EXHIBIT 2.1
================================================================================
ASSET CONTRIBUTION AND SECURITIES PURCHASE AGREEMENT
AMONG
ASSET ACCEPTANCE HOLDINGS LLC,
AAC HOLDING CORP.,
CONSUMER CREDIT CORP.,
THEIR RESPECTIVE SHAREHOLDERS
AND
AAC INVESTORS, INC.
DATED AS OF SEPTEMBER 30, 2002
================================================================================
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
1.1 Definitions.................................................................................... 2
ARTICLE II
MERGERS AND CONTRIBUTION OF ASSETS
2.1 Mergers........................................................................................ 11
2.2 Contribution of Assets by CCC; Assumption of Liabilities....................................... 12
2.3 Formation of the Company; Contribution of Membership Interests................................. 14
2.4 Purchase of Shares............................................................................. 15
2.5 Payment of Consideration....................................................................... 15
2.6 Non-Assignable Assets.......................................................................... 15
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HOLDING, CCC AND THE
SHAREHOLDERS
3.1 Organization; Qualification.................................................................... 17
3.2 Capitalization; Validity of Shares; Voting Trusts.............................................. 18
3.3 Authority; Binding Obligations................................................................. 18
3.4 Consents and Approvals......................................................................... 19
3.5 Non-Contravention.............................................................................. 19
3.6 Environmental Matters.......................................................................... 19
3.7 Licenses and Permits........................................................................... 20
3.8 Compliance with Laws........................................................................... 21
3.9 Financial Statements........................................................................... 21
3.10 Absence of Changes.......................................................................... 22
3.11 No Undisclosed Liabilities.................................................................. 25
3.12 Litigation.................................................................................. 26
3.13 Real Property............................................................................... 26
3.14 Personal Property........................................................................... 28
3.15 Charged Off Accounts; Accounts Receivable; Accounts Payable................................. 29
3.16 Sufficiency of Assets; No Conflicting Operations............................................ 30
3.17 Books and Records........................................................................... 30
3.18 Intellectual Property; Computer Software.................................................... 30
3.19 Material Contracts.......................................................................... 31
3.20 Insurance................................................................................... 33
3.21 Labor Matters............................................................................... 33
3.22 Employee Plans.............................................................................. 35
3.23 Tax Matters................................................................................. 39
3.24 Transactions with Certain Persons........................................................... 41
3.25 Suppliers of Charged Off Accounts........................................................... 41
3.26 Banking Relationships....................................................................... 41
3.27 No Other Agreements to Sell the Assets or Equity Interests in Holding or the
AAC Companies............................................................................... 42
3.28 Prohibited Payments......................................................................... 42
3.29 Brokers..................................................................................... 42
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTORS
4.1 Organization; Qualification.................................................................... 42
4.2 Authority; Binding Obligations................................................................. 42
4.3 Consents and Approvals......................................................................... 43
4.4 Non-Contravention.............................................................................. 43
4.5 Litigation..................................................................................... 43
4.6 Brokers........................................................................................ 43
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Conduct of Business............................................................................ 44
5.2 Forbearances................................................................................... 44
5.3 Negotiations with Others; Notification......................................................... 45
5.4 Investigation of Business and Properties....................................................... 45
5.5 Confidentiality................................................................................ 46
5.6 No Disclosure; Public Announcements............................................................ 46
5.7 Transfer Taxes; Expenses....................................................................... 46
5.8 Efforts to Consummate.......................................................................... 47
5.9 Environmental Investigation.................................................................... 47
5.10 Related Party Accounts...................................................................... 48
5.11 Allocation of Purchase Price................................................................ 48
5.12 Holding's and The AAC Companies' Insurance.................................................. 48
5.13 Disbursement Accounts....................................................................... 48
5.14 Names....................................................................................... 48
5.15 Further Assurances.......................................................................... 49
ARTICLE VI
EMPLOYEES AND EMPLOYEE MATTERS
6.1 Transferred Employees.......................................................................... 49
6.2 Employee Plans................................................................................. 49
6.3 Worker's Compensation.......................................................................... 50
6.4 Vacation and Holiday Pay....................................................................... 50
6.5 Non-Transferred Employees...................................................................... 50
ii
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF INVESTORS
7.1 Representations and Warranties................................................................. 50
7.2 Performance of this Agreement.................................................................. 50
7.3 Capital Expenditures........................................................................... 51
7.4 Distributions.................................................................................. 51
7.5 Consents and Approvals......................................................................... 51
7.6 Injunction, Litigation, etc.................................................................... 51
7.7 Legislation.................................................................................... 51
7.8 Proceedings.................................................................................... 51
7.9 LLC Agreement.................................................................................. 51
7.10 Opinion of Counsel.......................................................................... 51
7.11 Material Change............................................................................. 52
7.12 Financing................................................................................... 52
7.13 Payoff Letters.............................................................................. 52
7.14 Escrow Agreement............................................................................ 52
7.15 ▇▇▇ Acceptance Acquisition.................................................................. 52
7.16 Noncompetition Agreements................................................................... 52
7.17 Consulting Services Agreement............................................................... 52
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF HOLDING, CCC
AND THE SHAREHOLDERS
8.1 Representations and Warranties................................................................. 53
8.2 Performance of this Agreement.................................................................. 53
8.3 Consents and Approvals......................................................................... 53
8.4 Injunction, Litigation, etc.................................................................... 53
8.5 Legislation.................................................................................... 53
8.6 Proceedings.................................................................................... 53
8.7 LLC Agreement.................................................................................. 53
8.8 Opinion of Counsel............................................................................. 53
8.9 Escrow Agreement............................................................................... 53
8.10 Employment Agreements....................................................................... 54
ARTICLE IX
CLOSING
9.1 Time and Place of Closing...................................................................... 54
9.2 Deliveries by Holding, CCC and the Shareholders................................................ 54
9.3 Deliveries by the Company...................................................................... 55
9.4 Deliveries by Holding.......................................................................... 56
9.5 Deliveries By Investors........................................................................ 56
9.6 Deliveries of Ancillary Agreements............................................................. 56
iii
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
10.1 Survival of Representations................................................................. 56
10.2 Indemnification by Holding, CCC and the Shareholders........................................ 57
10.3 Indemnification by the Company and Investors................................................ 58
10.4 Notice and Defense of Claims................................................................ 59
10.5 Limitations on Indemnification.............................................................. 60
10.6 Calculation of Covered Liabilities.......................................................... 61
10.7 No Circular Recovery........................................................................ 61
10.8 Right of Set Off............................................................................ 62
10.9 Disclaimer of Projections; Memorandum....................................................... 62
10.10 Exclusive Remedy............................................................................ 62
ARTICLE XI
TERMINATION
11.1 Termination................................................................................. 63
11.2 Procedure: Effect of Termination............................................................ 63
ARTICLE XII
GENERAL PROVISIONS
12.1 Notices..................................................................................... 63
12.2 Interpretation.............................................................................. 65
12.3 Entire Agreement............................................................................ 65
12.4 No Third Party Beneficiaries................................................................ 65
12.5 Successors and Assigns...................................................................... 65
12.6 Severability................................................................................ 65
12.7 Amendment................................................................................... 66
12.8 Extension; Waiver........................................................................... 66
12.9 Disclosure Schedules........................................................................ 66
12.10 Counterparts; Transmission of Facsimile Signatures.......................................... 66
12.11 Submission to Jurisdiction; Venue........................................................... 66
12.12 Waiver of Jury Trial........................................................................ 67
12.13 Governing Law............................................................................... 67
EXHIBITS
A Form of Escrow Agreement
B Asset Acceptance LLC Amended and Restated Limited Liability
Company Agreement
C Form of Non-Interference, Non-Disclosure and Non-Competition
Agreement (Shareholders)
D Form of Non-Interference, Non-Disclosure and Non-Competition
iv
Agreement (Employees)
E Form of Opinion of Counsel for the AAC Companies and the
Shareholders
F Form of Opinion of Counsel for Investors
G Consulting Services Agreement
H-1 Form of Employment Agreement - ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
H-2 Form of Employment Agreement - ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
H-3 Form of Employment Agreement - ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
H-4 Form of Employment Agreement - ▇▇▇▇ ▇. ▇▇▇▇▇▇.
I Form of ▇▇▇▇ of Sale
SCHEDULES
1.1 2002 Budgeted Collections and EBITDA
3.1 Organization and Qualification
3.1(e) Holding Business
3.2 Capitalization
3.4 Consents and Approvals
3.5 Non-Contravention
3.6 Environmental Matters
3.7 Licenses and Permits
3.10 Absence of Changes
3.12 Litigation
3.13(b) Leased Real Property
3.14(a) Owned Personal Property
3.14(b) Leased Personal Property
3.15(b) Bulk Purchases Report
3.15(c) Accounts Receivable
3.18 Intellectual Property
3.19 Material Contracts
3.20 Insurance
3.21(a) Employment Agreements
3.21(b) Grievances
3.21(c) Unfair Labor Practices
3.21(d) Affirmative Action Plans
3.21(e) Wages
3.21(f) Employment Practices
3.21(g) OSHA
3.21(i) Employees
3.22 Employee Plans
3.22(b)(iv) Employment Not at Will
3.22(b)(ix) Amendments
3.22(b)(xi) Acceleration of Rights
3.23 Tax Matters
v
3.24 Transactions with Certain Person
3.25 Suppliers
3.26 Banking Relationships
4.3 Consents and Approvals
5.2 Forbearances
5.10 Related Party Accounts
5.11 Allocation of Purchase Price
6.2 Non Transferred Employee Plans
7.16 Non-Competition Agreements
vi
ASSET CONTRIBUTION AND SECURITIES PURCHASE AGREEMENT
This ASSET CONTRIBUTION AND SECURITIES PURCHASE AGREEMENT (the
"Agreement") dated as of September 30, 2002, is made among ASSET ACCEPTANCE
HOLDINGS LLC, a Delaware limited liability company (the "Company"), AAC HOLDING
CORP., a Nevada corporation ("Holding"), CONSUMER CREDIT CORP., a Michigan
corporation ("CCC"), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇ and the TRUSTS listed on the signature pages hereto
(collectively the "Shareholders") and AAC INVESTORS, INC., a Virginia
corporation ("Investors").
RECITALS
A. The Shareholders hold all of the outstanding capital stock of
Holding. Holding holds all of the outstanding capital stock of Asset Acceptance
Corp., a Nevada corporation ("Asset Acceptance"), Financial Credit Corp., a
Nevada corporation ("Financial Credit"), CFC Financial Corp., a Nevada
corporation ("CFC Financial"). ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., certain trusts established
for the benefit of the children of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ hold all of the outstanding capital stock of CCC.
B. Prior to the Closing of the actions described below in
Recitals C and D, Asset Acceptance, Financial Credit, CFC Financial and CCC will
each form Delaware limited liability companies (respectively, "Asset Acceptance,
LLC," "Financial Credit, LLC," "CFC Financial, LLC" and "Consumer Credit, LLC,"
and collectively, the "AAC LLCs") and will hold all of the membership interests
in such AAC LLCs. Prior to the Closing of the actions described below in
Recitals C and D, Asset Acceptance will purchase substantially all of the Assets
of ▇▇▇ Acceptance Corp., a Michigan corporation ("▇▇▇ Acceptance"), for a cash
payment of $200,000. Prior to the Closing of the actions described below in
Recitals C and D, and after the transaction described in the preceding sentence,
Asset Acceptance, Financial Credit and CFC Financial will merge into its
respective AAC LLC subsidiary, and as a result such AAC LLCs will succeed to all
of the assets and liabilities related to the business of purchasing and
collecting Charged Off Accounts (hereinafter defined) (the "AAC Business"), and
CCC will contribute to Consumer Credit LLC substantially all of the assets and
liabilities related to the business of making and servicing consumer loans and
mortgages, issuing credit cards and financing sales of consumer product
retailers (the "CCC Business," and together with the AAC Business, the
"Business") in exchange for all of the membership interests of Consumer Credit,
LLC.
C. The Shareholders desire to cause Holding to contribute to the
Company all of the membership interests in Asset Acceptance, LLC, Financial
Credit, LLC and CFC Financial, LLC in exchange for 39,000,000 Class A-1 Shares,
25,350,000 Class B-1 Shares, 6,000,000 Class A Shares and 3,900,000 Class B
Shares of the Company and $550,000 in cash. The shareholders of CCC desire to
cause CCC to contribute to the Company all of the membership interests in
Consumer Credit, LLC in exchange for 650,000 Class B-1 Shares and 100,000 Class
B Shares of the Company and $250,000 in cash.
D. Holding desires to sell to Investors and Investors desires to
purchase from Holding the 39,000,000 Class A-1 Shares and 6,000,000 Class A
Shares of the Company received by it as contemplated in Recital C.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties and agreements herein contained, the parties hereto
agree as follow:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. The following terms, as used herein, have the
following meanings:
"AAC Claims" has the meaning set forth in Section 10.3(b).
"AAC Companies" means Asset Acceptance, Financial Credit, CFC
Financial, and CCC; provided that reference to the AAC Companies in Article III
shall be interpreted to mean the AAC Companies, the AAC LLCs, any predecessor of
the AAC Companies and any other Person the equity interests in which were
acquired, and the operations of any Person whose assets or liabilities were
acquired or assumed, by the AAC Companies pursuant to agreement or by operation
of law.
"AAC Debt" means the sum of (i) indebtedness of Holding and
the AAC Companies for borrowed money from third parties and (ii) the combined
capitalized liability of Holding and the AAC Companies under Capital Leases;
provided that AAC Debt does not include trade accounts payable incurred by
Holding and the AAC Companies in the ordinary course of business.
"AAC Indemnified Parties" has the meaning set forth in Section
10.3(a).
"Action" means any complaint, claim, prosecution, indictment,
action, suit, arbitration, investigation, governmental audit, inquiry or
proceeding by or before any Governmental Authority.
"Affiliate" of any Person means any other Person directly or
indirectly controlling (including all directors and officers of such Person) or
controlled by or under direct or indirect common control with such Person. For
the purposes of this definition, "control", when used with respect to any
Person, means (i) with respect to any Person having voting shares or their
equivalent and elected directors, managers or Persons performing similar
functions, the possession, directly or indirectly, of the power to vote ten
percent (10%) or more of the shares or other ownership interests having ordinary
voting power of such Person or (ii) the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting shares or their equivalent,
by
2
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Ancillary Agreements" means the LLC Agreement, Escrow
Agreement, the Employment Agreements, the Non-Interference, Non-Disclosure and
Non-Competition Agreements, the Registration Rights Agreement, the CC Option
Agreement and the Consulting Services Agreement.
"Assets" means all of a Person's right, title and interest in
and to all properties, assets and rights of any kind, whether tangible or
intangible, real or personal, owned by such Person or in which such Person has
any interest whatsoever.
"Assumed CCC Liabilities" has the meaning set forth in Section
2.2.
"Audited Financial Statements" has the meaning set forth in
Section 3.9.
"Benefit Arrangement" means any employment, consulting,
severance or other similar contract, arrangement or policy (written or oral) and
each plan, arrangement, program, agreement or commitment (written or oral)
providing for insurance coverage (including, without limitation, any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
life, health or accident benefits (including, without limitation, any "voluntary
employees' beneficiary association" as defined in Section 501(c)(9) of the
Internal Revenue Code providing for the same or other benefits) or for deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation rights,
stock purchases or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (i) is not a Welfare Plan, Pension
Plan or Multiemployer Plan, (ii) is entered into, maintained, contributed to or
required to be contributed to, as the case may be, by Holding or the AAC
Companies or any ERISA Affiliate or under which Holding or the AAC Companies or
any ERISA Affiliate may incur any liability, and (iii) covers any employee or
former employee of Holding or the AAC Companies or any ERISA Affiliate (with
respect to their relationship with any such entity).
"Books and Records" means all books, records, lists, ledgers,
files, reports, plans, drawings and operating records of every kind (in any form
or medium) relating to the AAC Companies, the Assets of the AAC Companies,
business operations, customers, suppliers and personnel, including (i) all
company books and records of the AAC Companies, (ii) all disk or tape files,
printouts, runs or other computer-based information and the AAC Companies'
interest in all computer programs required to access, and the equipment
containing, all such computer-based information, (iii) all product, business and
marketing plans, (iv) all environmental control records, (v) all sales,
maintenance and production records, (vi) equipment warranty information, (vii)
litigation files, (viii) customer and supplier lists and information and (ix)
personnel records. Books and Records does not include any records of Holding or
the corporate or income tax records of the AAC Companies.
"Business" has the meaning set forth in the Recitals.
3
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in Detroit, Michigan, Richmond, Virginia, or
New York, New York are authorized by Law to close.
"Capital Lease" means any lease of which any of the AAC
Companies is the lessee which is required to be capitalized on the balance sheet
in accordance with GAAP.
"CCC Financial Statements" has the meaning set forth in
Section 3.9.
"Charged Off Accounts" means consumer accounts receivable that
have been charged off by the original creditor.
"Claim" has the meaning set forth in Section 10.4.
"Claim Notice" has the meaning set forth in Section 10.4.
"Closing" has the meaning set forth in Section 9.1.
"Closing Date" has the meaning set forth in Section 9.1.
"Company Claims" has the meaning set forth in Section 10.2(b)
"Company Indemnified Parties" has the meaning set forth in
Section 10.2(a).
"Consumer Credit Account" means any retail or other
installment contract involving periodic payments to a creditor which are
purchased by or originate with CCC.
"Contract" means any agreement, contract, lease, note, loan,
evidence of indebtedness, purchase order, letter of credit, franchise agreement,
undertaking, covenant not to compete, employment agreement, license, instrument,
obligation or commitment to which any of the AAC Companies is a party or by
which any of their Assets is bound, whether oral or written, express or implied,
and which pursuant to its terms has not expired, terminated or been fully
performed by the parties thereto.
"Contributed Assets" has the meaning set forth in Section 2.1.
"Controlled Group Liability" means any and all liabilities
under (i) Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 or
4971 of the Internal Revenue Code, (iv) the continuation coverage requirements
of Sections 601 et seq. of ERISA and Section 4980B of the Internal Revenue Code
and (v) the disclosure and reporting requirements of Sections 101 et seq. of
ERISA, other than such liabilities that arise solely out of, or relate solely
to, employees or former employees of Holding and the AAC Companies.
"Covered Liabilities" means any and all debts, losses,
liabilities, claims, fines, royalties, deficiencies, damages, Actions,
obligations, payments (including those arising out of any demand, assessment,
settlement, judgment or compromise relating to any Action), costs (including
costs of mitigation) and expenses (including interest and penalties due and
payable
4
with respect thereto and reasonable attorneys' and accountants' fees and any
other out-of-pocket expenses incurred in investigating, preparing, defending,
avoiding or settling any Action or in investigating, preserving or enforcing
another party's obligations hereunder), matured or unmatured, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, known or unknown,
including any of the foregoing arising under, out of or in connection with any
Action, order or consent decree of any Governmental Authority or award of any
arbitrator of any kind, or any law, rule, regulation, contract, commitment or
undertaking; provided that diminution in the value of the Purchased Shares as a
result of incurrence by the Company of a Covered Liability shall not itself be a
Covered Liability.
"Decrees" has the meaning set forth in Section 3.8.
"Delaware LLC Act" means the Delaware Limited Liability
Company Act, Del. Code, title 6, Sections 18-101 et seq., as amended from time
to time.
"Employee Plans" means all Benefit Arrangements, Multiemployer
Plans, Pension Plans and Welfare Plans.
"Employment Agreements" means the Employment Agreements, dated
the date hereof, between the Company, on the one hand, and each of ▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇, on
the other hand, as the same may be amended or modified from time to time, and
"Employment Agreement" means any one of the foregoing.
"Encumbrance" means any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, conditional sales agreement, encumbrance or other right of third
parties, whether voluntarily incurred or arising by operation of law, and any
contingent sale or other title retention agreement or financing lease.
"Environmental Laws" means all applicable federal, state,
district, local and foreign laws, all rules or regulations promulgated
thereunder, and all orders, judgments, notices, permits or demand letters
issued, promulgated or entered pursuant thereto, relating to pollution or
protection of the environment (including ambient air, surface water, ground
water, land surface, or subsurface strata), including (i) laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, industrial materials, wastes or other substances into
the environment and (ii) laws relating to the identification, generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
recovery, transport or other handling of pollutants, contaminants, chemicals,
industrial materials, wastes or other substances, in each case as applicable on
or before the Closing Date. By way of example only, Environmental Laws include
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), the Toxic Substances Control Act, as amended, the
Hazardous Materials Transportation Act, as amended, the Resource Conservation
and Recovery Act, as amended ("RCRA"), the Clean Water Act, as amended, the Safe
Drinking Water Act, as amended, the Clean Air Act, as amended, the Atomic Energy
Act of 1954, as amended, the Occupational Safety and Health Act, as amended, and
all analogous laws promulgated or issued by any state or other governmental
authority.
5
"Environmental Permit" means all registrations, applications,
filings, certifications, notices, orders, licenses, permits, approvals,
consents, qualifications, authorizations and waivers of any Governmental
Authority issued under or with respect to an Environmental Law.
"Environmental Reports" means any and all written analyses,
summaries or explanations, in the possession or control of Holding or the AAC
Companies, of (i) Hazardous Emissions, Handling Hazardous Substances or any
environmental conditions in, on or about the properties of Holding or the AAC
Companies or (ii) Holding and the AAC Companies' compliance with Environmental
Laws.
