Exhibit 2.1
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), effective as of the
1st day of October, 2003 (the "Effective Date"), by and among Hypercom
Corporation, a Delaware corporation ("Parent"), Golden Eagle Leasing, Inc., an
Arizona corporation ("Seller"), and Northern Leasing Systems Inc., a New York
corporation ("Purchaser").
W I T N E S S E T H
WHEREAS, Seller is a wholly-owned subsidiary of Parent;
WHEREAS, Seller is engaged in the business of providing equipment lease
financing of point-of-sale equipment, devices, terminals and other general
equipment (the "Business");
WHEREAS, Seller wishes to sell and transfer to Purchaser substantially
all of the assets, properties and business of the Business, pursuant to and in
accordance with the terms and conditions of this Agreement; and
WHEREAS, Purchaser wishes to acquire the assets, properties and
business of the Business, and to assume only certain liabilities of Seller
relating to the Business, pursuant to and in accordance with the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto hereby agree as
follows:
ARTICLE 1.
SALE AND PURCHASE OF ASSETS
1.1 PURCHASED ASSETS. Subject to the terms, conditions and exclusions
set forth in this Agreement, Seller will sell to Purchaser, and Purchaser will
purchase, acquire and accept from Seller, all of the assets, properties, rights
and business of the Business owned by Seller of every type and description,
real, personal and mixed, tangible and intangible, wherever located and whether
or not reflected on the books and records of Seller (collectively, the
"Purchased Assets"), as the same shall exist on the Effective Date, including,
without limitation, the following:
(a) all of Seller's accounts, rights to receive payments and other
forms of receivables, whether by installments, deferred payments, rental
payments or otherwise, as described in SCHEDULE 1.1(A) attached hereto and made
a part hereof (the "Accounts");
(b) with respect to any Account, any and all notes, loan agreements,
installment sale contracts, financing leases, capital leases, operating leases,
leveraged leases, chattel paper, deeds of trust, mortgages, instruments,
guaranties, security agreements, representations and warranties, recourse
agreements, letters of credit, certificates of title, financing statements,
opinion letters, and other documents evidencing such Account, or executed or
delivered in connection with such Account (collectively, the "Account
Documents");
(c) Seller's interest in or to the collateral described in an
Account Document or which otherwise secures the payment or performance of an
Account, including all proceeds thereof (the "Collateral");
(d) (i) all rentals, installments and other payments due or to
become due under the Accounts and the Account Documents, including, without
limitation, all amounts payable by the person obligated to make payment on an
Account (the "Account Debtor") upon any extension of the term of the Account or
upon the exercise of any renewal or purchase option and all rights to the
proceeds of insurance covering the Collateral, (ii) all of the rights and
remedies of Seller under the Accounts and all Account Documents, including the
right to take in Seller's name any and all proceedings, legal, equitable or
otherwise that Seller could otherwise take save for this Agreement, and (iii)
all proceeds of the sale or other disposition of the Accounts and/or the
Collateral;
(e) all equipment leases which were charged off, and any related
equipment, rental payments, documents and other rights and interests, as
reflected on the books and records of Seller;
(f) all United States and foreign patents, patent applications,
licenses, trademarks (whether registered or unregistered), service marks, trade
names, service names, brand names, labels, slogans, domain names, logos, claim
of copyrights, copyrights, drawings, and designs and any applications therefore,
and any other proprietary rights, including, without limitation, know-how,
processes, procedures, trade secrets, and other proprietary information owned by
or licensed to Seller relating to the Business, and all of the goodwill
associated with the foregoing (collectively, the "Intellectual Property
Rights"), including all right, title and interest in and to the name "Golden
Eagle Leasing";
(g) all furniture, fixtures, equipment or other property held for
lease or sale by Seller, whether purchased by Seller in anticipation of leasing
or other financings, received by Seller in full or partial satisfaction of loans
or other financings, or returned to Seller upon termination of a lease
(collectively, the "Inventory"), as such Inventory exists on the Effective Date;
(h) all business records, books, ledgers, files, computer models,
studies, reports, computer software (object code, and, to the extent
transferable, source code), data and the like in the possession of or used by
Seller relating to the Business, including, without limitation, customer files,
correspondence with customers and account histories, sales and promotional
literature or material, records relating to the employees of the Business,
consultants and contractors, credit information, and training and other manuals
(collectively, the "Books and Records");
(i) all furniture, fixtures, equipment, vehicles, and other items of
tangible personal property owned by Seller for the benefit of the Business,
including, without limitation, such items as are specified in SCHEDULE 1.1(I)
attached hereto and made a part hereof (collectively, the "Equipment");
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(j) to the extent transferable, the bank accounts and lockbox
arrangements primarily relating to the Business, including, without limitation,
those bank accounts and lockbox arrangements specified in SCHEDULE 1.1(J)
attached hereto and made a part hereof;
(k) subject to Section 3.3 hereof, all of Seller's rights and
interests under all personal property leases, other than the Accounts
(collectively, "Personal Property Leases") and all contracts, other than the
Accounts, including but not limited to all vendor agreements, specified in
SCHEDULE 1.1(K) attached hereto and made a part hereof (collectively, the
"Contracts");
(l) all of Seller's rights, title and interest related to any
securitization or structured financing listed on SCHEDULE 1.1(L), including
pursuant to any servicing or other agreement related thereto or in connection
with any special purpose limited partnerships, limited liability companies,
owner trusts, grantor trusts or other special purpose entities ("SPEs") related
thereto;
(m) all rights and interests of Seller in and to certain real
property leases specified in SCHEDULE 1.1(M) attached hereto and made a part
hereof (the "Real Property Leases");
(n) subject to Section 3.3 hereof, all franchises, approvals,
permits, licenses, orders, registrations, certificates, variances, and other
similar rights or governmental authorizations and approvals (federal, state and
local) relating to the Business, as such items are specified in SCHEDULE
4.1.7(A) attached hereto and made a part hereof (collectively, the "Licenses and
Permits");
(o) all prepaid items and deferred items or credits and deposits
relating to the Business;
(p) all personnel records (including, without limitation, all
personnel, human resources and other records) of Seller relating to the
Transferred Employees (as hereinafter defined); and
(q) cash and cash equivalents of Seller in an amount equal to
Seller's cash from operations net of expenses paid from and including the
Effective Date through the Closing Date.
1.2 EXCLUDED ASSETS. The Purchased Assets transferred, conveyed, set
over, assigned and delivered to Purchaser shall exclude the following assets
(the "Excluded Assets"):
(a) the balance of cash and cash equivalents of Seller through and
including the day immediately prior to the Effective Date, as set forth on
Seller's unaudited balance sheet as of the close of business on such date (the
"Effective Date Cash");
(b) any net operating loss or tax credit that inures directly to the
benefit of Seller from the operation of the Business prior to the Effective
Date;
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(c) the corporate minute books and stock registers of Seller;
(d) the income tax records covering transactions of Seller occurring
prior to the Effective Date;
(e) except for Seller's right, title and interest in and to the Real
Property Leases, all rights, title and interests of Seller in and to any real
property and improvements owned by Seller; and
(f) the personnel records (including, without limitation, all human
resources and other records) of Seller relating to all employees of Seller other
than Transferred Employees.
ARTICLE 2.
PURCHASE PRICE; ESCROW
2.1 PURCHASE PRICE. Purchaser shall pay to Seller the sum of Thirty
Million Dollars ($30,000,000) (the "Purchase Price"), including the $200,000
deposited by Purchaser with Seller as part of the Purchase Price in September
2003, in full consideration for the Purchased Assets.
2.2 PAYMENT OF THE PURCHASE PRICE. At the Closing, Purchaser shall pay
$29,800,000 to Seller by wire transfer in immediately available funds and remit
all Effective Date Cash to Parent.
2.3 RESERVED.
2.4 TRANSACTION COSTS. Except as otherwise provided in this Section
2.4, Seller shall be responsible for all sales and similar taxes assessed or
payable in connection with the transfer of the Purchased Assets to Purchaser.
All real estate transfer, recording and similar taxes shall be shared equally by
Purchaser and Seller.
ARTICLE 3.
ASSUMPTION OF LIABILITIES AND OBLIGATIONS BY PURCHASER
3.1 ASSUMED LIABILITIES. Except as otherwise provided for herein,
Purchaser, in addition to the consideration to be paid pursuant to Section 2
hereof, shall assume at the Closing and shall subsequently pay, honor and
discharge when due and payable in accordance with and subject to the terms and
conditions of the relevant governing agreements, commitments and instruments,
the following liabilities (collectively, the "Assumed Liabilities"):
(a) all liabilities and obligations of Seller at the Effective Date
pursuant to the Account Documents with respect to the Collateral, Personal
Property Leases, Real Property Leases, Contracts, and Licenses and Permits;
(b) all liabilities and obligations of Seller related to any
securitization or structured financing listed on SCHEDULE 1.1(L), pursuant to
any servicing or other agreements related thereto or in connection with any
special purpose vehicles related thereto;
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(c) all liabilities and obligations to pay over to the applicable
taxing authority any state or local personal property taxes or sales taxes
collected from lessees of Seller and held for payment to the applicable taxing
authority; and
(d) all liabilities and obligations arising out of or resulting from
the conduct of the Business as set forth in the financial statements for the
period ended September 30, 2003 and all liabilities and obligations related to
Seller's conduct of the Business on behalf of Purchaser from the Effective Date
to and including the Closing Date, except Excluded Liabilities (as defined in
Section 3.2 hereof). Notwithstanding the foregoing, Parent has agreed to
reimburse Seller for fifty percent (50%) of the trade payables as of the
Effective Date, such amount not to exceed $25,000.
3.2 EXCLUDED LIABILITIES. Except as set forth in Section 3.1, Purchaser
shall not assume, pay, or in any way be liable or responsible for any of the
following debts, liabilities or obligations (collectively, the "Excluded
Liabilities"):
(a) any liability or obligation of Seller under this Agreement or on
account of any of the transactions contemplated hereby, including, without
limitation, any liability or obligation of Seller to attorneys, accountants,
brokers, or others for services rendered or expenses incurred by or on behalf of
Seller;
(b) except as otherwise provided in Section 3.1(a) hereof or in
Section 6.1 hereof, any wages, salary, severance, bonuses, commissions, vacation
or holiday pay, post retirement medical benefits, fringe benefits, long-term
disability benefits, life insurance benefits, any duties, obligations or
liabilities arising under any employee benefit plan, policy or practice, whether
defined by Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended and in effect ("ERISA") or otherwise, relating to the employees of
the Business or other amounts due to any employees or former employees of the
Business which accrue on or prior to the Effective Date;
(c) any liabilities which would arise as either a result of a breach
of any of Seller's representations and warranties hereunder, or a breach of any
of Seller's covenants or agreements hereunder;
(d) any liabilities and obligations of Seller for any Taxes (as
defined in Section 4.1.8(a)(i) hereof) with respect to the operations of the
Business on or prior to the Effective Date;
(e) any liabilities or obligations of Seller relating to the matters
listed in SCHEDULE 4.1.6 attached hereto and made a part hereof;
(f) except as otherwise provided in Section 2.4 hereof, any tax
(including, without limitation, any federal, state or local income, franchise,
sales, transfer, recording, documentary or other tax) imposed upon or incurred
by Seller arising out of or in connection with the negotiation and preparation
of this Agreement and the consummation and performance of the transactions
contemplated hereby;
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(g) any liability or obligation of Seller relating to, resulting
from, caused by, or arising out of the ownership, operations or control of the
Business by Seller on or prior to the Effective Date, arising out of the
following:
(i) any accident or occurrence occurring on or prior to the
Effective Date resulting in personal injury, sickness, death, property damage,
property destruction or loss of use of property arising out of or resulting from
the operation of the Business by Seller, or
(ii) any breach of contract, workers' compensation claim or
violation of any law or final order of any federal, state, judicial,
quasi-judicial or governmental body;
(h) any violation, liability, penalty, cost, damage, fine, order,
judgment or obligation under any environmental laws, to the extent they arise
out of acts or omissions occurring on or prior to the Effective Date;
(i) any liabilities relating to the ownership of any real property
of Seller to the extent such liabilities arise out of Seller's ownership of such
real property prior to the Effective Date;
(j) any indebtedness for borrowed money that is not an Assumed
Liability;
(k) any liabilities and obligations of Seller under any financing
commitment (other than vendor agreements and lease agreements) made or issued by
Seller prior to the Effective Date; and
(l) any liabilities relating to any actions, suits, proceedings,
claims or investigations by any governmental agency or official relating to the
Business or the conduct of the Business prior to the Closing.
