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EXHIBIT 2.1
AGREEMENT FOR PURCHASE AND
SALE OF CERTAIN ASSETS OF
KARS-YES HOLDINGS INC.,
KARS-YES FINANCIAL INC., AND
KARS-YES INC., AS
SELLERS,
AND
UGLY DUCKLING CORPORATION,
AS BUYER,
DATED AS OF
SEPTEMBER 15, 1997
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TABLE OF CONTENTS
ARTICLE I - PURCHASE AND SALE OF ASSETS.................................... 2
1.1 Assets Purchased............................................ 2
1.2 Excluded Assets............................................. 3
1.3 Assumed Liabilities......................................... 4
1.4 Excluded Liabilities........................................ 5
1.5 Future Sales Arrangement.................................... 6
1.6 Lease Agreements............................................ 6
1.7 Financial Information Required.............................. 7
ARTICLE II - PURCHASE PRICE AND CLOSING.................................... 8
2.1 Purchase Price.............................................. 8
2.2 Payment of Purchase Price at Closing........................ 9
2.3 Closing..................................................... 9
2.4 Allocation of Purchase Price; Accounting Treatment.......... 9
ARTICLE III - PORTFOLIO SERVICING AGREEMENT................................ 10
3.1 Administration of Sellers' Existing Loan Portfolio.......... 10
3.2 Sellers' Continuing Responsibilities........................ 10
ARTICLE IV - MANAGEMENT SERVICES AGREEMENT................................. 10
4.1 Sellers to Enter into Services Agreement.................... 10
4.2 Responsibilities of Buyer................................... 10
ARTICLE V - AGREEMENTS REGARDING AUTOMOBILE INVENTORY...................... 11
5.1 Purchase of Automobile Inventory............................ 11
5.2 Automobile Inventory Holdback............................... 11
ARTICLE VI - FACILITIES CONSIDERATIONS..................................... 11
6.1 Relocation of Appliance Company Employees................... 11
6.2 Cooperation with Option Space Lease......................... 11
6.3 Redbird Sales and Reconditioning Facility................... 12
6.4 Appliance Company's Option with Respect to the Plano Road
Facility.................................................... 12
ARTICLE VII - SOFTWARE AND INTELLECTUAL PROPERTY ARRANGEMENTS.............. 12
7.1 Proprietary Software........................................ 12
7.2 Licensed Software........................................... 13
7.3 Agreements Relating to the Appliance Company Agreement...... 13
7.4 Use of Computer System by Appliance Company Personnel....... 13
7.5 Other Events................................................ 14
7.6 Cooperation................................................. 14
(i)
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ARTICLE VIII - NON-SOLICITATION OF EMPLOYEES............................... 15
ARTICLE IX - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES........ 15
9.1 Conditions Precedent to Obligations of Buyer and Sellers.... 15
9.2 Conditions to Obligations of Sellers to Close............... 16
9.3 Conditions Precedent to the Obligations of Buyer............ 16
ARTICLE X - COVENANTS OF THE PARTIES....................................... 18
10.1 Conduct of Acquired Business................................ 18
10.2 Access to Information....................................... 19
10.3 Efforts to Consummate Transaction........................... 20
10.4 Press Release............................................... 20
10.5 Books and Records........................................... 20
10.6 Employment.................................................. 21
10.7 Expenses.................................................... 21
10.8 Cobra Coverage.............................................. 21
10.9 Post Closing Responsibility................................. 22
10.10 Environmental Covenants..................................... 22
ARTICLE XI - REPRESENTATIONS AND WARRANTIES OF SELLERS..................... 23
11.1 Due Organization and Qualification.......................... 23
11.2 Corporate Power and Authority............................... 23
11.3 No Violations............................................... 24
11.4 Completeness of Acquired Assets............................. 24
11.5 Consents.................................................... 24
11.6 Governmental Approval....................................... 25
11.7 Litigation.................................................. 25
11.8 Environmental Laws and Regulations.......................... 25
11.9 Employee Benefit Plans...................................... 29
11.10 Financial Information....................................... 30
11.11 Subsidiaries................................................ 30
11.12 Absence of Undisclosed Liabilities.......................... 30
11.13 Absence of Certain Developments............................. 30
11.14 Real Estate................................................. 32
11.15 Tax Matters................................................. 33
11.16 Contracts and Commitments................................... 35
11.17 Intellectual Property....................................... 36
11.18 Employment Matters.......................................... 38
11.19 No Liens.................................................... 38
11.20 Affiliate Transactions...................................... 38
11.21 Compliance with Laws; Permits............................... 38
11.22 Reasonably Equivalent Value................................. 39
11.23 Disclosure.................................................. 39
(ii)
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ARTICLE XII - REPRESENTATIONS AND WARRANTIES OF BUYER............................ 39
12.1 Due Organization and Qualification................................ 39
12.2 Corporate Power and Authority..................................... 39
12.3 No Violations..................................................... 40
12.4 Consents.......................................................... 40
12.5 Conformity with Law and Litigation................................ 40
12.6 Reasonably Equivalent Value....................................... 40
ARTICLE XIII - INDEMNIFICATION................................................... 41
13.1 Definitions....................................................... 41
13.2 Indemnification by Sellers........................................ 41
13.3 Indemnification by Buyer.......................................... 42
13.4 Procedure for Indemnification Claims.............................. 42
ARTICLE XIV - GENERAL PROVISIONS................................................. 43
14.1 Cooperation....................................................... 43
14.2 Survival of Covenants, Agreements, Representations and Warranties. 43
14.3 Successors and Assigns............................................ 44
14.4 Entire Agreement.................................................. 44
14.5 Counterparts...................................................... 44
14.6 Brokers and Agents................................................ 44
14.7 Expenses.......................................................... 44
14.8 Notices........................................................... 44
14.9 Governing Law..................................................... 45
14.10 Exercise of Rights and Remedies................................... 45
14.11 Reformation and Severability...................................... 46
14.12 Remedies Cumulative............................................... 46
14.13 Captions.......................................................... 46
14.14 Use of Certain Terms.............................................. 46
14.15 Attorneys' Fees................................................... 46
14.16 Waiver of Jury Trial.............................................. 46
(iii)
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LIST OF SCHEDULES
Included in Disclosure Schedule
1.1(d) List of Furniture, Improvements, fixtures, equipment, supplies, tools and
other goods
1.1(e) Assignable Permits
1.1(g) Assumed Agreements
1.1(h) Intellectual Property
1.1(j) Acquired Automobile Inventory
1.6(a) Leases with Non-Affiliates
1.6(b) Copy of the Appliance Company Agreement
1.6(c) Rental Rates for Plano Road
2.2 Trade Creditors and Trade Claims
3.1(a) Portfolio Servicing Agreement
3.1(b) Subservicing Agreement
4.1 Management Services Agreement
7.1 Proprietary Software
7.1(a) Exceptions to Software Representations
7.2 Licensed Software
9.1(d) Master ▇▇▇▇ of Sale, Assignment and Assumption Agreement
10.6(a) Employees Not to Be Offered Employment
10.6(b) Employees who are precluded from Offers of Employment (Appliance
Company)
11.1 State Qualifications to Transact Business
11.5 Required Consents
11.8 Environmental Exceptions
11.9 Employee Benefit Plans
11.10 June 30, 1997 Balance Sheet
11.11 List of Subsidiaries
11.13 Post-June 30, 1997 Matters
(iv)
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11.14(b) Real Estate Leases and Improvements
11.15 Tax Exceptions
11.16 Contract Disclosure
11.17 Intellectual Property
11.18 Employment Matters
11.19 Liens
11.20 Affiliate Transactions
11.21 Permits
(v)
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AGREEMENT FOR PURCHASE AND SALE OF CERTAIN ASSETS
This Agreement for Purchase and Sale of Certain Assets ("the Agreement")
is entered into as of the 15th day of September, 1997, by and between KARS-YES
Holdings Inc., a Texas corporation ("Parent"), KARS-YES Financial Inc., a
Delaware corporation ("Finance"), and KARS-YES Inc., a Delaware corporation
("Retail"), as Sellers (Parent, Finance, and Retail collectively are referred to
hereinafter as "the Sellers"), and Ugly Duckling Corporation, a Delaware
corporation ("Buyer"), as Buyer, and joined in for certain limited purposes as
set forth herein by The YES Group Inc., a Texas Corporation (the "Appliance
Company").
WITNESSETH
WHEREAS, Sellers desire to sell, and Buyer desires to purchase, the
operations of Finance, the headquarters operations of Parent and all Sellers,
and the retail operations of Retail in certain states, including all equipment
owned by Sellers for such operations;
WHEREAS, Buyer will enter into or assume certain real estate leases or
subleases and equipment leases of the operations acquired by Buyer;
WHEREAS, the purchase price for the assets to be acquired, other than
automobile inventory, is $3 million dollars plus the direct payment of all
payroll expenses for the employees of Sellers hired by Buyer from and after
12:01 A.M. on Saturday, September 6, 1997 (the "Effective Time"), to the
Closing, as hereinafter defined;
WHEREAS, Buyer also will purchase designated automobile inventory for a
designated price with respect to which Buyer will hold back ten percent (10%) of
the designated price for the automobile inventory purchased for a period of
fourteen (14) days after the Closing, with payment pursuant to the holdback to
be made by the fifteenth (15th) day after the Closing, or if such day is not a
business day, the next following business day (the "Settlement Date"), as
protection for unacceptable automobile inventory returned to Sellers within such
period;
WHEREAS, Buyer expressly would not assume any of the loans or receivables
of Sellers or assume any obligations relating to operations not being acquired
by Buyer except with respect to a portfolio servicing agreement to be entered
into between Buyer and Sellers pursuant to which Buyer would administer and
service the existing loan portfolio of Sellers for a fee and pursuant to
arrangements set forth therein and except that Buyer will enter into a
subservicing agreement with respect to the obligations of Finance as Collection
Agent under that certain Originator Sale Agreement, dated as of October 1, 1995,
by and among Finance, as Seller and Collection Agent, and YES Receivables Inc.,
as Purchaser (the "Originator Sale Agreement");
WHEREAS, until such time as Buyer can procure applicable and appropriate
licenses, to the fullest extent permitted by applicable law, Sellers would enter
into a management services agreement
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with Buyer in order to permit continued operations of the businesses and
operations transferred after the effective time of the sale;
WHEREAS, Buyer will acquire all rights to the trade name "KARS-YES",
subject to Sellers' continued use thereof for their corporate names and in
connection with the Excluded Assets, and certain other trade names and other
intellectual property of the Sellers, with the express understanding that,
except as otherwise provided herein, Buyer will have no rights to the trade
names and intellectual property of the Appliance Company formerly affiliated
with Sellers, as governed by an agreement between the Parent and the Appliance
Company (the "Appliance Company Agreement");
WHEREAS, the Buyer and Sellers desire to make certain arrangements
regarding various facilities and with respect to arrangements for Sellers'
proprietary and licensed software, including the sharing of any transfer costs
or licensing fees; and
WHEREAS, each of Buyer, Sellers and the Appliance Company, which joins in
this Agreement for certain limited purposes, desires to agree not to solicit
employees of one another for the period specified herein except as otherwise
provided with respect to employees of Sellers to be offered employment or hired
by Buyer pursuant to this Agreement;
NOW, THEREFORE, for and in consideration of good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Assets Purchased. At the Closing, as hereinafter defined, the Buyer
will purchase (directly or through an affiliated company or companies) and the
Sellers will sell all of Sellers' assets, whether real, personal or mixed,
tangible or intangible, including the following, but not including Excluded
Assets (defined below) (hereinafter referred to as the "Acquired Assets"):
(a) the operations and related assets of Finance;
(b) the headquarters' operations and related assets of Sellers;
(c) the operations and related assets of Retail in the states of
California, Georgia, Texas and Florida (with (a), (b) and (c) of this
Section being hereinafter referred to as the "Acquired Business");
(d) All furniture, leasehold improvements, fixtures, equipment,
supplies, tools for maintenance and repair, other goods, and all other
appurtenances in and to the premises
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utilized by Sellers in the operation of the Acquired Business, as
specified on SCHEDULE 1.1(d) hereto except for fixtures and appurtenances
of the real property owned by Retail located at Plano Road in Dallas,
Texas;
(e) Any assignable title, claims, and rights under Permits (as
defined in Section 11.21), but excluding any permits relating solely to
Excluded Assets ("Acquired Permits"), as specified on SCHEDULE 1.1(e)
hereto;
(f) Subject to paragraph (g) below relating to Agreements (as
defined in Section 11.16), and paragraph (h) below relating to
Intellectual Property (as defined below), any additional items of tangible
or intangible property used or owned by Sellers related to the Acquired
Business, the Acquired Assets or the Acquired Facilities (defined below),
which are not included above, including, without limitation, prepaid
expenses and deposits, and goodwill;
(g) All Agreements relating to the Acquired Business, the Acquired
Assets, or the Acquired Facilities (including but not limited to equipment
leases) that Buyer agrees to assume and that are listed in SCHEDULE 1.1(g)
hereto ("Assumed Agreements");
(h) Subject to Article VII hereof, all of Sellers' right, title and
interest in and to the intellectual property assets, rights, and
properties of Sellers of every kind, character, and description and
wherever located, relating to or used directly or indirectly in the
operation of the Acquired Business, including, without limitation, all
copyrights, service marks, trademarks, trade names, trade secrets,
patents, patent applications, toll free telephone numbers, query libraries
and other licenses and permits issued to or owned by Sellers and the
property and rights to be transferred to Buyer pursuant to Article VII
hereof as described in SCHEDULE 1.1(h) (collectively, the "Intellectual
Property");
(i) All books of account, records, files, invoices, customer lists
and information, supplier lists and information, employee files, operating
manuals, catalogs, technical information sheets, pricing sheets,
advertising and display materials, and brochures and other materials and
data associated with, used, or employed by Sellers in the operation of the
Acquired Business and ownership of the Acquired Assets;
(j) The automobile inventory (the "Acquired Automobile Inventory")
as described in SCHEDULE 1.1(j);
(k) ▇▇▇▇▇ cash located at the retail locations of Retail being
acquired by Buyer; and
(l) Installment sales agreements originated after the Effective Time
for automobiles listed on the Acquired Automobile Inventory and sold after
the Effective Time, together with related files and the dollar amount of
down payments received after the Effective Time for such automobiles sold
after the Effective Time.
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1.2 Excluded Assets. Anything contained in Section 1.1 or elsewhere herein
to the contrary notwithstanding, there are expressly excluded from the assets,
properties, interests in properties and rights of the Sellers to be sold,
transferred, assigned, and delivered to Buyer the following (the "Excluded
Assets"):
(a) Receivable Files (as such term is defined in the Portfolio
Servicing Agreement), installment sales agreements and accounts receivable
of Sellers, except for installment sales agreements and related files
covered by Section 1.1(l);
(b) Any automobile inventory of Retail not included in the Acquired
Automobile Inventory;
(c) The stock of any subsidiary of any Seller, including, but not
limited to the stock of YES Receivables Inc. held by Finance and other
subsidiaries listed on SCHEDULE 11.11 hereto;
(d) All of Sellers' right, title and interest under or related to
this Agreement, including, without limitation, the consideration delivered
to Sellers pursuant to this Agreement;
(e) The minute books, stock transfer books, seals, blank share
certificates, and other documents and things relating to organizational
matters and the existence of each of the Sellers as a corporation and the
corporate tax returns (including all tax refunds) and financial statements
of Sellers, provided, however, that Buyer shall have the right to request
and promptly receive copies of corporate tax returns and financial
statements of Sellers for periods or portions thereof prior to the Closing
(as defined below);
(f) Cash (other than ▇▇▇▇▇ cash located at the retail locations of
Retail being acquired by Buyer), real estate loans, stockholder or
affiliate loans and advances, and any other loans or advances not
specifically purchased hereunder;
(g) any and all benefit plans of Sellers or for the benefit of any
employees, officers or directors of Sellers;
(h) the real property owned by Retail located at Plano Road in
Dallas, Texas; and
(i) Sellers' right, title, and interest relating to any assets,
rights, and properties of Sellers, wherever located, whether tangible or
intangible, unrelated to the Acquired Business or the Acquired Assets.