"Equipment" means all machinery, equipment, computer
equipment, furniture, vehicles, tools, dies, molds and parts, office and other
supplies, spare parts, fuel and other tangible personal property wherever
located (including any of the foregoing purchased subject to any conditional
sales agreement or title retention agreement in favor of any other Person).
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means any entity which is (or at any
relevant time was) a member of a "controlled group of corporations" with, under
"common control" with, or a member of an "affiliated service group" with, or
otherwise required to be aggregated with, any of Holding or the AAC Companies as
set forth in Section 414(b), (c), (m) or (o) of the Internal Revenue Code.
"Escrow Agent" means the Person appointed as the escrow agent
under the Escrow Agreement.
"Escrow Agreement" means the agreement entered into by or on
behalf of Holding, CCC and the Shareholders, on the one hand, and the Company
and Investors, on the other hand, substantially in the form of Exhibit A hereto.
"Escrow Fund" means, at any time, the amount held under the
Escrow Agreement at such time.
"Escrow Payment" means $3.75 million.
"Excluded Assets" has the meaning set forth in Section 2.2.
"Facilities" means all plants, offices, administration
buildings and all other real property owned or leased by Holding or the AAC
Companies.
"Final Determination" has the meaning set forth in Section
10.4(h).
"Financial Statements" means the Audited Financial Statements,
the Interim Financial Statements and/or the CCC Financial Statements, as the
context requires.
6
"GAAP" means generally accepted accounting principles in the
United States of America, as in effect from time to time, consistently applied.
"Governmental Authority" means any federal, state, local,
foreign, supernational or supranational court or tribunal, governmental,
regulatory or administrative agency, department, bureau, authority or commission
or arbitral panel.
"Hazardous Substances" means all pollutants, contaminants,
chemicals, wastes, and any other carcinogenic, ignitable, corrosive, reactive,
toxic or otherwise hazardous substances or materials (whether solids, liquids or
gases) subject to regulation, control or remediation under Environmental Laws.
By way of example only, the term Hazardous Substances includes petroleum, urea
formaldehyde, flammable, explosive and radioactive materials, PCBs, pesticides,
herbicides, asbestos, sludge, slag, acids, metals, solvents and waste waters.
"indemnified party" has the meaning set forth in Section 10.4.
"indemnifying party" has the meaning set forth in Section
10.4.
"Intellectual Property" means all trade names, trademarks and
service marks, domain names, patents, patent rights, copyrights, whether
domestic or foreign, (as well as applications, registrations or certificates for
any of the foregoing), inventions, trade secrets, proprietary processes,
software and other industrial and intellectual property rights.
"Interim Financial Statements" has the meaning set forth in
Section 3.9.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, and any successor legislation.
"Investor's Auditors" means PricewaterhouseCoopers LLP.
"Key Personnel" of a corporation or limited liability company
means all directors and officers, and all employees of such corporation or
limited liability company whose annual base compensation exceeds $65,000.
"Knowledge of the AAC Companies" means the actual knowledge of
any officer at the level of Assistant Vice President or above, including ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇'▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇ or as to which such person
has written notice, but without an obligation to make inquiry of any other
person.
"Knowledge of Investors" means the actual knowledge of ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ and C. ▇▇▇▇▇ ▇▇▇▇▇▇, or as to which such person has
written notice, but without an obligation to make inquiry of any other person.
"Laws" has the meaning set forth in Section 3.8.
7
"Lease" means a Real Property Lease or a Personal Property
Lease.
"Leased Real Property" has the meaning set forth in Section
3.13(b).
"Licenses and Permits" means all registrations, applications,
filings, certifications, notices, orders, licenses, permits, approvals,
consents, qualifications, authorizations and waivers of any Governmental
Authority, but does not include Environmental Permits.
"LLC Agreement" means the Amended and Restated Limited
Liability Company Agreement of the Company substantially in the form of Exhibit
B.
"Material Adverse Effect" or "Material Adverse Change" means
as to any Person (i) any material adverse effect on or material adverse change
with respect to (A) the business, operations, assets, liabilities, financial
condition or results of operations of such Person and its Affiliates, taken as a
whole (except as expressly provided otherwise, the use of "Material Adverse
Effect" or "Material Adverse Change" with respect to Holding or any of the AAC
Companies shall mean Holding and all of the AAC Companies, taken as a whole), or
(B) the right or ability of such Person or any of its Affiliates to consummate
the transactions contemplated hereby or (ii) any event or condition which, with
the passage of time or the giving or receipt of notice would reasonably be
expected to constitute a "Material Adverse Effect" or "Material Adverse Change"
with respect to such Person. No effect or change described in clause (i)(A) will
be considered a Material Adverse Effect or Material Adverse Change unless it
(together with all effects or changes arising out the same or related facts or
circumstances) involves at least $50,000.
"Material Contracts" has the meaning set forth in Section
3.19.
"Mergers" has the meaning set forth in Section 2.1.
"Multiemployer Plan" means any "multiemployer plan," as
defined in Section 4001(a)(3) or 3(37) of ERISA, which (i) Holding, the AAC
Companies or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or, after September 25, 1980, maintained,
administered, contributed to or was required to contribute to, or under which
Holding, the AAC Companies or any ERISA Affiliate may incur any liability and
(ii) covers any employee or former employee of Holding, the AAC Companies or any
ERISA Affiliate (with respect to their relationship with any such entity).
"Non-Interference, Non-Disclosure and Non-Competition
Agreements" means the Non-Interference, Non-Disclosure and Non-Competition
Agreements entered into by (i) Holding, the AAC Companies and the Shareholders,
on the one hand, and the Company, on the other hand, substantially in the form
of Exhibit C hereto and (ii) the employees of the AAC Companies set forth in
Schedule 7.16, on the one hand, and the Company and/or the applicable AAC LLC,
on the other hand, substantially in the form of Exhibit D hereto.
"PBGC" means the Pension Benefit Guaranty Corporation.
8
"Pension Plans" means any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which (i) the
AAC Companies or any ERISA Affiliate maintains, administers, contributes to or
is required to contribute to, or, within the five years prior to the Closing
Date, maintained, administered, contributed to or was required to contribute to,
or under which the AAC Companies or any ERISA Affiliate may incur any liability
(including, without limitation, any contingent liability) and (ii) covers any
employee or former employee of the AAC Companies or any ERISA Affiliate (with
respect to their relationship with any such entity).
"Permitted Encumbrances" means (i) statutory liens for current
state and local property taxes or assessments not yet due or delinquent; (ii)
mechanics', carriers', workers', repairers' and other similar liens arising or
incurred in the ordinary course of business relating to obligations as to which
there is no default on the part of the AAC Companies; and (iii) such other
recorded liens, imperfections in title, charges, easements, restrictions and
encumbrances which do not materially affect the use, value, enjoyment, occupancy
or marketability of such property.
"Person" means an individual, a corporation, a partnership, a
limited liability company, an association, a trust or any other entity or
organization, including a governmental or political subdivision or an agency of
instrumentality thereof.
"Personal Property Lease" has the meaning set forth in Section
3.14(b)(i).
"Purchased Shares" has the meaning set forth in Section 2.4.
"Q-Subs" means Asset Acceptance, Financial Credit and CFC
Financial.
"Real Property" means real estate together with the
structures, fixtures and other improvements thereon and the appurtenances,
rights and easements thereto belonging.
"Real Property Lease" has the meaning set forth in Section
3.13(b)(i).
"Retained Liabilities" means the Retained CCC Liabilities and
each of the following:
(i) any liability for federal, state or local
income or franchise Taxes, including the Michigan Single
Business Tax and income or franchise Taxes incurred by the AAC
Companies in the conduct of the Business prior to the Closing,
EXCEPT THOSE TAXES OWED BY THE AAC COMPANIES AND ACCRUED OR
RESERVED FOR ON THE BALANCE SHEETS FOR THE AAC COMPANIES IN
THE INTERIM FINANCIAL STATEMENTS AND SUCH TAXES OWED BY THE
AAC COMPANIES FOR PERIODS ENDING AFTER THE DATE OF THE INTERIM
FINANCIAL STATEMENTS AND ON OR BEFORE THE CLOSING DATE THAT
ARE RECORDED AS A CURRENT LIABILITY IN BOOKS AND RECORDS OF
THE AAC COMPANIES AS OF THE CLOSING DATE CONSISTENT WITH PAST
PRACTICE;
9
(ii) any liability for federal, state or local
Taxes incurred by Holding or the AAC Companies with respect to
any of the transactions contemplated hereby;
(iii) any liability or obligation of the AAC
Companies or any of their Affiliates or any ERISA Affiliate of
any of the foregoing whether currently existing or hereafter
arising that is not attributable to, or does not arise out of
the conduct of the Business;
(iv) subject to Section 2.6, any liability or
obligation arising under any Contract, including Material
Contracts and Leases, if the rights of the AAC Companies are,
for any reason, not transferred to, or the benefits thereunder
are not otherwise made available to, the AAC LLCs by the AAC
Companies;
(v) any liability or obligation of Holding or
the AAC Companies arising under this Agreement;
(vi) any liability or obligation, including
liabilities and obligations arising under Environmental Law,
with respect to an Excluded Asset;
(vii) any liability or obligation of any of the
AAC Companies to any of the Shareholders (other than salary,
but not bonuses, and benefits in the ordinary course of
business consistent with past practices); and
(viii) any liability or obligation (including under
ERISA) in respect of the ▇▇▇ Acceptance Corp. Defined Benefit
Pension Plan.
"Retained CCC Liabilities" has the meaning set forth in
Section 2.2(d).
"Subsidiary" with respect to any party to this Agreement,
means any corporation or other business entity, whether or not incorporated, of
which at least 50% of the securities or interests having, by their terms,
ordinary voting power to elect members of the Board of Directors, or other
persons performing similar functions with respect to such entity, is held
directly or indirectly by such party.
"Survival Date" has the meaning set forth in Section 10.1.
"Tax Benefit" means the tax effect of any item of loss,
deduction or credit or any other item (including any increase in tax basis of
Assets of the Company) which decreases Taxes paid or payable.
"Tax Returns" means any and all returns, reports, declarations
and information statements with respect to Taxes required to be filed by or on
behalf of any of Holding or the
10
AAC Companies with any Governmental Authority, including consolidated, combined
or unitary returns and all amendments thereto.
"Tax Law" means the Internal Revenue Code, federal, state or
local laws relating to Taxes and any regulations or official administrative
pronouncements released thereunder.
"Tax Loss" means the tax effect of any item (including any
decrease in tax basis of Assets of the AAC Companies) which increases Taxes paid
or payable.
"Taxes" means (i) all federal, state and local, whether
domestic or foreign, taxes or assessments, including those relating to income,
gross receipts, gross income, capital stock, franchise, profits, employees and
payroll, withholding, foreign withholding, social security, unemployment,
disability, license, real property, personal property, intangibles, stamp,
excise, sales, use, transfer, occupation, value added, ad valorem, premium,
windfall profits, environmental (including taxes under Section 59A of the
Internal Revenue Code), alternative minimum or estimated taxes or other similar
tax, duty or governmental charge, together with any interest, penalties or
additions to tax or additional amounts with respect to the foregoing, whether
disputed or not and (ii) any obligations under any agreements or arrangements
with respect to any Taxes described in clause (i) hereof.
"Taxing Authority" means any Governmental Authority, domestic
or foreign, having jurisdiction over the assessment, determination, collection,
or other imposition of Tax.
"Third Party Claim" has the meaning set forth in Section 10.4.
"Transferred Employees" has the meaning set forth in Section
6.1.
"Welfare Plan" means any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, which (i) any of the AAC Companies or any
ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or under which the AAC Companies or any ERISA Affiliate may incur
any liability and (ii) covers any employee or former employee of the AAC
Companies or any ERISA Affiliate (with respect to their relationship with any
such entity).
"2002 Budgeted Collections and EBITDA" means the budgeted
collections and EBITDA for the AAC Companies for the year ending December 31,
2002 as set forth in Schedule 1.1.
ARTICLE II
MERGERS AND CONTRIBUTION OF ASSETS
2.1 MERGERS.
Prior to the Closing, Holding agrees to cause Asset Acceptance, Financial Credit
and CFC Financial to merge into Asset Acceptance, LLC, Financial Credit, LLC and
CFC Financial
11
Credit, LLC, respectively (the "Mergers"). Following the Mergers, the separate
corporate existence of Asset Acceptance, Financial Credit and CFC Financial
shall cease and the respective AAC LLC shall continue as the surviving entity
and shall be governed by the Delaware LLC Act. The Mergers shall have the
effects set forth in Section 18-209 of the Delaware LLC Act.
2.2 CONTRIBUTION OF ASSETS BY CCC; ASSUMPTION OF LIABILITIES.
(a) Prior to the Closing, CCC agrees to contribute to Consumer
Credit, LLC all of CCC's, as the case may be, right title and interest in and to
the assets, properties or rights of every kind and nature (whether real,
personal or mixed, tangible or intangible, fixed or contingent, known or
unknown, wherever located, and whether or not reflected in the Financial
Statements), and whether now existing or hereafter acquired through the Closing
Date used or held for use in connection with the Business (the "Contributed
Assets"), including the following:
(i) all Equipment and other tangible personal
property, wherever located (including any of the foregoing
purchased subject to any conditional sales agreement or title
retention agreement in favor of any other Person), which are
owned by the AAC Companies and are used or held for use in
connection with the Business;
(ii) all Consumer Credit Accounts and other notes
and accounts receivable, and all rights to collect the
unrecovered balances thereon;
(iii) all transferable Licenses and Permits held
by CCC which relate to the Contributed Assets or the CCC
Business;
(iv) all Intellectual Property owned or licensed
by CCC, or which CCC otherwise have the right to use, which is
assignable and which relates to the Contributed Assets or the
CCC Business, including rights to ▇▇▇ for past, present and
future infringement thereof;
(v) all right, title and interest of CCC in, to
and under all Contracts which any of them is a party, all
rights to receive goods or services pursuant to such
agreements or to assert claims or take other rightful action
in respect of breaches, defaults and other violations of such
agreements and all rights under express or implied warranties
or rights of indemnity;
(vi) all Books and Records (in any form or
medium), including computerized records and any associated
software and documentation, relating to the CCC Business;
(vii) all purchase orders, forms, labels,
stationery, shipping materials, catalogues, brochures, art
work, photographs and advertising materials held by CCC for
use in connection with the CCC Business;
12
(viii) all credits, prepaid expenses, deferred
charges, security deposits, claims for refund and rights of
offset;
(ix) all rights with respect to causes of action,
lawsuits, judgments, claims and demands of any nature
available or being pursued by or on behalf of the CCC with
respect to the CCC Business or the ownership, use, function or
value of any Contributed Assets;
(x) all other tangible and intangible properties
and Assets which are used or held for use in connection with
the CCC Business or which historically have been reflected as
Assets on the books of CCC;
(xi) all guarantees, warranties, indemnities and
similar rights with respect to any Contributed Assets;
(xii) all proceeds (including cash and cash
equivalents) received by CCC in respect of the loss, damage or
destruction of any of the foregoing on or after the date
hereof; and
(xiii) cash and cash equivalents, including all
banking and deposit accounts and ▇▇▇▇▇ cash funds located at
the offices of CCC.
(b) The Contributed Assets will not include any of the
following (the "Excluded Assets"):
(i) subject to Section 2.6, any Asset that is
not assignable; and
(ii) any rights of CCC under this Agreement or
the Ancillary Agreements.
(c) Except to the extent set forth in paragraph (d) of this
Section 2.2, Consumer Credit, LLC will assume all of liabilities and obligations
of CCC which relate to the CCC Business and are not paid or discharged at or
before the Closing (the "Assumed CCC Liabilities"); provided that the foregoing
shall not affect adversely the obligations of Holding, CCC and the Shareholders
to provide indemnification under Section 10.2 hereof if there is a breach of the
representations and warranties made by Holding, CCC or the Shareholders in this
Agreement or any document delivered pursuant hereto.
(d) Notwithstanding the provisions of paragraph (c) of this
Section 2.2 or any other provision hereof, and regardless of any disclosure to
Investors, the Company shall not succeed to, assume or become liable for, and
Consumer Credit, LLC shall not succeed to, assume or become liable for, any of
the following listed liabilities and obligations (the "Retained CCC
Liabilities"):
(i) any liability for federal, state or local
income or franchise Taxes, including the Michigan Single
Business Tax and income or
13
franchise Taxes incurred by the AAC Companies in the conduct
of the Business prior to the Closing, EXCEPT THOSE TAXES OWED
BY THE AAC COMPANIES AND ACCRUED OR RESERVED FOR ON THE
BALANCE SHEETS FOR THE AAC COMPANIES IN THE INTERIM FINANCIAL
STATEMENTS AND SUCH TAXES OWED BY THE AAC COMPANIES FOR
PERIODS ENDING AFTER THE DATE OF THE INTERIM FINANCIAL
STATEMENTS AND ON OR BEFORE THE CLOSING DATE THAT ARE RECORDED
AS A CURRENT LIABILITY IN BOOKS AND RECORDS OF THE AAC
COMPANIES AS OF THE CLOSING DATE CONSISTENT WITH PAST
PRACTICE;
(ii) any liability for federal, state or local
Taxes incurred by Holding or the AAC Companies with respect to
any of the transactions contemplated hereby;
(iii) any liability or obligation of the AAC
Companies or any of their Affiliates or any ERISA Affiliate of
any of the foregoing whether currently existing or hereafter
arising that is not attributable to, or does not arise out of
the conduct of the Business;
(iv) subject to Section 2.6, any liability or
obligation arising under any Contract, including Material
Contracts and Leases, if the rights of the AAC Companies are,
for any reason, not transferred to, or the benefits thereunder
are not otherwise made available to, the AAC LLCs by the AAC
Companies;
(v) any liability or obligation of Holding or
the AAC Companies arising under this Agreement;
(vi) any liability or obligation, including
liabilities and obligations arising under Environmental Law,
with respect to an Excluded Asset;
(vii) any liability or obligation of any of the
AAC Companies to any of the Shareholders (other than salary,
but not bonuses, and benefits in the ordinary course of
business consistent with past practices); and
(viii) any liability or obligation (including under
ERISA) in respect of the ▇▇▇ Acceptance Corp. Defined Benefit
Pension Plan.
2.3 FORMATION OF THE COMPANY; CONTRIBUTION OF MEMBERSHIP INTERESTS.
(a) Prior to the Closing, Holding and CCC shall cause the
Company to be organized under the Delaware LLC Act.
(b) At the Closing, Holding shall contribute to the Company,
free and clear of any Encumbrances, all of the membership interests in Asset
Acceptance, LLC, Financial Credit, LLC and CFC Financial, LLC in exchange for
39,000,000 Class A-1 Shares, 25,350,000 Class B-1
14
Shares, 6,000,000 Class A Shares and 3,900,000 Class B Shares of the Company and
$550,000 in cash.
(c) At the Closing, CCC shall contribute to the Company, free
and clear of any Encumbrances, all of the membership interests in Consumer
Credit, LLC in exchange for 650,000 Class B-1 Shares, 100,000 Class B Shares of
the Company and $250,000 in cash.
2.4 PURCHASE OF SHARES. At the Closing Holding agrees to sell to
Investors, and Investors agree to purchase from Holding, the 39,000,000 Class
A-1 Shares and the 6,000,000 Class A Shares of the Company (the "Purchased
Shares") received by it as a portion of the consideration for the contribution
by it to the Company of the membership interests in the AAC LLCs held by it.
2.5 PAYMENT OF CONSIDERATION.
(a) At the Closing the Company will:
(i) deliver to Holding certificates evidencing
the 39,000,000 Class A-1 Shares, 25,350,000 Class B-1 Shares,
6,000,000 Class A Shares and 3,900,000 Class B Shares of the
Company and $550,000 in cash or immediately available funds in
consideration for the membership interests in Asset Acceptance
LLC, Financial Credit LLC and CFC Financial LLC contributed by
Holding to the Company; and
(ii) deliver to CCC, certificates evidencing the
650,000 Class B-1 Shares and 100,000 Class B Shares of the
Company and $250,000 in cash or immediately available funds in
consideration for the membership interests in Consumer Credit
LLC contributed by CCC to the Company.
(b) As the purchase price for the Purchased Shares, Investors
will pay to Holding $45,000,000 in cash or immediately available funds, of which
$41,250,000 shall be delivered by wire transfer to Holding and $3,750,000 shall
be delivered by wire transfer to the Escrow Agent to be held pursuant to the
Escrow Agreement.
2.6 NON-ASSIGNABLE ASSETS.
(a) This Agreement will not constitute an assignment or
transfer, or an attempted assignment or transfer, of any License and Permit or
Contract which, but for this Section 2.6(a), would constitute a Contributed
Asset (a "Non-Assignable Asset"), if and to the extent that the assignment or
transfer of such Non-Assignable Asset:
(i) would require the consent or waiver of a
third party, including any Governmental Authority, and such
consent or waiver has not been obtained;
15
(ii) would constitute a breach of the terms of
such Non-Assignable Asset; or
(iii) would constitute a violation of any Law or
Decrees.
(b) The AAC LLCs and the AAC Companies will use their best
efforts to obtain the consents and waivers and to resolve the impracticalities
of assignment referred to in Section 2.6(a) and in the meantime the AAC LLCs and
the AAC Companies will use their best efforts to obtain for the AAC LLCs the
benefit of any Non-Assignable Asset, subject to the corresponding liabilities
and obligations.
