2004 (the “Prototype Pro Forma Balance Sheet”),which is Schedule 2.4.1(A). The Prototype Pro Forma Balance Sheet illustrates all transferscontemplated by Seller as of the Closing Date.

 

(b)                                 PrototypeWorking Capital Adjustment. Notwithstanding Section 2.4.1(a), the Parties agree that WorkingCapital as of the Closing Date shall not be less than Working Capital as of September 30,2004, as stated on Schedule 2.4.1(B) in the column headed “BaseAmount” (the “Base Working Capital”). Seller has prepared a pro forma working capital adjustment calculationusing stipulated values as of September 30, 2004, and actual values as of December 31,2004 (“Adjusted Working Capital”), which is Schedule 2.4.1(B), toillustrate the calculation of the working capital adjustment.  The amount so determined by subtracting theBase Working Capital from the Adjusted Working Capital is the “Working CapitalAdjustment.”

 

2.4.2.                     ClosingFinancial Information.  On or beforea date five Business Days prior to the Closing Date, Seller shall deliver toPurchaser a pro forma balance sheet of the Companies on a consolidated basis asof the end of the month preceding the month in which the Closing Date occurs(the “Closing Pro Forma Balance Sheet”), which shall be prepared in a mannerconsistent with the preparation of the Prototype Pro Forma Balance Sheet.  The transfers illustrated in the Closing ProForma Balance Sheet shall be made on or before the Closing Date in the amountsprovided on the Closing Pro Forma Balance Sheet.  On the same date, Seller shall prepare and deliverto Purchaser a calculation of the Working Capital Adjustment in accordance withSchedule 2.4.1(B) using Working Capital as reflected in theClosing Pro Forma Balance Sheet (the “Closing Working Capital Adjustment”).

 

2.4.3.                     ClosingWorking Capital Adjustment  If theClosing Working Capital Adjustment is negative, cash in an amount equal to theClosing Working Capital Adjustment shall be retained in the Company at theClosing.   If the Closing Working CapitalAdjustment is positive, cash in an amount equal to the Closing Working CapitalAdjustment shall be distributed to Seller at the Closing, provided, however,that if such distribution, together with all other permitted distributions ofcash shown on the Closing Pro Forma Balance Sheet, would exceed the amount ofcash on the Closing Pro Forma Balance Sheet, the Cash Consideration Amountshall be increased by the amount of such excess.

 

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2.4.4.                     PreliminaryPro Forma Balance Sheet and Income Statement.  Within 75****days after theClosing Date, Seller shall prepare and deliver to Purchaser, a preliminary proforma balance sheet of the Companies on a consolidated basis as of the close ofbusiness on the Closing Date (the “Preliminary Pro Forma Balance Sheet”)and an income statement of the Companies on a consolidated basis for the periodfrom January 1, 2005, through the Closing Date (the “Preliminary IncomeStatement”).  The Preliminary ProForma Balance Sheet and the Preliminary Income Statement are collectivelyreferred to herein as the “Preliminary Financial Statements.”  The Preliminary Pro Forma Balance Sheet willbe substantially in the format of the Prototype Pro Forma Balance Sheet andwill comply with Section 3.4.2.  ThePreliminary Income Statement will present the Parent’s consolidated andconsolidating results of operations for the period for which it is prepared,will comply with Section 3.4.2 and will be prepared in a manner and usingaccounting policies consistent with the unaudited year end financial statementsof Parent and the Company for the year ended December 31, 2004.  Purchaser agrees that Purchaser’s personnelwill use reasonable best efforts to assemble and provide to Seller the workpapers and records necessary for Seller to prepare the Preliminary FinancialStatements and to deliver the Preliminary Financial Statements to Purchaser.

 

2.4.5.                     MutualRight to Review.  For a period endingon the 60th day after delivery of the Preliminary Pro Forma BalanceSheet (the “Review Period”), Seller and Purchaser shall consider anddetermine whether or not they agree on the Preliminary Financial Statements.  Purchaser and its Representatives shall havethe right to review all of Seller’s work papers and any other financial andaccounting records of Seller and the Companies relevant to the Preliminary FinancialStatements.  Seller and itsRepresentatives shall have the right to review Purchaser’s relevant financialand accounting records relating to the Business.  If agreement is reached on or before the endof the Review Period as to the consolidated pro forma balance sheet or theconsolidated income statement of the Companies as of Closing Date, Seller andPurchaser shall agree upon and deliver to one another (i) a pro formabalance sheet that will be the Preliminary Pro Forma Balance Sheet adjusted byamounts agreed to by Seller and Purchaser, and that, if so agreed, shall be theFinal Pro Forma Balance Sheet (the “Final Pro Forma Balance Sheet”), or (ii) aconsolidated income statement that will be the Preliminary Income Statementadjusted by amounts agreed to by Seller and Purchaser that, if so agreed, shallbe the Final Income Statement (the “Final Income Statement”).  If Purchaser or Seller does not timelydispute the Preliminary Pro Forma Balance Sheet or the Preliminary IncomeStatement in accordance with Section 2.4.6, the Preliminary Pro FormaBalance Sheet shall be deemed to be the Final Pro Forma Balance Sheet and thePreliminary Income Statement shall be deemed to be the Final Income Statement.  Neither Purchaser nor Seller shall have theright to obtain indemnification under Article X, or to make a claim forbreach of any other provision of this Agreement or to any other remedy at lawor in equity with respect to any matter (i) agreed in writing by the Partiesin resolving any difference under Section 2.4.6, or (ii) determinedby the Accounting Firm under Section 2.4.6.

 

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 2.4.6.                  DisputeResolution.

 

(a)                                  If,following the conclusion of the Review Period, Purchaser or Seller disagreeswith any items on either the Preliminary Pro Forma Balance Sheet or thePreliminary Income Statement, Purchaser or Seller, as the case may be, shallgive written notice to the other party and to the Accounting Firm of suchdisagreement, stating such objection and a reasonably detailed explanation ofthe reasons therefor.  Such notice shallbe delivered within 5 days following the end of the Review Period.  Neither Purchaser nor Seller shall beentitled to invoke this dispute resolution procedure by notice to theAccounting Firm unless at least $100,000 in the aggregate is claimed by suchparty in good faith as adjustments to be made under Section 2.4.8, or ascorrections to the Preliminary Income Statement.  The professional fees of the Accounting Firmwill be shared equally by Purchaser and Seller. Within 15 days following receipt of such notice, Seller or Purchaser, asthe case may be, shall submit to the Accounting Firm and to the other party allof the material written information upon which Purchaser or Seller, as the casemay be, intends to rely in rebutting Purchaser’s or Seller’s claim.  The Accounting Firm may, but is not requiredto, request a meeting of Purchaser and Seller and their Representatives todiscuss Purchaser’s or Seller’s claim. The Accounting Firm may request additional information from Seller,Purchaser and their Representatives and copies of any such requestedinformation shall also be provided to the other party to the dispute.  All materials provided by Seller, Purchaserand their Representatives to the Accounting Firm are referred to herein as the “AccountingFirm’s Dispute Work Papers.”  BothSeller and Purchaser and their Representatives shall have the right to reviewall of either Seller’s or Purchaser’s Accounting Firm’s Dispute Work Papers, asthe case may be.  Within 30 days afterthe Accounting Firm’s receipt of all information (including any informationrequested by the Accounting Firm from Purchaser or Seller), the Accounting Firmshall provide its written decision on the dispute between Seller and Purchaser.

 

(b)                                 Thescope of the review and determination of the Accounting Firm shall be limitedto compliance of the Preliminary Pro Forma Balance Sheet with the Prototype ProForma Balance Sheet and with the terms of Section 3.4.2, and thecompliance of the Preliminary Income Statement with Section 3.4.2 and itspreparation in a manner and using accounting policies consistent with theunaudited year end financial statements of Parent and the Company for the yearended December 31, 2004.

 

(c)                                  Thedecision of the Accounting Firm on Purchaser’s or Seller’s claim under this Section 2.4.6shall be final and binding on Purchaser and Seller, unless it is vacated on anyof the grounds provided by the Federal Arbitration Act.  The decision of the Accounting Firm may beconfirmed by and enforced as a judgment of any State or Federal Court sittingin Cook County, Illinois, and each party hereto irrevocably and unconditionallysubmits to the exclusive jurisdiction and venue of those courts in anyproceeding to confirm, vacate, or enforce any such decision.

 

2.4.7.                     AccountingFirm’s Determination.

 

(a)                                  Ifthe dispute resolution procedure in Section 2.4.6 is requested by Selleror Purchaser as to the Preliminary Pro Forma Balance Sheet, the Preliminary ProForma Balance Sheet 

 

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shall be adjusted asdetermined by the Accounting Firm by the full amount of such adjustment and anyother adjustments agreed to by the parties and shall be deemed to be the FinalPro Forma Balance Sheet.  The WorkingCapital Adjustment determined using the Final Pro Forma Balance Sheet shall bethe “Final Working Capital Adjustment.”* *There shall be no recovery byeither party under this Section 2.4.7 unless the difference between theClosing Working Capital Adjustment and the Final Working Capital Adjustment is atleast $100,000 following adjustments to the Preliminary Pro Forma Balance Sheetas determined by the Accounting Firm.  Ifthe difference between the Closing Working Capital Adjustment and the FinalWorking Capital Adjustment is less than $100,000 following adjustments to thePreliminary Pro Forma Balance Sheet as determined by the Accounting Firm, thePreliminary Working Capital Adjustment shall be deemed to be the Final WorkingCapital Adjustment.

 

(b)                                 Ifthe dispute resolution procedure in Section 2.4.6 is requested by Selleror Purchaser as to the Preliminary Income Statement, the Preliminary IncomeStatement shall be adjusted as determined by the Accounting Firm by the fullamount of such adjustment and any other adjustments agreed to by the partiesand shall be deemed to be the Final Income Statement.  There shall be no adjustment to thePreliminary Income Statement unless at least $100,000 in the aggregate isdetermined by the Accounting Firm as adjustments to the Preliminary IncomeStatement.  If the aggregate adjustmentto the Preliminary Income Statement as determined by the Accounting Firm isless than $100,000, the Preliminary Income Statement shall be deemed to be theFinal Income Statement.  Adjustments, ifany, to the Preliminary Income Statement shall not affect the Final Pro FormaBalance Sheet unless corresponding adjustments are made in accordance with theprovisions of this Section 2.4 to the Preliminary Pro Forma Balance Sheet.

 

2.4.8.                     FinalAdjustments.

 

(a)                                  Withinfive Business Days after the earlier of (x) delivery of an agreed Final ProForma Balance Sheet under Section 2.4.5 or (y) delivery of the Final ProForma Balance Sheet as determined by the Accounting Firm under Section 2.4.7or as deemed if the difference between the Closing Working Capital Adjustmentand the Final Working Capital Adjustment is less than $100,000, a settlementwill be made as follows:

 

(i)                                     ifthe difference between the Final Working Capital Adjustment and the ClosingWorking Capital Adjustment is positive, the amount of such difference shall bepaid by Purchaser to Seller; or

 

(ii)                                  ifdifference between the Final Working Capital Adjustment and the Closing WorkingCapital Adjustment is negative, the amount of such difference shall be paid bySeller to Purchaser.

 

(b)                                 Anyamount due pursuant to this Section 2.4.8 shall include interest thereonfrom the Closing Date through the payment date calculated at an annual rate of5% per annum.

 

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ARTICLE III

 

Representations and Warranties of Seller

 

Sellerhereby represents and  warrants as of theClosing Date:

 

3.1.                              Organizationand Good Standing.

 

3.1.1.                     Parent.  Parent is a corporation duly organized,validly existing and in good standing under the laws of Delaware.  A true and correct copy of the Certificate ofIncorporation and By-Laws of Parent have been delivered to Purchaser and Parentis not in violation of any of the provisions thereof.  Parent has full corporate power and authorityto conduct its business as it is now being conducted.  Parent is a holding company, the soleactivity of which is the ownership of the Company Shares, and does not conductany business.  Parent is not qualified todo business in any jurisdiction other than Delaware.

 

3.1.2.                     TheCompany.  The Company is acorporation duly organized, validly existing and in good standing under thelaws of Delaware.  A true and correctcopy of the Certificate of Incorporation and By-Laws of the Company have beendelivered to Purchaser and the Company is not in violation of any of theprovisions thereof.  The Company has fullcorporate power and authority to conduct its business as it is now beingconducted.  The  Company is duly qualified to do business inthe jurisdictions listed in Schedule 3.1, and is in good standingin each such jurisdiction, and such jurisdictions constitute each jurisdictionin which the Company is required to be so qualified as a result of the natureof its business or the ownership or use of property.

 

3.1.3.                     Seller.  Seller is a stock insurance company dulyorganized, validly existing and in good standing under the laws ofIllinois.  Seller has full corporatepower and authority to conduct its business as it is now being conducted.  Seller is not in violation of any theprovisions of its Articles of Incorporation or By-Laws.

 

3.2.                              Capitalization;Title to Shares.

 

3.2.1.                     Parent.  The authorized capital stock of Parentconsists of 2,000 shares of Class A Common Stock, par value $.001 pershare, 2,000 shares of Class B common stock, par value $.001 per share,and 2,000 shares of Preferred Stock, par value $0.001 per share (collectively,the “Parent Capital Stock”), of which 900 shares of Class A Common Stockare issued and outstanding.  Seller isthe sole record and beneficial owner of the issued and outstanding ParentCapital Stock.  The Parent Shares havebeen duly authorized and validly issued, and are fully paid and nonassessable.  Seller owns the Parent Shares free and clearof any Encumbrances.  Except to theextent provided in the Parent’s Certificate of Incorporation, there is no call,option, warrant, subscription, preemptive right, conversion right, redemptionright or other right with respect to shares of the Parent Capital Stock.  There is no obligation to pay any dividend ordistribution with respect to the Parent Capital Stock.  No shares of the Parent Capital Stock wereissued in violation of the Securities Act or any other Legal Requirement.  Parent has no Subsidiaries other than theCompany, and, except for 

 

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investments in theordinary course of its business, no ownership interest or right or obligationto acquire any ownership interest in any other corporation, trust, partnership,joint venture or other legal entity.  Nopromissory notes have been issued to or are held by Parent.

 

3.2.2.                     Company.  The authorized capital stock of the Companyconsists of 3,000 shares of Common Stock without par value, of which 100 sharesare issued and outstanding.  Parent isthe sole record and beneficial owner of the issued and outstanding CompanyCommon Stock.  The Company Shares havebeen duly authorized and validly issued, and are fully paid andnonassessable.  Parent owns the CompanyShares free and clear of any Encumbrances. There is no call, option, warrant, subscription, preemptive right,conversion right, redemption right or other right with respect to shares of theCompany Common Stock.  There is noobligation to pay any dividend or distribution with respect to the CompanyCommon Stock.  No shares of the CompanyCommon Stock were issued in violation of the Securities Act or any other LegalRequirement.  The Company has no Subsidiaries,and, except for investments in the ordinary course of its business, noownership interest or right or obligation to acquire any ownership interest inany other corporation, trust, partnership, joint venture or other legal entity.  No promissory notes have been issued to orare held by the Company.

 

3.2.3.                     ClaimsAgainst the Company.  Except withrespect to agreements or open accounts under which Seller and its Affiliates(other than Parent and the Company) obtain services as customers of the Businessfrom the Company, as of the Closing Date, Seller will not have any claimsagainst the Companies, including rights to indemnification under the Companies’Certificates of Incorporation or By-Laws. As of the Closing Date, no officer or director of the Companies willhave any claim against the Companies except for rights to indemnification underthe Companies’ Certificates of Incorporation or By-Laws, as to which no claimhas been asserted.

 

3.3.                              Enforceability.

 

3.3.1.                     Enforceabilityof this Agreement.  Seller has fullcorporate power and authority to execute and to deliver this Agreement, and tocarry out the transactions contemplated herein. Seller has taken all necessary corporate action to authorize Seller’sexecution and performance of this Agreement. This Agreement is the valid and binding obligation of Seller, and isenforceable against Seller in accordance with its terms under the laws ofIllinois, except as such enforceability may be limited by laws affecting therights and remedies of creditors and applicable principles of equity (the “EnforceabilityExceptions”).  The execution, deliveryand performance of this Agreement by Seller will not, with or without the giving of notice or passage of timeor both, (i) conflict with, result in a default, right to accelerate orloss of rights under, or result in the creation of any lien, charge orencumbrance pursuant to any provision of any mortgage, deed of trust, lease,license agreement or other agreement to which Seller or either of the Companiesis a party or by which any of them is bound or affected, (ii) conflictwith or result in a default under any provision of the articles ofincorporation or by-laws of Seller or the articles of incorporation or by-lawsof either of the Companies, or any effective resolution of the Directors orStockholders of Seller or either of the Companies, or (iii) conflict withor result in a violation of any contract, License or Legal 

 

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Requirement, the conflictwith or violation of which would have a Material adverse effect on the Companyor its assets.

 

3.3.2.                     Enforceabilityof the Related Agreements.  Each ofSeller, the Company and                has full corporate power and authority, respectively, to execute and to deliverthe Related Agreements to which such entities are parties, and to carry out thetransactions contemplated therein.  Eachof Seller and the Company, respectively, has taken all necessary corporateaction to authorize the execution and performance of the RelatedAgreements.  The Related Agreements are,if executed by Seller and the Company, the valid and binding obligations,respectively, of  Seller and the Company,and enforceable against Seller and the Company in accordance with their termsunder the laws of Illinois, subject to the Enforceability Exceptions.  The execution, delivery and performance ofthe Related Agreements by Seller and the Company will not, with or without thegiving of notice or passage of time or both, (i) conflict with, result in adefault, right to accelerate or loss of rights under, or result in the creationof any lien, charge or encumbrance pursuant to any provision of any mortgage,deed of trust, lease, license agreement or other agreement to which Seller andthe Company is a party or by which it is bound or affected, (ii) conflictwith or result in a default under any provision of the articles ofincorporation or by-laws of Seller or the articles of incorporation or by-lawsof the Company, or any effective resolution of the Directors or Stockholders ofSeller and the Company, or (iii) conflict with or result in a violation ofany Legal Requirement.