1.3 Assumed Liabilities. The Buyer will assume (i) the contractual
obligations of the Sellers with respect to all Assumed Agreements, the Future
Sales Arrangement (defined below), and the Acquired Third Party Leases (defined
below), as well as the obligations specified in the Portfolio Servicing
Agreement (defined below) and the Subservicing Agreement (defined below), in
each case
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arising from and after the Closing, and (ii) obligations of the Sellers to
employees of the Sellers who are offered employment and hired by Buyer pursuant
to Section 10.6 hereof for accrued vacation and sick pay as of the Closing, and
(iii) all obligations for the operations of the Acquired Business and the
Acquired Assets arising from and after the Closing, subject in all cases to
Sellers' obligations of indemnity and other obligations hereunder (collectively,
the "Assumed Liabilities"). It is expressly understood and agreed that Buyer
shall not be liable for any of the obligations or liabilities of Sellers of any
kind or nature other than those specifically assumed by Buyer under this Section
1.3, and the Acquired Assets will be conveyed to Buyer at the Closing free and
clear of all liens, claims, and other liabilities other than the Assumed
Liabilities.
1.4 Excluded Liabilities. Notwithstanding anything to the contrary herein,
Buyer expressly will not assume, and Sellers will continue to have
responsibility for (i) all obligations and liabilities arising from Sellers'
existing customer loans (other than Buyer's servicing obligations pursuant to
the terms of the Portfolio Servicing Agreement and the Subservicing Agreement),
(ii) any and all liabilities and obligations arising prior to the Closing, (iii)
any and all liabilities with respect to the operations and assets of Sellers not
being acquired by Buyer, (iv) all transfer taxes, costs or fees imposed on
Sellers arising out of this Agreement, except as provided in Section 7.2, (v)
all liabilities and obligations of Sellers under this Agreement or with respect
to or arising out of the consummation of the transactions contemplated by this
Agreement, (vi) except as described in clause (ii) of the first sentence of
Section 1.3, hereof, any liabilities to officers or employees of any of Sellers
for any period prior to the Closing, including without limitation, accrued
severance pay, and similar matters, or arising out of the consummation of the
transactions contemplated hereby, including without limitation, the termination
of employment of any of such officers or employees as contemplated herein prior
to any of such persons being hired by Buyer or any subsidiary of Buyer pursuant
to Section 10.6 hereof, (vii) all liabilities and obligations of Sellers for
fees and expenses incurred in connection with, relating to, or arising out of
the consummation of the transactions contemplated by this Agreement, (viii) all
liabilities and obligations of any Seller secured by any Acquired Assets, which
shall be satisfied and any related liens or security interests released prior to
the Closing, (ix) all liabilities for "Taxes" (as defined in Section 11.15) of
the Sellers (regardless of when incurred), including, without limitation, Taxes
of the Seller relating to any period prior or subsequent to the Closing or
arising as a result of the conveyance of the Acquired Assets to Buyer or the
assumption by Buyer of the Assumed Liabilities, or of any other person
(regardless of when incurred) under Treas. Reg. 1502-6 (or any similar provision
of state, local, or foreign law) as a transferee or successor, by contract or
otherwise, (x) any liability under or attributable to any benefit plan of
Sellers or for the benefit of any employees, officers or directors of Sellers,
(xi) any liability or obligation arising from the ownership or operation of the
Acquired Business or the Acquired Assets or the ownership or operation of the
Acquired Facilities prior to the Closing, including but not limited to any
scheduled contingency or item pertaining to any Seller, the Acquired Business,
the Acquired Assets, or the Acquired Facilities, any environmental claim or
matter, including any such matter identified on any Phase I or Phase II reports
on the Acquired Facilities obtained by Buyer in connection with the transactions
contemplated herein, any taxes due or claimed to be due, and any litigation
relating to or in respect of the Acquired Assets, the Acquired Business, or the
Acquired Facilities, and (xii) all other liabilities that are not specifically
assumed by Buyer under Section 1.3 hereof, including but not limited to any
liabilities that are reflected on any balance sheet
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of any Seller provided to Buyer pursuant to this Agreement or that should be so
reflected or disclosed as a contingent liability under generally accepted
accounting principles ("GAAP") (collectively, the "Excluded Liabilities").
Sellers shall discharge the Excluded Liabilities and, without limitation of the
foregoing, if Sellers shall at any time dissolve or make any distribution for
the benefit of equity holders following the Closing, Sellers shall pay, post
security for or otherwise make full and adequate provision for all Excluded
Liabilities. Except as otherwise contemplated herein, Buyer and Sellers shall
allocate as of Closing all expenses for utilities, property, sales and use
taxes, Acquired Lease rentals, costs and other expenses, and other similar
expenses relating to the Acquired Business and the Acquired Assets.
Notwithstanding the preceding, Sellers shall pay or be responsible to pay all
leasehold rentals, including all amounts payable for related taxes, insurance
and maintenance of the Acquired Business that become due and payable prior to
Closing, without pro ration, and Buyer shall pay or be responsible to pay all
leasehold rentals, including all amounts payable for related taxes, insurance
and maintenance of the Acquired Business that become due and payable after the
Closing, without pro ration.
1.5 Future Sales Arrangement. Buyer will assume the Sellers' position in
Sellers' upgrade guaranty program pursuant to which a customer within six months
of paying off his or her loan is eligible for an upgrade which entitles the
customer to fast credit approval, a lower down payment and a lower APR (the
"Future Sales Arrangement").
1.6 Lease Agreements. Buyers and Sellers agree that, as of the Closing,
Buyer or one or more subsidiaries or affiliates of Buyer shall:
(a) assume the existing leases (the "Assumed Leases") entered into
by Sellers for facilities located in the states of Texas, Georgia and
California used in the Acquired Business and owned by non-affiliates of
Sellers as described on SCHEDULE 1.6(a) and enter into subleases with the
applicable Seller (the "Subleases") under existing leases (the "Sublease
Leases" and together with the Assumed Leases, the "Acquired Third-Party
Leases") for the three facilities located in the state of Florida and
described on SCHEDULE 1.6(a) (collectively, the "Independent Facilities"),
the assumption of the Assumed Leases to be for the remaining term of such
leases and under their existing terms and provisions and such Subleases to
be for a term and with such provisions as are described on SCHEDULE 1.6(a)
hereof, including put back rights, rental subsidies, etc., provided,
however, that if the Buyer and Sellers determine that a sublease of the
Assumed Leases is beneficial, the Buyer may sublease the applicable
facilities from the applicable Sellers on terms and conditions as are
mutually agreed; and
(b) enter into a new lease with Retail for the real property and
facilities of Retail located at Plano Road in Dallas, Texas (the "Related
Facilities" and, together with the Independent Facilities, the "Acquired
Facilities"), subject to the contractual right of the Appliance Company to
purchase the Plano Road facility, as expressly set forth in the Appliance
Company agreement, which accompanies this Agreement as SCHEDULE 1.6(b)
(the "Appliance Company Agreement"), at the rental rates stated in
SCHEDULE 1.6(c) for a period of twelve (12) months and up to an additional
six (6) months in the sole discretion of Retail,
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in the event of extraordinary circumstances or undue hardship to Buyer,
including without limitation if replacement space has not been completed
being built and is not ready for Buyer to occupy, and upon terms and
subject to conditions mutually acceptable to the parties, such lease to be
terminable at any time by Buyer upon 30 days notice (the "Acquired Related
Party Lease" and together with the Acquired Third-Party Leases, the
"Acquired Leases"). Notwithstanding the contractual right of the Appliance
Company to purchase the Plano Road facility, the Appliance Company agrees
that no such purchase by the Appliance Company shall affect the Acquired
Related Party Lease for the first twelve (12) months thereof and, in the
event of such purchase, the Appliance Company agrees hereby to assume such
Acquired Related Party Lease and to be bound thereby for the first twelve
(12) months thereof, provided that the Appliance Company may in its sole
discretion permit the Acquired Related Party Lease to remain in effect for
up to an additional six (6) months in the event of extraordinary
circumstances of undue hardship to Buyer, including without limitation if
replacement space has not been completed being built and is not ready for
Buyer to occupy. Signage will be split equally, subject to the reasonable
discretion of Retail or Appliance Company, as applicable, with signage
changes to be paid by Buyer except for relocation of Appliance Company
signs or for new Appliance Company signs.
1.7 Financial Information Required. Sellers will provide to Buyer the
following financial information:
A. No later than 45 days after the Closing, audited consolidated
financial statements of Sellers for the fiscal year ended June 30, 1997
with related consolidating schedules opined on by the auditors performing
the audit (the "1997 Audited Financials"). The 1997 Audited Financial
shall contain sufficient information on a quarterly basis to allow Buyer
to recast such financials to full calendar year financials;
B. No later than 45 days after the Closing and updated as of the
Closing, unaudited consolidated financial statements of Sellers from July
1, 1997 through the Closing with related consolidating schedules (the
"Current Financials");
C. No later than 45 days after the Closing, Sellers will cooperate
with Buyer in preparing a list of all pro forma adjustments which in
Buyer's reasonable judgment would be necessary or appropriate to allow
Buyer to incorporate the Audited Financials and the Current Financials
into its own financial statements or as may be required in connection with
filings required to be made by Buyer under the Securities Exchange Act of
1934, as amended (the "Pro Forma List"); and
D. No later than the Closing, (i) audited consolidated financial
statements of Sellers for the fiscal years ended June 30, 1996 and 1995
(the "Prior Year Audited Financials"), (ii) unaudited consolidated
financial statements of Sellers for the fiscal year ended June 30, 1997
(the "Unaudited Year-End Financials"), and (iii) a complete copy of
Sellers' "query library" contained in or relating to their computer
databases, with an index and description of each query therein (the "Query
Information" and together with the 1997
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Audited Financials, the Current Financials, the Pro Forma List, the Prior
Year Audited Financials, and the Unaudited Year-End Financials, the
"Financial Information").
Without limiting the above, the 1997 Audited Financials and the Unaudited
Year-End Financials will consist of at least balance sheets and related
statements of income, cash flow and stockholders' equity prepared in accordance
with GAAP plus, in the case of the 1997 Audited Financials, consolidating
schedules for each thereof, and the Current Financials will consist of at least
balance sheets and the related statements of income and cash flows prepared in
accordance with GAAP plus consolidating schedules for each thereof.
ARTICLE II
PURCHASE PRICE AND CLOSING
2.1 Purchase Price. The purchase price (the "Purchase Price") for the
Acquired Assets will consist of the following and will be payable as set forth
below:
(a) Payable in cash by wire transfer to Sellers' designated account
at Closing:
(i) Three million dollars ($3,000,000.00); and
(ii) The Automobile Inventory Price as set forth in Article V
(less the Automobile Inventory Holdback as set forth in Article V).
(b) Payable in accordance with Buyer's payroll practices directly to
the employees of Sellers hired by Buyer:
All payroll expenses from and after the Effective Time to the
Closing for the Employees of Sellers hired by Buyer.
(c) On the Settlement Date, the amounts payable by Buyer to Sellers
and by Sellers to Buyer as the case may be, as follows:
(i) The amounts required by Section 5.2 regarding the
Unacceptable Automobile Inventory and Automobile
Inventory Holdback;
(ii) Cash down payments received from the sale of Acquired
Automobile Inventory after the Effective Time to the
extent not previously paid by offset of amounts payable
by Buyer to Sellers on the Closing Date;
(iii) Proration as of the Effective Time of all expenses
relating to the operation of the Acquired Facility at
▇▇▇ ▇. ▇▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇,
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▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, but not any leasehold rentals, and
related taxes, insurance and maintenance; and
(iv) Proration as of 11:59 p.m. September 18, 1997 of all
expenses relating to the operation of all other Acquired
Facilities, but not any leasehold rentals and related
taxes, insurance and maintenance.
The amounts payable by Buyer to Sellers and by Sellers to
Buyer pursuant to this Section 2.1(c) may be made by netting
and offsets so that there is a net, single amount payable by
Buyer to Sellers or by Sellers to Buyer as the case may be,
which net single amount shall be paid on the Settlement Date
by wire transfer. The Sellers will prepare a statement of the
net amount payable for review by Buyer not later than the
twelfth (12th) day after the Closing, and Buyer and Sellers
will work together in good faith to determine the appropriate
amount of the net amount payable prior to the Settlement Date.
2.2 Payment of Purchase Price at Closing. Sellers authorize and instruct
Buyer to wire transfer to the two bank accounts as set forth below the funds
being paid by Buyer to Sellers pursuant to Section 2.1(a) herein, a total of
$5,492,131 (the "Closing Date Payment"). Sellers are authorizing and instructing
Buyer, and Buyer is following Sellers' authorization and instruction, in order
to satisfy certain conditions to the consent of the secured lenders to the
transaction on or before Closing and as contemplated by this Agreement. Sellers
assure Buyer that the Reserve Account (as described below) shall be used to
satisfy in full all of Sellers' unsecured trade creditors (the "Trade
Creditors"). Attached hereto as Schedule 2.2 is an accurate and complete
schedule of Sellers' Trade Creditors and the amounts payable to the Trade
Creditors (the "Trade Claims") prepared to the best knowledge and belief of
Sellers as of September 18, 1997. Any difference between the total amount of the
Trade Claims pursuant to Schedule 2.2 and the amount wired to the Reserve
Account by Buyer shall be promptly deposited by Sellers into the Reserve Account
or promptly paid by Sellers to the appropriate Trade Creditors. Sellers agree
that they shall pay the Trade Claims in full without regard to the adequacy of
funds within the Reserve Account. Sellers will provide Buyer reasonable and
periodic evidence that Trade Claims have been paid promptly after Closing.
(i) $2,323,316 wired to the "Reserve Account," Account name:
KARS-YES Financial Inc., Account No. 4073-9272;
(ii) $3,168,815 wired to the "Collection Account," Account name:
CUSA FBO YES Financial Inc., Account No. 4073-9299.
2.3 Closing. The closing of the transactions contemplated herein (the
"Closing") will take place at 10:00 a.m., Dallas, Texas time, on September 15,
1997, at the offices of ▇▇▇▇▇ ▇▇▇▇▇▇▇ Rain ▇▇▇▇▇▇▇ (A Professional Corporation),
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇, or at such other time and place as
the parties hereto may agree. If the Closing has not occurred by September 20,
1997, either party has the right to terminate this Agreement.
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2.4 Allocation of Purchase Price; Accounting Treatment. Within 45 days
following the Closing, Buyer will prepare in its reasonable discretion an
Internal Revenue Service Form 8594, Asset Acquisition Statement, which will set
forth the allocation of the Purchase Price among the Acquired Assets (the "Form
8594"). Sellers and Buyer hereby agree to report this transaction for federal
tax purposes in accordance with the Form 8594, which will be filed with Buyer's
and Sellers' Federal Income Tax Returns for the tax year that includes the
Closing. To the extent not specified above, the parties further agree to
coordinate their accounting for the transaction.
ARTICLE III
PORTFOLIO SERVICING AGREEMENT
3.1 Administration of Sellers' Existing Loan Portfolio. In connection with
Buyer's acquisition of the headquarters' operations of Sellers, Buyer will,
after Closing, administer and service the existing loan portfolio of the Sellers
for a fee and pursuant to the terms of the portfolio servicing agreement which
accompanies this Agreement as SCHEDULE 3.1(a) (THE "PORTFOLIO SERVICING
AGREEMENT"). Buyer will also enter into a subservicing agreement (the
"Subservicing Agreement") in substantially the form of SCHEDULE 3.1(b) with
respect to the obligations of Sellers under the Originator Sale Agreement.
3.2 Sellers' Continuing Responsibilities. Sellers will continue to be
responsible for all obligations and liabilities arising from Sellers' existing
customer loans other than with respect to Buyer's servicing obligations pursuant
to the Portfolio Servicing Agreement and the Subservicing Agreement.