(c) To the extent that any consent or waiver referred to in
Section 2.6(a) is not obtained by the AAC Companies until the impracticalities
of assignment referred to in Section 2.6(a) are resolved, the AAC Companies will
use their reasonable best efforts to (i) provide to the AAC LLCs the benefits of
any Non-Assignable Asset, (ii) cooperate in any reasonable and lawful
arrangement designed to provide such benefits to the AAC LLCs, and (iii) at the
request of the Company, enforce for the account of the AAC LLCs any right of the
AAC Companies arising from any Non-Assignable Asset against such issuer or the
other party or parties referred to in Section 2.6(a) (including the right to
elect to terminate in accordance with the terms of such Non-Assignable Asset on
the advice of the Company).
(d) To the extent that the AAC LLCs are provided the benefits
pursuant to this Section 2.6 of any Non-Assignable Asset, the AAC LLCs will
perform the obligations of the AAC Companies under or in connection with such
Non-Assignable Asset; provided that neither the Company nor any of the AAC LLCs
shall have any obligation or liability under any Licenses and Permits or
Contracts as to which the AAC LLCs are not provided any benefits.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HOLDING, CCC AND THE
SHAREHOLDERS
As an inducement to Investors to enter into this Agreement, Holding,
CCC and the Shareholders hereby make, as of the date hereof and as of the
Closing Date, the following representations and warranties to the Company and
Investors, except as otherwise set forth in written disclosure schedules (the
"Schedules") delivered to Investors prior to the execution hereof, a copy of
which is attached hereto. The Schedules are numbered to correspond to the
various sections of this Article III setting forth certain exceptions to the
representations and warranties contained in this Article III and certain other
information called for by this Agreement. No disclosure made in any particular
Schedule shall be deemed made in any other Schedule unless expressly made
therein (by cross-reference or otherwise) unless, and to the extent that, it
would be fairly understood on its face to contain information which also is
applicable to the representation and warranty to which such other Schedule
relates.
Holding, CCC and the Shareholders, jointly and severally, represent and
warrant to the Company and Investors the following:
16
3.1 ORGANIZATION; QUALIFICATION.
(a) Each of Holding and the AAC Companies is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation as set forth in Schedule 3.1, and has all
necessary power and authority to own or lease all of its properties and assets
and to carry on its business as it is presently being conducted. Each of Holding
and the AAC Companies is duly qualified and in good standing to transact
business in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary, except where the failure to be in good standing or to be duly
qualified would not, individually or in the aggregate, have a Material Adverse
Effect on Holding and the AAC Companies. Each jurisdiction in which any of
Holding or the AAC Companies, as the case may be, is qualified to do business is
set forth in Schedule 3.1. Holding has heretofore delivered to Investors
complete and correct copies of the articles or certificates of incorporation and
bylaws of each of Holding and the AAC Companies as currently in effect.
(b) Each of the Company and the AAC LLCs is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has all necessary power and authority to
own or lease all of the Contributed Assets that will be contributed to it and to
carry on the Business as it is presently being conducted by the Company and the
respective AAC Company which is its parent. Each of the AAC LLCs is duly
qualified and in good standing to transact business in each jurisdiction in
which the property owned, leased or operated by its respective AAC Company
parent or the nature of the business conducted by its respective AAC Company
parent makes such qualification necessary, except where the failure to be in
good standing or to be duly qualified would not, individually or in the
aggregate, have a Material Adverse Effect on the AAC LLCs taken as a whole. Each
jurisdiction in which each of the AAC LLCs is qualified to do business is set
forth in Schedule 3.1. Holding has heretofore delivered to Investors complete
and correct copies of the certificate of formation and limited liability company
agreements of the Company and each of the AAC LLCs as currently in effect.
(c) A complete list of the directors and officers of each of
Holding, the AAC Companies and the AAC LLCs is set forth in Schedule 3.1.
(d) Except for the Q-Subs and the AAC LLCs, none of Holding,
the AAC Companies or the AAC LLCs has, or has ever had, any Subsidiary. All of
the outstanding capital stock of each Q-Sub is owned by Holding, in each case
free and clear of any Encumbrances. Immediately prior to the Mergers, all of the
membership interests of the AAC LLCs were held by the respective AAC Company, in
each case free and clear of any Encumbrances.
(e) Holding was formed and organized for the sole and
exclusive purpose of holding the outstanding shares of capital stock of the
Q-Subs. Except as set forth in Schedule 3.1(e), Holding has never conducted any
business, been a party to any Contract, incurred any liability or obligation or
owned any Assets other than the outstanding capital stock of the Q-Subs.
17
(f) The Company was formed and organized for the sole and
exclusive purpose of holding the outstanding membership interests of the AAC
LLCs. The Company has never conducted any business, been a party to any Contract
(with the exception of the Original LLC Agreement), incurred any liability or
obligation or owned any Assets. There are no outstanding membership interests in
the Company, except as contemplated in Article II hereof. Immediately following
the consummation of the transactions contemplated hereby, the only outstanding
membership interests in the Company will be the membership interests issued
pursuant to Section 2.3 (including the Purchased Shares to be sold to Investors
pursuant to Section 2.4).
3.2 CAPITALIZATION; VALIDITY OF SHARES; VOTING TRUSTS.
(a) The authorized capitalization of each of Holding and the
AAC Companies and the shares of capital stock thereof which are outstanding are
set forth in Schedule 3.2. All of the outstanding shares of capital stock (i)
have been duly authorized, are validly issued, fully paid and nonassessable, and
were not issued in violation of any preemptive rights, and (ii), except as set
forth in Schedule 3.2, are owned beneficially and of record as set forth in
Schedule 3.2, free and clear of any restrictions on transfer (other than
restrictions under the Securities Act of 1933, as amended (the "Securities
Act"), and state securities laws) and Encumbrances.
(b) Immediately prior to the Mergers, all of the membership
interests of the AAC LLCs were held by the respective AAC Company free of any
Encumbrances, and upon consummation of the transactions contemplated hereby all
of the membership interests in the AAC LLCs will be held by the Company.
(c) Except as set forth in Schedule 3.2, (i) none of Holding,
the AAC Companies or the AAC LLCs has any commitment to issue or sell any shares
of capital stock or membership interests, or any securities or obligations
convertible into or exchangeable therefor, or giving any Person any right to
acquire from Holding, the AAC Companies or the AAC LLCs any shares of capital
stock or membership interests, and no such securities or obligations are
outstanding and (ii) there are no obligations or commitments of any kind for the
repurchase, redemption or other acquisition of any shares of capital stock of
Holding or the AAC Companies or membership interests in the AAC LLCs.
(d) Except as set forth in Schedule 3.1 or 3.2, none of
Holding, the AAC Companies or the AAC LLCs, directly or indirectly, owns any
capital stock of or other equity interest in any corporation, partnership or
other entity or other Person.
(e) Except as set forth in Schedule 3.2, there are no
shareholders agreements, voting trusts, proxies or other agreements or
understandings with respect to or concerning the purchase, sale or voting of the
ownership interests of Holding, the AAC Companies or the AAC LLCs.
3.3 AUTHORITY; BINDING OBLIGATIONS. EACH OF HOLDING AND CCC HAS ALL
NECESSARY CORPORATE POWER AND AUTHORITY TO EXECUTE AND DELIVER THIS AGREEMENT
AND THE ANCILLARY AGREEMENTS TO WHICH IT IS A PARTY AND TO CONSUMMATE THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY AND TO PERFORM ITS OBLIGATIONS
HEREUNDER AND THEREUNDER. THE EXECUTION AND
18
DELIVERY OF THIS AGREEMENT AND THE ANCILLARY AGREEMENTS TO WHICH IT IS A PARTY
AND THE CONSUMMATION THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY HAVE BEEN
VALIDLY AUTHORIZED BY ALL NECESSARY CORPORATE ACTION OF EACH OF HOLDING AND CCC
AND NO OTHER CORPORATE PROCEEDINGS ON THE PART OF ANY OF THEM ARE NECESSARY.
THIS AGREEMENT HAS BEEN, AND WHEN EXECUTED THE ANCILLARY AGREEMENTS WILL BE,
DULY EXECUTED AND DELIVERED BY HOLDING, CCC AND THE SHAREHOLDERS, AND, ASSUMING
THAT THE COMPANY AND INVESTORS HAVE DULY AUTHORIZED, EXECUTED AND DELIVERED THIS
AGREEMENT AND THE ANCILLARY AGREEMENTS, THIS AGREEMENT CONSTITUTES, AND THE
ANCILLARY AGREEMENTS, WHEN EXECUTED AND DELIVERED WILL CONSTITUTE, VALID AND
BINDING OBLIGATIONS OF HOLDING, CCC AND THE SHAREHOLDERS, ENFORCEABLE AGAINST
EACH OF THEM AND THEIR SUCCESSORS, PERMITTED ASSIGNS, HEIRS AND PERSONAL
REPRESENTATIVES IN ACCORDANCE WITH THEIR TERMS.
3.4 CONSENTS AND APPROVALS. No consent, waiver, agreement, approval or
authorization of, or declaration, filing, notice or registration to or with, any
Governmental Authority is required to be made or obtained by any of Holding or
the AAC Companies in connection with the execution, delivery and performance of
this Agreement and the Ancillary Agreements and the consummation of the
transactions contemplated hereby and thereby other than those set forth in
Schedule 3.4, except where the failure to receive any of the foregoing would
not, individually or in the aggregate, have a Material Adverse Effect. Except as
set forth in Schedule 3.4, there is no requirement that any party to any
Material Contract to which any Shareholder or any of Holding or the AAC
Companies is a party or by which any of them is bound, consent to the execution
and delivery of this Agreement or the Ancillary Agreements by Holding, the AAC
Companies or any Shareholder or the consummation of the transactions
contemplated hereby and thereby.
3.5 NON-CONTRAVENTION. The execution, delivery and performance by
Holding, CCC and the Shareholders of this Agreement and the Ancillary Agreements
to which they are parties do not, and the consummation by Holding, the AAC
Companies and the Shareholders of the transactions contemplated hereby and
thereby will not (i) violate or result in a breach of any provision of the
articles or certificate of incorporation, bylaws or similar organizational
documents of Holding, the AAC Companies or the AAC LLCs, (ii) except as
described in Schedule 3.5, conflict with, result in a breach of or result in a
default (or give rise to any right of termination, cancellation or acceleration)
under the terms, conditions or provisions of any Material Contract to which the
Shareholders or any of Holding, the AAC Companies or the AAC LLCs is a party or
by which the Shareholders or any of Holding, the AAC Companies or the AAC LLCs
is bound, or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Shareholders or any of Holding, the AAC Companies
or the AAC LLCs or any of their Assets.
3.6 ENVIRONMENTAL MATTERS.
(a) To the Knowledge of the AAC Companies, none of Holding,
the AAC Companies or the AAC LLCs is required to obtain any Environmental
Permits to conduct the Business as it is presently being conducted, including
those relating to (i) emissions, discharges or threatened discharges of
pollutants, contaminants, hazardous or toxic substances or petroleum into the
air, surface water, ground water or the ocean, or on or into the land and (ii)
the
19
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, hazardous or toxic
substances, or petroleum.
(b) To the Knowledge of the AAC Companies, no underground
storage tanks or underground storage receptacles for Hazardous Substances are
located on the Facilities, there have been no releases of Hazardous Substances
and no owners or operators of real property adjacent to the Facilities spilled,
released or discharged any Hazardous Substances onto such adjacent properties.
Except as set forth in Schedule 3.6, to the Knowledge of the AAC Companies, no
facts, conditions or events exist which (i) interfere with, prevent, or, with
the passage of time, could interfere with or prevent continued compliance in all
material respects with any of the Environmental Permits or any Environmental
Law, (ii) may give rise to any liability (whether based in contract, tort,
implied or express warranty, criminal or civil statute or otherwise) under any
Environmental Law or (iii) obligate Holding, the AAC Companies or the AAC LLCs
or, with the passage of time, could cause Holding, the AAC Companies or the AAC
LLCs to be obligated to clean up, remedy, ▇▇▇▇▇ or otherwise restore to a former
condition, by themselves or jointly with others, any contaminated surface water,
ground water, soil or any natural resources associated therewith either on the
Facilities or at any property owned by a third party, or in any building,
structural or insulation materials located on or in the Facilities that contain
greater than 1% asbestos, and neither Holding or the AAC Companies have received
any notice of, or are otherwise aware of any facts, events or conditions which
interfere with or prevent continued compliance or give rise to any such
liability or obligation.
(c) None of Holding or the AAC Companies has released any
other Person from any claim under any Environmental Law or waived any rights
concerning any violation of Environmental Law. To the Knowledge of the AAC
Companies, none of Holding or the AAC Companies has contractually indemnified
any other person for any violation of Environmental Law related to the
Facilities or any real property formerly owned by Holding or the AAC Companies.
(d) There are no consent decrees, consent orders, judgments,
judicial or administrative orders or agreements (other than Licenses and
Permits) with or liens by, any Governmental Authority or quasi-governmental
entity relating to any Environmental Law which regulate, obligate or bind
Holding, the AAC Companies or the AAC LLCs.
(e) True and correct copies of any Environmental Reports
prepared by or on behalf of Holding or the AAC Companies since January 1, 1994,
have been delivered to Investors and a list of all such Environmental Reports is
set forth in Schedule 3.6.
3.7 LICENSES AND PERMITS. Schedule 3.7 contains a complete and correct
list of all Licenses and Permits necessary for the operation by the Company and
AAC LLCs of the Contributed Assets and the Business in the same manner as
currently operated by the AAC Companies, except where the failure to hold any
such Licenses and Permits would not, individually or in the aggregate, have a
Material Adverse Effect. All transfers to the AAC LLCs of Licenses and Permits
which are transferable will be effective as of the Closing, and all filings and
applications for the obtaining by the AAC LLCs of such other Licenses and
Permits necessary for the operation of the Business by AAC LLCs have been made.
The Business has
20
been conducted in compliance in all material respects with all required Licenses
and Permits. Since January 1, 1999, no written notice of a violation of any such
License or Permit has been received by any of Holding or the AAC Companies or,
to the Knowledge of the AAC Companies, recorded or published, and no proceeding
is pending or, to the Knowledge of the AAC Companies threatened, to revoke or
limit any of them. To the Knowledge of the AAC Companies, Holding and the AAC
Companies are currently in compliance with all Licenses and Permits in all
material respects. Neither Holding nor the AAC Companies have received any
written notice to the effect that the AAC Companies are not currently in
compliance with, or are in violation of, any such Licenses and Permits in any
material respect.
3.8 COMPLIANCE WITH LAWS. The AAC Companies have at all times been in
compliance with, (i) all applicable laws, statutes, ordinances, regulations,
rules, policies, guidelines and orders of every federal, state, local or foreign
government and every federal, state, local or foreign court or other
Governmental Authority (collectively, "Laws") and (ii) every judgment, decision,
decree, writ, injunction or order of any court or Governmental Authority
(collectively, "Decrees"), relating to the Assets, Business or operations of the
AAC Companies, except where any such noncompliance under clauses (i) or (ii)
above would not, individually or in the aggregate, have a Material Adverse
Effect.
3.9 FINANCIAL STATEMENTS.
(a) Investors have previously been delivered true and complete
copies of (i) the combined audited financial statements, including the notes
thereto, of Holding and its Subsidiaries and ▇▇▇ Acceptance for the three years
ended December 31, 2001 (the "Audited Financial Statements"), (ii) reviewed
financial statements for CCC for the two years ended December 31, 2001 (the "CCC
Financial Statements"), and (iv) management's unaudited combined financial
statements for Holding and its Subsidiaries and ▇▇▇ Acceptance and management's
unaudited financial statements for CCC for the seven month period ended July 31,
2002 (the "Interim Financial Statements"). The Audited Financial Statements and
the CCC Financial Statements present fairly, in all material respects, the
financial position of Holding and its Subsidiaries, ▇▇▇ Acceptance and CCC as of
such dates and the results of operations and cash flows for such periods and
have been prepared in accordance with GAAP. The Interim Financial Statements
present fairly the financial position of Holding and its Subsidiaries, ▇▇▇
Acceptance and CCC as of such date and the results of operations and cash flows
for the periods set forth therein and have been prepared in accordance with
GAAP, subject to changes resulting from normal year-end audit adjustments and
the absence of footnotes required by GAAP.
(b) Since January 1, 1999, the accounting and financial
records of Holding and the AAC Companies have been prepared and maintained in
accordance with GAAP and sound bookkeeping practices. The AAC Companies maintain
systems of internal accounting controls sufficient to provide reasonable
assurance that (i) material transactions are executed in accordance with
management's general or specific authorizations, (ii) material transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is
21
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
3.10 ABSENCE OF CHANGES. Except for the transactions contemplated by
Article II hereof or as set forth in Schedule 3.10, since December 31, 2001 (i)
the Business has been operated in the ordinary course consistent with past
practices, (ii) there has not been any Material Adverse Change with respect to
the Business and (iii) there has not been any deterioration of relations between
the AAC Companies and their vendors, suppliers or Key Personnel. Without
limiting the generality of the foregoing, except for the transactions
contemplated by Article II hereof or as set forth in Schedule 3.10, since
December 31, 2001, none of Holding or the AAC Companies has:
(i) made any distributions to its shareholders
other than distributions in the amount necessary to pay its
shareholders income taxes with respect to the profits of
Holding and the AAC Companies allocated to such shareholders
for the period between January 1, 2002 and the Closing Date,
but not in excess of $1,500,000;
(ii) sold, assigned, leased or transferred any of
the Assets that exceed $50,000 individually or $250,000 in the
aggregate in fair market value;
(iii) canceled or terminated, or amended, modified
or waived any material term of, any Material Contract;
(iv) (A) increased the compensation payable or to
become payable to any of its directors or officers, (B)
increased the base compensation payable or to become payable
to any of its Key Personnel, except for normal periodic
increases in such base compensation (not exceeding, in each
case, 5%) in the ordinary course of business, consistent with
past practice, (C) increased the sales commission rate payable
or to become payable to any of its Key Personnel who are not
directors or officers, (D) granted, made or accrued any loan,
bonus, severance, termination or continuation fee, incentive
compensation (excluding sales commissions), service award or
other like benefit, contingently or otherwise, to or for the
benefit of any of its Key Personnel, except pursuant to the
Employee Plans set forth in Schedule 3.22, (E) adopted,
amended or caused or suffered any addition to or modification
of any Employee Plan, other than (1) contributions made in the
ordinary course of business, consistent with past practice or
(2) the extension of coverage to any of its Key Personnel who
became eligible after the date of this Agreement, (F) granted
any additional stock options or performance unit grants or
other interest under any Employee Plan, (G) entered into any
new employment or consulting agreement or caused or suffered
any written or oral termination, cancellation or amendment of
any such employment or consulting agreement to which it is a
party (except with
22
respect to any employee at will without a written agreement),
(H) entered into any collective bargaining agreement or caused
or suffered any termination or amendment of any collective
bargaining agreement to which it is a party or (I) with
respect to any Shareholder, or any Affiliate of any
Shareholder, granted, made or accrued any payment or
distribution or other like benefit, contingently or otherwise,
or otherwise transferred Assets, including any payment of
principal of or interest on any debt owed to any such
Shareholder or Affiliate, other than (1) any payments to such
person in the ordinary course of business in his capacity as
an employee of the AAC Companies, (2) any transactions between
Holding and the AAC Companies, in the ordinary course of
business and on an arms' length basis, (3) since May 31, 2002
the compensation bonuses in the amount of $500,000 paid July
3, 2002 or (4) except as described in Section 5.2;
(v) failed to make capital expenditures and debt
purchases at a pace reasonably consistent with achieving the
2002 Budgeted Collections and EBITDA through the Closing;
(vi) executed (A) any Lease for real property or
(B) any Lease for personal property which requires an annual
payments in excess of $50,000, or, with respect to clauses (A)
and (B) of this clause (vi), engaged in negotiations with any
Person which, if consummated would require disclosure pursuant
to this clause (vi);
(vii) made any payments or given any other
consideration to vendors or suppliers, other than payments
under, and in accordance with the terms of, Contracts in
effect at the time of such payment;
(viii) changed its accounting methods, principles
or practices, including any change in the application or
interpretation of GAAP;
(ix) suffered any damage, destruction or casualty
loss (whether or not covered by insurance) affecting its
physical properties that exceeded $10,000 in any one instance
or $50,000 in the aggregate;
(x) except for the distributions described in
clause (i), (A) issued or sold, or entered into any agreement
obligating it to issue or sell, (B) declared, set aside for
payment or paid any dividends or distributions or (C) directly
or indirectly redeemed, purchased or otherwise acquired, or
split, combined, reclassified or otherwise adjusted, any class
or series of capital stock, or any securities convertible into
or exchangeable for capital stock;
(xi) incurred any obligations for any performance
bonds, payment bonds, bid bonds, surety bonds, letters of
credit, guarantees or
23
similar instruments (other than sheriff's bonds and similar
obligations incurred in the ordinary course of business
consistent with past practice);
(xii) taken any action in anticipation of the
execution of this Agreement or for any other reason to delay
or defer expenses (including delay or postponement of capital
expenditures or the payment of accounts payable), liabilities
or obligations of any kind whatsoever or to accelerate any
income, revenue, payment or similar item, other than in the
ordinary course of business consistent with past practice;
(xiii) except for the payment of AAC Debt as
contemplated hereby, paid, discharged or satisfied any
liability other than any such payment, discharge or
satisfaction in the ordinary course of business, consistent
with past practice, of (A) liabilities reflected or reserved
against on the balance sheets in the Audited Financial
Statements, the ▇▇▇ Acceptance Financial Statements and the
CCC Financial Statements or in the Interim Financial
Statements or incurred subsequent thereto in the ordinary
course of business, consistent with past practice, or (B)
liabilities under, and in accordance with the terms of, any
Contracts, Licenses and Permits and other commitments set
forth in the Schedules or under Contracts, Licenses and
Permits and other commitments which are not required to be
disclosed in the Schedules;
(xiv) changed or amended its certificate or
articles of incorporation, bylaws, certificate of formation or
limited liability company agreement;
(xv) (A) acquired (by merger, consolidation,
acquisition of stock, other securities or assets or
otherwise), (B) made a capital investment (whether through the
acquisition of an equity interest, the making of a loan or
advance or otherwise) in or (C) guaranteed indebtedness for
borrowed money of, (1) any Person or (2) any portion of the
assets of any Person that constitutes a division or operating
unit of such Person;
(xvi) mortgaged or pledged, or otherwise made or
suffered any Encumbrance (other than any Permitted
Encumbrance) on, any of their material Asset or group of their
Assets that are material in the aggregate;
(xvii) except in the ordinary course of business
consistent with past practice, revalued any of their Assets,
including any write-off of notes or accounts receivable
(including Charged Off Accounts) or any increase in any
reserve, involving in excess of $10,000 individually or
$50,000 in the aggregate (such amounts to be calculated
without netting any decrease);
24
(xviii) granted any license or sublicense of any
material rights to any Intellectual Property;
(xix) amended, cancelled or suffered termination
of any License or Permit that is material to any of Holding,
the AAC Companies or the AAC LLCs;
(xx) except in the ordinary course of business
consistent with past practice, canceled, waived or released
any right or claim (or series of related rights or claims)
involving in excess of $10,000 individually or $50,000 in the
aggregate;
(xxi) except in the ordinary course of business
consistent with past practice, written off as uncollectible,
or established any extraordinary reserve with respect to, any
account receivable or indebtedness involving in excess of
$10,000 individually or $50,000 in the aggregate;
(xxii) (A) commenced any Action other than with
respect to the collection of Charged Off Accounts or Consumer
Credit Accounts or (B) settled any Action resulting in
payments, or an obligation to make payments, by the AAC
Companies in excess of $10,000 individually or $100,000 in the
aggregate;
(xxiii) made any material change in the policies or
practices relating to the acquisition or collection of Charged
Off Accounts and Consumer Credit Accounts; or
(xxiv) entered into any Contract or commitment to
do any of the forgoing.
