1
AMENDED AND RESTATED
INTEREST PURCHASE AGREEMENT
DATED AS OF JULY 22, 1998
BY AND AMONG
FIRST SIERRA FINANCIAL, INC.,
REPUBLIC COMMERCIAL CREDIT, LLC,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
AND
W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
2
TABLE OF CONTENTS
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ARTICLE I
THE ACQUISITION
SECTION 1.1 PURCHASE AND SALE OF MEMBERSHIP INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 EFFECTIVE TIME OF THE ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
[INTENTIONALLY OMITTED]
ARTICLE III
CLOSING
SECTION 3.1 CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 3.2 ANTI-DILUTION PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.3 EFFECT OF ACQUISITION ON MEMBERSHIP INTEREST . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.4 NO FRACTIONAL SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.5 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.6 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 3.7 ESCROW AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT
SECTION 4.1 ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4.2 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4.3 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 4.5 REPORTS AND FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 4.6 ABSENCE OF UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4.8 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4.9 NO VIOLATION OF LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 4.10 COMPLIANCE WITH AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 4.11 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 4.12 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 4.13 NON-COMPETITION AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 4.14 TITLE TO ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
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SECTION 4.15 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.16 BROKERS AND FINDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.17 OWNERSHIP OF SELLING MEMBERSHIP INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
AND THE INTEREST HOLDERS
SECTION 5.1 ORGANIZATION AND QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 5.2 CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5.3 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5.5 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.6 ABSENCE OF UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.8 LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.9 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.10 PERMITS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.11 CONTRACTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5.12 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5.13 EMPLOYEE BENEFIT PLANS; ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5.14 LABOR CONTROVERSIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 5.15 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 5.16 NON-COMPETITION AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5.17 TITLE TO ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.18 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.19 CERTAIN BUSINESS PRACTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.20 INTELLECTUAL PROPERTY RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.21 INSIDER INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 5.22 BROKERS AND FINDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 5.23 BUSINESS RELATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE INTEREST HOLDERS
SECTION 6.1 OWNERS OF SELLING MEMBERSHIP INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 6.2 AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 6.3 NO CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.4 INVESTOR STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 6.5 RESTRICTIONS ON TRANSFER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
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ARTICLE VII
CONDUCT OF BUSINESS PENDING THE ACQUISITION
SECTION 7.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE ACQUISITION . . . . . . . . . . . . . . . . 26
SECTION 7.2 CONDUCT OF BUSINESS BY PARENT PENDING THE ACQUISITION . . . . . . . . . . . . . . . . . . . 28
SECTION 7.3 CONTROL OF THE COMPANY'S OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 7.4 CONTROL OF PARENT'S OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 7.5 ACQUISITION TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.1 ACCESS TO INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 8.2 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 8.3 COMPLIANCE WITH THE SECURITIES ACT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 8.4 [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 8.5 EXPENSES AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 8.6 AGREEMENT TO COOPERATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 8.7 PUBLIC STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 8.8 NOTIFICATION OF CERTAIN MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 8.9 NON-COMPETITION AND CONFIDENTIALITY AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . 31
SECTION 8.10 BENEFITS AND CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 8.11 COOPERATION WITH RESPECT TO TAX RETURNS . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 8.12 INDEMNIFICATION OF MANAGERS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 8.13 RESALE REGISTRATION STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE IX
CONDITIONS
SECTION 9.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE ACQUISITION . . . . . . . . . . . . . . 37
SECTION 9.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE ACQUISITION . . . . . . . . . . . . . 38
SECTION 9.3 CONDITIONS TO OBLIGATION OF PARENT TO EFFECT THE ACQUISITION . . . . . . . . . . . . . . . 38
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ARTICLE X
INDEMNIFICATION
SECTION 10.1 INDEMNIFICATION OF PARENT INDEMNIFIED PARTIES . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 10.2 INDEMNIFICATION OF THE COMPANY INDEMNIFIED PARTIES . . . . . . . . . . . . . . . . . . . . 40
SECTION 10.3 DEFENSE OF THIRD-PARTY CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 10.4 DIRECT CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 10.5 LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 10.6 RECOURSE AGAINST ESCROWED SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
SECTION 11.1 TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 11.2 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 11.3 AMENDMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 11.4 WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE XII
GENERAL PROVISIONS
SECTION 12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 12.2 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 12.3 INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 12.4 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 12.5 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 12.6 PARTIES IN INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 12.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 12.8 NO WAIVER RELATING TO CLAIMS FOR FRAUD . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 12.9 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
EXHIBITS
EXHIBIT A - MEMBERSHIP INTERESTS
EXHIBIT B - INDEMNIFICATION ESCROW AGREEMENT
EXHIBIT C - AFFILIATE AGREEMENTS
EXHIBIT D - LEGAL OPINION OF ▇▇▇▇▇▇▇▇▇, WILL & ▇▇▇▇▇
SCHEDULE
PARENT DISCLOSURE SCHEDULE
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AMENDED AND RESTATED INTEREST PURCHASE AGREEMENT
THIS AMENDED AND RESTATED INTEREST PURCHASE AGREEMENT, dated as of
July 22, 1998 (this "Agreement"), is made and entered into by and among First
Sierra Financial, Inc., a Delaware corporation ("Parent"), Republic Commercial
Credit, LLC, a California limited liability company (the "Company"), ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ and W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (each an "Interest Holder" and collectively the
"Interest Holders"). Except as otherwise defined herein, capitalized terms
shall have the meanings ascribed to them in that certain Agreement and Plan of
Merger, dated as of June 24, 1998, as amended by the Amendment to Agreement and
Plan of Merger, by and among Parent, Sierra Acquisition Corporation II, a
Delaware corporation and a wholly-owned subsidiary of Parent, Republic, and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the "Agreement and Plan of Merger").
This Agreement amends and restates the Interest Purchase Agreement, dated as of
June 24, 1998 (the "Original Purchase Agreement"), among the parties hereto.
W I T N E S S E T H:
WHEREAS, the Interest Holders own collectively 30% of the outstanding
member ownership interests of the Company (the "Membership Interests");
WHEREAS, The Republic Group, Inc., a California corporation
("Republic"), owns the remaining outstanding 70% member ownership interests of
the Company;
WHEREAS, it is contemplated that Parent will acquire Republic pursuant
to the Agreement and Plan of Merger; and
WHEREAS, the Interest Holders desire to sell, and the Parent desires
to purchase from the Interest Holders, all of the outstanding Membership
Interests from the Interest Holders, subject to the terms and conditions of
this Agreement;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
THE ACQUISITION
SECTION 1.1 PURCHASE AND SALE OF MEMBERSHIP INTERESTS. Subject
to the terms and conditions of this Agreement, on the Closing (as defined
below), each of the Interest Holders shall sell to Parent, and Parent shall
purchase from each of the Interest Holders (the "Acquisition"), the Membership
Interests set forth opposite such Interest Holder's name in Exhibit A
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attached hereto, constituting in the aggregate 30% of the outstanding Membership
Interests of the Company for the Consideration (as defined below).
SECTION 1.2 EFFECTIVE TIME OF THE ACQUISITION. The Acquisition
shall become effective at the Effective Time. The parties acknowledge that it
is their mutual desire and intent to consummate the Acquisition as soon as
practicable after the date hereof. Accordingly, the parties shall, subject to
the provisions hereof, use all reasonable efforts to consummate, as soon as
practicable, the transactions contemplated by this Agreement.
ARTICLE II
[INTENTIONALLY OMITTED]
ARTICLE III
CLOSING
SECTION 3.1 CONSIDERATION. At the Effective Time, by virtue of
the Acquisition and assuming the satisfaction or waiver of the conditions set
forth in Article IX hereof,
(a) The Interest Holders' Membership Interests (the
"Selling Membership Interests") shall, as of the Effective Time and
subject to the provisions of this Article III, entitle the Interest
Holders to receive, in the aggregate and without interest, the
following:
(i) wire transfers in immediately available
funds, pursuant to wire transfer instructions provided to
Parent by each of the Interest Holders, in the aggregate
amount of $400,000 (the "Cash Consideration"); and
(ii) an aggregate number of shares of common
stock, par value $.01 per share ("Parent Common Stock"), of
Parent (the "Common Stock Consideration" and, together with
the Cash Consideration, the "Consideration") in accordance
with the following exchange ratio (the "Exchange Ratio"):
$600,000
N = --------
ACP
where:
"N" equals the aggregate number of shares of Parent Common Stock to be
issued to the Interest Holders hereunder.
"ACP" equals $25,538.
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The Consideration shall be allocated between the Interest Holders in accordance
with their relative ownership interests of Selling Membership Interests at the
Effective Time.
SECTION 3.2 ANTI-DILUTION PROVISIONS. In the event Parent
changes the number of shares of Parent Common Stock issued and outstanding
prior to the Effective Time as a result of a stock split, stock dividend or
recapitalization transaction with respect to such stock and the record date
therefor (in the case of a stock dividend) or the effective date thereof (in
the case of a stock split or similar recapitalization for which a record date
is not established) shall be prior to the Effective Time, the Exchange Ratio
shall be proportionately adjusted.
SECTION 3.3 EFFECT OF ACQUISITION ON MEMBERSHIP INTEREST. No
interest shall be paid on any Consideration payable to the Interest Holders.
If any certificate for shares of Parent Common Stock is to be issued in a name
other than that of the Interest Holders, it shall be a condition of such
exchange that the person requesting such exchange shall pay any applicable
transfer or other taxes required by reason of such issuance.
SECTION 3.4 NO FRACTIONAL SECURITIES. Notwithstanding any other
provision of this Agreement, no certificates or scrip for fractional shares of
Parent Common Stock shall be issued in the Acquisition and no Parent Common
Stock dividend, stock split or interest shall relate to any fractional
security, and such fractional interests shall not entitle the owner thereof to
vote or to any other rights of a security holder.
SECTION 3.5 CLOSING. The closing (the "Closing") of the
transactions contemplated by this Agreement shall take place at a location
mutually agreeable to Parent and the Company as promptly as practicable (but in
any event within five business days) following the date on which the last of
the conditions set forth in Article IX is fulfilled or waived, or at such other
time and place as Parent and the Company shall agree. The date on which the
Closing occurs is referred to in this Agreement as the "Closing Date."
SECTION 3.6 [INTENTIONALLY OMITTED].
SECTION 3.7 ESCROW AGREEMENT. Pursuant to Article X hereof, the
Interest Holders have agreed to indemnify the Parent Indemnified Parties (as
hereinafter defined) from and against certain Parent Indemnified Costs (as
hereinafter defined). On or prior to Closing, the Interest Holders, Parent and
an escrow agent mutually agreed upon by Parent and the Interest Holders shall
enter into an Indemnification Escrow Agreement in the form of Exhibit B
attached hereto (the "Escrow Agreement"). Notwithstanding any other provision
in this Agreement to the contrary, in order to secure the indemnity obligations
of the Interest Holders to the Parent Indemnified Parties under this Agreement,
share certificates evidencing shares of Parent Common Stock equal in value to
ten percent (10%) of the Consideration, which would otherwise be delivered to
the Interest Holders as Consideration at Closing pursuant to Section 3.1(a)
hereof (the "Escrowed Shares"), together with Stock Powers executed in blank,
shall be deposited into and held in escrow pursuant to the terms of the Escrow
Agreement. Parent is hereby directed by each Interest Holder to deposit the
Escrowed Shares set forth opposite such Interest Holder's name in Annex A to
the Escrow Agreement with the Escrow Agent at the Closing and Parent shall make
such deposit as directed.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT
Parent represents and warrants to the Company that, as of the date
hereof and as of the Closing Date:
SECTION 4.1 ORGANIZATION AND QUALIFICATION. Parent is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and has the requisite power and
authority to own, lease and operate its assets and properties and to carry on
its business as it is now being conducted. Parent is qualified to do business
and is in good standing in each jurisdiction in which the properties 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 so qualified and
in good standing will not, when taken together with all other such failures,
have a material adverse effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of Parent and its
subsidiaries, taken as a whole ("Parent Material Adverse Effect"). For
purposes of this Agreement, Parent Material Adverse Effect shall not be deemed
to include the impact on the financial condition or results of operations of
Parent of (a) actions and omissions by Parent (or any of its subsidiaries)
taken at the request of the Company in contemplation of the transactions
contemplated hereby, and (b) the Merger and compliance with the provisions of
this Agreement. True, accurate and complete copies of each of Parent's charter
and Bylaws, in each case as in effect on the date hereof, including all
amendments thereto, have heretofore been delivered to the Company.
SECTION 4.2 CAPITALIZATION.
(a) As of June 19, 1998, the authorized capital stock of Parent
consisted of 25,000,000 shares of Parent Common Stock and 1,000,000 shares of
preferred stock, par value $.01 per share ("Parent Preferred Stock"). As of
June 19, 1998, (i) 12,670,632 shares of Parent Common Stock were issued and
outstanding, all of which were validly issued and are fully paid, nonassessable
and free of preemptive rights, (ii) 38,437 shares of Parent Preferred Stock
were issued and outstanding, (iii) no shares of Parent Common Stock or Parent
Preferred Stock were held in the treasury of Parent, (iv) 1,726,626 shares of
Parent Common Stock were reserved for issuance pursuant to the exercise of
outstanding options and warrants to purchase Parent Common Stock and (v)
210,250 shares of Parent Common Stock were reserved for issuance upon
conversion of outstanding Parent Preferred Stock. Assuming the conversion of
all outstanding Parent Preferred Stock and the exercise of all outstanding
options and warrants to purchase Parent Common Stock, as of June 19, 1998,
there would be 14,607,508 shares of Parent Common Stock issued and outstanding.
In addition, as of June 19, 1998, no more than 3,800,000 shares of Parent
Common Stock were reserved and unissued pending conversion of shares of
acquired companies.
(b) Except as disclosed in the Parent SEC Reports (as defined in
Section 4.5) or in Section 4.2(a) or as otherwise contemplated by this
Agreement or the Agreement and Plan of Merger, as of the date hereof, there are
no outstanding subscriptions, options, calls, contracts,
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commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement and also including any rights plan or other
anti-takeover agreement, obligating Parent or any subsidiary of Parent to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of the capital stock of Parent or obligating Parent or any subsidiary of
Parent to grant, extend or enter into any such agreement or commitment. Except
as otherwise disclosed in the Parent SEC Reports, there are no voting trusts,
proxies or other agreements or understandings to which Parent or any subsidiary
of Parent is a party or is bound with respect to the voting of any shares of
capital stock of Parent, other than voting agreements executed in connection
with this Agreement. The shares of Parent Common Stock issued to the Interest
Holders in the Acquisition will be at the Effective Time duly authorized,
validly issued, fully paid and nonassessable and free of preemptive rights.