ARTICLE IV
MANAGEMENT SERVICES AGREEMENT
4.1 Sellers to Enter into Services Agreement. Upon the request of Buyer,
to the fullest extent permitted by applicable law, Sellers will enter into a
management services agreement with Buyer or any one or more subsidiaries or
affiliates of Buyer at no additional cost to Buyer or any such subsidiary or
affiliate in order to permit continued operations of the Acquired Business after
the Closing until such time as the Buyer or any such subsidiary or affiliate can
procure applicable and appropriate licenses and permits, with the agreement to
be in the form accompanying this Agreement as SCHEDULE 4.1 (THE "MANAGEMENT
SERVICES AGREEMENT").
4.2 Responsibilities of Buyer. In the event that Sellers should enter into
the Management Services Agreement, Buyer or its designated subsidiary or
affiliate will retain responsibility for all Assumed Liabilities only arising
out of the operation of the Acquired Business from and after the Closing,
including expressly any such Assumed Liability incurred by Sellers which might
arise during the operation of such Management Services Agreement, other than
liabilities arising out of
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Sellers' willful misconduct or bad faith, and Buyer or its designated subsidiary
or affiliate will indemnify and hold harmless Sellers for any such liabilities
or obligations. Nothing in this Section 4.2 will impose any responsibility or
liability on Buyer or any subsidiary or affiliate of Buyer for any Excluded
Liabilities.
ARTICLE V
AGREEMENTS REGARDING AUTOMOBILE INVENTORY
5.1 Purchase of Automobile Inventory. Buyer will purchase the Acquired
Automobile Inventory in consideration for sixty-three percent (63%) of the book
value of the Acquired Automobile Inventory as of the Effective Time as set forth
at SCHEDULE 1.1(j) with such book value for each automobile included in the
Acquired Automobile Inventory as set forth at SCHEDULE 1.1(j) (the "Automobile
Inventory Price").
5.2 Automobile Inventory Holdback. Buyer will retain for a period of up to
fourteen (14) days after the Closing ten percent (10%) of the Automobile
Inventory Price (the "Automobile Inventory Holdback") for use as an offset for
any Acquired Automobile Inventory found to be unacceptable ("Unacceptable
Automobile Inventory") due to mechanical defect or failure in the reasonable
judgment of Buyer during the period of up to fourteen (14) days after the
Closing. Any Unacceptable Automobile Inventory will be reconveyed by Buyer to
Retail no later than fourteen (14) days after the Closing, and Buyer will retain
out of the Automobile Inventory Holdback the dollar amount of the individual
Automobile Inventory Price for each automobile reconveyed to Retail as
Unacceptable Automobile Inventory and will transmit by wire transfer to the
Sellers no later than the Settlement Date the balance of the Automobile
Inventory Holdback. In the event the total dollar amount of the Unacceptable
Automobile Inventory exceeds the Automobile Inventory Holdback, Sellers shall
pay the excess to Buyer by wire transfer on the Settlement Date.
ARTICLE VI
FACILITIES CONSIDERATIONS
6.1 Relocation of Appliance Company Employees. Within six months after the
Closing, the employees of the Appliance Company who currently office in the 20th
floor headquarters facilities of Sellers will relocate to that certain option
space on the eighth floor of the building in which the headquarters of Sellers
are located. Buyer may agree in its sole discretion to extend the occupancy
period for up to an additional two months in the event that extraordinary
circumstances shall have prevented completion of the relocations of such
employees within the six-month period contemplated above. Until relocation, the
Appliance Company will pay costs attributable to its reasonable third party
costs other than leasehold rent (such as telephone costs and supplies).
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6.2 Cooperation with Option Space Lease. In connection with the relocation
of the Appliance Company offices to the option space on the eighth floor of the
building in which the headquarters of Sellers are located, the Buyer will work
with the Sellers to exercise such option and lease of the option space for the
benefit of the Appliance Company, provided that the Appliance Company will pay
all fees, rental and other costs attributable thereto and will indemnify and
hold harmless Buyer with respect to any undertaking or obligation of Buyer in
connection therewith.
6.3 Redbird Sales and Reconditioning Facility. While the Appliance Company
has a facility located at the Redbird Sales and Reconditioning Facility of
Sellers, Buyer will control the Redbird Sales and Reconditioning Facility, with
Appliance Company's rights to be established, subject to any required landlord
approvals, by a sublease of its portion of such facility for a term of one year,
such sublease to be negotiated and executed by Closing with Buyer.
6.4 Appliance Company's Option with Respect to the Plano Road Facility.
Subject to Section 1.6(b) hereof, Buyer acknowledges that the Appliance Company
has a contractual right to purchase the Plano Road facility, as set forth in the
Appliance Company Agreement as modified to provide for a purchase price equal to
the greater of appraised value or original cost. The Appliance Company will
control such facility, with Buyer's rights to be established by a lease of its
portion of such facility for a term of twelve months, such lease to be
negotiated and executed by Closing.
ARTICLE VII
SOFTWARE AND INTELLECTUAL PROPERTY ARRANGEMENTS
7.1 Proprietary Software. Sellers hereby transfer to Buyer and the
Appliance Company all right, title and interest in and to the Sellers'
proprietary software described in SCHEDULE 7.1, in both object code and source
code form, and all documentation and other information and processes related
thereto (the "Shared Software"), and any other software related to the Acquired
Business. Without limiting the above, the Shared Software will include all
documentation, processes, parameters, and all other information, whether
internally developed or otherwise, associated with the Shared Software,
including without limitation the credit scoring card system. Buyer and Appliance
Company shall have joint ownership of all rights in such Shared Software,
including the rights to copy, modify, revise, and license to others the Shared
Software. Notwithstanding the above, Appliance Company shall not license the
Shared Software to any competitor of Buyer for a period of 5 years following the
Closing, and Buyer shall not license the Shared Software to any competitor of
Appliance Company for a period of 5 years following the Closing. Sellers, Buyer
and Appliance Company agree that Sellers will provide both Buyer and the
Appliance Company with all copies of the Shared Software. Buyer and the
Appliance Company shall solely own all modifications and revisions made by or on
behalf of Buyer and the Appliance Company, respectively. Except as set forth in
SCHEDULE 7.1(a), Sellers represent and warrant that (i) the Shared Software
shall operate in accordance with the description set forth in SCHEDULE 7.1, (ii)
the Shared Software shall include design, function, and performance capabilities
such that the Shared Software shall not abnormally end or have invalid or
incorrect results from and/or performance or functional
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degradation because of the then current date, (iii) the design and function of
the Shared Software ensure year 2000 functionality and include, without
limitation, date data century recognition, calculations that accommodate same
century and multicentury formulae and date values, and date data interface
values that reflect the then current century, and (iv) the Shared Software is
otherwise year 2000 date compliant with present capability to implement year
2000 century date conversion without material additional cost or devotion of
management, employee or other resources, and will suffer no material adverse
disruption resulting from such date conversion. Notwithstanding any exceptions
listed in SCHEDULE 7.1, Sellers represent and warrant that (i) no exceptions
therein listed or described will impair the functionality or operation of the
Shared Software for any purpose until January 1, 2000 and (ii) the Shared
Software and the other components of the servicing and collection system are
fully operational and capable, without any material modification thereto, of
allowing Buyer or any subsidiary or affiliate of Buyer to perform its
obligations under the Portfolio Servicing Agreement and the Subservicing
Agreement. Sellers further warrant and represent that the Shared Software shall
be free of material defects in material and workmanship.
7.2 Licensed Software. SCHEDULE 7.2 includes a complete list of all
software or other intellectual property licensed to any of Sellers or their
affiliates (including without limitation the CACS program) and used in
conjunction with Sellers' proprietary software or otherwise in connection with
the Acquired Business (the "Licensed Software"), with a description of the term
and the fees therefor. Sellers represent and warrant that they have provided to
Buyer complete copies of the licensing agreements for all such Licensed
Software. Sellers, Buyer and Appliance Company agree to work together in good
faith to accomplish necessary transfers of Licensed Software from the Sellers to
Buyer and the Appliance Company, acknowledging that there will be transfer costs
or licensing fees with respect thereto, which fees and expenses Sellers, Buyer
and the Appliance Company will share in a manner so that the Buyer will pay the
reasonable costs and expenses of transferring or licensing such Licensed
Software for the benefit of Buyer, and the Appliance Company will pay the
reasonable fees and expenses of transferring or licensing such Licensed Software
for the benefit of the Appliance Company. To the extent that any such Licensed
Software is transferred or licensed jointly to Buyer and the Appliance Company,
Buyer and the Appliance Company will each pay one-half of the reasonable costs
and expenses of such transfer or license. Prior to Closing, Buyer and the
Appliance Company will make arrangements satisfactory to both for the sharing of
any such Licensed Software.
7.3 Agreements Relating to the Appliance Company Agreement. Buyer
acknowledges that certain rights to tradenames and intellectual property were
granted to the Appliance Company pursuant to Sections 2 and 3 of the Appliance
Company Agreement. Notwithstanding said Section 2, the parties will cooperate in
resolving any signage issues. In addition, the Appliance Company acknowledges
that any finance company affiliate of Buyer engaged in financing the purchase of
automobiles or in purchasing, selling or securitizing automobile receivables is
a car related business as such term is used in the Appliance Company Agreement.
In all other respects, the provisions of this Agreement and all other agreements
contemplated hereby, including but not limited to the Acquired Leases, shall
govern the rights of the parties hereto and shall supersede any provisions of
the Appliance Company Agreement with respect to the Acquired Assets, the
Acquired Business, and the Acquired Facilities, whether or not such provisions
of the Appliance Company Agreement are
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contrary or inconsistent with the provisions of this Agreement or any such other
agreement. In the event of any conflict or discrepancy between this Agreement
and the Appliance Company Agreement, the terms and provisions of this Agreement
will control.
7.4 Use of Computer System by Appliance Company Personnel. During the
period that Appliance Company personnel shall occupy a portion of the 20th floor
headquarters facility as contemplated in Section 6.1 of this Agreement (the
"Occupancy Period"), Buyer shall provide access to computer hardware and
software transferred from Sellers to Buyer in accordance with this Agreement for
no more than 120 remote terminals to be operated by Appliance Company personnel.
Buyer shall further provide, during the Occupancy Period and at the 20th floor
headquarters facility, office space and the appropriate equipment for not more
than 38 Appliance Company personnel to allow access to such computer hardware
and software. All identifiable costs incurred by Appliance Company personnel
during the Occupancy Period, including telephone tolls and credit reporting
fees, shall be paid by the Appliance Company. All other costs associated with
the operation of the computer hardware and software transferred from Sellers to
Buyer in accordance with this Agreement during the Occupancy Period shall be
shared by Buyer and the Appliance Company according to the extent of each
party's use of the computer hardware and software. During the Occupancy Period,
the Appliance Company shall identify and copy only information from the database
relating to the business of the Appliance Company. The Appliance Company shall
not copy, delete, or otherwise tamper with any data associated with the Buyer or
any portion of the Acquired Business. Appliance Company's access to Buyer's
facilities and resources shall be restricted to functions associated with the
normal operation of Appliance Company's business, and shall not be provided to
the existing computer network of Buyer. Any information acquired by Appliance
Company personnel during such six month period relating to any aspect of Buyer's
business shall be regarded as proprietary information of Buyer, except to the
extent that such information (a) is publicly and openly known and in the public
domain, (b) becomes publicly and openly known and in the public domain through
no fault of the Appliance Company, or (c) is in Appliance Company's possession
and documented prior to this Agreement, lawfully obtained by Appliance Company
from a source other than from Buyer, and not subject to any obligation of
confidentiality or restrictions on use. Similarly, information acquired by Buyer
personnel during such six month period relating to any aspect of Appliance
Company's business shall be regarded as proprietary information of Appliance
Company, except to the extent that such information (a) is publicly and openly
known and in the public domain, (b) becomes publicly and openly known and in the
public domain through no fault of the Buyer, or (c) is in Buyer's possession and
documented prior to this Agreement, lawfully obtained by Buyer from a source
other than from Appliance Company, and not subject to any obligation of
confidentiality or restrictions on use.
7.5 Other Events. In the event that the Portfolio Servicing Agreement or
the Subservicing Agreement is terminated for any reason during the term thereof,
or in the event that for any other reason Buyer is released from all of its
duties and obligations under either such agreement, and the servicing
obligations thereunder revert to Sellers, Buyer agrees to provide access to the
computer hardware and software transferred from Sellers to Buyer in accordance
with this Agreement to the extent necessary for Sellers to retrieve information
necessary for Sellers to perform such servicing obligations subject to agreement
at such time between Sellers and Buyer as to the reasonable and
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appropriate fees and costs to be paid by Sellers to Buyer therefor and subject
further to Sellers obtaining any third party licenses required at their own cost
and expense. Buyer further agrees to provide access to the computer hardware and
software to the extent necessary for Sellers to retrieve information necessary
for Sellers to lawfully fulfill any state or federal tax obligations arising for
periods prior to the Closing.
7.6 Cooperation. Buyer will ▇▇▇▇▇ ▇▇▇▇▇▇▇ and the Appliance Company
reasonable access to the computer system as may be reasonably necessary for the
preparation of any tax returns or for responding to any taxing authority. Each
party will at all times act with care so as not to damage the information of
another party and to preserve the confidentiality of each other party's
information. Furthermore, Buyer will grant reasonable access to the books,
records and assets of the Appliance Company (whether in electronic, paper or
other form) to any lender of the Appliance Company during the period of
facilities sharing with the Appliance Company.
ARTICLE VIII
NON-SOLICITATION OF EMPLOYEES
Except as provided in Section 10.6, each of the Sellers, the Buyer and
Appliance Company agree not to solicit (other than through a general
solicitation) employees of one another without the express written consent of
the company affected, for a period of two years after the Closing. The
restrictions in this Article VIII will not apply to employees who have left the
employment of any of Sellers, Buyer or Appliance Company after termination of
such employment as long as the employee's decision to terminate his or her
employment was not as a result of a violation of this provision.
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES
9.1 Conditions Precedent to Obligations of Buyer and Sellers. It will be
conditions precedent to the obligations of each of the Buyer and the Sellers to
close the transactions contemplated hereby that:
(a) Approval of Sellers' Lenders. Sellers shall have procured the
consent to the transactions contemplated hereby of the Sellers' lenders,
including the consent of the senior bank lenders pursuant to Sellers'
revolving credit facility, the subordinated lenders of Sellers, any
required consents pursuant to the securitization facility of Sellers, and
any other consents to this Agreement and the transactions contemplated
hereby as shall be deemed necessary by either Buyer or Sellers.
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(b) Consent of Shareholders of Sellers. The Sellers shall have
procured the consent of the shareholders of Parent, Retail and Finance, if
required, for the sale of assets as contemplated hereby.
(c) Consents Pursuant to Contracts to be Assigned. Required
third-party consents to the assignment of the Assumed Agreements shall
have been procured, unless procurement of any such consents shall have
been waived in writing by Sellers and Buyer.
(d) Master ▇▇▇▇ of Sale, Assignment and Assumption Agreement.
Sellers and Buyer shall have executed and delivered to one another the
Master ▇▇▇▇ of Sale, Assignment and Assumption Agreement in substantially
the form as set forth at SCHEDULE 9.1(d) hereto.