3.11 NO UNDISCLOSED LIABILITIES. The AAC Companies do not have any
material liabilities, obligations or commitments of any nature, whether known or
unknown, absolute, accrued, contingent or otherwise and whether due or to become
due, except (i) as and to the extent set forth in the balance sheet included in
the Audited Financial Statements or the Interim Financial Statements or
specifically disclosed as such in the notes thereto, (ii) contractual or other
obligations of performance (other than obligations arising by reason of a
default in performance) not required to be recorded or disclosed in the balance
sheet in the Audited Financial Statements or in the notes thereto under GAAP
consistently applied, (iii) liabilities and obligations (other than liabilities
and obligations arising by reason of any breach of contract, breach of warranty,
tort, infringement or violation of Law) incurred in the usual and ordinary
course of business consistent with past practice since December 31, 2001, (iv)
liabilities and obligations disclosed in the Schedules hereto, (v) liabilities
and obligations which would have been disclosed in the Schedule with respect to
the representation or warranty in another Section of this Article III, but which
were not disclosed because the specific dollar thresholds set forth in such
representation and warranty did not require disclosure and (vi) liabilities and
obligations which are not a breach of the representations and warranties in the
other Sections of this Article
25
III because of "knowledge" or "materiality" qualifications set forth therein,
but would have constituted a breach of such representations and warranties if
the "knowledge" or "materiality" qualifications were not contained therein.
3.12 LITIGATION. Except as set forth in Schedule 3.12, there is no
outstanding Decree by any court or Governmental Authority or any Action (other
than Actions brought by an AAC Company against a debtor to collect a Charged Off
Account or Consumer Credit Account in which the debtor has not made a
counterclaim individually in an amount not exceeding $10,000) against Holding or
an AAC Company) pending or, to the Knowledge of the AAC Companies, (i)
threatened against or affecting (A) Holding, the AAC Companies, the AAC LLCs,
the Business, their operations or their Assets involving amounts not covered by
insurance in excess of $50,000 or seeking non-monetary relief, (B) any director,
officer or shareholder of the AAC Companies in their capacity as such or (C) any
Employee Plan of the AAC Companies, (ii) relating to the transactions
contemplated hereby, (iii) that involve allegations of criminal liability or
(iv) in which any of the AAC Companies is a plaintiff (including any derivative
suits brought by or on behalf of the AAC Companies). The AAC Companies are not
in default with respect to any Action required to be listed in Schedule 3.12 and
there are no unsatisfied judgments or awards against the AAC Companies or the
Business or their Assets. To the Knowledge of the AAC Companies, none of the
Actions listed in Schedule 3.12, if adversely determined, would have a Material
Adverse Effect on the AAC Companies, individually or in the aggregate. There is
no Action by any of Holding or the AAC Companies currently pending or which any
of Holding or the AAC Companies intends to initiate.
3.13 REAL PROPERTY.
(a) Owned Real Property. None of Holding or any of the AAC
Companies has ever owned any Real Property.
(b) Leased Real Property.
(i) Holding does not lease any real property.
Schedule 3.13(b) sets forth all leases ("Real Property
Leases") pursuant to which Facilities are leased by the AAC
Companies (as lessee), true and correct copies of which have
been delivered to Investors. Such Real Property Leases
constitute all leases, subleases or other occupancy agreements
pursuant to which the AAC Companies occupy or use such
Facilities. The AAC Companies have a good and valid leasehold
interest in all leased property described in such Real
Property Leases (the "Leased Real Property"), free and clear
of any and all Encumbrances other than any Permitted
Encumbrances which would not permit the termination of the
lease therefor by the lessor. With respect to each such parcel
of Leased Real Property (A) to the Knowledge of the AAC
Companies, there are no pending or threatened condemnation
proceedings or Actions relating to such Leased Real Property,
(B) neither the AAC Companies nor, to the Knowledge of the AAC
Companies, any third party has entered into any sublease,
license, option, right, concession or other agreement or
26
arrangement, written or oral, granting to any Person (other
than the AAC Companies) the right to use or occupy such Leased
Real Property or any portion thereof or interest therein (C)
none of Holding or the AAC Companies has received written
notice of any pending or, to the Knowledge of the AAC
Companies, threatened special assessment relating to such
Leased Real Property and (D) the AAC Companies enjoy peaceful
and undisturbed possession of the Leased Real Property.
(ii) With respect to each such Real Property
Lease listed in Schedule 3.13(b), (A) there is no material
default under any such Real Property Lease by the AAC
Companies or, to the Knowledge of the AAC Companies, by any
other party thereto, (B), except as set forth in Schedule 3.4,
the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will
not cause a material default under any such Real Property
Lease, (C) each such Real Property Lease is a valid and
binding obligation of the AAC Companies, is in full force and
effect with respect to the AAC Companies and is enforceable
against the AAC Companies in accordance with its terms, except
as the enforceability thereof may be limited by (1) applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance or similar laws in effect which affect the
enforcement of creditors' rights generally or (2) general
principles of equity, whether considered in a proceeding at
law or in equity, (D) no action has been taken by Holding or
the AAC Companies and, to the Knowledge of the AAC Companies
no event has occurred which, with notice or lapse of time or
both, would permit termination, modification or acceleration
by a party thereto other than the AAC Companies, without the
consent of the AAC Companies, under any such Real Property
Lease that is material to the AAC Companies, (E) to the
Knowledge of the AAC Companies, no party has repudiated in
writing any material term thereof or threatened in writing to
terminate, cancel or not renew any such Real Property Lease
that is material to the AAC Companies and (F), except as set
forth in Schedule 3.13(b), the AAC Companies have not
assigned, transferred, conveyed, mortgaged or encumbered any
interest therein or in any leased property subject thereto (or
any portion thereof).
(c) Compliance, Utilities and Other Matters. With respect to
the Leased Real Property, to the Knowledge of the AAC Companies,:
(i) no Facility thereon is in violation of
applicable zoning Laws;
(ii) all Facilities thereon have received all
approvals of Governmental Authorities (including Licenses and
Permits) required in connection with the AAC Companies'
current use thereof and have been
27
operated and maintained in compliance in all material respects
with applicable laws, rules and regulations; and
(iii) all Facilities thereon are supplied with
utilities and other services necessary for the present
operation of such Facilities, including gas, electricity,
water, telephone, sanitary sewer and storm sewer.
3.14 PERSONAL PROPERTY.
(a) Owned Personal Property. Except as set forth in Schedule
3.14(a), the AAC Companies own all such personal property owned by them, free
and clear of any and all Encumbrances other than Permitted Encumbrances. With
respect to each such item of personal property (i) there are no leases,
subleases, licenses, options, rights, concessions or other agreements, written
or oral, granting to any party or parties the right of use of any portion of
such item of personal property, (ii) there are no outstanding options or rights
of first refusal in favor of any other party to purchase any such item of
personal property or any portion thereof or interest therein and (iii) there are
no parties (other than the AAC Companies) who are in possession of or who are
using any such item of personal property;
(b) Leased Personal Property.
(i) Except as set forth in Schedule 3.14(b), the
AAC Companies have a good and valid leasehold interest in all
of such Equipment and other tangible personal property leased
by them from third parties, free and clear of any and all
Encumbrances other than Permitted Encumbrances which would not
permit the termination of the lease therefor by the lessor.
Schedule 3.14(b) sets forth all Leases for personal property
("Personal Property Leases") involving annual payments in
excess of $10,000, true and correct copies of which have been
delivered to Investors.
(ii) With respect to each such Personal Property
Lease listed in Schedule 3.14(b), (A) there is no material
default under any such Personal Property Lease by the AAC
Companies or, to the Knowledge of the AAC Companies, by any
other party thereto, (B), except as set forth in Schedule 3.4,
the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will
not cause a material default under any such Personal Property
Lease, (C) such Personal Property Lease is a valid and binding
obligation of the AAC Companies, is in full force and effect
with respect to the AAC Companies and is enforceable against
the AAC Companies in accordance with its terms, except as the
enforceability thereof may be limited by (1) applicable
bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance or similar laws in effect which affect the
enforcement of creditors' rights generally or (2) general
principles of equity, whether considered in a proceeding at
law or in equity, (D) no action has been
28
taken by the AAC Companies and, to the Knowledge of the AAC
Companies no event has occurred which, with notice or lapse of
time or both, would permit termination, modification or
acceleration by a party thereto other than the AAC Companies,
without the consent of the AAC Companies, under any such
Personal Property Lease that is material to the AAC Companies,
(E) to the Knowledge of the AAC Companies, no party has
repudiated in writing any term thereof or threatened in
writing to terminate, cancel or not renew any such Personal
Property Lease that is material to the AAC Companies and (F)
except as set forth in Schedule 3.14(b), the AAC Companies
have not assigned, transferred, conveyed, mortgaged or
encumbered any interest therein or in any leased property
subject thereto (or any portion thereof).
(c) Maintenance. The Equipment has been maintained in good
repair in accordance with the usual practices in the United States of businesses
similar to the Business, are in good operating condition and repair, ordinary
wear and tear excepted, and are useable in the ordinary course of the Business
as it is presently being conducted.
3.15 CHARGED OFF ACCOUNTS; ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE.
(a) The AAC Companies have good and marketable title free of
any Encumbrances (other than claims of the obligor thereunder) to all of the
Charged Off Accounts and Consumer Credit Accounts reflected in the Financial
Statements and those acquired by the AAC Companies subsequent to December 31,
2001 (and not collected prior to Closing). Such Charged Off Accounts and
Consumer Credit Accounts were acquired by the AAC Companies from third parties
in the ordinary course of business consistent with past practice. To the
Knowledge of the AAC Companies none the representations and warranties, if any,
in the agreements pursuant to which the AAC Companies acquired such Charged Off
Accounts or Consumer Credit Accounts has been breached in any material respect.
(b) The information set forth in the Bulk Purchases Report as
of August 31, 2002, set forth in Schedule 3.15(b) is true and correct in all
material respects.
(c) Except as set forth in Schedule 3.15(c), the accounts
receivable (other than Charged Off Accounts or Consumer Credit Accounts)
reflected in the Financial Statements and those acquired by the AAC Companies
subsequent to December 31, 2001 (and not collected prior to Closing), have or
will have arisen in the ordinary course of business and will, except as set
forth in Schedule 3.15(c) have been collected or are collectible in amounts not
less than the aggregate amount thereof (net of reserves for uncollectible
accounts) carried on the books of the Company. Except as set forth in Schedule
3.15(c), to the Knowledge of the AAC Companies, there are no accounts receivable
related to any of the AAC Companies with a value in excess of $25,000 that is
being contested or disputed by the obligor thereon. Except as set forth in
Schedule 3.15(c), the accounts receivable are not subject to any Encumbrance.
(d) The accounts payable reflected in the Financial Statements
and those arising after December 31, 2001, (i) have or will have arisen in the
ordinary course of business, (ii) are
29
the only accounts payable of the AAC Company, (iii) are not being disputed and
(iv) will have been paid or will be paid in accordance with their terms, except
for any accounts payable in dispute. There are no disputes with respect to the
accounts payable reflected in the Financial Statements and those arising after
December 31, 2001, involving in excess of $10,000 individually or $50,000 in the
aggregate.
3.16 SUFFICIENCY OF ASSETS; NO CONFLICTING OPERATIONS. Except for the
rights of Holding set forth in items 2-4 on Schedule 3.1(e), the sole Assets of
Holding are the shares of capital stock held by it in the Q-Subs and the
subscription receivable from ▇▇▇▇ ▇. ▇▇▇▇▇▇. The Contributed Assets constitute
all of the properties and assets used or held for use in connection with,
necessary for, or material or otherwise relating to the Business. The Assets
used in the Business that are owned by any Person other than the AAC Companies
are leased or licensed to the AAC Companies under valid, current leases or
license arrangements that will, subject to obtaining the consents required to be
obtained as set forth in Schedule 3.4, remain in full force and effect following
consummation of the transactions contemplated hereby. The Contributed Assets and
the leased Assets are in all material respects suitable and adequate for the
purposes for which such Assets are currently used. There are no facts or
conditions affecting the Contributed Assets or the leased Assets that,
individually or in the aggregate, are reasonably likely to interfere in any
material respect with the use, occupancy or operation thereof as currently used,
occupied or operated, or their adequacy for such use, occupancy or operation.
Except as set forth in Schedule 3.16, no Shareholder or any Affiliate of any of
them, holds any interest in any Person (other than Holding, the AAC Companies
and ▇▇▇ Acceptance) that is engaged, or proposes to engage, in a business
activity that is of the nature of the activities that comprise all or part of
the Business, whether or not directly competing with the Business.
3.17 BOOKS AND RECORDS. Holding and the AAC Companies have made and
kept Books and Records and accounts which, in reasonable detail, accurately and
fairly reflect the activities of Holding and the AAC Companies in all material
respects.
3.18 INTELLECTUAL PROPERTY; COMPUTER SOFTWARE.
(a) Schedule 3.18 sets forth a complete and correct list of
all trade names, trademarks, service marks, domain names, patents, patent rights
and registered copyrights used, necessary or held by the AAC Companies in
connection with the Business. The AAC Companies have delivered to Investors
true, correct and complete copies of each registration, application or other
material document relating to the Intellectual Property set forth in Schedule
3.18. The AAC Companies own, or possess adequate and enforceable licenses or
other rights to use, all Intellectual Property used in the Business as it is
currently conducted, and such ownership and licenses will not cease to be valid
and in full force and effect in any material respect by reason of the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby. There is no Action pending or, to the
Knowledge of the AAC Companies, threatened, against the AAC Companies asserting
that the AAC Companies' use of any Intellectual Property infringes the rights of
any third party or otherwise contesting their rights with respect to any
Intellectual Property and no third party has given written notice to the AAC
Companies that such third party is claiming ownership of or right to use any
Intellectual Property, and, to the Knowledge of the AAC Companies no third
30
party is infringing upon the rights of the AAC Companies in the Intellectual
Property in a manner which would have a Material Adverse Effect on the AAC
Companies.
(b) The AAC Companies own, or possess adequate and enforceable
licenses or other rights to use, the computer software for their systems and
such ownership and licenses will not cease to be valid and in full force and
effect in any material respect by reason of the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby.
3.19 MATERIAL CONTRACTS.
(a) Schedule 3.19 sets forth a complete and accurate list of
all Contracts in the following categories (each, a "Material Contract") as of
the date hereof (except to the extent that any such category specifies a
different date, in which case such corresponding list is made as of such
specified date):
(i) each Contract (or group of related
Contracts) concerning a partnership or joint venture with, or
any other investment in (whether through the acquisition of an
equity interest, the making of a loan or advance or
otherwise), any other Person;
(ii) each Contract (or group of related
Contracts) (A) under which the AAC Companies have created,
incurred, assumed or guaranteed (or agreed to create, incur,
assume or guarantee) indebtedness for borrowed money, (B)
constituting a Capital Lease, (C) under which the AAC
Companies have granted (or agreed to grant) a security
interest or lien on any of their Assets or (D) under which the
AAC Companies have incurred any obligations for any
performance bonds, payment bonds, bid bonds, surety bonds,
letters of credit, guarantees or similar instruments, other
than sheriff's bonds and similar obligations entered into in
the ordinary course of business consistent with past practice;
(iii) each Contract (or group of related
Contracts) concerning confidentiality;
(iv) each Contract (or group of related
Contracts) with any Key Personnel, any Affiliate of the AAC
Companies or, to the Knowledge of the AAC Companies, any
member of any such person's immediate family, including (A)
Contracts to employ or terminate such officers or sales
representatives and other Contracts with present or former
shareholders, directors or officers or other Key Personnel of
the AAC Companies or (B) Contracts that will result in the
payment by, or the creation of any commitment or obligation
(absolute or contingent) of the AAC Companies to pay, any
severance, termination, "golden parachute" or other similar
payments to any present or former Key Personnel following
termination of
31
employment or otherwise as a result of the consummation of the
transactions contemplated hereby;
(v) each Contract (or group of related
Contracts), including open purchase orders or groups of
related open purchase orders, for the purchase of Charged Off
Accounts;
(vi) each Contract (or group of related
Contracts) providing for payments in excess of $25,000
annually, except for such Contracts that are cancelable on not
more than 30 days' notice by the AAC Companies without
substantial penalty or substantial increased cost;
(vii) each distribution, franchise, license,
commission, consulting, agency or advertising Contract related
to the Assets of the AAC Companies or the Business which
requires annual payments in excess of $25,000, except for such
Contracts that are cancelable on not more than 30 days' notice
by the AAC Companies without substantial penalty or
substantial increased cost;
(viii) each Contract (or group of related
Contracts) containing covenants restraining or limiting the
freedom of Holding or the AAC Companies or any officer,
director, shareholder or Affiliate thereof to engage in any
line of business or compete with any Person including by
restraining or limiting the right to solicit customers;
(ix) each option with respect to any real
property or any personal property, whether the AAC Companies
are the grantor or grantee thereunder;
(x) each Contract (or group of related
Contracts) with the United States, state or local government
or any agency or department thereof; and
(xi) each other Contract (or group of related
Contracts) not entered into in the ordinary course of
business, consistent with past practice.
The AAC Companies have delivered to Investors a true and correct copy of each
written Contract listed in Schedule 3.19 (other than those contemplated by
clause (v) above which, except as set forth in Schedule 3.19, have been made
available to Investors) and have included as part of Schedule 3.19 a brief
summary of the material terms of each material oral Contract.
(b) With respect to each Material Contract set forth or
described in Schedule 3.19, (i) there is no material default under any such
Material Contract by the AAC Companies or, to the Knowledge of the AAC
Companies, by any other party to any such Contract, (ii) such Contract is a
valid and binding obligation of the AAC Companies, is in full force and effect
with
32
respect to the AAC Companies and is enforceable against the AAC Companies in
accordance with its terms, except as the enforceability thereof may be limited
by (A) applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance or similar laws in effect which affect the enforcement of creditors'
rights generally or (B) general principles of equity, whether considered in a
proceeding at law or in equity; (iii) no action has been taken by the AAC
Companies and, to the Knowledge of the AAC Companies, no event has occurred
which, with notice or lapse of time or both, would permit termination,
modification or acceleration by a party thereto other than the AAC Companies
under any such Contract; and (iv) to the Knowledge of the AAC Companies, no
party has repudiated any term thereof or threatened to terminate, cancel or not
renew any such Contract.
3.20 INSURANCE. Schedule 3.20 contains a complete and accurate list of
all policies or binders for business interruption, fire, liability, title,
worker's compensation, product liability, errors and omissions and other forms
of insurance (showing as to each policy or binder the carrier, policy number,
coverage limits, expiration date, annual premium and a general description of
the coverage provided) maintained by the AAC Companies. Such insurance provides,
and during its term has provided, coverage (i) reasonably adequate for the
Assets, Business and operations of the AAC Companies, and the risks insured
against in connection therewith consistent with similarly situated businesses
and (ii) as may be or may have been required by law and by any and all Material
Contracts to which the AAC Companies are or have been a party. None of the AAC
Companies are in material default under any of such policies or binders, and
they have not failed to give any notice or to present any material claim under
any such policy or binder in a due and timely fashion. Since January 1, 1999, no
insurer has refused, denied or disputed coverage of any material claim made
thereunder. No insurer has advised the AAC Companies that it intends to reduce
coverage or increase any premium in any material respect or fail to renew any
existing policy or binder. All such policies and binders are in full force and
effect on the date hereof. Schedule 3.20 describes any self-insurance
arrangements affecting the AAC Companies.