 

3.4.                              FinancialStatements.

 

3.4.1.                     Deliveryof Financial Statements.  Seller hasdelivered to Purchaser the following financial statements:  the unaudited consolidated GAAP balancesheets and statements of income of Parent and the Company as of and for thefiscal years ended December 31, 2002, December 31, 2003, and December 31,2004, and the unaudited consolidated GAAP balance sheet and statement of incomeof Parent as of January 31, 2005 (collectively, the “Parent FinancialStatements”).

 

3.4.2.                     ParentFinancial Statements.  The ParentFinancial Statements fairly present the respective financial condition andresults of operations of Parent at the dates thereof or for the periodsreferred to therein, all in accordance with GAAP, provided, however, that (i) revenuehas been treated as deferred and earned in accordance with Schedule 3.4.2(A),(ii) good will is stipulated to be $17,183,293, and (iii) the MostRecent Parent Financial Statements do not contain statements of changes instockholder equity and cash flow and footnote disclosure, and are subject tonormal year-end adjustments.  Since January 1,2002, except as set forth in Schedule 3.4.2(B), Parent has not madeany Material change in the accounting methods employed by the Companies, exceptas may be required by GAAP accounting practices.  Notwithstanding the foregoing, (x) providedthat revenue has been treated as deferred and earned in the Parent FinancialStatements in accordance with Schedule 3.4.2A, the Parties agreethat Purchaser shall have no claim under this Section 3.4.2 or any otherprovision of this Agreement with respect to the timing or method of revenuedeferral or earning in the Parent Financial Statements, and (y) the Partiesagree that Purchaser shall have no claim under this Section 3.4.2 or anyother provision of this Agreement with respect to good will.  

 

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The foregoing stipulationas to timing and method of revenue deferral or earning shall not apply to, orexclude claims by Purchaser on account of, manifest errors.

 

3.4.3.                     ContingentLiabilities.  Except as set forth in Schedule 3.4.3,Parent does not have any liabilities that should be reflected in the ParentFinancial Statements, including, without limitation, contingent liabilitiesrequired to be disclosed under GAAP except for liabilities that were incurredafter the last day of the period covered in the Most Recent Parent FinancialStatements  in the ordinary course ofbusiness.  There are no Materialdeficiencies or shortages of funds owing to customers of the Company withrespect to any customer funds over which the Company has had signatureauthority or access.

 

3.5.                              Assets.

 

3.5.1.                     CompanyAssets.  Schedule 1(D) isa complete list of assets owned by Parent and the Company as of September 30,2004****(the “Company Assets”).** **As of the Closing Date, theParent or the Company, as applicable, will own all of the Company Assets,except for (i) the Company Transferred Assets, (ii) cash, cashequivalents, intercompany accounts receivable or payable and intercompanyobligations that will be paid to Seller or settled as Closing Adjustments asprovided in Section 5.1prior to or at the Closing, (iii) acquisitions, dispositions orretirements of Company Assets in the ordinary course of business and (iv) anyother dispositions described in Schedule 3.5.1.  Except as stated in Schedule 3.5.1,Parent or the Company, as applicable, has good and marketable title to theCompany Assets, respectively, and none of the Company Assets is subject to anyEncumbrance except Permitted Encumbrances.

 

3.5.2.                     CNATransferred Assets.  As of theClosing Date, each of the transferors identified on Schedule 1(C) shallhave transferred to the Company good and marketable title to its respectiveassets constituting the CNA Transferred Assets free of any Encumbrance, exceptfor (a) Encumbrances identified on Schedule 3.5.2, or (b) PermittedEncumbrances.

 

3.5.3.                     TaxBasis of Transferred Assets.  To theKnowledge of Seller, the Income Tax basis of the movable personal propertyconstituting Company Assets and CNA Transferred Assets is shown on Schedule 3.5.3.

 

3.6.                              Litigation.  There is no litigation, investigation,arbitration or other proceeding of any court or other Governmental Authoritypending or, to Seller’s Knowledge, threatened against the Companies seeking orasserting (i) damages in excess of $10,000 individually or $160,000 in theaggregate, (ii) injunctive relief or other mandatory relief that wouldrestrict the Companies’ business operations or (iii) a claim thatconstitutes or if brought would constitute a Retained Employee Liability,except as listed in Schedule 3.6 to this Agreement by date offiling, names of parties, court or agency and docket number, (iv) to  revoke any License, or (v) a Materialviolation of any Legal Requirement. Except as listed in Schedule 3.6, none of Seller and theCompanies is a party to or is bound by any order, judgment, injunction, decreeor settlement agreement under which it may have continuing obligations as ofthe date hereof and which may restrict or affect Seller’s ownership of theShares or current business operations of the Companies.  There is not pending any action against 

 

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Seller or the Companiesthat may reasonably be expected to have the effect of preventing, delaying ormaking unlawful the consummation of the transactions contemplated by thisAgreement and the Related Agreements.  ToSeller’s Knowledge, no such proceedings have been threatened.

 

3.7.                              Booksand Records.  The Books and Recordsof the Companies related to the Business and in the possession of the Companieshave been maintained in accordance with applicable Legal Requirements and theCompanies’ customary business practices and are used by the Companies in theoperation of the Business.  The minutebooks, stock ledger and seal of Parent and the Company have been made availableto Purchaser for inspection and such minute books and stock ledger are completeand correct in all material respects with respect to records dating from andafter the Acquisition Date.

 

3.8.                              Contracts.

 

3.8.1                        CompanyContracts.  Except as provided inthis Section 3.8.1, Schedule 3.8.1 lists all of the followingwritten contracts to which the Company is a party:

 

(a)                                  contractsthe performance of which is expected to involve consideration payablesubsequent to the date of this Agreement in excess of $25,000;

 

(b)                                 contractswhich restrict in any Material respect or contain Material limitations on theability of the Company to freely conduct business in the United States;

 

(c)                                  contractsunder which the Company has lent or borrowed money, or guaranteed borrowings ofmoney, which loans or borrowings exceed $25,000;

 

(d)                                 contractspursuant to which any Encumbrance, other than Permitted Encumbrances, is placedor imposed on any Company Assets;

 

(e)                                  contractsunder which the Company is licensor or licensee of patents, trademarks, servicemarks or copyrights;

 

(f)                                    partnershipor joint venture agreements; or

 

(g)                                 anyother Material contract not terminable on notice of 90 days or less.

 

Parent is not a party toany type of contract described in (a) through (g) above.  Schedule 3.8.1 excludes (i) agreementswith employees, (ii) Company ERISA Plans, (iii) contractsconstituting products or services sold or administered by the Company, (iv) anycustomer agreements of the Company, (v) Company Assigned Contracts, (vi) computersoftware agreements and (vii) leases of real property, which are discussedelsewhere in this Agreement.  True andcorrect copies of the contracts listed in Schedule 3.8.1 have beenprovided to Purchaser.  Except as statedin Schedule 3.8.1, the Company is not in default under saidcontracts, and, to Seller’s Knowledge, no third parties are in default undersaid contracts.  Except for unsignedcontracts, the contracts listed in 

 

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Schedule 3.8.1are enforceable by the Company in accordance with their terms, subject to theEnforceability Exceptions.

 

3.8.2.                     CNAAssigned Contracts.  True and correctcopies of the CNA Assigned Contracts listed in Schedule 1(B) havebeen provided to Purchaser.  Except asstated in Schedule 3.8.2, the assignor is not in default under saidcontracts, and, to Seller’s Knowledge, no third parties are in default undersaid contracts.  The CNA AssignedContracts are enforceable by the assignor or the Company as assignees, as theirinterests may appear, in accordance with their terms, subject to theEnforceability Exceptions.

 

3.9.                              IntellectualProperty.

 

3.9.1.                     Patents,Trademarks, Trade Names, Service Marks and Copyrights.  Neither of the Companies owns, and is not thelicensee of, any patents.  The Companycurrently uses the trademarks, service marks, trade names, registeredcopyrights and domain names listed in Schedule 3.9.1.  Except as provided in Schedule 3.6,to Seller’s Knowledge, the Company’s current use of its trademarks, service marks,domain names and copyrights does not infringe upon the rights of anyPerson.  Except as provided in Schedule 3.6,Seller and its Affiliates (including the Companies) have not received anywritten notice from any Person that the operation of the Business infringesupon trademarks, service marks, domain names, patents and copyrights of anyother entity.

 

3.9.2.                     Know-How,Methods of Operation, Customer Lists and Business Records.  The Company has the right to use in theconduct of its current business its know-how, methods of operation, customerlists and business records free and clear of any claims of third persons tocompensation for the use thereof.  Sellerand its Affiliates (including the Companies) have not received any writtennotice that the Company’s use in the conduct of the Business of its know-how,methods of operation, customer and producer lists and business recordsinfringes upon or otherwise violates the rights of any Person.

 

3.9.3.                     ComputerPrograms.

 

(a)                                  Schedule 3.9.3(a) setsforth a true and complete listing of all Computer Programs owned by Seller orits Affiliates (including the Companies) and used by the Company in the conductof the Business.  Schedule 3.9.3(a) setsforth (i) the owner of each such Computer Program and (ii) whethersuch Computer Program is (A) principally used in the Business (the “OwnedPrincipally Used Computer Programs”) or (B) used in the Business and inbusiness units of Seller and its Affiliates other than the Business (the “OwnedGenerally Used Computer Programs”), and identifies any Embedded ComputerPrograms contained in any of the Owned Principally Used Computer Programs andOwned Generally Used Computer Programs.

 

(b)                                 Schedule 3.9.3(b) setsforth a true and complete listing of all Computer Programs used in the conductof the Business that are licensed either to Seller or to other Affiliates ofSeller (including the Companies) by unrelated third party licensors, other 

 

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thanthe Shrink Wrap Computer Programs, the Embedded Computer Programs and theService Computer Programs (the “Licensed Computer Programs”).

 

(c)                                  Schedule 3.9.3(c) setsforth a listing of all Computer Programs that, to the Knowledge of Seller, havebeen purchased by Seller or its Affiliates (including the Companies) inoff-the-shelf, commercial packaging and are currently used by the Company inthe conduct of the Business (“Shrink Wrap Computer Programs”).

 

(d)                                 Subjectto the terms, conditions and limitations of Section 5.8, on the ClosingDate the Company will have:

 

(i)                                     exclusiveownership of the Owned Principally Used Computer Programs, free and clear ofany licenses or any royalty to third persons (except for Embedded ComputerPrograms) or other payment obligations or Encumbrances;

 

(ii)                                  theright to use the Embedded Computer Programs as embedded in the OwnedPrincipally Used Computer Programs in the same manner used by Seller or itsAffiliates in the conduct of the Business as of the Closing Date;

 

(iii)                               the right to use theOwned Generally Used Computer Programs (including the Embedded ComputerPrograms as embedded therein) in the same manner used by Seller or itsAffiliates in the conduct of the Business as of the Closing Date;

 

(iv)                              theright to use the Licensed Computer Programs, in the same manner used by Selleror the Company as of the Closing Date, solely in connection with the Business,subject to the terms of the license agreements disclosed in Schedule 3.9.3(b) orto such other written agreements as may be entered into in accordance with Section 5.8;

 

(v)                                 theright to use the Shrink Wrap Computer Programs, in the same manner used bySeller or the Company as of the Closing Date, solely in connection with theBusiness; and

 

(vi)                              theright to receive services from Seller using the Service Computer Programs inaccordance with the terms of the CNA Interim Services Agreement.

 

(e)                                  Tothe Knowledge of Seller, the use of the Owned Principally Used ComputerPrograms and the Owned Generally Used Computer Programs in the Business ascurrently conducted (including the Embedded Computer Programs) does notinfringe upon or otherwise violate the rights of any Person.  Seller and its Affiliates (including theCompanies) have not received any written notice that the use in the 

 

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Businessof the Owned Principally Used Computer Programs, the Owned Generally UsedComputer Programs, the Embedded Computer Programs, the Licensed ComputerPrograms or the Shrink Wrap Computer Programs infringes upon or otherwiseviolate the rights of any Person.

 

(f)                                    TheOwned Principally Used Computer Programs (including the Embedded ComputerPrograms), the Owned Generally Used Computer Programs, the Licensed ComputerPrograms, the Shrink Wrap Computer Programs and the Service Computer Programsconstitute all of the Computer Programs used in the conduct of the Business asof the date of this Agreement.

 

(g)                                 NeitherSeller nor any of its Affiliates is in breach of or in default under anylicense or other agreements under which the Company has rights to use theLicensed Computer Programs, the Embedded Computer Programs or the Shrink WrapComputer Programs.

 

(h)                                 TheService Computer Programs do not constitute the lead applications used toperform line business functions of the Business, including, but not limited to,providing claim management services, investigative services and audit andconsulting services to customers of the Business.

 

3.9.4.                     ThirdParty Infringement.  To the Knowledgeof Seller, no Person (other than Seller and its Affiliates) has infringed orotherwise violated any intellectual property rights of the Company nototherwise described in this Section 3.9 in any Material respect.  The Seller and its Affiliates (including theCompany) have not received written notice that the conduct of the Businessinfringes or otherwise violates any intellectual property rights of any Person.

 

3.10.                        CustomerAgreements.  Schedule 3.10lists all agreements in effect as of the date hereof that constitute theBusiness and pursuant to which the Company or any Affiliate receives fees inexcess of $25,000 per year with respect to the Business.  True and correct copies of the contractslisted in Schedule 3.10 have been provided to Purchaser.  Except as stated in Schedule 3.10,the Company is not in default under any contracts listed in Schedule 3.10.  Schedule 3.10 separatelyidentifies the ten customers that have generated the most revenues inconnection with the Business during the 2003 and 2004 calendar years in theaggregate.  Schedule 3.10lists all contracts currently in effect with any Governmental Authority, andnames any other Governmental Authority with which the Company has had anycontract or contracts in effect during calendar years 2002, 2003 or 2004 underwhich the Company received aggregate revenues from such Governmental Authorityin excess of $10,000 or more in any such calendar year, separately listing suchrevenues by Governmental Authority and by calendar year.

 

3.11.                        Compliancewith Legal Requirements.  Except asdisclosed in Schedule 3.11, the Company is in compliance in allMaterial respects with Legal Requirements applicable to the Company and to itsbusiness.  To Seller’s Knowledge, exceptas described in Schedule 3.11, the Company has not committed any breach of any Legal Requirement thatmay reasonably be expected 

 

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to result in any Materialpenalty or fine, suspension or loss of any License listed in Schedule 3.12,or other adverse or remedial action that would Materially interfere with theconduct of the Business.

 

3.12.                        Licenses.  Schedule 3.12 lists each Licenseof the Company.  Schedule 3.12lists by individual each professional License, including but not limited toclaim adjuster licenses, held by the Business Employees (the “IndividualLicenses”).  Except as described in Schedule 3.11,each such License and, to the Knowledge of Seller, each Individual License iscurrently effective and is not the subject of any proceedings by which suchLicense or Individual License might reasonably be expected to be suspended,restricted, revoked or nonrenewed.  TheLicenses listed in Schedule 3.12 constitute all of the Licensesthat are necessary for the conduct of the Business as the Business is currentlyconducted, except for municipal or county business licenses and similar locallicenses obtainable as a matter of right upon payment of a fee. Except withrespect to Licenses issued to natural persons that are listed in Schedule 3.12,no person other than the Company owns any interest in any License listed in Schedule 3.12.  Since the Acquisition Date, no License issuedto the Company has been revoked or suspended for any reason other than theCompany’s failure to renew such License.

 

3.13.                        Taxesand Tax Returns.

 

3.13.1.               Affiliated Group Taxes.  All U.S. federal Income Tax Returns and allother Tax Returns that were required to be filed through the Closing Date by anAffiliated Group on a consolidated basis including the Companies have beenfiled.

 

3.13.2.               Taxes for which Either of theCompanies is Taxpayer.  The Companieshave filed with the appropriate Governmental Authorities all Tax Returnsrequired to be filed through the Closing Date by the Companies or appropriateextensions have been obtained therefor. All of the foregoing have been filed on a timely basis and are correctand complete.  All Taxes which havebecome due have been or will be fully paid. This Section 3.13.2 does not apply to any Tax for which either ofthe Companies is or may become liable as a member of an Affiliated Group.

 

3.14.                        Employees.  Neither of the Companies has anyemployees.  Except as set forth on Schedule 3.14,none of the Companies, Seller or its Affiliates is a party to any employmentagreement or severance agreement with any of the Business Employees (except forpersonnel policies applicable to all employees generally, true and completecopies of which have previously been made available to Purchaser).  True and correct copies of any contractslisted in Schedule 3.14 have been provided to Purchaser.  Schedule 1(A) contains acomplete and accurate list of the following information for each BusinessEmployee, including each employee on leave of absence: name, position title,date of hire, and current rate of compensation payable.