SECTION 4.3 SUBSIDIARIES. Except as disclosed in Section 4.3 of
the disclosure schedule of Parent, dated as of the date hereof and signed by an
authorized officer of Parent ("Parent Disclosure Schedule"), each direct and
indirect subsidiary of Parent is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has the
requisite power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted and each
subsidiary of Parent is qualified to do business, and is in good standing, in
each jurisdiction in which the properties owned, leased or operated by it or
the nature of the business conducted by it makes such qualification necessary;
except in all cases where the failure to be so qualified and in good standing
will not have a Parent Material Adverse Effect. All of the outstanding shares
of capital stock of each corporate subsidiary of Parent are validly issued,
fully paid, nonassessable and free of preemptive rights and are owned directly
or indirectly by Parent free and clear of any liens, claims, encumbrances,
security interests, equities, charges and options of any nature whatsoever.
There are no subscriptions, options, warrants, rights, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions or
arrangements relating to the issuance, sale, voting, transfer, ownership or
other rights with respect to any shares of capital stock of any corporate
subsidiary of Parent, including any right of conversion or exchange under any
outstanding security, instrument or agreement.
SECTION 4.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) Parent has full corporate power and authority to enter into
this Agreement and, subject to the Parent Required Statutory Approvals (as
defined in Section 4.4(c)), to consummate the transactions contemplated hereby.
This Agreement has been approved by the Boards of Directors of Parent, and no
other corporate proceedings on the part of Parent are necessary to authorize
the execution and delivery of this Agreement or the consummation by Parent of
the transactions contemplated hereby. This Agreement has been duly executed
and delivered by Parent, and, assuming the due authorization, execution and
delivery hereof by the Company and the Interest Holders, constitutes a valid
and legally binding agreement of Parent enforceable against it in accordance
with its terms, except that such enforcement may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (ii) general
equitable principles.
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(b) The execution and delivery of this Agreement by Parent do not
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination of, or accelerate the
performance required by, or result in a right of termination or acceleration
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Parent or any of its
subsidiaries under any of the terms, conditions or provisions of (i) the
respective charters or bylaws of Parent or any of its subsidiaries, (ii) any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any court or governmental authority applicable to
Parent or any of its subsidiaries or any of their respective properties or
assets or (iii) any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which Parent or any of its subsidiaries is now a
party or by which Parent or any of its subsidiaries or any of their respective
properties or assets may be bound or affected. The consummation by Parent of
the transactions contemplated hereby will not result in any violation,
conflict, breach, termination, acceleration or creation of liens under any of
the terms, conditions or provisions described in clauses (i) through (iii) of
the preceding sentence, subject (x) in the case of the terms, conditions or
provisions described in clause (ii) above, to obtaining (prior to the Effective
Time) the Parent Required Statutory Approvals and (y) in the case of the terms,
conditions or provisions described in clause (iii) above, to obtaining (prior
to the Effective Time) consents required from commercial lenders, lessors or
other third parties. Excluded from the foregoing sentences of this paragraph
(b), insofar as they apply to the terms, conditions or provisions described in
clauses (ii) and (iii) of the first sentence of this paragraph (b) (and whether
resulting from such execution and delivery or consummation), are such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens, security interests, charges or encumbrances that would not
have a Parent Material Adverse Effect.
(c) Except for any necessary required filings with applicable
state regulatory authorities (the "Parent Required Statutory Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by Parent or the
consummation by Parent of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not have a
Parent Material Adverse Effect.
SECTION 4.5 REPORTS AND FINANCIAL STATEMENTS. Since May 15,
1997, Parent has filed with the Securities and Exchange Commission (the "SEC")
all forms, statements, reports and documents (including all exhibits,
post-effective amendments and supplements thereto) required to be filed by it
under each of the Securities Act of 1933, as amended (the "Securities Act"),
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
respective rules and regulations thereunder, all of which, as amended if
applicable, complied when filed in all material respects with all applicable
requirements of the appropriate act and the rules and regulations thereunder.
Parent has previously delivered or made available to the Company copies
(including all exhibits, post-effective amendments and supplements thereto) of
its (a) Annual Report on Form 10-K for the fiscal year ended December 31, 1997,
as filed with the SEC, (b) its proxy statement relating to its 1998 annual
meeting of stockholders, (c) its Quarterly Report on Form 10-Q for the period
ended March 31, 1998, and (d) all other reports, including quarterly reports,
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and registration statements filed by Parent with the SEC since May 15, 1997
(other than registration statements filed on Form S-8) (the documents referred
to in clauses (a), (b), (c) and (d) filed prior to the date hereof are
collectively referred to as the "Parent SEC Reports"). As of their respective
dates, the Parent SEC Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The representation in the preceding
sentence shall not apply to any misstatement or omission in any Parent SEC
Report filed prior to the date of this Agreement which was superseded by a
subsequent Parent SEC Report filed prior to the date of this Agreement. The
audited consolidated financial statements of Parent included in the Parent's
Annual Report on Form 10-K for the year ended December 31, 1997 (collectively,
the "Parent Financial Statements") have been prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
(except as may be indicated therein or in the notes thereto) and fairly present
the financial position of Parent and its subsidiaries as of the dates thereof
and the results of their operations and changes in financial position for the
periods then ended.
SECTION 4.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as
disclosed in the Parent SEC Reports or as disclosed in Section 4.6 of the
Parent Disclosure Schedule, neither Parent nor any of its subsidiaries had at
March 31, 1998, or has incurred since that date and as of the date hereof, any
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
of any nature, except: (a) liabilities, obligations or contingencies (i) which
are accrued or reserved against in the Parent Financial Statements or reflected
in the notes thereto or (ii) which were incurred after March 31, 1998, and were
incurred in the ordinary course of business and consistent with past practices;
(b) liabilities, obligations or contingencies which (i) would not have a Parent
Material Adverse Effect, or (ii) have been discharged or paid in full prior to
the date hereof; and (c) liabilities and obligations which are of a nature not
required to be reflected in the consolidated financial statements of Parent and
its subsidiaries prepared in accordance with generally accepted accounting
principles consistently applied and which were incurred in the ordinary course
of business.
SECTION 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date
of the most recent Parent SEC Report that contains consolidated financial
statements of Parent, (i) there have been no events, changes, or occurrences
which have had, or are reasonably likely to have, a Parent Material Adverse
Effect and (ii) Parent and its subsidiaries have conducted their respective
businesses in the ordinary and usual course (excluding the incurrence of
expenses in connection with this Agreement and the transactions contemplated
hereby).
SECTION 4.8 LITIGATION. Except as referred to in the Parent SEC
Reports or as disclosed in Section 4.8 of the Parent Disclosure Schedule, there
are no claims, suits, actions or proceedings pending or, to the knowledge of
Parent, threatened against, relating to or affecting Parent or any of its
subsidiaries, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seek to restrain the
consummation of the Acquisition or which would reasonably be expected, either
alone or in the aggregate with all such claims, actions or proceedings, to have
a Parent Material Adverse Effect. Except as referred to in the Parent SEC
Reports, neither Parent nor any of its subsidiaries is subject to any judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency,
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instrumentality or authority, or any arbitrator which prohibits or restricts
the consummation of the transactions contemplated hereby or would have a Parent
Material Adverse Effect.
SECTION 4.9 NO VIOLATION OF LAW. Except as disclosed in the
Parent SEC Reports, neither Parent nor any of its subsidiaries is in violation
of, or has been given notice or been charged with any violation of, any law,
statute, order, rule, regulation, ordinance, or judgment (including, without
limitation, any applicable environmental law, ordinance or regulation) of any
governmental or regulatory body or authority, except for violations which could
not reasonably be expected to have a Parent Material Adverse Effect. Except as
disclosed in the Parent SEC Reports, as of the date of this Agreement, to the
knowledge of Parent, no investigation or review by any governmental or
regulatory body or authority is pending or threatened involving Parent or its
subsidiaries, nor has any governmental or regulatory body or authority
indicated an intention to conduct the same.
SECTION 4.10 COMPLIANCE WITH AGREEMENTS. Except as disclosed in
the Parent SEC Reports, Parent and each of its subsidiaries are not in breach
or violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by
a third party, could result in a default under (a) the respective charter,
bylaws or other similar organizational instruments of Parent or any of its
subsidiaries or (b) any contract, commitment, agreement, indenture, mortgage,
loan agreement, note, lease, bond, license, approval or other instrument to
which Parent or any of its subsidiaries is a party or by which any of them is
bound or to which any of their property is subject, other than, in the case of
clause (b) of this Section 4.10, breaches, violations and defaults which would
not have a Parent Material Adverse Effect.
SECTION 4.11 TAXES.
(a) Parent and its subsidiaries have (i) duly filed with the
appropriate governmental authorities all Tax Returns (as defined in Section
4.11(c)) required to be filed by them for all periods ending on or prior to
December 31, 1997, other than those Tax Returns the failure of which to file
would not have a Parent Material Adverse Effect, and such Tax Returns are true,
correct and complete in all material respects and (ii) duly paid in full or
made adequate provision in accordance with generally accepted accounting
principles for the payment of all Taxes (as defined in Section 4.11(b)) for all
past and current periods. All Tax Returns for periods ending on or before the
date of the most recent fiscal year end immediately preceding the Effective
Time or requests for extensions relating thereto will be timely filed. The
liabilities and reserves for Taxes reflected in the Parent balance sheet
included in the latest Parent SEC Report to cover all Taxes for all periods
ending at or prior to the date of such balance sheet have been determined in
accordance with GAAP and there is no material liability for Taxes for any
period beginning after such date other than Taxes arising in the ordinary
course of business. There are no material liens for Taxes upon any property or
assets of Parent or any subsidiary thereof, except for liens for Taxes not yet
due or Taxes contested in good faith and adequately reserved against in
accordance with GAAP. There are no unresolved issues of law or fact arising out
of a notice of deficiency, proposed deficiency or assessment from the Internal
Revenue Service (the "IRS") or any other governmental taxing authority with
respect to Taxes of the Parent or any of its subsidiaries which would
reasonably be expected to have a Parent Material Adverse Effect.
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Neither Parent nor its subsidiaries has waived any statute of limitations in
respect of a material amount of Taxes or agreed to any extension of time with
respect to a material Tax assessment or deficiency other than waivers and
extensions which are no longer in effect. Neither Parent nor any of its
subsidiaries is a party to any agreement providing for the allocation or
sharing of Taxes with any entity that is not, directly or indirectly, a
wholly-owned corporate subsidiary of Parent other than agreements the
consequences of which are fully and adequately reserved for in the Parent
Financial Statements. Neither Parent nor any of its corporate subsidiaries has,
with regard to any assets or property held, acquired or to be acquired by any
of them, filed a consent to the application of Section 341(f) of the Code.
(b) For purposes of this Agreement, the term "Taxes" shall mean
all taxes, including, without limitation, income, gross receipts, excise,
property, sales, withholding, social security, occupation, use, service,
license, payroll, franchise, transfer and recording taxes, fees and charges,
windfall profits, severance, customs, import, export, employment or similar
taxes, charges, fees, levies or other assessments imposed by the United States,
or any state, local or foreign government or subdivision or agency thereof,
whether computed on a separate, consolidated, unitary, combined or any other
basis, and such term shall include any interest, fines, penalties or additional
amounts and any interest in respect of any additions, fines or penalties
attributable or imposed or with respect to any such taxes, charges, fees,
levies or other assessments.
(c) For purposes of this Agreement, the term "Tax Return" shall
mean any return, report or other document required to be supplied to a taxing
authority in connection with Taxes.
SECTION 4.12 [INTENTIONALLY OMITTED].
SECTION 4.13 NON-COMPETITION AGREEMENTS. Neither Parent nor any
subsidiary of Parent is a party to any agreement which (i) purports to restrict
or prohibit in any material respect any of them from, directly or indirectly,
engaging in any business involving the acquisition, origination, sale or
servicing of equipment leases or any other business currently engaged in by
Parent or the Company or any corporations affiliated with either of them, and
(ii) would restrict or prohibit the Company or any subsidiary of the Company
(other than the Company and its subsidiaries that are currently so restricted
or prohibited) from engaging in any such business. None of Parent's officers,
directors or key employees is a party to any agreement which, by virtue of such
person's relationship with Parent, restricts in any material respect Parent or
any subsidiary of Parent from, directly or indirectly, engaging in any of the
businesses described above.
SECTION 4.14 TITLE TO ASSETS. Parent and each of its subsidiaries
has good and marketable title in fee simple to all its real property and good
title to all its leasehold interests and other properties as reflected in the
most recent balance sheet included in the Parent Financial Statements, except
for such properties and assets that have been disposed of in the ordinary
course of business since the date of such balance sheet, free and clear of all
mortgages, liens, pledges, charges or encumbrances of any nature whatsoever,
except (i) the lien for current taxes, payments of which are not yet
delinquent, (ii) such imperfections in title and easements and encumbrances, if
any, as are not substantial in character, amount or extent and do not
materially detract from the value or interfere with the present use of the
property subject thereto or affected
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thereby, or otherwise materially impair the Parent's business operations (in
the manner presently carried on by the Parent), (iii) as disclosed in the
Parent SEC Reports or (iv) such matters which could not reasonably be expected
to have a Parent Material Adverse Effect. All leases under which Parent leases
any real or personal property are in good standing, valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event which with notice or lapse of time or
both would become a default other than failures to be in good standing, valid
and effective and defaults under such leases which in the aggregate will not
have a Parent Material Adverse Effect.
SECTION 4.15 [INTENTIONALLY OMITTED].
SECTION 4.16 BROKERS AND FINDERS. Except for the fees and
expenses payable to Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc., which fees are
reflected in its agreement with Parent, Parent has not entered into any
contract, arrangement or understanding with any person or firm which may result
in the obligation of Parent to pay any finder's fees, brokerage or agent
commissions or other like payments in connection with the transactions
contemplated hereby. Except for the fees and expenses paid or payable to
Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc., there is no claim for payment by Parent
of any investment banking fees, finder's fees, brokerage or agent commissions
or other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby.
SECTION 4.17 OWNERSHIP OF SELLING MEMBERSHIP INTERESTS. Except as
may be acquired pursuant to the Agreement and Plan of Merger, neither Parent
nor any of its subsidiaries beneficially owns any Membership Interests as of
the date hereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
AND THE INTEREST HOLDERS
The Company and each of the Interest Holders, jointly and severally,
represent and warrant to Parent that, as of the date hereof and as of the
Closing Date:
SECTION 5.1 ORGANIZATION AND QUALIFICATION. The Company is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of California and has the requisite corporate power
and authority to own, lease and operate its assets and properties and to carry
on its business as it is now being conducted. The Company is duly qualified to
do business and is in good standing in each jurisdiction listed on Schedule 3.1
of the disclosure schedule of the Company dated as of the date hereof and
signed by an authorized officer of the Company (the "Company Disclosure
Schedule"), which jurisdictions represent every jurisdiction in which the
properties 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 so qualified and in good standing would not, when taken together with all
other such failures, have a material adverse effect on the business,
operations, properties, assets, condition (financial or other) or results of
operations of the Company and its subsidiaries, taken as a whole ("Company
Material
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Adverse Effect"). For purposes of this Agreement, Company Material Adverse
Effect shall not be deemed to include the impact of (a) actions and omissions
by the Company (or any of its subsidiaries) taken at the request of Parent or
Subsidiary in contemplation of the transactions contemplated hereby, and (b)
the Acquisition and compliance with the provisions of this Agreement on the
financial condition or results of operations of the Company. True, accurate
and complete copies of the Company's Articles of Organization and Operating
Agreement, in each case as in effect on the date hereof, including all
amendments thereto, have heretofore been delivered to Parent.