3.21 LABOR MATTERS.
(a) Schedule 3.21(a) includes a complete list and description
of all employment contracts and all material written personnel policies,
employment practices, supervisors' manuals, commission, and any other
arrangements applicable to any employee or former employee or any beneficiary or
dependent thereof, whether or not written, whether or not deemed terminable at
will or legally enforceable, and whether covering one or more Persons, entered
into, issued, adopted, or followed by the AAC Companies, other than an
arrangement listed in Schedule 3.22 as an Employee Plan. For purposes of this
Section 3.21, the terms "employee" or "employees" shall be considered to include
individuals rendering personal services to the AAC Companies as independent
contractors.
(b) Schedule 3.21(b) identifies and describes all material
grievances or complaints, written or oral, filed or submitted since January 1,
1999, by any employee or applicant for employment against the AAC Companies or
their employees whether pursuant to a collective bargaining agreement, a formal
or informal grievance procedure afforded employees, or otherwise, including
without limitation, any claims of sexual, racial or other harassment,
33
discriminatory treatment, breach of collective bargaining agreement, breach of
contract, or violation of policy.
(c) Schedule 3.21(c) identifies and describes all unfair labor
practice charges, union organizing efforts, union certifications, bargaining
unit definitions, demands for recognition or collective bargaining, strikes or
work stoppages, union election results, National Labor Relations Board
proceedings or related court cases relating to or affecting any employees of the
AAC Companies since January 1, 1999.
(d) Schedule 3.21(d) identifies and describes all affirmative
action plans, audits, results, conciliation agreements, Office of Federal
Contract Compliance charges or proceedings, Equal Employment Opportunity
Commission employment charges or proceedings, state or local unfair employment
practice charges or proceedings, or any written or unwritten claims or suspected
claims of discrimination, unequal pay, or retaliation relating to any current or
former employee or applicant for employment of the AAC Companies since January
1, 1999.
(e) Schedule 3.21(e) identifies and describes all state or
federal wage and hour, wage payment, or other wage related investigations,
claims, or proceedings, any other local, state or federal investigations,
claims, or proceedings related to any current or former practice, current or
former employee, or applicant for employment of the AAC Companies since January
1, 1999.
(f) Schedule 3.21(f) identifies and describes all Actions not
otherwise expressly identified and described in other schedules under this
Section 3.21 which relate to current or former employment practices, current or
former employees, or applicants for employment of the AAC Companies, including
claims relating to the Family and Medical Leave Act ("FMLA"), immigration law
compliance, the Worker Adjustment and Retraining Notification Act ("WARN"),
wrongful discharge, tortious interference, intentional infliction of emotional
distress, or any other claim raised by or on behalf of a current or former
employee or applicant for employment since January 1, 1999.
(g) Schedule 3.21(g) identifies and describes all Occupational
Safety and Health Act ("OSHA") or state occupational safety and health
citations, charges, lawsuits, inspections, investigations, claims, and
proceedings, all current, former, or suspected claims for unsafe or unhealthy
working conditions, including claims for exposure to asbestos, carcinogenic
substances, or other workplace risks since January 1, 1999.
(h) All policies and practices of the AAC Companies are in all
material respects in compliance with, and have been administered in compliance
with, all applicable requirements of Law, including but not limited to federal,
state, or local Laws relating to employment, including Laws relating to wrongful
discharge, breach of express or implied contract, fraud, misrepresentation,
defamation, or liability in tort, duties to prevent, disclose, warn or remedy
unhealthy or unsafe workplace conditions, Title VII of the Civil Rights Act of
1964, the Age Discrimination in Employment Act, the Americans with Disabilities
Act, the Fair Labor Standards Act, ERISA, COBRA, FMLA, WARN or OSHA, workers
compensation statutes, and other federal, state or local regulations, rules,
statutes, or ordinances relating to employees or employment.
34
(i) Schedule 3.21(i) sets forth a true and complete list of
all employees to whom the AAC Companies are paying compensation, disability,
▇▇▇▇▇▇▇'▇ compensation and/or pension benefits, and sets forth the current
annual rate of compensation for each such employee together with bonuses and
incentives.
3.22 EMPLOYEE PLANS.
(a) Schedule 3.22 contains a complete list of Employee Plans.
True and complete copies of each of the following documents have been delivered
to Investors: (i) each Employee Plan (and, if applicable, related trust
agreements) and all amendments thereto, all summary plan descriptions, summaries
of material modifications (as defined in ERISA), annuity contracts or other
funding instruments, the number of and a general description of the level of
employees covered by each Benefit Arrangement and a complete description of any
Employee Plan which is not in writing, (ii) the most recent determination letter
issued by the Internal Revenue Service and any opinion letter issued by the
Department of Labor with respect to each Pension Plan and each voluntary
employees' beneficiary association as defined under Section 501(c)(9) of the
Internal Revenue Code which covers or has covered employees of Holding or the
AAC Companies, (iii) for the three most recent plan years, Annual Reports on
Form 5500 Series required to be filed with any governmental agency for each
Pension Plan or Welfare Plan which covers or has covered employees of Holding or
the AAC Companies and (iv) a description setting forth the amount of any
liability of Holding or the AAC Companies as of the Closing Date for payments
more than thirty (30) calendar days past due with respect to each Welfare Plan
which covers or has covered employees or former employees of Holding or the AAC
Companies.
(b)
(i) Pension Plans.
(A) No Employee Plan is a Pension Plan
subject to Title IV or Section 302 of ERISA or
Section 412 or 4971 of the Internal Revenue Code.
(B) Each Pension Plan and each related trust
agreement, annuity contract or other funding
instrument which covers or has covered employees or
former employees of Holding or the AAC Companies
which has been operated as a plan qualified under
Section 401(a) of the Internal Revenue Code (1) has
received a favorable determination letter from the
Internal Revenue Service relating to such Pension
Plan stating that such Pension Plan and each related
trust is qualified and tax-exempt under the
provisions of Internal Revenue Code Sections 401(a)
and 501(a) and (2) has been so qualified during the
period from its adoption to the date of such
determination letter. To the Knowledge of the AAC
Companies, no event or condition exists or has
occurred that could adversely affect such qualified
and tax-exempt status.
35
(C) Each Pension Plan and each related trust
agreement, annuity contract or other funding
instrument which covers or has covered employees or
former employees of Holding or the AAC Companies
currently complies in all material respects and has
been maintained in compliance in all material
respects with its terms and, both as to form and in
operation, with the requirements prescribed by any
and all statutes, orders, rules and regulations which
are applicable to such plans, including ERISA and the
Internal Revenue Code.
(ii) Multiemployer Plans. None of the Employee
Plans is a Multiemployer Plan, none of Holding or the AAC
Companies or any ERISA Affiliate has any liability with
respect to a Multiemployer Plan, and no liability will arise
or be imposed on Holding or the AAC Companies or any ERISA
Affiliate under, or with respect to, any Multiemployer Plan.
(iii) Welfare Plans.
(A) Each Welfare Plan which covers or has
covered, employees or former employees of Holding or
the AAC Companies currently complies in all material
respects and has been maintained in compliance in all
material respects with its terms and, both as to form
and operation, with the requirements prescribed by
any and all statutes, orders, rules and regulations
which are applicable to such Welfare Plan, including
ERISA and the Internal Revenue Code.
(B) Except as required by Section 4980B of
the Internal Revenue Code or Part 6 of Title 1,
Subtitle B of ERISA, or as set forth in Schedule
3.22, none of Holding or the AAC Companies, any ERISA
Affiliate or any Welfare Plan has any present or
future obligation to make any payment to, or with
respect to any present or former employee of Holding
or the AAC Companies or any ERISA Affiliate pursuant
to, any retiree medical benefit plan, or other
retiree Welfare Plan, and, to the Knowledge of the
AAC Companies, no condition exists which would
prevent the AAC Companies or an ERISA Affiliate from
amending or terminating any such benefit plan or such
Welfare Plan.
(C) Each Welfare Plan which covers or has
covered employees or former employees of Holding or
the AAC Companies and which is a "group health plan,"
as defined in Section 607(1) of ERISA, presently
complies in all material respects with and has been
operated in compliance in all material respects with
provisions of Part 6 of Title I, Subtitle B of ERISA
36
and Sections 162(k) and 4980B of the Internal Revenue
Code at all times.
(D) None of Holding or the AAC Companies or
any ERISA Affiliate has maintained, contributed to or
had any obligation to maintain or contribute to any
Welfare Plan that is a Multiemployer Plan.
(E) Each Welfare Plan presently complies in
all material respects with and has been operated in
compliance in all material respects with the group
health plan requirements of Section 701 et seq. of
ERISA, Section 4980D of the Internal Revenue Code,
and Section 9801 et seq. of the Internal Revenue
Code.
(iv) Benefit Arrangements. Each Benefit
Arrangement presently complies and has been maintained in
compliance in all material respects with its terms and with
the requirements prescribed by any and all statutes, orders,
rules and regulations which are applicable to such Benefit
Arrangement, including the Internal Revenue Code. Except as
provided by Law, or in any employment agreement set forth in
Schedule 3.22(b)(iv), the employment of all persons presently
employed or retained by Holding or the AAC Companies is
terminable at will.
(v) Unrelated Business Taxable Income. No
Employee Plan (or trust or other funding vehicle pursuant
thereto) has incurred any liability under Section 511 of the
Internal Revenue Code.
(vi) Deductibility of Payments. There is no
contract, agreement, plan or arrangement covering any employee
or former employee of Holding or the AAC Companies that,
individually or collectively, requires the payment by Holding
or the AAC Companies of any amount (i) that is not deductible
under Section 162(a)(1) or 404 of the Internal Revenue Code or
(ii) that is, or which as a result of the execution and
delivery of this Agreement or the consummation of the
transactions contemplated hereby could be, an "excess
parachute payment" pursuant to Section 280G of the Internal
Revenue Code.
(vii) Fiduciary Duties and Prohibited
Transactions. None of Holding or the AAC Companies or any plan
fiduciary of any Welfare Plan or Pension Plan which covers has
covered, employees or former employees of Holding or the AAC
Companies has engaged in, or has any liability in respect of,
any transaction in violation of Sections 404 or 406 of ERISA
or any "prohibited transaction," as defined in Section
4975(c)(1) of the Internal Revenue Code, for which no
exemption exists under Section 408 of ERISA or Section
4975(c)(2) or (d) of the Internal Revenue Code, or has
otherwise violated the provisions of Part 4 of Title I,
37
Subtitle B of ERISA so as to create any liability of Holding
or the AAC Companies or any Employee Plan. None of Holding or
the AAC Companies has participated in a violation of Part 4 of
Title I, Subtitle B of ERISA by any plan fiduciary of any
Welfare Plan or Pension Plan, and none of them has been
assessed any civil penalty under Section 502(l) of ERISA.
(viii) Litigation. There is no Action or Decree
outstanding or, to the Knowledge of the AAC Companies, any
governmental audit or investigation, relating to or seeking
benefits under any Employee Plan (including any Action, order,
writ, injunction, judgment or decree relating to any fiduciary
of such plans with respect to their duties to the plans) that
is pending or, to the Knowledge of the AAC Companies,
threatened against Holding or the AAC Companies, any fiduciary
of any Employee Plan, any ERISA Affiliate or any Employee
Plan.
(ix) No Amendments. Except as described in
Schedule 3.22(b)(ix), none of Holding or the AAC Companies or
any ERISA Affiliate has announced to employees, former
employees or directors an intention to create, or otherwise
created, a legally binding commitment to adopt any additional
Employee Plan which is intended to cover employees or former
employees of Holding or the AAC Companies or to amend or
modify any existing Employee Plan which covers or has covered
employees or former employees of Holding or the AAC Companies.
(x) Insurance Contracts. None of Holding or the
AAC Companies or any Employee Plan holds as an asset of any
Employee Plan any interest in any annuity contract, guaranteed
investment contract or any other investment or insurance
contract issued by an insurance company that is the subject of
bankruptcy, conservatorship or rehabilitation proceedings.
(xi) No Acceleration or Creation of Rights.
Except as set forth in Schedule 3.22(b)(xi), neither the
execution and delivery of this Agreement by Holding and the
AAC Companies nor the consummation of the transactions
contemplated hereby will result in the acceleration or
creation of any rights of any person to benefits under any
Employee Plan (including the acceleration of the vesting or
exercisability of any stock options, the acceleration of the
vesting of any restricted stock, the acceleration of the
accrual or vesting of any benefits under any Pension Plan or
the acceleration or creation of any rights under any
severance, parachute or change in control agreement).
(xii) Severance Agreements. No Shareholder is a
party to any severance or similar arrangement in respect of
any of the Key Personnel that will result in any obligation
(absolute or contingent) of Holding or the
38
AAC Companies or the Company after the Closing to make any
payment to any of such Personnel following the consummation of
the transactions contemplated by this Agreement or termination
of employment, whether before or after the Closing.
(c) There does not now exist, nor, to the Knowledge of the AAC
Companies, do any circumstances exist that could result in, any Controlled Group
Liability that would be a liability of the Company following the Closing Date.
Without limiting the generality of the foregoing, none of Holding or the AAC
Companies, nor any of their ERISA Affiliates has engaged in any transaction
described in Section 4069 or Section 4204 of ERISA.
3.23 TAX MATTERS.
(a) Filing of Tax Returns. Holding and the AAC Companies have
timely filed with the appropriate taxing authorities all Tax Returns (including
information returns and other material information) in respect of Taxes required
to be filed through the date hereof and will timely file any such Tax Return
required to be filed on or prior to the Closing Date. All such Tax Returns are
complete and accurate in all material respects. None of Holding or the AAC
Companies currently has outstanding any request for any extension of time within
which to file Tax Returns in respect of any Taxes. The AAC Companies have
delivered to Investors complete and accurate copies of the federal, state and
local income Tax Returns (and examination reports and statements of deficiency)
for the years 1999, 2000 and 2001. No claim has ever been made by a Taxing
Authority in a jurisdiction where Holding or an AAC Company does not file Tax
Returns that the nonfiling entity is or may be subject to taxation by that
jurisdiction.
(b) S-Corporation. Each of Holding and CCC is and has at all
times been an "S corporation" (within the meaning of Section 1361(a) of the
Internal Revenue Code) for each taxable year (or portion thereof) since the date
of its incorporation, and no action has been or will be taken to terminate and
no condition exists which could result in the termination of such election prior
to the Closing. Each of the Q-Subs is and at all times has been a "qualified
subchapter S subsidiary" (within the meaning of Section 1361(b) of the Internal
Revenue Code) of Holding for each taxable year (or portion thereof) since the
date it became a subsidiary of Holding, and no action has been or will be taken
to terminate, and no condition exists which could result in termination of, such
status prior to the Closing.
(c) Payment of Taxes. All Taxes for which Holding or the AAC
Companies are or may be liable in respect of periods (or portions thereof)
ending on or before the Closing Date, have been either (i) timely paid, (ii)
reserved adequately in accordance with GAAP in the Interim Financial Statements,
or (iii), with respect to Taxes accruing after the date of the Interim Financial
Statements, adequately provided for in the books and records of Holding and the
AAC Companies.
(d) Audits, Investigations or Claims. No substantial
deficiencies for Taxes have been claimed, proposed or assessed in writing by any
Taxing Authority against any of Holding or the AAC Companies which have not been
paid or reserved in the Financial Statements. There are no pending or, to the
Knowledge of the AAC Companies, threatened audits, investigations or
39
claims for or relating to any liability in respect of Taxes that in the
reasonable judgment of the AAC Companies are likely to result in an additional
amount of Taxes, and there are no matters under discussion with any Taxing
Authority with respect to Taxes that in the reasonable judgment of the AAC
Companies is likely to result in an additional liability for Taxes to Holding or
the AAC Companies. Audits of federal, state, and local returns for income Taxes
by the relevant taxing or other governmental authorities have been completed for
the periods set forth in Schedule 3.23. No income Tax Return is currently the
subject of audit and none of Holding or the AAC Companies has been notified in
writing that any Taxing Authority intends to audit a Return for Taxes for any
other period. No extension of a statute of limitations relating to Taxes is in
effect with respect to Holding or the AAC Companies. No power of attorney has
been executed by Holding or the AAC Companies with respect to any matters
relating to Taxes which is currently in force.
(e) Encumbrances. There are no Encumbrances for Taxes (other
than current taxes not yet due and payable) on the Assets of Holding or the AAC
Companies.
(f) Safe Harbor Lease Property. None of the Assets of Holding
or the AAC Companies is property that (i) is required to be treated as being
owned by any other person pursuant to the so-called safe harbor lease provisions
of former Section 168(f)(8) of the Internal Revenue Code, (ii) directly or
indirectly secures any debt the interest on which is tax-exempt under Section
103(a) of the Internal Revenue Code or (iii) is "tax-exempt use property" within
the meaning of Section 168(h) of the Internal Revenue Code.
(g) Tax Election. All material elections with respect to Taxes
affecting Holding or the AAC Companies as of the date hereof are set forth in
Schedule 3.23. None of Holding or the AAC Companies has consented at any time to
have the provisions of Section 341(f)(2) of the Internal Revenue Code (or
similar provisions under state or local law) apply to any disposition of the
Assets. None of Holding or the AAC Companies has agreed to make, or is required
to make, any adjustment under Section 481(a) of the Internal Revenue Code (or
similar provisions under state or local law) by reason of a change in accounting
method or otherwise.
(h) Withholding. Holding and the AAC Companies have paid over
all Taxes required to have been withheld and paid to any Governmental Authority
in connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other third party.
(i) Combined Returns. Except for Holding, CCC, ▇▇▇ Acceptance
and the AAC Companies, none of Holding or the AAC Companies has been included in
any consolidated, combined or unitary Tax Return provided for under the laws of
the United States, any state or locality with respect to Taxes for any taxable
period for which the statute of limitations has not expired. None of Holding or
the AAC Companies has any liability for the Taxes of any Person under Treasury
Regulation Section 1.1502 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise.
(j) Tax Sharing Agreements. There are no tax sharing
agreements or similar arrangements (whether written or unwritten) with respect
to or involving any of Holding or the
40
AAC Companies pursuant to which any of Holding or the AAC Companies may be
liable for Taxes of another Person.
(k) Section 280G. None of Holding or the AAC Companies has
made any payments, is obligated to make any payments, or is a party to any
agreement that could obligate it to make any payments that will not be
deductible under Section 280G of the Internal Revenue Code.
(l) Section 6662. Each of Holding and the AAC Companies has
disclosed on its federal income Tax Return all positions taken therein that
could give rise to a substantial understatement of federal income Tax within the
meaning of Section 6662 of the Internal Revenue Code.
3.24 TRANSACTIONS WITH CERTAIN PERSONS. Except as disclosed in Schedule
3.24, (i) no officer, director or shareholder of Holding or the AAC Companies,
or any member of any such Person's immediate family is currently, or since
January 1, 1999 has been, a party to any transaction or arrangement with Holding
or the AAC Companies and (ii) no employee or any member of any such Person's
immediate family, is currently, or since January 1, 1999 has been, a party to
any material transaction or arrangement with Holding or the AAC Companies,
including any Contract or Lease (A) providing for the furnishing of services by,
(B) providing for the rental of real or personal property from, or (C) otherwise
requiring payments to (other than (1) dividends or distributions to any
shareholder of Holding in his or her capacity as such or (2) compensation for
services as officers, directors or employees of Holding or the AAC Companies),
any such Person or any corporation, partnership, trust or other entity in which
any such Person has an interest as an officer, director, trustee or partner, or
as the holder of more than 10% of such entity's equity securities. The only
Contracts, Leases, transactions, arrangements or other items listed in Schedule
3.24 with respect to which the Company will have any ongoing obligations or
duties are those items which are explicitly identified in Schedule 3.24 as
having such ongoing obligations or duties.
3.25 SUPPLIERS OF CHARGED OFF ACCOUNTS. Schedule 3.25 sets forth for
each of the fiscal years 1999, 2000 and 2001, and the current fiscal year the
name and address of each of the ten largest suppliers of Charged Off Accounts to
the AAC Companies based on the aggregate value of receivables purchased by the
AAC Companies during each such period, and the amount the AAC Companies paid
such suppliers during each such period.
3.26 BANKING RELATIONSHIPS. Schedule 3.26 sets forth a complete and
accurate list of all accounts, including checking accounts, cash contribution
accounts, safe deposit boxes, borrowing arrangements and certificates of deposit
that Holding or the AAC Companies have with any banks, savings and loan
associations or other financial institutions, indicating in each case account
numbers, if applicable, and the person or persons authorized to act or sign on
behalf of Holding or the AAC Companies in respect of any of the foregoing. No
other Person holds any power of attorney or similar authority from the AAC
Companies with respect to any such accounts.
41
3.27 NO OTHER AGREEMENTS TO SELL THE ASSETS OR EQUITY INTERESTS IN
HOLDING OR THE AAC COMPANIES. Other than this Agreement, none of the
Shareholders, Holding or the AAC Companies has any legal obligation, absolute or
contingent, to any other Person to (i) sell or effect a sale of all or
substantially all of the Assets of the AAC Companies, (ii) sell or effect a sale
of all or substantially all of the capital stock of Holding or the AAC
Companies, (iii) effect any merger, consolidation or other reorganization of
Holding or the AAC Companies or (iv) enter into any Contract or cause the
entering into a Contract with respect to any of the foregoing.