(e) There shall not be threatened, instituted, or pending any action
or proceeding, before any court or governmental authority or agency,
domestic or foreign: (i) challenging or seeking to make illegal, or to
delay or otherwise directly or indirectly to restrain or prohibit, the
consummation of the transactions contemplated hereby, or seeking to obtain
damages in connection therewith; (ii) seeking to prohibit direct or
indirect ownership or operation by Buyer or any of its subsidiaries or
affiliates of all or any material portion of the Acquired Business or the
Acquired Assets, or to compel Buyer or any of its subsidiaries or
affiliates to divest of or to hold separately all or any material portion
of the Acquired Business or the Acquired Assets as a result of the
transactions contemplated hereby; (iii) seeking to impose or confirm
limitations on the ability of Buyer effectively to exercise directly or
indirectly full rights of ownership of any of the Acquired Business or the
Acquired Assets; (iv) seeking or causing any material diminution in the
direct or indirect benefits expected to be derived by Buyer or Sellers as
a result of the transactions contemplated by this Agreement; (v)
invalidating or rendering unenforceable any material provision of this
Agreement (including without limitation any of the documents or agreements
to be delivered hereunder); or (vi) which otherwise might materially
adversely affect Buyer or any of its subsidiaries or affiliates, Sellers,
or the Acquired Assets or Acquired Business.
(f) There shall not be any action taken, or any statutes, rule,
regulation, judgment, order, or injunction proposed, enacted, entered,
enforced, promulgated, issued, or deemed applicable to the transactions
contemplated hereby by any federal, state, or foreign court, government,
or governmental authority or agency, which may, directly or indirectly,
result in any of the consequences referred to in (e) above or otherwise
prohibit consummation of the transactions contemplated hereby.
9.2 Conditions to Obligations of Sellers to Close. It will be conditions
precedent to the obligations of Sellers to close the transactions contemplated
hereby that:
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(a) Portfolio Servicing Agreement. Buyer and Sellers shall have
entered into the Portfolio Servicing Agreement in substantially the form
set forth in SCHEDULE 3.1(a) hereto and the Subservicing Agreement in
substantially the form set forth in SCHEDULE 3.1(b) hereto.
(b) Representations and Warranties of Buyer. The representations and
warranties of Buyer shall be true and correct in all material respects as
of Closing.
(c) Covenants of Buyer. Buyer shall be in compliance in all material
respects with the covenants of Buyer pursuant hereto as of the Closing.
9.3 Conditions Precedent to the Obligations of Buyer. It shall be
conditions precedent to the obligations of Buyer to consummate the transactions
contemplated hereby that:
(a) Buyer and Sellers shall have entered into a Management Services
Agreement in substantially the form set forth at SCHEDULE 4.1 hereto if
requested by Buyer, and Buyer and Sellers, the Appliance Company or third
parties shall have entered into such other agreements as are expressly
contemplated herein.
(b) The representations and warranties of Sellers and Appliance
Company in this Agreement and in any certificate or other instrument or
agreement delivered pursuant to the provisions hereof or in connection
with the transactions contemplated hereby shall be true and correct as of
the Closing as if made at and as of the Closing, and each Seller, and, to
the extent of its obligations hereunder, the Appliance Company shall in
all material respects have performed each obligation and agreement and
complied with each covenant to be performed and complied with by it
hereunder at or prior to the Closing;
(c) Sellers and Appliance Company shall have furnished to Buyer a
certificate or certificates in which they shall certify that the
conditions set forth in Section 9.3(b) have been fulfilled;
(d) Sellers and Appliance Company shall have furnished to Buyer: (i)
copies of the texts of the resolutions by which the corporate action on
the part of each Seller and its shareholders and Appliance Company
necessary to approve this agreement and the transactions contemplated
hereby were taken; and (ii) certificates of Sellers and Appliance Company
certifying to Buyer that such copies are true, correct and complete copies
of such resolutions and that such resolutions were duly adopted and have
not been amended or rescinded;
(e) Buyer shall have received an opinion letter addressed to Buyer
from ▇▇▇▇▇ ▇▇▇▇▇▇▇ Rain ▇▇▇▇▇▇▇ (A Professional Corporation), counsel for
Sellers based on customary reliance and subject to customary
qualifications in a form mutually agreed upon;
(f) This Agreement and the transactions contemplated hereby shall
have been approved by Buyer's Board of Directors;
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(g) Except as is otherwise adequately covered in the Management
Services Agreement to the satisfaction of Buyer, Buyer shall have obtained
or assumed all permits or licenses necessary to ownership of the Acquired
Assets and operation of the Acquired Business and the Acquired Facilities,
including, without limitation, the following: (i) the approval of the
transaction by all governmental authorities exercising jurisdiction over
the ownership of the Acquired Assets or the operation of the Acquired
Business or the Acquired Facilities; (ii) the approval by all governmental
authorities with respect to the issuance to, or assumption by, Buyer of
all Acquired Permits; and (iii) each other consent and approval necessary
in order that the transactions contemplated herein not constitute a breach
or violation of, or result in a right of termination or acceleration with
respect to, any agreement, arrangement, or understanding or any license,
franchise, or Permit, or result in any encumbrance on any Seller's assets,
including the Acquired Assets;
(h) Buyer shall have accepted, in its sole discretion, the results
of its inspections, investigations, studies, assessments and evaluations
of the Acquired Assets, the Acquired Business, the Assumed Liabilities,
the Assumed Agreements, the Acquired Facilities and all matters relating
thereto;
(i) There shall have been no damage, destruction, or loss of or to
any property or properties owned or used by any Seller, whether or not
covered by insurance, which in the aggregate may have a material adverse
effect on the Acquired Assets or the Acquired Business;
(j) All Insider (as defined in Section 11.20 below) agreements shall
have been terminated except as specifically contemplated herein;
(k) Sellers shall have furnished to Buyer good standing
certificates, and certificates from state taxing authorities and any
related certificates that Buyer may reasonably require as evidence that
Sellers are in good standing in the states of their respective
organizations and in which they do business and that all sales and use tax
liabilities of Sellers accruing before the Closing or payable on the
Closing as a result of the conveyance of the Acquired Assets or the
Acquired Business have been fully satisfied or provided for, to the extent
such certificates are prepared by the applicable state taxing authorities
and Appliance Company shall have furnished to Buyer a good standing
certificate in the states of its organization and in which it does
business;
(l) Buyer shall have received such non-disturbance, subordination
and other agreements from Sellers' lenders and third party lessors as
Buyer shall reasonably request; and
(m) The form and substance of all schedules, certificates,
instruments, opinions, and other documents delivered to Buyer under this
Agreement shall be satisfactory in all respects to Buyer and its counsel.
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ARTICLE X
COVENANTS OF THE PARTIES
10.1 Conduct of Acquired Business. From the date hereof to the Closing,
except as expressly contemplated by this Agreement or otherwise consented to by
Buyer in writing, Sellers shall:
(a) perform in all material respects all obligations under leases,
agreements, contracts and instruments relating to or affecting the
operations and assets to be acquired by Buyer;
(b) maintain the books of account and records of their businesses in
the usual, regular and ordinary manner;
(c) comply in all material respects with all statutes, laws,
ordinances, rules and regulations applicable to the conduct of the
businesses of the Sellers;
(d) not enter into or modify any employment, severance, or other
agreement or commitment to employees of the Acquired Business to be
acquired by Buyer or affect any increase in the compensation or other
benefits payable or to become payable to any employee of the Acquired
Business other than increases and compensation effected in the ordinary
course of business or adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment, or other benefit plan, trust, fund, or group arrangement for
the benefit or welfare of any officers, directors or employees;
(e) not cancel or terminate or permit to be canceled or terminated
its current insurance (or reinsurance) policies or permit any of the
coverage thereunder to lapse, unless simultaneous with such termination,
cancellation, or lapse, replacement policies providing coverage equal to
or greater than the coverage under the canceled, terminated, or lapsed
policies for substantially similar premiums are in full force and effect;
(f) maintain and repair its assets and properties in accordance with
good standards of maintenance and as required in any leases or other
agreements pertaining thereto; and
(g) Subject to the Sellers' current financial constraints, use
reasonable commercial efforts to operate the Acquired Business in
accordance with normal operating procedures and in the ordinary course of
business, preserve intact Sellers' business organization and goodwill,
keep available the services of their officers and employees as a group,
and maintain satisfactory relationships with suppliers, distributors,
customers, and others having business relationships with them.
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10.2 Access to Information.
(a) Buyer's Access. Between the date of this Agreement and the
Closing, Sellers will (i) give Buyer and its authorized representatives
(including lenders, legal counsel and accountants) reasonable access to
all employees, offices, warehouses, and other facilities and property of
the Acquired Business to be acquired and to relevant books and records,
and will permit Buyer and its authorized representatives to make such
inspections thereof as Buyer may reasonably require, and (ii) furnish
Buyer and its representatives and advisors with such financial and
operating data and other information with respect to the Acquired Business
as Buyer may from time to time reasonably request; provided, however, that
any such investigation shall be conducted in such a manner as not to
interfere unreasonably with the operation of the businesses of Sellers.
(b) Confidentiality. If the transactions contemplated by this
Agreement are not consummated (and in any event prior to the Closing),
Buyer will maintain the confidentiality of all confidential information
and materials obtained from Sellers and will not use or permit others to
use such information for any other purpose, except to the extent
disclosure of any such information is authorized by Sellers or required by
law, and upon termination of this Agreement, Buyer and its representatives
will use reasonable efforts to return to Sellers all confidential
materials obtained from Sellers in connection with the transactions
contemplated by this Agreement and all copies thereof. The provisions of
this Section will not apply to any information, documents or material
which are in the public domain or have been obtained by Buyer otherwise
than pursuant to this Agreement and other than by reason of a breach of
this Section. Sellers and the Appliance Company will maintain and will
cause their agents and affiliates to maintain the confidentiality of all
confidential information obtained from Buyer and will not use or permit
others to use such information for any other purpose, in each case to a
like extent as stated herein with respect to confidential information of
Sellers.
(c) Notice regarding Ongoing Status. Sellers shall (i) confer on a
regular basis with representatives of Buyer and report operational matters
and the general status of ongoing operations; (ii) notify Buyer of any
material adverse change in the normal course of its business or in the
operation of its properties and of any governmental or third party
complaints, investigations, or hearings (or communications indicating that
the same may be contemplated); (iii) not take any action which would
render, or which reasonably may be expected to render, any representation
or warranty made by them in this Agreement untrue at, or at any time prior
to, the Closing; and (v) promptly notify Buyer if any of them shall
discover that any representation or warranty made by it in this Agreement
was when made, or has subsequently become, untrue.
10.3 Efforts to Consummate Transaction. The parties hereto shall use their
reasonable best efforts to take or cause to be taken all such actions required
to consummate the transactions contemplated hereby including, without
limitation, such actions as may be necessary to obtain, prior to the Closing,
all necessary governmental or other third-party approvals and consents required
to
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be obtained by Sellers or Buyer in connection with the consummation of the
transactions contemplated by this Agreement.
10.4 Press Release. Buyer and Sellers will work together on a mutually
acceptable press release to announce this Agreement at a mutually acceptable
time. Buyer may make any disclosure or announcement that, in the opinion of its
counsel, it is obligated to make pursuant to applicable law or regulation of the
Nasdaq Stock Market, Inc. or any national securities exchange, as applicable, in
which case Buyer shall reasonably consult with Sellers prior to making such
disclosure or announcement, and upon execution of this Agreement, Buyer may make
a public announcement of such occurrence in a press release reviewed and
reasonably approved by Sellers prior to publication.
10.5 Books and Records. To the extent that any such books and records are
not Acquired Assets, Sellers will make available to Buyer, at Buyer's request
and expense, from time to time, all books and records of Sellers relating,
directly or indirectly, to the Acquired Business or the Acquired Assets which
are reasonably necessary with respect to Buyer's ongoing operations, for
inspection or copying by Buyer at any reasonable time for a period of six (6)
years following the Closing, and will offer the same to Buyer, from time to
time, at Buyer's expense, prior to the destruction of all or any part thereof
including at any time during such six-year period. Buyer shall provide Sellers
and their accountants with access to Sellers' former employees and to the books
and records transferred to Buyer to aid Sellers in the closing of Sellers' books
for the current tax year and to assemble information required to prepare current
tax year tax returns. In addition, the parties shall make reasonably available
to one another any records or documents that they maintain with respect to the
Acquired Assets or the Acquired Business for purposes of compliance with
applicable laws or in defending any third party litigation, audits,
investigations, etc. arising after Closing.
10.6 Employment. On the Closing, Buyer or one or more subsidiaries or
affiliates of Buyer that will hold the Acquired Assets (the "KARS-YES Division")
will offer employment to all employees of Sellers then employed in the Acquired
Business except as listed on SCHEDULE 10.6(a) hereto, on an "at will" or other
basis as determined by Buyer, and at such wages and with such benefits as Buyer
shall determine, and Sellers will cooperate with Buyer to that end.
Notwithstanding the above, SCHEDULE 10.6(b) contains a list prepared by Sellers
of such of its employees as Buyer shall not offer employment pursuant to this
Section 10.6. All employees of Sellers to be offered employment by Buyer or the
KARS-YES Division will be terminated by Sellers on or before the Closing.
Sellers shall be responsible for any severance and/or other payments, and other
compensation, benefits, and perquisites, incurred in connection therewith and
during the period prior to the Closing, provided that Buyer shall be responsible
for all accrued vacation and sick pay for those employees who are offered
employment and who are hired by Buyer and remain employed by Buyer as of the
Closing pursuant to this provision. In the event that the WARN Act is triggered
with respect to employees terminated by Sellers in connection with the
transaction contemplated herein and not hired by Buyer, Sellers may elect to
terminate this Agreement without further right or obligation of either party
except under the confidentiality provisions in Section 10.2(b) hereof. For the
period from the Effective Time through October 1, 1997, Sellers shall cause all
employees of Sellers hired by Buyer pursuant to this provision to be covered
under Sellers' existing health care plan, and Buyer will forward to the insurer
the premiums for such coverage, prorated on a daily
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basis, for the period from the Closing through September 30. Effective October
1, 1997, Buyer will provide coverage to employees of Sellers hired by Buyer
pursuant to this provision under Buyer's group health plan, and such coverage
will contain no exclusion for pre-existing conditions.
10.7 Expenses. Sellers shall pay the costs and expenses of Sellers and
Buyer shall pay the costs and expenses of Buyer, incurred in connection with
this Agreement and the transactions contemplated hereby. Notwithstanding the
foregoing, in the event any party breaches the terms of this Agreement prior to
the Closing, and the transactions contemplated hereby are not consummated, the
breaching party agrees to pay the non-breaching party an amount equal to all of
the expenses incurred by the non-breaching party in connection with this
Agreement, and otherwise related to the transactions contemplated hereby,
including, but not limited to, all fees and expenses incurred by the
non-breaching party to accountants, attorneys, and finders, brokers or
consultants. Nothing herein shall be deemed to limit the right or remedy of a
party in the event of a breach of this Agreement by the other party.
10.8 Cobra Coverage. COBRA continuation coverage obligations under Code
Section 4980B with respect to the current and former employees of Sellers and
their covered spouses and dependents shall be divided as follows: (i) subject to
Code Section 4980B(f)(2)(B)(ii), Sellers' health care plans shall provide such
coverage for qualifying events occurring prior to October 1, 1997, and (ii)
Buyer's health care plans shall provide such coverage for qualifying events
occurring on or after October 1, 1997 with respect to Sellers' employees who
become employees of Buyer or the KARS-YES Division.
10.9 Post Closing Responsibility. In the event that all consents required
from any third parties to the execution and delivery of this Agreement and the
other agreements and instruments contemplated hereby and the consummation of the
transactions contemplated hereby, including, without limitation, any (i)
consents required from the landlords of any facilities to be leased or subleased
as contemplated herein, and (ii) consents and approvals required to transfer or
assign any of the Assumed Agreements and/or for Buyer to license the Licensed
Software, are not obtained prior to the Closing, Sellers shall have primary
responsibility and agree to use their continuing good faith reasonable best
efforts following the Closing to obtain all such consents on behalf of Buyer in
form and substance satisfactory to Buyer.