SECTION 5.2 CAPITALIZATION.
(a) The outstanding membership interests in the Company are as
disclosed in Section 5.2(a) of the Company Disclosure Schedule. The Company
has no outstanding bonds, debentures, notes or other obligations the holders of
which have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the holders of membership interests
of the Company on any matter.
(b) Except as disclosed in Section 5.2(b) of the Company
Disclosure Schedule or in Section 5.2(a), as of the date hereof there are no
outstanding subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement, obligating the Company or any subsidiary of the Company to
issue, transfer, deliver or sell, or cause to be issued, transferred, delivered
or sold, any membership interest in the Company or obligating the Company or
any subsidiary of the Company to grant, extend or enter into any such agreement
or commitment. There are no voting trusts, proxies or other agreements or
understandings to which the Company or any subsidiary of the Company is a party
or is bound with respect to the voting of any membership interest in the
Company.
(c) There are no agreements which require the Company to register
any Selling Membership Interests under the Securities Act upon or after the
Closing.
SECTION 5.3 SUBSIDIARIES. The Company has no direct or indirect
subsidiaries.
SECTION 5.4 AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) The Company has all requisite power and authority to enter
into this Agreement and any Transaction Documents (hereinafter defined) to
which it is a party and to consummate the transactions contemplated hereby and
thereby. This Agreement has been approved by the Managers of the Company and
each of the holders of outstanding membership interests of the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize the execution and delivery of this Agreement or the consummation by
the Company of the transactions contemplated hereby. This Agreement and the
Transaction Documents to which the Company is a party have been, or upon
execution and delivery will be, duly executed and delivered by the Company,
and, constitute, or upon execution and delivery will constitute, valid and
legally binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except that such enforcement may be
subject to (a) bankruptcy,
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insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally and (b) general
equitable principles. As used in this Agreement with respect to any party
hereto, "Transaction Documents" means any of the following documents to which
such person or entity is a party: (a) the Escrow Agreement; (b) the
Non-Competition and Confidentiality Agreements of even date herewith between
Parent and each Interest Holder (the "Non-Competition Agreements"); and (c) all
other documents to be executed by any of the Company, any of the Interest
Holders or Parent in connection with the consummation of the transactions
contemplated by this Agreement.
(b) The execution and delivery by the Company of this Agreement
and the Transaction Documents to which the Company is a party do not violate,
conflict with or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under or result in the termination of, or accelerate the
performance required by or result in a right of termination of acceleration
under (whether as a result of a change of control of the Company or otherwise
as a result of this Agreement), or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company or any of its subsidiaries, or result in the loss of any benefit or
give any person the right to require any security to be repurchased under, any
of the terms, conditions or provisions of (i) the respective charters or bylaws
of the Company or any of its subsidiaries, (ii) any statute, law, ordinance,
rule, regulation, judgment, decree, order, injunction, writ, permit or license
of any court or governmental authority applicable to the Company or any of its
subsidiaries or any of their respective properties or assets, or (iii) any
note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which the Company or any of its subsidiaries is now a party or by which
the Company or any of its subsidiaries or any of their respective properties or
assets may be bound or affected. The consummation by the Company of the
transactions contemplated by this Agreement and the Transaction Documents to
which the Company is a party will not result in any violation, conflict,
breach, termination, acceleration or creation of liens under any of the terms,
conditions or provisions described in clauses (i) through (iii) of the
preceding sentence, subject (x) in the case of the terms, conditions or
provisions described in clause (ii) above, to obtaining (prior to the Effective
Time) the Company Required Statutory Approvals and (y) in the case of the
terms, conditions or provisions described in clause (iii) above, to obtaining
(prior to the Effective Time) consents required from commercial lenders,
lessors or other third parties as specified in Section 5.4(b) of the Company
Disclosure Schedule. Excluded from the foregoing sentences of this paragraph
(b), insofar as they apply to the terms, conditions or provisions described in
clauses (ii) and (iii) of the first sentence of this paragraph (b) (and whether
resulting from such execution and delivery or consummation), are such
violations, conflicts, breaches, defaults, terminations, accelerations or
creations of liens, security interests, charges or encumbrances that would not,
in the aggregate, have a Company Material Adverse Effect.
(c) Except for the required filings with or approvals from state
regulatory authorities listed in Section 5.4(c) of the Company Disclosure
Schedule collectively the "Company Required Statutory Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval or permit of, any governmental or regulatory body or
authority ("Governmental Entity") is necessary for the execution and delivery
of this Agreement or any
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Transaction Document by the Company or the consummation by the Company of the
transactions contemplated hereby or thereby, other than such declarations,
filings, registrations, notices, authorizations, consents or approvals which,
if not made or obtained, as the case may be, would not, in the aggregate,
prevent or delay consummation of any of the transactions contemplated hereby or
otherwise prevent the Company from performing its obligations under this
Agreement or have a Company Material Adverse Effect.
SECTION 5.5 FINANCIAL STATEMENTS. The Company has delivered to
Parent copies of the unaudited balance sheet of the Company as of May 31, 1998,
together with the unaudited statement of income of the Company for the period
then ended (such financial statements collectively being referred to as the
"Company Financial Statements"). The Company Financial Statements fairly
present the financial position of the Company at the dates thereof and the
results of operations and changes in financial position of the Company for the
respective periods indicated.
SECTION 5.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as
disclosed in Section 5.6 of the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries had at May 31, 1997, or has incurred since
that date and as of the date hereof, any liabilities or obligations (whether
absolute, accrued, fixed, contingent or otherwise) of any nature, except (a)
liabilities, obligations or contingencies (i) which are accrued or reserved
against in the Company Financial Statements or reflected in the notes thereto
or (ii) which were incurred after May 31, 1997, and were incurred in the
ordinary course of business and consistent with past practices, and (b)
liabilities and obligations which are of a nature not required to be reflected
in the consolidated financial statements of the Company and its subsidiaries
prepared in accordance with generally accepted accounting principles
consistently applied and which were incurred in the ordinary course of
business.
SECTION 5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December
31, 1997, the Company and its subsidiaries have conducted their respective
businesses in the ordinary and usual course (excluding the incurrence of
expenses in connection with this Agreement and the transactions contemplated
hereby). Except as disclosed in Section 5.7 of the Company Disclosure
Schedule, since December 31, 1997, there has not been (i) any event, change,
circumstance, fact or occurrence (whether or not covered by insurance) which
has had, or is reasonably likely to have, a Company Material Adverse Effect,
(ii) any material change by the Company in its accounting methods, principles
or practices, (iii) any entry by the Company into any agreement, commitment or
transaction material to the Company, except in the ordinary course of business
and consistent with past practice or except in connection with the negotiation
and execution and delivery of this Agreement and the Transaction Documents,
(iv) any declaration, setting aside or payment of any dividend or distribution
in respect of any equity security of the Company or any redemption, purchase or
other acquisition of any of the Company's securities, (v) other than pursuant
to the Company Plans (as hereinafter defined) or as required by law, any
increase in, amendment to, or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option, stock
purchase or other employee benefit plan, (vi) granted any general increase in
compensation, bonus or other benefits payable to the employees of the Company,
except for increases occurring in the ordinary course of business in accordance
with its customary practice, (vii) paid any bonus to the employees of the
Company
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except in the ordinary course and consistent with past practice, (viii) any
incurrence of indebtedness for borrowed money or assumption or guarantee of
indebtedness for borrowed money by the Company, or the grant of any lien on the
material assets of the Company to secure indebtedness for borrowed money, (ix)
any sale or transfer of any material assets of the Company other than in the
ordinary course of business and consistent with past practice, or (x) any loan,
advance or capital contribution to or investment in any person by the Company.
SECTION 5.8 LITIGATION. Except as disclosed in Section 5.8 of
the Company Disclosure Schedule, there are no claims, suits, inquiries,
actions, judicial or administrative proceedings, grievances or arbitrations
pending or, to the knowledge of the Company or the Interest Holders, threatened
against, relating to or affecting the Company or any of its subsidiaries or
relating to the transactions contemplated by this Agreement and the Transaction
Documents, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator. Except as disclosed in
Section 5.8 of the Company Disclosure Schedule, neither the Company nor any of
its subsidiaries nor any of their respective properties or assets is subject to
any judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or authority or arbitrator.
SECTION 5.9 [INTENTIONALLY OMITTED].
SECTION 5.10 PERMITS; COMPLIANCE WITH LAW. The Company and its
subsidiaries have all permits, licenses, franchises, grants, variances,
exemptions, easements, orders, authorizations, consents, certificates,
identifications, registration numbers and approvals necessary to own, lease and
operate their respective properties and to conduct their businesses as
presently conducted (collectively, the "Company Permits"), except for permits,
licenses, franchises, grants, variances, exemptions, easements, orders,
authorizations, consents, certificates, identifications, registration numbers
and approvals the absence of which would not have a Company Material Adverse
Effect. Section 5.10 of the Company Disclosure Schedule sets forth a list of
all Company Permits and the jurisdiction issuing the same, all of which Company
Permits are in good standing and not subject to meritorious challenge. The
Company and its subsidiaries are not in violation of the terms of any Company
Permit, except for delays in filing reports or violations which would not have
a Company Material Adverse Effect. Section 5.10 of the Company Disclosure
Schedule also sets forth, as of the date of this Agreement, all actions,
proceedings or investigations, pending or, to the knowledge of the Company and
the Interest Holders, threatened against the Company that could reasonably be
expected to result in the loss, revocation, suspension or cancellation of a
Company Permit, except for any suspension, loss or revocation that could not
reasonably be expected to have a Company Material Adverse Effect. Except as
disclosed in Section 5.10 of the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries is in violation of, or has been given
notice or been charged with any violation of, any Company Permit or any law or
statute, or any order, rule, regulation, ordinance, decree or judgment of any
governmental or regulatory body or authority, except for violations which, in
the aggregate, could not reasonably be expected to have a Company Material
Adverse Effect. Except as disclosed in Section 5.10 of the Company Disclosure
Schedule, as of the date of this Agreement, no investigation or review by any
governmental or regulatory body or authority is pending or, to the knowledge of
the Company or the Interest Holders, threatened
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involving the Company or its subsidiaries, nor has any governmental or
regulatory body or authority indicated an intention to conduct the same.
SECTION 5.11 CONTRACTS AND AGREEMENTS. The contracts and
agreements listed in Section 5.11 of the Company Disclosure Schedule constitute
all of the written and oral contracts, commitments, leases and other agreements
(including, without limitation, promissory notes, loan agreements and other
evidences of indebtedness) to which the Company is a party or by which any of
its properties are bound with respect to which the obligations of or the
benefits to be received by the Company could reasonably be expected to have a
value in excess of $25,000 in any consecutive 12-month period and all real
property leases or sub-leases to which the Company is a party (each a "Company
Material Contract"). Except as disclosed in Section 5.11 of the Company
Disclosure Schedule, the Company and each of its subsidiaries are not in breach
or violation of or in default in the performance or observance of any term or
provision of, and no event has occurred which, with lapse of time or action by
a third party, could result in a default under, (a) the respective charter,
bylaws or similar organizational instruments of the Company or any of its
subsidiaries, (b) any Company Material Contract or (c) any contract,
commitment, agreement, indenture, mortgage, loan agreement, note, lease, bond,
license, approval or other instrument to which the Company or any of its
subsidiaries is a party or by which any of them is bound or to which any of
their property is subject, the breach, violation or default of or under which
would have a Company Material Adverse Effect, and the Company has not waived
any right under or received any notice of default or termination under or
assigned or otherwise transferred any rights under any such contract,
commitment, agreement, indenture, mortgage, loan agreement, note, lease, bond,
license, approval or other instrument.
SECTION 5.12 TAXES.
(a) The Company and its subsidiaries have (i) duly filed with the
appropriate governmental authorities all Tax Returns required to be filed by
them, and all such Tax Returns are true, correct and complete in all material
respects, and (ii) duly and timely paid in full or made adequate provision in
accordance with generally accepted accounting principles for the payment of all
Taxes for all past and current periods. All Tax Returns for periods ending on
or before the date of the most recent fiscal year end immediately preceding the
Effective Time or requests for extensions relating thereto will be timely filed
by the Company. With respect to any period for which Taxes are not yet due
with respect to the Company and its subsidiaries, the Company has made due and
sufficient current accruals for such Taxes in accordance with GAAP in the
Company Financial Statements and there is no material liability for Taxes for
any period beginning after December 31, 1997 other than Taxes arising in the
ordinary course of business. The Company has withheld and paid all material
Taxes required by all applicable laws to be withheld or paid in connection with
any amounts paid or owing to any employee, creditor, independent contractor,
stockholder or other third party.
(b) There are no material liens for Taxes upon any property or
asset of the Company or any subsidiary thereof, except for liens for Taxes not
yet due or Taxes contested in good faith and adequately reserved against in
accordance with GAAP. There are no unresolved issues of law or fact arising out
of a notice of deficiency, proposed deficiency or assessment from the IRS or
any other governmental taxing authority with respect to Taxes of the Company or
any of its
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subsidiaries and all material deficiencies of Taxes have been paid, fully
settled or adequately provided for in the Company Financial Statements.
(c) There are no outstanding agreements, waivers or arrangements
extending the statutory period of limitation applicable to any claim for, or
the period for the collection or assessment of, Taxes due from or with respect
to the Company or any of its subsidiaries, for any taxable period. No audit or
other proceeding by any court, governmental or regulatory authority, or similar
person is pending in regard to any Taxes due from or with respect to the
Company or any of its subsidiaries, other than normal and routine audits by
nonfederal governmental authorities. The Company has not received written
notice that any assessment of material Taxes is proposed against the Company or
any of its subsidiaries or any of its assets.
(d) No consent to the application of Section 341(f)(2) of the Code
(or any predecessor provision) has been made or filed by or with respect to the
Company or any of its assets. The Company has not agreed to make any material
adjustment pursuant to Section 481(a) of the Code (or any predecessor
provision) by reason of any change in any accounting method, and there is no
application pending with any taxing authority requesting permission for any
changes in any accounting method of the Company which, in each respective case,
will or would reasonably cause the Company to include any material adjustment
in taxable income for any taxable period (or portion thereof) ending after the
Closing Date.
