STOCK PURCHASE AGREEMENT
dated as of December 7, 1999
pertaining to the acquisition by
FINOVA CAPITAL CORPORATION
of all of the outstanding shares of:
FREMONT FINANCIAL CORPORATION
TABLE OF CONTENTS
PAGE
1. SALE AND TRANSFER OF SHARES; CLOSING..................................1
1.1. Shares.........................................................1
1.2. Purchase Price.................................................1
1.3. Closing........................................................1
1.4. Closing Obligations............................................1
1.5. Determination of Purchase Price................................2
2. REPRESENTATIONS AND WARRANTIES OF SELLERS.............................3
2.1. Organization and Good Standing.................................3
2.2. Enforceability; No Conflict....................................3
2.3. Capitalization.................................................4
2.4. Financial Statements...........................................5
2.5. Books and Records..............................................5
2.6. Title To Properties; Encumbrances..............................5
2.7. Condition of Assets............................................6
2.8. Loans..........................................................6
2.9. Certain Liabilities............................................7
2.10. Taxes..........................................................7
2.11. No Material Adverse Change.....................................9
2.12. Employee Benefits..............................................9
2.13. Compliance With Legal Requirements; Governmental
Authorizations................................................13
2.14. Environmental Matters.........................................13
2.15. Legal Proceedings.............................................14
2.16. Absence of Certain Changes and Events.........................14
2.17. Contracts; No Defaults........................................15
2.18. Insurance.....................................................16
2.19. Employees.....................................................16
2.20. Labor Relations; Compliance...................................17
2.21. Intellectual Property.........................................17
2.22. Certain Payments..............................................18
2.23. Relationships With Related Persons............................18
2.24. Year 2000.....................................................18
2.25. Brokers Or Finders............................................18
2.26. Full Disclosure...............................................19
3. REPRESENTATIONS AND WARRANTIES OF BUYER..............................19
3.1. Organization and Good Standing................................19
3.2. Validity; No Conflict.........................................19
3.3. Investment Intent.............................................19
3.4. Certain Proceedings...........................................19
3.5. Brokers Or Finders............................................20
4. CERTAIN SELLER COVENANTS.............................................20
4.1. Access and Investigation......................................20
4.2. Operation of The Businesses of The Acquired Companies.........20
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4.3. Negative Covenant.............................................21
4.4. No Negotiation................................................21
4.5. Non-Competition and Non-Solicitation..........................22
5. CERTAIN ADDITIONAL COVENANTS.........................................23
5.1. Approvals of Governmental Bodies..............................23
5.2. Best Efforts..................................................23
5.3. Accrued Bonuses...............................................23
5.4. Change of Name; Marks.........................................23
5.5. Section 338(h)(10)............................................23
5.6. Transition Services...........................................24
5.7. Excluded Assets...............................................24
5.8. Inter-Company Obligations.....................................26
5.9. Asset Securitization Program; Letter of Credit Facilities.....26
5.10. Severance, etc................................................26
5.11. Indebtedness; Preferred Share Dividends.......................26
5.12. Real Property Leases..........................................26
5.13. Restricted Stock..............................................27
5.14. Maintenance of Books and Records..............................27
5.15. Company Welfare Plans.........................................27
5.16. Tax Sharing Arrangements......................................28
6. CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATION TO CLOSE..............28
6.1. Accuracy of Representations...................................28
6.2. Sellers' Performance..........................................28
6.3. Consents......................................................28
6.4. No Order......................................................28
6.5. No Material Adverse Change....................................28
6.6. Corporate Proceedings.........................................28
6.7. Resignation of Directors......................................29
6.8. HSR Act.......................................................29
7. CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATION TO CLOSE.............29
7.1. Accuracy of Representations...................................29
7.2. Buyer's Performance...........................................29
7.3. No Order......................................................29
7.4. Corporate Proceedings.........................................29
7.5. HSR Act.......................................................29