10.10 Environmental Covenants.
(a) Investigation. Within thirty (30) days after Closing, subject to
the conditions set forth in Section 10.10(c), Sellers will perform the
following investigation at its sole cost and expense and report the
results of the investigation to Buyer: (i) at the facilities located at
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ("Garden Grove") ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ("Montclair"), and ▇▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇ ▇▇., ▇▇▇▇▇▇, ▇▇▇▇▇ ("Redbird"), Sellers will engage a qualified
hydraulic system service company to perform appropriate pressure testing
of the hydraulic system to determine whether the systems pass; (ii) at
Montclair, Sellers will cause a qualified environmental consulting firm to
perform the appropriate testing of the wastewater discharges from the
wastewater interceptor to
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determine whether these discharges are in compliance with Environmental
Laws; (iii) at the facility at Redbird, Sellers will cause a qualified
environmental consulting firm to determine whether or not an oil/water
separator discharges wastewater into the sanitary sewer system or
stormwater system or otherwise into the environment or whether the
separator is self-contained and does not discharge wastewater; (iv) if the
separator at Redbird does not discharge wastewater, then the Sellers will
provide reasonable evidence from a qualified environmental consulting firm
or transport company that the wastewater from the separator is being
properly disposed of; (v) if the Redbird separator is discharging, Buyer
will cause a qualified environmental consulting firm to perform the
appropriate testing of the wastewater discharges from the separator to
determine whether these discharges are in compliance with Environmental
Laws.
(b) Corrective Action. (i) If any of the hydraulic systems tested
pursuant to Section 10.10(a)(i) do not pass a pressure test, then Sellers,
at their sole cost and expense, will, within a reasonable time after
Closing, (A) repair the system, providing Buyer with reasonable evidence
that the system has been repaired, and providing Buyer with a new pressure
test demonstrating that the system passes the appropriate pressure test,
or if the repairs required are substantial and provided Buyer and the
owner of the facility agree, remove the system; and (B) demonstrate by
appropriate subsurface testing and sampling or by appropriate field
observations or field instruments performed by a qualified consulting firm
that either no releases have occurred or that releases from the hydraulic
system have not been significant enough to impact the environment in a
manner that is required to be reported, investigated or remediated under
applicable Environment Laws. (ii) If the Sellers perform the investigation
under Section 10.10(a)(i) above and it is determined that soil or
groundwater have been impacted in a manner that is required to be
reported, investigated or remediated under applicable Environmental Laws,
the presence of the impacted soil and groundwater will be subject to the
provisions of Sections 1.4 and 13.2. (iii) If any of the investigations
conducted pursuant to Section 10.10(a)(ii)-(v) result in a conclusion that
any disposal or discharges from the separator or the interceptor are not
in compliance with applicable Environmental Laws, the Sellers, at its sole
cost and expense, will, within a reasonable time after Closing implement
the corrective steps necessary to correct the practice that is not in
compliance and the presence of the impacted media will be subject to the
provisions of Sections 1.4 and 13.2.
(c) Access and Landlord Consent. As a condition to the performance
of the work described in Sections 10.10(a) and (b) above, Buyer shall
provide Sellers with access to the facilities described in Section
10.10(a), and to the extent required by the Leases for such facilities,
Buyer shall use its reasonable best efforts to provide the Sellers with
the written consent of the landlord under the Lease for such facility for
the performance of this work.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES OF SELLERS
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Sellers (as to themselves only and not as to the Appliance Company) and,
to the limited extent specified herein, the Appliance Company (as to itself
only), hereby represent and warrant that all of the following representations
and warranties in this Article XI are true and correct at the time of execution
and delivery of this Agreement and at the time of the Closing.
11.1 DUE ORGANIZATION AND QUALIFICATION. Each of the Sellers and the
Appliance Company is a corporation duly organized, validly existing and in good
standing under the laws of its State of incorporation, and has all requisite
corporate power and authority to own or lease its properties and to carry on its
business as it is presently being operated and in the place where such
properties are owned or leased and such business is conducted. Each Seller is
duly qualified to do business and is in good standing in each jurisdiction
listed in SCHEDULE 11.1 hereto, the only jurisdictions where the nature of its
business and activities in such jurisdictions require it to be so qualified.
11.2 CORPORATE POWER AND AUTHORITY. The execution, delivery and
performance of this Agreement by Sellers and the Appliance Company, and all
other agreements by and among the parties or any of them, and the consummation
by them of the transactions contemplated hereby and thereby, have been or will
be duly authorized by all requisite corporate actions of such Sellers and the
Appliance Company and their shareholders, as required, and no further actions or
approvals are required in order to permit Sellers and the Appliance Company to
consummate the transactions contemplated hereby and thereby. This Agreement
constitutes, and all other agreements by and among the parties or any of them,
when executed and delivered in accordance with the terms thereof, will
constitute the legal, valid and binding obligations of Sellers and the Appliance
Company, enforceable against Sellers and the Appliance Company in accordance
with their terms (subject, as to the enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights from time to time in effect (the "Equitable Exceptions"). Each
of the Sellers and the Appliance Company has full power, authority and legal
right to enter into this Agreement, and all other agreements by and among the
parties or any of them, and to consummate the transactions contemplated hereby
and thereby. Each of the Sellers and the Appliance Company have duly executed
and delivered this Agreement and each other agreement by and among the parties
or any of them to which it is a party.
11.3 NO VIOLATIONS. The making and performance of this Agreement, and all
other agreements by and among the parties or any of them, and the consummation
of the transactions contemplated hereby and thereby in accordance with the terms
hereof and thereof will not (i) conflict with the Articles of Incorporation, or
the Certificate of Incorporation or the Bylaws of Sellers or the Appliance
Company, (ii) result in any breach or termination of, or constitute a default
under, or constitute an event which with notice or lapse of time, or both, would
become a default under, or result in the creation of any encumbrance upon any of
the Acquired Assets under, or create any rights of termination, cancellation or
acceleration in any person under, any contract, lease, arrangement or
commitment, or violate any judgment, order, writ, injunction or decree, to which
any of the Sellers or the Appliance Company is a party, by which any of the
Acquired Assets, businesses or operations of Sellers or the Appliance Company
may be bound or affected or under which any of the Acquired Assets, businesses
or operations of Sellers or the Appliance Company receive benefits, (iii) result
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in the loss or adverse modification of any material license, franchise, permit
or other authorization granted to or otherwise held by Sellers or the Appliance
Company and related to their businesses or operations, (iv) result in the
violation of any provisions of law or regulation applicable to Sellers or the
Appliance Company, the violation of which could have an adverse effect upon the
Acquired Assets, businesses or operations of Sellers or the Appliance Company or
(v) be deemed to be a fraudulent conveyance.
11.4 COMPLETENESS OF ACQUIRED ASSETS. The Acquired Assets constitute all
assets necessary for the operation of the Acquired Business as conducted by the
Sellers with the exception of the Excluded Assets. Buyer will acquire interests
in the leased properties as described in the instruments of lease referred to in
SCHEDULES 1.6(a) AND (b) and good title to all of the other Acquired Assets,
whether real, personal or mixed, free and clear of any and all liens and
encumbrances. Sellers will obtain, as of the day of Closing, the release of all
liens on the Acquired Assets. The Acquired Assets that are tangible assets are
in good condition and repair, ordinary wear and tear excepted, and are usable in
the ordinary course of business.
11.5 CONSENTS. Set forth on SCHEDULE 11.5 is a complete and accurate list
of all agreements, leases, instruments, arrangements and commitments which will
require any consent, approval, authorization or order of any court or other
person or entity in order to permit the Sellers to consummate the transactions
contemplated by this Agreement. All Acquired Assets constituting Licensed
Software will require the consent of the licensor; such Licensed Software is
accordingly identified on SCHEDULE 11.5.
11.6 GOVERNMENTAL APPROVAL. Subject to the procurement by the Buyer of any
necessary permits or licenses, no consent, approval or other authorization of
any governmental authority is required as a result of or in connection with the
execution or delivery of this Agreement and the other agreements and documents
to be executed by the Sellers or the Appliance Company or the consummation by
the Sellers and the Appliance Company of the transactions contemplated hereby.
11.7 LITIGATION. There are no actions, suits, proceedings, investigations
or grievances entered against or pending against the Sellers or the Appliance
Company, or to the best knowledge of the Sellers and the Appliance Company,
threatened against the Sellers or the Appliance Company, or the businesses or
any properties or rights of the Sellers or the Appliance Company, at law or in
equity, which may result in any judgment, order, award, decree, liability, or
other determination which will or could reasonably be expected to have any
material adverse effect upon the Acquired Assets, the Acquired Leases, the
Acquired Business or the ability of Sellers or the Appliance Company to
consummate the transactions contemplated by this Agreement or to perform their
obligations under the transaction contemplated herein. There is no continuing
court, arbitration or administrative order, writ, injunction, or decree
applicable to the Acquired Business, the Acquired Assets or the employees of
Seller.
11.8 ENVIRONMENTAL LAWS AND REGULATIONS.
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(a) Except as set forth on SCHEDULE 11.8(a) AND (b), each of the
Sellers has at all times been in full compliance with all Environmental
Laws (as defined below in clause (h)) governing its business, operations,
properties, and assets, including, without limitation: (i) all
requirements relating to the Discharge (as defined in clause (h) below)
and Handling (as defined in clause (h) below) of Hazardous Substances (as
defined in clause (h) below) or other Wastes (as defined in clause (h)
below); (ii) all requirements relating to notice, record keeping, and
reporting; (iii) all requirements relating to obtaining and maintaining
Permits for the ownership of its properties and assets and the operation
of the Acquired Business, including Permits relating to the Handling and
Discharge of Hazardous Substances and other Wastes; or (iv) all applicable
writs, orders, judgments, injunctions, governmental communications,
decrees, informational requests, or demands issued pursuant to, or arising
under, any Environmental Laws.
(b) Except as set forth on SCHEDULE 11.8(a) AND (b), there are no
(and, to the knowledge of the Sellers, there is no basis for any)
non-compliance orders, warning letters, notices of violation (collectively
"Notices"), claims, suits, actions, judgments, penalties, fines, or
administrative or judicial investigations or proceedings (collectively
"Proceedings") pending or threatened against or involving any Seller, the
Acquired Business, the Acquired Assets, the Related Facilities or, the
Independent Facilities, issued by any Governmental Authority or third
party with respect to any Environmental Laws or Permits issued to any
Seller thereunder in connection with, related to, or arising out of the
ownership by any Seller of its properties or assets or the operation of
the Acquired Business or related to the Acquired Facilities which have not
been resolved to the satisfaction of the issuing Governmental Authority or
third party in a manner that would not impose any obligation, burden, or
continuing liability on Buyer in the event that the transactions
contemplated by this Agreement are consummated, or which could have a
material adverse affect on Sellers' or the Acquired Business financial
condition, or results of operations including, without limitation: (i)
Notices or Proceedings related to any Seller being a potentially
responsible party for a federal or state environmental cleanup site or for
corrective action under any applicable Environmental Laws; (ii) Notices or
Proceedings in connection with any federal or state environmental cleanup
site, or in connection with any of the real property or premises where any
Seller has transported, transferred, or disposed of other Wastes; (iii)
Notices or Proceedings relating to any Seller being responsible to
undertake any response or remedial actions or clean-up actions of any
kind; or (iv) Notices or Proceedings related to any Seller being liable
under any Environmental Laws for personal injury, property damage, natural
resource damage, or clean up obligations.
(c) Except as set forth on SCHEDULE 11.8(c), no Seller has
Discharged, nor allowed or arranged for any third party to Discharge,
Hazardous Substances or other Waste to, at, or upon: (i) any location
other than a site lawfully permitted to receive such Hazardous Substances
or other Waste; (ii) any of the Acquired Facilities; or (iii) any site (x)
which, pursuant to CERCLA (as defined in clause (h) below) or any similar
state law has been placed on the National Priorities List or its state
equivalent; or (y) with respect to which the Environmental Protection
Agency or the relevant state agency or other Governmental
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Authority has notified any Seller that such Governmental Authority has
proposed or is proposing to place on the National Priorities List or its
state equivalent. To the knowledge of the Sellers, there has not occurred
during the ownership or operation of Sellers, nor is there presently
occurring, a Discharge, or threatened Discharge, of any Hazardous
Substance on, into, or beneath the surface of, or adjacent to, any of the
Related Facilities or, to the best knowledge of Sellers, the Independent
Facilities, in an amount or otherwise requiring a notice or report to be
made to a Governmental Authority or in violation of any applicable
Environmental Laws. To the extent any Seller has Handled Hazardous
Substances, they have done so in compliance with all Environmental Laws.
(d) SCHEDULE 11.8(d)(i) identifies the operations and activities,
and locations thereof, which have been conducted or are being conducted by
any Seller on any of the Acquired Facilities which have involved the
Discharge of Hazardous Substances. SCHEDULE 11.8(d)(ii) identifies the
operations and activities and locations thereof, which have been conducted
or are being conducted by any Seller on any of the Acquired Facilities
which have involved the Handling of Hazardous Substances in any manner
other than for routine cleaning, maintenance, and repair.
(e) SCHEDULE 11.8(e) identifies the locations to which any Seller
has transferred, transported, hauled, moved, or disposed of Waste over the
past five (5) years and the types and volumes of Waste transferred,
transported, hauled, moved, or disposed of to each such location.
(f) Except as set forth on SCHEDULE 11.8(f), no Seller uses, and no
Seller has ever used, any Aboveground Storage Tanks (as defined in clause
(h) below) or Underground Storage Tanks (as defined in clause (h) below),
and to the best knowledge of the Sellers there are not now nor, have there
ever been any Underground Storage Tanks beneath any of the Related
Facilities or, to the best knowledge of Sellers, the Independent
Facilities, that are required to be registered under applicable
Environmental Laws.
(g) SCHEDULE 11.8(g) identifies (i) all environmental audits,
assessments, or occupational health studies undertaken since January 1,
1994 by any Seller or any of its agents or undertaken by any Governmental
Authority or any third party, relating to or affecting any Seller or any
of the Related Facilities or, to the best knowledge of Sellers, the
Independent Facilities; (ii) the results of any ground, water, soil, air,
or asbestos monitoring, undertaken by any Seller or any of its agents or
undertaken by any Governmental Authority or any third party, relating to
or affecting any Seller or any of the Related Facilities or, to the best
knowledge of Sellers, the Independent Facilities, which indicate the
presence of Hazardous Substances at levels requiring a notice or report to
be made to a Governmental Authority or in violation of any applicable
Environmental Laws; (iii) all material written communications between any
Seller and any Governmental Authority arising under or related to
Environmental Laws; and (iv) all outstanding citations issued to any of
the Sellers, or to the best knowledge of Sellers, any other person, under
OSHA, or similar state or local statutes, laws, ordinances, codes, rules,
regulations, orders, rulings, or decrees, relating to or
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affecting any Seller or any of the Related Facilities or, to the best
knowledge of Sellers, the Independent Facilities.
(h) For purposes of this Section 11.8, the following terms shall
have the meanings ascribed to them below:
"Aboveground Storage Tank" shall have the meaning ascribed to such
term in Section 6901 et seq., as amended, of RCRA, or any applicable state
or local statute, law, ordinance, code, rule, regulation, order ruling, or
decree governing Aboveground Storage Tanks.
"Discharge" means any manner of spilling, leaking, dumping,
discharging, releasing, or emitting, as any of such terms may further be
defined in any Environmental Law, into any medium including, without
limitation, ground water, surface water, soil, or air.
"Environmental Laws" means all federal, state, regional, or local
statutes, laws, rules, regulations, codes, orders, plans, injunctions,
decrees, rulings, and changes or ordinances or judicial or administrative
interpretations thereof, or similar laws of foreign jurisdictions where
Seller conducts business, currently in existence, any of which govern (or
purport to govern) or relate to pollution, protection of the environment,
public health and safety, air emissions, water discharges, hazardous or
toxic substances, solid or hazardous Waste, or occupational health and
safety, as any of these terms are or may be defined in such statutes,
laws, rules, regulations, codes, orders, plans, injunctions, decrees,
rulings, and changes or ordinances, or judicial or administrative
interpretations thereof, including, without limitation: the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
by the Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C.