3.3 NONASSIGNABLE CONTRACTS AND AUTHORIZATIONS. To the extent that the
assignment of any contract or any license, permit, approval or qualification
issued or to be issued by any government or agency or instrumentality thereof
relating to the Business or the Purchased Assets, including, without limitation,
the Licenses and Permits, to be assigned to Purchaser pursuant to this Agreement
shall require the consent of any other party, this Agreement shall not
constitute a contract to assign the same if an attempted assignment would
constitute a breach thereof. Seller shall use its best commercial efforts, and
Purchaser shall cooperate where appropriate, to obtain any consent necessary to
any such assignment. If any such consent is not obtained, then Seller shall
cooperate with Purchaser in any reasonable arrangement requested by Purchaser
designed to provide to Purchaser the benefits under any such contract, license,
permit, approval or qualification and the Licenses and Permits, including
enforcement of any and all rights of Seller against the other party thereto
arising out of breach or cancellation thereof by such other party or otherwise.
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ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
4.1 REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER. Parent and
Seller each represents and warrants to Purchaser as follows:
4.1.1 CORPORATE ORGANIZATION AND STANDING. Parent is a corporation
duly organized, validly existing and in good standing under the laws of Delaware
and has all corporate power and authority to own or lease its properties and to
carry on its business as presently conducted. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Arizona and
has all corporate power and authority to own or lease its properties and to
carry on the business of the Business as presently conducted. Seller has
delivered to Purchaser complete and correct copies of the Articles of
Incorporation of Seller and by-laws of Seller. Seller is qualified to do
business as a foreign corporation and is in good standing in each of the
jurisdictions in which the nature of the Business as now being conducted by
Seller or the property owned or leased by Seller for the benefit of the Business
makes such qualification, licensing or registration necessary, except where the
failure to be so qualified would not have a Material Adverse Effect (as defined
in Section 4.2(b) hereof).
4.1.2 AUTHORIZATION. All corporate and other proceedings required to
be taken on the part of Seller, including, without limitation, all action
required to be taken by the directors or shareholders of Seller to authorize
Seller to enter into and carry out this Agreement and to sell the Purchased
Assets, have been, or prior to the Closing will be, duly and properly taken.
Seller has full right, power and authority to enter into this Agreement and to
perform fully its obligations hereunder. This Agreement has been duly executed
and delivered by Seller and is the valid and binding obligation of Seller
enforceable against it in accordance with its terms, except as enforcement may
be limited by equitable principles limiting the right to obtain specific
performance or other equitable remedies, or by applicable bankruptcy or
insolvency laws and related decisions affecting creditors' rights generally.
4.1.3 NO CONFLICT. Except as set forth in SCHEDULE 4.1.3 attached
hereto and made a part hereof, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will (i)
result in the acceleration of, or the creation in any party of any right to
accelerate, terminate, modify or cancel any material indenture, contract, lease,
sublease, loan agreement, note or other obligation or liability to which Seller
is a party or by which it is bound or to which any of its assets is subject,
(ii) conflict with or result in a breach of or constitute a default under any
provision of the Articles of Incorporation or Bylaws (or other charter
documents) of Seller, or a default under or violation of any material
restriction, lien, encumbrance, indenture, contract, lease, sublease, loan
agreement, note or other obligation or liability to which it is a party or by
which it is bound or to which any of its assets is subject or result in the
creation of any lien or encumbrance upon any of said assets, or (iii) violate or
result in a breach of or constitute a default under any judgment, order, decree,
rule or regulation of any court or governmental agency to which Seller is
subject, and which, in each of clauses (i) and (ii) above, would have or could
reasonably be expected to have a Material Adverse Effect.
4.1.4 FINANCIAL STATEMENTS. Seller has delivered to Purchaser (i)
unaudited balance sheets and statements of operations of Seller at and for the
fiscal years ended December
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31, 2002, 2001 and 2000, and (ii) unaudited balance sheets and statements of
operations of Seller at and for the seven-month period ended July 31, 2003 (the
"Financial Statements"). To the best knowledge of Seller, the Financial
Statements fairly present, in all material respects, the financial position and
the results of operations of Seller at the respective dates of and for the
periods referred to in such Financial Statements, all in accordance with GAAP,
subject to normal recurring period-end adjustments. The Financial Statements
reflect the consistent application of such accounting principles throughout the
periods covered.
4.1.5 INSURANCE.
(a) SCHEDULE 4.1.5 attached hereto and made a part hereof accurately
lists and describes the policies of insurance covering the assets and operations
of the Business. All such policies are valid and subsisting and in full force
and effect in accordance with their terms and are with reputable insurance
carriers. All such policies provide full and adequate coverage for all normal
risks incident to the Business and its properties and assets and are in
character and amount generally equivalent to that carried by persons engaged in
similar businesses and subject to the same or similar perils or hazards. Seller
has not been denied insurance or suffered the cancellation of any insurance with
respect to the Business in the past five years.
(b) There are no outstanding claims under any insurance policy or
default with respect to provisions in any such policy, which claim or default
individually or in the aggregate would have a Material Adverse Effect.
4.1.6 LITIGATION. Except as set forth in SCHEDULE 4.1.6 attached
hereto and made a part hereof, there is no action, suit, proceeding, arbitration
or investigation pending or threatened against Parent or Seller or the
directors, officers, agents or employees of Parent or Seller with respect to the
Business, and there are no orders, writs, injunctions or decrees currently in
force against Parent or Seller or the directors, officers, agents or employees
of Parent or Seller with respect to the conduct of the Business.
4.1.7 LICENSES AND PERMITS; COMPLIANCE WITH LAWS.
(a) Except as set forth in SCHEDULE 4.1.7(A) attached hereto and
made a part hereof, Seller owns, holds or possesses in its own name all Licenses
and Permits necessary to entitle it to use its corporate name, to own or lease,
operate and use its assets and properties and to carry on and conduct the
Business and its operations as presently conducted, except for such Licenses and
Permits the absence of which would not have a Material Adverse Effect. Seller is
not in violation of or default under any Licenses and Permits that could
reasonably be expected individually or in the aggregate to have a Material
Adverse Effect or which could reasonably be expected to interfere materially
with the consummation of the transactions contemplated herein. SCHEDULE 4.1.7(A)
hereto sets forth a complete and correct list of all material Licenses and
Permits related to the Business, all of which are in full force and effect as of
the date hereof.
(b) Except as set forth in SCHEDULE 4.1.7(B) attached hereto and
made a part hereof, with respect to the Business, Seller is, and has been, in
full compliance with each Legal Requirement that is or was applicable to it or
to the conduct or operation of the Business or the ownership or use of any of
its assets, except for events or circumstances where non-compliance
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could not reasonably be expected to result in a Material Adverse Effect. No
event has occurred or circumstance exists that (with or without notice or lapse
of time) (i) may constitute or result in a violation by Seller of, or a failure
on the part of Seller to comply with, any Legal Requirements, or (ii) may give
rise to any obligation on the part of Seller to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature which could reasonably
be expected to result in a Material Adverse Effect. For the purposes of this
Agreement, "Legal Requirement(s)" means any federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principal of common law, regulation, statute,
judgment, or treaty.
4.1.8 TAXES.
(a) Definitions. For purposes of this Agreement:
(i) The term "Tax" means any of the Taxes, and "Taxes" means (A)
all net income, capital gains, gross income, gross receipts, sales, use, ad
valorem, franchise, capital, profits, license, and other withholding,
employment, social security, payroll, transfer, conveyance, documentary, stamp,
property, value added, customs duties, minimum taxes, estimated and any other
taxes, fees, charges, levies, excises, duties or assessments of any kind
whatsoever, together with additions to tax or additional amounts, interest and
penalties relating thereto that may be imposed by the federal government or any
state, local, or foreign government, and (B) any liability of Seller for the
payment of any amount of any type described in clause (A) as a result of Seller
being a transferee or a member of an affiliated or combined group prior to the
Closing,
(ii) "Tax Returns" means all returns, reports, statements, and
forms required to be filed in respect of any Tax, and
(iii) "Code" means the Internal Revenue Code of 1986, as
amended, including the rules and regulations thereunder and any substitute or
successor provisions;
(b) Seller has paid or will pay when due or finally settled all
Taxes relating to the Business or to the Purchased Assets that are or become due
and payable for all periods up to and including the Effective Date. Seller has
properly filed on a timely basis, or so will file, when due, all Returns
relating to the Business or the Purchased Assets for all periods up to and
including the Effective Date.
(c) There are no liens for Taxes (other than for current Taxes not
yet due and payable) on the Purchased Assets.
(d) Seller is not a person other than a United States person within
the meaning of the Code.
(e) Seller's Federal Tax Identification Number is ▇▇-▇▇▇▇▇▇▇.
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4.1.9 BROKERS; FINDERS. Parent and Seller have not retained any
broker or finder in connection with the transactions contemplated herein and is
not obligated and has not agreed to pay any brokerage or finder's commission,
fee or similar compensation.
4.1.10 ABSENCE OF CERTAIN CHANGES. Since July 31, 2003, except as
set forth in SCHEDULE 4.1.10 attached hereto and made a part hereof, Seller has
conducted the Business in the ordinary course, and there has not occurred with
respect to the Business:
(i) any Material Adverse Effect;
(ii) any payment, discharge or satisfaction of any liabilities
or obligations (whether accrued, absolute, contingent or otherwise) in excess of
Ten Thousand Dollars ($10,000), other than the payment, discharge or
satisfaction, in the ordinary course of business, of liabilities or obligations
incurred in the ordinary course of business;
(iii) except in the ordinary course of business, any assets
(whether real, personal or mixed, tangible or intangible) becoming subject to
any mortgage, pledge, lien, security interest, encumbrance, or restriction or
charge of any kind;
(iv) any cancellation or waiver of any claims or rights of
value, or any sale, transfer, distribution or other disposal of any assets,
except for sales of assets in the ordinary course of business, or disposal of
any assets for any amount to affiliates of Seller;
(v) any disposal or lapse of any rights in, to or for the use of
any patent, trademark, trade name or copyright, or any disclosure to any person
not an employee or other disposal of any customer lists used by the Business;
(vi) except in the ordinary course of business, any increase in
the base compensation or other payment to any director, officer or employee of
the Business, whether now or hereafter payable or granted, or entry into or
variation of the terms of any employment or incentive agreement with any such
person or entry into or variation of the terms of any employment or incentive
agreements with any such person;
(vii) any capital expenditure or commitment for additions to
property, plant or equipment, or lease agreement which exceeds Ten Thousand
Dollars ($10,000) and which, if purchased, would be reflected in the property,
plant or equipment accounts;
(viii) any material change in any method of accounting or
keeping its books of account or accounting practices;
(ix) any damage, destruction or loss of any asset, whether or
not covered by insurance, which exceeds Ten Thousand Dollars ($10,000);
(x) except liabilities incurred in the ordinary course of
business, any obligation or liability being incurred, including, without
limitation, any liability for borrowed money or any liability for nonperformance
or termination of any contract;
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(xi) any event which would require in accordance with GAAP an
increase in the reserve for bad debts set forth in the Financial Statements
which in the aggregate exceeds Ten Thousand Dollars ($10,000);
(xii) any dividend distributions or share repurchases; or
(xiii) except in the ordinary course of business, any
shareholder loans or any similar distributions to shareholders or equity
holders.