 

3.15.                        EmployeeBenefits.  Neither of the Companieshas (i) contributed to a multiemployer plan as defined in Section 3(37)of ERISA, (ii) sponsored or participated in any plan subject to Title IVof ERISA (a “Title IV Plan”), or (iii) maintained any Pension Plan of anypredecessor employer, as contemplated by Section 414(a) of theCode.  Neither of the Companies has beena member of a commonly controlled group of businesses required to be aggregatedunder 

 

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Sections 414(b) or (c) ofthe Code or Section 4001(b) of ERISA other than (A) the LoewsCorporation group (the “ERISA Group”) and (B) prior to July 23, 1997,a group consisting solely of the Companies. The ERISA Group has not contributed to a multiemployer plan as describedabove, but sponsors Title IV Plans.  Asof the date of this Agreement, there is no accumulated funding deficiency, asdefined in Section 412(a) of the Code, in any Title IV Plan of theERISA Group, nor have either of the Companies incurred any liability underSubtitle D of Title IV of ERISA, with respect to any Title IV Plan of the ERISAGroup.  Other than as required by Section 4980Bof the Code or Part 6 of Title IV of ERISA, neither of the Companiessponsors or contributes to any ERISA Plan that reimburses or funds health orother insurance benefits to retired employees, or otherwise has any obligationto reimburse or fund health or other insurance benefits for retired employees,provided, however, that Seller has obligations of the type described in thissentence.  Neither of the Companies hasterminated any ERISA Plan with respect to which there remains any unpaidliability.  Each ERISA Plan that theCompanies maintain or to which either of the Companies has any contractualobligation to contribute is listed in Schedule 3.15(a).  True and correct copies of each ERISA Planlisted in Schedule 3.15(a) have been made available toPurchaser.  Each ERISA Plan that isintended to be qualified under Section 401 of the Code has a determinationletter from the Internal Revenue Service stating it is so qualified.  Except as stated in Schedule 3.15(a),the administrator of each ERISA Plan has administered each ERISA Plan inaccordance with the provisions thereof and reasonable interpretationsthereof.  Each Employee BenefitArrangement of the Company is listed in Schedule 3.15(b).  True and correct copies of each such EmployeeBenefit Arrangement have been made available to Purchaser.  There are no pending audits or examinationsof any of any ERISA Plan covering any Business Employees by any GovernmentalAuthority, except to the extent that CNA Financial is under continuous audit bythe Internal Revenue Service, nor has any notice of any such audit beenreceived.  As of the Closing Date, theCompanies will have no unpaid obligations or allocations with respect to anyBusiness Employee participants in any ERISA Plan, except for futurecontributions that may be due from members of the ERISA Group to any Title IVPlan or Plans.  All amounts withheld fromany Business Employee’s pay for any ERISA Plan shall have been paid to suchERISA Plan within the period required by Legal Requirements.  No benefit due to any Business Employee underany ERISA Plan has been wrongfully withheld or left unpaid.

 

3.16.                        LaborRelations.

 

(a)                                  TheBusiness is and has been since the Acquisition Date in compliance in allMaterial respects with all Legal Requirements respecting employment andemployment practices, terms and conditions of employment and wages and hours,including, without limitation any such laws respecting employment anddiscrimination, workers’ compensation, family and medical leave, theImmigration Reform and Control Act, and occupational safety and healthrequirements, and has not and is not engaged in any unfair labor practice;

 

(b)                                 Thereis not now, nor within the past three years has there been, any unfair laborpractice complaint against the Business pending, or to the Knowledge of Seller,threatened, before the National Labor Relations Board or any other comparable 

 

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GovernmentalAuthority, and there is not now any pending labor dispute or grievance withrespect to any Business Employee;

 

(c)                                  Thereis no known, nor within the past three years has there been, any labor strike,slowdown or stoppage actually pending, or to the Knowledge of Seller,threatened, against or directly affecting the Business;

 

(d)                                 Tothe Knowledge of Seller, no labor representation organization effort exists norhas there been any such activity within the past three years with respect tothe Business;

 

(e)                                  Noemployee of the Business has been covered in such capacity by a collectivebargaining agreement since the Acquisition Date; and

 

(f)                                    Tothe Knowledge of Seller, since the Acquisition Date, all persons engaged by theBusiness as independent contractors do satisfy and have satisfied therequirements of law to be so classified, and the entity engaging such personshas fully and accurately reported their compensation on Internal RevenueService Forms 1099 when required to do so.

 

3.17.                        Insurance.  Schedule 3.17 lists all insurancepolicies covering the Companies by type of insurance, name of insurer,expiration date, deductibles and policy limits. Seller has provided Purchaser with loss runs with respect to the Companyfor 2004, provided, however, that such loss run with respect to workerscompensation includes the calendar years 2002, 2003 and 2004.

 

3.18.                        Brokersor Finders.  Other than with respectto Sandler O’Neill & Partners, L.P., the fees and expenses of whichshall be paid by Seller, neither Seller nor the Companies have incurred anyobligation or liability, contingent or otherwise, for brokerage or finders’fees or agents’ commissions or other similar payment in connection with thisAgreement and the transactions contemplated hereby.

 

3.19.                        Absenceof Certain Changes and Events. Except as stated in Schedule 3.19 and, between the date ofthis Agreement and the Closing, as permitted by Section 5.2, since September 30,2004, the Company has conducted the Business in the ordinary course ofbusiness, and none of Seller and either of the Companies have (withoutlimitation):

 

(a)                                  Increasedthe rate of compensation to any Business Employee, except for such changes asdo not, in the aggregate for all Business Employees (including increases inbonuses and accruals under any non-qualified deferred compensation plan) exceedan increase of 5% or more on an annualized basis;

 

(b)                                 Paidany bonus or extraordinary compensation to any shareholder, director or officerof the Companies, or entered into any severance agreement or other contract oragreement with any shareholder, director or officer of the Companies;

 

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(c)                                  Adoptedor modified any ERISA Plan or Employee Benefit Arrangement applicable to anyBusiness Employee;

 

(d)                                 Grantedor modified any employment contract, severance agreement, Severance Benefit orother benefit not constituting an ERISA Plan or Employee Benefit Arrangementapplicable to any Business Employee;

 

(e)                                  Withrespect to the Companies, paid any dividend or made any distribution withrespect to its stock, or split, combined, reclassified or otherwise amended theterms of such stock (except as permitted under Section 5.1), or made anydirect or indirect redemption, purchase or other acquisition of shares of suchstock;

 

(f)                                    Withrespect to the Companies, issued any voting securities (including, but notlimited to, additional shares of its authorized but not issued capital stock asof September 30, 2004);

 

(g)                                 Sufferedor initiated the loss or termination of any agreement set forth on Schedule 3.10,or received notice from the customer under any such agreement under whichannual revenues of $100,000 or more were received in 2004 of any intent toterminate such agreement or materially decrease the volume of servicescurrently being purchased thereunder;

 

(h)                                 Sold,leased or otherwise disposed of any assets that are individually or in theaggregate Material to the operation of the Business;

 

(i)                                     Incurredany damage, destruction or loss to any asset or property dedicated to the useof the Business that resulted in Material damages in the aggregate;

 

(j)                                     Madecapital expenditures related to the Business in excess of $25,000;

 

(k)                                  Withrespect to the Companies, merged with or acquired capital stock in anycorporation;

 

(*l*)                                    Withrespect to either of the Companies in its own name, or with respect to Sellerwith respect to the Business, made any loan or advance under any loan to orguaranteed any obligation of any Person (except for travel advances andendorsement of checks for collection);

 

(m)                               Incurredor assumed any indebtedness for money borrowed by the Companies that is notconsistent with past practice;

 

(n)                                 Madeany change in the accounting methods employed by the Companies, except as maybe required by GAAP accounting practices;

 

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(o)                                 Madeany amendment to the Companies’ articles of incorporation or by-laws;

 

(p)                                 Changedthe Company’s practices with respect to billing for services in advance of thedate such services are rendered; or

 

(q)                                 Enteredinto any agreement to do any of the foregoing.

 

All of the foregoingrepresentations and warranties of this Section 3.19 exclude any changesresulting from transactions contemplated by this Agreement.

 

3.20.                        Seller’sApprovals.  Except as provided inthis Section, none of Seller and the Companies require any approvals of ornotice filings with any Governmental Authority or other third party except forthose to be obtained prior to the Closing Date and listed in Schedule 3.20(the “Seller’s Approvals”) in order to consummate the transactions described inthis Agreement and the Related Agreements.

 

3.21.                        Sufficiencyof Assets and Contracts.  The Company’sassets, properties and rights as of the Closing Date, including the CNATransferred Assets, the CNA Assigned Contracts and the rights of the Companyunder the Related Agreements (including, without limitation, the Trademark andTrade Name License Agreement, the Software License Agreement and the CNAInterim Services Agreement) will constitute all of the assets, properties andrights used by the Company in the conduct of the Business as of the ClosingDate (except to the extent that Purchaser shall elect not to purchase servicesfrom Seller that are currently being provided by Seller or its Affiliates tothe Company).

 

3.22.                        RealProperty.

 

3.22.1.               Owned Real Property.  The Company does not own any real property.

 

3.22.2.               Leased Real Property.  Schedule 3.22.2 lists all realproperty leased or subleased to  Selleror its Affiliates and used in connection with the Business, and states the dateand parties to the applicable lease or sublease (the “Business Leases”).  Except as stated in Schedule 3.22.2,there are no defaults under the Business Leases, provided that as to defaultsby parties to the Business Leases other than the Company or Seller or anyAffiliate of Seller, the only defaults required to be disclosed in Schedule 3.22.2are those of which Seller has Knowledge. Seller and the Company have not assigned or placed any Encumbrance uponany Business Lease.

 

3.23.                        ExcludedAffiliates.  None of the Affiliatesof Seller described in item (ii) of the definition of Affiliates arecurrently engaged in a business that would violate the terms of Sections 5.16.1through 5.16.3 as of the Closing Date, if such provisions were applicable tosuch Affiliates.

 

3.24.                        DeferredRevenue.  With respect to in force lifeof file contracts, deferred revenue recorded on the Most Recent FinancialStatements has been determined in accordance with GAAP 

 

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and reflects deferredrevenue so determined for each in force customer agreement for which currentlife of file obligations exist as of the date of the Most Recent FinancialStatements.  With respect to in forcecontracts other than life of file contracts, deferred revenue recorded on theMost Recent Financial Statements has been determined in accordance with GAAP,and is adequate to satisfy future service obligations to customers under inforce contracts other than life of file contracts.

 

3.25.                        EnvironmentalMatters 

 

3.25.1.               Hazardous Materials.  Except as set forth in Schedule 3.25,to the Knowledge of Seller, no underground storage tanks are present in, on orunder any property that the Company has owned, operated, occupied or leasedsince the Acquisition Date.  Since theAcquisition Date, the Company has not violated any Legal Requirement by disposingof any substance that has been designated by any Governmental Authority or byany Legal Requirement to be radioactive, toxic, hazardous or otherwise a dangerto health or the environment, including, without limitation PCBs, asbestos,petroleum, urea-formaldehyde and all substances listed as hazardous substancespursuant to the Comprehensive Environmental Response, Compensation, andLiability Act of 1980, as amended, or defined as a hazardous waste pursuant tothe United States Resource Conservation and Recovery Act of 1976, as amended, andthe regulations promulgated pursuant to said laws, but excluding office andjanitorial supplies properly and safely maintained (a “Hazardous Material”) in,on, or under any property that the Company has at any time owned, operated,occupied or leased.

 

3.25.2.               Hazardous Materials Activities.    To the Knowledge of Seller, since theAcquisition Date, the Company has not transported, stored, used, manufactured,released, or exposed its employees or others to, Hazardous Materials inMaterial violation of any Legal Requirement in effect on or before the ClosingDate, nor to Seller’s Knowledge, has the Company transported, sold ormanufactured any product containing a Hazardous Material (collectively, “CompanyHazardous Materials Activities”) in Material violation of any LegalRequirement.

 

3.25.3.               Permits.  The Company does not hold, and is notrequired to hold, any environmental License in order to conduct the Business.

 

3.25.4.               Environmental Liabilities.          No action, proceeding,revocation proceeding, amendment procedure, writ, injunction or claim ispending, or to the knowledge of the Company threatened against the Companyconcerning any Hazardous Material or any Company Hazardous Materials Activity.

 

3.26.                        AccountsReceivable.  To the knowledge ofSeller, the accounts receivable set forth in the balance sheet of the Companyas of December 31, 2004, represent bona fide claims of the Company againstdebtors for sales, services performed or other charges arising on or before thedate thereof.  To the Knowledge of Seller,all accounts receivable set forth in the Final Pro Forma Balance Sheet willrepresent bona fide claims of the Company against debtors for sales, servicesperformed or other charges arising on or before the Closing Date.  To the Knowledge of Seller, such accountsreceivable are subject to no claims, defenses, counterclaims or rights ofsetoff.

 

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ARTICLE IV

 

Representations and Warranties of Purchaser

 

Purchaserhereby warrants and represents to Seller that:

 

4.1.                              Statusof Purchaser.  Purchaser is acorporation duly organized, validly existing and in good standing under thelaws of the State of Minnesota. Purchaser has full corporate power and authority to conduct its businessas it is now being conducted.  Purchaseris duly qualified to do business as a foreign corporation in the jurisdictionslisted in Schedule 4.1, and is in good standing in each suchjurisdiction, and such jurisdictions constitute each jurisdiction in whichPurchaser is required to be so qualified as a result of the nature of itsbusiness or the ownership or use of property.

 

4.2.                              Enforceability.  Purchaser has full corporate power andauthority to execute and to deliver this Agreement and the Related Agreements,and to carry out the transactions contemplated herein and therein.  Purchaser has taken all necessary corporateaction to authorize its execution and performance of this Agreement and theRelated Agreements.  This Agreement andeach of the Related Agreements is the valid and binding obligation ofPurchaser, and enforceable against Purchaser in accordance with its terms,except as such enforceability may be limited by the EnforceabilityExceptions.  The execution, delivery andperformance of this Agreement and each of the Related Agreements by Purchaserwill not, with or without the giving of notice or passage of time or both, (i) conflictwith, result in a default, right to accelerate or loss of rights under, orresult in the creation of any lien, charge or encumbrance pursuant to anyprovision of any mortgage, deed of trust, lease, license agreement or otheragreement to which Purchaser is a party or by which it is bound or affected, (ii) conflictwith or result in a default under any provision of the certificate ofincorporation or by-laws of Purchaser, or any effective resolution of theDirectors or Stockholders of Purchaser, or (iii) conflict with or resultin a violation of any Legal Requirement.

 

4.3.                              Enforceabilityof Security Capital Guarantee. Security Capital Corporation, a Delaware corporation and the indirectparent company of Purchaser, has full corporate power and authority to executeand to deliver its Guarantee of the obligations of Purchaser under thisAgreement and the Related Agreements that has been executed and delivered toSeller by Security Capital Corporation simultaneously with the execution by theParties of this Agreement (the “Security Capital Guarantee”).  Security Capital Corporation has taken allnecessary corporate action to authorize its execution and performance of theSecurity Capital Guarantee.  The SecurityCapital Guarantee is the valid and binding obligation of Security CapitalCorporation, and enforceable against Security Capital Corporation in accordancewith its terms, except as such enforceability may be limited by theEnforceability Exceptions.  Theexecution, delivery and performance of the Security Capital Guarantee bySecurity Capital Corporation will not, with or without the giving of notice or passageof time or both, (i) conflict with, result in a default, right toaccelerate or loss of rights under, or result in the creation of any lien,charge or encumbrance pursuant to any provision of any mortgage, deed of trust,lease, license agreement or other agreement to which Security Capital 

 

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Corporation is a party orby which it is bound or affected, (ii) conflict with or result in adefault under any provision of the certificate of incorporation or by-laws ofSecurity Capital Corporation, or any effective resolution of the Directors orStockholders of Security Capital Corporation, or (iii) conflict with orresult in a violation of any Legal Requirement

 

4.4.                              CertainProceedings.  There is no pendingaction against Purchaser in any court or administrative agency that challengesor may reasonably be expected to have the effect of preventing or delaying ormaking unlawful the consummation of the transactions contemplated by thisAgreement and the Related Agreements or the Security Capital Guarantee.  To Purchaser’s Knowledge, no such proceedinghas been threatened.

 

4.5.                              FinancialStatements.  Seller has received the consolidatingand consolidated audited balance sheet and income statement of WC Holdings, Inc.,the parent company of Purchaser, as of December 31, 2003, and the consolidatingand consolidated unaudited balance sheet and income statement of WC Holdings, Inc.,as of December 31, 2004(the “Purchaser Financial Statements”). The Purchaser Financial Statements fairly present the financialcondition of WC Holdings, Inc., and Purchaser as of and for the periodsending on the dates thereof.  As of theClosing Date, there shall not have been any material adverse change in thefinancial condition of Purchaser, and Purchaser shall be solvent and paying itsobligations in the ordinary course of business. Except as set forth in Schedule 4.4, Purchaser has noliability, including, without limitation, contingent liabilities required to bedisclosed under GAAP, except for (i) liabilities set forth in the balancesheet included in the Purchaser Financial Statements and (ii) liabilitieswhich were incurred on and after December 31,2004, in the ordinary course of business.

 

4.6.                              Brokersor Finders.  Purchaser has incurredno obligation or liability, contingent or otherwise, for brokerage or finders’fees or agents’ commissions or other similar payment in connection with thisAgreement and the transactions contemplated hereby.

 

4.7.                              Purchaser’sApprovals. Purchaser requires no approvals of or notice filings with anyGovernmental Authority or other third party except for those listed in Schedule 4.7(the “Purchaser’s Approvals”) in order to consummate the transactions describedin this Agreement and the Related Agreements.

 

4.8.                              SecuritiesLaws.  Purchaser is acquiring theParent Shares (and through ownership of the Parent Shares, the Company Shares)for investment for its own account, not as a nominee or agent, and not with aview to, or for resale in connection with, any distribution thereof.  Purchaser understands that the Parent Sharesand the Company Shares have not been, and will not be, registered under theSecurities Act or any applicable state securities law by reason of specificexemption from the registration provision of the Securities Act or such statesecurities laws that depends upon, among other things, the bona fide nature ofthe investment intent and the accuracy of the representations expressed in thisSection 4.8.  Purchaser agrees thatthe certificates representing the Parent Shares and Company Shares may bearlegends to the effect that such shares have not been registered under theSecurities Act, or such other state securities laws, and that no interesttherein may be transferred or otherwise disposed of in violation of the provisionsthereof.

 

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4.9.                              InvestmentCompany.  Purchaser is not aninvestment company subject to registration and regulation under the InvestmentCompany Act of 1940, as amended.

 

4.10.                        Financing.  Purchaser has available, andat the Closing will have available, sufficient cash and debt capacity toconsummate the transactions contemplated by this Agreement and the RelatedAgreements and to pay all related fees and expenses required to be paid byPurchaser hereunder and thereunder.