(e) The Company is not a party to, is not bound by and has no
obligation under, any Tax sharing agreement, Tax allocation agreement or
similar contract, agreement or arrangement.
(f) The Company has not executed or entered into with the IRS or
any taxing authority, a closing agreement pursuant to Section 7121 of the Code
or any similar provision of state, local, foreign or other income tax law,
which will require any increase in taxable income or alternative minimum
taxable income, or any reduction in tax credits for, the Company for any
taxable period ending after the Closing Date.
(g) There are no requests from any taxing authority for
information relating to Taxes of the Company and no material reassessments (for
property or ad valorem tax purposes) of any assets or any property owned or
leased by the Company have been proposed in written form.
SECTION 5.13 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Section 5.13 of the Company Disclosure Schedule contains a
list of the names and annual rates of compensation of the employees of the
Company whose annual rates of compensation during the fiscal year ending
December 31, 1997 (including base salary, bonuses, commissions and incentive
pay), exceeded $25,000 and provides a description of each of the following
which is sponsored, maintained or contributed to by the Company for the benefit
of the employees of the Company, former employees of the Company, directors of
the Company, former directors of the Company, or any agents, consultants or
similar representatives providing services to or for the Company, or has been
so sponsored, maintained or contributed to within six years prior to the
Closing Date for the benefit of such individuals:
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(i) each "employee benefit plan," as such term is defined
in Section 3(3) of ERISA (including, but not limited to, employee
benefit plans, such as foreign plans, which are not subject to the
provisions of ERISA (each, a "Company Plan");
(ii) each personnel policy, stock option plan, stock
purchase plan, stock appreciation right, phantom stock plan,
collective bargaining agreement, bonus plan or arrangement, incentive
award plan or arrangement, vacation policy, severance pay plan, policy
or agreement, deferred compensation agreement or arrangement,
executive compensation or supplemental income arrangement, consulting
agreement, employment agreement and each other employee benefit plan,
agreement, arrangement, program, practice or understanding which is
not described in Section 5.13(a)(i) (individually, a "Benefit Program
or Agreement" and, collectively, the "Benefit Programs and
Agreements").
(b) True, correct and complete copies of each of the Company
Plans, related trusts, insurance or group annuity contracts and each other
funding or financing arrangement relating to any Company Plan, including all
amendments thereto, have been furnished to Parent. There has also been
furnished to Parent, with respect to each Company Plan required to file such
report and description, the most recent report on Form 5500 and the summary
plan description. True, correct and complete copies or descriptions of each
Benefit Program or Agreement have also been furnished to Parent. A schedule
of employer expenses with respect to each Company Plan and Benefit Program or
Agreement for the current plan year and past plan year has been furnished to
Parent along with any administration agreement associated with any Company
Plan. Parent has also been furnished the recent actuarial report or valuation
for each Company Plan subject to Title IV of ERISA. Additionally, the most
recent determination letter from the IRS for each of the Company Plans intended
to be qualified under Section 401 of the Code, and any outstanding
determination letter application for such plans have been furnished.
(c) (i) The Company has substantially performed all
obligations, whether arising by operation of law or by contract, required to be
performed by it in connection with the Company Plans and the Benefit Programs
or Agreements, and to the knowledge of the Company and the Interest Holders
there have been no material defaults or violations by any other party to the
Company Plans or Benefit Programs and Agreements;
(ii) All reports and disclosures relating to the Company
Plans required to be filed by the Company with or furnished to governmental
agencies, Company Plan participants or Company Plan beneficiaries have been
filed or furnished in accordance with applicable law in a timely manner, and
each Company Plan and each Benefit Program or Agreement has been administered
in substantial compliance with its governing documents;
(iii) Each of the Company Plans intended to be qualified
under Section 401 of the Code satisfies the requirements of such section and
has received a favorable determination letter from the IRS regarding such
qualified status and has not, since receipt of the most recent favorable
determination letter, been amended or operated in a way which would adversely
affect such qualified status;
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(iv) Each Company Plan and Benefit Program or Agreement
has been administered in substantial compliance with its terms, the applicable
provisions of ERISA, the Code and all other applicable laws and the terms of
all applicable collective bargaining agreements;
(v) There are no actions, suits or claims pending (other
than routine claims for benefits) or, to the knowledge of the Company or the
Interest Holders, threatened against, or with respect to, any of the Company
Plans or Benefit Programs and Agreements or their assets;
(vi) All contributions required to be made to the Company
Plans pursuant to their terms and provisions have been made timely;
(vii) As to any Company Plan subject to Title IV of ERISA,
there has been no event or condition which presents the risk of plan
termination, no accumulated funding deficiency, whether or not waived, within
the meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred, no reportable event within the meaning of Section 4043 of ERISA (for
which the disclosure requirements of Regulation Section 4043.1 et seq.,
promulgated by the Pension Benefit Guaranty Corporation ("PBGC") have not been
waived) has occurred, no notice of intent to terminate the Company Plan has
been given under Section 4041 of ERISA, no proceeding has been instituted under
Section 4042 of ERISA to terminate the Company Plan, no liability to the PBGC
has been incurred, and the assets of the Company Plan equal or exceed the
actuarial present value of the benefit liabilities, within the meaning of
Section 4041 of ERISA, under the Company Plan, based upon reasonable actuarial
assumptions and the asset valuation principles established by the PBGC;
(viii) As to any Company Plan intended to be qualified under
Section 401 of the Code, there has been no termination or partial termination
of the Company Plan within the meaning of Section 411(d)(3) of the Code;
(ix) No act, omission or transaction has occurred which
would result in imposition on the Company of (1) breach of fiduciary duty
liability damages under Section 409 of ERISA, (2) a civil penalty assessed
pursuant to subsections (c), (i) or (l) of Section 502 of ERISA or (3) a Tax
imposed pursuant to Chapter 43 of Subtitle D of the Code;
(x) There is no matter pending (other than routine
qualification determination filings) with respect to any of the Company Plans
before the IRS, the Department of Labor or the PBGC;
(xi) Each trust funding a Company Plan, which trust is
intended to be exempt from federal income taxation pursuant to Section
501(c)(9) of the Code, satisfies the requirements of such section and has
received a favorable determination letter from the IRS regarding such exempt
status and has not, since receipt of the most recent favorable determination
letter, been amended or operated in a way that would adversely affect such
exempt status;
(xii) With respect to any employee benefit plan, within the
meaning of Section 3(3) of ERISA, which is not listed in Section 5.13 of the
Company Disclosure Schedule
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but which is sponsored, maintained or contributed to, or has been sponsored,
maintained or contributed to within six years prior to the Effective Time, by
any corporation, trade, business or entity under common control with the
Company, within the meaning of Section 414(b), (c) or (m) of the Code or
Section 4001 of ERISA ("Commonly Controlled Entity"), (1) no withdrawal
liability, within the meaning of Section 4201 of ERISA, has been incurred,
which withdrawal liability has not been satisfied, (2) no liability to the PBGC
has been incurred by any Commonly Controlled Entity, which liability has not
been satisfied, (3) no accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred, and (4) all contributions (including installments) to such plan
required by Section 302 of ERISA and Section 412 of the Code have been timely
made; and
(xiii) Except as otherwise set forth in Section 5.13 of the
Company Disclosure Schedule, the execution and delivery of this Agreement and
the Transactions Documents and the consummation of the transactions
contemplated hereby and thereby will not (1) require the Company to make a
larger contribution to, or pay greater benefits under, any Company Plan or
Benefit Program or Agreement than it otherwise would or (2) create or give rise
to any additional vested rights or service credits under any Company Plan or
Benefit Program or Agreement.
(d) Except as otherwise set forth in Section 5.13 of the Company
Disclosure Schedule, the Company is not a party to any agreement, nor has it
established any policy or practice, requiring it to make a payment or provide
any other form of compensation or benefit to any person performing services for
the Company upon termination of such services which would not be payable or
provided in the absence of the consummation of the transactions contemplated by
this Agreement.
(e) There are no agreements which will or may provide payments to
any officer, employee, stockholder, or highly compensated individual which will
be "parachute payments" under Section 280G of the Code that are nondeductible
to the Company or subject to tax under Section 4999 of the Code for which the
Company or any ERISA Affiliate would have withholding liability.
(f) Except as otherwise set forth in Section 5.13 of the Company
Disclosure Schedule, the Company is not a party to or bound by any employment
contract or other employee benefit arrangements with "change of control,"
severance or similar provisions.
(g) Each Company Plan which is an "employee welfare benefit plan",
as such term is defined in Section 3(1) of ERISA, may be unilaterally amended
or terminated in its entirety without liability except as to benefits accrued
thereunder prior to such amendment or termination.
(h) No Company Plan or Benefit Program or Agreement provides
retiree medical or retiree life insurance benefits to any person and the
Company is not contractually or otherwise obligated (whether or not in writing)
to provide any person with life insurance or medical benefits upon retirement
or termination of employment, other than as required by the provisions of
Section 601 through 608 of ERISA and Section 4980B of the Code.
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(i) As to each Company Plan described in Section 5.13 of the
Company Disclosure Schedule, which is a multi-employer plan within the meaning
of Section 3(37) of ERISA, Section 5.13 of the Company Disclosure Schedule
accurately describes the dollar amount of withdrawal liability which would be
owed by the Company to such Company Plan if the Company ceased contributing to
such Company Plan immediately after consummation of the transactions
contemplated by this Agreement.
(j) Except as set forth in Section 5.13 of the Company Disclosure
Schedule, no Company Plan or Benefit Program or Agreement provides that
payments pursuant to such Company Plan or Benefit Program or Agreement may be
made in securities of the Company or a Commonly Controlled Entity, nor does any
trust maintained pursuant to any Company Plan or Benefit Program or Agreement
hold any securities of the Company or a Commonly Controlled Entity.
SECTION 5.14 LABOR CONTROVERSIES. The Company is not a party to
any collective bargaining agreement. The Company has not agreed to recognize
any union or other collective bargaining representative, nor has any union or
other collective bargaining representative been certified as the exclusive
bargaining representative of any of its employees. There is no question
concerning representation as to any collective bargaining representative
concerning employees of the Company, and no labor union or representative
thereof claims to or is seeking to represent employees of the Company. No
union organizational campaign or representation petition is currently pending
with respect to any of the employees of the Company. There is no labor strike
or labor dispute, slowdown, work stoppage or lockout pending or, to the
knowledge of the Company and the Interest Holders, threatened against or
affecting the Company, and the Company has not experienced any labor strike,
slowdown, work stoppage or lockout since January 1, 1995. The Company (i) is,
and has always been since January 1, 1995, in substantial compliance with all
applicable laws regarding labor and employment practices, including, without
limitation, applicable laws relating to terms and conditions of employment,
equal employment opportunity, employee compensation, employee benefits,
affirmative action, wages and hours, plant closing and mass layoff,
occupational safety and health, immigration, workers' compensation, disability,
unemployment compensation, whistle blower laws or other employment or labor
relations laws, except where the failure to be in substantial compliance would
not have a Company Material Adverse Effect, (ii) is not engaged, nor has it
since January 1, 1995 engaged, in any unfair labor practices, and has no, and
has not had since January 1, 1995 any, unfair labor practice charges or
complaints before the National Labor Relations Board pending or, to the
knowledge of the Company and the Interest Holders, threatened against it, (iii)
has no, and has not had since January 1, 1995 any, grievances, arbitrations, or
other proceedings arising or asserted to arise under any collective bargaining
agreement pending or, to the knowledge of the Company and the Interest Holders
threatened, against it and (iv) has no, and has not had since January 1, 1995
any, charges, complaints, or proceedings before the Equal Employment
Opportunity Commission, Department of Labor or any other Governmental Entity
responsible for regulating labor or employment practices, pending, or, to the
knowledge of the Company and the Interest Holders, threatened against it.
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SECTION 5.15 ENVIRONMENTAL MATTERS.
(a) The Company does not hold, and neither the Company nor any of
its subsidiaries has ever held, any ownership interest in any real property.
The Company and its subsidiaries have conducted their respective businesses and
operations in compliance with all applicable Environmental Laws (defined in
Section 5.15(b)), including, without limitation, having all permits, licenses
and other approvals and authorizations necessary for the operation of their
respective businesses as presently conducted. None of the properties leased or
operated by the Company or any of its subsidiaries contain any Hazardous
Substance as a result of any activity of the Company or any of its subsidiaries
in amounts exceeding the levels permitted by applicable Environmental Laws.
Since January 1, 1995, neither the Company nor any of its subsidiaries has
received any notices, demand letters or requests for information from any
federal, state, local or foreign governmental entity indicating that the
Company or any of its subsidiaries may be in violation of, or liable under, any
Environmental Law in connection with the ownership or operation of their
businesses. There are no civil, criminal or administrative actions, suits,
demands, claims, hearings, investigations or proceedings pending or threatened,
against the Company or any of its subsidiaries relating to any violation, or
alleged violation, of any Environmental Law. No Hazardous Substance has been
disposed of, released or transported in violation of any applicable
Environmental Law from any properties leased or operated by the Company or any
of its subsidiaries as a result of any activity of the Company or any of its
subsidiaries during the time such properties were leased or operated by the
Company or any of its subsidiaries. Neither the Company, its subsidiaries nor
any of their respective properties are subject to any material liabilities or
expenditures (fixed or contingent) relating to any suit, settlement, court
order, administrative order, regulatory requirement, judgment or claim asserted
or arising under any Environmental Law.
(b) As used herein, "Environmental Law" means any federal, state,
local or foreign law, statute, ordinance, rule, regulation, code, license,
permit, authorization, approval, consent, legal doctrine, order, judgment,
decree, injunction, requirement or agreement with any governmental entity
relating to (x) the protection, preservation or restoration of the environment
(including, without limitation, air, water vapor, surface water, groundwater,
drinking water supply, surface land, subsurface land, plant and animal life or
any other natural resource) or to human health or safety or (y) the exposure
to, or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Hazardous
Substances, in each case as amended and as in effect on the Closing Date. The
term "Environmental Law" includes, without limitation, (i) the Federal
Comprehensive Environmental Response Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act, the Federal Water Pollution
Control Act of 1972, the Federal Clean Air Act, the Federal Clean Water Act,
the Federal Resource Conservation and Recovery Act of 1976 (including the
Hazardous and Solid Waste Amendments thereto), the Federal Solid Waste Disposal
Act and the Federal Toxic Substances Control Act, the Federal Insecticide,
Fungicide and Rodenticide Act, and the Federal Occupational Safety and Health
Act of 1970, each as amended and as in effect during the term of this
Agreement, and (ii) any common law or equitable doctrine (including, without
limitation, injunctive relief and tort doctrines such as negligence, nuisance,
trespass and strict liability) that may impose liability or obligations for
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injuries or damages due to, or threatened as a result of, the presence of,
effects of or exposure to any Hazardous Substance.