4.1.11 MATERIAL CONTRACTS. SCHEDULE 4.1.11 attached hereto and made
a part hereof lists all of the Material Contracts (as hereinafter defined) to
which Seller is a party and that relate to the Business. Seller has or will
furnish to Purchaser true and correct copies of all Material Contracts prior to
the Closing.
As used in this Agreement, "Material Contracts" means:
(a) all leases or other agreements under which Seller is lessee of,
or holds or operates, any furniture, fixtures, equipment, vehicle or other
tangible personal property owned by a third party and used in the business of
the Business and which entails annual payments, in the case of any such lease or
agreement, in excess of Twenty Thousand Dollars ($20,000);
(b) all contracts and agreements to which Seller is a party relating
to the Business and which are:
(i) outstanding contracts with the officers, employees, agents,
consultants, advisors, salesmen, sales representatives, distributors, sales
agents or dealers of Seller relating to the Business, other than contracts which
by their terms are cancelable by Seller with notice of not more than 30 days
(except as required by any state laws) and without cancellation penalties or
severance payments, in the case of any such contract, in excess of Twenty
Thousand Dollars ($20,000),
(ii) collective bargaining agreements of Seller which relate to
the Business, or
(iii) pension, profit-sharing, 401(k), bonus, severance,
retirement, stock option or employee benefit plans or other similar plans or
arrangements of Seller relating to the Business;
(c) all mortgages, indentures, security agreements, pledges, notes,
loan agreements, guarantees, asset-backed securities, interest rate, currency or
credit swaps, interest rate caps, forward currency contracts, options or other
derivatives, and other agreements or instruments relating to the borrowing of
money or the hedging of interest rate, currency exchange or credit risk relating
to the Business;
(d) all uncompleted customer contracts relating to the Business and
not priced in a manner generally consistent with Seller's customary practices;
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(e) all outstanding contracts with customers or vendors of the
Business expected to result in payment to or by Seller in excess of Twenty
Thousand Dollars ($20,000);
(f) all licenses pursuant to which Seller is a licensee or a
licensor and which relate to the Business, except for licenses for routine
desktop software with a purchase price or license fee of $500 or less per user;
(g) all partnership, joint venture, brokerage or business referral
agreements relating to the Business;
(h) any contracts or agreements for the acquisition or sale of any
Accounts (by merger, purchase, securitization or sale of assets or otherwise);
and
(i) any servicing agreements.
All such Material Contracts are valid, binding, and enforceable in accordance
with their terms against each party thereto and are in full force and effect,
and Seller is not in material default thereunder. The documents relating to each
Material Contract constitute the entire agreement of the parties with respect to
the subject matter thereof and are enforceable in accordance with their terms.
To the best knowledge of Seller, no material breach or default by any other
party to any such Contract has occurred. Seller has not received notice, and is
not otherwise aware, that any party to any such Material Contract intends to
cancel, terminate or refuse to renew such Material Contract or to exercise or
decline to exercise any option or rights thereunder.
4.1.12 INTELLECTUAL PROPERTY RIGHTS. SCHEDULE 4.1.12 attached hereto
and made a part hereof sets forth a complete and correct list of all of the
Intellectual Property Rights. Except as set forth in SCHEDULE 4.1.12 hereto,
Seller solely owns or has the exclusive right to use, free and clear of any lien
or other encumbrance or restriction, all of the Intellectual Property Rights.
Except as set forth in SCHEDULE 4.1.12 hereto, there is no claim or demand of
any person pertaining to, or any proceeding pending or threatened, which
challenges the exclusive rights of Seller in respect of (i) the Intellectual
Property Rights, or (ii) the rights of Seller in respect of any trade secret
owned or used by Seller in the conduct of the Business. None of the Intellectual
Property Rights is subject to any outstanding order, ruling, decree, judgment or
stipulation by or with any court, arbitrator or administrative agency. To the
best knowledge of Seller, none of the Intellectual Property Rights held, owned
or used by Seller is being infringed upon by others or used by others, whether
or not such use constitutes infringement, or has been the subject of dispute,
and whether or not resulting in litigation.
4.1.13 NO CONSENT. Except as set forth in SCHEDULE 4.1.13 attached
hereto and made a part hereof, no consent, approval, authorization, order,
filing, registration or qualification of or with any court, governmental
authority or third person is required to be made or obtained by Seller in
connection with the execution and delivery of this Agreement by Seller or the
consummation by Seller of the transactions contemplated hereby.
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4.1.14 OWNERSHIP OF PURCHASED ASSETS; NO LIENS.
(a) Except for Accounts that were previously included in a
securitization or structured financing transaction listed on SCHEDULE 1.1(L),
Seller has good and valid title to, or a valid and binding leasehold interest or
license in, all of the Purchased Assets, free and clear of liens, claims,
encumbrances and security interests. Seller is the sole and lawful owner of the
Accounts and has good and marketable title to them. Except for Accounts that
were previously included in a securitization or structured financing transaction
listed on SCHEDULE 1.1(L), upon the closing hereunder, Purchaser shall receive
good and marketable title to the Accounts free and clear of all security
interests, liens, encumbrances and claims whatsoever.
(b) SCHEDULE 4.1.14(B) attached hereto and made a part hereof sets
forth a complete and correct list and description of all real property owned by
Seller for the benefit of the Business and lists any lease pursuant to which
Seller leases real property as lessee or lessor. Except as set forth in SCHEDULE
4.1.14(B) hereto, Seller has or will have at the Closing (a) good and valid
title to all of the real property listed in SCHEDULE 4.1.14(B) hereto owned by
it, and (b) valid leasehold interests in all real properties listed in SCHEDULE
4.1.14(B) hereto as leased by it, in each case free and clear of all mortgages,
liens, charges, encumbrances, easements, security interests or title
imperfections other than (i) those listed in SCHEDULE 4.1.14(B) hereto, (ii)
liens not yet due and delinquent for current taxes, assessments or governmental
charges, and (iii) those which do not, individually or in the aggregate,
materially interfere with the use of the real properties or materially detract
from their value. Seller enjoys peaceful and undisturbed possession under all of
the Real Property Leases. The ownership or lease of real property by Seller or
the use thereof, as presently used by the Business, does not violate any local
zoning or similar land use laws or governmental regulations that could
reasonably be expected to result in a Material Adverse Effect. Seller is not in
violation of or in noncompliance with any covenant, condition, restriction,
order or easement affecting the real property owned or leased by Seller for the
benefit of the Business where such violation or noncompliance would have a
Material Adverse Effect. There is no condemnation or, to the best knowledge of
Seller, threatened condemnation affecting the real property owned or leased by
Seller. Seller has delivered or will deliver to Purchaser prior to the Closing
complete and correct copies of the Real Property Leases listed in SCHEDULE
4.1.14(B) hereto.
(c) SCHEDULE 4.1.14(C) attached hereto and made a part hereof sets
forth a complete and correct list of all personal property owned by Seller,
except for (i) personal property with an original purchase price of $1,000 or
less per item or (ii) equipment, other than Inventory, which is the subject of
the Accounts, and SCHEDULE 1.1(K) hereto sets forth all material Personal
Property Leases pursuant to which Seller leases personal property as lessee or
lessor pertaining to the Business. Except as set forth in SCHEDULE 4.1.14(C)
hereto, Seller has or will have at the Closing (a) good, valid and unencumbered
title to all of its personal property listed in SCHEDULE 4.1.14(C) hereto as
owned by it, including, without limitation, the personal property acquired after
the date of this Agreement (except for the inventory and other assets sold or
otherwise disposed of in accordance with the provisions of this Agreement), and
(b) valid leasehold interests in all Personal Property Leases listed in SCHEDULE
1.1(K) hereto as leased by it, in each case free and clear of all mortgages,
liens, charges, encumbrances, easements, security interests or title
imperfections other than (i) those listed in SCHEDULES 4.1.14(C) or 1.1(K)
hereto,
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(ii) payments for current taxes, assessments or governmental charges not yet due
and delinquent, and (iii) those which do not, individually or in the aggregate,
materially interfere with the use of the personal property or materially detract
from its value. Seller enjoys peaceful and undisturbed possession under all
Personal Property Leases. The personal property set forth in SCHEDULE 4.1.14(C)
hereto constitutes all material personal property necessary in the operation of
the Business as presently conducted. Except as set forth in SCHEDULE 4.1.14(C)
hereto, the personal property is maintained in good operating condition,
reasonable wear and tear excepted, for the purposes for which it is currently
being used. Seller shall deliver to Purchaser prior to the Closing complete and
correct copies of the Personal Property Leases.
4.1.15 EMPLOYEES BENEFIT PLANS; EMPLOYMENT AGREEMENT.
(a) For purposes of this Section 4.1.15 and the Agreement:
(i) "Plan" means (A) all employee benefit plans within the
meaning of Section 3(3) of ERISA, including, but not limited to, multiple
employer welfare arrangements (within the meaning of Section 3(40) of ERISA),
plans to which more than one unaffiliated employer contributes and employee
benefit plans (such as foreign or excess benefit plans) which are not subject to
ERISA; and (B) all stock option plans, bonus or incentive award plans, severance
pay policies or agreements, deferred compensation agreements, supplemental
income arrangements, vacation plans, and all other employee benefits,
agreements, and arrangements (including any informal arrangements) not described
in (A) above, including without limitation, any arrangement intended to comply
with Section 120, 125, 127 or 129 of the Code. In the case of a Plan funded
through a trust described in Section 401(a) of the Code or an organization
described in Section 501(c) (9) of the Code, each reference to such Plan shall
include a reference to such trust or organization.
(ii) An entity "maintains" a Plan if such entity sponsors,
contributes to, or provides benefits under such Plan, or has any obligation (by
agreement or under applicable law) to contribute to or provide benefits under
such Plan, or if such Plan provides benefits to or otherwise covers employees,
former employees or directors of such entity (or their spouses, dependents, or
beneficiaries).
(iii) An entity is an "Affiliate" if it would have ever been
considered a single employer with Seller under Section 4001(b) of ERISA or part
of the same "controlled group" as Seller for purposes of Section 302(d)(8)(C) of
ERISA.
(b) SCHEDULE 4.1.15(B) attached hereto and made a part hereof sets
forth a complete and correct list of all Plans currently maintained by Seller or
any Affiliate.
4.1.16 BOOKS AND RECORDS. The Books and Records of the Business are
maintained with respect to the Purchased Assets in accordance with GAAP and
consistent with prudent and responsible industry practices and fairly reflect,
in reasonable detail, the transactions and the assets and liabilities of Seller
with respect to the Purchased Assets and the Assumed Liabilities, and have been
maintained in accordance with sound business practices. Seller has not (i)
engaged in any transactions with respect to the Purchased Assets, (ii)
maintained any bank account with respect to the Purchased Assets, or (iii) used
any of the funds of Seller in
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connection with the Purchased Assets, except for transactions, bank accounts and
funds that have been and are reflected in the normally maintained books and
records of the Seller.
4.1.17 OBLIGATIONS AND LIABILITIES OF PURCHASER. The purchase of the
Purchased Assets by Purchaser shall not subject Purchaser to any of the
obligations of Seller thereunder, other than (i) the Assumed Liabilities and
(ii) the duties and obligations of Seller to the Account Debtors under the terms
of the Accounts and the laws applicable thereto, provided however that Purchaser
shall have no obligation under the terms of the Accounts to make additional
loans or advances or to lease other property to Account Debtors other than as
disclosed on SCHEDULE 4.1.17.
4.1.18 ENVIRONMENTAL MATTERS.
(a) Seller is in compliance with all environmental laws applicable
to the conduct of its business, except where non-compliance could not reasonably
be expected to result in a Material Adverse Effect.