 

ARTICLE V

 

Additional Agreements of Seller and Purchaser

 

5.1                                 ClosingAdjustments.  Seller and Purchasercovenant and agree that the transfers, payments and intercompany transactionsdescribed in the Prototype Pro Forma Balance Sheet (the “Closing Adjustments”),which are described therein on a pro forma basis as of September 30,2004, will be made at or prior to the Closing. Except as set forth in the Prototype Pro Forma Balance Sheet, anyagreements between Seller or its Affiliates, on the one hand, and either of theCompanies, on the other hand, shall be terminated at or prior to the Closing.  For avoidance of doubt, (i) Seller willnot cause to be terminated prior to the Closing any customer agreement or openaccount under which Seller and its Affiliates (except for Parent and theCompany) obtain services from the Company as customers of the Business, unlessthe related obligation of Seller or any of its Affiliates to their customer isterminated by such customer prior to the Closing, and (ii) Seller will noteliminate as an intercompany obligation any account receivable of the Companywith respect to any of such services. Notwithstanding the covenant of Seller and its Affiliates in the precedingsentence, nothing in this Agreement or any Related Agreement shall modify orotherwise affect the existing right of Seller and its Affiliates as customersof the Business to terminate agreements or open accounts with the Company subsequentto the Closing.

 

5.2.                              Conduct of the Business.

 

(a)                                  Prior to the Closing Date or the terminationof this Agreement pursuant to the terms hereof, except as contemplated hereby(including, without limitation, as set forth on Schedule 5.2(b)),Seller will cause the Company (and will cause Parent to cause the Company) toconduct the Business only in the ordinary course of business, substantiallyconsistent with past practice and with current business plans, and will usecommercially reasonable efforts to preserve the business organization andrelationships of the Company as they relate to the Business, preserve therights, franchises, good will and relations of its clients, preserve theLicenses issued to the Company in full force and effect consistent with pastpractice, keep available the services of the Business Employees and otheremployees directly involved in the Business (provided, however, that Sellershall have no obligation to pay stay bonuses not already committed to), preserve the Company’s relationshipswith its clients and 

 

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others having business dealings with the Businessand continue to market new Business consistent with past practice.

 

(b)                                 Without limiting the generality of Section 5.2(a),during the period from the date of this Agreement to the Closing Date, to theextent it affects the Business and except as set forth on Schedule 5.2(b) oras expressly permitted by this Agreement, Seller shall not, and shall cause theCompany (and shall cause the Parent to cause the Company) not to, without theprior written consent of Purchaser:

 

(i)                                     other than in the ordinary course of businessconsistent with past practice, (A) terminate, transfer or otherwisedispose of any Company Assets or assets which would otherwise be CNATransferred Assets, (B) enter into, modify or make any substantial changeto any CNA Assigned Contract, (C) acquire any assets (other thaninvestment securities acquired in the ordinary course of business) related tothe Business which in the aggregate exceed $25,000, or (D) reallocate any assetscurrently owned, used or held for use by the Business to any other line ofbusiness, unit or division of the Company or to any Affiliate of Seller or anyother line of business, unit or division of Seller or any Affiliate of Seller;

 

(ii)                                  (A) permit or allow any of the CompanyAssets, CNA Transferred Assets oragreements with customers or distributors of the Business to becomesubject to any Encumbrance except Permitted Encumbrances, (B) waive anyclaims or rights relating to the Business, except in the ordinary course ofbusiness consistent with past practices, (C) without reference topractices followed in the ordinary course of business, grant any increase inthe compensation or benefits of or increase or promise to increase, orestablish any new Plan or Employee Benefit Arrangement for any of the BusinessEmployees (including any such increase pursuant to any wage, salary, incentive,bonus, pension, profit-sharing or other plan or commitment), except for paymentsof bonuses earned by Business Employees according to the CNA Annual IncentiveBonus plan for the 2004 calendar year, or (D) adopt, enter into or amendany Severance Benefits, except as provided in Section 5.7(i);

 

(iii)                               make any change, in a manner which would beadverse to the Business, in accounting methods, principles or practices used bythe Company in connection with the Business, including, without limitation withrespect to maintenance of capital adequacy requirements, except insofar as maybe required by a change in U.S. generally accepted accounting principles or taxaccounting principles or as may be required by law or any GovernmentalAuthority;

 

(iv)                              permit any Business Employee’s employment tobe transferred to any other business of Seller or any Affiliate of Seller otherthan the Business at any 

 

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time from the date of this Agreement to the datewhich is one day after the Closing Date;

 

(v)                                 other than in the ordinary course of theBusiness, terminate the services of any Business Employee (other than forcause) or substantially change the duties of any Business Employee;

 

(vi)                              solicit the employment of any BusinessEmployee unless Purchaser has notified Seller in writing that it will not makean offer of employment to the Business Employee, or that Purchaser’s offer ofemployment has been rejected by the Business Employee and Purchaser has electedto waive the prohibition of this subsection 5.2(b)(vi);

 

(vii)                           cause the Company to maintain the Books andRecords other than in the same manner and with the same care that such Booksand Records have been maintained prior to the execution of this Agreement;

 

(viii)                        fail to pay any undisputed accounts payablein accordance with existing practices, including, but not limited to, thetiming of such payments in relation to the date the invoice is received; or

 

(ix)                                agree in writing or otherwise to take any ofthe actions described above in this Section 5.2(b).

 

5.3.                              Expenses.  Except as otherwise expressly provided hereinand regardless of whether any or all of the transactions contemplated by thisAgreement are consummated, Seller and Purchaser shall each be responsible,respectively, for the payment of expenses incurred in connection with thetransactions contemplated by this Agreement

 

5.4.                              Purchaser’s Access to the Business Prior toClosing.  Between the date of this Agreement and theClosing Date, subject to Legal Requirements relating to the exchange ofinformation, Seller shall afford to Purchaser and its authorized agents andrepresentatives access, upon reasonable notice and during normal businesshours, to all contracts, documents and information of or relating to theassets, liabilities, business, operations and other aspects of the Business,provided, however, that Purchaser’s agents and representatives shall not haveaccess to (i) information that is legally privileged or to which Purchaser’saccess is not permitted pursuant to any contractual obligation or LegalRequirement, (ii) Tax records and information, and (iii) contracts,documents and information pertaining to the operations of the Seller or itsAffiliates (not including the Company) other than the Business.  Seller shall cause the Business Employees andother employees of Affiliates of Seller to provide reasonable assistance toPurchaser in Purchaser’s investigation of matters relating to the transactionscontemplated hereby; provided, however, that Purchaser’s investigation shall beconducted in a manner which does not interfere with the normal operations,client and employee relations of Seller and Seller’s Affiliates.  Without limiting any of the terms thereof, (i) theterms of the Confidentiality Agreement shall govern Purchaser’s and its 

 

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representatives’obligations with respect to all confidential information with respect to theBusiness, Seller and its respective Affiliates and other related Persons, whichhas been provided or made available to them at any time, including during theperiod between the date of this Agreement and the Closing Date, provided,however, that this sentence shall not apply to communications approved by theParties in accordance with Section 5.9, and (ii) Purchaser shallmaintain the confidentiality of all nonpublic personal information of the Company’scustomers as required under applicable Legal Requirements.

 

5.5.                              Performance of this Agreement.  Eachof the Parties hereto shall execute such documents and other papers and performsuch further acts as may be reasonably required to carry out the provisionshereof and the transactions contemplated hereby.  Each such party shall, at or prior to theClosing Date, use its commercially reasonable efforts to fulfill or obtain thefulfillment of the conditions precedent to the consummation of the transactionscontemplated hereby, including the execution and delivery of any documents,certificates, instruments or other papers that are reasonably required for theconsummation of the transactions contemplated hereby.

 

5.6.                              Notification of Certain Matters.

 

(a)                                  Each party shall give notice to the otherparty within 3 Business Days of (i) the occurrence, or failure to occur,of any event or the existence of any condition that has caused or couldreasonably be expected to cause any of its representations or warrantiescontained in this Agreement to be untrue or inaccurate at any time after thedate of this Agreement, up to and including the Closing Date (except to theextent such representations and warranties are given as of a particular date orperiod and relate solely to such particular date or period), and (ii) anyfailure on its part to comply with or satisfy any covenant, conditions oragreement to be complied with or satisfied by it under this Agreement.

 

(b)                                 Seller shall by written notice to Purchaserprovide or supplement any Schedule to reflect any change or event thatoccurs after the date of this Agreement and prior to Closing.

 

(c)                                  Such supplemental schedules shall be deemedto cure any breach of any of Seller’s representations or warranties only to theextent that changes reflected in such supplemental schedules result from normalretirements and replacements of CNA Transferred Assets, including normalupgrades or replacements of Computer Programs (other than replacements ofComputer Programs constituting the lead applications for key line operations ofthe Business), and the hiring, resignation and termination of BusinessEmployees, all of which shall otherwise be in compliance with the terms of thisAgreement.

 

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5.7.                              EmployeeMatters.

 

(a)                                  Purchaseror the Company shall offer to employ each Business Employee effective as of theClosing Date in each case for a base annual salary that will not be less thanthe base annual salary shown for such Business Employee in Schedule 1(A),and with a pay grade or officer level that corresponds reasonably withinPurchaser’s organization to their current grade or officer level with Seller,except for the excepted Business Employees designated on Schedule 1A.  Seller agreesthat it will reasonably cooperate with Purchaser with respect to the transitionof Business Employees as provided above. Each Business Employee who accepts employment with Purchaser or theCompany to commence following the Closing Date shall be treated as a “TransferredEmployee” for purposes hereof.

 

(b)                                 From and after the Closing Date, Purchaser orthe Company shall grant all Transferred Employees, for purposes of employeebenefit rights, the following privileges:

 

(i)                                     With respect to any Pension Plan in which aTransferred Employee is covered, Purchaser shall grant (i) immediateparticipation to any Transferred Employee who was employed by Seller for aperiod of at least one year prior to the Closing Date, and for any suchTransferred Employee who was not employed by Seller for a period of at leastone year prior to the Closing Date, Purchaser shall grant credit for servicewith Seller and its Affiliates for purposes of determining eligibility toparticipate in such Pension Plan, and (ii) credit for service as anemployee of Seller and its Affiliates shall be credited as service withPurchaser for purposes of vesting of benefits and early retirement under anysuch Pension Plan, provided, however, that service with Seller and itsAffiliates shall not be credited for purposes of benefit accrual or in anyformula affecting the accrual of benefits under any such Pension Plan;

 

(ii)                                  When applicable with respect to any medicalbenefit, dental benefit, group life insurance, business travel and short termdisability plan of Purchaser, (A) Purchaser shall waive, with respect toany Transferred Employee, any pre-existing condition exclusion andactively-at-work or waiting period requirements (to the extent such exclusionor requirement would not have applied under the applicable corresponding planof Seller or its Affiliates covering such Business Employee immediately priorto the Closing), (B) with respect to any long term disability plan ofPurchaser, Purchaser shall waive any actively-at-work requirements and (C) any covered expenses incurred onor before the Closing Date by a Transferred Employee or a Transferred Employee’scovered dependents shall be taken into account for purposes of satisfyingapplicable deductible, coinsurance and maximum out-of-pocket provisions afterthe Closing Date to the same extent as such expenses would 

 

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be taken into account if incurred by similarlysituated employees of Purchaser; and

 

(iii)                               For purposes of determining the vacation andholiday paid time off benefits to which any Transferred Employee is eligible,Purchaser agrees to credit Transferred Employees with service accrued asemployees of Seller and any of its Affiliates.

 

Nothing in this Section shall obligatePurchaser to retain any Transferred Employee as an employee of the Company orany Affiliate of Purchaser for any fixed period of time, or to provide any formof employee benefit to Transferred Employees, nor shall Purchaser be obligatedto provide service credits for prior service with Seller and its Affiliates toTransferred Employees other than the service credits described in this Section.

 

(c)                                  Seller agrees to provide COBRA continuationcoverage for all Business Employees (and their covered dependents) to the extentrequired by applicable law.

 

(d)                                 Atthe Closing, Seller will to pay to each Transferred Employee his or her accruedpaid time off as of the Closing Date.

 

(e)                                  Business Employees who (i) are receivingshort term disability benefits, workers compensation benefits, sick daybenefits, or who are on leave of absence on the date hereof, as identified on Schedule 5.7(e) (whichshall be updated one day prior to the Closing Date), (ii) return to activeemployment with Seller or any of their Affiliates within a 26-weekcontinuous cumulative period of absence, which absence is approved by Seller, (iii) acceptemployment with Purchaser or the Company (effective the day following the datethe Business Employee returns to active employment with Seller or itsAffiliates) and (iv) are actively at work for Purchaser or the Company onsuch day, shall be referred to as “Delayed Transferred Employees.”  Seller shall terminate the employment of allTransferred Employees as of the Closing Date, and the employment of all DelayedTransferred Employees effective the date they return to active employment withSeller on and after the Closing Date (except as otherwise prohibited by law) orthe expiration of the 26-week cumulative approved period of absence,whichever is sooner.  Seller mayterminate the employment of any Business Employees who are not TransferredEmployees or Delayed Transferred Employees as of the Closing Date orthereafter.

 

(f)                                    Except as provided in this subsection, allemployment records of the Business Employees compiled prior to the Closing willbe retained by Seller or its designee. At the Closing, Seller shall deliver to Purchaser an electronicemployment record for each Transferred Employee in the form of, and containingthe fields specified in, Schedule 5.7(f).  Seller will retain all other employmentrecords of the Transferred Employees and will grant access by Purchaser to suchrecords, subject to Seller 

 

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personnel policies and applicable Legal Requirementsrelated to disclosure of personnel files.

 

(g)                                 Forthe avoidance of doubt, Purchaser will not be responsible for or assume anyliability or loss incurred or suffered as a result of any claim by any presentor former employee who performed or performs services in or for the Business,including, without limitation, the Transferred Employees and the DelayedTransferred Employees, that (x) relates to the employment relationship of suchpresent or former employee with Seller or any of its Affiliates, (y) arose outof actions, events or omissions that occurred (or, in the case of omissions,failed to occur) prior to the Closing Date, and (z) arises either underfederal, state or local statute (including, without limitation, Title VII ofthe Civil Rights Act of 1964, the Civil Rights Act of 1991, the AgeDiscrimination in Employment Act of 1990, the Equal Pay Act, the Americans withDisabilities Act of 1990, ERISA and all other statutes regulating the terms andconditions of employment or the payment of compensation or benefits),regulation or ordinance, under the common law or in equity (including anyclaims for wrongful discharge or otherwise), or under any policy, agreement,understanding or promise, written or oral, formal or informal, between Selleror any of its Affiliates, and the Person (collectively, the “Retained EmployeeLiabilities”).

 

(h)                                 Purchaseragrees to pay severance and provide benefits to any Transferred Employee whoseemployment terminates or is terminated on or before the first anniversary of theClosing Date that are substantially equivalent to the Severance Benefits suchTransferred Employee would have received under and in accordance with severancearrangements or plans covering such Transferred Employees immediately prior tothe Closing Date and disclosed on Schedule 5.7(h).

 

(i)                                     Selleragrees to continue to employ the Business Employees located at the Company’soffice at 40 Wall Street, New York, New York, for a period up to six monthsafter the Closing Date, subject to the terms and conditions of their employmentthat are applicable as of the date of this Agreement or as they may be modifiedby changes to Seller’s general employment policies and practices.  Seller agrees to make such employeesavailable to provide services to the Company for a period of six months afterthe Closing as provided in the CNA Interim Services Agreement, at the sole costof the Company.  Seller further agrees tooffer and pay to each such Business Employee a stay bonus equal to 25% of eachsuch Business Employee’s annual base salary provided that each such BusinessEmployee successfully completes his or her service for Seller during the periodprovided for such service in the CNA Interim Services Agreement.  Such stay bonus, including any employment andwithholding Taxes thereon, shall be reimbursed to Seller by Purchaser or theCompany.  Seller shall have no obligationto such Business Employees other than as specified in this Section 5.7(i) and,provided that Seller fulfills such obligations, Seller shall have no liabilityto Purchaser or the Company 

 

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shouldSeller fail to retain any of such Business Employees as Seller’s employees forall or any portion of the period specified in this Section 5.7(i).

 

5.8.                              ComputerPrograms.  The obligations of Sellerand Purchaser with respect to Computer Programs used in the Business shall besatisfied as of the Closing as follows:

 

(a)                                  TheOwned Principally Used Computer Programs that are owned by Seller and itsAffiliates (excluding the Company) shall be conveyed to the Company as CNATransferred Assets.

 

(b)                                 TheCompany shall be granted the rights with respect to the Owned Generally UsedComputer Programs that are described in the Software License Agreement.

 

(c)                                  Withrespect to each Licensed Computer Program, Embedded Computer Program and ShrinkWrap Computer Program that is licensed by the licensor thereof to Seller or anyof Seller’s Affiliates (except those Licensed Programs that are solely licensedto the Company), at the Closing Seller will use reasonable best efforts toprovide to the Company as of the Closing Date the rights described in Section 3.9.3(d).  All rights proposed to be provided by Sellerto the Company as of the Closing Date with respect to each Licensed ComputerProgram, Embedded Computer Program and Shrink Wrap Computer Program shall bedescribed in Schedule 5.8(c), which Schedule shall bedelivered to Purchaser not later than three business days prior to the Closing.

 

(d)                                 Withrespect to each Service Computer Program, Seller to the extent necessary toprovide services to the Company under the CNA Interim Services Agreement shalluse reasonable best efforts to obtain from the licensor thereof at the expenseof Seller the right to use each Service Computer Program solely to provideservices to the Company under the CNA Interim Services Agreement and theduration of the right of use so obtained shall not exceed six months after theClosing Date, unless, subject to any necessary consents required from the applicablelicensors, the Parties in the future agree to a longer term in the CNA InterimServices Agreement with respect to any service supported by a Service ComputerProgram or Programs.