(c) As used herein, "Hazardous Substance" means any substance
presently or hereafter listed, defined, designated or classified as hazardous,
toxic, radioactive, or dangerous, or otherwise regulated, under any
Environmental Law. Hazardous Substance includes any substance to which exposure
is regulated by any government authority or any Environmental Law including,
without limitation, any toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste, industrial
substance or petroleum or any derivative or by-product thereof, radon,
radioactive material, asbestos, or asbestos containing material, urea
formaldehyde foam insulation, lead or polychlorinated biphenyls.
SECTION 5.16 NON-COMPETITION AGREEMENTS. Neither the Company nor
any subsidiary of the Company is a party to any agreement which (i) purports to
restrict or prohibit in any material respect any of them or any corporation
affiliated with any of them from, directly or indirectly, engaging in any
business involving the acquisition, origination, sale or servicing of equipment
leases or any other material business currently engaged in by Parent or the
Company or any corporations affiliated with either of them and (ii) would
restrict or prohibit Parent or any subsidiary of the Parent (other than the
Company and its subsidiaries that are currently so restricted or prohibited)
from engaging in such business. None of the Company's officers, directors or
key employees is a party to any agreement which, by virtue of such person's
relationship with the Company, restricts in any material respect the Company or
any subsidiary or affiliate of the Company from, directly or indirectly,
engaging in any of the businesses described above.
SECTION 5.17 TITLE TO ASSETS. The Company and each of its
subsidiaries has good and marketable title in fee simple to all its real
property and good title to all its leasehold interests and other properties and
assets, whether tangible or intangible, real, personal or mixed, as reflected
in the most recent balance sheet included in the Company Financial Statements,
except for properties and assets that have been disposed of in the ordinary
course of business since the date of such balance sheet, free and clear of all
mortgages, liens, pledges, charges or encumbrances of any nature whatsoever,
except (i) the lien for current taxes, payments of which are not yet
delinquent, (ii) such imperfections in title and easements and encumbrances, if
any, as are not substantial in character, amount or extent and do not
materially detract from the value, or interfere with the present use of the
property subject thereto or affected thereby, or otherwise materially impair
the Company's business operations (in the manner presently carried on by the
Company) or (iii) liens disclosed in the notes to Company Financial Statements.
All leases under which the Company leases any real or personal property are in
good standing, valid and effective in accordance with their respective terms,
and there is not, under any of such leases, any existing default or event which
with notice or lapse of time or both would become a default other than failures
to be in good standing, valid and effective and defaults under such leases
which will not have a Company Material Adverse Effect.
SECTION 5.18 [INTENTIONALLY OMITTED].
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SECTION 5.19 CERTAIN BUSINESS PRACTICES. None of the Company, or,
to the knowledge of the Company and the Interest Holders, any directors,
officers, agents or employees of the Company (in their capacities as such) have
(a) used any funds for unlawful contributions, gifts, entertainment or other
unlawful purposes relating to political activity, (b) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or (c) made any other
unlawful payment.
SECTION 5.20 INTELLECTUAL PROPERTY RIGHTS. Section 5.20 of the
Company Disclosure Schedule sets forth a true and complete list and description
of all registered patents, trademarks, servicemarks, tradenames, copyrights and
applications therefor owned by or registered in the name of the Company, or in
which the Company has any right, license or interest (the "Company Intellectual
Property Rights"). Except as set forth in Section 5.20 of the Company
Disclosure Schedule, the Company is not a party to any license agreement,
whether written or oral, either as licensor or licensee, with respect to any
Company Intellectual Property Rights. The Company has good and marketable
title to or the right to use all Company Intellectual Property Rights and all
inventions, processes, designs, formulae, trade secrets and know-how necessary
for the operation of the business of the Company without the payment of any
royalty or similar payment. The Company is not infringing any patent,
trademark, servicemark, tradename or copyright of others, and neither the
Company nor any Interest Holder is aware of any infringement by others of any
such rights owned by the Company.
SECTION 5.21 INSIDER INTERESTS. Except as set forth in Schedule
5.21, no officer or director of the Company or holder of more than five percent
of Selling Membership Interests outstanding on a fully-diluted basis has any
interest in any material property, real or personal, tangible or intangible,
including without limitation, any computer software or Company Intellectual
Property Rights, used in or pertaining to the business of the Company, except
for the ordinary rights of a stockholder or employee stock optionholder.
SECTION 5.22 BROKERS AND FINDERS. The Company has not entered
into any contract, arrangement or understanding with any person or firm which
may result in the obligation of the Company to pay any finder's fees, brokerage
or agent commissions or other like payments in connection with the transactions
contemplated hereby. There is no claim for payment by the Company of any
investment banking fees, finder's fees, brokerage or agent commissions or other
like payments in connection with the negotiations leading to this Agreement or
the consummation of the transactions contemplated hereby.
SECTION 5.23 BUSINESS RELATIONS. Except as set forth on Schedule
5.23, neither the Company nor any Interest Holder knows or has any reason to
believe that any customer or supplier of the Company will cease or otherwise
refuse to do business with the Company after the Effective Time in the same
manner as such business was previously conducted with the Company. The Company
has not received any notice of any disruption in the availability of the
materials, services or products used by the Company in the conduct of its
business, nor is the Company aware of any facts which could lead it to believe
that the operations of the Company will be subject to any such material
disruption.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE INTEREST HOLDERS
Each Interest Holder hereby represents and warrants to Parent, as of
the date hereof and as of the Closing Date, as follows:
SECTION 6.1 OWNERS OF SELLING MEMBERSHIP INTERESTS. As of the
date hereof, each such Interest Holder is the holder of record and beneficially
owns the Selling Membership Interests set forth opposite his, her or its name
on Exhibit A.
SECTION 6.2 AUTHORITY.
(a) If such Interest Holder is an entity (i.e., not a natural
person), such Interest Holder has been duly created and is validly existing
under the laws of the jurisdiction of its creation; such Interest Holder has
all requisite power and authority to execute and deliver this Agreement and the
Transaction Documents to which it is a party and to perform its obligations
hereunder and thereunder; and the execution, delivery and performance by such
Interest Holder of this Agreement and Transaction Documents to which it is a
party and the consummation by such Interest Holder of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of such Interest Holder.
(b) Such Interest Holder has full legal capacity to execute and
deliver this Agreement and the Transaction Documents to which he, she or it is
a party and to perform the obligations of such Interest Holder hereunder and
thereunder. This Agreement has been duly and validly executed and delivered by
such Interest Holder and constitutes a valid and binding obligation of such
Interest Holder, enforceable against him, her or it in accordance with its
terms, subject as to enforceability to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity). The Transaction Documents to which such Interest Holder is a party
have been duly and validly executed and delivered by such Interest Holder and
constitute valid and binding obligations of such Interest Holder, enforceable
against him, her or it in accordance with its terms, subject as to
enforceability, to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). Each consent,
authorization, order or approval of, or filing or registration with, any
Governmental Entity required by applicable law on or before the Closing Date
for or in connection with the execution and delivery by such Interest Holder of
this Agreement or any Transaction Documents, or the performance by such
Interest Holder of his, her or its obligations hereunder or under any
Transaction Documents, will have been obtained or made on or before the Closing
Date, except where the failure to obtain any such consent, authorization,
order, approval, filing or registration would not affect such Interest Holder's
ability to perform his, her or its obligations under this Agreement or under
any Transaction Documents in any material respect.
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SECTION 6.3 NO CONFLICTS. The execution, delivery and
performance by such Interest Holder of this Agreement and the Transaction
Documents to which it is a party does not (a) violate or breach any provision
of any law or statute applicable to such Interest Holder (and, if such Interest
Holder is a legal entity, any provision of its organizational or constituent
documents), or (b) violate, breach, cause a default under or result in the
creation of a lien pursuant to, any agreement or instrument to which such
Interest Holder is a party or to which it or any of its properties may be
subject.
SECTION 6.4 INVESTOR STATUS.
(a) Each Interest Holder alone, or with his purchaser
representative, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Inc., has such knowledge and experience in
financial and business matters that he is capable of evaluating the merits and
risks of accepting Parent Common Stock under the terms and conditions of this
Agreement. Each Interest Holder represents and acknowledges that the Original
Purchase Agreement contemplated that such Interest Holder would receive only
cash as consideration in the Acquisition and that this amended and restated
Agreement, contemplating the inclusion of Parent Common Stock as Consideration
in the Acquisition, is being entered into by Parent at the request of, and
entirely as an accommodation to, such Interest Holder.
(b) Each Interest Holder has received and reviewed a copy of (A)
the Parent's 1997 Annual Report to Stockholders, (B) Parent's Annual Report on
Form 10-K for the year ended December 31, 1997, (C) Parent's Form 10-Q for the
quarter ended March 31, 1998 and (D) all other reports filed by Parent with the
SEC under the Exchange Act since December 31, 1997 (collectively, the
"Acquisition Disclosure Documents"). Each Interest Holder has had an
opportunity to ask questions of and receive answers from Parent and the Company
concerning the terms and conditions of this Agreement and to obtain any
additional information, to the extent that Parent or the Company possesses such
information or can acquire it without unreasonable effort or expense, necessary
to verify the accuracy of the information contained in the Acquisition
Disclosure Documents. Each Interest Holder is acquiring the Parent Common
Stock to be received by such Interest Holder pursuant to this Agreement for (i)
such Interest Holder and not for any other person and (ii) investment purposes
only and not with a view to, or in connection with, the distribution of such
stock.
SECTION 6.5 RESTRICTIONS ON TRANSFER. Each Interest Holder
acknowledges that if it should decide to dispose of any of the Parent Common
Stock to be received by it in the Acquisition, it may do so only pursuant to an
effective registration statement under the Securities Act or pursuant to an
exemption from registration under the Securities Act. In connection with any
offer, resale, pledge or other transfer (individually and collectively, a
"Transfer") of any Parent Common Stock other than pursuant to an effective
registration statement, Parent may require that the transferor of the Parent
Common Stock provide to Parent an opinion of counsel, which opinion shall be
reasonably satisfactory in form and substance to Parent, to the effect that
such Transfer is being made pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act and any
state or federal securities laws. Each Interest Holder agrees to the
imprinting, so long as appropriate, of substantially the following legends on
certificates representing the Parent Common Stock received hereunder:
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THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND ACCORDINGLY MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED,
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
ARTICLE VII
CONDUCT OF BUSINESS PENDING THE ACQUISITION
SECTION 7.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE
ACQUISITION. Except as otherwise contemplated by this Agreement, after the
date hereof and prior to the Closing Date or earlier termination of this
Agreement, unless Parent shall otherwise agree in writing, the Company shall,
and shall cause its subsidiaries to:
(a) conduct their respective businesses in the ordinary
and usual course of business and consistent with past practice;
(b) not (i) amend or propose to amend their respective
charter or documents, (ii) split, combine or reclassify their
outstanding equity securities or (iii) declare, set aside or pay any
dividend or distribution payable in cash, stock, property or
otherwise, except for the payment of dividends or distributions to the
Company by a wholly-owned subsidiary of the Company;
(c) not issue, sell, pledge or dispose of, or agree to
issue, sell, pledge or dispose of, any additional shares of, or any
options, warrants or rights of any kind to acquire any of their equity
securities or any debt or equity securities convertible into or
exchangeable for such equity securities;
(d) not (i) incur or become contingently liable with
respect to any indebtedness for borrowed money other than borrowings
in the ordinary course of business (other than pursuant to credit
facilities) or borrowings under the existing credit facilities of the
Company or any of its subsidiaries (the "Existing Credit Facilities")
up to the existing borrowing limit on the date hereof or borrowings to
refinance existing indebtedness on terms which are reasonably
acceptable to Parent, (ii) redeem, purchase, acquire or offer to
purchase or acquire any of its equity securities or any options,
warrants or rights to acquire any of its equity securities or any
security convertible into or exchangeable for its equity securities,
(iii) make any acquisition of any assets or businesses other than
expenditures for current assets in the ordinary course of business and
expenditures for fixed or capital assets in the ordinary course of
business, (iv) sell, pledge, dispose of or encumber any material
assets or businesses other than (a) sales of businesses or assets in
the ordinary course of business, (b) sales of businesses or assets
disclosed in Section 7.1 of the Company Disclosure Schedule, and (c)
pledges or encumbrances pursuant to
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Existing Credit Facilities or other permitted borrowings, or (v) enter
into any binding contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(e) use all reasonable efforts to preserve intact their
respective business organizations and goodwill, keep available the
services of their respective present officers and key employees, and
preserve the goodwill and business relationships with customers and
others having business relationships with them and not engage in any
action, directly or indirectly, with the intent to adversely impact
the transactions contemplated by this Agreement or the Transaction
Documents.
(f) subject to restrictions imposed by applicable law,
confer with one or more representatives of Parent to report
operational matters of materiality and the general status of ongoing
operations;
(g) not enter into or amend any employment, severance,
special pay arrangement with respect to termination of employment or
other similar arrangements or agreements with any directors, officers
or key employees, except in the ordinary course and consistent with
past practice; provided, however, that the Company and its
subsidiaries shall in no event enter into or amend any written
employment agreement providing for annual base salary in excess of
$50,000 per annum;
(h) not adopt, enter into or amend any pension or
retirement plan, trust or fund, except as required to comply with
changes in applicable law and not adopt, enter into or amend in any
material respect any bonus, profit sharing, compensation, stock
option, deferred compensation, health care, employment or other
employee benefit plan, agreement, trust, fund or arrangement for the
benefit or welfare of any employees or retirees generally, other than
in the ordinary course of business, except (i) as required to comply
with changes in applicable law, or (ii) as required pursuant to an
existing contractual arrangement or agreement;
(i) use commercially reasonable efforts to maintain with
financially responsible insurance companies insurance on its tangible
assets and its businesses in such amounts and against such risks and
losses as are consistent with past practice;
(j) not make, change or revoke any material Tax election
or make any material agreement or settlement regarding Taxes with any
taxing authority; and
(k) not take or fail to take any action which action or
failure to take action would materially delay consummation of the
Acquisition.