8. TERMINATION..........................................................29
8.1. Termination Events............................................29
8.2. Effect of Termination.........................................30
9. INDEMNIFICATION; REMEDIES............................................30
9.1. Indemnification and Payment of Damages by the Sellers.........30
9.2. Indemnification and Payment of Damages by the Buyer...........31
9.3. Time Limitations..............................................31
9.4. Limitations On Amount-- Sellers...............................31
9.5. Limitations On Amount-- Buyer.................................32
9.6. Procedure For Indemnification-- Third Party Claims............32
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9.7. Procedure for Indemnification-- Other Claims..................33
9.8. Insurance.....................................................33
9.9. No Limitation as a Result of Book Value Determination.........33
10. CERTAIN TAX MATTERS..................................................33
10.1. Tax Returns...................................................33
11. GENERAL PROVISIONS...................................................37
11.1. Expenses......................................................37
11.2. Public Announcements..........................................37
11.3. Confidentiality...............................................37
11.4. Notices.......................................................38
11.5. Arbitration...................................................39
11.6. Further Assurances............................................40
11.7. Waiver........................................................41
11.8. Entire Agreement and Modification.............................41
11.9. Assignments, Successors, and No Third-Party Rights............41
11.10. Severability..................................................41
11.11. Section Headings, Construction................................41
11.12. Governing Law.................................................42
11.13. Counterparts..................................................42
SIGNATURE PAGE..............................................................S-1
EXHIBIT A - DEFINITIONS.....................................................A-1
iii
Schedules
2.1 Organization Information
2.2.3 Consents
2.6 Owned and Leased Properties
2.8.1 Description of Loans
2.8.4 Notices of Default
2.9.1 Undisclosed Liabilities
2.9.2 Debt Obligations
2.10.5 Tax Returns
2.12.2 Employee Benefit Plans
2.13.2 Government Authorizations
2.15 Legal Proceedings
2.17.1 Material Contracts
2.19 Employees
2.21.1 Trademarks
2.23 Transactions with Related Persons
4.2 Operation of the Businesses Exceptions
4.5.2 California Counties
5.7 Excluded Assets
5.9 Letter of Credit Facilities
5.15 Company Welfare Plan Exceptions
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of December 7, 1999
("Agreement"), by FINOVA Capital Corporation, a Delaware corporation (the
"Buyer"), Fremont General Corporation, a Nevada corporation ("FGC"), and Fremont
General Credit Corporation, a California corporation ("FGCC," and, collectively
with FGC, the "Sellers"). In this Agreement, the term "Party" means the Sellers
on one hand, and the Buyer on the other. Exhibit A contains definitions, or
references to the definitions, of the capitalized terms used in this Agreement.
RECITALS
1. The Sellers collectively own all of the issued and outstanding
shares of capital stock of Fremont Financial Corporation, a California
corporation (the "Company"), consisting of 958,684 shares of Common Stock, $.10
par value per share (the "Common Shares"), owned by FGCC, and 40,000 shares of
Series A 10% Cumulative Preferred Stock, $1,000 par value per share (the
"Preferred Shares" and, collectively with the Common Shares, the "Shares"),
owned by FGC.
2. The Parties desire to provide for the Sellers' sale of the
Shares to the Buyer, on the terms and subject to the conditions stated in this
Agreement.
AGREEMENT
The Parties, intending to be legally bound, agree as follows:
1. SALE AND TRANSFER OF SHARES; CLOSING
1.1. Shares. Subject to the satisfaction or waiver of the conditions to
closing in Sections 6 and 7, at the Closing, the Sellers will sell and
transfer the Shares to the Buyer, and the Buyer will purchase the Shares
from the Sellers.
1.2. Purchase Price. The purchase price for the Shares (the "Purchase Price")
will be equal to the total of (a) Book Value as reflected on the Closing
Date Balance Sheet and (b) $18,000,000.
1.3. Closing. The closing of the purchase and sale of the Shares (the
"Closing") will take place at the offices of O'Melveny & Xxxxx LLP, 000
Xxxxx Xxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000, at 10:00 a.m. (local
time) on the second Business Day after the satisfaction of the
conditions to closing in Sections 6 and 7, or at any other time and
place the Parties agree. The Parties intend that the Closing occur on or
before December 31, 1999.
1.4. Closing Obligations. At the Closing:
1.4.1. Seller Deliveries. The Sellers will deliver to the Buyer:
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(a) certificates representing the Shares, duly endorsed (or accompanied
by duly executed stock powers) for transfer to the Buyer;
(b) a certificate executed by an executive officer of FGC certifying the
satisfaction of the conditions in Sections 6.1, 6.2, 6.3, 6.6, 6.7 and,
to such officer's knowledge, 6.4 and 6.5;
(c) supplements to the Disclosure Schedules pursuant to Section 4.1,
including an updated Schedule 2.8.1 as contemplated by Section 2.8.1;
(d) evidence of receipt of the Consents required by Section 6.3; and
(e) the documents relating to corporate proceedings specified in Section
6.6.