 

(e)                                  Sellershall be responsible and liable for the first $500,000 of the cost of complyingwith the provisions of this Section 5.8 and Section 3.9.3(d).  Any costs of compliance in excess of suchamount shall be shared equally by Seller and Purchaser.  For avoidance of doubt, costs other thanthose for which Seller is responsible under Section 5.8(i) withrespect to Unavailable Computer Programs shall be charged to the $500,000amount to be reimbursed by Seller under this Section 5.8(e) prior tothe charging of any costs to be reimbursed by Seller and described in Section 5.8(i).  An example of the aggregation ofreimbursement of costs under Sections 5.8(e) and 5.8(i) is Schedule 5.8(e).  

 

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(f)                                    TheCompany shall be exclusively responsible and liable for payment of continuing seatcharges, upgrade and maintenance fees, and for performance of other contractualobligations arising with respect to use by the Company after the Closing Dateof the Licensed Computer Programs, the Embedded Computer Programs and theShrink Wrap Computer Programs licensed or assigned or otherwise provided to theCompany pursuant to this Section 5.8.

 

(g)                                 Ifany Computer Programs not previously scheduled are placed in service in theBusiness between the date of this Agreement and the Closing Date, such ComputerPrograms shall, respectively, be subject as of the Closing Date to therepresentations and warranties of Section 3.9.3 and shall be added as ofthe Closing Date to the applicable schedule described in Section 3.9.3.  If any Computer Programs are removed in theordinary course of business by Seller from active service in the Business afterthe date of this Agreement and prior to the Closing Date, and such ComputerPrograms are not necessary for the conduct of the Business on the Closing Date(to process current or previously recorded data of the Business), then Sellermay remove such Computer Programs from any Schedule described in Section 3.9.3as of the Closing Date and may remove such Computer Programs as ServiceComputer Programs; provided, that no such removal from any Schedule shallrelieve Seller of any indemnification obligation with respect to any breach ofany representation in Section 3.9.3 (other than Section 3.9.3(d))with respect to any such Computer Programs. Seller shall notify Purchaser in writing as soon as reasonablypracticable after Seller’s decision to remove any such Computer Programs from aschedule or as Service Computer Programs, but in any event suchnotification shall be provided within ten business days prior to the Closing Date.

 

(h)                                 Seller’ssole obligations to Purchaser with respect to transferring or providing rightsto use the Licensed Computer Programs, Embedded Computer Programs, the ShrinkWrap Computer Programs and the Service Computer Programs shall be thosedescribed in this Section 5.8.  Eachparty shall bear its own costs of reviewing and negotiating any agreementsrequired for the implementation of this Section 5.8.  Seller shall, in using reasonable bestefforts to obtain the rights described in Sections 5.8(c) and (d) forPurchaser, be entitled to use reasonable business judgment in negotiating withunrelated third party licensors and agreeing to terms and conditions underwhich such rights are granted or consented to by such licensors.  Seller shall keep Purchaser informed on acontemporaneous basis as to the general progress of negotiations with each ofthe unrelated third party licensors, but Purchaser shall have no right tointervene in or participate in such negotiations or to contest, by an actionfor injunction or otherwise, Seller’s decisions to accept or reject termsoffered by a licensor.  The foregoingsentence does not apply to or limit in any way Seller’s obligations under Section 5.8(i) nordoes it limit Purchaser’s right to obtain damages if Seller fails to usereasonable best efforts to obtain the rights for Purchaser described inSections 5.8(c) and (d).

 

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(i)            Notwithstandingany other provision in this Section 5.8, if despite reasonable best efforts ofSeller to obtain on behalf of Purchaser the rights described in subsections (c)or (d) of this Section 5.8, such rights cannot be obtained at a reasonable cost,or cannot be obtained at all, Seller shall provide, at Seller’s expense,Computer Programs that will perform all of the functions of the ComputerPrograms the rights to which Seller is otherwise obligated to obtain undersubsections (c) or (d), as applicable (the “Unavailable Computer Programs”)that would have been Material to the operation of the Business by Seller at thetime of the Closing, in a manner that does not Materially increase thedifficulty or expense of operating the Business in comparison to its operationusing the Unavailable Computer Programs. To the extent that Seller delivers any substitute Computer Programsinstead of Unavailable Computer Programs in accordance with this Section5.8(i), Seller agrees to reimburse 100% of Purchaser’s additional expenses ofimplementing the use of the substitute Computer Programs, including, but notlimited to, expenses of implementing the use of such Computer Programs withcustomers and other third parties that currently use or have access to the UnavailableComputer Programs, to an aggregate total of reimbursable expenses not to exceed$250,000, in addition to any such expenses that are charged against the$500,000 obligation of Seller under Section 5.8(e).

 

(j)            Atthe Closing, by consummating the transactions described in this Agreement,Purchaser accepts the rights to Computer Programs described in this Section 5.8and confirms that as to the Computer Programs (i) listed as CNA TransferredAssets, and (ii) assigned or otherwise provided rights to the Company underSections 5.8(b) and 5.8(c) as satisfying Seller’s obligations to transfer to orobtain for the Company rights with respect to each of the Computer Programsdescribed in the foregoing clauses (i) and (ii), provided, however, that bymaking this confirmation Purchaser does not waive any rights it has or may havein the future to claim and recover from Seller because of a breach of any ofSeller’s representations and warranties with respect to such Computer Programsin Article  III.

 

5.9.          Communications.  Except pursuant to any Legal  Requirements (including, without limitation,the filing of periodic and other reports with the Securities and ExchangeCommission or other Governmental Authorities concerning the transactionscontemplated by this Agreement and the Related Agreements) or the rules of anyapplicable stock exchange, no release or announcement concerning this Agreementor the transactions contemplated hereby, shall be made without advance writtenapproval thereof by Seller and Purchaser, which approval shall not beunreasonably conditioned, delayed or withheld. All Parties shall cooperate with each other in making any such releaseor announcement.  Each Party shallrequest confidential treatment of information concerning the transactionscontemplated by this Agreement and the Related Agreements when filing suchinformation with, or communicating such information to Governmental Authoritieswhich allow confidential treatment of such type of information.  Seller and Purchaser have prepared a mutuallyacceptable communications plan for announcing the status of the transactionscontemplated hereby, any related events that will occur prior to the Closing,and Purchaser’s plans with respect to future relations with or employment ofthe Transferred Employees and the

 

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customers and distributors of the Business.  From the date of this Agreement through theClosing Date, Purchaser and its Affiliates shall take no action that interfereswith or damages the conduct of the Business (provided, however, that Purchaser’slawful activities in the ordinary course of selling products that compete withthose of the Business shall not constitute a violation of this covenant).

 

5.10.        Executionand Delivery of Documents. All agreements or certificates delivered in connection with thetransactions contemplated by this Agreement shall be deemed to be delivered bythe corporations or companies executing the same, and the individual officersexecuting the same shall not be personally liable thereon.

 

5.11.        Cooperationafter the Closing.

 

5.11.1      FurtherAssurances.  After the Closing,Seller and Purchaser shall cooperate with each other by furnishing anyadditional information and executing and delivering any additional documents asmay be reasonably requested by the other to further perfect or evidence theconsummation of, or otherwise implement, any transaction contemplated by thisAgreement and the Related Agreements, or to aid in the preparation of anyregulatory filing, financial statement or (subject to the provisions of Section8.1) Tax Return; provided, however, that any such additional documents must bereasonably satisfactory to each of the Parties and not impose upon either Partyany Material liability, risk, obligation, loss, cost or expense notcontemplated by this Agreement or the Related Agreements.  After the Closing, Seller and Purchaser, asthe case may be, shall afford or cause to be afforded to any Indemnifying Partypursuant to Article X hereof such access to all books, records and personnel ofthe Company during normal business hours as shall be reasonably requested withrespect to any claim or assertion of any Loss. Seller may retain copies of any Records of the Business (as defined inSection 5.11.4) as of the Closing Date, which if retained shall be held subjectto Section 5.16.

 

5.11.2.     Seller’sAccess to Records.  Except as to Taxbooks, records and information, which are subject to the provisions of Section8.1, for a period of seven years after the Closing Date, Seller and itsrepresentatives shall have reasonable access to all of the books and records ofthe Company to the extent that such access may reasonably be required by Sellerin connection with matters relating to or affected by the operations of theCompany prior to the Closing Date.  Suchaccess shall be afforded by Purchaser upon receipt of reasonable advance noticeand during normal business hours.  Sellershall be solely responsible for any costs or expenses incurred by it pursuant tothis Section 5.11.2.  If Purchaser shalldesire to dispose of any of such books and records after the expiration of suchseven-year period, Purchaser shall, prior to such disposition, give Seller areasonable opportunity, at Seller’s expense, to segregate and remove such booksand records as Seller may select.

 

5.11.3.     Purchaser’sAccess to Records.  Except as to Taxbooks, records and information, which are subject to the provisions of Section8.1, for a period of seven years after the Closing Date, Purchaser and itsrepresentatives shall have reasonable access to all of the books and recordsrelating to the Company that Seller or any of its Affiliates may retain afterthe Closing Date, except for consolidated Tax Returns of the Loews CorporationAffiliated Group.  Such access shall beafforded

 

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by Seller and its Affiliates upon receipt of reasonable advance noticeand during normal business hours. Purchaser shall be solely responsible for any costs and expensesincurred by it pursuant to this Section 5.11.3. If Seller or any of its Affiliates shall desire to dispose of any ofsuch books and records after the expiration of such seven-year period, Sellershall, prior to such disposition, give Purchaser a reasonable opportunity, atPurchaser’s expense, to segregate and remove such books and records asPurchaser may select.

 

5.11.4.Records of the Business.  All records of the Business except forrecords transferred to or maintained at the corporate level of Seller (the “Recordsof the Business”) that are not already owned by the Company prior to Closingshall be transferred to the Company as part of the CNA Transferred Assets, tothe extent permitted by applicable Legal Requirements, and shall, as the interestof the Company and Seller may appear, remain the property of the Company.  Records of the Business shall include,without limitation, all client account records. Seller shall not move, alter or destroy any Records of the Businesswithout first providing Purchaser with written notice, and Seller shall notproceed to move, alter or destroy any such records unless Purchaser expresslyconsents thereto in writing.  To theextent that any Records of the Business are in the possession of Seller, Sellershall permit and cooperate with Purchaser’s downloading and purging of suchRecords of the Business after the Closing, except to the extent that Seller orany of its Affiliates are required to retain ownership thereof under applicableLegal Requirements.  The cost ofretrieving Records of the Business or copies thereof from Seller after theClosing shall be at Purchaser’s expense.

 

5.11.5.Storage of Records of theBusiness.  The Parties agree that forthe period of time that Records of the Business are maintained in storagefacilities leased by Seller or its Affiliates, Purchaser shall pay to Sellerthe leasing costs associated with storage of the Records of the Business, asmutually agreed by the Parties.

 

5.11.6.     Subpoenas ofBusiness Records.  If any GovernmentalAuthority shall after the Closing Date serve upon the Purchaser or any of itsAffiliates, including the Companies, a subpoena, civil investigative demand orother request or demand for documents related to operation of the Businessprior to the Closing Date, Purchaser shall give prompt notice to Seller andshall, if requested by Seller, permit Seller’s counsel a reasonable opportunityto review, prior to delivery, any such documents proposed to be delivered byPurchaser or any of its Affiliates to such Governmental Authority in responseto such subpoena, civil investigative demand or other request or demand forinformation.  If Purchaser is advised inwriting by its counsel that the giving of such notice to Purchaser or theinspection of documents is prohibited by any Legal Requirement, Purchaser shallapply to the Governmental Authority at the expense of Seller for permission tomake such disclosure or permit such inspection. To the extent such application is denied by such Governmental Authority,Purchaser shall be excused from performing such of its obligations under thisSection as it is prohibited from performing by such Legal Requirements.  To the extent Seller has lawful notice ofsuch a subpoena, civil investigative demand or other request or demand fordocuments, Seller may at its own expense make any application in its own nameto obtain prior review or access to documents proposed to be delivered byPurchaser or any of its Affiliates in response thereto.  At Seller’s expense and at Seller’s request,Purchaser shall cause the Companies to cooperate and provide Seller access toand copies of relevant Business Records generated prior to

 

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the Closing Date with respect to Seller’s responses to any subpoena,civil investigative demand or other request or demand for information of anyGovernmental Authority that has been or shall be served on Seller or any of itsAffiliates (including the Companies), whether before or after the Closing Date.

 

5.12.        ThirdParty Consents.

 

5.12.1. ObtainingThird Party Consents. Seller and Purchaser shall cooperate and use commercially reasonableefforts to obtain all approvals and consents to the transactions contemplatedby this Agreement and the Related Agreements, including the consents of thirdparties under CNA Assigned Contracts or Company Assigned Contracts.  In the event and to the extent that Seller isunable to obtain any required approval or consent of non-governmental authoritiesto any agreement to be assigned to the Company hereunder, (i) Seller shalluse commercially reasonable efforts in cooperation with Purchaser to (A)provide or cause to be provided to Purchaser or the Company the benefits of anysuch agreement, (B) cooperate in any arrangement, reasonable and lawful asto Seller and Purchaser, designed to provide such benefits to Pur­chaser or theCompany and (C) enforce for the account of Purchaser or the Company anyrights of Seller arising from such agreements, including the right to elect toterminate in accordance with the terms thereof on the advice of Purchaser and(ii) Purchaser shall use commercially reasonable efforts to perform orcause the Company to perform the obligations of Seller arising under suchagreements and licenses, to the extent that, by reason of the transactionsconsum­mated pursuant to this Agreement or otherwise, Purchaser has controlover the resources necessary to perform such obligations.  If and when any such approval or consentshall be obtained or such agreement or license shall otherwise becomeassignable, Seller shall promptly assign all of its rights and obligationsthereunder to the Company without the payment of further consideration (exceptas may be required under Section 5.8(e)) and Purchaser shall, without the paymentof any further consideration therefor (except as may be required under Section5.8(e)), cause the Company to assume such rights and obligations and Sellershall be relieved of any and all obligation or liability thereunder.

 

5.12.2.     AgreementsAffecting the Other Party. Notwithstanding any other provision of this Section 5.12, neither Sellernor Purchaser shall make or permit any of its Affiliates to make any agreementor understanding affecting the assets or business of the other Party or itsAffiliates as a condition to obtaining any consents, approvals or waiversexcept with the prior written approval of such other Party.

 

5.13.        RegulatoryCompliance.  Purchaser andSeller and their agents, representatives and Affiliates shall comply  with all Legal Requirements applicable totheir conduct in performing their obligations under this Agreement and theRelated Agreements.

 

5.14.        NoSolicitations.  From and afterthe date hereof until the Closing, Seller and its Affiliates shall not, andshall direct and use its reasonable best efforts to cause each of its officers,directors, employees, agents, advisors or other representatives (each a “Representative”)not to, (i) directly or indirectly, solicit, initiate or knowinglyencourage the submission of any Proposal (as defined below),(ii) participate in any discussions or negotiations regarding, or furnishto any Person

 

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any non-publicinformation with respect to any Proposal or Alternative Transaction, other thanwith Purchaser or (iii) agree to or approve any Alternative Transaction orauthorize any of its Subsidiaries to agree to or approve any AlternativeTransaction.  For purposes of thisAgreement: (i) “Proposal” means any written proposal or offer from anyPerson relating to an Alternative Transaction; and (ii) “AlternativeTransaction” means any transaction for the sale of the Company and/or theBusiness.

 

5.15.        Useof Names.  Notwithstanding anyimplication contained herein or prior course of conduct to the contrary, in noevent shall Purchaser or any of its Affiliates, including the Company, have anyright to use, nor shall Purchaser or any of its Affiliates, including theCompany, use, any trademark, service mark, trade name, corporate name or acronymof Seller or any of its Affiliates in any jurisdiction or any domain name orURL or any application or registration therefor, owned by, licensed to or usedby Seller or any of its Affiliates, or any other mark, name, term oridentification that suggests, simulates or is otherwise confusing due to itssimilarity to the foregoing, except to the extent the Company are authorized todo so pursuant to the Trademark and Trade Name License Agreement.

 

5.16.        Non-Competition.

 

5.16.1.     Seller.  Inconsideration of the benefits of this Agreement and the Related Agreements toSeller and in order to induce Purchaser to enter into this Agreement, Sellerhereby covenants and agrees, subject to the exceptions in Section 5.16.3, thatfor a period of three years after the Closing Date (the “Non-Compete Term”),neither it nor any of its Affiliates shall, without the prior written consentof Purchaser, directly or indirectly, operate, engage in, manage or own anycontrolling equity interest in any line of business comprised of health careprofessional liability or product liability claim administration, investigationand consulting for self-insured clients in the Restricted Area (as definedbelow).

 

5.16.2.     Restricted Area.  The covenants contained in Section 5.16.1shall be construed as a series of separate covenants, one for each county orstate of the United States of America (including its territories andpossessions), and one for the United States (including its territories andpossessions), as a whole (together, the “Restricted Area”).