SECTION 7.2 CONDUCT OF BUSINESS BY PARENT PENDING THE
ACQUISITION. Except as otherwise contemplated by this Agreement, after the
date hereof and prior to the Closing Date or earlier termination of this
Agreement, unless the Company shall otherwise agree in writing, Parent shall,
and shall cause its subsidiaries to:
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(a) not (i) amend or propose to amend their respective
charter (except for any amendments by Parent of its Certificate of
Incorporation to increase the number of authorized shares of Parent
Common Stock) or bylaws, (ii) split, combine or reclassify (whether by
stock dividend or otherwise) their outstanding capital stock, or (iii)
declare, set aside or pay any dividend or distribution payable in
cash, stock, property or otherwise, except for the payment of
dividends or distributions to Parent by a wholly-owned subsidiary of
Parent;
(b) not take or fail to take any action which action or
failure to take action would materially delay consummation of the
Acquisition; and
(c) use all reasonable efforts to preserve intact their
respective business organizations and goodwill, keep available the
services of their respective present officers and key employees, and
preserve the goodwill and business relationships with customers and
others having business relationships with them and not engage in any
action, directly or indirectly, in any case, with the intent to
adversely impact the transactions contemplated by this Agreement.
SECTION 7.3 CONTROL OF THE COMPANY'S OPERATIONS. Nothing
contained in this Agreement shall give to Parent, directly or indirectly,
rights to control or direct the Company's operations prior to the Effective
Time. Prior to the Effective Time, the Company shall exercise, consistent with
the terms and conditions of this Agreement, complete control and supervision of
its operations.
SECTION 7.4 CONTROL OF PARENT'S OPERATIONS. Nothing contained in
this Agreement shall give to the Company, directly or indirectly, rights to
control or direct Parent's operations prior to the Effective Time. Parent
shall exercise, consistent with the terms and conditions of this Agreement,
complete control and supervision of its operations.
SECTION 7.5 ACQUISITION TRANSACTIONS. After the date hereof and
prior to the Effective Time or earlier termination of this Agreement, the
Company shall not, and shall not permit any of its subsidiaries to, initiate,
solicit, negotiate, encourage or provide information to facilitate, and the
Company shall, and shall use its reasonable efforts to cause any officer,
director or employee of the Company, or any attorney, accountant, investment
banker, financial advisor or other agent retained by it or any of its
subsidiaries, not to initiate, solicit, negotiate, encourage or provide
information to facilitate, any proposal or offer to acquire all or any
substantial part of the business or properties of the Company or any equity
securities of the Company, whether by merger, purchase of assets or otherwise,
whether for cash, securities or any other consideration or combination thereof
(any such transactions being referred to herein as an "Acquisition
Transaction"). The Company shall immediately notify Parent after receipt of
any proposal for an Acquisition Transaction, indication of interest or request
for information relating to the Company or its subsidiaries in connection with
an Acquisition Transaction or for access to the properties, books or records of
the Company or any subsidiary by any person or entity that informs the Board of
Directors of the Company or such subsidiary that it is considering making, or
has made, a proposal for an Acquisition Transaction. Such notice to Parent
shall be made orally and in writing and shall indicate in reasonable detail the
identity of the offeror and the terms and conditions of such proposal, inquiry
or contact.
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ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.1 ACCESS TO INFORMATION.
(a) Subject to applicable law, the Company and its subsidiaries
shall afford to Parent and its respective accountants, counsel, financial
advisors and other representatives (the "Parent Representatives") and Parent
and its subsidiaries shall afford to the Company and its accountants, counsel,
financial advisors and other representatives (the "Company Representatives")
full access during normal business hours with reasonable notice throughout the
period prior to the Effective Time to all of their respective properties,
books, contracts, commitments and records (including, but not limited to, Tax
Returns) and, during such period, shall furnish promptly to one another such
information concerning their respective businesses, properties and personnel as
Parent or the Company, as the case may be, shall reasonably request; provided,
however, that no investigation pursuant to this Section 8.1 shall amend or
modify any representations or warranties made herein or the conditions to the
obligations of the respective parties to consummate the Acquisition. Parent
and its subsidiaries shall hold and shall use their reasonable best efforts to
cause the Parent Representatives to hold, and the Company and its subsidiaries
shall hold and shall use their reasonable best efforts to cause the Company
Representatives to hold, in strict confidence all nonpublic documents and
information furnished to Parent or to the Company, as the case may be, in
connection with the transactions contemplated by this Agreement, except that
(i) Parent and the Company may disclose such information as may be necessary in
connection with seeking the Parent Required Statutory Approvals and the Company
Required Statutory Approvals and (ii) each of Parent and the Company may
disclose any information that it is required by law or judicial or
administrative order to disclose.
(b) In the event that this Agreement is terminated in accordance
with its terms, each party shall promptly redeliver to the other all nonpublic
written material provided pursuant to this Section 8.1 and shall not retain any
copies, extracts or other reproductions in whole or in part of such written
material. In such event, all documents, memoranda, notes and other writings
prepared by Parent or the Company based on the information in such material
shall be destroyed (and Parent and the Company shall use their respective
reasonable best efforts to cause their advisors and representatives to
similarly destroy their documents, memoranda and notes), and such destruction
(and reasonable best efforts) shall be certified in writing by an authorized
officer supervising such destruction.
SECTION 8.2 [INTENTIONALLY OMITTED].
SECTION 8.3 COMPLIANCE WITH THE SECURITIES ACT. The Company
shall use its commercially reasonable efforts to cause each officer, each
director and each other person who is an "affiliate," as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities
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Act or Accounting Series Releases No. 130 and No. 135 of the SEC, of the
Company to deliver to Parent and the Company on or prior to the Effective Time
a written agreement (an "Affiliate Agreement"), in substantially the form of
Exhibit C, to the effect that such person will not offer to sell, sell or
otherwise dispose of any shares of Parent Common Stock issued in the
Acquisition, except, in each case, pursuant to an effective registration
statement or in compliance with Rule 145, as amended from time to time, or in a
transaction which, in the opinion of legal counsel satisfactory to Parent, is
exempt from the registration requirements of the Securities Act.
SECTION 8.4 [INTENTIONALLY OMITTED].
SECTION 8.5 EXPENSES AND FEES. All costs and expenses incurred
in connection with this Agreement, the Transaction Documents and the
transactions contemplated hereby and thereby shall be paid by the party
incurring such expenses.
SECTION 8.6 AGREEMENT TO COOPERATE.
(a) Subject to the terms and conditions herein provided each of
the parties hereto shall use all 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 under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including using its
reasonable efforts to obtain all necessary or appropriate waivers, consents or
approvals of third parties required in order to preserve material contractual
relationships of Parent and the Company and their respective subsidiaries, all
necessary or appropriate waivers, consents and approvals and SEC "no-action"
letters to effect all necessary registrations, filings and submissions and to
lift any injunction or other legal bar to the Acquisition (and, in such case,
to proceed with the Acquisition as expeditiously as possible).
(b) In the event any litigation is commenced by any person or
entity relating to the transactions contemplated by this Agreement, including
any Acquisition Transaction, Parent shall have the right, at its own expense,
to participate therein, and the Company will not settle any such litigation
without the consent of Parent, which consent will not be unreasonably withheld.
SECTION 8.7 PUBLIC STATEMENTS. Except as may be required to be
disclosed by law, the parties shall consult with each other prior to issuing
any press release or any written public statement with respect to this
Agreement or the transactions contemplated hereby and shall not issue any such
press release or written public statement prior to such consultation.
SECTION 8.8 NOTIFICATION OF CERTAIN MATTERS. Each of the Company
and Parent agrees to give prompt notice to each other of, and to use
commercially reasonable efforts to remedy, (i) the occurrence or failure to
occur of any event which occurrence or failure to occur would be likely to
cause any of its representations or warranties in this Agreement to be untrue
or inaccurate in any material respect at the Effective Time and (ii) any
material failure on its part to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 8.9 shall
not limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
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SECTION 8.9 NON-COMPETITION AND CONFIDENTIALITY AGREEMENTS. At
the closing, Parent shall enter into non-competition and confidentiality
agreements with ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and W. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ in the form set forth in
Section 8.9 of the Parent Disclosure Schedule.
SECTION 8.10 BENEFITS AND CONTRACTS. During the twelve-month
period immediately following the Effective Time, Parent shall provide generally
to employees of the Company, employee benefits either (a) under employee
benefit plans on terms and conditions which when taken as a whole are
substantially similar to those currently provided by Parent to its similarly
situated employees or (b) under the Company Plans. For purposes of
participation and vesting under such employee benefit plans described in (a)
above, (i) service under any qualified plans of the Company shall be treated as
service under Parent's qualified plans, (ii) service under any other employee
benefit plans of the Company shall be treated as service under any similar
employee benefit plans maintained by Parent. Parent shall cause the welfare
benefit plans that cover the employees of the Company after the Effective Time
to (i) waive any waiting period and restrictions and limitations for
preexisting conditions or insurability and (ii) cause any deductible,
co-insurance, or maximum out-of-pocket payments made by employees of the
Company under the Company's welfare benefit plans to be credited to such
employees under such welfare benefit plans, so as to reduce the amount of any
deductible, co-insurance, or maximum out-of-pocket payments payable by such
employees under the welfare benefit plans after the Effective Time.
SECTION 8.11 COOPERATION WITH RESPECT TO TAX RETURNS. Parent
shall reasonably cooperate with the Interest Holders with respect to any
matters involving the Interest Holders arising out of the Interest Holders'
ownership of the Company prior to the Effective Time or the transactions
contemplated by this Agreement, including matters relating to tax returns and
any tax audits, appeals, claims or litigation with respect to such tax returns
or the preparation of such tax returns. In connection therewith, Parent shall
make available to the Interest Holders such files, documents, books and records
of the Company for inspection and copying as may be reasonably requested by the
Interest Holders and shall cooperate with the Interest Holders with respect to
retaining information and documents which relate to such matters.
SECTION 8.12 INDEMNIFICATION OF MANAGERS AND OFFICERS. After the
Effective Time, Parent shall, to the fullest extent permitted under the
applicable law, indemnify and hold harmless each present and former manager or
officer of the Company and each such person who served at the request of the
Company as a manager, officer, partner, fiduciary, employee or agent of the
Company (collectively, the "Pre-Acquisition Indemnified Parties") against all
costs and expenses (including reasonable attorneys fees), judgments, fines,
losses, claims, damages, liabilities and settlement amounts paid in connection
with any claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), whether civil, administrative or
investigative, arising out of or relating to any action or omission in their
capacity as an officer, manager, employee, agent or other person to whom this
provision applies, in each case occurring before the Effective Time (including
the transactions contemplated by this Agreement). Without limiting the
generality of the foregoing, in the event of any such claim, action, suit,
proceeding or investigation, Parent shall pay the fees and expenses of counsel
selected by any Pre-Acquisition Indemnified Party, which counsel shall be
reasonably satisfactory to Parent, as the case may be, promptly after
statements therefor are received.
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SECTION 8.13 RESALE REGISTRATION STATEMENT.
(a) As soon as reasonably practicable after the Effective Date,
but not later than the earlier of (i) 150 days following the Effective Date or
(ii) Parent's public release of its financial results for the third quarter of
1998, Parent shall prepare and file with the SEC a Registration Statement on
Form S-3 or other appropriate form pursuant to Rule 415 under the Securities
Act, or other similar rule of the SEC covering the resale by the Interest
Holders of 50% of the shares of Parent Common Stock issued to them in
connection with the Acquisition (the "Resale Registration Statement"). The
Interest Holders shall, promptly after any request by Parent, furnish to Parent
all financial statements and other information as may be requested by Parent in
connection with preparation and filing of the Resale Registration Statement.
Parent shall use all commercially reasonable efforts to cause the Resale
Registration Statement to be declared effective and to keep the Resale
Registration Statement continuously effective for a period of two years
following the Closing Date, or, if sooner, until the date on which the Interest
Holders have disposed of such 50% of the shares of Parent Common Stock issued
to them in connection with the Acquisition. Parent further agrees, if
necessary during the time that the Resale Registration Statement is required to
be maintained effective, to amend or supplement the Resale Registration
Statement when required by the registration form, by the instructions
applicable to such form, or by the Securities Act or the rules and regulations
thereunder.
(b) Parent agrees to furnish promptly to each Interest Holder such
number of copies of the Resale Registration Statement, any amendments thereto,
any documents incorporated by reference therein, the prospectus included in the
Resale Registration Statement, including any preliminary prospectus, and such
other documents as such Interest Holder may reasonably request in writing in
order to facilitate the disposition of the shares of Parent Common Stock
covered by the Resale Registration Statement ("Registered Stock").
(c) Parent agrees to promptly notify each holder of Registered
Stock, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the occurrence of an event requiring the
preparation of a supplement to such prospectus or an amendment of the Resale
Registration Statement necessary in order to maintain the effectiveness of the
Resale Registration Statement and to ensure that such prospectus will not
contain an untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and to promptly file with the SEC and make available to such
holder any such supplemented prospectus or amended Resale Registration
Statement.
(d) Each Interest Holder agrees that, upon receipt of written
notice from Parent of the happening of any event of the kind described in
Section 8.13(c) hereof, such Interest Holder will treat such information as
confidential, will immediately discontinue the disposition of Registered Stock
pursuant to the Resale Registration Statement until such Interest Holder's
receipt of the copies of the revised prospectus contemplated by Section 8.13(c)
hereof (a "Suspension Period") and, if so directed by Parent, such Interest
Holder will deliver to Parent all copies, other than permanent file copies then
in such Interest Holder's possession, of the most recent prospectus covering
such Registered Stock at the time of receipt of such notice. Parent agrees and
acknowledges that for the period beginning on the date on which Parent
announces its results of
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operations for the first full calendar month of combined operations of Parent
and the Company and ending six months thereafter (i) it shall not impose any
single Suspension Period in excess of 30 consecutive days, (ii) a period of at
least 10 trading days must occur between Suspension Periods and (iii) that the
total number of days constituting Suspension Periods shall not exceed 100 days
in the aggregate, provided that such limitations shall not apply to events of
the type described in Section 8.13(c) hereof which are beyond Parent's control.
(e) Parent shall use all commercially reasonable efforts to
register or qualify the Registered Stock under such other securities or blue
sky laws of such jurisdictions as each holder of Registered Stock shall
reasonably request, and do any and all other acts and things which may be
necessary under such securities or blue sky laws to enable each such holder of
Registered Stock to consummate the public sale or other disposition in such
jurisdictions of the Registered Stock owned by such holder, except that Parent
shall not for any such purpose be required to qualify to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified.
(f) Parent shall use all commercially reasonable efforts to
prevent the issuance of any order suspending the effectiveness of the Resale
Registration Statement, and if one is issued, use its best efforts to obtain
the withdrawal of any order suspending the effectiveness of the Resale
Registration Statement at the earliest possible moment.
(g) Parent shall promptly file appropriate additional listing
applications, and shall use all commercially reasonable efforts to cause the
Registered Stock to be listed on the securities exchange or quoted on the
automated quotation system on which the Parent Common Stock is then listed or
quoted.
(h) Parent shall otherwise use all commercially reasonable efforts
to comply with all applicable rules and regulations of the SEC in connection
with the Resale Registration Statement and make generally available to Parent's
security holders, in each case as soon as practicable, but not later than 45
days after the close of the period covered thereby (90 days in case the period
covered corresponds to a fiscal year of Parent), an earnings statement of
Parent which will satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder (or any comparable successor provisions).