Section 9601, et seq. (collectively "CERCLA"); the Solid Waste Disposal
Act, as amended by the Resource Conversation and Recovery Act of 1976 and
subsequent Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. Section
6901 et seq. (collectively "RCRA"); the Hazardous Materials Transportation
Act, as amended, 49 U.S.C. Section 1801, et seq.; the Clean Water Act, as
amended, 33 U.S.C. Section 1311, et seq.; the Clean Air Act, as amended,
42 U.S.C. Section 7401-7642; the Toxic Substances Control Act, as amended,
15 U.S.C. Section 2601 et seq.; the Federal Insecticide, Fungicide, and
Rodenticide Act as amended, 7 U.S.C. Section 136-136y ("FIFRA"); the
Emergency Planning and Community Right-to-Know Act of 1986 as amended, 42
U.S.C. Section 11001, et seq. (Title III of ▇▇▇▇) ("EPCRA"); and the
Occupational Safety and Health Act of 1970, as amended, 29 U.S.C, Section
651, et seq. ("OSHA").
"Handle" means any manner of generating, accumulating, storing,
treating, disposing of, transporting, transferring, labeling, handling,
manufacturing, or using, as any of such terms may further be defined in
any Environmental Law, of any Hazardous Substances or Waste.
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"Hazardous Substances" shall be construed broadly to include any
toxic or hazardous substance, material, or waste, and any other
contaminant, pollutant, or constituent thereof, whether liquid, solid,
semi-solid, sludge, and/or gaseous, including without limitation,
chemicals, compounds, by-products, pesticides, asbestos containing
materials, petroleum or petroleum products, and polychlorinated biphenyls,
the presence of which requires investigation or remediation under any
Environmental Laws or which are regulated, listed, or controlled by,
under, or pursuant to any Environmental Laws, including, without
limitation, RCRA, CERCLA, the Hazardous Materials Transportation Act, the
Toxic Substances Control Act, the Clean Air Act, the Clean Water Act,
FIFRA, EPCRA, and OSHA, or any similar state statute, or regulations
implementing such statutes, laws, ordinances, codes, rules, regulations,
orders, rulings, or decrees, or which has been determined or interpreted
by any Governmental Authority to be a hazardous or toxic substance
regulated under any other statute, law, regulation, order, code, rule,
order, or decree.
"Underground Storage Tank" shall have the meaning ascribed to such
term in Section 6901 et seq., as amended, of RCRA, or any applicable state
or local statute, law, ordinance, code, rule, regulation, order, ruling,
or decree governing Underground Storage Tanks.
"Waste" shall be construed broadly to include agricultural wastes,
biomedical wastes, biological wastes, bulky wastes, construction and
demolition debris, garbage, household wastes, industrial solid wastes,
liquid wastes, recyclable materials, sludge, solid wastes, special wastes,
used oils, white goods, and yard trash as those terms are defined under
any applicable Environmental Laws.
11.9 EMPLOYEE BENEFIT PLANS. Each employee benefit plan within the meaning
of Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), maintained or contributed to by any of the Sellers or any of
its Group Members (as defined below) (collectively, the "Plans") is listed on
SCHEDULE 11.9, is in compliance with applicable law and has been administered
and operated in all material respects in accordance with its terms. Each Plan
that is intended to be "qualified" within the meaning of Section 401(a) of the
Internal Revenue Code of 1986, as amended as of the date hereof (the "Code"),
has received a favorable determination letter from the Internal Revenue Service
(the "IRS") and no event has occurred and no condition exists that could be
expected to result in the revocation of any such determination. No event that
constitutes a "reportable event" (within the meaning of Section 4043(b) of
ERISA) for which the 30-day notice requirement has not been waived by the
Pension Benefit Guaranty Corporation (the "PBGC") has occurred with respect to
any Plan. No Plan is subject to Title IV of ERISA, and none of the Sellers nor
any Group Member has made any contributions to or participated in any "multiple
employer plan" (within the meaning of the Code or ERISA) or "multi-employer
plan" (as defined in Section 4001(a)(3) of ERISA). Full payment has been made of
all amounts that Sellers were required under the terms of the Plans to have paid
as contributions to such Plans on or prior to the date hereof (excluding any
amounts not yet due) and all amounts properly accrued to date as liabilities of
the Sellers that have not been paid have been properly recorded on the Sellers'
financial statements, and
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no Plan that is subject to Part 3 of Subtitle B of Title 1 of ERISA has incurred
any "accumulated funding deficiency" (within the meaning of Section 302 of ERISA
or Section 412 of the Code), whether or not waived. To the knowledge of the
Sellers, no other "disqualified person" or "party in interest" (within the
meaning of Section 4975(e)(2) of the Code and Section 3(14) of ERISA,
respectively) has engaged in any transactions in connection with any Plan that
could be expected to result in the imposition of a material penalty pursuant to
Section 502(i) of ERISA, damages pursuant to Section 409 of ERISA or a tax
pursuant to Section 4975(a) of the Code. No material claim, action, proceeding,
or litigation has been made, commenced or, to the knowledge of the Sellers,
threatened with respect to any Plan (other than for benefits payable in the
ordinary course and PBGC insurance premiums). No Plan or related trust owns any
securities in violation of Section 407 of ERISA. Neither the Sellers nor any
Group Member has incurred any liability or taken any action, or has any
knowledge of any action or event, that could cause it to incur any liability (i)
under Section 412 of the Code or Title IV of ERISA with respect to any "single
employer plan" (within the meaning of Section 4001(a)(15) of ERISA), (ii) on
account of a partial or complete withdrawal (within the meaning of Section 4205
and 4203 of ERISA, respectively) with respect to any "multi-employer plan"
(within the meaning of Section 3(37) of ERISA), (iii) on account of unpaid
contributions to any such multi-employer plan, or (iv) to provide health
benefits or other non-pension benefits to retired or former employees, except as
specifically required by Section 4980B(f) of the Code. Except as set forth on
SCHEDULE 11.9, neither the execution and delivery of this Agreement by the
Sellers nor the consummation of the transactions contemplated hereby will (i)
entitle any current or former employee of the Sellers to severance pay,
unemployment compensation or any similar payment, (ii) accelerate the time of
payment or vesting, or increase the amount of, any compensation due to any such
employee or former employee, or (iii) directly or indirectly result in any
payment made or to be made to or on behalf of any person to constitute a
"parachute payment" (within the meaning of Section 280G of the Code). For
purposes of this Agreement, "Group Member" shall mean any member of any
"affiliated service group" as defined in Section 414(m) of the Code that
includes the Sellers, any member of any "controlled group of corporations" as
defined in Section 1563 of the Code that includes the Sellers or any member of
any group of "trades or businesses under common control" as defined by Section
414(c) of the Code that includes the Sellers.
11.10 FINANCIAL INFORMATION. Within 45 days after the Closing, (i) the
1997 Audited Financial and the Current Financials will be prepared in accordance
with GAAP applied on a consistent basis throughout the periods involved and will
fairly present the financial position of Sellers as of the dates thereof and the
results of their operations and cash flows for the periods then ended, (ii) the
Pro Forma List will be prepared in good faith by Sellers in consultation with
their auditors and Buyer, and Sellers will have used their best efforts in the
preparation thereof. The Unaudited Year-End Financials and Prior Year Audited
Financials have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods involved and fairly present the financial position
of Sellers as of the dates thereof and the results of their operations and cash
flows for the periods then ended and are complete and accurate in all material
respects. The Query Information is complete and accurate in all material
respects. The Unaudited Year-End Financials and the Query Information index are
set forth at SCHEDULE 11.10.
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11.11 SUBSIDIARIES. Except for YES Receivables Inc., a Delaware
corporation, which is a wholly-owned subsidiary of Finance, and certain name
holding companies and inactive leasing and insurance agent subsidiaries listed
as SCHEDULE 11.11 hereto, Sellers do not have, nor have they ever had, any
Subsidiaries and Sellers do not own, and, except for small interests in publicly
traded stock and securities, have never otherwise owned, any stock, partnership
interest, joint venture interest, or any other security issued by or equity
interest in any other corporation, organization, association, or entity. For
purposes of this Agreement, the term "Subsidiary" means any corporation or other
entity of which securities having a majority of the ordinary voting power in
electing directors or other managers are owned by any Seller directly or through
another Subsidiary.
11.12 Absence of Undisclosed Liabilities. No Seller has any material
obligations or liabilities (whether accrued, absolute, contingent, liquidated,
unliquidated, or otherwise, whether due or to become due and regardless of when
asserted), except (a) liabilities reflected in the Unaudited Year-End
Financials, and (b) liabilities specifically disclosed in any Schedule to this
Agreement.
11.13 Absence of Certain Developments. Except as set forth in the
Unaudited Year-End Financials or SCHEDULE 11.13 hereto, since June 30, 1997, no
Seller has:
(a) Changed its accounting methods or practices (including any
change in loan reserve or write off policies) or revalued any of its
assets;
(b) Borrowed any amount under existing lines of credit, or otherwise
incurred or become subject to any indebtedness, except as is reasonably
necessary for the ordinary operation of its business and in a manner and
in amounts that are in keeping with its historical practice;
(c) Except in the ordinary course of business pursuant to its lines
of credit, loan agreements and related documents with lenders, mortgaged,
pledged, or subjected to any lien, charge, or other encumbrance, any of
its assets with an aggregate fair market value in excess of $5,000, except
liens for current property taxes not yet due and payable;
(d) Sold, assigned, or transferred (including, without limitation,
transfers to any Insiders as defined in Section 11.20) any assets, except
in the ordinary course of business;
(e) Disclosed any proprietary or confidential information to any
person other than Buyer, lenders, shareholders and prospective purchasers;
(f) Modified, waived, canceled or written off any receivable, note,
right or claim, other than in the ordinary course of business and
consistent with past practice;
(g) Suffered any extraordinary financial or other loss or suffered
any material theft, damage, destruction, or loss of or to any property or
properties owned or used by it, whether or not covered by insurance;
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(h) Increased the annualized level of compensation of or granted any
extraordinary bonuses, benefits, or other forms of direct or indirect
compensation to any employee, officer, director, or consultant, or
increased, terminated, or amended or otherwise modified any agreement or
plan for the benefit of officers or employees, except in the ordinary
course of business and consistent with historical adjustments to such
compensation and benefits;
(i) Except for the computer purchase described in SCHEDULE 11.13,
made any capital expenditures or commitments therefor that aggregate in
excess of $50,000;
(j) Taken any other action or entered into any other action other
than in the ordinary course of business and in accordance with past custom
and practice, or entered into or modified any transaction with any Insider
or any contract, written or oral, that involves consideration or
performance by it of a value exceeding $5,000 or a term exceeding six
months;
(k) Made any loans or advances to, or guarantees for the benefit of
any persons;
(l) Acquired (by merger, exchange, consolidation, acquisition of
stock or assets, or otherwise) any corporation, partnership, joint
venture, or other business organization or division or material assets
thereof;
(m) Redeemed or purchased, directly or indirectly, any shares of its
capital stock, or declared or paid any dividends or distributions with
respect to any shares of its capital stock;
(n) Issued or sold any equity securities, securities convertible
into or exchangeable for equity securities, warrants, options, or other
rights to acquire equity securities, or bonds or other debt securities;
(o) Discharged or satisfied any lien or encumbrance or paid any
liability, other than current liabilities (or current installments due on
intermediate or long-term liabilities) paid in the ordinary course of
business; or
(p) Sold, assigned, or transferred (including, without limitation,
transfers to any employees, shareholders, or affiliates) any patents,
trademarks, trade names, copyrights, trade secrets, or other intangible
assets, except in the ordinary course of business.
11.14 Real Estate.
(a) Except for the Related Facilities, Sellers do not own any real
estate.
(b) SCHEDULE 11.14(b) sets forth a list of all leases of real
property and improvements relating to the Acquired Business ("Leases").
True and correct copies of the
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Leases, as amended, have been delivered to Buyer and have not been amended
since the delivery of such copies. The Leases, as amended, are in full
force and effect, the applicable Seller has a valid and existing leasehold
interest under each such Lease for the term set forth therein, and,
neither any Seller, nor to the best of any Seller's knowledge, any other
party, thereto is in default or breach under any such Lease. No event has
occurred which, with the passage of time or the giving of notice or both,
would cause a breach of or default under any of such Leases by any
Sellers, or, to the best of any Seller's knowledge, any other party.
(c) The properties set forth on SCHEDULES 1.6(a) AND (b) AND
11.14(b) constitute all of the real estate used or occupied by Sellers in
connection with the Acquired Business, and, to the best of Sellers'
knowledge, each such property has access, sufficient for the conduct of
the business conducted thereon, to public roads and to all utilities,
including electricity, sanitary and storm sewer, potable water, natural
gas and other utilities, used in the operations of the Acquired Business.
(d) No Seller is in violation of any applicable zoning ordinance or
other law, regulation, or requirement relating to the operation of any of
the properties used in the Acquired Business, including, without
limitation, applicable environmental protection and occupational health
and safety laws and regulations, and no Seller has received any notice of
any such violation, or of the existence of any condemnation proceeding
with respect to any such properties owned or leased by it.
(e) At the Closing, all Acquired Facilities shall be surrendered to
Buyer in clean, good operating condition (reasonable wear and tear
excepted). Prior to the Closing, Sellers shall lawfully remove and dispose
of all waste, refuse and rubbish from the Acquired Facilities. At the
Closing, the condition of the Acquired Facilities and the activities
conducted by Sellers thereat shall comply fully with all applicable
environmental, occupational zoning, fire, health and safety laws, rules
and regulations.
11.15 Tax Matters.
(a) For purposes of this Agreement:
(i) The term "Taxes" means any and all federal, state, local,
or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code Section 59A), customs
duties, capital stock, franchise, profits, withholding, social
security (or similar), unemployment, payroll, employment, recapture,
disability, real property, personal property, sales, use, transfer,
registration, value-added, alternative or add-on minimum, estimated,
or any other taxes, assessment, or government charges of any kind
whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not.
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(ii) The term "Tax Returns" means any return, declaration,
report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
(iii) The term "Code" means the Internal Revenue Code of 1986,
as amended. All references to sections of the Code shall include any
amendments or any successor provisions thereof.
(b) Each of the Sellers has filed all Tax Returns, or filed a timely
extension for all such Tax Returns, that each was required to file prior
to the date hereof. All such Tax Returns were correct and complete in all
respects. All Taxes owed by each of the Sellers (whether or not shown on
any Tax Return) with respect to Tax Returns the due date of which preceded
the date hereof have been paid. All other Taxes due and payable by each of
the Sellers with respect to periods ending on or as of the date of the
Closing or in respect of transactions entered into or any state of facts
existing as of the date of Closing (whether or not a Tax Return is due on
such date) have been paid or are accrued on the applicable financial
statements or will be accrued on the books and records of the Sellers as
of the Closing and made available to the Buyer. For purposes of the
preceding sentence, in determining the amount of taxes due and payable by
the Sellers with respect to periods ending on or as of the date of the
Closing or with respect to transactions entered into or any state of facts
existing as of the date of the Closing, the date of the Closing shall be
deemed to be the last day of any applicable tax period. It is expressly
provided that for purposes of this Section 11.15(b), the term Taxes
includes all Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor or
shareholder of Sellers, or to any other third party.