 

5.16.3.     Exceptions.  Notwithstanding any other provisions of thisAgreement to the contrary, the provisions of Section 5.16.1 shall not apply to:

 

(a)           Claimadministration, loss prevention, investigation and consulting for policyholdersof Seller and its Affiliates, including, but not limited to, policyholders offronted or captive programs sponsored, written or reinsured by Seller or itsAffiliates, in each case as originated both prior to and after the ClosingDate;

 

(b)           Insuringof policyholders (directly or through fronted or captive programs) that obtainclaim administration services from insurance agents or other third partyadministrators;

 

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(c)           anyPerson who acquires any interest in CNA Financial or any of its Affiliates,contracts or policies;

 

(d)           investments(including the retention of investments) in the ordinary course of business bySeller and its Affiliates in less than 10% of the outstanding voting stock orstock equivalents of entities engaging in any lines of business constitutingthe Business;

 

(e)           anytransaction or transactions, as a result of which CNA Financial or any of itsAffiliates acquires any interest in the aggregate of less than 50% of theoutstanding voting stock or stock equivalents of any Person engaging in linesof business constituting the Business, the total revenues of such Personattributable to lines of business constituting the Business for the fiscal yearimmediately preceding such acquisition are less than 50% of such Person’s totalrevenues for the fiscal year immediately preceding such acquisition, andretention of such interest; or

 

(f)            anytransaction or transactions, as a result of which CNA Financial or any of itsAffiliates acquires any interest in the aggregate equal to or greater than 50%of the outstanding voting stock or stock equivalents of any Person engaging inlines of business constituting the Business and the retention of such interest,if the annual revenues of such Person from lines of business constituting theBusiness are less than 25% of such Person’s total annual revenues for thefiscal year immediately preceding such acquisition and the activities of suchPerson constituting the Business (the “Business Activities”) are (i)discontinued within 18 months after such acquisition or (ii) disposed of inaccordance with Section 5.16.4.

 

5.16.4.     Dispositionof Business Activities.

 

(a)           Inthe event of any transaction described in Sections 5.16.3(e) or (f), Seller or,to the extent applicable, its Affiliates shall take the steps provided underSection 5.16.4(a) to attempt to dispose of Business Activities upon a price andterms that are acceptable to Seller within two years after suchacquisition.  Seller shall provide toPurchaser prior written notice of its intention to so dispose of the BusinessActivities. Within ten Business Days after such notice, Purchaser may provide awritten offer to Seller to purchase the Business Activities, and Seller shallrespond to such offer within five Business Days of receiving such offer,stating whether Seller desires to commence negotiations with Purchaser or takethe steps provided under Section 5.16.4(c). If Seller at any time thereafter in its sole discretion determines thatit will initiate the steps provided under Section 5.16.4(c), Purchaser shallhave the right to participate in such offering of the Business Activities forsale on the same terms as other potential purchasers that are invited toparticipate in such offering.

 

(b)           IfSeller or its Affiliates fail to dispose of the Business Activities inaccordance with Section 5.16.4(a), not later than three months prior to theearlier of fifteen months 

 

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after the closing of theapplicable acquisition or the end of the Non-Compete Term, Seller shall offerthe Business Activities to Purchaser at a fair value (a “Purchaser Offer”).  For purposes hereof, fair value will bedetermined by Seller taking into account, among other things, an appraisal ofthe Business Activities by a nationally recognized consulting firm and avaluation of the Business Activities by a nationally recognized investmentbanking firm with recognized experience in valuing third party claimadministration companies.

 

(c)           Beforemaking any Purchaser Offer, Seller shall have used commercially reasonable bestefforts to sell the Business Activities in accordance with Section 5.16.4(a),including providing an offering memorandum to prospective purchasers having, tothe Knowledge of Seller, the qualifications and financial means to purchase theBusiness Activities and providing such prospective purchasers reasonable accessto the Business Activities to conduct customary due diligence of such BusinessActivities.

 

(d)           Withrespect to any Purchaser Offer, Seller shall provide Purchaser and itsrespective representatives, upon execution of customary confidentialityagreements, reasonable access to the Business Activities to conduct customarydue diligence of such Business Activities.

 

(e)           Withrespect to any Purchaser Offer, Seller and Purchaser shall, at Purchaser’soption, use commercially reasonable best efforts to negotiate and enter intodefinitive agreements upon commercially reasonable terms to sell to Purchaserthe Business Activities for fair value.

 

(f)            IfPurchaser desires to purchase the Business Activities in accordance with thisSection 5.16.4, and there is disagreement concerning the fair value asdetermined by Seller in accordance herewith, the parties shall promptly submitto binding arbitration the question as to fair value of the BusinessActivities.  Binding arbitration shall beconducted in accordance with the commercial arbitration rules of the AmericanArbitration Association (“AAA”) and judgment on the award rendered by the arbitratormay be entered in any court having jurisdiction thereof.  The arbitrator shall be selected by AAA andshall have at least 10 years of experience in valuing third partyadministrators.  The determination offair value by the arbitrators shall be final. The parties shall use commercially reasonable best efforts to negotiateand enter into definitive agreements upon commercially reasonable terms to sellto Purchaser the Business Activities for fair value, as determined by thearbitrators.

 

(g)           IfPurchaser fails to purchase the Business Activities in accordance herewith,then Seller’s retention of the Business Activities shall be an exception toSection 5.16.1.

 

5.16.5.  DueDiligence Materials. Notwithstanding any other provision of this Agreement, following theClosing, each of Purchaser and Seller may retain one copy of all materialsprovided by

 

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Seller toPurchaser during the due diligence review of the Business by Purchaser.  Copies of “read only” materials of Sellerwill be provided by Seller to Purchaser at the Closing.

 

5.16.6.     Enforcement.  Each of the Parties specifically agrees thatthis covenant is an integral part of the inducement of the respective Partiesto enter into this Agreement and that each Party (or its successors or assigns)shall be entitled to injunctive relief in addition to all other legal andequitable rights and remedies available to it in connection with any breach bythe other Party or any of its Affiliates of any provision of this Section 5.16and that, notwithstanding the foregoing, no right, power or remedy conferredupon or reserved or exercised by a Party in this Section 5.16 is intended to beexclusive of any other right, power or remedy, each and every one of which (nowor hereafter existing at law, in equity, by statute or otherwise) shall becumulative and concurrent.

 

5.16.7.     No-Hire.

 

(a)           Purchaserhereby covenants and agrees that neither it nor the Company nor SecurityCapital Corporation and its subsidiaries shall, during the Non-Compete Term,without the prior written consent of Seller, directly or indirectly, solicitfor employment, hire, or enter into an agency or consulting relationship withany personnel employed by Seller or its Affiliates identified on Schedule5.16.7(a), or any personnel of Seller or its Affiliates working in systemsor technology, whether or not so identified, in each case during suchemployment and for a period of one year after any termination thereof.

 

(b)           Sellerhereby covenants and agrees that neither it nor any of its Affiliates shall,during the Non-Compete Term, without the prior written consent of Purchaser,directly or indirectly, solicit for employment, hire or enter into an agencyrelationship with, any employee of the Company engaged in the conduct of theBusiness, during such employment and for a period of one year after anytermination thereof.

 

(c)           Purchaserhereby covenants and agrees that in the event this Agreement is terminated atany time prior to the Closing, neither it nor any of its Affiliates shall, fora period of two years from and including the date of such termination, withoutthe prior written consent of Seller, directly or indirectly, solicit foremployment, hire or enter into an agency relationship with, any personnel ofSeller or their Affiliates identified on Schedule 5.16.7(c).

 

(d)           Nothingin this Section 5.16.7 shall prohibit any party from hiring any person whoresponds to a general solicitation of employment in any newspaper, magazine,trade publication, electronic medium or other media or from soliciting orhiring any person whose employment with the other party terminated one yearprior to such solicitation or hiring.

 

5.16.8.     ConfidentialInformation.  Except asprovided in this Section, Seller and its Affiliates will not disclose to, sellor license to or permit the use by any other Person of any Confidential

 

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Information; nor willSeller and its Affiliates use any Confidential Information in violation of anycovenant in this Section 5.16.  Theforegoing covenant concerning Confidential Information shall not apply to anyConfidential Information that is or becomes generally known to and availablefor use by the public other than as a result of Seller’s fault or the fault ofany other Person bound by a duty of confidentiality to Purchaser or theCompany.  The foregoing covenant alsoshall not apply to Confidential Information that is used by the Company andSeller and its Affiliates in common with the other businesses of Seller and itsAffiliates as of the Closing Date.

 

5.16.9.     RightsRetained by Seller.  Purchaseracknowledges that it is not acquiring any interest in any confidential orproprietary information concerning the enterprise of Seller and its Affiliatesexcluding  the  Business, including, but not limited to, (i)the customers and employees of Seller and its Affiliates, or (ii) information(x) in which the Company or Seller have an ownership interest (either throughcreation, license, other contractual relation or through acquisition fromSeller and its Affiliates), (y) that is confidential, and (z) relates to thedata bases, marketing strategies, marketing relationships, products, productdevelopment, product pricing, and customers of the enterprise of Seller and itsAffiliates excluding the Business.

 

5.17.        MonthlyFinancial Statements of the Companies.  From the date hereof through the ClosingDate, Seller shall make available to Purchaser, when completed, the unauditedfinancial statements of the Companies as of the end of, and for, each month asprepared by Seller in the ordinary course of its business.

 

5.18.        BidderAgreements.  From the datehereof to the Closing Date, Seller shall use its commercially reasonableefforts to enforce its rights under all effective agreements entered intobetween Seller, on the one hand, and any proposed purchaser, on the other hand,with respect to the potential acquisition of all or any portion of the Businessor similar transaction (the “Bidder Agreements”).  Promptly following the Closing, Seller shalluse its commercially reasonable efforts to enforce its rights under the BidderAgreements for the return or destruction of all confidential information withrespect to the Business.  Immediatelyfollowing the Closing, Seller shall assign each of the Bidder Agreementsidentified on Schedule 5.18 to Purchaser.  Following the Closing Date, Seller shall useits commercially reasonable efforts to enforce, upon Purchaser’s consent and atPurchaser’s expense, Seller’s rights under all Bidder Agreements not assignedto Purchaser unless a breach of such rights under any such Bidder Agreementwould not reasonably be expected to adversely affect the Business.

 

5.19.        FacilitiesPlan.  Effective as of theClosing Date, Purchaser will cause the Company to enter into the CNA Subleasesdescribed in the Facilities Plan that is Schedule 5.19 to this Agreement(the “Facilities Plan”),  whichrepresents premises that the Company will continue to occupy after theClosing.   Purchaser will further causethe Company to make the monthly rental payments to Seller that are described inthe Facilities Plan with respect to space temporarily occupied by the Companyafter the Closing Date in premises owned or leased by Seller.

 

5.20.        Auditof Parent Financial Statements.  Effectiveas of the date of this Agreement, Seller agrees to engage Deloitte & TouchLLP to audit the financial statements of Parent and the

 

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Company for yearsended as determined at the Closing Date, subject to terms of the engagementagreement among Seller, Deloitte & Touche LLP and Purchaser to be enteredinto prior to the Closing.  Theengagement agreement shall provide that Purchaser agrees (i) to indemnify andhold Seller, its Affiliates, and the officers, directors and employees of eachand Deloitte & Touche harmless from and against any claim or liabilitywhatsoever arising from such audit, and (ii) to reimburse Seller for all costsand expenses of Seller and its Affiliates and Deloitte & Touche LLPassociated with such audit and the negotiation and preparation of anyagreements with respect thereto, all pursuant to an engagement agreement thatis in form and substance satisfactory to Seller and Deloitte & Touche LLP.

 

5.21.        Confidentiality.  Seller and Purchaser shall hold andcause their respective Representatives to hold in strict confidence, unlesscompelled to disclose by a Governmental Authority or Legal Requirement, (i) anyterm of this Agreement, the Related Agreements or the transactions contemplatedhereby and thereby, except to the extent provided for under Sections 5.9 and5.11.6 or as otherwise mutually agreed by the Parties; and (ii) any informationthat is furnished by or on behalf of the other Party or its Representativesprior to the Closing in connection with the transactions contemplated by thisAgreement, except to the extent such information can be shown to have been (x)previously known by the Party to which it was furnished, (y) in the public domainthrough no fault of the Party to which it was furnished, or (z) later lawfullyacquired from other sources by the Party to which it was furnished, providedthat such source is not, to such Party’s Knowledge, bound by a confidentialityagreement with the other Party or its Representatives and is not, to suchPerson’s Knowledge, otherwise prohibited from transmitting the information tosuch Party by a contractual, legal or fiduciary obligation.

 

ARTICLE VI

 

Conditions Precedent ToThe ObligationOf Purchaser To Close

 

Purchaser’s obligation to consummate the transactionscontemplated by this Agreement and the Related Agreements is subject to thefulfillment on or prior to the Closing Date of the following conditions, anyone or more of which may be waived by Purchaser.

 

6.1.          Representations,Warranties and Covenants.  Therepresentations and warranties of Seller contained in this Agreement shall betrue and correct on the date of this Agreement and as of the Closing Date withthe same force and effect as though made on and as of the Closing Date, (i) exceptthat any such representations and warranties that are given as of a particulardate and relate solely to a particular date or period shall be true and correctas of such date or period, and (ii) except when the failure to be true andcorrect (without regard to any materiality qualifiers therein), after takinginto account any amendments to the Schedules pursuant to Section 5.6(c), wouldnot have a Closing Material Adverse Effect. Seller shall have performed and complied with all covenants andagreements required by this Agreement to be performed or complied with bySeller on or prior to the Closing Date, except when such failure to perform(without regard to any materiality qualifiers

 

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therein) would not have aClosing Material Adverse Effect.  On theClosing Date, Seller shall have delivered to Purchaser a certificate dated asof the Closing Date, and signed by a senior officer of Seller, to the effectcontemplated by this Section 6.1.

 

6.2.          RelatedAgreements.  The RelatedAgreements shall have been duly executed and delivered by Seller, asapplicable, on or prior to the Closing Date and such agreements shall be infull force and effect with respect to Seller and the Company, as applicable, onthe Closing Date.

 

6.3.          Secretaries’Certificates.  Seller shallhave delivered to Purchaser a certificate of the secretary or assistantsecretary of Seller, dated as of the Closing Date, as to the resolutions of theBoard of Directors (or other similar governing body) of Seller authorizing theexecution, delivery and performance of this Agreement and the RelatedAgreements to which it is a party, as to the status and signature of each ofits officers who executed and delivered this Agreement and such RelatedAgreements and any other document delivered by it in connection with thetransactions contemplated by this Agreement and the Related Agreements, and asto its due incorporation, existence and good standing.

 

6.4.          Approvalsand Consents.  The approvalsand consents of any Governmental Authority listed on Schedule 3.20 and Schedule4.7 shall have been received or deemed received in each case without anyMaterial conditions, restrictions or limitations, and the approvals andconsents of any Person other than a Governmental Authority listed on Schedule3.20 and Schedule 4.7 shall have been received or deemed received,in each case without any conditions, restrictions or limitations which in theaggregate would have a Closing Material Adverse Effect; provided, however*,* that if Seller cannot obtain any such consent from aPerson other than a Governmental Authority, Seller shall have the option toprovide Purchaser with substantially equivalent arrangements with respect to theitem for which such consent could not be obtained, in which event the conditioncontained in this Section 6.4 shall be deemed satisfied.  All applicable waiting periods under anyfederal or state statute or regulation shall have expired or been terminated.

 

6.5.          Injunctionand Litigation.  There shallbe in effect no injunction, writ, preliminary restraining order or other orderissued by any court of competent jurisdiction directing that the transactionscontemplated by this Agreement or the Related Agreements not be consummated asherein or therein provided.

 

6.6.          BankFinancing.  Purchaser shallhave received financing for the purchase of the Company in the principal amountnot to exceed $16,000,000 prior to the Closing on terms substantially equivalentto those contained in terms under discussion between Purchaser and  Bank One, N.A., which terms have not beendisclosed to Seller.  Notwithstanding anyother provision of this Agreement, if such financing is not obtained, Purchasershall not be deemed to be in breach of this Agreement provided that Purchaserused commercially reasonable efforts to obtain and close such financing or asimilar financing from another institution on substantially equivalent terms.

 

6.7.          CNARelease.  Seller and suchdirectors and officers of the Companies as Purchaser may reasonably specifyshall have executed and delivered the CNA Release.

 

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6.8.          ClosingMaterial Adverse Effect. Since the date hereof, there shall not have been any change, event orcircumstance with respect to the Company or the Business which is a ClosingMaterial Adverse Effect.

 

ARTICLE VII

 

Conditions Precedent ToThe ObligationOf Seller To Close

 

Seller’s obligation to consummate the transactionscontemplated by this Agreement and the Related Agreements is subject to thefulfillment on or prior to the Closing Date of the following conditions, anyone or more of which may be waived by Seller.

 

7.1.          Representations,Warranties and Covenants.  Therepresentations and warranties of Purchaser contained in this Agreement shallbe true and correct on the date of this Agreement and as of the Closing Datewith the same force and effect as though made on and as of the Closing Date,except that any such representations and warranties that are given as of aparticular date and relate solely to a particular date or period shall be trueand correct as of such date or period, and except where the failure to be trueand correct (without regard to any materiality qualifiers therein) would notimpair the ability of Purchaser to perform its obligations under this Agreementand the Related Agreements.  Purchasershall have performed and complied with all covenants and agreements required bythis Agreement to be performed or complied with by Purchaser on or prior to theClosing Date.  On the Closing Date,Purchaser shall have delivered to Seller a certificate dated as of the ClosingDate, and signed by a senior officer of Purchaser, to the effect contemplatedby this Section 7.1.

 

7.2.          RelatedAgreements.  The RelatedAgreements shall have been duly executed and delivered by Purchaser or aPurchaser’s Affiliate, as the case may be, on or prior to the Closing Date andsuch agreements shall be in full force and effect with respect to Purchaser.

 

7.3.          Secretary’sCertificates.  Purchaser shallhave delivered to Seller a certificate of the secretary or assistant secretaryof Purchaser, dated as of the Closing Date, as to the resolutions of the Boardof Directors (or other similar governing body) of Purchaser authorizing theexecution, delivery and performance of this Agreement and the RelatedAgreements to which it is a party, as to the status and signature of each ofits officers who executed and delivered this Agreement and such RelatedAgreements and any other document delivered by it in connection with thetransactions contemplated by this Agreement and the Related Agreements and asto its due incorporation, existence and good standing.

 

7.4.          Approvalsand Consents.  The approvalsand consents of any Governmental Authority listed in Schedule 3.20 and Schedule4.7 shall have been received or deemed received in each case without anyMaterial conditions, restrictions or limitations and the approvals and consents

 

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of any Person other thana Governmental Authority listed on Schedule 3.20 and Schedule 4.7shall have been received or deemed received in each case without anyconditions, restrictions or limitations which in the aggregate would have aMaterial adverse effect on the financial condition and results of operations ofthe Seller.  All applicable waitingperiods under any federal or state statute or regulation shall have expired orbeen terminated.