(b) Seller is not required to obtain any environmental permit under
any environmental laws for the lawful operation of its business.
(c) No written notice, notification, demand, request for
information, citation, summons, complaint or order has been received by, is
pending, or to Seller's knowledge, threatened by any person against, Seller in
connection with its business or the Purchased Assets, nor has any penalty been
assessed against Seller for any alleged violation of an environmental law or
liability thereunder.
(d) There have been no releases, or threatened releases, of any
hazardous substances relating to any equipment acquired by Seller in connection
with the Purchased Assets in any case in such a way as to create any liability
(including the costs of investigation or remediation) under any applicable
environmental laws which could reasonably be expected to result in a Material
Adverse Effect.
(e) There exist no liens under environmental laws with respect to
the Purchased Assets.
4.1.19 CERTAIN AGREEMENTS. All of the Contracts, Material Contracts,
Real Property Leases and Personal Property Leases (collectively, the
"Commitments") are legal, valid and binding obligations of the Business
enforceable (except as enforcement may be limited by equitable principles
limiting the right to obtain specific performance or other equitable remedies or
by applicable bankruptcy or insolvency laws and related decisions affecting
creditors' rights generally) against Seller; have been negotiated in good faith
on an "arms length" transaction basis; are enforceable against the other parties
in accordance with their respective terms. Except as listed on SCHEDULE 4.1.19
attached hereto and made a part hereof, all Material Contracts are fully
assignable without the consent of any third party; and, except as listed on
SCHEDULE 4.1.19 hereto, Seller has no knowledge of any default or claimed or
purported or alleged default or state of facts which, with notice or lapse of
time or both, would constitute a default on the part of any party in the
performance of any obligation to be performed or paid by any party under the
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Commitments, and has not received or given notice of any default or claimed or
purported or alleged default or state of facts which, with notice or lapse of
time or both, would constitute a default on the part of any party in the
performance or payment of any of the Commitments.
4.1.20 APPROVALS, ETC. Except as provided in Section 3.3 hereof, and
except for consents of lessors under Personal Property Leases, all consents,
approvals, authorizations and orders (corporate, governmental or otherwise)
necessary for the due authorization, execution and delivery by Seller of this
Agreement and the valid delivery of the Purchased Assets have been obtained or
will be obtained prior to the Effective Date.
4.1.21 POWERS OF ATTORNEY. Except as set forth in SCHEDULE 4.1.21
attached hereto and made a part hereof, there are no powers of attorney executed
on behalf of Seller with respect to the Business.
4.1.22 UNDISCLOSED LIABILITIES. Seller has no liabilities or
obligations, whether accrued, absolute, contingent or otherwise, which are
material to the Business taken as a whole, except (i) to the extent disclosed,
reflected or reserved for on the Financial Statements, or not required in
accordance with GAAP to be so disclosed, reflected or reserved, (ii) liabilities
or obligations disclosed in SCHEDULE 4.1.22 attached hereto and made a part
hereof and in the other Schedules hereto, (iii) liabilities or obligations
disclosed in this Agreement, or (iv) liabilities or obligations arising in the
ordinary course of business.
4.1.23 RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this
Agreement or as set forth in SCHEDULE 4.1.23 attached hereto and made a part
hereof, there is no agreement, judgment, injunction, order or decree binding
upon Seller which has or could reasonably be expected to have the effect of
prohibiting or impairing any business practice of Seller, acquisition of
property by Seller, or the conduct of business by Seller as currently conducted
or as proposed to be conducted by Seller.
4.1.24 ACCOUNTS.
(a) Enforceability.
(i) Except as disclosed in SCHEDULE 4.1.24(A)(I), each Account
and the related Account Documents are true and complete in all material
respects, and constitute legal, valid, and binding obligations of Seller and the
other parties thereto, enforceable in accordance with their terms (except as
enforcement may be limited by equitable principles limiting the right to
specific performance or other equitable remedies, or by applicable bankruptcy or
insolvency laws and related decisions affecting creditors' rights generally),
and are in full force and effect; except as disclosed in SCHEDULE 4.1.24(A)(I),
neither Seller nor any other party thereto is in default or delinquent on any
payment under the terms of any Account or the related Account Documents, and
neither Seller nor any other party thereto is in default in any material respect
under the terms, other than payment, of any Account or the related Account
Documents;
(ii) except for originals of the Accounts and Account Documents
held by SPEs in connection with the securitizations or structured financings
listed on SCHEDULE 1.1(L), which are held by ▇▇▇▇▇ Fargo Bank Minnesota, NA, and
Chase, First Sierra Financial, Seller
16
has delivered, or on the Closing Date will deliver, the originals of the
Accounts and Account Documents, and such Account Documents are the only
documents executed relating to the obligations of the Account Debtors and the
Collateral;
(iii) the Accounts contain or initially contained a fixed term;
(iv) the Accounts and Account Documents conform with all
applicable laws, rules and regulations in all material respects;
(v) all signatures, names, addresses, amounts and descriptions
of Collateral contained in the Accounts or Account Documents are genuine, true
and accurate, and all other statements and facts contained in the Accounts or
Account Documents are genuine, true and accurate in all material respects;
(vi) the computation of all accrued income, fees, and other
charges, if any, have been made in accordance with the terms of the respective
Account;
(vii) except as disclosed in SCHEDULE 4.1.24(A)(VI), no
defenses, setoffs or counterclaims of any kind have been raised with respect to
the Accounts and Account Documents and no suit or any legal action or
proceeding, administrative, judicial or otherwise has been brought or threatened
to be brought by or against Seller in connection therewith; the Account
Documents for each Account provide that they are (A) not cancelable and (B) not
subject to any defenses, setoffs or counterclaims of any kind; and the Accounts
and Account Documents will not be subject to any valid defenses, setoffs or
counterclaims of any kind;
(viii) the Collateral has been delivered to the appropriate
Account Debtor and has been unconditionally accepted by the Account Debtor and
Seller has no knowledge that the Collateral is not in the actual possession of
and being used by such Account Debtor in its business operations or that it is
not in good operating condition; and
(ix) except as listed on SCHEDULE 4.1.24(A)(VIII), no Account
Debtor is the subject of any bankruptcy or insolvency proceeding.
(b) Priority. Seller is the owner of the Collateral and the
Collateral is not subject to any security interest or lien except for any lien
held by the lender in the securitization or structured financing transactions
listed on SCHEDULE 1.1(L).
(c) Account Records; Information on Schedules. Seller's reports,
ledger cards, and other records pertaining to the Accounts are accurate in all
material respects; and all information contained on the Schedules attached to
this Agreement, including, without limitation, information regarding the unpaid
balances owing on the Accounts and the interest, rental and finance charge rates
are accurate.
(d) Payments on Accounts. No payments made on the Accounts were made
or financed, directly or indirectly, by Seller or any of its affiliates or made
by any guarantor of an Account Debtor's obligations.
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(e) Damage to Collateral. None of the Collateral has been
repossessed by any party other than Seller or sold or substantially damaged
without being repaired or in the process of being repaired, or adequately
covered by enforceable casualty insurance.
4.1.25 CREDIT STANDARDS AND RESERVES. Seller has delivered to
Purchaser true and correct copies of the current policies of Seller with respect
to the Accounts relating to credit approval review of customers (the "Credit
Policies"). Except as disclosed in SCHEDULE 4.1.25, since July 31, 2003, Seller
(i) has not changed in any material respects the credit standards applied by it
to its customers, (ii) has applied its policies with respect to accruals of
provisions for credit losses in a manner consistent with prior practice, and
(iii) has not changed in any material respect its Credit Policies.
4.1.26 INVENTORY. The Inventory as reflected in the financial
statements for the period ended July 31, 2003 (i) are carried at an amount not
in excess of the lower of cost or net realizable value, and (ii) do not include
any inventory which is obsolete, surplus or not usable or saleable in the lawful
and ordinary course of the Business as heretofore conducted, in each case net of
reserves provided therefor.
4.1.27 LABOR MATTERS.
(a) Except as set forth in SCHEDULE 4.1.27 attached hereto and made
a part hereof, there are no (i) labor strikes, disputes, slowdowns,
representation campaigns or work stoppages with respect to employees of the
Business pending or threatened against or affecting the Business, (ii) grievance
or arbitration proceedings arising out of collective bargaining agreements to
which Seller is a party (other than informal grievances), (iii) unfair labor
practice complaints pending or threatened against the Business, or (iv)
collective bargaining agreements or other labor union contracts applicable to
persons employed by the Business, and, to the best knowledge of Seller, there
are no activities or proceedings of any labor union to organize any such
employees.
(b) Except to the extent set forth in SCHEDULE 4.1.27 hereto, Seller
is in compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours, and is not engaged in any unfair labor practice.
4.1.28 ABANDONED PROPERTY. Seller has timely filed with the relevant
state governmental authorities all reports and filings required to be given or
made under the applicable laws of such states with respect to abandoned funds or
property arising out of any Accounts included in the Purchased Assets.
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4.1.29 ACCURACY OF INFORMATION FURNISHED. No representation or
warranty by Seller contained in this Agreement, the disclosure schedules, or in
respect of the exhibits or other documents delivered to Purchaser by Seller and
referred to herein, and no statement contained in any certificate furnished or
to be furnished by or on behalf of Seller pursuant hereto, or in connection with
the transactions contemplated hereby, contains, or will contain as of the date
such representation or warranty is made or such certificate is or will be
furnished, any untrue statement of a material fact, or omits, or will omit to
state as of the date such representation or warranty is made or such certificate
is or will be furnished, any material fact which is necessary to make the
statements contained herein or therein not misleading. To the best knowledge of
Seller, there is no fact which would or could reasonably be expected to have a
Material Adverse Effect on the Business, which the Seller has not prior to or on
the date hereof disclosed to Purchaser in writing. Any disclosure made with
respect to one or more Schedules hereto shall be deemed to be a disclosure with
respect to each other Schedule as to which such disclosure is relevant, provided
that such relevance is reasonably apparent.
4.2 DEFINITIONS.
(a) For purposes of this Agreement, the term "to the best knowledge
of Seller" or other term of similar import means the knowledge of any officer or
employee listed on SCHEDULE 4.2(A) with primary responsibility for the matter in
question, which knowledge such officer or employee actually has, at any time
had, or should reasonably be expected to have in the ordinary course of the
discharge of his responsibilities without having made any specific inquiry into
the subject matter.
(b) For purposes of this Agreement, "Material Adverse Effect" means
any change, effect or circumstance that, individually or when taken together
with all other changes, effects or circumstances that have occurred prior to the
date of determination of the occurrence of the material adverse effect, is or is
reasonably likely to be materially adverse to the Purchased Assets or the
financial condition, prospects or results of operation of the Business,
excluding the effects of changes to the extent arising from or related to (i)
the United States or global economy or capital markets generally, or (ii)
general changes in conditions in the industries in which Seller conducts
business.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
5.1 REPRESENTATIONS AND WARRANTIES. Purchaser represents and warrants
to Parent and Seller as follows:
5.1.1 ORGANIZATION AND STANDING. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of New York and
has all corporate power and authority to execute and deliver this Agreement, to
carry on the businesses in which it is engaged, to own and use the properties
owned and used by it, to consummate the transactions contemplated hereby, and
perform its obligations hereunder.
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5.1.2 AUTHORIZATION. All corporate and other proceedings required to
be taken on the part of Purchaser, including, without limitation, all action
required to be taken by the directors or shareholders of Purchaser to authorize
Purchaser to enter into and carry out this Agreement and to purchase the
Purchased Assets, have been, or prior to the Closing will be, duly and properly
taken. This Agreement has been duly executed and delivered by Purchaser and is
the valid and binding obligation of Purchaser enforceable against it in
accordance with its terms, except as enforcement may be limited by equitable
principles limiting the right to obtain specific performance or other equitable
remedies, or by applicable bankruptcy or insolvency laws and related decisions
affecting creditors' rights generally.