(c) Except as set forth on SCHEDULE 11.15, with respect to each
taxable period for each of the Sellers prior to the date hereof or prior
to the date of the Closing, (i) either such taxable period has been
audited by the relevant taxing authority or the time for assessing or
collecting Taxes with respect to each such taxable period has closed and
each taxable period is not subject to review by a relevant taxing
authority; (ii) no deficiency or proposed adjustment which has not been
settled or otherwise resolved for any amount of Taxes has been asserted or
assessed by any taxing authority against any of the Sellers; (iii) none of
the Sellers has consented to extend the time in which any Taxes may be
assessed or collected by any taxing authority; (iv) none of the Sellers
has requested or been granted an extension of the time for filing any Tax
Return to a date later than the Closing; (v) there is no action, suit,
taxing authority proceeding, or audit or claim for refund now in progress,
pending or threatened against or with respect to any of the Sellers
regarding Taxes; (vi) none of the Sellers has made an election or filed a
consent under Section 341(f) of the Code (or any corresponding provision
of state, local or foreign law); (vii) there are no liens on the assets of
any of the Sellers relating or attributable to Taxes (other than liens for
sales and payroll Taxes not yet due and payable) and none of the Sellers
has any knowledge of any reasonable basis for the assertion of any claim
relating or attributable to Taxes which, if adversely determined, would
result in any lien on the assets of the Sellers; (viii) none of the
Sellers will
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be required (A) as a result of a change in method of accounting for a
taxable period ending on or prior to the date of the Closing, to include
any adjustment under Section 481 of the Code (or any corresponding
provision of state, local or foreign law) in taxable income for any
taxable period (or portion thereof) beginning after the date of the
Closing or (B) as a result of any "closing agreement," as described in
Section 7121 of the Code (or any corresponding provision of state, local
or foreign law), to include any item of income or exclude any item of
deduction from any taxable period (or portion thereof) beginning after the
date of the Closing; (ix) none of the Sellers has been a member of an
affiliated group (as defined in Section 1504 of the Code) or filed, or
been included in a combined, consolidated or unitary income Tax Return;
(x) none of the Sellers is a party to or bound by any Tax allocation or
tax sharing agreement and has no current or potential contractual or other
obligation to indemnify any other person with respect to Taxes; (xi) no
taxing authority will claim or assess any additional Taxes against any of
the Sellers for any period for which Tax Returns have been filed; (xii) no
claim has ever been made by a taxing authority in a jurisdiction where any
of the Sellers does not file Tax Returns that any of the Sellers is or may
be subject to Taxes assessed by such jurisdiction; (xiii) none of the
Sellers has any permanent establishment in any foreign country, as defined
in the relevant tax treaty between the United States of America and such
foreign county; (xiv) true, correct and complete copies of all income and
sales Tax Returns filed by or with respect to each of the Sellers for the
past three (3) years have been furnished or made available to the Buyer;
(xv) each of the Sellers has disclosed on each Tax Return filed by each
all positions taken thereon that could give rise to a substantial
understatement of penalty of federal income Taxes within the meaning of
Code Section 6662; (xvi) none of the Sellers was acquired in a qualified
stock purchase under Code Section 338(d)(3) and no elections under Code
Section 338(g), protective carryover basis elections, or offset
prohibition elections are applicable to any of the Sellers; (xvii) none of
the assets of Sellers (a) is property required to be treated as being
owned by any other person under the "safe harbor lease provisions" of
former section 168(f)(8) of the Internal Revenue Code of 1954, as amended,
or (b) has been financed with or directly or indirectly secures any bond
or debt the interest on which is tax-exempt under Section 103(a) of the
Code; and (xviii) no sales or use tax will be payable by any of the
Sellers as a result of this transaction, and there will be no nonrecurring
intangible tax, documentary stamp tax or other excise tax (or comparable
tax imposed by a governmental entity) as a result of this transaction.
(d) Any reference to the term "Sellers" in this Section 11.15 shall
refer to each of the Sellers, any predecessor entities, and any subsidiary
of any of the Sellers.
11.16 Contracts and Commitments.
(a) Except as set forth in SCHEDULE 11.16 hereto or any other
Schedule hereto, no Seller is a party to any written or oral: (i)
collective bargaining agreement or contract with any labor union; (ii)
bonus, pension, profit sharing, retirement, or other form of deferred
compensation plan; (iii) hospitalization insurance, or similar plan or
practice, whether formal or informal; (iv) contract for the employment or
compensation of any officer, individual
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employee, or other person on a full-time, part-time or consulting basis or
relative to severance pay or change-in-control benefits for any such
person; (v) agreement or indenture relating to the borrowing of money in
excess of $5,000 relating to the Acquired Business or Acquired Assets or
to mortgaging, pledging, or otherwise placing a lien on any of the
Acquired Assets; (vi) guaranty of any obligation for borrowed money or
otherwise, other than endorsements made for collection; (vii) lease or
agreement under which it is lessor or lessee of, or permits any third
party to hold or operate, any Acquired Assets or any facilities relating
to the Acquired Business; (viii) other agreement material to the Acquired
Business or (ix) agreement not entered into in the ordinary course of
business relating to the Acquired Assets, the Acquired Business or the
Acquired Facilities (collectively, the "Agreements"). True and correct
copies of the Agreements, as amended, have been delivered to Buyer and
have not been amended since the delivery of such copies. Buyer is not
assuming any obligations of Sellers under the Agreements unless the
Agreement is an Assumed Agreement or a liability thereunder is an Assumed
Liability.
(b) Sellers have furnished Buyer with a true and correct copy of
each written Agreement, and a written description of each oral Agreement,
referred to in SCHEDULE 11.16, together with all amendments, waivers, or
other changes thereto.
(c) Except as specifically disclosed in SCHEDULE 11.16 hereto: (i)
no customer or supplier has indicated that it will stop or decrease the
rate of business done with any Seller, except for changes in the ordinary
course of the Acquired Business; and (ii) no breach or default by Sellers
or claim of any such breach or default by Sellers or to their best
knowledge, by any other party, exists under any Assumed Agreement and no
event has occurred with respect thereto that with the lapse of time or
action or inaction by any Seller or, to their best knowledge, any other
party thereto, would result in a breach thereof or a default thereunder.
(d) Each Assumed Agreement is in full force and effect and is the
legal, valid and binding obligation of each Seller party thereto,
enforceable in accordance with its terms against each Seller party thereto
and each other party thereto, subject to the Equitable Exceptions. Except
as set forth on SCHEDULE 11.16, no Seller has, and, to the best of
Sellers' knowledge, no other party thereto has, assigned any of its rights
or delegated any of its duties under any Assumed Agreement.
(e) Upon the assignment of each Assumed Agreement to the Buyer
pursuant hereto, all rights of the Sellers with respect to the Assumed
Agreements will inure to the Buyer and the Assumed Agreements will be
enforceable by the Buyer in accordance with their terms, subject to the
Equitable Exceptions.
(f) As of the Closing, no Seller will owe any amount (whether
absolute, contingent, or otherwise) for any period prior to Closing with
respect to any Assumed Agreement, other than amounts incurred in the
ordinary course of business consistent with
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past practices and this Agreement, with any exceptions thereto to be
properly reflected on SCHEDULE 11.16 hereof.
(g) Sellers have paid all rental and other payments due under each
lease (including each Lease) under which a Seller is the lessee, in
accordance with its terms. With respect to each such lease, the applicable
Seller has been in peaceable possession of the buildings, equipment,
machinery, real property, vehicles, or other tangible property covered
thereby since the commencement of the original term of such lease.
Moreover, no indulgence, postponement, or waiver of any Seller's
obligations under any such lease has been granted by the lessor. Sellers
possess full right and power to occupy as a tenant or possess as a lessee,
as the case may be, all of the buildings, equipment, machinery, real
property, vehicles, and other tangible property covered by such leases.
11.17 Intellectual Property.
(a) Sellers warrant and represent that Sellers own, or are licensed
or otherwise possess legally enforceable and, except as otherwise
disclosed in SCHEDULE 11.17, transferrable rights to use all of the
Intellectual Property, the Shared Software, and the Licensed Software,
including all patents, trademarks, trade names, service marks, copyrights,
and all applications therefor, maskworks, net lists, schematics,
technology, know-how, computer software programs or applications (in both
source code and object code form), trade secrets and tangible or
intangible proprietary information or material that are used in the
Acquired Business (the "Intellectual Property Rights").
(b) Sellers warrant and represent that SCHEDULE 11.17 comprises (i)
a complete list of all patents, registered and unregistered trademarks and
service marks, registered copyrights, maskworks, trade names, and any
applications relating to the foregoing, included in the Intellectual
Property Rights, and specifies, where applicable, the jurisdiction in
which each such Intellectual Property Right has been issued or registered
or in which an application for such issuance and registration has been
filed, including the respective registration or application numbers and
the names of all registered owners; (ii) a complete list of all material
licenses, sublicenses and other agreements as to which any of Sellers are
a party and pursuant to which any of Sellers are authorized to use the
intellectual property rights of any third parties; and (iii) a complete
list of all material licenses, sublicenses and other agreements as to
which any of Sellers are parties and pursuant to which any third party is
authorized to use Intellectual Property Rights, and includes the identity
of all parties thereto, a description of the nature and subject matter
thereof, the applicable royalty or other fees and the term thereof. None
of Sellers is in violation of any such licenses, sublicenses or agreements
nor, to Sellers' knowledge, is any other party thereto. All proprietary
software and enhancements, modifications and customizations thereto that
were developed by Sellers were developed by employees of Sellers who were
hired for such purposes, and except as disclosed on SCHEDULE 11.17 no
consultants or independent contractors or other third parties were
utilized by Sellers in the development of such software or enhancements,
modifications or customizations. Sellers have provided to Buyer complete
and true copies of all
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agreements with those consultants, independent contracts or other third
parties listed on SCHEDULE 11.17 pursuant to which such development
activities occurred.
(c) Sellers warrant and represent that the execution and delivery of
this Agreement by Sellers, and the consummation of the transactions
contemplated hereby, will neither cause any of Sellers to be in violation
or default under any license, sublicense or agreement, nor entitle any
other party to any such license, sublicense or agreement to terminate or
modify such license, sublicense or agreement. Sellers are the sole and
exclusive owners or licensees of, with all right, title and interest in
and to (free and clear of any liens or encumbrances), the Intellectual
Property Rights, and have sole and exclusive rights (and are not
contractually obligated to pay any compensation to any third party in
respect thereof) to the use thereof or the material covered thereby in
connection with the services or products in respect of which the
Intellectual Property Rights are being used.
(d) No claims with respect to the Intellectual Property Rights have
been asserted or are threatened by any person nor are there any valid
grounds for any bona fide claims (i) to the effect that the manufacture,
sale, licensing or use of any product or service of the Acquired Business
infringes on any copyright, patent, trademark, service ▇▇▇▇, trade secret
or other proprietary right of any third party, (ii) against the use by
Sellers of any trademarks, service marks, trade names, trade secrets,
copyrights, maskworks, patents, technology, know-how or computer software
programs and applications used in the Acquired Business as currently
conducted, or (iii) challenging the ownership by Sellers or the validity
or effectiveness of any of the Intellectual Property Rights. All licenses
to Intellectual Property patents, and registered trademarks, service marks
and copyrights held by Sellers are valid and subsisting. There is no
material unauthorized use, infringement or misappropriation of any of the
Intellectual Property Rights by any third party, including any employee or
former employee or present or former consultants, independent contractors
or other agents of Sellers. No Intellectual Property Right or product or
service of Sellers is subject to any outstanding decree, order, judgment,
or stipulation restricting in any manner the transfer or licensing thereof
by Sellers.
11.18 Employment Matters. Attached hereto as SCHEDULE 11.18 is a list of
names, job title, name of employer, city and state of employment, current annual
rates of salary, bonus, commission, employee benefits, accrued vacation and sick
time, sick pay, and other compensation, benefits, and perquisites, including the
provision of company-owned automobiles, of all the employees of Sellers and its
independent contractors whose work relates, directly or indirectly, to the
operation of the Acquired Business and all benefit plans (with a brief
description of each thereof) and employment agreements (written or oral) in
favor of or applicable to any such employees or independent contractors. To the
best of Sellers' knowledge, except as disclosed in SCHEDULE 11.18, no key
employee of any Seller, and no group of any Seller's other employees, has any
plans to terminate his, her, or its employment. No Seller is a party to any
collective bargaining agreement, there are no discussions, negotiations,
demands, or proposals that are pending or that have been conducted or made with
or by any labor union or association, and there are no pending or threatened
labor disputes, strikes, or work stoppages with respect to the business
operations of Sellers and Sellers'
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labor relations are satisfactory in all material respects. Each Seller has
complied with all laws relating to the employment of labor, terms and conditions
of employment, and wages and hours, including provisions thereof relating to
wages, hours, equal opportunity, collective bargaining, and the payment of
social security and other taxes, and is not engaged in any unfair labor
practices. Except as disclosed in SCHEDULE 11.18, each Seller may terminate any
employee, with or without cause, without liability or obligation other than for
salary, vacation pay and other employee benefits accrued through the date of any
such termination.
11.19 No Liens. Sellers' title to the Acquired Assets is free and clear of
all liens, other than the liens listed on SCHEDULE 11.19 hereto all of which
will be released as of the Closing.
11.20 Affiliate Transactions. Except as set forth on SCHEDULE 11.20, no
officer, director or shareholder of any Seller or any member of the immediate
family of any such officer, director, or shareholder, or any entity in which any
of such persons owns any beneficial interest (other than a publicly held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 1% of the stock of which is beneficially
owned by any of such persons) (collectively "Insiders"), has any agreement with
any Seller or any interest in any property (real, personal, or mixed, tangible
or intangible) used in or pertaining to the Acquired Business. For purposes of
the preceding sentence, the members of the immediate family of an officer,
director, or, shareholder shall consist of the spouse, parents, children, and
sons- and daughters-in-law, of such officer, director, or shareholder and, in
addition to the above, with respect to any material agreement or interest,
siblings, mothers- and fathers-in-law and brothers-and sisters-in-law.
11.21 Compliance with Laws; Permits. Each Seller and its officers,
directors, and employees and, to the best of such Seller's knowledge, its
agents, have complied with all applicable laws and regulations of foreign,
federal, state, and local governments and all agencies thereof which affect the
Acquired Business or any of the Acquired Assets or the Acquired Facilities and
no claims have been filed or threatened against any Seller alleging a violation
of any such law or regulation, except as set forth in SCHEDULE 11.21 hereto.
Each Seller possesses all approvals, authorizations, certificates, consents,
registrations, franchises, licenses, permits, rights, variances, and waivers
necessary for the lawful conduct of the Acquired Business and the ownership or
operation of the Acquired Assets and the Acquired Facilities (collectively, the
"Permits"). All Permits are in full force and effect, no violations have
occurred with respect thereto, and no basis exists for any limitation,
revocation, or withdrawal thereof or any denial of any extension or renewal with
respect thereto. A list of all Permits (including the expiration dates thereof)
is set forth in SCHEDULE 11.21 hereto. Except as indicated on SCHEDULE 11.21, no
Permit is transferable to the Buyer. Sellers have made available to Buyer each
Permit for Buyer's review.
11.22 Reasonably Equivalent Value. Sellers acknowledge and warrant that
the value received by the Sellers pursuant to this Agreement is reasonably
equivalent to the value of the Acquired Business, Acquired Assets and Acquired
Facilities. Sellers further warrant that the transfer of the Acquired Business,
Acquired Assets and Acquired Facilities to Buyer is not being made by the
Sellers with the intent to hinder, delay or defraud any creditor of the Sellers;
that Buyer is not an insider (as that term is defined in 11 U.S.C. Section
101(31) and/or Tex. Bus. & Com. Code Section 24.002(7))
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of the Sellers; that the Sellers shall not retain possession or control of any
such assets following the transfer; and that the transfer shall not be concealed
from any of the Sellers' creditors.
11.23 Disclosure. Neither this Agreement nor any of the Schedules hereto
or documents or agreements to be delivered hereunder contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances in
which they were made, not misleading, and there is no fact which has not been
disclosed to Buyer which material adversely affects or could reasonably be
anticipated to materially adversely affect the Acquired Assets, Acquired
Business, or Acquired Facilities or the customer, employee or supplier relations
relating thereto.
ARTICLE XII
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants that all of the following
representations and warranties in this Article XII are true and correct at the
time of execution and delivery of this Agreement and at the time of the Closing.
12.1 Due Organization and Qualification. Buyer is duly organized, validly
existing and in good standing under the laws of the State of Delaware, and is
duly authorized and qualified under all applicable laws, regulations, and
ordinances of public authorities to carry on its businesses in the places and in
the manner as now conducted except for where the failure to be so authorized or
qualified would not have a material adverse effect on its business, operations,
affairs, properties, assets or condition (financial or otherwise).