 

7.5.          Companies’Release.  The Companies andsuch directors and officers of the Companies as Seller may reasonably specifyshall have executed and delivered the Companies’ Release.

 

7.6.          Injunctionand Litigation.  There shallbe in effect no injunction, writ, preliminary restraining order or any order ofany nature directing that the transactions contemplated by this Agreement andthe Related Agreements not be consummated as herein or therein provided.

 

 

ARTICLE VIII

 

Tax Matters

 

8.1.          Post-ClosingAccess to Records; Cooperation. After the Closing, Seller and Purchaser will each afford (or cause theCompanies and their respective Affiliates to afford) to the other or to suchother’s representatives or agents reasonable access during normal businesshours (on terms not unreasonably disruptive to the business, operations oremployees of the party or parties of which access is sought) to the records andall other data and information relating to Taxes pertaining to taxable years orperiods ending on or prior to the Closing Date (and the Straddle Period) and tothe Companies’ employees, the Transferred Employees, the Delayed TransferredEmployees, or such other employees providing services in respect of theBusiness and auditors for the purpose of obtaining information relating toTaxes, to the extent such access is reasonably necessary: (i) to prepare andcomplete any Tax Returns required to be made hereunder; (ii) to prosecute ordefend on behalf of the Companies litigation or administrative controversiescontrolled by Seller or Purchaser, as the case may be, under Section 8.2 ofthis Agreement; and (iii) to comply with requests made by any Tax authorityconducting an audit, investigation or inquiry relating to the Companies’activities; provided that in no case will Purchaser (or its Affiliates) haveaccess to the consolidated Tax Returns of the Loews Corporation AffiliatedGroup.  After the Closing, Purchaser andSeller agree (i) to retain, or (in the case of Purchaser) cause the Companiesto retain, all books and records with respect to Tax matters pertinent to theCompanies relating to any Tax period beginning before the Closing Date untilthe expiration of the statute of limitations (and, to the extent notified byPurchaser or Seller, any extensions thereof) of the respective Tax periods, andto abide by all record retention agreements entered into with any GovernmentalAuthority; and (ii) to give the other party hereto reasonable written noticeprior to transferring, destroying or discarding any such books and records and,if the other party so requests, Purchaser or Seller, as the case may be, shallallow the other party hereto to take possession of such books and records.

 

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8.2.          Liabilityfor Taxes and Related Matters.

 

8.2.1.       Seller’s Liabilityfor Taxes.  Seller shall beliable for all federal income taxes imposed on the Company for any taxable yearor period that ends on or before the Closing Date.  Seller shall also be liable for all otherTaxes, including any obligation to contribute to the payment of a Taxdetermined on a consolidated, combined or unitary basis, with respect to agroup of corporations that includes or included the Companies (i) imposed onSeller or its Affiliates (other than the Companies) for any taxable year and (ii)imposed on the Companies or for which the Companies may otherwise be liable (A)for any taxable year or period that ends on or before the Closing Date or (B)with respect to any taxable year or period beginning before and ending afterthe Closing Date, for the portion of such taxable year or period ending on theClosing Date, which shall be paid to Purchaser or to the Governmental Authorityimposing the tax as Purchaser and Seller shall agree.

 

8.2.2.       Purchaser’sLiability for Taxes. Purchaser shall be liable to Seller for the Taxes of the Companies forany taxable year or period that begins after the Closing Date and, with respectto any taxable year or period beginning before and ending after the ClosingDate, the portion of such taxable year beginning after the Closing Date.

 

8.2.3.       Taxes forShort Taxable Year.  Sellerand Purchaser shall close the taxable period of the Companies as of the closeof business on the Closing Date, unless such action is prohibited by LegalRequirements.  In any case where a LegalRequirement prohibits the Company from closing its taxable year on the ClosingDate then, for purposes of Sections 8.2.1 and 8.2.2, the determination of theTaxes of the Companies for the portion of the year or period ending on, and theportion of the year or period beginning after, the Closing Date shall bedetermined on the basis of an interim closing of the books as of the close ofbusiness on the Closing Date, except that exemptions, allowances, deductions orminimum amounts that are calculated on an annual basis, such as the deductionfor depreciation, shall be ratably apportioned on a time basis.

 

8.2.4.       Adjustment toCash Consideration Amount.  Anypayment by Purchaser or Seller of any amount for which Purchaser or Seller isliable under Section 8.2.1 and 8.2.2 will be an adjustment to the CashConsideration Amount and will also be a purchase price adjustment for federalincome tax purposes unless a determination (as defined in Section 1313 of theCode) causes any such payment not to constitute an adjustment to the purchaseprice****for federal income tax purposes.

 

8.2.5.       Preparationand Filing of Tax Returns.  (a) Seller shall cause to be prepared andtimely filed, taking into account all valid extensions of time to file, and payall Taxes due on Tax Returns of the Companies (or Tax Returns in which theCompanies are required to be included) that are due to be filed for any taxableyears or periods ending on or before the Closing Date.  Withoutlimiting the generality of the foregoing, Seller shall be responsible forpreparing and distributing all Internal Revenue Service Forms 1099 with respectto the Company’s operations during the 2004 calendar year.  All such Tax Returns shall be preparedconsistent with past practices.  Sellershall pay or cause to be paid all Taxes shown to be due on Tax Returns that itis responsible for preparing and filing under this Agreement.

 

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(b)           Purchasershall cause to be prepared and timely filed, taking into account all validextensions of time to file, all Tax Returns of the Companies that are due to befiled for any taxable year or period that begins on or before the Closing Dateand ends after the Closing Date (“Straddle Period”).  Taxes for a Straddle Period shall be thejoint responsibility of Seller and Purchaser and shall be apportioned betweenSeller and Purchaser based on an interim closing of the books.  Purchaser shall pay to the appropriate taxingauthority the full amount of Taxes shown on any Straddle Period TaxReturn.  Purchaser shall promptly provideto Seller a copy of all such Straddle Period Tax Returns as filed andthereafter Seller shall promptly reimburse Purchaser for Seller’s share of suchTaxes as determined under this Section 8.2.5. Purchaser or the Company shallbe responsible for preparing and distributing all Internal Revenue ServiceForms 1099 with respect to the Company’s operations during the 2005 and latercalendar years.

 

(c)           Purchasershall be responsible for preparing and filing all Tax Returns and paying allTaxes not covered by Sections 8.2.5(a) and (b).

 

8.2.6.       ContestProvisions.  (a) Purchasershall promptly notify Seller in writing upon receipt by Purchaser, any ofPurchaser’s Affiliates or the Companies of notice of any pending or threatenedfederal, state, local or foreign Tax audits or assessments which may affect theTax liabilities of the Companies for which Seller is liable to Purchaserpursuant to Section 8.2.1, provided that failure to comply with this provisionshall not affect Purchaser’s right to indemnification under Article X except tothe extent such failure directly results in an increase in the amount for whichSeller is liable under Section 8.2.1. Seller shall promptly notify Purchaser in writing upon receipt by Selleror any of Seller’s Affiliates of notice of any pending or threatened federal,state, local or foreign Tax audits or assessments which may affect the Taxliabilities of the Companies for which Purchaser is liable to Seller pursuantto Section 8.2.2, provided that failure to comply with this provision shall notaffect Seller’s right to indemnification under Article X except to the extentsuch failure directly results in an increase in the amount for which Purchaseris liable under Section 8.2.2.

 

(b)           Sellershall have the sole right to represent the Companies’ interests in any Taxaudit or administrative or court proceeding relating to taxable years orperiods ending on or before the Closing Date, and to employ counsel of itschoice and expense.

 

(c)           Withrespect to Straddle Periods, the Parties shall jointly control any audits orproceedings, and neither Party shall settle or compromise any matter withoutthe prior written consent of the other Party.

 

(d)           Purchasershall have the sole right to represent the Companies’ interests in the defenseof any claim for Taxes relating to taxable years or periods beginning on orafter the Closing Date.

 

8.3.          Survivalof Obligations.  The obligations ofthe parties set forth in Article VIII shall be unconditional and absolute andshall remain in effect for the period of the relevant statute of limitationsapplicable to the Taxes at issue.

 

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8.4.          Refundsand Tax Benefits

 

8.4.1        IncomeTax Refunds.  Any Income TaxRefunds that are received by Purchaser or the Companies, and any amountscredited against the Income Tax to which Purchaser or the Companies becomeentitled, that relate to Tax periods or portions thereof ending on or beforethe Closing Date shall be for the account of Seller, and Purchaser shall payover to Seller such refund or the amount of any such credit within 15 daysafter receipt or entitlement thereto.

 

8.4.2.       Carrybackof Tax Attributes.  Purchaseragrees that it will (and will cause the Companies to) make a timely electionunder applicable state Legal Requirements to relinquish, with respect to allconsolidated net operating losses attributable to the Companies, the portion ofthe carryback period for which the Companies were a member of an AffiliatedGroup, other than the Affiliated Group of which Purchaser is the commonparent.  Purchaser shall not elect underany applicable state Legal Requirement to carry back any item of loss,deduction or credit of Purchaser, the Companies or any of their Affiliates thatarises in any Tax Period or portion thereof after the Closing Date into any Taxperiod or portion thereof ending on or before the Closing Date.

 

8.5.          TaxSharing Agreements.  All taxsharing agreements or similar agreements (other than this Agreement) withrespect to or involving the Companies shall be terminated as of the Closing,and, after the Closing Date, neither Purchaser and the Companies nor Seller andits ultimate tax parent (or any of its direct or indirect Subsidiaries orAffiliates) shall be bound thereby or have any liability thereunder.

 

8.6.          CertainTaxes.  All transfer,documentary, sales, use, stamp, registration and other such Taxes and fees(including any penalties and interest) incurred in connection with thisAgreement) shall be paid by Purchaser when due, and Purchaser will, at its ownexpense, file all necessary Tax Returns and other documentation with respect toall such transfer, documentary, sales, use, stamp, registration and other Taxesand fees, and, if required by applicable Legal Requirements, Seller will joinin the execution of any such Tax Returns and other documentation.

 

8.7.          Disclosureof U.S. Federal Income Tax Treatment.  Notwithstanding any other provision of thisAgreement to the contrary, Seller and Purchaser (and each of their employees,representatives or other agents) may disclose to any and all Persons, withoutlimitation of any kind, the tax treatment and tax structure of the transactionscontemplated under this Agreement and the Related Agreements and all materialsof any kind (including opinions or other tax analyses) that are providedrelating to such tax treatment and tax structure, provided, however, that suchdisclosure may not be made until the earlier of the date of the public announcementof discussions relating to the transactions contemplated by this Agreement, thedate of the public announcement of the transactions contemplated by thisAgreement, or the date of the execution of this Agreement.  For this purpose, the “tax treatment” is thepurported or claimed U.S. federal income tax treatment of the transactionscontemplated by this Agreement and the Related Agreements, and the “taxstructure” is any fact that may be relevant to understanding the purported orclaimed U.S. federal income tax treatment of such transactions.  The preceding two sentences are intended tocause such

 

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transactions not to betreated as offered under conditions of confidentiality for purposes of Sections1.6011-4(b)(3) and 301.6111-2(a)(2)(ii) (or any successor provisions) of theTreasury Regulations issued under the Code, and shall be construed in a mannerconsistent with such purpose.

 

 

ARTICLE IX

 

Termination

 

9.1.          Termination. This Agreement may be terminatedat any time prior to the Closing Date:

 

(a)           bymutual agreement of Purchaser and Seller;

 

(b)           byPurchaser or Seller if a Governmental Authority shall have issued an order,decree or ruling or taken any other action (which order, decree or ruling theParties shall use commercially reasonable efforts to terminate), in each casepermanently restraining, enjoining or otherwise prohibiting the transactionscontemplated by this Agreement, and such order, decree, ruling or other actionshall have become final and nonappealable;

 

(c)           byPurchaser if, subsequent to the date hereof and prior to the Closing Date,there occurs any events that have had or are likely to have individually or inthe aggregate a Closing Material Adverse Effect, and such Closing MaterialAdverse Effect is incapable of being cured or has continued without cure for aperiod of 30 days after notice thereof by Purchaser to Seller;

 

(d)           byPurchaser if the Closing has not occurred on or before the Outside Closing Date(unless the failure results primarily from a breach by Purchaser of anyrepresentation, warranty or covenant of Purchaser contained in this Agreementor Purchaser’s failure to fulfill its obligations incidental to a conditionprecedent to Closing or another default by Purchaser); or

 

(e)           bySeller if the Closing has not occurred on or before the Outside Closing Date(unless the failure results primarily from a breach by Seller of anyrepresentation, warranty or covenant of Seller contained in this Agreement orSeller’s failure to fulfill a condition precedent to Closing or another defaultby Seller).

 

9.2.          Procedureon Termination.  In the eventof termination of this Agreement pursuant to Section 9.1 hereof, written noticeof termination shall be given pursuant to the notice provisions herein, and thetransactions contemplated by this Agreement shall be terminated without furtheraction by any Party.  If the transactionscontemplated by this Agreement are terminated as provided herein:

 

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(a)           Purchaserand Seller shall return all documents, work papers and other material of anyother Party relating to the transactions contemplated hereby, whether soobtained before or after the execution hereof, upon the written request of the Partyfurnishing the same,

 

(b)           suchtermination shall not in any way limit or restrict the rights and remedies ofany Party hereto against any other Party which has breached any of therepresentations, warranties, covenants, agreements or other provisions of thisAgreement prior to termination hereof, and

 

(c)           anyconfidentiality obligations of the Parties (arising under this Agreement orunder any other confidentiality agreement entered into by Seller and Purchaser,including, but not limited to, the Confidentiality Agreement) shall survive thetermination of this Agreement.

 

ARTICLE X

 

Indemnification

 

10.1.        Seller’s Indemnification.  Inaddition to any other provisions of this Agreement under which Seller hasagreed to indemnify Purchaser, and except as otherwise expressly provided inthis Agreement, Seller (without right of contribution from the Companies) shallindemnify and hold Purchaser, the Company and their respective directors,officers and employees harmless from and against any Loss arising or resultingfrom:

 

(a)           Anybreach of any representation or warranty contained in this Agreement or fromany misrepresentation in any certificate furnished or to be furnished toPurchaser hereunder;

 

(b)           Anynonfulfillment of any agreement on the part of Seller under this Agreement;

 

(c)           Anybreach by the Companies of any agreement binding on the Companies that occursprior to the Closing

 

(d)           TheRetained Employee Liabilities;

 

(e)           Litigationof the type described in Section 3.6 that arises as a result of acts oromissions of the Company prior to the Closing Date;

 

(f)            UnpaidTaxes of any member of the Loews Corporation Affiliated Group (other than theCompanies) under Internal Revenue Service Reg. §1.1502-6 (or any similarprovision of state, local or foreign law), as a transferee or successor, bycontract or otherwise; and

 

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(g)           AnyTaxes of the Companies with respect to any Tax year or portion thereof endingon or before the Closing Date.

 

In the case of anyaction, event or omission described in Sections 10.1(a), (b), (c) and (d) thatcontinues after the Closing, Seller shall be responsible for indemnificationfor the period prior to the Closing, and the responsibility of Seller andPurchaser for such action, event or omission after the Closing shall beapportioned between them according to equitable allocation principles.

 

10.2.        Purchaser’sIndemnification.  In additionto any other provisions of this Agreement under which Purchaser has agreed toindemnify Seller, and except as expressly provided in this Agreement, Purchasershall indemnify and hold Seller and its directors, officers and employeesharmless from and against any Loss resulting from any breach of anyrepresentation or warranty contained in this Agreement or nonfulfillment of anyagreement on the part of Purchaser under this Agreement or from anymisrepresentation in any certificate furnished or to be furnished to Sellerhereunder.

 

10.3.        Conditionsof Indemnification.  Therespective obligations and liabilities of Seller and Purchaser (hereinsometimes called the “Indemnifying Party”) to the other (herein sometimescalled the “Indemnified Party”) under Sections 10.1 and 10.2 hereof shall besubject to the following terms and conditions:

 

(a)           Sellerand Purchaser each agree to designate a single point of contact within each oftheir respective corporate organizations to give and receive notices ofdisputes under this Agreement and the Related Agreements (the “Dispute Officer”),who shall be acceptable to the other party and shall be a senior manager whoeither reports directly to the Chief Executive Officer or a person who reportsto a person who reports directly to the Chief Executive Officer.  In the event of any claim by Purchaser orSeller against the other covered by this Article X that does not involve aclaim, audit or inquiry by a third party to which a response must be served inorder to avoid default or waiver of any defense, the Parties agree that for aperiod of not less than 15 days following receipt of the claim by the Partyagainst which the claim has been asserted, they each will respond to reasonableinquiries by the other Party and will hold at least one meeting in person or bytelephone conference of the Dispute Officers to attempt to resolve the claimand to provide prompt reimbursement to the claiming Party of the amount agreedto be owed to such Party.  To the extentthat any amount of any claim remains in dispute at the end of the agreed periodfor consideration by the Dispute Officers, which shall not be less than 15 daysfollowing receipt of the claim by the Party against whom the claim has beenmade, the Party seeking recovery may proceed with its claim under Section10.3(b).  Any undisputed portion of anyinvoice or other claim that has been submitted pursuant to this Section 10.3shall be paid to the Party to which such amount is owed within 15 days of thelater of (i) the date the invoice or claim is received by the IndemnifyingParty, (ii) the date a bona fide dispute over such portion is resolved byagreement of the Parties, or (iii) if a bona fide dispute is not resolved byagreement,

 

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the date such dispute isotherwise finally resolved.  Amounts notpaid within the time limits provided in this Section 10.3(a) shall bearinterest at the Contract Interest Rate.