5.1.3 COMPLIANCE. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, upon satisfaction of
the conditions set forth in Article 8 hereof, will not:
(a) result in the breach of any of the terms or conditions of, or
constitute a default under or violate, as the case may be, the articles of
organization or by-laws of Purchaser, or any agreement, lease, mortgage, note,
bond, indenture, license, guarantee or other document or undertaking, oral or
written, to which Purchaser or any of its subsidiaries or affiliates is bound,
or by which any of its or their properties or assets may be affected; or
(b) violate any rule, regulation, writ, injunction, order or decree
of any court, administrative agency or governmental body.
5.1.4 LITIGATION. There are no actions, suits, proceedings,
arbitrations, or investigations pending or, to Purchaser's best knowledge,
threatened which question the validity of this Agreement or any actions taken or
to be taken in connection herewith or the consummation of the transactions
contemplated herein.
5.1.5 BROKERS, FINDERS. Purchaser has not retained any broker or
finder in connection with the transactions contemplated herein and is not
obligated and has not agreed to pay any brokerage or finder's commission, fee or
similar compensation.
5.1.6 APPROVALS, ETC. All consents, approvals, authorizations and
orders (corporate, governmental or otherwise) necessary for the due
authorization, execution and delivery by Purchaser of this Agreement and the
consummation of the transactions contemplated hereby have been obtained or will
be obtained prior to the Closing Date.
5.1.7 FUNDS. Purchaser has sufficient funds to consummate this
transaction and operate the Business.
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ARTICLE 6.
COVENANTS AND AGREEMENTS
6.1 EMPLOYEE MATTERS.
6.1.1 EMPLOYMENT STATUS.
(a) On or before the Closing Date, Seller will notify all employees
of the Business (the "Employees"), both salaried and hourly, of their respective
termination dates, which in no event shall be later than December 8, 2003.
Following the Closing Date, (i) Employees whose services are no longer required
to transition the Business will be placed on paid leave for a period determined
by Seller and Parent; (ii) Employees whose services are required by Purchaser to
facilitate the transition of the Business will be made available to Purchaser by
Seller until December 8, 2003; and (iii) Employees whose services are required
by Seller or Parent to assist in certain clerical or administrative functions
related to the transition of the Business will be provided access to the
Business's facilities, provided that such employees do not interfere with
Purchaser's operations. Purchaser may make offers of temporary or permanent
employment to those Employees it chooses, at its discretion, to employ on terms
and conditions acceptable to Purchaser and such employees. Those Employees who
accept permanent employment shall be referred to herein as the "Transferred
Employees". Purchaser's employment of those Employees who accept offers of
employment, whether temporary or permanent, shall commence on the Closing Date;
however, Purchaser understands that the Transferred Employees may also remain on
Seller's or Parent's payroll until December 8, 2003. Notwithstanding anything to
the contrary in this Section 6.1.1, any Employee accepting Purchaser's offer of
employment, whether temporary or permanent, shall be considered to be employed
"at will" and nothing shall be construed to limit the ability of Purchaser or
any of its Affiliates to terminate any such Employee at any time for any reason,
or to change their terms and conditions of employment, including, but not
limited to, the levels of compensation and pension, welfare and/or fringe
benefits plans, programs or arrangements in effect after the date of hire.
Purchaser will pay to Seller an amount equal to thirty-percent (30%), provided,
however, that in no event shall such amount exceed $300,000, of the aggregate
severance costs incurred by Seller, subject to any reductions for Seller's
employees that are hired by Purchaser, which amount will be paid by Purchaser to
Seller at Closing with the balance of the Purchase Price pursuant to Section
2.2. Seller will determine and notify Purchaser of the aggregate severance costs
to be incurred by Seller with respect to such terminated Employees as soon as
reasonably possible on or after the Closing Date.
(b) Seller shall not be responsible for wages, salaries and other
employee benefits for Transferred Employees for service of such Transferred
Employees with Purchaser after the Closing Date. Transferred Employees shall
cease active participation in each Plan on the Closing Date and no additional
benefits shall be accrued thereafter for such employees.
(c) Seller will remain responsible for all benefits payable to
Employees who, as of the close of business on the day immediately preceding the
Closing Date, were determined to be totally and permanently disabled in
accordance with the applicable provisions of Seller's long-term disability
program or who were receiving workers' compensation on such date. Seller shall
be responsible for providing any Employee whose "qualifying event," within the
meaning
21
of Section 4980(f) of the Code, occurs prior to the Closing Date (and such
Employee's "qualified beneficiaries" within the meaning of Section 4980B(f))
with continuation of group health coverage required by Section 4980B(f) ("COBRA
Coverage") under the terms of the applicable group health plan maintained by
Seller and to the extent required by law.
6.1.2 LIABILITY WITH RESPECT TO CERTAIN BENEFIT OBLIGATIONS. Seller
shall retain all liability, responsibility and obligations under the Plans and
arrangements set forth in SCHEDULE 4.1.15 hereto with respect to any amounts
payable or benefits to be provided to any Employee, former employee or
beneficiary thereof for payments, services, benefits, materials or supplies
incurred, provided or received thereunder by any Employees, former employees or
beneficiaries thereof prior to the Closing Date. Seller shall remain liable for
all compensation and deferred compensation payments to any Employees, former
employees, or beneficiaries incurred, provided or received prior to the Closing
Date, whether pursuant to a Plan or other arrangements. For purposes of this
Agreement, the following claims shall be deemed to be incurred, provided or
received as follows: (i) life, accidental death and dismemberment and business
travel accident insurance benefits, upon the death or accident giving rise to
such benefits, (ii) health, dental and/or prescription drugs benefits, upon
provision of such services, materials or supplies, (iii) in the case of
long-term disability benefits, the later of when the disability is determined to
have occurred or when the employee ceases active employment as a result of the
disability; and (iv) in the case of workers' compensation, when the event giving
rise to such claim arises.
6.1.3 REQUIRED DOCUMENTATION. In connection with the implementation
of this Section 6.1, Seller and Purchaser shall cooperate in the preparation and
filing of all documentation required to be filed with the Internal Revenue
Service, the United States Department of Labor, or any other applicable
governmental agency or authority.
6.2 COMMERCIALLY REASONABLE EFFORTS TO CLOSE. During the period commencing
on the date of the execution of this Agreement and continuing until the Closing
Date, Purchaser and Seller shall use commercially reasonable efforts to comply
promptly with all requests or requirements, which applicable federal or state
law or governmental officials may impose on them with respect to the
transactions which are the subject of this Agreement, and to consummate such
transactions as promptly as practicable. The commercially reasonable efforts of
Purchaser and Seller shall include, without limitation, good faith response, in
cooperation with each other, to all requests for information, documentary or
otherwise, by any governmental agency.
6.3 PRESS RELEASE; DISCLOSURES. Except as required by law, neither Parent
or Seller, on the one hand, nor Purchaser, on the other hand, without the prior
written consent of the other, will make any press release or any similar public
announcement concerning the transactions contemplated hereby. Except as required
by law, no written or oral announcement or private disclosure with respect to
the transactions contemplated hereby will be made, either prior to or after the
Closing, to any person unrelated to Parent, Seller, or Purchaser unless jointly
approved by Parent or Seller and Purchaser. If disclosure is required by law,
the disclosing party shall consult in advance with the other party and attempt
in good faith to reflect such other party's concerns in the required disclosure.
Notwithstanding the foregoing, Parent may disclose the
22
existence and general terms of this Agreement in its periodic reports (including
the filing of this Agreement), including reports on Form 8-K, 10-Q, 10-K and any
registration statement filed by Parent with the Securities Exchange Commission
under the Securities Act of 1933. Parent agrees to consult with Purchaser with
respect to any disclosure of this Agreement in its Form 10-Q for the period
ended September 30, 2003. Parent and Seller agree to cooperate with any
confidentiality treatment request suggested by Purchaser.
6.4 BOOKS AND RECORDS AND INFORMATION.
6.4.1 INSPECTION OF DOCUMENTS. Purchaser agrees that all documents
delivered to Purchaser by Parent or Seller pursuant to this Agreement and all
documents of the Business (including, but not limited to, files, books and
records) shall after the Closing be open for inspection by representatives of
Parent or Seller at any time during regular business hours for reasonable and
necessary purposes until such time as documents are destroyed or possession
thereof is given to the other party as provided for in Section 6.4.2 hereof and
that Parent or Seller may during such period at its expense make such copies
thereof as it may reasonably request. Parent and Seller agrees that all
documents that are retained by Parent or Seller after the Closing Date and that
are related to the Business (other than tax records of Seller) shall be open for
inspection by representatives of Purchaser at any time during regular business
hours until such time as documents are destroyed or possession thereof is given
up to the other party as provided for in Section 6.4.2 hereof and that Purchaser
may during such period at its expense make such copies thereof as it may
reasonably request.
6.4.2 DESTRUCTION OF DOCUMENTS. Without limiting the generality of
Section 6.4.1 hereof, for a period ending on the sixth anniversary of the
Closing Date, neither Purchaser nor Parent or Seller shall destroy or give up
possession of any item referred to in Section 6.4.1 hereof without first
offering to the other the opportunity, at such other's expense (but without any
other payment), to obtain the same. Thereafter each party shall be free to
dispose of them as it deems fit.
6.4.3 ACCESS TO EMPLOYEES. Purchaser shall use reasonable efforts to
afford Parent and Seller access to Employees who were previously employees of
Seller, and remain in the employ of Purchaser or its affiliates, as Parent and
Seller shall reasonably request for its proper corporate purposes, including,
without limitation, the defense of legal proceedings. Such access may include
interviews or attendance at depositions or legal proceedings. All out-of-pocket
expenses reasonably incurred by Purchaser in connection with this Section 6.4.3
shall be paid or promptly reimbursed by Parent.
6.5 TAX MATTERS.
6.5.1 TAXES THROUGH EFFECTIVE DATE. Except for personal property
taxes, gross receipts taxes payable by Seller and sales taxes payable by
customers for which Purchaser assumes responsibility under Section 3.1(c),
Seller shall be solely responsible for and shall indemnify and hold harmless
Purchaser for all Taxes with respect to the Business for or pertaining to all
periods up to and including the Effective Date, and Purchaser shall be
responsible for and indemnify and hold harmless Seller for all Taxes with
respect to the Business for or pertaining to all periods thereafter, except that
any Taxes imposed upon the ownership of
23
property on a particular date, or similar tax, shall be prorated over the period
ending on the Effective Date and the period thereafter. Any claim for
indemnification hereunder shall be subject to the procedures set forth in
Section 11.4 hereof.
6.5.2 COOPERATION AND EXCHANGE OF INFORMATION. Purchaser shall
provide Seller with such cooperation and information as Seller reasonably may
request with respect to the filing of any Return, amended Return or claim for
refund, the determination of a liability for Taxes, or a right to refund of
Taxes, or the conduct of any audit or other proceeding in respect of Taxes. Such
cooperation and information shall include providing copies of all relevant
Returns, together with accompanying schedules and related work papers, documents
relating to rulings or other determinations by taxing authorities, and records
concerning the ownership and tax basis of property, which Purchaser may possess
concerning the Business. Purchaser shall make its employees available to Seller
on a mutually convenient basis to provide explanation of any documents or
information provided hereunder. Notwithstanding the foregoing, Purchaser shall
not be required to prepare any documents or determine any information not
required to be maintained pursuant to Section 6.4.2. Seller shall reimburse
Purchaser for any reasonable out-of-pocket costs incurred by Purchaser in
providing any Return, document or other written information, and shall reimburse
Purchaser for any reasonable out-of-pocket costs (including regular wages,
salaries and traveling expenses) of making employees available, upon receipt of
reasonable documentation of such costs. Except as otherwise provided in Section
1.2(b) hereof, Purchaser shall retain all Returns, schedules and work papers and
all material records or other documents relating thereto, until the expiration
of the period of time beginning on the Effective Date and ending on the date on
which taxes may no longer be assessed under the applicable statutes of
limitation, including the period of waivers or extensions thereof. Any
information obtained under this Section 6.5.2 shall be kept confidential, except
as may be otherwise necessary in connection with the filing of returns or claims
for refund or in conducting any audit or other proceeding.