(i) In connection with the Resale Registration Statement, Parent
shall pay the following registration expenses: (i) all registration and filing
fees; (ii) the fees and expenses of compliance with securities or blue sky laws
(including reasonable fees and disbursements of Parent's counsel in connection
with blue sky qualifications of the Registered Stock); (iii) printing expenses;
(iv) the reasonable fees and disbursements of counsel for Parent and the
customary fees and expenses for independent certified public accountants
retained by Parent; and (v) the reasonable fees and expenses of any experts
retained by Parent in connection with such registration. Parent shall not have
any obligation to pay any legal fees of the holders of Registered Stock, any
fees or expenses of independent certified public accountants retained by the
Interest Holders, any underwriting fees, discounts, or commissions attributable
to the sale of Registered Stock, or any out-of-pocket expenses of the holders
of Registered Stock (or the agents of such holders who manage the holders'
accounts).
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(j) Each Interest Holder shall comply with Regulation M under the
Exchange Act which, among other things, requires a seller of Registered Stock
and all affiliates of that seller to suspend all bids for or purchases of
shares of Parent Common Stock at least one business day before and during any
offers and sales of Registered Stock by that seller and until that seller's
offers and sales terminate and prohibits any person from stabilizing the prices
of a security to facilitate an offering of that security.
(k) Each of Parent and the Interest Holders shall execute and
deliver such additional instruments and other documents and shall take such
further actions as may be necessary or appropriate to effectuate, carry out and
comply with all of such party's obligations under this Section 8.13, including
without limitation any actions reasonably requested by Parent in connection
with obtaining any required consents or approvals to the actions contemplated
hereby under the Securities Act.
(l) Parent agrees to indemnify and hold harmless each holder of
Registered Stock (a "Holder"), its directors and officers, and each person, if
any, who controls each Holder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages, liabilities, and expenses (including reasonable
attorneys fees and costs of investigation) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in
the Resale Registration Statement or the prospectus contained therein or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities, or expenses arise out of, or are based upon, any such untrue
statement or omission or allegation thereof based upon information furnished in
writing to Parent by such Holder or on such Holder's behalf expressly for use
therein; and, provided further, that, with respect to any untrue statement or
omission or alleged untrue statement or omission made in any preliminary
prospectus, the indemnity agreement contained in this subsection shall not
apply to the extent that it has been established that any such loss, claim,
damage, liability, or expense results from the fact that a current copy of the
prospectus was not sent or given to the person asserting any such loss, claim,
damage, liability, or expense at or prior to the written confirmation of the
sale of the Registered Stock to such person and such current copy of the
prospectus was previously provided to the Holder and such current copy of the
prospectus would have cured the defect giving rise to such loss, claim, damage,
liability, or expense. Any indemnification obligation of Parent pursuant to
this Section 8.13(l) shall be in addition to and not exclusive of any other
liability or indemnification obligation that Parent may have at law or in
equity or pursuant to Article X of this Agreement.
(m) Each Holder, severally but not jointly, agrees to indemnify
and hold harmless Parent and the Company, and their respective directors and
officers, and each person, if any, who controls Parent within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent as the foregoing indemnity from Parent to such Holder, but only
with respect to information furnished in writing by such Holder or on such
Holder's behalf expressly for use in the Resale Registration Statement or
prospectus relating to the Registered Stock, any amendment or supplement
thereto, or any preliminary prospectus; provided, however, that such Holder
shall not be obligated to provide such indemnity to the extent that such
losses,
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claims, damages, liabilities or expenses result from the failure of Parent to
promptly amend or take action to correct or supplement any such Resale
Registration Statement or Prospectus on the basis of corrected or supplemental
information provided in writing by such Holder to Parent expressly for such
purpose. In case any action or proceeding shall be brought against Parent or
its directors or officers, or any such controlling person, in respect of which
indemnity may be sought against such Holder, such Holder and its directors,
officers and controlling persons shall have the rights and duties given to
Parent, and Parent or its directors or officers or such controlling person
shall have the rights and duties given to such Holder, by the preceding section
hereof. In no event shall the liability of any Holder of Registered Stock
hereunder be greater in amount than the amount of the proceeds received by such
Holder upon the sale of the Registered Stock giving rise to such
indemnification obligation. Any indemnification obligation of a Holder
pursuant to this Section 8.13(m) shall be in addition to, and not exclusive of,
any other liability or indemnification obligation that such Holder may have at
law or in equity or pursuant to Article X of this Agreement.
(n) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against any person entitled to
indemnification under Section 8.13(l) or 8.13(m) above (a "Securities
Indemnified Party") in respect of which indemnity may be sought from any party
who has agreed to provide such indemnification (a "Securities Indemnifying
Party"), the Securities Indemnifying Party shall assume the defense thereof,
including the employment of counsel reasonably satisfactory to such Securities
Indemnified Party, and shall assume the payment of all expenses. Such
Securities Indemnified Party shall have the right to employ separate counsel in
any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Securities Indemnified
Party unless (i) the Securities Indemnifying Party has agreed to pay such fees
and expenses, (ii) the Securities Indemnifying Party has failed to assume the
defense of such action within a reasonable time following written notice
thereof from the Securities Indemnified Party or fails to employ counsel
reasonably satisfactory to such Securities Indemnified Party, or (iii) the
named parties to any such action or proceeding (including any impleaded
parties) include both such Securities Indemnified Party and the Securities
Indemnifying Party, and such Securities Indemnified Party shall have been
advised by counsel that there is a conflict of interest on the part of counsel
employed by the Securities Indemnifying Party to represent such Securities
Indemnified Party (in which case, if such Securities Indemnified Party notifies
the Securities Indemnifying Party in writing that it elects to employ separate
counsel at the expense of the Securities Indemnifying Party, the Securities
Indemnifying Party shall not have the right to assume the defense of such
action or proceeding on behalf of such Securities Indemnified Party; it being
understood, however, that the Securities Indemnifying Party shall not, in
connection with any one such action or proceeding or separate but substantially
similar or related actions or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (together with appropriate
local counsel) at any time for all such Securities Indemnified Parties, which
firm shall be designated in writing by such Securities Indemnified Parties).
The Securities Indemnifying Party shall not be liable for any settlement of any
such action or proceeding effected without its written consent, but if settled
with its written consent, or if there be a final judgment for the plaintiff in
any such action or proceeding, the Securities Indemnifying Party shall
indemnify and hold harmless such Securities Indemnified Parties from and
against any loss or liability (to the extent stated above) by reason of such
settlement or judgment.
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(o) If the indemnification provided for in this Section 8.13 is
unavailable to the Securities Indemnified Parties in respect of any losses,
claims, damages, liabilities, or judgments referred to herein, then each
Securities Indemnifying Party, in lieu of indemnifying such Securities
Indemnified Party, shall contribute to the amount paid or payable by such
Securities Indemnified Party as a result of such losses, claims, damages,
liabilities and judgments in the following manner: as between Parent on the
one hand and a Holder on the other, in such proportion as is appropriate to
reflect the relative fault of Parent on the one hand and such Holder on the
other hand in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative fault of Parent on the one
hand and of a Holder on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by such party, and the party's relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. No person guilty of fraudulent misrepresentation
(within the meaning of subsection 11(f) of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
Notwithstanding the provisions of this Section 8.13(o), no Holder
shall be required to contribute any amount in excess of the amount by which the
total price at which shares of the Registered Stock of such Holder were offered
to the public exceeds the amount of any damages which such Holder has otherwise
been required to pay by reason of such untrue statement or omission. Each
Holder's obligation to contribute pursuant to this Section 8.13(o) is several
in the proportion that the proceeds of the offering received by such Holder
bears to the total proceeds of the offering received by all the Holders and not
joint.
(p) The indemnity and contribution agreements contained in this
Section 8.13 shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by or on
behalf of any Securities Indemnified Party or by or on behalf of Parent, and
(iii) the consummation of the sale or successive resale of the Registered
Stock.
ARTICLE IX
CONDITIONS
SECTION 9.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
ACQUISITION. The respective obligations of each party to effect the
Acquisition shall be subject to the fulfillment at or prior to the Closing Date
of the following conditions:
(a) [INTENTIONALLY OMITTED];
(b) [INTENTIONALLY OMITTED];
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(c) [INTENTIONALLY OMITTED];
(d) no preliminary or permanent injunction or other order
or decree by any federal or state court which prevents the
consummation of the Acquisition shall have been issued and remain in
effect (each party agreeing to use its reasonable efforts to have any
such injunction, order or decree lifted);
(e) no statute, rule or regulation shall have been
enacted by any state or federal government or governmental agency in
the United States which would prevent the consummation of the
Acquisition or make the Acquisition illegal; and
(f) the transactions contemplated by the Agreement and
Plan of Merger shall have been consummated.
SECTION 9.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
ACQUISITION. Unless waived by the Company, the obligation of the Company to
effect the Acquisition shall be subject to the fulfillment at or prior to the
Closing Date of the following additional conditions:
(a) Parent shall have performed in all material respects
its agreements contained in this Agreement required to be performed on
or prior to the Closing Date and the representations and warranties of
Parent contained in this Agreement shall be true and correct on and as
of the date made and (except to the extent that such representations
and warranties speak as of an earlier date) on and as of the Closing
Date as if made at and as of such date, and the Company shall have
received a certificate of the Chairman of the Board and Chief
Executive Officer, the President or a Vice President of Parent and of
the President and Chief Executive Officer or a Vice President of
Subsidiary to that effect;
(b) [INTENTIONALLY OMITTED];
(c) the Company shall have received from ▇▇▇▇▇▇▇▇▇, Will
& ▇▇▇▇▇ a written opinion dated the Closing Date, in substantially the
form attached hereto as Exhibit D; and
(d) Parent Common Stock Certificate; Cash Consideration.
On the Closing Date, Parent shall have delivered to each Interest
Holder (i) a certificate representing the number of shares of Parent
Common Stock which such holder has the right to receive pursuant to
Article II hereof and (ii) such Interest Holder's pro rata share of
the Cash Consideration.
SECTION 9.3 CONDITIONS TO OBLIGATION OF PARENT TO EFFECT THE
ACQUISITION. Unless waived by Parent, the obligations of Parent to effect the
Acquisition shall be subject to the fulfillment at or prior to the Effective
Time of the additional following conditions:
(a) the Company shall have performed in all material
respects its agreements contained in this Agreement required to be
performed on or prior to the Closing Date and the representations and
warranties of the Company and the Interest Holders contained in
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this Agreement shall be true and correct on and as of the date made
and (except to the extent that such representations and warranties
speak as of an earlier date) on and as of the Closing Date as if made
at and as of such date, and Parent shall have received a Certificate
of the President and Chief Executive Officer of the Company and of
each Interest Holder to that effect;
(b) [INTENTIONALLY OMITTED];
(c) Parent shall have received from Jeffers, Wilson,
▇▇▇▇▇ & ▇▇▇▇, LLP, a written opinion dated the Closing Date, in form
and substance satisfactory to Parent;
(d) Delivery of Certificates Representing Selling
Membership Interests. Each holder of Selling Membership Interests
shall have delivered to Parent the certificates, if any, representing
such Selling Membership Interests, which certificates shall be
properly endorsed for transfer or accompanied by duly executed stock
powers in either case executed in blank or in favor of Parent or its
designee;
(e) Indemnification Escrow Agreement. Parent, the Escrow
Agent and each Interest Holder shall have executed and delivered that
certain Indemnification Escrow Agreement of even date herewith by and
among Parent, the Escrow Agent and the Interest Holders;
(f) each manager and officer of the Company shall have
resigned from his or her position as a manager or officer of the
Company, as the case may be, effective as of the Effective Time;
(g) all governmental waivers, consents, orders and
approvals legally required for the consummation of the Acquisition and
the transactions contemplated hereby, and all consents from lenders
required to consummate the Acquisition, including, without limitation,
all required consents or approvals of each person that is a party to a
contract or agreement identified in Section 5.11 of the Company
Disclosure Schedule shall have been obtained and be in effect at the
Effective Time; and
(h) the non-competition and confidentiality agreements
referenced in Section 8.9 shall have been entered into by the parties
thereto.
ARTICLE X
INDEMNIFICATION
SECTION 10.1 INDEMNIFICATION OF PARENT INDEMNIFIED PARTIES.
Subject to the overall limitations and time limitations set forth in Section
10.5 below, each Interest Holder, jointly and severally, agrees to indemnify
and hold harmless Parent and the Company and their respective officers,
directors, employees, consultants, stockholders and affiliates (which after the
Closing shall include the Company) (collectively, the "Parent Indemnified
Parties") from and against any and all damages, losses, claims, liabilities,
demands, charges, suits, penalties, costs and expenses
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(including court costs and attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
"Damages") which any of the Parent Indemnified Parties may sustain, or to which
any of Parent Indemnified Parties may be subjected, relating to or arising
directly or indirectly out of any breach or default by the Company or the
Interest Holders of any of their representations or warranties contained in
Article V or VI hereof (determined without regard to any qualifications as to
materiality in such representations or warranties) or any covenants or
agreements under this Agreement. Any Damages which any Parent Indemnified
Party sustains, or to which any of the Parent Indemnified Parties may be
subjected, are referred to herein as "Parent Indemnified Costs".
SECTION 10.2 INDEMNIFICATION OF THE COMPANY INDEMNIFIED PARTIES.
Subject to the overall limitations and time limitations set forth in Section
10.5 below, Parent agrees to indemnify and hold harmless the Company, each
Interest Holder and each officer, director, authorized representative,
employee, consultant, stockholder, limited partner, general partner or
affiliate of the Company or any Interest Holder which is not a natural person
(collectively, the "Company Indemnified Parties" and together with Parent
Indemnified Parties, the "Indemnified Parties") from and against any and all
Damages which any of the Company Indemnified Parties may sustain, or to which
any of the Company Indemnified Parties may be subjected, related to or arising
directly or indirectly out of any breach or default by Parent of any of their
representations or warranties contained in Article IV hereof (determined
without regard to any qualifications as to materiality in such representations
or warranties), covenants or agreements under this Agreement. Any Damages
which any Company Indemnified Party sustains, or to which any of the Company
Indemnified Parties may be subjected, are referred to herein as the "Company
Indemnified Costs" and together with Parent Indemnified Costs, the "Indemnified
Costs". Any Indemnified Costs arising out of or relating to any breach or
default by any party who is obligated to provide indemnification hereunder (an
"Indemnifying Party") of any of his, her or its representations, warranties,
covenants or agreements under this Agreement are referred to herein as
Indemnified Representation Costs.