 

(b)           Onor before the earliest of (i) the 20th day after receipt of notice (referred toherein as “notice”) of commencement of any action or the assertion in writing,formal or informal, of any claim, audit or inquiry (referred to herein as a “claim”),(ii) the tenth day preceding the day on which a responsive pleading must beserved in order to prevent judgment by default in favor of the person assertingthe claim, or (iii), in the case of a claim described in (a) above, the 30thday after expiration of the agreed period of consideration by the DisputeOfficers, the Indemnified Party shall give the Indemnifying Party writtennotice thereof together with a copy of the document asserting such claim.  Failure to give such notice timely shall notrelieve the Indemnifying Party from any obligation under this Agreement exceptto the extent that the Indemnifying Party is prejudiced, except that theIndemnifying Party shall not be responsible for expenses incurred during theperiod within which the Indemnified Party failed to give notice.  The Indemnifying Party shall have the rightto respond to such claim and to undertake the defense thereof by arepresentative of its own choosing (which shall be reasonably satisfactory tothe Indemnified Party) and to enter into a settlement or compromise thereof orconsent to a judgment with respect thereto; provided, however, the IndemnifyingParty shall not, without the prior written consent of the Indemnified Party,settle or compromise any claim by any third party or consent to the entry ofjudgment (i) that does not include as an unconditional term thereof the givingby the claimant or the plaintiff to the Indemnified Party a release from allliability in respect of such claim, or (ii) that contemplates any payment orperformance by the Indemnified Party. The Indemnified Party may retain separate counsel at its sole cost andexpense to represent it in any proceedings involving any claim;

 

(c)           Inthe event that the Indemnifying Party, by the 20th day after receipt of noticeof a claim by a third party (or, if earlier, by the fifth day preceding the dayon which a responsive pleading must be served in order to prevent judgment bydefault in favor of the person asserting such claim), (i) does not elect todefend against such claim, or (ii) if an election to defend is made, does notprovide reasonable assurances to the Indemnified Party of (x) the IndemnifyingParty’s (or its insurer’s) ability to pay defense costs and indemnity costslikely to be incurred with respect to the claim, or (y) the Indemnifying Party’sactive and diligent defense of the claim, the Indemnified Party will, uponnotice to the Indemnifying Party, have the right to respond to such claim andto undertake to defend, compromise or settle such claim on behalf of and forthe account and risk of loss of the Indemnifying Party, subject to the right ofthe Indemnifying Party to assume the defense of such claim upon satisfying conditions(i) and (ii) above at any time prior to the settlement, compromise or finaldetermination thereof (if such assumption be permitted by any court or othertribunal having jurisdiction thereof), provided that the Indemnifying Partyshall be

 

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given at least 15 days’prior written notice of the effectiveness of any such proposed settlement orcompromise; and

 

(d)           Inconnection with any such indemnification, the Indemnifying Party shallcooperate in all reasonable requests of the Indemnified Party.

 

10.4.        IndemnificationLimits.

 

10.4.1.     Exclusionsfrom Indemnification. Required payments by an Indemnifying Party pursuant to this Article Xshall be limited to the amount of any Loss remaining after deducting therefrom(i) any insurance proceeds recoverable by the Indemnified Party on account ofthe Loss, (ii) any Tax benefit to the Indemnified Party, and (iii) anyindemnity, contribution, or other similar payment recoverable by anyIndemnified Party from any third party, in each case with respect to suchLoss.  The Indemnified Party shall usecommercially reasonable efforts to collect all such indemnity, contribution orother similar payments.

 

10.4.2.     Time Limits.  Neither Purchaser nor Seller shall have any obligationto indemnify the other for any breach of any representation or breach ofwarranty or a breach of Section 5.6 or from any misrepresentation in anycertificate furnished or to be furnished hereunder unless on or before a date18 months after the Closing Date, the party seeking indemnification notifiesthe other party of a claim specifying the factual basis for the claim inreasonable detail to the extent then known by the party seekingindemnification.  The foregoing limitshall not apply, expressly or by implication, (i) to claims based on Sections3.1, 3.2, 3.3, 3.5, 3.14, 3.15, 4.1, 4.2 and 4.7, each of which shall surviveindefinitely, (ii) to claims based on Sections 3.13 or 10.1(f) or 10.1(g) orthe covenants in Article VIII, which shall survive, as to each Tax Period towhich such representation applies, until the closing of the statute oflimitations with respect to such Tax period, and (iii) to claims arising underSections 10.1(b), (c) (d) and (e), which shall survive indefinitely subject tostatutes of limitations applicable to claims that are the subject of Sections10.1(b), (c), (d) and (e).

 

10.4.3.     Limitations on Amount.  Seller shall have no obligation to indemnifyPurchaser under Section 10.1(a) unless (i) the amount of Purchaser’s claimexceeds $225,000 with respect to any single Loss, (ii) the aggregate amount ofsuch indemnifiable claims previously paid by Purchaser shall exceed $225.000,and thereafter Seller shall be responsible only for the excess of suchaggregate amount over $225,000, provided, however, that in no event shall theaggregate of all indemnifiable claims paid by Seller to Purchaser hereunderexceed $3,000,000.  The limitations onamount set forth in this Section shall not apply to limit recovery by Purchaserfor indemnification under clauses (i), (ii) and (iii) of Section 10.4.2.

 

10.4.4.     Exclusive Remedy.  The Parties expressly acknowledge that (i)the provisions of this Article X shall be the sole and exclusive remedy fordamages caused as a result of breaches of the representations, warranties andagreements contained in this Agreement (except to the extent additionallyprovided in Article VIII), except that the Parties shall not be limited to theremedies provided in this Article X with respect to any agreements to beperformed after the Closing Date and except that the remedies of injunction andspecific performance shall remain available to the

 

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Parties hereto,and (ii) no Indemnifying Party shall be liable or responsible to any otherparty hereto or its Affiliates for punitive, incidental and consequential ormultiplied damages or for lost profits, in accordance with Section 11.11.

 

ARTICLE XI

 

MiscellaneousProvisions

 

11.1.        Notices.  Any notice, request or othercommunication to be given by any party hereunder shall be in writing and shallbe delivered personally, sent by registered or certified mail, postage prepaid,by overnight courier with written confirmation of delivery or by facsimiletransmission with written confirmation of error-free transmission.  Any such notice shall be deemed given when sodelivered personally or sent by facsimile transmission (and immediately aftertransmission confirmed by telephone), if mailed, on the date shown on thereceipt therefor, or if sent by overnight courier, on the date shown on thewritten confirmation of delivery.  Suchnotices shall be given to the following address:

 

To Seller:                               ContinentalCasualty Company

CNA Center

Chicago, Illinois 60685

Attention:  Secretary

Telephone No.: 312-822-1384

Fax Number: 312-822-1297

 

To Purchaser:                       SecurityCapital Corporation

8 Greenwich Office Park

Greenwich, CT 06831

Attention: Brian Fitzgerald, Chairman

Telephone No.:  203-625-0770

Fax Number:  203-625-0423

 

With a copy to:                    BrianO’Connor, Esq.

Diserio Martin O’Connor & Castiglioni LLP

One Atlantic Street

Stamford, CT 06901

Telephone No.:  203-358-0800,Ext. 334

Fax Number:  203-348-2321

 

11.2.        Sole Agreement.  This Agreement may not be amended or modifiedin any respect whatsoever except by instrument in writing signed by the Partieshereto.  This Agreement and the RelatedAgreements and other documents delivered pursuant hereto, constitute the entireagreement among the Parties hereto with respect to the subject matter hereofand supersede all prior negotiations, discussions, writings and agreementsbetween them with respect thereto. EXCEPT TO THE EXTENT OF THE EXPRESS REPRESENTATIONS AND WARRANTIES

 

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CONTAINED INARTICLE III, SELLER IS SELLING THE PARENT SHARES ON AN “AS IS, WHERE IS” BASIS,AND DISCLAIMS ALL OTHER WARRANTIES, REPRESENTATIONS AND GUARANTEES, WHETHEREXPRESS OR IMPLIED.

 

11.3.        Successorsand Assigns.  The rights andobligations of the Parties under this Agreement shall not be subject toassignment except upon prior written consent of the non-assigning Party, andany attempted assignment in violation of this Section 11.3 shall be null andvoid.  The terms of this Agreement shallbe binding upon and inure to the benefit of and be enforceable by and againstthe successors and permitted assigns of the Parties hereto.

 

11.4.        Captions.  The captions of this Agreement are forconvenience of reference only and shall not define or limit any of the terms orprovisions hereof.

 

11.5.        DisputesResolution.  This Sectionestablishes a procedure for (i) internal review of disputes between Seller andPurchaser under this Agreement and the Related Agreements, and (ii) a procedurefor review and discussion of disputes by Seller and Purchaser prior toinitiating any litigation or arbitration with respect thereto.  The parties agree that a failure to followthe procedures described in this Section 11.5 will constitute a breach of thisAgreement and of the standard of good faith applicable to this Agreement.  Seller and Purchaser agree to establishprocedures within their respective corporate organizations intended to resultin the prompt internal reporting of disputes by all levels of the respective organizations.  The dispute resolution procedures soestablished will require Seller’s and Purchaser’s employees and representativesto report the existence of a dispute with the other party promptly to theDispute Officer for such employee’s or representative’s organization.  Seller and Purchaser agree that prior toinitiating litigation or arbitration of any dispute under this Agreement or anyof the Related Agreements, notice of the dispute and a statement of the basistherefor will be provided to the other party by the Dispute Officers for eachorganization to discuss and explain their positions with respect to thedispute.  Notice of disputes will begiven under this provision promptly after the existence of the dispute becomesknown to either Seller or Purchaser.  Anynotice of a dispute by any person other than the Dispute Officer will beineffective to initiate the dispute review process under this Section.

 

11.6.        GoverningLaw and Jurisdiction.  ThisAgreement shall be governed by and construed in accordance with the laws of theState of Illinois applicable to contracts entered into therein, withoutreference to principles of choice of law or conflicts of laws.  Purchaser hereby irrevocably andunconditionally submits to the exclusive jurisdiction of any State or FederalCourt sitting in Cook County, State of Illinois, over any suit, action orproceeding arising out of or relating to this Agreement.  Purchaser hereby agrees that service of anyprocess, summons, notice or document by U.S. registered mail addressed toPurchaser shall be effective service of process for any action, suit orproceeding brought against Purchaser in such court.  Purchaser hereby irrevocably andunconditionally waives any objection to the laying of venue of any such suit,action or proceeding brought in any such court and any claim that any suchaction, suit or proceeding brought in any such court has been brought in aninconvenient forum.  Purchaser agreesthat final judgment in any such action, suit or proceeding brought in any suchcourt shall be conclusive and binding

 

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upon Purchaser and may beenforced in any other courts to whose jurisdiction Purchaser may be subject, bysuit upon such judgment.

 

11.7.        NoThird Party Beneficiaries. Except as otherwise expressly set forth in any provision of thisAgreement, nothing in this Agreement is intended or shall be construed to giveany Person, other than the Parties hereto, any legal or equitable right, remedyor claim under or in respect of this Agreement or any provision containedherein.  For the avoidance of doubt,nothing in this Agreement shall be construed to give any Business Employee anylegal or equitable right, remedy or claim under or in respect of this Agreementof any provision contained herein.

 

11.8.        Expenses.  Except as otherwise provided herein, theParties hereto shall each bear their respective expenses incurred in connectionwith the negotiation, preparation, execution, and performance of this Agreementand the Related Agreements and the transactions contemplated hereby andthereby, including, without limitation, all fees and expenses of agents,representatives, investment bankers, counsel and accountants.

 

11.9.        Counterparts. This Agreement may be executed bythe Parties hereto in separate counterparts, each of which when so executed anddelivered shall be an original, but all such counterparts shall togetherconstitute one and the same instrument. Each counterpart may consist of a number of copies hereof each signed byless than all, but together signed by all of the parties hereto.  Each counterpart may be delivered byfacsimile transmission, which transmission shall be deemed delivery of anoriginally executed document.

 

11.10.      Severability.  Any term or provision of this Agreement whichis invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,be ineffective to the extent of such invalidity or unenforceability withoutrendering invalid or unenforceable the remaining terms and provisions of thisAgreement or affecting the validity or enforceability of any of the terms orprovisions of this Agreement in any other jurisdiction, so long as the economicor legal substance of the transactions contemplated hereby is not affected inany manner Materially adverse to any party. If any provision of this Agreement is so broad as to be unenforceable,that provision shall be interpreted to be only so broad as is enforceable.

 

11.11.      Waiverof Jury Trial; Damages.  Eachof the Parties hereto irrevocably waives, with respect to any first party actionfiled by the other party (but not as to any action by one party against theother seeking indemnification for a third party claim against the partyinitiating the action, to the extent that such damages may be recoverable aspart of the indemnification by the indemnified party) (i) any and all right totrial by jury, and (ii) any right to punitive, incidental and consequential ormultiplied damages or lost profits, either pursuant to common law or statute,in any legal proceedings arising out of or related to this Agreement or thetransactions contemplated hereby.

 

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IN WITNESSWHEREOF, the Parties hereby execute this Agreement as of the day and year firstset forth above.

 
| SELLER:    | CONTINENTAL CASUALTY COMPANY |
|------------|------------------------------|
|       |                         |
|       |                         |
|       | By:                          |   |   |
|       | Name                         |
|       | Title                        |
|       |                         |
|       |                         |
| PURCHASER: | OCTAGON RISK SERVICES, INC.  |
|       |                         |
|       |                         |
|       | By:                          |   |   |
|       | Name:                        |
|       | Title:                       |

 

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INDEX OF EXHIBITS

 
| Exhibit A |   | CNA Assignment and Assumption Agreement |
|-----------|--------|-----------------------------------------|
| Exhibit B |   | CNA Bill of Sale                        |
| Exhibit C |   | Company Bill of Sale                    |
| Exhibit D |   | CNA Sublease Form                       |
| Exhibit E |   | CNA Interim Services Agreement          |
| Exhibit F |   | Company Interim Services Agreement      |
| Exhibit G |   | Software License Agreement              |
| Exhibit H |   | Seller Release                          |
| Exhibit I |   | Purchaser Release                       |

 

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INDEX OF SCHEDULES

 
| Schedule 1(A)     |   | Business Employees                                                                   |
|-------------------|--------|--------------------------------------------------------------------------------------|
| Schedule 1(B)     |   | CNA Assigned Contracts                                                               |
| Schedule 1(C)     |   | CNA Transferred Assets                                                               |
| Schedule 1(D)     |   | Company Assets                                                                       |
| Schedule 1(E)     |   | Company Transferred  Assets                                                          |
| Schedule 1(F)     |   | Knowledge                                                                            |
| Schedule 2.4.1(A) |   | Prototype Pro Forma  Balance Sheet                                                   |
| Schedule 2.4.1(B) |   | Prototype Working  Capital Adjustment                                                |
| Schedule 3.1      |   | The Company                                                                          |
| Schedule 3.4.2(A) |   | Revenue Recognition  Policy                                                          |
| Schedule 3.4.2(B) |   | Changes in Accounting  Methods                                                       |
| Schedule 3.4.3    |   | Liabilities                                                                          |
|              |   |                                                                                 |
| Schedule 3.5.1    |   | Company Assets without  Good and Marketable Title                                    |
| Schedule 3.5.2    |   | Encumbrances                                                                         |
| Schedule 3.5.3    |   | Income Tax Basis                                                                     |
| Schedule 3.6      |   | Litigation                                                                           |
| Schedule 3.8.1    |   | Company Contracts                                                                    |
| Schedule 3.8.2    |   | Assignors in Default of  CNA Assigned Contracts                                      |
| Schedule 3.9.1    |   | Trademarks, Trade  Names, Service Marks and Copyrights                               |
| Schedule 3.9.3(a) |   | Owned Principally Used  Computer Programs and Owned Generally Used Computer Programs |
| Schedule 3.9.3(b) |   | Licensed Computer  Programs                                                          |
| Schedule 3.9.3(c) |   | Shrink Wrap Computer  Programs                                                       |
| Schedule 3.10     |   | Customer Agreements                                                                  |
| Schedule 3.11     |   | Compliance with Legal  Requirements                                                  |
| Schedule 3.12     |   | Licenses                                                                             |
| Schedule 3.14     |   | Employment Agreements                                                                |
| Schedule 3.15(a)  |   | ERISA Plans                                                                          |
| Schedule 3.15(b)  |   | Employee Benefit  Arrangements of the Company                                        |
| Schedule 3.17     |   | Insurance                                                                            |
| Schedule 3.19     |   | Absence of Certain  Changes and Events                                               |
| Schedule 3.20     |   | Seller’s Approvals                                                              |
| Schedule 3.22.2   |   | Leased Real Property                                                                 |
| Schedule 3.25     |   | Hazardous Materials                                                                  |
| Schedule 4.1      |   | Status of Purchaser                                                                  |
| Schedule 4.4      |   | Financial Statements                                                                 |
| Schedule 4.7      |   | Purchaser’s Approvals                                                           |
| Schedule 5.2(b)   |   | Conduct of the Business                                                              |
| Schedule 5.7(e)   |   | Delayed Transferred  Employees                                                       |
| Schedule 5.7(f)   |   | Employment Records of  Transferred Employees                                         |
| Schedule 5.7(h)   |   | Severance Benefits                                                                   |

 

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| Schedule 5.8(c)    |   | Seller’s Obligations  with respect to Computer Programs                                 |
|--------------------|--------|----------------------------------------------------------------------------------------------|
| Schedule 5.8(e)    |   | Aggregation of  Reimbursement of Costs Example                                               |
| Schedule 5.16.7(a) |   | Employees of Seller or  Its Affiliates Subject to No-Hire                                    |
| Schedule 5.16.7(c) |   | Employees of Seller or  Its Affiliates Subject to No-Hire upon termination of this Agreement |
| Schedule 5.18      |   | Bidder Agreements                                                                            |
| Schedule 5.19      |   | Facilities Plan                                                                              |

 

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