6.5.3 ALLOCATION/TAX POSITION. Within 60 days after the Closing
Date, Purchaser will provide to Seller copies of IRS Form 8594 and any required
exhibits thereto with Purchaser's proposed allocation of the Purchase Price
(together with any Assumed Liabilities). Within 30 days after the receipt of
such proposed Purchase Price allocation, Seller will propose to Purchaser any
changes to such proposed Purchase Price allocation (and in the event no such
changes are proposed in writing to Purchaser within such time period, Seller
will be deemed to have agreed to, and accepted, the proposed Purchase Price
allocation). Purchaser and Seller will endeavor in good faith to resolve any
differences with respect to the Purchase Price allocation within 15 days after
Purchaser's receipt of written notice of objection from Seller. Without limiting
the generality of the foregoing it is agreed by the parties that the portion of
the Purchase Price allocated to goodwill shall not materially exceed ten percent
(10%) of the Purchase Price.
6.6 NON-COMPETITION AND NON-SOLICITATION AGREEMENTS.
(a) Parent and Seller agree that, as part of the consideration for
the payment by Purchaser of the Purchase Price, for a period of five (5) years
immediately following the Closing Date, neither Parent, Seller nor any of their
divisions, subsidiaries or corporate affiliates will, directly or indirectly,
operate, perform, have any interest in or otherwise be engaged in a
24
business which provides equipment lease financing and rental of point of sale
equipment within the United States to end-user customers pursuant to any vendor
programs or leasing programs. Notwithstanding the foregoing, Parent will not be
prohibited from (i) selling point of sale equipment to any unaffiliated party
that engages in equipment lease financing and rental of point of sale equipment,
(ii) renting or leasing point of sale equipment to end-user customers seeking to
rent or lease such equipment directly from Parent, provided that Parent must
first refer such opportunity to Purchaser and may only enter into such a
transaction (on substantially the same terms and conditions offered to
Purchaser) if Purchaser elects not to pursue the opportunity, or (iii) merging
with and into, selling all of its capital stock to, exchanging all of its
capital stock for the capital stock of, selling substantially all of its assets
to or otherwise entering into a transaction pursuant to which Parent is, or
substantially all of Parent's assets are, acquired by a person or entity which,
prior to such transaction, is not an affiliate of Parent and which then has, or
in the future may have, an interest in or otherwise engages, or in the future
may engage, in the business activities otherwise prohibited by this Section 6.6.
The prohibitions applicable to Parent under this Section 6.6 automatically will
cease to be effective upon the consummation of a transaction described in
Section 6.6(a)(ii) and such prohibitions will not be binding upon the person or
entity, or affiliate or subsidiary thereof, that acquires Parent or Parent's
assets pursuant to such transaction.
(b) Parent and Seller agree that for a period of one (1) year
following the Closing Date neither Parent, Seller nor any of their related or
affiliated entities will induce any of the Transferred Employees to terminate
his or her relationship with Purchaser. Notwithstanding anything to the contrary
in the foregoing, Purchaser agrees that Parent may offer employment to Seller's
President, provided that such employment shall not interfere with transitional
responsibilities of such employee, if any.
(c) Parent and Seller, on the one hand, and Purchaser, on the other
hand, acknowledge that the restrictions on their activities under Sections
6.6(a) and (b) hereof, as applicable, are necessary for the reasonable
protection of the other party and constitute a material inducement to the other
party's entering into and performing this Agreement. The parties further
acknowledge, stipulate and agree that a breach of any of such obligations and
agreements will result in irreparable harm and continuing damage to the
non-breaching party for which there will be no adequate remedy at law and the
parties further agree that in the event of any breach of said obligations and
agreements, the non-breaching party and its successors and assigns will be
entitled to injunctive relief and to such other relief as is proper under the
circumstances.
(d) If any of the covenants set forth in this Section 6.6 are held
to be unreasonable, arbitrary, or against public policy, such covenants will be
considered divisible with respect to scope, time, and geographic area, and in
such lesser scope, time and geographic area, will be effective, binding and
enforceable.
6.7 OFFICE LEASES. SCHEDULE 6.7 attached hereto and made a part hereof
sets forth a schedule of leases for sales offices or other office, storage or
other space leased by Seller (each an "Office Lease") and setting forth, in
reasonable detail, the total annual rent, utilities and other charges payable on
each Office Lease and any termination fees or charges, including costs of
25
restoration, to which any landlord or owner of such leased space is entitled
from Seller (the "Office Lease Schedule").
6.8 TRUST FUNDS; COLLECTIONS. Seller shall, after the Closing Date, hold
in trust for Purchaser all sums received by Seller on any Account to which
Purchaser is entitled pursuant to this Agreement and shall immediately upon
receipt thereof, pay over such sums to Purchaser. Seller agrees that Purchaser
may endorse in Purchaser's name all remittances received and all notes or other
instruments (if any) evidencing obligations under the Accounts. Without limiting
the generality of the foregoing, it is understood that for up to sixty (60) days
after the Closing Date, Purchaser may use the Seller's bank accounts not
otherwise transferable pursuant to Section 1.1(j) for the receipt of remittances
from Accounts and Seller agrees to promptly pay over such remittances to
Purchaser. Purchaser agrees to reimburse Seller for any ACH rejections during
such time period.
6.9 LETTER TO ACCOUNT DEBTORS. On or after the Closing Date, Seller shall,
upon request of Purchaser, sign a letter, in a form reasonably satisfactory to
Purchaser, addressed to each Account Debtor which notifies the Account Debtor
that the Account has been sold to Purchaser and instructs such Account Debtor to
make all payments due after a specified date to Purchaser.
6.10 INSURANCE OBLIGATIONS. Seller or an affiliate of Seller will maintain
in effect until midnight on the Closing Date all casualty, credit and liability
insurance policies (or comparable replacement policies) it currently has on the
Purchased Assets, as applicable.
6.11 ACCESS TO INFORMATION; CONFIDENTIALITY. Upon reasonable notice and
subject to any restrictions contained in any applicable confidentiality
agreements between the parties, Seller shall (and shall cause its subsidiaries
to) (i) afford to the officers, employees, agents, attorneys, accountants and
other representatives of Purchaser reasonable access during reasonable hours,
during the period after the execution and delivery of this Agreement and prior
to the Closing Date, to the properties, premises, books, contracts, commitments,
records and computer systems of Seller, and (ii) during such period, Seller
shall furnish promptly to the Purchaser all information concerning the business,
properties and personnel of Seller as Purchaser may reasonably request, and
Seller shall make available to Purchaser the appropriate individuals (including
officers, employees, agents, attorneys, accountants and other representatives
and professionals) for discussion of Seller's business, properties and personnel
as Purchaser may reasonably request. Such information shall be kept confidential
in accordance with the terms of the confidentiality agreement, dated September
4, 2003 (the "Confidentiality Agreement"), between Seller and Purchaser.
ARTICLE 7.
CONDUCT OF BUSINESS PENDING CLOSING
7.1 CONDUCT OF BUSINESS PENDING CLOSING. Seller agrees that, during the
period between the date of this Agreement and the Closing Date, Seller shall
conduct the Business in a manner materially consistent with past practices of
Seller, and Seller shall not engage in any practice, take any action, or enter
into any transaction out of the ordinary course of business consistent with past
practice and custom. Furthermore, Seller covenants and agrees that, except
26
as may otherwise be required under this Agreement or with the prior written
consent of Purchaser, after the date of this Agreement and prior to the Closing
Date:
(a) Seller shall continue to service the Accounts until the Closing
Date in substantially the same manner as they were serviced prior to the date of
this Agreement and shall promptly notify Purchaser of any material event which
relates to the Accounts and occurs prior to the Closing Date, including events
of default thereunder known to Seller, which would have or reasonably could be
expected to have a Material Adverse Effect;
(b) Seller shall not, and shall cause its affiliates not to, take
the following actions with respect to any Account, without the prior written
consent of Purchaser:
(i) enter into any loan or lease with any potential or
existing customer that is, individually or in the aggregate, in excess of Fifty
Thousand Dollars ($50,000);
(ii) reduce the interest or finance charge rate or rental
payments on any Account with an aggregate value greater than Ten Thousand
Dollars ($10,000);
(iii) release any Collateral which secures such Account, it
such Account has an aggregate value greater than Ten Thousand Dollars ($10,000);
(iv) release or modify the obligations of any guarantor of the
Account Debtor's obligations on any Account with an aggregate value greater than
Ten Thousand Dollars ($10,000); or
(v) agree to waive any default thereunder in excess of Ten
Thousand Dollars ($10,000).
(c) Seller shall not take the following actions with respect to the
Business and the Purchased Assets:
(i) sell, securitize or dispose of any Purchased Assets;
(ii) acquire or lease any Purchased Assets, except in the
ordinary course of business;
(iii) incur or assume any long-term or short-term debt, except
for borrowings under existing lines of credit in the ordinary course of
business;
(iv) voluntarily permit to be incurred any lien or encumbrance
on any of the Purchased Assets;
(v) materially change any of the accounting policies,
practices and methods used by Seller, unless required by GAAP or applicable law;
(vi) increase the rate of compensation for any of the
employees of the Business, except for increases in the ordinary course of
business and consistent with customary
27
practices, or otherwise enter into or alter any employment, consulting, or
service agreement respecting the Business;
(vii) commence, enter into, or alter any profit sharing,
401(k) deferred compensation, bonus, stock option, stock purchase, pension,
retirement, or incentive plan or any fringe benefit plan for the Employees;
(viii) incur or permit to be incurred any obligation or other
liabilities, or make or commit to any capital expenditure, in excess of Ten
Thousand Dollars ($10,000);
(ix) make any dividend distributions or share repurchases;
(x) except in the ordinary course of business, make any
shareholder loans or any similar distributions to shareholders or other equity
holders; or
(xi) authorize or enter into an agreement to do any of the
foregoing.
7.2 NO SOLICITATION. Parent and Seller agree that through and including
October 10, 2003, Parent and Seller shall not, without the prior written consent
of Purchaser, directly or indirectly, through any officer, director, employee,
representative, agent or advisor of Parent, Seller or any of their subsidiaries,
solicit or knowingly encourage the initiation of (including by way of furnishing
information) any inquiries or proposals regarding any merger, sale of assets,
sale of shares of capital stock (including by way of a tender offer) or similar
transactions involving Seller or any subsidiaries of Seller that if consummated
would constitute an Alternative Transaction (as defined below) (any of the
foregoing inquiries or proposals being referred to as an "Acquisition
Proposal").
For purposes of this Agreement, "Alternative Transaction" means any of (i)
a transaction pursuant to which any person (or group of persons) other than
Purchaser or its affiliates (a "Third Party") acquires or would acquire more
than 25% of the outstanding shares of any class of equity securities of Seller,
whether from Seller or pursuant to a tender offer or exchange offer or
otherwise, (ii) a merger or other business combination involving Seller pursuant
to which any Third Party acquires or would acquire more than 25% of the
outstanding equity securities of Seller or the entity surviving such merger or
business combination, (iii) any transaction pursuant to which any Third Party
acquires or would acquire control of assets (including for this purpose the
outstanding equity securities of subsidiaries of Seller and securities of the
entity surviving any merger or business combination including any of Seller's
subsidiaries) of Seller, or any of its subsidiaries having a fair market value
(as determined by the Board of Directors of Seller in good faith) equal to more
than 25% of the fair market value of all the assets of Seller and its
subsidiaries, taken as a whole, immediately prior to such transaction, or (iv)
any other consolidation, business combination, recapitalization or similar
transaction involving Seller, other than the transactions contemplated by this
Agreement.