12.2 Corporate Power and Authority. The execution, delivery and
performance of this Agreement by Buyer, and all other agreements by and among
the parties, and the consummation by it of the transactions contemplated hereby
and thereby, have been or will at the time of the Closing be duly authorized by
all requisite corporate action and no further action or approval is required or
will at the time of Closing be required in order to permit Buyer to consummate
the transactions contemplated hereby and thereby. This Agreement constitutes,
and all other agreements by and among the parties, when executed and delivered
in accordance with the terms thereof, will constitute the legal, valid and
binding obligations of Buyer, enforceable against Buyer in accordance with their
terms (subject to the Equitable Exceptions). Buyer has full corporate power,
authority and legal right to enter into this Agreement and all other agreements
by and among the parties and to consummate the transactions contemplated hereby
and thereby.
12.3 No Violations. The execution, delivery and performance of this
Agreement, and all other agreements by and among the parties, and the
consummation of the transactions contemplated hereby and thereby in accordance
with the terms hereof and thereof will not (i) conflict with or result in a
breach or violation of the Certificate of Incorporation or the Bylaws of Buyer,
(ii) result in any breach or termination of, or constitute a default under, or
constitute an event which with notice or
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lapse of time, or both, would become a default under, or result in the creation
of any encumbrance upon any asset of Buyer under, or create any rights of
termination, cancellation or acceleration in any person under, any contract,
lease, arrangement, commitment, or any other instrument or violate any judgment
order, writ, injunction or decree, to which Buyer is a party or by which Buyer
or any of its assets, business or operations may be bound or affected or under
which Buyer or its assets, business or operations receive benefits, (iii) result
in the loss or adverse modification of any material license, franchise, permit
or other authorization granted to or otherwise held by Buyer which is material
to the business or financial condition of Buyer or (iv) result in the violation
of any provisions of law applicable to Buyer, the violation of which could have
a material adverse effect upon the business, operations or assets of Buyer.
12.4 Consents. Except with respect to licenses and permits necessary or
appropriate to the operation of the Acquired Business as contemplated in Section
4.1 hereof, no consent, approval, authorization or order of any court, agency or
any other person or authority is required in order to permit Buyer to consummate
the transactions contemplated by this Agreement.
12.5 Conformity with Law and Litigation. Except with respect to licenses
and permits necessary or appropriate to the operation of the Acquired Business
as contemplated in Section 4.1 hereof, Buyer is not in violation of any law or
regulation or any order of any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
having jurisdiction over it that would have a material adverse effect on the
ability of the Buyer to consummate the transactions contemplated by this
Agreement. There are no pending or threatened claims, actions, suits,
proceedings or litigation in any court or any proceeding before any agency (i)
in which it is sought to restrain, prohibit, invalidate or obtain damages in
respect of the consummation of the purchase and sale of the Acquired Assets or
the other transactions contemplated hereby or (ii) which could, if adversely
determined, result in the inability of the Buyer to consummate the transactions
contemplated by this Agreement.
12.6 Reasonably Equivalent Value. In the good faith judgment of Buyer, the
assets being purchased pursuant to this Agreement are being purchased for value
reasonably equivalent to the value of the Acquired Business, Acquired Assets and
Acquired Facilities.
ARTICLE XIII
INDEMNIFICATION
13.1 Definitions. For purposes of this Article, the following terms shall
have the respective meanings set forth below:
"Indemnified Party" means a party entitled to indemnification
pursuant to this Article.
"Indemnifying Party" means a party liable for indemnification
pursuant to this Article.
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"Losses" means any and all out-of-pocket damages, costs,
liabilities, losses (including consequential losses), judgments, penalties,
fines, expenses or other costs, including reasonable attorney's fees, incurred
by an Indemnified Party.
"Third Party Claim" means a claim or demand made by any person or
corporation (other than an Indemnified Party) or any governmental authority or
other third party against an Indemnified Party.
13.2 Indemnification by Sellers. Sellers shall indemnify and hold harmless
Buyer and its directors, officers, employees, affiliates and agents, at all
times from and after Closing, against any Losses arising from or relating to:
(i) any breach of the representations or warranties made by Sellers in this
Agreement or in any certificate or other document or agreement delivered by
Sellers or any of them pursuant to this Agreement; (ii) any breach of the
covenants and agreements made by Sellers in this Agreement or in any certificate
or other document or agreement delivered by Sellers or any of them pursuant to
this Agreement; (iii) the Excluded Assets; (iv) the Excluded Liabilities; and
(v) any Losses arising from the failure to obtain on or prior to the Closing any
required consent of any landlord of the Independent Facilities or to have
executed and delivered on or prior to the Closing any assumptions of the
Independent Third-Party Leases as contemplated in Section 1.6(a) of this
Agreement, including but not limited to any Losses resulting from any changes
demanded by a landlord in rental rates or other terms and conditions in any
Independent Third-Party Lease or from any relocation to different facilities
required as a result of consent not having been obtained, and any Losses arising
from the failure of Sellers to obtain on or prior to the Closing on their own
behalf or on behalf of Buyer any required Sellers' lenders consents, shareholder
approvals or consents of other third parties, including but not limited to the
consent of the mortgage lender of the Plano Road facility and any consents
required to transfer or assign the Assumed Agreements and/or to license the
licensed Software if not obtained by the Closing, to the execution and delivery
of this Agreement and the other agreements and instruments contemplated hereby
and the consummation of the transactions contemplated hereby. If Sellers shall
at any time dissolve or make any distribution to equity holders following the
Closing after satisfaction of all debts to creditors, Sellers shall post
security for or otherwise make full and adequate provisions for all identifiable
obligations of indemnity under this Section 13.2. The Appliance Company shall
indemnify and hold harmless Buyer and its directors, officers, employees,
affiliates and agents, at all times from and after the Closing arising from or
relating to any breach of any covenant, agreement, representation or warranty
made in this Agreement by the Appliance Company.
13.3 Indemnification by Buyer. Buyer shall indemnify and hold harmless
Sellers, and as applicable the Appliance Company, and their respective
directors, officers, employees, affiliates and agents, at all times from and
after the Closing, against any Losses arising from or relating to: (i) any
breach of the representations or warranties made by Buyer in this Agreement;
(ii) any breach of the covenants and agreements made by Buyer in this Agreement;
(iii) the Assumed Liabilities; (iv) any Assumed Liabilities arising in
connection with the Acquired Business or the Acquired Assets following the
Closing during or in connection with the operation of the Management Services
Agreement except as otherwise provided in Section 4.2 hereof; (v) any breach of
Buyer's obligations
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pursuant to the Portfolio Servicing Agreement or the Subservicing Agreement; and
(vi) the ownership or operation of the Acquired Business or the Acquired Assets
after the Closing.
13.4 Procedure for Indemnification Claims.
(a) Any Indemnified Party asserting a right of indemnification
provided for under this Agreement in respect of a Third Party Claim shall notify
the Indemnifying Party in writing of the Third Party Claim within ten business
days after receipt by such Indemnified Party of written notice of the Third
Party Claim. As part of such notice, the Indemnified Party shall furnish the
Indemnifying Party with copies of any pleadings, correspondence or other
documents relating thereto that are in the Indemnified Party's possession. The
Indemnified Party's failure to notify the Indemnifying Party of any such matter
within the time frame specified above shall not release the Indemnifying Party,
in whole or in part, from its obligations under this Article except to the
extent that the Indemnifying Party's ability to defend against such claim is
actually prejudiced thereby. The Indemnifying Party agrees (and, at such time as
the Indemnifying Party acknowledges its liability under this Article with
respect to such Third Party Claim, the Indemnifying Party shall have the sole
and exclusive right) to defend against, settle or compromise such Third Party
Claim at the expense of such Indemnifying Party. The Indemnified Party shall
have the right (but not the obligation) to participate in the defense of such
claim through counsel selected by it, which counsel shall be at the Indemnified
Party's expense to the extent that the Indemnifying Party has assumed the
defense of such claim unless counsel for the Indemnifying Party could not
adequately represent the interests of the Indemnified Party due to an actual or
potential conflict of interest, in which case such counsel shall be at the
Indemnifying Party's expense. The Indemnified Party shall cooperate with the
Indemnifying Party and provide such assistance at the Indemnifying Party's
expense as the Indemnifying Party may reasonably request in connection with the
defense of such claim, including but not limited to providing the Indemnifying
Party access to and use of all relevant corporate records and making available
its officers and employees for depositions, other pre-trial discovery and as
witnesses at trial, if required. If the Indemnifying Party has not yet
acknowledged its liability under this Article with respect to such Third Party
Claim, then the Indemnifying Party and the Indemnified Party shall cooperate in
defending against such Third Party Claim at the Indemnifying Party's expense,
and neither party shall have the right, without the other's consent, to settle
or compromise any such Third Party Claim.
(b) In the event of any claim for indemnification hereunder that is
not a Third Party Claim, the Indemnified Party shall give reasonable notice
thereof to the Indemnifying Party and shall afford the Indemnifying Party access
to all relevant corporate records and other information in its possession
relating thereto.
(c) If any party becomes obligated to indemnify another party with
respect to any claim for indemnification hereunder and the amount of liability
with respect thereto shall have been finally determined, the Indemnifying Party
shall pay such amount to the Indemnified Party plus the reasonable fees and
expenses of the Indemnified Party and of its counsel and other agents in
connection with such claim for indemnification and the enforcement thereof, in
immediately available funds within ten days following written demand by the
Indemnified Party. Sellers
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acknowledge that pursuant to Section 3.1(b) of the Portfolio Servicing
Agreement, Collections (as defined in the Portfolio Servicing Agreement) may be
remitted to Buyer by the Servicer (as defined in the Portfolio Servicing
Agreement) in order to satisfy the indemnity obligations of Sellers hereunder
provided that such remittance is in accordance with Section 3.1(b) of the
Portfolio Servicing Agreement.
ARTICLE XIV
GENERAL PROVISIONS
14.1 COOPERATION. Buyer and Sellers shall each deliver or cause to be
delivered to the other on the day of the Closing, and at such other times and
places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement.
14.2 SURVIVAL OF COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES.
(a) Covenants and Agreements. All covenants and agreements made
hereunder or pursuant hereto or in connection with the transactions contemplated
hereby shall survive the Closing and shall continue in full force and effect
thereafter according to their terms without limit as to duration except as
otherwise expressly stated herein, not withstanding any investigation by any
parties hereto.
(b) Representations and Warranties. All representations and
warranties contained herein shall survive the Closing and shall continue in full
force and effect thereafter for a period of one (1) year following the Closing,
except that (a) the representations and warranties contained in Section 11.8
(Environmental) hereof shall survive for a period of five (5) years following
the Closing, (b) the representations and warranties contained in Section 11.9
(Employee Benefit Plans) and Section 11.15 (Tax Matters) hereof shall survive
until the expiration of the applicable period of the statutes of limitation
applicable to ERISA matters and tax matters, respectively, and (c) the
representations and warranties contained in Article VII and Sections 11.1 to
11.4 and Sections 11.17 and 11.19 (Organization, Authorization, Ownership of
Assets, Intellectual Property, No Liens) hereof shall survive indefinitely.
Notwithstanding anything to the contrary in this Section 14.2(b), Sellers
obligations of indemnity pursuant to Section 13 hereof shall not be impaired
after the expiration of any period stated in this Section 14.2(b) with respect
to any Excluded Liabilities, which obligations of indemnity shall survive
indefinitely.
(c) Claims Made Prior to Expiration. Notwithstanding the foregoing
survival periods set forth in this Section 14.2, the termination of a survival
period shall not affect the rights of an Indemnified Party in respect of any
claim or potential claim made by any party with reasonable specificity, in good
faith and in writing to the Indemnifying Party in accordance with Article XIII
hereof prior to the expiration of the applicable survival period.
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14.3 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the parties
hereunder may not be assigned except by operation of law and except that Buyer
may assign all or any portion of its rights and obligations hereunder to any one
or more subsidiaries or affiliates and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and assigns.
Notwithstanding the foregoing, no assignment by Buyer will relieve Buyer of its
obligations to the parties hereto, including expressly its indemnification
obligations.
14.4 ENTIRE AGREEMENT. This Agreement (including the schedules, exhibits
and annexes attached hereto) and the documents delivered pursuant hereto
constitute the entire agreement and understanding among the Sellers and Buyer
and supersede any prior agreement and understanding relating to the subject
matter of this Agreement. This Agreement, upon execution, constitutes a valid
and binding agreement of the parties hereto enforceable in accordance with its
terms subject to Equitable Exceptions and this Agreement and the schedules,
exhibits and annexes hereto may be modified or amended only by a written
instrument executed by the Sellers and Buyer acting through their respective
officers, duly authorized by their respective Boards of Directors.
14.5 COUNTERPARTS. This Agreement may be executed simultaneously in two
(2) or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument. One or more
counterparts of this Agreement may be delivered via telecopier with the
intention that they shall have the same effect as an original executed
counterpart hereof.
14.6 BROKERS AND AGENTS. Each party will be responsible for the fees and
expenses of its own broker or agent, if any, in connection with this transaction
and agrees to indemnify the other against all loss, cost, damages or expense
arising out of claims for fees or commissions of brokers employed or alleged to
have been employed by such indemnifying party.
14.7 EXPENSES. Except as otherwise expressly provided herein, Sellers and
Buyer shall each pay their own expenses in connection with the preparation of
this Agreement and the consummation of the transactions contemplated hereby
including, without limitation, fees of its own counsel, auditors and other
experts, whether or not such transactions be consummated.
14.8 NOTICES. All notices or communication required or permitted hereunder
shall be in writing and may be given by (a) depositing the same in United States
mail, addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, or with a national overnight delivery
service if delivery thereof is confirmed by the sender, (b) delivering the same
in person to an officer or agent of such party, or (c) telecopying the same with
electronic confirmation of receipt.
(i) If to Sellers, addressed to Sellers at:
KARS-YES Holdings Inc.
c/o ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇
▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: Mr. J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Chairman
with copies to:
▇▇▇▇▇ ▇▇▇▇▇▇▇ Rain ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, Esq.
(ii) If to Buyer, addressed to Buyer at:
Ugly Duckling Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
with copies to:
▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
or to such other address or counsel as any party hereto shall specify pursuant
to this Section from time to time.
14.9 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO ITS CHOICE OF LAW PRINCIPLES.
14.10 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
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14.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
14.12 REMEDIES CUMULATIVE. No right, remedy or election given by any term
of this Agreement shall be deemed exclusive but each shall be cumulative with
all other rights, remedies and elections available at law or in equity.
14.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
14.14 USE OF CERTAIN TERMS. As used in this Agreement, the words "herein",
"hereof" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular paragraph, subparagraph or other
subdivision.
14.15 ATTORNEYS' FEES. In the event of a dispute arising out of this
Agreement, the prevailing party, whether by way of prosecution or defense, shall
be entitled to all of its costs and expenses including, but not limited to,
attorneys' or counsels' (including paralegals' and similar persons') fees and
expenses, and accountants' fees and expenses, whether in a judicial, bankruptcy,
reorganization, administrative, arbitration or other proceeding, including
appellate proceedings, and any proceedings instituted to collect or enforce any
judgment or other relief granted or awarded whether such fees or expenses arise
before proceedings are commenced or after entry of a final judgment.
14.16 WAIVER OF JURY TRIAL. All parties waive trial by jury in all actions
relating to this Agreement and the transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
Sellers:
KARS-YES Holdings Inc.
By: /s/ J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chairman
KARS-YES Financial Inc.
By: /s/ J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chairman
KARS-YES Inc.
By: /s/ J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------------
Name: J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chairman
Buyer:
Ugly Duckling Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
And joined in for certain limited
purposes as set forth above:
The YES Group Inc.
By: /s/ J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
------------------------------
Name: J. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Chairman
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