3.28 PROHIBITED PAYMENTS. None of Holding or the AAC Companies has,
directly or indirectly, (i) made or agreed to make any contribution, payment or
gift to any government official, employee or agent where either the
contribution, payment or gift or the purpose thereof was illegal under the Laws
of any federal, state, local or foreign jurisdiction, (ii) knowingly established
or maintained any unrecorded fund or asset for any purpose or made any false
entries on the Books and Records for any reason, (iii) made or agreed to make
any contribution, or reimbursed any political gift or contribution made by any
other Person, to any candidate for federal, state, local or foreign public
office which was illegal under the Laws of any federal, state, local or foreign
jurisdiction, or (iv) paid or delivered any fee, commission or any other sum of
money or item of property, however characterized, to any finder, agent,
government official or other party, in the United States or any other country,
which in any manner relates to the Assets of Holding or the AAC Companies,
Business or operations of Holding and the AAC Companies, which the AAC Companies
know or have reason to believe to have been illegal under any federal, state or
local Laws (or any rules or regulations thereunder) of the United States or any
other country having jurisdiction.
3.29 BROKERS. Other than The Geneva Companies, no broker, finder or
investment banker is entitled to any fee or commission for services rendered on
behalf of Holding or the AAC Companies or the Shareholders in connection with
the transactions contemplated by this agreement. The AAC Companies have
delivered to Investors a true and complete copy of the agreement with The Geneva
Companies.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTORS
As an inducement to Holding, CCC and the Shareholders to enter into
this Agreement, Investors hereby makes, as of the date hereof and as of the
Closing Date, the following representations and warranties to Holding, CCC and
the Shareholders:
4.1 ORGANIZATION; QUALIFICATION. Investors is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and has all power and authority to own all of its
properties and assets and to carry on its business as it is presently being
conducted.
4.2 AUTHORITY; BINDING OBLIGATIONS. Investors has all necessary
corporate power and authority to execute and deliver this Agreement and the
Ancillary Agreements to which it is a
42
party and to consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder. The execution and delivery by
Investors of this Agreement and the Ancillary Agreements to which it is a party
and the consummation by it of the transactions contemplated hereby have been
duly authorized by the board of directors of Investors and no other proceedings
on the part of Investors are necessary with respect thereto. This Agreement and
the Ancillary Agreements to which it is a party have been duly executed and
delivered by Investors and, assuming that Holding, the AAC Companies and the
Shareholders have duly authorized, executed and delivered this Agreement and the
Ancillary Agreements, this Agreement constitutes, and the Ancillary Agreements
will constitute, valid and binding obligations of Investors, enforceable against
Investors in accordance with its terms.
4.3 CONSENTS AND APPROVALS. No consent, waiver, agreement, approval or
authorization of, or declaration, filing, notice or registration to or with, any
Governmental Authority is required to be made or obtained by Investors in
connection with the execution, delivery and performance of this Agreement and
the Ancillary Agreements and the consummation of the transactions contemplated
hereby and thereby. There is no requirement that any party to any material
Contract to which Investors is a party or by which it is bound, consent to the
execution and delivery of this Agreement or the Ancillary Agreements by
Investors or the consummation of the transactions contemplated hereby or
thereby, except for such consents the failure of which to obtain, individually
or in the aggregate, would not have a Material Adverse Effect on Investors.
4.4 NON-CONTRAVENTION. The execution, delivery and performance by
Investors of this Agreement does not, and the consummation by Investors of the
transactions contemplated hereby will not (i) violate or result in a breach of
any provision of the Articles of Incorporation or bylaws of Investors, (ii)
result in a breach of or result in a default (or give rise to any right of
termination, cancellation or acceleration) under the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, agreement, lease or
other instrument or obligation to which Investors is a party or by which
Investors is bound, or (iii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Investors excluding from the foregoing
clauses (ii) and (iii) such requirements, defaults, breaches, rights or
violations that become applicable as a result of (1) the business or activities
in which Holding and the AAC Companies or any of their Affiliates is engaged, or
(2) any acts or omissions by, or facts pertaining to, Holding and the AAC
Companies or any of their Affiliates.
4.5 LITIGATION. There is no Action pending or, to the Knowledge of
Investors, threatened (i) against Investors or any of its Affiliates with
respect to which there is a reasonable likelihood of a determination which would
have a material adverse effect on the ability of Investors to consummate the
transactions contemplated hereby or (ii) which seeks to enjoin or prevent, or
questions the validity or legality of, the consummation of the transactions
contemplated hereby.
4.6 BROKERS. No broker, finder or investment banker is entitled to any
fee or commission from Investors for services rendered on behalf of Investors in
connection with transactions contemplated by this Agreement.
43
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 CONDUCT OF BUSINESS. From the date hereof and until the Closing,
the Shareholders will cause the AAC Companies (i) to conduct the Business only
in the ordinary and usual course and in a manner consistent with past practices,
(ii) maintain in good repair, at their expense, all of its material structures
and Equipment consistent with past practices, (iii) make capital expenditures
and Charged Off Accounts purchases at a pace reasonably consistent with
achieving the 2002 Budgeted Collections and EBITDA through the Closing Date,
(iv) pay accounts payable and other obligations in the ordinary course of
business consistent with past practice, (v) use commercially reasonable efforts
to preserve intact the present business organization and operations of the
Business, keep available the services of its officers, employees,
representatives, agents and consultants, and (vi) keep in full force and effect
its insurance policies. The Shareholders shall cause Holding's and the AAC
Companies' management to meet with Investors and its representatives on a
regular and reasonably frequent basis to discuss the general status of the
ongoing operations of the Business and any issues relating to the conduct
thereof. The AAC Companies shall give prompt notice to Investors of (i) any
emergency or material change in the normal conduct of its business or
operations, (ii) the threat or initiation of any material Action against the AAC
Companies, (iii) the initiation of any material investigation of Holding or the
AAC Companies' business by any Person, whether private or governmental, (iv) the
failure of Holding, the AAC Company or the Shareholders to comply with or
satisfy any covenant, agreement or condition to be complied with or satisfied by
them hereunder, and (v) any budget revisions approved by the management of
Holding and the AAC Companies, and will keep Investors fully informed of
developments with respect to such events and afford Investors' representatives
reasonable access to all materials in their possession reasonably relating
thereto, as more fully described in Section 5.4.
5.2 FORBEARANCES. Except as contemplated by this Agreement or as set
forth in Schedule 5.2, the Shareholders shall cause Holding and the AAC
Companies not, from the date hereof until the earlier of (i) the Closing or (ii)
termination under Article XI, without the written consent of Investors, (A) to
take or fail to take any action or enter into any transaction of the kind which
if taken or failed to be taken after December 31, 2001, would have required
disclosure in Schedule 3.10, (B) to make distributions to its respective
shareholders after May 31, 2002, except (1) bonuses paid July 3, 2002 in the
aggregate amount of $500,000 and (2) distributions in the amount necessary for
such shareholders to pay the income Taxes on the profits of Holding and the AAC
Companies allocated to them for the period from January 1, 2002 through the
Closing Date; including, solely for purposes of this clause (2) amounts
necessary for Holding and the AAC Companies to pay the Michigan Single Business
Tax (net of tax benefits arising from the deduction of such amounts on federal,
state and local income tax returns) arising from the acquisition of the
Purchased Shares from Holding; provided that the distributions made pursuant to
this clause (2) shall not exceed $1,500,000 in the aggregate, or (C) to engage
in any practice, or take, or fail or omit to take, any action or enter into any
transaction, other than in the ordinary course of business and consistent with
past practices, that would reasonably be expected to (1) impair or prevent
Holding, the AAC Companies or the Shareholders from consummating the
transactions contemplated by this Agreement or (2) cause or result in any of the
44
representations and warranties set forth in Article III to be untrue in any
material respect at any time after the date hereof through the Closing Date.
5.3 NEGOTIATIONS WITH OTHERS; NOTIFICATION.
(a) No Solicitation. From the date hereof until the earlier of
(i) the Closing or (ii) termination of this Agreement under Article XI, the
Shareholders shall not, and shall cause Holding and the AAC Companies, and shall
instruct each of their respective representatives (including investment bankers,
attorneys and accountants), not to, directly or indirectly, enter into, solicit,
initiate, conduct or continue any discussions or negotiations with, or encourage
or respond favorably to any inquiries or proposals by, or provide any
information to, or otherwise cooperate in any other way with, any Person or
group, other than Investors and its representatives, concerning any sale of all
or any substantial portion of the Assets or the Business of, or of any shares of
capital stock or other securities of, Holding or the AAC Companies, or any
merger, consolidation, recapitalization, liquidation, dissolution or similar
transaction involving Holding or the AAC Companies (each such transaction being
referred to herein as a "Proposed Acquisition Transaction"). The Shareholders
hereby represent that neither they nor Holding or the AAC Companies is presently
engaged in discussions or negotiations with any party other than Investors with
respect to any Proposed Acquisition Transaction. Holding, the AAC Companies and
the Shareholders agree not to release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which any of them
is a party.
(b) Notification. Holding, the AAC Companies and the
Shareholders shall (i) within 24 hours notify Investors (orally and in writing)
if any offer is made, any discussions or negotiations are sought to be
initiated, any inquiry, proposal or contact is made or any information is
requested with respect to any Proposed Acquisition Transaction, (ii) promptly
notify Investors of the terms of any proposal which they may receive in respect
of any such Proposed Acquisition Transaction, including the identity of the
prospective purchaser or soliciting party, (iii) promptly provide Investors with
a copy of any such offer, if written, or a written summary (in reasonable
detail) of such offer, if not in writing, and (iv) keep Investors informed of
the status of such offer and the offeror's efforts and activities with respect
thereto.
5.4 INVESTIGATION OF BUSINESS AND PROPERTIES. From the date hereof
until the earlier of (i) the Closing and (ii) termination under Article XI, the
Shareholders shall cause Holding and the AAC Companies to afford Investors, any
financial institution providing financing to the Company, and their respective
attorneys, accountants, financial advisors and other representatives, reasonable
access during regular business hours upon reasonable notice, to make such
reasonable inspection of the Assets, business and operations of Holding and the
AAC Companies and to inspect and make copies of Contracts, Books and Records and
all other documents and information reasonably requested by Investors and
related to the operations and business of Holding and the AAC Companies,
including historical financial information concerning the business of Holding
and the AAC Companies to meet with designated Key Personnel of Holding and the
AAC Companies and/or their representatives; provided that any such access shall
be conducted in such a manner as not to interfere unreasonably with the
operation of the Business; provided further, that no disclosure to Investors,
its counsel, accountants or other representatives after the date hereof shall be
deemed to be a reduction of, or
45
otherwise affect, the representations and warranties of Holding, the AAC
Companies and the Shareholders set forth in this Agreement. Holding, the AAC
Companies and the Shareholders shall furnish to Investors promptly upon request
(i) all additional documents and information with respect to the affairs of
Holding and the AAC Companies and (ii) access during regular business hours to
Holding's and the AAC Companies' Key Personnel and to Holding's and the AAC
Companies' accountants and counsel as Investors, or its counsel or accountants,
may from time to time reasonably request and the Shareholders shall instruct
Holding's and the AAC Companies' Key Personnel, accountants and counsel to
cooperate with Investors, and to provide such documents and information as
Investors and its representatives may reasonably request.
5.5 CONFIDENTIALITY. The provisions of the letter agreement dated April
23, 2002, between Quad-C Management, Inc. and The Geneva Companies (the
"Investors Confidentiality Letter") are hereby incorporated herein by reference.
Unless and until the Closing has been consummated, Investors shall hold, and
shall cause its counsel, accountants and other representatives to hold, in
confidence all confidential data and information relating to Holding and the AAC
Companies made available to Investors, together with all analyses, compilations,
studies and other documents and records prepared by Investors or any of its
representatives which contain or otherwise reflect or are generated from such
information, as set forth in the Investors Confidentiality Letter. If the
transactions contemplated by this Agreement are not consummated, Investors
agrees to keep confidential all data and information relating to Holding and the
AAC Companies or the Business, and upon written request of the Holding, to
return or cause to be returned to holding all written materials and all copies
that contain any such confidential data or to certify to Holding that such
materials have been destroyed. Notwithstanding the foregoing, Investors may
disclose this Agreement and the information and data in Investors' possession in
connection therewith (i) to its lenders (and their counsel) and (ii) subject to
the provisions of the Investors Confidentiality Letter, to the extent such
disclosure is required by law.
5.6 NO DISCLOSURE; PUBLIC ANNOUNCEMENTS. Prior to Closing, without the
prior written consent of the other parties, (i) except to the extent required by
applicable Law, neither party will, and each party will direct its directors,
officers, employees, representatives and advisors not to, disclose to any other
Person (except the Company's prospective lenders (and their counsel)) and except
Holding's, the AAC Companies' and the Shareholders' financial advisors
(including, The Geneva Companies), accountants, counsel and Persons from whom a
consent is needed in connection with the consummation of the transactions
contemplated hereby) the fact that discussions or negotiations are taking place
concerning the transactions contemplated hereby or the existence of this
Agreement or any of the terms, conditions or other facts with respect thereto
and (ii) except for filings required by law, neither party will issue any press
release or otherwise make any public statements with respect to this Agreement
and the transactions contemplated hereby.
5.7 TRANSFER TAXES; EXPENSES.
(a) All transfer, documentary, sales, use, registration and
other such Taxes and the related fees (including any penalties, interests and
additions to Tax) incurred in connection with the transactions contemplated by
this Agreement shall be paid by the Company. The parties
46
shall cooperate in timely preparing and filing all Tax Returns as may be
required to comply with the provisions of such Tax Laws. Holding, the AAC
Companies and the Shareholders will cooperate with the Company to minimize, to
the extent permitted by law, the amount of any sales taxes, transfer taxes or
similar taxes and fees imposed with respect to the transactions contemplated by
this Agreement, including by utilizing any applicable sales tax exemptions for
occasional sales.
(b) Except as otherwise provided in this Agreement, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby will be paid by the party incurring such costs and expenses;
provided that in the event the transactions contemplated hereby are consummated,
the fees and expenses of The Geneva Companies, Quad-C Management, Inc.,
accountants, tax advisors and counsel to the Company and Investors, accountants,
tax advisors and counsel to Holding, the AAC Companies and the Shareholders and
Investors' Auditors with respect to this Agreement and the transactions
contemplated hereby shall be paid by the Company.
5.8 EFFORTS TO CONSUMMATE. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate, as promptly as practicable,
the transactions contemplated hereby, including the obtaining of all necessary
consents, waivers, authorizations, orders and approvals of third parties,
whether private or governmental, required of it to enable it to comply with the
conditions precedent to consummating the transactions contemplated by this
Agreement. Each party agrees to cooperate fully with the other party in
assisting it to comply with this Section 5.8. Without limiting the generality of
the foregoing, (i) the Shareholders agree to provide, and to cause Holding and
the AAC Companies and their Key Personnel to provide, at the expense of the
Company, all necessary cooperation with the arrangement of any financing to be
consummated in respect of the transactions contemplated by this Agreement,
including participation in meetings and due diligence sessions. No
consideration, whether such consideration shall consist of the payment of money
or shall take any other form, for any consent, waiver or agreement necessary to
the consummation of the transactions contemplated hereby shall be given or
promised by Holding, the AAC Companies or the Shareholders without the prior
written approval of Investors. Notwithstanding the foregoing, nothing contained
herein shall require (i) any party hereto or any of its respective Affiliates to
sell, transfer, divest or otherwise dispose of any of its respective business,
assets or properties in connection with this Agreement or any of the
transactions contemplated hereby, (ii) the Company to enter into any agreement
or other arrangement for the financing of the transactions contemplated hereby
on terms that are not satisfactory to Investors, in its sole discretion or (iii)
any party hereto to initiate any litigation, make any substantial payment or
incur any material economic burden (including as a result of any divestiture),
except for payments a party presently is contractually obligated to make, to
obtain any consent, waiver, authorization, order or approval.
5.9 ENVIRONMENTAL INVESTIGATION. Investors shall have the right to (i)
conduct tests of the soil surface or subsurface waters and air quality at, in,
on, beneath or about the Facilities, and to conduct such other procedures as may
be recommended by an environmental consultant
47
engaged by Investors based on its professional judgment, in a manner consistent
with good engineering practice, (ii) inspect records, reports, permits,
applications, monitoring results, studies, correspondence data and any other
information or documents relevant to environmental conditions or environmental
noncompliance and (iii) inspect all buildings and equipment at the Facilities
including, without limitation, the visual inspection of the physical plants for
asbestos-containing construction materials; provided that in each case, such
tests and inspections shall be conducted only (A) during regular business hours
and upon reasonable notice, (B) in a manner that will not materially interfere
with the operation of the business of the AAC Companies and/or the use of,
access to or egress from the Facilities and (C) to the extent required, prior
consent of the owner of the Facilities.
5.10 RELATED PARTY ACCOUNTS. Except as and to the extent set forth in
Schedule 5.10, contemporaneously with the Closing, the Shareholders and their
Affiliates (other than Holding and the AAC Companies), on the one hand, and
Holding and the AAC Companies, on the other hand, shall satisfy and/or terminate
(without recourse), as between a Shareholder and any of its Affiliates (other
than Holding and the AAC Companies), on the one hand, and Holding and the AAC
Companies, on the other hand, all amounts (i) due by a Shareholder or any of its
Affiliates (other than Holding and the AAC Companies), on the one hand, to
Holding and the AAC Companies, on the other hand, or (ii) due by Holding or the
AAC Companies, on the one hand, to a Shareholder or any of its Affiliates (other
than Holding and the AAC Companies), on the other hand. Any liability for Taxes
arising from such satisfaction or termination of such amounts shall be the
responsibility, jointly and severally, of the Shareholders.
5.11 ALLOCATION OF PURCHASE PRICE. The Purchase Price has been agreed
upon by the parties and the values assigned to the various assets which
constitute the Contributed Assets are listed in Schedule 5.11. The AAC Companies
and the Company agree that the values reflected in Schedule 5.11 were separately
established as a result of good faith bargaining and that in reporting the
transactions contemplated by this Agreement to the Internal Revenue Service, as
is required by Section 1060 of the Internal Revenue Code, they will use such
prices and cooperate with each other in meeting the requirements of the Internal
Revenue Code and the regulations promulgated thereunder.
5.12 HOLDING'S AND THE AAC COMPANIES' INSURANCE. Holding and the AAC
Companies shall, both before and after the Closing, take all reasonable action
required to assert, or following the Closing to enable the Company to assert,
and fully protect its rights under any insurance policy of Holding or the AAC
Companies existing on or before the Closing Date with respect to claims relating
to the operation of the Business prior to the Closing Date.
5.13 DISBURSEMENT ACCOUNTS. The Shareholders will deposit or cause to
remain on deposit, in the various accounts upon which checks issued by the AAC
Companies before Closing (the "Pre-Closing Checks") are drawn, funds sufficient
to pay the Pre-Closing Checks in full as and when they are presented for
payment.
5.14 NAMES. Promptly following the Closing, Holding and the AAC
Companies shall, and the Shareholders shall cause Holding and the AAC Companies,
to, change their respective corporate names to new names that do not use the
names "Asset Acceptance," "Financial Credit,"
48
"CFC Financial," "City Financial," "Consumer Credit,""▇▇▇ Acceptance," Merit
Acceptance or the initials "AAC."
5.15 FURTHER ASSURANCES. Holding, the AAC Companies and the
Shareholders, on the one hand, and the Company, on the other hand, will use
reasonable efforts to implement the provisions of this Agreement, and for such
purpose, at the request of the other party will, at or after the Closing,
without further consideration, promptly execute and deliver such additional
instruments, documents, conveyances or assurances, and take such other action,
as the AAC Companies or the Company may reasonably deem necessary or desirable
in order to consummate more effectively the transactions contemplated hereby, to
vest in the AAC LLCs title to the Contributed Assets free and clear of any
Encumbrances (other than Permitted Encumbrances), and otherwise to carry out the
intent and purposes of this Agreement unless such action would result in
liabilities or obligations not reasonably contemplated by the transactions
contemplated hereby.
ARTICLE VI
EMPLOYEES AND EMPLOYEE MATTERS
6.1 TRANSFERRED EMPLOYEES. Schedule 3.21(i) sets forth a list of all of
the employees of the AAC Companies and their current compensation as of the most
recent date for which such information is available. Except as set forth in
Schedule 3.21(i), the Company will cause the AAC LLCs to offer employment with
the AAC LLCs, immediately after the Closing in a same position and at the same
rate of pay and with the same benefits as in effect on the date immediately
preceding the Closing, to all of such persons, whether such persons are salaried
or hourly employees; provided that, except as otherwise provided in the
Employment Agreements, any such offer of employment by the AAC LLCs shall not
constitute an offer of employment by the AAC LLCs over any minimum period of
time, or an obligation to continue any such employee's rate of pay or employee
benefits, and any such employment shall be at will. Such employees who elect to
become employees of the AAC LLCs are hereinafter referred to as "Transferred
Employees" and shall be deemed to have become employees of the AAC LLCs as of
the time the Closing becomes effective; provided that those employees of the AAC
Companies who are regarded by the AAC Companies as being on layoff, short-term
disability or leave of absence (whether paid or unpaid) as of the Closing shall
continue in such status with the AAC LLCs after the Closing and the AAC LLCs
shall not be obligated to offer employment to any employees of the AAC Companies
who are regarded by the AAC Companies as being on long-term disability. The
Company acknowledges that it has not informed the AAC Companies of any planned
or contemplated decisions or actions by the Company that would require the
service of notice under the WARN Act. The Company shall not take, either
directly or indirectly, any action which will cause the notice provisions of the
WARN Act to be applicable to the transactions contemplated by this Agreement.