ARTICLE 8.
CLOSING DATE; CONDITIONS AND TRANSACTIONS
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8.1 CLOSING DATE AND PLACE. The consummation of the sale and purchase of
the Business contemplated by this Agreement (the "Closing") will take place at
the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, at such date and time as may be mutually agreeable to
the parties hereto, which shall be no later than the fifth business day after
the satisfaction or waiver of the conditions set forth in Sections 8.2 and 8.3,
and in no event later than October 14, 2003 (the "Closing Date"). The parties
hereto agree that the Closing may be effected by facsimile.
8.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER. The obligations
of Purchaser under this Agreement are subject to the fulfillment by Parent
and/or Seller, as the case may be, prior to or at the Closing of each of the
following conditions, any one or more of which may be waived by Purchaser:
8.2.1 NO INJUNCTIVE PROCEEDINGS. No preliminary or permanent
injunction or other order (including a temporary restraining order), or the
threat thereof, of any state or federal court or other governmental agency which
prevents the consummation of the transactions which are the subject of this
Agreement or prohibits Purchaser's ownership of the Business shall have been
issued and remain in effect.
8.2.2 REPRESENTATIONS AND WARRANTIES. All representations and
warranties of Parent and Seller contained in this Agreement shall be true and
correct in all material respects as of the Closing Date, except (i) for each of
the representations and warranties of Parent and Seller contained herein that
are limited by materiality, which shall be true and correct in all respects as
of the Closing Date, and (ii) that no representation or warranty of Parent or
Seller shall be deemed to be untrue or incorrect by reason of any transaction
that conforms to the requirements of Article 7 hereof.
8.2.3 PERFORMANCE OF AGREEMENTS, INSTRUMENTS OF TRANSFER. Parent
and/or Seller shall have fully performed in all material respects all
obligations, agreements, conditions and commitments required to be fulfilled by
Parent and/or Seller pursuant to the terms hereof on or prior to the Closing
Date, and Parent and/or Seller shall have tendered to Purchaser the documents,
instruments and certificates required by Article 10 hereof.
8.2.4 MATERIAL CHANGES. There shall not have been any Material
Adverse Effect from the date hereof to the Closing Date.
8.2.5 COMPLIANCE CERTIFICATE. Parent and/or Seller shall have
delivered to Purchaser its certificate, dated the Closing Date, executed on its
behalf by its duly authorized representative, as to the fulfillment of the
conditions set forth in Sections 8.2.2, 8.2.3 and 8.2.4 hereof.
8.2.6 OPINION OF COUNSEL. Purchaser shall have received the opinion
of ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P. counsel for Seller, in the form set forth in SCHEDULE
8.2.6 attached hereto and made a part hereof.
8.2.7 CONSENTS, ETC. All authorizations, consents or approvals of
any and all governmental regulatory authorities necessary to the transfer and
assignment of the Purchased
29
Assets in connection with the consummation of the Closing shall have been
obtained and be in full force and effect.
8.2.8 NAME CHANGE. Seller shall have reserved and shall have
prepared for filing on the Closing Date a change of name certificate to effect
the change of the name of Seller to a name, in the opinion of Purchaser,
dissimilar to "Golden Eagle Leasing".
8.2.9 REPAYMENT OF DEBT. Seller shall have paid, at or prior to
Closing, all amounts outstanding under any of Seller's outstanding credit
facilities, bank loans, notes or other obligations for borrowed money, and in
each instance Seller shall deliver at Closing evidence satisfactory to counsel
for Purchaser that such outstanding amounts have been paid and all credit
facilities, bank loans, and applicable notes have been cancelled.
8.2.10 NO SHAREHOLDER LOANS. Any and all shareholder loans made by
Seller shall have been repaid at or prior to Closing.
8.2.11 LIQUIDATION OF SUBSIDIARIES. All subsidiaries of Seller shall
have been liquidated or merged into Seller so that it owns all their assets at
Closing.
8.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. The obligations of
Seller under this Agreement are subject to the fulfillment by Purchaser prior to
the Closing of each of the following conditions, any one or more of which may be
waived by Seller:
8.3.1 NO INJUNCTIVE PROCEEDINGS. No preliminary or permanent
injunction or other order (including a temporary restraining order) of any state
or federal court or other governmental agency which prevents the consummation of
the transactions which are the subject of this Agreement or prohibits
Purchaser's ownership of the Business shall have been issued and remain in
effect.
8.3.2 PAYMENT. Purchaser shall have delivered to Seller the payment
provided for in Section 2.1 hereof.
8.3.3 REPRESENTATIONS AND WARRANTIES. Except as otherwise
contemplated by this Agreement, all representations and warranties of Purchaser
contained in this Agreement shall be true and correct in all material respects
as of the Closing Date.
8.3.4 PERFORMANCE OF AGREEMENTS, INSTRUMENTS OF TRANSFER. Purchaser
shall have fully performed in all material respects all obligations, agreements,
conditions and commitments required to be fulfilled by Purchaser on or prior to
the Closing Date and shall have tendered to Seller the documents, instruments
and certificates required by Article 10 hereof.
8.3.5 COMPLIANCE CERTIFICATE. Purchaser shall have delivered to
Seller its certificate, dated the Closing Date, executed on its behalf by its
President or a Vice President, as to the fulfillment of the conditions set forth
in Sections 8.3.3 and 8.3.4 hereof.
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8.3.6 CONSENTS, ETC. All authorizations, consents or approvals of
any and all governmental regulatory authorities necessary in connection with the
consummation of the Closing shall have been obtained and be in full force and
effect.
ARTICLE 9.
TERMINATION
9.1 NON-COMPLIANCE WITH AND TERMINATION OF THIS AGREEMENT.
(a) Each of the parties hereto agrees to use commercially reasonable
efforts to bring about the satisfaction of the conditions required to be
performed by it hereunder prior to and at the Closing, including, without
limitation, compliance with the requirements of Section 6.2 hereof.
(b) This Agreement may be terminated at any time prior to the
Closing without any liability of either party to the other:
(i) by the mutual agreement of Parent, Seller and Purchaser,
provided, such termination is set forth in writing executed by all the parties;
(ii) by Purchaser, if any of the conditions specified in
Section 8.2 hereof shall not have been met by October 14, 2003 and shall not
have been waived in writing by Purchaser, unless the failure to meet such
conditions result primarily from Purchaser itself breaching any representation,
warranty, or covenant contained in this Agreement; or
(iii) by Parent and Seller, if any of the conditions set forth
in Section 8.3 hereof shall not have been met by October 14, 2003 and shall not
have been waived in writing by Parent and Seller, unless the failure to meet
such conditions result primarily from Parent and/or Seller breaching any
representation, warranty, or covenant contained in this Agreement.
ARTICLE 10.
CLOSING DOCUMENTS
10.1 SELLER'S OBLIGATIONS. On the Closing Date, Seller shall deliver to
Purchaser physical possession of all tangible Purchased Assets and shall execute
and/or deliver to Purchaser all of the following:
10.1.1 RESOLUTIONS. Copies of resolutions of Seller certified by the
Secretary or an Assistant Secretary of Seller authorizing the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.
10.1.2 ▇▇▇▇ OF SALE. A warranty ▇▇▇▇ of sale, duly executed by
Seller, in form and substance reasonably satisfactory to counsel for Purchaser,
sufficient to convey, transfer and assign to Purchaser all right, title and
interest of Seller in and to the Purchased Assets free and clear of liens,
claims, encumbrances and security interests in accordance with this Agreement.
31
10.1.3 ASSIGNMENTS. Assignments of the Intellectual Property Rights,
Accounts Receivable, Contracts, Personal Property Leases, Real Property Leases,
and Licenses and Permits, duly executed by Seller, in form and substance
reasonably satisfactory to counsel for Purchaser, and all consents which Seller
is able to obtain therefore, or permitted alternate arrangements with respect
thereto, such consents to be in form and substance reasonably satisfactory to
counsel for Purchaser.
10.1.4 ACCOUNTS AND ACCOUNT DOCUMENTS.
(a) All original copies (except for the executed copy retained by
the Account Debtor) of all notes, chattel paper, other evidences of
indebtedness, security agreements, conditional sale contracts, financing leases,
mortgages, deeds of trust, certificates of title, and other evidences or
documents of ownership, guarantees, recourse agreements and all other security
and other instruments or documents of every kind evidencing or representing the
Accounts, Account Documents and Collateral, or, with respect to such original
documents representing the Accounts, Account Documents and Collateral held by
SPEs in connection with the securitizations or structured financings listed on
Schedule 1.1(l), evidence from the trustee for each SPE satisfactory to counsel
for Purchaser stating that such trustee has possession of such original
documents and acknowledging that all right, title and interest of Seller in such
SPE has been transferred to Purchaser; and
(b) With respect to each Account which is a financing lease,
evidence of Seller's ownership of property leased pursuant to such financing
lease.
10.1.5 BOOKS AND RECORDS. Except as otherwise provided in Section
1.2(b) hereof, all books and records of the Business.
10.1.6 COMPLIANCE CERTIFICATE; MATERIAL CHANGES. The certificates
required by Section 8.2.5 hereof.
10.1.7 OPINION OF COUNSEL. The opinion of counsel for Seller
required by Section 8.2.6 hereof.
10.1.8 NAME CHANGE CERTIFICATE. The name change certificates to be
filed by Seller immediately after Closing as required by Section 8.2.8 hereof.
10.1.9 REPAYMENT OF DEBT. Evidence that the outstanding debts that
Seller is required by Section 8.2.9 to repay have been paid and all applicable
Notes have been cancelled.
10.2 PURCHASER'S OBLIGATIONS. At the Closing, Purchaser shall deliver to
Seller the following:
10.2.1 RESOLUTIONS. Copies of resolutions of Purchaser certified by
the Secretary or an Assistant Secretary of Purchaser, authorizing the execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.
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10.2.2 ASSUMPTION AGREEMENT. An assignment and assumption agreement,
duly executed by Purchaser, in form and substance reasonably satisfactory to
counsel for Seller, sufficient to effect the assumption by Purchaser of the
Assumed Liabilities.
10.2.3 PAYMENT. Funds in the amounts and payable as set forth in
Section 2.1 hereof and all other payments required to be made by Purchaser on or
prior to the Closing Date pursuant to the provisions of this Agreement.
10.2.4 COMPLIANCE CERTIFICATE. The certificate required by Section
8.3.5 hereof.
10.3 JOINT OBLIGATIONS. The parties will deliver each to the other the
certificates, records, schedules, and the other documents required by the terms
of this Agreement.
ARTICLE 11.
INDEMNIFICATION
11.1 INDEMNIFICATION BY PARENT AND SELLER. Subject to the limits set forth
in this Article 11, Parent and Seller, jointly and severally, agree to
indemnify, defend and hold Purchaser and each of Purchaser's shareholders,
affiliates, officers, directors, employees, agents, successors and assigns
(Purchaser and such persons are hereinafter collectively referred to as
"Purchaser's Indemnified Persons"), harmless from and against any and all loss,
liability, damage or deficiency (including interest, penalties, costs of
preparation and investigation, and reasonable attorneys' fees) (collectively
"Losses") that Purchaser's Indemnified Persons may suffer, sustain, incur or
become subject to, arising out of or due to: (a) any inaccuracy of any
representation of Parent and/or Seller in this Agreement; (b) the material
breach of any warranty of Parent and/or Seller in this Agreement; (c) the
non-fulfillment of any covenant, undertaking, agreement or other obligation of
Parent and/or Seller under this Agreement; (d) any noncompliance by Parent
and/or Seller with bulk sales laws or similar laws which may be applicable to
the sale or transfer of the Purchased Assets; or (e) any Excluded Liability.