SECTION 10.3 DEFENSE OF THIRD-PARTY CLAIMS. An Indemnified Party
shall give prompt written notice to any Indemnifying Party of the commencement
or assertion of any action, proceeding, demand or claim by a third party
(collectively, a "third-party action") in respect of which such Indemnified
Party shall seek indemnification hereunder. Any failure so to notify an
Indemnifying Party shall not relieve such Indemnifying Party from any liability
that it, he or she may have to such Indemnified Party under this Article X
except to the extent the failure to give such notice materially and adversely
prejudices such Indemnifying Party. The Indemnifying Party shall have the
right to assume control of the defense of, settle or otherwise dispose of such
third-party action on such terms as he, she or it deems appropriate; provided,
however, that:
(a) The Indemnified Party shall be entitled, at his, her
or its own expense, to participate in the defense of such third-party
action (provided, however, that the Indemnifying Parties shall pay the
attorneys' fees of the Indemnified Party if (i) the employment of
separate counsel shall have been authorized in writing by any such
Indemnifying Party in connection with the defense of such third-party
action, (ii) the Indemnifying Parties shall not have promptly employed
counsel reasonably satisfactory to the Indemnified Party to take
charge of such third-party action, or (iii) the Indemnified
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Party's counsel shall have advised the Indemnified Party in writing,
with a copy to the Indemnifying Party, that there is a conflict of
interest that could make it inappropriate under applicable standards
of professional conduct to have common counsel or that there are
defenses available to the Indemnified Party that are not available to
the Indemnifying Party);
(b) The Indemnifying Party shall obtain the prior written
approval of the Indemnified Party before entering into or making any
settlement, compromise, admission or acknowledgment of the validity of
such third-party action or any liability in respect thereof if,
pursuant to or as a result of such settlement, compromise, admission
or acknowledgment, injunctive or other equitable relief would be
imposed against the Indemnified Party;
(c) To the extent that the Indemnified Party participates in
the defense of any third party action as contemplated by Section
10.3(a), the Indemnified Party shall obtain the prior written approval
of the Indemnifying Party before entering into or making any
settlement, compromise, admission or acknowledgment of the validity of
such third party action or any liability in respect thereof;
(d) No Indemnifying Party shall consent to the entry of
any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to
each Indemnified Party of a release from all liability in respect of
such third-party action; and
(e) The Indemnifying Party shall not be entitled to
control (but shall be entitled to participate at his, her or its own
expense in the defense of), and the Indemnified Party shall be
entitled to have sole control over, the defense or settlement,
compromise, admission or acknowledgment of any third-party action (i)
as to which the Indemnifying Party fails to assume the defense within
a reasonable length of time or (ii) to the extent the third-party
action seeks an order, injunction or other equitable relief against
the Indemnified Party which, if successful, would materially adversely
affect the business, operations, properties, assets condition
(financial or other) or results of operations of the Indemnified
Party; provided, however, that the Indemnified Party shall make no
settlement, compromise, admission or acknowledgment that would give
rise to liability on the part of any Indemnifying Party without the
prior written consent of such Indemnifying Party.
The parties hereto shall extend reasonable cooperation in connection with the
defense of any third-party action pursuant to this Article X and, in connection
therewith, shall furnish such records, information, and testimony and attend
such conferences, discovery proceedings, hearings, trials and appeals as may be
reasonably requested.
SECTION 10.4 DIRECT CLAIMS. In any case in which an Indemnified
Party seeks indemnification hereunder which is not subject to Section 10.3
because no third-party action is involved, the Indemnified Party shall notify
the Indemnifying Party in writing of any Indemnified Costs which such
Indemnified Party claims are subject to indemnification under the terms hereof.
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The failure of the Indemnified Party to exercise promptness in such
notification shall not amount to a waiver of such claim except to the extent
the resulting delay materially prejudices the position of the Indemnifying
Party with respect to such claim.
SECTION 10.5 LIMITATIONS. Subject to Section 10.6 and Section
12.8 hereof, the following limitations shall apply to claims for Indemnified
Costs made pursuant to this Article X; provided, however, that, notwithstanding
anything herein to the contrary, the following limitations shall not apply to
any claims contemplated by Sections 8.13(l) or 8.13(m) hereof.
(a) Limitation as to Time. Except as hereinafter
provided, no Indemnifying Party shall be liable for any Indemnified
Costs pursuant to this Article X relating to or arising out of any
breach of a representation or warranty contained in this Agreement
unless a written claim for indemnification in accordance with Section
10.3 or 10.4 is given by the Indemnified Party to the Indemnifying
Party with respect thereto by 5:00 p.m., Eastern time, on the date of
issuance of the first report of Parent's independent auditors on the
combined operations of Parent and the Republic following the Effective
Date. Notwithstanding anything in this Agreement to the contrary,
there shall be no time limitation with respect to claims relating to
or arising out of a breach of a covenant or agreement contained in
this Agreement.
(b) Limitations on Indemnification. Article X shall not
apply to any claims arising under or related to the Non-Competition
Agreements, the Escrow Agreement or the Affiliate Letters.
(c) Notwithstanding anything to the contrary set forth
herein, in no event shall Parent's or any other Parent Indemnified
Party's aggregate liability under this Article X exceed $100,000.
SECTION 10.6 RECOURSE AGAINST ESCROWED SHARES. Subject to Section
12.8 hereof, any claim by a Parent Indemnified Party against any Interest
Holder for Parent Indemnified Costs payable under this Article X shall be
payable only out of the Escrowed Shares for all amounts due to the Parent
Indemnified Party from such Interest Holder with respect to such claim and
shall be payable in an amount not to exceed the Maximum Escrow Amount (as
defined below) of such Interest Holder. In no event shall the Parent
Indemnified Party be entitled to be paid out of the Escrowed Shares in respect
of claims against a Interest Holder an amount in excess of such Interest
Holder's Maximum Escrow Amount. In the event of any claim pursuant to Section
10.1 hereof by a Parent Indemnified Party against one or more Interest Holders,
each such Interest Holder's Maximum Escrow Amount shall be reduced (but not
below zero) by such Interest Holder's pro rata portion, determined in
accordance with the percentage set forth opposite such Interest Holder's name
on Exhibit B, of the amount paid out of the Escrowed Shares in respect of such
claim, and, to the extent that the portion of such claim for which such
Interest Holder is liable exceeds such Interest Holder's Maximum Escrow Amount
as of the time of payment of such claim out of the Escrowed Shares, the Parent
Indemnified Party shall then be entitled to seek the remaining amount of such
claim from such other Interest Holders whose respective Maximum Escrow Amounts
exceed zero, pro rata based upon the Maximum Escrow Amounts of such Interest
Holders as of the time of payment of such claim, until such claim has been paid
in full
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or each Interest Holder's Maximum Escrow Amount has been reduced to zero. For
purposes of this Section 10.6, a Interest Holder's "Maximum Escrow Amount"
shall mean, at any time, such Interest Holder's pro rata share of the Escrowed
Shares, less any amounts previously deducted from such Interest Holder's
Maximum Escrow Amount in accordance with this Section 10.6. For purposes of
satisfying a claim for Parent Indemnified Costs under this Section 10.6, the
Escrowed Shares shall be valued at the Average Closing Price. Subject to the
provisions of Section 12.8, the parties hereto intend and agree that,
notwithstanding anything to the contrary stated in any other paragraph of this
Agreement, the Parent Indemnified Parties' sole recourse against the Interest
Holders for any claim with respect to a breach of this Agreement (other than a
claim contemplated by Sections 8.13(l) or 8.13(m)) hereof shall be governed by,
and subject to the terms and provisions of, the Escrow Agreement.
ARTICLE XI
TERMINATION, AMENDMENT AND WAIVER
SECTION 11.1 TERMINATION. This Agreement may be terminated at any
time prior to the Closing Date, by the mutual written consent of the Company
and Parent or as follows:
(a) The Company shall have the right to terminate this
Agreement:
(i) upon a material breach of a representation or
warranty of Parent contained in this Agreement which has not
been cured in all material respects and which has caused any
of the conditions set forth in Section 8.2(a) to be incapable
of being satisfied by the Termination Date;
(ii) if the Acquisition is not completed by
September 30, 1998 (the "Termination Date") (unless due to a
delay or default on the part of the Company);
(iii) if the Acquisition is enjoined by a final,
unappealable court order not entered at the request or with
the support of the Company and if the Company shall have used
reasonable efforts to prevent the entry of such order; or
(iv) if Parent (A) fails to perform in any
material respect any of its covenants in this Agreement and
(B) does not cure such default in all material respects within
30 days after written notice of such default specifying such
default in reasonable detail is given to Parent by the
Company.
(b) Parent shall have the right to terminate this
Agreement:
(i) upon a material breach of a representation or
warranty of the Company or the Interest Holders contained in
this Agreement which has not been cured in all material
respects and which has caused any of the conditions set forth
in Section 9.3(a) to be incapable of being satisfied by the
Termination Date;
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(ii) if the Acquisition is not completed by
September 30, 1998 (unless due to a delay or default on the
part of Parent); or
(iii) if the Acquisition is enjoined by a final,
unappealable court order not entered at the request or with
the support of Parent and if Parent shall have used reasonable
efforts to prevent the entry of such order.
SECTION 11.2 EFFECT OF TERMINATION. In the event of termination
of this Agreement by either Parent or the Company pursuant to the provisions of
Section 11.1, this Agreement shall forthwith become void and there shall be no
liability or further obligation on the part of the Company, Parent or their
respective officers or directors (except with respect to this Section 11.2, the
second sentence of Section 8.1(a) and Sections 8.1(b), 8.6 and 12.4, all of
which shall survive the termination). Nothing in this Section 11.2 shall
relieve any party from liability for any willful and intentional breach of any
covenant or agreement of such party contained in this Agreement.
SECTION 11.3 AMENDMENT. This Agreement may not be amended except
by action taken by the parties' respective Boards of Directors or duly
authorized committees thereof and then only by an instrument in writing signed
on behalf of each of the parties hereto and in compliance with applicable law.
Such amendment may take place at any time prior to the Closing Date, and,
subject to applicable law, whether before or after approval by the stockholders
of the Company or Parent.
SECTION 11.4 WAIVER. At any time prior to the Effective Time, the
parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant thereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE XII
GENERAL PROVISIONS
SECTION 12.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) Except as set forth in Section 12.1(b) of this Agreement, the
representations, warranties, covenants and agreements of each party hereto
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any other party hereto, any person
controlling any such party or any of their officers, directors, representatives
or agents whether prior to or after the execution of this Agreement.
(b) Each representation, warranty, covenant and agreement set
forth in this Agreement shall survive the Effective Time. Each representation
and warranty made by any of the parties
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to this Agreement shall expire on the last day, if any, that any claims for
breaches of such representation and warranty may be made pursuant to Section
10.5 hereof, except that any such representation or warranty that has been made
the subject of a third-party or direct claim prior to such expiration date
shall survive with respect to such claim until the final resolution of such
claim pursuant to Article X. Except as otherwise specifically stated in this
Agreement, all covenants and agreements in this Agreement shall survive the
Closing indefinitely.
SECTION 12.2 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered
personally, mailed by registered or certified mail (return receipt requested)
or sent via facsimile to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) If to Parent to:
First Sierra Financial, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company or the Interest Holders, to:
c/o The Republic Group, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Jeffers, Wilson, ▇▇▇▇▇ & ▇▇▇▇, LLP
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 12.3 INTERPRETATION. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this
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Agreement. In this Agreement, unless a contrary intention appears, (i) the
words "herein", "hereof" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular Article, Section
or other subdivision and (ii) reference to any Article or Section means such
Article or Section hereof. No provision of this Agreement shall be interpreted
or construed against any party hereto solely because such party or its legal
representative drafted such provision. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved against any
party, whether under any rule of construction or otherwise. No party to this
Agreement shall be considered the draftsman. The parties acknowledge and agree
that this Agreement has been reviewed, negotiated, and accepted by all parties
and their attorneys and shall be construed and interpreted according to the
ordinary meaning of the words used so as fairly to accomplish the purposes and
intentions of the parties.
SECTION 12.4 MISCELLANEOUS. This Agreement (including the
documents and instruments referred to herein) (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the
subject matter hereof, (b) shall not be assigned by operation of law or
otherwise. THIS AGREEMENT SHALL BE GOVERNED IN ALL RESPECTS, INCLUDING
VALIDITY, INTERPRETATION AND EFFECT, BY THE LAWS OF THE STATE OF DELAWARE
APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE.
THE EXCLUSIVE VENUE FOR THE ADJUDICATION OF ANY DISPUTE OR PROCEEDING ARISING
OUT OF THIS AGREEMENT OR THE PERFORMANCE THEREOF SHALL BE THE COURTS LOCATED IN
THE STATE OF DELAWARE AND THE PARTIES HERETO AND THEIR AFFILIATES EACH CONSENT
TO AND HEREBY SUBMIT TO THE JURISDICTION OF ANY COURT LOCATED IN THE STATE OF
DELAWARE.
SECTION 12.5 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
SECTION 12.6 PARTIES IN INTEREST. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement other than as provided in Section 7.13.
SECTION 12.7 CAPTIONS. The captions contained in this Agreement
are for reference purposes only and are not part of this Agreement.
SECTION 12.8 NO WAIVER RELATING TO CLAIMS FOR FRAUD. The
liability of any party under Article X shall be in addition to, and not
exclusive of any other liability that such party may have at law or equity
based on such party's intentional misrepresentations or fraudulent acts or
omissions. None of the provisions set forth in this Agreement, including, but
not limited to, the provisions set forth in Sections 10.5(a) (relating to
limitations on the period of time during which a claim for indemnification may
be brought), or 10.5(b) (relating to liability caps), shall be deemed a waiver
by any party to this Agreement of any right or remedy which such party may have
at law or equity based on any other party's intentional misrepresentations or
fraudulent acts
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or omissions, nor shall any such provisions limit, or be deemed to limit, (a)
the amounts of recovery sought or awarded in any such claim for fraud, (b) the
time period during which a claim for fraud may be brought, or (c) the recourse
which any such party may seek against another party with respect to a claim for
fraud; provided, that with respect to such rights and remedies at law or
equity, the parties further acknowledge and agree that none of the provisions
of this Section 12.8, nor any references to this Section 12.8 throughout this
Agreement, shall be deemed a waiver of any defenses which may be available in
respect of actions or claims for fraud, including but not limited to, defenses
of statutes of limitations or limitations of damages.
SECTION 12.9 SEVERABILITY. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
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IN WITNESS WHEREOF, Parent, the Company and the Interest Holders have
caused this Agreement to be signed by their respective officers and attested to
as of the date first written above.
FIRST SIERRA FINANCIAL, INC.
Attest:
By:
------------------------ -----------------------------
Secretary Name:
Title:
REPUBLIC COMMERCIAL CREDIT, LLC
By:
------------------------ -----------------------------
Secretary Name:
Title:
INTEREST HOLDERS:
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