6.2 EMPLOYEE PLANS. Except as set forth in Schedule 6.2, the AAC LLCs
will assume the sponsorship of and be substituted for the AAC Companies as the
"employer" under the Employee Plans listed in Schedule 3.22(a) (and any related
trust agreements) which require such
49
assumption and substitution in order for such Employee Plans to be maintained by
the AAC LLCs. As soon as practicable after the Closing, the AAC LLCs shall,
where applicable, amend the Employee Plans to take into account the service of
Transferred Employees with the AAC Companies for all purposes under such
Employee Plans; provided that with respect to any Employee Plan, the Company
shall adopt any such amendments only to the extent that such adoption does not
adversely affect the qualified status of such Employee Plan under Section 401(a)
of the Code.
6.3 WORKER'S COMPENSATION. The AAC LLCs will assume the responsibility
for all worker's compensation claims made by Transferred Employees after the
Closing arising from events occurring before the Closing.
6.4 VACATION AND HOLIDAY PAY. The AAC LLCs will assume all liability
for unpaid vacation and holiday pay accrued by all Transferred Employees prior
to the Closing in the amounts accrued in the books and records of the AAC
Companies in the ordinary course of business consistent with past practices.
6.5 NON-TRANSFERRED EMPLOYEES. Notwithstanding anything herein to the
contrary, the Company shall not have any liability for any severance or
termination obligations or post-retirement benefits to employees of the AAC
Companies who do not become Transferred Employees.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF INVESTORS
The obligation of Investors to consummate the transactions contemplated
by this Agreement shall be subject, in the sole discretion of Investors, to the
satisfaction, at or prior to the Closing, of each of the following conditions,
any of which may be waived by Investors in accordance with Section 12.9:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Holding, CCC and the Shareholders contained in Article III hereof shall be
true and correct in all respects (in the case of any representation or warranty
containing any materiality qualification) and in all material respects (in the
case of any representation or warranty without any materiality qualification) as
of the date of this Agreement and as of the date of Closing; provided that to
the extent that any such representations and warranties were made as of a
specified date, such representations and warranties shall continue on the date
of Closing to have been true as of such specified date.
7.2 PERFORMANCE OF THIS AGREEMENT. Holding, the AAC Companies and the
Shareholders shall have, in all material respects, performed all covenants and
agreements and complied with all conditions required by this Agreement to be
performed or complied with by them prior to or at the Closing.
50
7.3 CAPITAL EXPENDITURES. The AAC Companies shall have made capital
expenditures and Charged Off Account purchases after December 31, 2001, at a
pace consistent with achieving 2002 Budgeted Collections and EBITDA through the
Closing.
7.4 DISTRIBUTIONS. None of Holding, ▇▇▇ Acceptance or CCC shall have
made distributions to its respective shareholders after May 31, 2002, except (i)
bonuses paid July 3, 2002 in the aggregate amount of $500,000 and (ii)
distributions in the amount necessary for such shareholders to pay the income
Taxes on the profits of such Companies allocated to them for the period from
January 1, 2002 through the Closing Date; including, solely for purposes of this
clause (ii) amounts necessary for Holding and the AAC Companies to pay the
Michigan Single Business Tax (net of tax benefits arising from the deduction of
such amounts on federal, state and local income tax returns) arising from the
acquisition of the Purchased Shares from Holding; provided that the
distributions made pursuant to this clause (ii) shall not exceed $1,500,000 in
the aggregate.
7.5 CONSENTS AND APPROVALS. All registrations, filings, applications,
notices, consents, orders, approvals, qualifications, waivers and Licenses and
Permits required to be made or obtained by Holding, the AAC Companies or the
Shareholders shall have been made or obtained and all waiting periods specified
by law with respect thereto shall have expired or been terminated, except where
the failure to do any of the foregoing would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
7.6 INJUNCTION, LITIGATION, ETC. No Actions by any Governmental
Authority or any other Person shall have been instituted for the purpose of
enjoining or preventing, or which question the validity or legality of, the
transactions contemplated hereby and which could reasonably be expected to
damage the Company materially or impair the Company's ability to own and control
the Business and the Contributed Assets if the transactions contemplated hereby
are consummated.
7.7 LEGISLATION. No statute, rule or regulation shall have been
proposed (and reasonably believed will be enacted) or enacted which prohibits or
is reasonably likely to prohibit, restrict or materially delay the consummation
of the transactions contemplated by this Agreement.
7.8 PROCEEDINGS. All corporate proceedings of Holding, the AAC
Companies and ▇▇▇ Acceptance that are required in connection with the
transactions contemplated by this Agreement (including documentation of the
transactions contemplated by Recitals B, C and D) shall be reasonably
satisfactory in form and substance to Investors and its counsel.
7.9 LLC AGREEMENT. Holding, CCC and the Shareholders shall have
executed the LLC Agreement substantially in the form of Exhibit B hereto.
7.10 OPINION OF COUNSEL. Holding shall have delivered to Investors an
opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLLC, counsel for Holding, the AAC Companies and the
Shareholders, dated as of the date of Closing, substantially with respect to the
matters set forth in Exhibit C hereto, and stating that such opinion is made for
the benefit of the Company and the Company's
51
institutional lenders and that the Company's institutional lenders shall be
entitled to rely thereon as if such opinion were addressed to them.
7.11 MATERIAL CHANGE. There shall not have been any Material Adverse
Change in the Assets, liabilities, financial condition, results of operations or
business of Holding or the AAC Companies since December 31, 2001, nor any
occurrence or circumstance that with the passage of time would reasonably be
expected to result in such change, and there shall not be any material liability
not shown in the Interim Financial Statements or otherwise disclosed herein.
7.12 FINANCING. The Company shall have obtained and consummated
long-term financing containing a three-year revolving line of credit in a
principal amount not less than $75,000,000 on such other terms reasonably
satisfactory to Investors.
7.13 PAYOFF LETTERS. The AAC Debt lenders shall have delivered "payoff"
letters to the Company stating that ,upon receipt of the payment in full with
respect to the AAC Debt, the lenders shall (i) cancel, terminate, extinguish and
deliver to the Company all instruments with respect to the AAC Debt
(collectively, "Debt Instruments") and shall release all Encumbrances in
connection therewith (and shall, if necessary or advisable, reconvey all Assets
or property that are the subject of such Encumbrances) and (ii) deliver to the
Company an acknowledgment of payment and release and other evidence reasonably
satisfactory to the Company of such termination, cancellation and extinguishment
of all Debt Instruments and related Encumbrances.
7.14 ESCROW AGREEMENT. Holding, CCC and the Shareholders shall have
executed and delivered to the Company, Investors and the Escrow Agent the Escrow
Agreement in substantially in the form of Exhibit A hereto.
7.15 ▇▇▇ ACCEPTANCE ACQUISITION. Prior to its merger into Asset
Acceptance, LLC, Asset Acceptance shall have acquired substantially all of the
assets of ▇▇▇ Acceptance (other than the condominium in Grosse Point, Michigan)
in exchange for a payment of $200,000.
7.16 NONCOMPETITION AGREEMENTS. The Non-Interference, Non-Disclosure
and Non-Competition Agreements substantially in the form of Exhibit C hereto,
shall have been executed by Holding, the AAC Companies, the Shareholders, and
the Company. The Non-Interference, Non-Disclosure and Non-Competition Agreements
substantially in the form of Exhibit D hereto, shall have been executed by the
employees of the AAC Companies set forth in Schedule 7.16.
7.17 CONSULTING SERVICES AGREEMENT. The Company and the AAC LLCs shall
have entered into the Consulting Services Agreement with Quad-C Management, Inc.
substantially in the form of Exhibit G hereto.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF HOLDING, CCC AND THE SHAREHOLDERS
The obligation of Holding, CCC and the Shareholders to consummate the
transactions contemplated by this Agreement shall be subject, in the sole
discretion of Holding and CCC, to
52
the satisfaction, at or prior to the Closing, of each of the following
conditions, any of which may be waived by Holding and CCC in accordance with
Section 12.9.
8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Investors contained in Article IV hereof shall be true and correct in all
respects (in the case of any representation or warranty containing any
materiality qualification) and in all material respects (in the case of any
representation or warranty without any materiality qualification) as of the date
of this Agreement and as of the date of Closing; provided that to the extent
that any such representations and warranties were made as of a specified date,
such representations and warranties shall continue on the date of Closing to
have been true as of such specified date.
8.2 PERFORMANCE OF THIS AGREEMENT. Investors shall have, in all
material respects, performed all covenants and agreements and complied with all
conditions required by this Agreement to be performed or complied with by it
prior to or on the date of Closing.
8.3 CONSENTS AND APPROVALS. All registrations, filings, applications,
notices, consents, orders, approvals, qualifications or waivers required to be
made or obtained by the Company or Investors shall have been made or obtained
and all waiting periods specified by law with respect thereto shall have expired
or been terminated, except where the failure to do any of the foregoing would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company.
8.4 INJUNCTION, LITIGATION, ETC. No Actions by any Governmental
Authority or any other Person shall have been instituted for the purpose of
enjoining or preventing, or which question the validity or legality of, the
transactions contemplated hereby and which could reasonably be expected to
damage Holding, the AAC Companies or the Shareholders materially if the
transactions contemplated hereby are consummated.
8.5 LEGISLATION. No statute, rule or regulation shall have been
proposed (and reasonably believed will be enacted) or enacted which prohibits or
reasonably likely to prohibit, restrict or materially delay the consummation of
the transactions contemplated this Agreement.
8.6 PROCEEDINGS. ALL PROCEEDINGS OF INVESTORS THAT ARE REQUIRED IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL BE
REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE HOLDING AND ITS COUNSEL.
8.7 LLC AGREEMENT. INVESTORS SHALL HAVE EXECUTED THE LLC AGREEMENT
SUBSTANTIALLY IN THE FORM OF EXHIBIT B HERETO.
8.8 OPINION OF COUNSEL. Investors shall have delivered to Holding and
CCC an opinion of McGuireWoods LLP, counsel for Investors, dated as of the
Closing Date, substantially with respect to the matters set forth in Exhibit F
attached hereto.
8.9 ESCROW AGREEMENT. The Company and Investors shall have executed and
delivered to Holding, CCC and the Shareholders and the Escrow Agent the Escrow
Agreement substantially in the form of Exhibit A hereto.
53
8.10 EMPLOYMENT AGREEMENTS. The Company shall have executed and
delivered to each of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ ▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇ their respective Employment Agreements
substantially in the form of Exhibits ▇-▇, ▇-▇, ▇-▇ and H-4.
ARTICLE IX
CLOSING
9.1 TIME AND PLACE OF CLOSING. The closing (the "Closing") shall take
place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLLC, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, at 10:00 a.m. local time on September 30, 2002, or such other date as
may be agreed upon by the parties (the "Closing Date"). If the Closing takes
place, the Closing and all of the transactions contemplated by this Agreement
shall be deemed to have occurred simultaneously and become effective as of 11:59
p.m. on September 30, 2002.
9.2 DELIVERIES BY HOLDING, CCC AND THE SHAREHOLDERS. At the Closing
Holding, CCC and the Shareholders shall deliver to Company the following:
(i) certificates evidencing all the membership
interests in the AAC LLCs;
(ii) certificates of merger evidencing the
Mergers of the AAC Companies (other than CCC) into its
respective AAC LLC;
(iii) bills of sale and assignment in the form
attached as Exhibit I evidencing the transfer of the
Contributed Assets to Consumer Credit, LLC;
(iv) properly endorsed title certificates
transferring the motor vehicles which are a part of the
Contributed Assets to the AAC LLCs;
(v) such document or documents (in form
satisfactory to Investors and suitable for filing,
registration or recording, if applicable) as may be necessary
to transfer to the AAC LLCs the remainder of the Contributed
Assets;
(vi) a certificate executed by the Shareholders
certifying that, as of the date of Closing Date, the
conditions set forth in Sections 7.1 through 7.5 and 7.11 have
been satisfied;
(vii) evidence that the actions described in
Section 7.8 have been taken;
(viii) copies of the consents required by Section '
7.5;
54
(ix) certificate from the Secretary of State of
Delaware of the Company's and the AAC LLCs good standing in
the State of Delaware as of the most recent date obtainable;
(x) certificate from the Secretary of State of
Nevada or the State of Michigan, as the case may be, of
Holding and the AAC Companies good standing in the State of
Nevada or the State of Michigan, as the case may be, as of the
most recent date obtainable;
(xi) a certificate executed by the Secretary of
Holding certifying as of the date of Closing (A) a true and
correct copy of the certificate or certificate of
incorporation of Holding and the AAC Companies, (B) a true and
correct copy of the bylaws of Holding and the AAC Companies,
(C) a true and correct copy of the certificate of formation
and limited liability company agreement or comparable
organizational documents of the Company and each of the AAC
LLCs and (D) incumbency matters;
(xii) the opinion of counsel required by Section
7.10;
(xiii) physical possession of all Books and
Records, Licenses and Permits, policies, Contracts, plans or
other instruments of the AAC Companies that are in the
possession of Holding and the AAC Companies, all such
materials to be deemed delivered to the Company if they are
present at any of the Facilities;
(xiv) UCC-1 searches with respect to Holding, the
AAC Companies, the AAC LLCs, the Business and the Assets used
in the Business; and
(xv) such additional documents as Investors may
reasonably request.
9.3 DELIVERIES BY THE COMPANY. At the Closing the Company shall deliver
to Holding and CCC the following:
(i) to Holding, certificates evidencing the
39,000,000 Class A-1 Shares, 25,350,000 Class B-1 Shares,
6,000,000 Class A Shares and 3,900,000 Class B Shares of the
Company and $550,000 in cash or immediately available funds in
consideration for the contribution by Holding to the Company
of the membership interests in Asset Acceptance, LLC,
Financial Credit, LLC and CFC Financial, LLC;
(ii) to CCC, certificates evidencing the 650,000
Class B-1 Shares and 100,000 Class B Shares of the Company and
$250,000 in cash or immediately available funds in
consideration for the contribution by
55
CCC to the Company of the membership interests in Consumer
Credit, LLC; and
(iii) such additional documents as Holding may
reasonably request.
9.4 DELIVERIES BY HOLDING. At the Closing Holding shall deliver to
Investors certificates evidencing the Purchased Shares, duly endorsed and free
of Encumbrances, which certificates shall be cancelled by the Company in
exchange for certificates evidencing the Purchased Shares registered in the name
of Investors in such denominations as Investors shall direct.
9.5 DELIVERIES BY INVESTORS. At the Closing, Investors shall deliver to
Holding the following:
(i) $45,000,000, of which $41,250,000 shall be
delivered by wire transfer to Holding and $3,750,000 shall be
delivered by wire transfer to the Escrow Agent;
(ii) a certificate executed by Investors
certifying that, as of the Closing Date, the conditions set
forth in Sections 8.1 through 8.3 have been satisfied as to
Investors;
(iii) evidence that the corporate action described
in Section 8.6 has been taken;
(iv) a copy of the articles of incorporation of
Investors certified as of a recent date by the Clerk of the
State Corporation Commission of the Commonwealth of Virginia;
(v) the opinion of counsel required by Section
8.8; and
(vi) such additional documents as Holding may
reasonably request.
9.6 DELIVERIES OF ANCILLARY AGREEMENTS. At the Closing Holding, the AAC
Companies, the Shareholders, the Company and Investors shall each execute and
deliver to the appropriate parties copies of the Ancillary Agreements to which
they are parties.
ARTICLE X
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
10.1 SURVIVAL OF REPRESENTATIONS.
(a) The representations and warranties of Holding, CCC and the
Shareholders contained in this Agreement will survive until the later of (i) the
60th day after receipt by the
56
Company of the audited financial statements for the Company and its Subsidiaries
for the fiscal year ending December 31, 2003 and (ii) the 18 month anniversary
of the Closing Date; provided that (i) the representations and warranties
contained in the first sentence of Section 3.1 and in Section 3.3 shall survive
the Closing indefinitely (ii) the representations and warranties contained in
Section 3.6 shall survive until the fifth anniversary of the Closing Date, (iii)
the representations and warranties in Section 3.22 of this Agreement shall
survive until 90 days after the expiration of the last of the limitation periods
contained in ERISA during which a claim thereunder can be made, and (iv) the
representations and warranties in Section 3.23 of this Agreement shall survive
until 90 days after the expiration of the last of the limitation periods
contained in the Internal Revenue Code or other applicable Tax law during which
an assessment or reassessment can be made (the respective dates on which the
representations and warranties hereunder lapse are hereinafter referred to as
the "Survival Date").
(b) All representations and warranties of Investors contained
in this Agreement will survive until the first anniversary of the Closing Date;
provided that the representations and warranties contained in the first sentence
of Section 4.1 and in Section 4.3 shall survive the Closing indefinitely.
(c) If a specific claim in writing with respect to any
representation or warranty shall have been made, or an action at law or in
equity shall have been commenced or filed, before the relevant Survival Date
(whether or not liability has actually been incurred), then such representation
or warranty shall, with respect to such claim or action, survive until the claim
or action has been finally resolved.
10.2 INDEMNIFICATION BY HOLDING, CCC AND THE SHAREHOLDERS.
(a) Subject to the limitations contained in this Article X,
Holding, CCC and the Shareholders, jointly and severally, shall, without
duplication, indemnify and hold harmless, the Company, Investors, their
Affiliates, each of their respective members (other than Holding, CCC and the
Shareholders), shareholders, directors, officers, employees and agents, and each
of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "Company Indemnified Parties") from and against, and pay or
reimburse the Company Indemnified Parties for, any and all Covered Liabilities
actually incurred or paid by the Company Indemnified Parties as a result of:
(i) any inaccuracy contained in, omission from
or breach of, a representation and warranty made by Holding,
the AAC Companies or the Shareholders in this Agreement;
(ii) the nonfulfillment, nonperformance or other
breach of any covenant or agreement of Holding, the AAC
Companies or the Shareholders contained in this Agreement
other than pursuant to Sections referred to in clause (iii) of
this Section 10.2(a);
(iii) the nonfulfillment, nonperformance or other
breach of any covenant or agreement of Holding, the AAC
Companies or the
57
Shareholders contained in clause (ii)(B) of Section 5.2
(Forbearances), 5.11 (Allocation of Purchase Price),
5.14(Names), or 5.15 (Further Assurances);
(iv) any failure of CCC to satisfy in full the
Retained CCC Liabilities; and
(v) the failure of Holding or the Shareholders
to satisfy in full any of the Retained Liabilities.
(b) The claims for indemnity by Company Indemnified Parties
pursuant to this Section 10.2 are referred to as "Company Claims." The indemnity
provided for in this Section 10.2 is not limited to matters asserted by third
parties against any Company Indemnified Party, but includes Covered Liabilities
actually incurred or sustained by any Company Indemnified Party in the absence
of third party claims.
10.3 INDEMNIFICATION BY THE COMPANY AND INVESTORS.
(a) Subject to the limitations contained in this Article X,
the Company shall, without duplication, indemnify and hold harmless Holding, CCC
and the Shareholders, their Affiliates, each of their respective shareholders,
directors, officers, employees and agents, and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "AAC
Indemnified Parties") from and against, and pay or reimburse the AAC Indemnified
Parties for, any and all Covered Liabilities actually incurred or paid by the
AAC Indemnified Parties as a result of the nonfulfillment, nonperformance or
other breach by the Company of its covenants and agreements in Sections 5.11
(Allocation of Purchase Price), 5.15 ("Further Assurances") or Article VI
("Employees and Employee Matters").
(b) Subject to the limitations contained in this Article X,
Investors shall, without duplication, indemnify and hold harmless the AAC
Indemnified Parties from and against, and pay or reimburse the AAC Indemnified
Parties for, any and all Covered Liabilities actually incurred or paid by the
AAC Indemnified Parties as a result of:
(i) any inaccuracy contained in, omission from
or breach of, a representation and warranty made by Investors
in this Agreement or in any document delivered pursuant
hereto;
(ii) the nonfulfillment, nonperformance or other
breach of any covenant or agreement of Investors contained
this Agreement.
(c) The claims for indemnity by AAC Indemnified Parties
pursuant to this Section 10.3 are referred to as "AAC Claims." The indemnity
provided for in this Section 10.3 is not limited to matters asserted by third
parties against any AAC Indemnified Party, but includes Covered Liabilities
actually incurred or sustained by any AAC Indemnified Party in the absence of
third-party claims.
58
10.4 NOTICE AND DEFENSE OF CLAIMS.
(a) Whenever a claim shall arise for indemnification hereunder
(a "Claim"), the party seeking indemnification (an "indemnified party") shall
give reasonably prompt notice to the party from whom indemnification is sought
(an "indemnifying party") of the claim for indemnification and the facts, in
reasonable detail, constituting the basis for such claim (a "Claim Notice");
provided that failure of an indemnified party to give prompt written notice of
any Claim shall not release, waive or otherwise affect an indemnifying party's
obligations with respect thereto except to the extent that the indemnifying
party is adversely affected in its ability to defend against such Claim or is
otherwise prejudiced thereby.