Parent and Seller shall have no liability for indemnification or otherwise with
respect to claims under this Section 11.1 or otherwise related to this
transaction until the total of all Losses with respect to such matters, net of
any reduction pursuant to Section 11.5, exceeds Four Hundred Fifty Thousand
Dollars ($450,000) and then only for the amount by which such Losses, net of any
reduction pursuant to Section 11.5, exceed Four Hundred Fifty Thousand Dollars
($450,000), and do not exceed, in the aggregate, an amount equal to the amount
of gross receivables of the Accounts as set forth on Seller's September 30, 2003
balance sheet, a copy of which Seller shall deliver to Purchaser at the Closing
or as soon as practicable thereafter.
11.2 INDEMNIFICATION BY PURCHASER. Purchaser agrees to indemnify, defend
and hold Parent and Seller and their affiliates, officers, directors, employees,
agents, successors and assigns (Parent, Seller and such persons are hereinafter
collectively referred to as "Seller's Indemnified Persons"), harmless from and
against any and all Losses that Seller's Indemnified Persons may suffer,
sustain, incur or become subject to arising out of or due to: (a) any inaccuracy
of any representation of Purchaser in this Agreement; (b) the material breach of
any warranty of Purchaser in this Agreement; (c) the non-fulfillment of any
covenant, undertaking, agreement or other obligation of Purchaser under this
Agreement, including but not limited to, the discharge of the Assumed
Liabilities; (d) the ownership, operation or control of the Business
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after the Effective Date; (e) Purchaser's obligations under the Real Property
Leases; or (f) any Assumed Liabilities.
11.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The several
representations and warranties of the parties contained in this Agreement or in
any document delivered pursuant hereto and the parties' right to indemnity in
accordance with this Article 11 shall survive the Closing Date and shall remain
in full force and effect thereafter for a period of eighteen (18) months after
the Closing Date and shall be effective with respect to any inaccuracy therein
or breach thereof, notice of which shall have been duly given within such
eighteen (18) month period in accordance with Section 11.4 hereof after which
eighteen (18) month period they shall terminate and be of no further force or
effect. Notwithstanding the foregoing, Purchaser may give notice of, and make a
claim relating to, and shall be indemnified in connection with: (i) the breach
of the representations and warranties contained in Sections 4.1.8 and 4.1.15
hereof, at any time prior to sixty (60) days after the expiration of the
appropriate statute of limitations and any extensions thereof; (ii) any breach
of the representations and warranties contained in Section 4.1.18 hereof for a
period of three (3) years after the Closing Date after which three (3) year
period such representation and warranty shall terminate and be of no further
force or effect; and (iii) any breach of the representations and warranties
contained in Section 4.1.2 hereof and the first sentence of Section 4.1.14(a)
hereof, at any time.
11.4 NOTICE AND OPPORTUNITY TO DEFEND. If there occurs an event that
either party asserts is an indemnifiable event pursuant to Sections 11.1 or 11.2
hereof, the party seeking indemnification (the "Indemnitee") shall deliver an
Officer's Certificate to the party obligated to provide indemnification (the
"Indemnitor") promptly. If such event involves (a) any claim, or (b) the
commencement of any action or proceeding by a third person, the Indemnitee will
give the Indemnitor written notice of such claim or the commencement of such
action or proceeding within fifteen (15) days of Indemnitee's becoming aware
thereof; provided, however, that delay or failure to so notify the Indemnitor
shall only relieve the Indemnitor of its obligations to the extent, if at all,
that it is prejudiced by reasons of such delay or failure. The Indemnitor shall
have a period of 30 days within which to respond thereto. If the Indemnitor
accepts responsibility within such 30-day period, the Indemnitor shall be
obligated to compromise or defend, at its own expense and by counsel chosen by
the Indemnitor and reasonably satisfactory to the Indemnitee, such matter, and
the Indemnitor shall provide the Indemnitee with such assurances as may be
reasonably required by the Indemnitee to assure that the Indemnitor will assume
and be responsible for the entire liability at issue. If the Indemnitor does
respond within such 30-day period and rejects responsibility for such matter in
whole or in part, or does not respond, the Indemnitee shall be free to pursue in
good faith, without prejudice to any of its rights hereunder, such remedies as
may be available to the Indemnitee under applicable law at the Indemnitor's
expense. The Indemnitee agrees to cooperate fully with the Indemnitor and its
counsel in the defense against any such asserted liability. In any event, the
Indemnitee shall have the right to participate in a non-controlling manner and
at its own expense in the defense of such asserted liability. Any compromise of
such asserted liability by the Indemnitor shall require the prior written
consent of the Indemnitee and until such consent is obtained the Indemnitor
shall continue the defense of such asserted liability. If, however, the
Indemnitee refuses its consent to a bona fide offer of settlement that the
Indemnitor wishes to accept, the Indemnitee may continue to pursue such matter,
free of any participation by the Indemnitor, at the sole expense of the
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Indemnitee. In such event, the obligation of the Indemnitor to the Indemnitee
shall be equal to the lesser of (i) the amount of the offer of settlement which
the Indemnitee refused to accept plus the costs and expenses of the Indemnitee
prior to the date the Indemnitor notifies the Indemnitee of the offer of
settlement, and (ii) the actual out-of-pocket amount the Indemnitee is obligated
to pay as a result of the Indemnitee's continuing to pursue such matter. The
Indemnitor shall be entitled to recover from the Indemnitee any additional
expenses incurred by the Indemnitor as a result of the decision of the
Indemnitee to pursue such matter.
For the purposes of this Agreement, "Officer's Certificate" shall mean a
certificate signed by any officer of Indemnitee (i) stating that Indemnitee
paid, sustained, incurred, or properly accrued, or reasonably anticipates that
it will have to pay, sustain, incur, or accrue Losses, and (ii) specifying in
reasonable detail the individual items of Losses included in the amount so
stated, the date each such item was paid, sustained, incurred or properly
accrued, or the basis for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or covenant, bulk transfer tax or Excluded
Liability, as applicable.
11.5 REDUCTION FOR INSURANCE. The amount which the Indemnitor is required
to pay to, for, or on behalf of the Indemnitee pursuant to this Article 11 shall
be reduced (including, without limitation, retroactively) by any insurance
proceeds actually recovered by or on behalf of the Indemnitee in reduction of
the related indemnifiable loss (the "Indemnifiable Loss"). Amounts required to
be paid, as so reduced, are hereinafter sometimes called an "Indemnity Payment".
If the Indemnitee shall have received, or if the Indemnitor shall have paid on
its behalf, an Indemnity Payment in respect of an Indemnifiable Loss and shall
subsequently receive, directly or indirectly, insurance proceeds (which
duplicate in whole or in part, the Indemnity Payment) in respect of such
Indemnifiable Loss, then the Indemnitee shall promptly pay to the Indemnitor the
amount of such insurance proceeds, or, if less, the amount of the Indemnity
Payment. The parties hereto agree that the foregoing shall not affect the
subrogation rights of any insurance companies making payments hereunder.
ARTICLE 12.
MISCELLANEOUS
12.1 EXPENSES. Except as otherwise set forth in this Agreement, each of
the parties hereto shall pay its own expenses and costs incurred or to be
incurred by it in negotiating, closing and carrying out this Agreement.
Notwithstanding the foregoing, a party not in breach of this Agreement shall be
entitled to recover from a breaching party all expenses and costs incurred by
the non-breaching party by reason of such breach (including, without limitation,
all legal expenses and costs), which recovery shall be subject to, and
recoverable in accordance with, Section 11.1 or Section 11.2, as applicable.
12.2 NOTICES. All notices, requests, demands and other communications
given hereunder (collectively, "Notices") shall be in writing and personally
delivered or mailed by registered or certified mail, postage prepaid, return
receipt requested, as follows:
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(a) If to Parent or Seller at:
Hypercom Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President and Chief
Financial and Administrative Officer
-and-
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice President
General Counsel
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
One Arizona Center
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(b) If to Purchaser at:
Northern Leasing Systems Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇
President
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇ Bershad ▇▇▇▇▇ & Lerach LLP
▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(c) All Notices shall be deemed delivered when actually received if
personally delivered or five days after having been placed in the mail,
addressed in accordance with Sections 12.2(a) or (b) hereof, as the case may be.
Each of the parties shall hereafter notify the other in accordance with this
Section 12.2 of any change of address or party to which notice is required to be
mailed.
12.3 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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12.4 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties and supersedes any prior understandings, agreements, or
representations by or among the parties, written or oral, to the extent they
related in any way to the subject matter hereof.
12.5 HEADINGS. The headings contained in this Agreement and in the
schedules hereto are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
12.6 ASSIGNMENT AND AMENDMENT OF AGREEMENT. This Agreement shall be
binding upon the respective successors and assigns of the parties hereto. This
Agreement may not be assigned, whether by operation of law or otherwise, without
the prior written consent of the other party. This Agreement may be amended only
by written agreement of the parties hereto, duly executed by an authorized
representative of each of the parties hereto. Notwithstanding the foregoing,
Purchaser shall have (a) the absolute right to assign this Agreement to an
affiliate, and (b) the right to assign, transfer or grant participation in all
or any part of, or any interest in, its rights and benefits hereunder to any
lender of Purchaser. Purchaser agrees to promptly notify Parent in writing of
any such assignment.
12.7 GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the state of New York applicable to
contracts made in that state, without giving effect to the conflict of laws
principles thereof. The parties hereto consent to the jurisdiction of the State
of New York and agree that the venue of any action or proceeding arising from
this Agreement shall be venued in the State of New York.
12.8 FURTHER ASSURANCES. Each party agrees that it will execute and
deliver, or cause to be executed and delivered, on or after the date of this
Agreement, all such other instruments and will take all reasonable actions as
may be necessary to transfer and convey the Purchased Assets to Purchaser, on
the terms herein contained, and to consummate the transactions herein contained
to effectuate the provisions and purposes hereof.
12.9 NO THIRD PARTY RIGHTS. This Agreement is not intended and shall not
be construed to create any rights in any parties other than Parent, Seller and
Purchaser and no person shall have any rights as a third party beneficiary
hereunder, including, without limitation, any rights with respect to the
provisions of Section 6.1 hereof.
12.10 WAIVER OF BULK SALES LAWS. Subject to the provisions of Section 11.1
hereof, the parties hereto waive compliance with the provisions of any
applicable bulk sales laws.
12.11 NON-WAIVER. The failure in any one or more instances of a party to
insist upon performance of any of the terms, covenants or conditions of this
Agreement, to exercise any right or privilege in this Agreement conferred, or
the waiver by said party of any breach of any of the terms, covenants or
conditions of this Agreement shall not be construed as a subsequent waiver of
any such terms, covenants, conditions, rights or privileges, but the same shall
continue and remain in full force and effect.
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12.12 SEVERABILITY. The invalidity of any provision of this Agreement or
portion of a provision shall not affect the validity of any other provision of
this Agreement or the remaining portion of the applicable provision.
12.13 INCORPORATION OF SCHEDULES. The schedules hereto are incorporated
into this Agreement and shall be deemed a part hereof as if set forth herein in
full. References herein to "this Agreement" and the words "herein," "hereof" and
words of similar import refer to this Agreement (including its schedules as an
entirety). In the event of any conflict between the provisions of this Agreement
and any such schedule the provisions of this Agreement shall control.
12.14 WAIVER OF JURY TRIAL. PARENT, SELLER AND PURCHASER HEREBY
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL
BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY.
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IN WITNESS WHEREOF, Seller and Purchaser have duly executed and delivered
this Agreement as of the day and year first above written.
HYPERCOM CORPORATION ("PARENT") GOLDEN EAGLE LEASING, INC. ("SELLER")
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------- -------------------
Title:Executive Vice President and Title:Executive Vice President
---------------------------- ------------------------
Chief Financial and Administrative Officer
------------------------------------------
NORTHERN LEASING SYSTEMS INC. ("PURCHASER")
By: /s/ ▇▇▇ ▇▇▇▇▇
--------------
Title: President/CEO
--------------
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