(b) If any third party shall notify any indemnified party with
respect to any matter (a "Third Party Claim") which may give rise to a Claim
under this Article X, then the indemnified party shall promptly notify the
indemnifying party of such Third Party Claim in writing; provided that failure
of an indemnified party to give prompt written notice of any Claim shall not
release, waive or otherwise affect an indemnifying party's obligations with
respect thereto except to the extent that the indemnifying party is adversely
affected in its ability to defend against such Claim or is otherwise prejudiced
thereby.
(c) Any indemnifying party will have the right to assume the
defense of the Third Party Claim with counsel of its choice at any time within
fifteen days after the indemnified party has given notice of the Third Party
Claim; provided that the indemnifying party must conduct the defense of the
Third Party Claim actively and diligently to preserve its rights to assume the
defense of the Third Party Claim; and provided further that the indemnified
party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim. In the event the
indemnifying party assumes the defense of the Third Party Claim, the
indemnifying party shall keep the indemnified party reasonably informed of the
progress of any such defense, compromise or settlement, and in the event the
indemnified party assumes the defense of the Third Party Claim, the indemnified
party shall keep the indemnifying party reasonably informed of the progress of
any such defense, compromise or settlement. If the indemnifying party is held
liable for the Third-Party Claim, the indemnifying party shall be liable for any
settlement of any Third-Party Claim effected pursuant to and in accordance with
this Section 10.4(c) and for any final judgment (subject to any right of
appeal), and the indemnifying party agrees to indemnify and hold harmless each
indemnified party from and against any and all Covered Liabilities by reason of
such settlement or judgment.
(d) So long as the indemnifying party has assumed and is
conducting the defense of the Third Party Claim in accordance with Section
10.4(c), the indemnifying party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the indemnified party (not to be withheld unreasonably)
unless the judgment or proposed settlement involves only the payment of money
damages by the indemnifying party and does not impose an injunction or other
equitable relief upon the indemnified party.
(e) If the indemnifying party does not assume or conduct the
defense of the Third Party Claim in accordance with Section 10.4(c), (i) the
indemnified party may defend against,
59
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the indemnified party need not consult with, or obtain any
consent from, the indemnifying party in connection with any such defense,
consent or settlement), and (ii) the indemnifying party will remain responsible
for any Covered Losses the indemnified party may suffer resulting from, arising
out of, relating to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Article X.
(f) If the claim for indemnification involves a matter other
than a Third Party Claim, the indemnifying party shall have thirty (30) days to
object to such claim by delivery of a written notice of such objection to such
indemnified party specifying in reasonable detail the basis for such objection.
Failure to timely so object shall constitute a final and binding acceptance of
the claim for indemnification by the indemnifying party, and the claim shall be
paid in accordance with the further provisions hereof. If an objection is timely
interposed by the indemnifying party, then the indemnified party and the
indemnifying party shall negotiate in good faith for a period of thirty (30)
business days from the date the indemnified party receives such objection prior
to commencing any arbitration, formal legal action, suit or proceeding with
respect to such claim for indemnification. Upon Final Determination (as defined
below) of the amount of a Claim, the indemnifying party shall pay the amount of
such Claim within thirty (30) days of the date of such Final Determination.
(g) Any Covered Liabilities for which an indemnifying party is
responsible shall, subject to the provisions of Section 10.5 hereof, be paid
directly by the indemnifying party. Upon Final Determination (as defined below)
of the amount of a claim for indemnification, the indemnifying party shall pay
the amount of such claim within 20 days after the date of such Final
Determination together with interest at the prime rate of JPMorgan Chase Bank in
New York City (or its successor or successors) from time to time, from (and
including) the later of (i) the date of delivery of the Claim Notice or (ii) the
date such Covered Liability was paid, to (and including) the date immediately
preceding the date of payment.
(h) A "Final Determination" of a Claim shall be (i) a judgment
of any court determining the validity of a disputed Claim, if no appeal is
pending from such judgment or if the time to appeal therefrom has elapsed (it
being understood that the indemnified party shall have no obligation to appeal);
or (ii) an award of any arbitrator or arbitration panel determining the validity
of such disputed Claim, if there is not pending any motion to set aside such
award or if the time within which to move to set such award aside has elapsed;
or (iii) a written termination of the dispute with respect to such Claim signed
by all of the parties thereto or their attorneys; or (iv) a written
acknowledgment of the indemnifying party that it no longer disputes the validity
of such Claim; or (v) such other evidence of final determination of a disputed
Claim as shall be reasonably acceptable to the parties.
10.5 LIMITATIONS ON INDEMNIFICATION.
(a) Notwithstanding any other provision of this Article X, (i)
Holding, CCC and the Shareholders shall not be liable under Section 10.2(a)(i)
or Section 10.2(a)(ii) unless and until the aggregate amount of liability
thereunder exceeds $750,000, and thereafter the indemnified party shall be
entitled to indemnification thereunder only for the aggregate amount
60
of such liability in excess of $750,000 and (ii) the maximum amount for which
the Company Indemnified Parties shall be entitled to indemnification under
Section 10.2(a)(i) or Section 10.2(a)(ii) shall be $7,500,000 in the aggregate;
provided that the limitations set forth in this Section 10.5(a) shall not apply
to liability for a breach of the representations or warranties in Sections 3.1,
3.2, 3.3, 3.23, 3.24 and 3.29 or to clause (B) of Section 5.2.
(b) Notwithstanding any other provision of this Article X, (i)
Investors shall not be liable under Section 10.3(b)(i) or Section 10.3(b)(ii)
unless and until the aggregate amount of liability thereunder exceeds $750,000,
and thereafter the indemnified party shall be entitled to indemnification
thereunder only for the aggregate amount of such liability in excess of $750,000
and (ii) the maximum amount for which the AAC Indemnified Parties shall be
entitled to indemnification under Section 10.3(b)(i) or Section 10.3(b)(ii)
shall be $7,500,000 in the aggregate; provided that the limitations set forth in
this Section 10.5(c) shall not apply to liability for a breach of the
representations or warranties in Sections 4.1, 4.2 and 4.6.
10.6 CALCULATION OF COVERED LIABILITIES.
(a) Insurance Proceeds. To the extent that any Company Claim
or AAC Claim is covered by insurance held by such Company Indemnified Party or
AAC Indemnified Party, such indemnified party shall be entitled to
indemnification pursuant to Section 10.2 or 10.3, as applicable, only with
respect to the amount of the Covered Liabilities that are in excess of the cash
proceeds received by such indemnified party pursuant to such insurance. If such
indemnified party receives such cash insurance proceeds prior to the time such
Claim is paid, then the amount payable by the indemnifying party pursuant to
such Claim shall be reduced by the amount of such proceeds. If such indemnified
party receives such cash insurance proceeds after such Claim has been paid, then
upon the receipt by the indemnified party of any cash proceeds pursuant to such
insurance up to the amount of Covered Liabilities incurred by such indemnified
party with respect to such Claim, such indemnified party shall promptly repay
any portion of such amount which was previously paid by the indemnifying party
to such indemnified party in satisfaction of such Claim.
(b) Effect of Taxes. The amount of any indemnity payments for
Covered Liabilities under Section 10.2 or 10.3 above shall be (i) decreased to
reflect the actual Tax Benefit, if any, reasonably expected to be realized
within two years by the indemnified party resulting from the Covered Liabilities
giving rise to such indemnity payments and (ii) increased to reflect the actual
Tax Loss reasonably expected to be realized within two years by such indemnified
party as a result of the receipt of such Covered Liabilities, in each case
subject to the limitations on indemnification contained in Section 10.5. Any
indemnity payment made pursuant to Section 10.2 or 10.3 shall be treated by the
Company, Holding and the AAC Companies as an adjustment to the Purchase Price.
10.7 NO CIRCULAR RECOVERY. No Shareholder shall be entitled to
make any claim for indemnification or contribution against the AAC Companies or
any of their Affiliates (including the Company or any AAC LLC) with respect to a
matter constituting a breach of the representations and warranties set forth in
Article III hereof or a Retained Liability by reason of the fact that it or he
is or was a controlling person, member, manager, director, officer, employee,
61
agent or other representative of the AAC Companies (whether such claim is
pursuant to any statute, charter, bylaw, limited liability company agreement,
contractual obligation or otherwise).
10.8 RIGHT OF SET OFF. Anything in this Agreement to the
contrary notwithstanding, the Company may withhold and set off against any and
all amounts due Holding or its transferees as holder of the Series B-1 Shares,
any and all amounts as to such Person is obligated to indemnify the Company
Indemnified Parties pursuant to any provision of this Article X, subject to the
limitations on indemnification described in Section 10.5.
10.9 DISCLAIMER OF PROJECTIONS; MEMORANDUM. Holding, CCC and
the Shareholders make no representation or warranty to the Company or the
Investors except as specifically made in this Agreement. In particular, other
than the representation that, to the Knowledge of the AAC Companies, the
following were prepared in good faith based upon assumptions that were deemed
reasonable by Holding, CCC and the Shareholders at the time they were prepared,
Holding, CCC and the Shareholders make no representation or warranty to the
Company or Investors with respect to:
(i) the information set forth in the
Confidential Business Review distributed by The Geneva
Companies in connection with the transactions contemplated by
this Agreement;
(ii) any presentations made to the Company,
Investors, or their representatives by the management of
Holding and the AAC Companies; or
(iii) any financial or other projection or
forecast relating to Holding and the AAC Companies.
With respect to any financial or other projection or forecast delivered by or on
behalf of Holding, the AAC Companies, or the Shareholders to the Company,
Investors, or their representatives, the Company and Investors acknowledge that
(i) there are uncertainties inherent in attempting to make such projections and
forecasts, (ii) it is taking full responsibility for making its own evaluation
of the adequacy and accuracy of all such projections and forecasts so furnished
to it and (iii) it shall have no claim against Holding, the AAC Companies, or
the Shareholders with respect to such projection or forecast.
10.10 EXCLUSIVE REMEDY. The indemnification provided under Sections
10.2 and 10.3 shall be the sole and exclusive remedy of any indemnified party
for any Covered Liabilities or other matter relating to this Agreement or the
transactions contemplated by this Agreement other than claims (i) pursuant to
the terms of this Agreement, (ii) related to the Retained CCC Liabilities or the
Retained Liabilities, (iii) for fraud and (iv) for injunctive relief. With
respect to fraud, (i) the right of a party to be indemnified and held harmless
pursuant to this Article X shall be in addition to and cumulative of any other
remedy of such party at law or in equity with respect thereto and (ii) no party,
shall, by exercising any remedy available to it under this Article X, be deemed
to have exercised such remedy exclusively or to have waived any other remedy,
whether at law or in equity, available to it.
62
ARTICLE XI
TERMINATION
11.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(i) by the mutual written consent of all of the
parties to this Agreement;
(ii) by the Company or Investors, if any event
occurs which renders impossible compliance with one or more of
the conditions set forth in Article VII hereof, which
condition or conditions are not waived by the Company or
Investors;
(iii) by Holding and CCC, if any event occurs
which renders impossible compliance with one or more of the
conditions set forth in Article VIII hereof, which condition
or conditions are not waived by Holding and the AAC Companies;
or
(iv) by any party if the Closing has not occurred
by 11:59 p.m. October 31, 2002.
11.2 PROCEDURE: EFFECT OF TERMINATION. If this Agreement is terminated
as provided in Section 11.1, written notice thereof shall forthwith be given by
the terminating parties to the other party, and this Agreement shall thereupon
terminate and become void and of no further force and effect and there shall be
no further liability or obligation on the part of either party hereto except for
the obligations under Sections 5.5, 5.7 and 11.1; provided that termination of
this Agreement pursuant to clause (ii) or (iii) of Section 11.1, respectively,
shall not relieve the defaulting or breaching party (the "Breaching Party"),
whether or not it is the terminating party, of liability for damages actually
incurred by the other party as a result of breach of this Agreement by the
Breaching Party.
ARTICLE XII
GENERAL PROVISIONS
12.1 NOTICES. All notices required to be given hereunder shall be in
writing and shall be deemed to have been given if (i) delivered personally or by
nationally recognized overnight delivery service, (ii) transmitted by facsimile
or (iii) mailed by registered or certified mail (return receipt requested and
postage prepaid) to the following listed persons at the addresses and facsimile
numbers specified below, or to such other persons, addresses or facsimile
numbers as a party entitled to notice shall give, in the manner hereinabove
described, to the others entitled to notice:
(a) If to Holding, CCC or any Shareholder, to:
63
AAC Holding Corp.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
and to:
AAC Holding Corp.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PLLC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
(b) If to the Company or Investors, to:
AAC Holdings LLC
c/o Quad-C Management, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile No.: 434-979-1145
with a copy to:
McGuireWoods LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
Notice pursuant hereto shall be deemed given (i) if delivered personally, when
so delivered, (ii) if given by nationally recognized overnight delivery, one
business day after delivery to the delivery service for next business day
delivery, (iii) if given by facsimile, when transmitted to the facsimile number
set forth above, when so transmitted if transmitted during normal business hours
at the location to which it is transmitted or upon the opening of business on
the next Business Day if transmitted other than during normal business hours at
the location to which it is
64
transmitted and (iii) if given by mail, on the third business day following the
day on which it was posted.
12.2 INTERPRETATION. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement. For purposes of this Agreement, the words
"includes" and "including" shall mean "including without limitation." All
accounting terms not defined in this Agreement shall have the meaning determined
by GAAP. All capitalized terms defined herein are equally applicable to both the
singular and plural forms. The language in all parts of this Agreement shall be
construed, in all cases, according to its fair meaning. The parties acknowledge
that each party and its counsel have reviewed and revised this Agreement and
that any rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement.
12.3 ENTIRE AGREEMENT. This Agreement, together with the Ancillary
Agreements, the Company Confidentiality Letter and the Schedules and Exhibits
hereto, contain the entire agreement among the parties with respect to the
subject matter hereof and there are no agreements, understandings,
representations or warranties between the parties other than those set forth or
referred to herein.
12.4 NO THIRD PARTY BENEFICIARIES. Except as set forth in Article X,
nothing in this Agreement (whether expressed or implied) is intended to confer
upon any person other than the parties hereto and their respective permitted
successors and assigns, any rights or remedies under or by reason of this
Agreement nor is anything in this Agreement intended to relieve or discharge the
liability of any party hereto, nor shall any provision hereof give any person
any right of subrogation against, or action over against any party. Without
limiting the generality of the foregoing, nothing contained herein shall confer
any third-party beneficiary right (actual or implied) upon any employee of
Holding or the AAC Companies or obligate the Company to continue any such
employee in its employ for any specified period of time or at any specified
salary, wages or benefits after the Closing Date.
12.5 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided that no party hereto will assign its rights or delegate its
obligations under this Agreement without the express prior written consent of
each other party hereto, except that the Company may assign its right, title and
interest under this Agreement (i) to one or more wholly-owned Subsidiaries, (ii)
to a Person that acquires substantially all of the assets or business of the
Company and (iii) to any institutional lender to the Company as security for
obligations to such lender in respect of the financing arrangements entered into
in connection with the transactions contemplated hereby and any refinancings,
extensions, refundings or renewals thereof; provided, that in the event of such
assignment, the Company shall not be released from any obligations under this
Agreement.
12.6 SEVERABILITY. In the event that this Agreement or any other
instrument referred to herein, or any of their respective provisions, or the
performance of any such provision, is found to be invalid, illegal or
unenforceable under applicable law now or hereafter in effect, the parties shall
be excused from performance of such portions of this Agreement as shall be found
to be
65
invalid, illegal or unenforceable under the applicable laws or regulations
without, to the maximum extent permitted by law, affecting the validity of the
remaining provisions of the Agreement. Should any method of termination of this
Agreement or a portion thereof be found to be invalid, illegal or unenforceable,
such method shall be reformed to comply with the requirements of applicable law
so as, to the greatest extent possible, to allow termination by that method.
Nothing herein shall be construed as a waiver of any party's right to challenge
the validity of such law.
12.7 AMENDMENT. This Agreement may be amended, modified or supplemented
at any time by the parties hereto. This Agreement may be amended only by an
instrument in writing signed by each of the parties hereto.
12.8 EXTENSION; WAIVER. At any time prior to the Closing either party
to this Agreement may (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive a breach of a representation
or warranty of the other party hereto, or (iii) waive compliance by the other
party hereto with any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in a written instrument signed
by the party giving the extension or waiver. No waiver of any of the provisions
of this Agreement shall be deemed or shall constitute a waiver of any other
provision hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver unless otherwise expressly provided.
12.9 DISCLOSURE SCHEDULES. Certain of the representations and
warranties set forth in this Agreement contemplate that there will be attached
schedules setting forth information that might be "material" or have a "Material
Adverse Effect on Holding and the AAC Companies." Holding, CCC and the
Shareholders may, at their option, include in such schedules items that are not
material or are not likely to have a Material Adverse Effect on Holding and the
AAC Companies in order to avoid any misunderstanding, and any such inclusion
shall not be deemed to be an acknowledgment or representation that such items
are material or would have a Material Adverse Effect on Holding and the AAC
Companies, to establish any standard of materiality or Material Adverse Effect
on Holding and the AAC Companies, or to define further the meaning of such terms
for purposes of this Agreement
12.10 COUNTERPARTS; TRANSMISSION OF FACSIMILE SIGNATURES. This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, and delivered by means of facsimile
transmission or otherwise, each of which when so executed and delivered shall be
deemed to be an original and all of which when taken together shall constitute
but one and the same agreement. If any party hereto elects to execute and
deliver a counterpart signature page by means of facsimile transmission, it
shall deliver an original of such counterpart to each of the other parties
hereto within ten days of the date hereof, but in no event will the failure to
do so affect in any way the validity of the facsimile signature or its delivery.
12.11 SUBMISSION TO JURISDICTION; VENUE.
(a) Any legal action or proceeding with respect to this
Agreement or any transactions contemplated hereby shall be brought in the courts
of the Commonwealth of
66
Virginia or the State of Michigan or in the United States District Court for the
Eastern District of Virginia sitting in Richmond, Virginia, or the United States
District Court for the Eastern District of Michigan sitting in Detroit,
Michigan, and, by execution and delivery of this Agreement, each party hereto
hereby accepts for himself, herself or itself and in respect of his, her or its
property generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts. Each party irrevocably consents to the service of process out
of any of the aforementioned courts in any such action or proceeding by mailing
copies thereof by registered or certified mail, postage prepaid, to such
Shareholder at his, her or its address as provided in Section 12.1 hereof.
Nothing in this paragraph (a) shall affect the right of any party to serve
process in any other manner permitted by law or to commence legal proceedings in
any other jurisdiction.
(b) Each party hereby irrevocably waives any objections which
he, she or it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Agreement brought in the courts referred to in paragraph (a) of this Section
12.11 and hereby further irrevocably waives and agrees not to plead or claim in
any such court that any action or proceeding brought in any such court has been
brought in an inconvenient forum.
(c) WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, EACH OF
THE PARTIES TO THIS AGREEMENT AGREES THAT, AT THE TIME OF ANY SUCH ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY TRANSACTIONS CONTEMPLATED
HEREBY, EACH OF THE PARTIES WILL EXECUTE SUCH INSTRUMENTS AND OTHER DOCUMENTS AS
MAY BE NECESSARY TO CONSENT TO AND WAIVE ANY OBJECTION TO VENUE AND JURISDICTION
IN THE COURTS IDENTIFIED IN SUBSECTIONS (a) AND (b) ABOVE.
12.12 WAIVER OF JURY TRIAL. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
12.13 GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of Michigan without regard to any laws or regulations
relating to choice of laws (whether of the State of Michigan or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Michigan.
67
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed.
ASSET ACCEPTANCE HOLDINGS LLC
By: ________________________________
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
Title: President
AAC HOLDING CORP.
By:________________________________
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
Title: President
CONSUMER CREDIT CORP.
By:________________________________
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
Title: President
___________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
___________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
___________________________________
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
___________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇
68
________________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.,
Trustee of the ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Revocable Living Trust, dated May 24, 1996,
as amended on March 3, 1999,
a shareholder of AAC Holding Corp.
________________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Trustee of the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Revocable Living Trust, dated May 24, 1996,
as amended on March 3, 1999,
a shareholder of AAC Holding Corp.
________________________________________________
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Trustee of the ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
Revocable Living Trust,
dated November 7, 1998,
a shareholder of AAC Holding Corp.
________________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.,
Trustee of the ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Revocable Living Trust, dated May 24, 1996,
as amended on March 3, 1999,
a shareholder of Consumer Credit Corp.
________________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and/or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
Trustees of the ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Trust-1999,
dated December 29, 1999,
a shareholder of Consumer Credit Corp.
________________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and/or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
Trustees of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
Trust Trust-1999,
dated December 29, 1999,
a shareholder of Consumer Credit Corp.
69
________________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and/or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
Trustees of the Traecy ▇▇▇▇▇ ▇▇▇▇▇▇▇
Trust-1999,
dated December 29, 1999,
a shareholder of Consumer Credit Corp.
________________________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. and/or ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
Trustees of the ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Trust-1999,
dated December 29, 1999,
a shareholder of Consumer Credit Corp.
________________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Trustee of the ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Revocable Living Trust, dated May 24, 1996,
as amended on March 3, 1999,
a shareholder of Consumer Credit Corp.
________________________________________________
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Trustee of the ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇
Revocable Living Trust,
dated November 7, 1998,
a shareholder of Consumer Credit Corp.
AAC INVESTORS, INC.
By:____________________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
70