1.4.2. Buyer Deliveries. The Buyer will deliver to the Sellers:
(a) $131,000,000 (the "Estimated Payment") by wire transfer to an
account specified by the Sellers; and
(b) a certificate executed by an executive officer of the Buyer
certifying the satisfaction of the conditions in Sections 7.1, 7.2, 7.3,
7.4 and, to such officer's knowledge, 7.3; and
(c) the documents relating to corporate proceedings specified in Section
7.4.
1.5. Determination of Purchase Price.
1.5.1. Determination of Book Value. The Sellers will cause the Company
to prepare the consolidated unaudited balance sheet of the Company as of
the close of business on the date during which the Closing Date occurs
without giving effect to purchase accounting adjustments (the "Closing
Date Balance Sheet"), which will include a computation of Book Value as
of that date. The Closing Date Balance Sheet will be prepared in
accordance with GAAP, Section 4.2(d) and the Company's past practices.
The Sellers will deliver the Closing Date Balance Sheet and, as
reasonably requested by the Buyer, supporting schedules, backup
documents and workpapers, to the Buyer as soon as possible, and in any
event within fifteen Business Days, after the Closing Date. If within
ten Business Days after delivery of the Closing Date Balance Sheet and
any delivered supporting schedules, backup documents and workpapers, the
Buyer has not given the Sellers notice of its objection to the
computation of Book Value (together with a reasonably detailed statement
of the basis of the Buyer's objection), Book Value as computed by the
Sellers will be presumed to be Book Value for purposes of computing the
Purchase Price, subject to the provisions of Section 9.
1.5.2. Objection. If there is a notice of objection with respect to the
Closing Date Balance Sheet, the issues in dispute will be promptly
submitted to the principal Los Angeles Office of PricewaterhouseCoopers
LLP, certified public accountants (the "Accountants"), for resolution.
If this happens, (a) each Party (i) will furnish to the
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Accountants the work papers, other documents and information relating to
the disputed issues that the Accountants reasonably request and that are
available to that Party or its Subsidiaries (or its independent public
accountants), and (ii) can present to the Accountants any other relevant
material and arguments the Party desires; (b) the Accountants'
determination of Book Value as stated in a notice to both parties from
the Accountants, will be conclusive and binding on them; and (c) each
Party will bear 50% of the fees and expenses of the Accountants in
connection with that determination.
1.5.3. Payment. If the Estimated Payment is more than the Purchase Price
determined in accordance with Sections 1.2, 1.5.1 and 1.5.2, the Sellers
will pay the difference to the Buyer within three Business Days of the
final determination of the Purchase Price. If the Estimated Payment is
less than the Purchase Price, the Buyer will pay the difference to the
Sellers within three Business Days of the final determination of the
Purchase Price (in either case, a "Post Closing Payment"). Any Post
Closing Payment will be made together with interest at 8% simple
interest for the period, beginning on the Closing Date and ending on the
date of payment. Any such payment to a Party must be by wire transfer to
the bank account that Party specifies.
2. REPRESENTATIONS AND WARRANTIES OF SELLERS
The Sellers, jointly and severally, represent and warrant to the
Buyer as follows (subject to any exceptions in the Disclosure Schedules that
expressly reference the section to which the exception relates):
2.1. Organization and Good Standing. Schedule 2.1 accurately lists each
Acquired Company's name, jurisdiction of incorporation or formation,
other jurisdictions where it is qualified to do business as a foreign
corporation or limited liability company, and capitalization (including
the identity of each of its stockholders and the number of shares held
by each). Each Acquired Company is a corporation or limited liability
company duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, with full corporate or
limited liability company power and authority to conduct its business as
it is now being conducted, to own or use the properties and assets that
it purports to own or use, and to perform its obligations under each
Applicable Contract to which it is a party. Each Acquired Company is
duly qualified to do business as a foreign corporation or limited
liability company and is in good standing under the laws of each state
in which the failure to qualify would reasonably be expected to have a
Company Material Adverse Effect. Each Seller is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation.
2.2. Enforceability; No Conflict.
2.2.1. Enforceability. This Agreement constitutes the legal, valid, and
binding obligation of the Sellers, enforceable against them in
accordance with its terms, subject to the Enforceability Exceptions. The
Sellers have the corporate power and authority to execute and deliver,
and perform their obligations under, this Agreement.
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2.2.2. No Conflict. Neither the execution and delivery of this Agreement
nor the consummation or performance of any of the Transactions will
(with or without notice or lapse of time):
(a) contravene, conflict with, or result in a violation of the
Organizational Documents of either of the Sellers or any Acquired
Company;
(b) contravene, conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to prevent, delay or
otherwise interfere with any of the Transactions or to exercise any
remedy or obtain any relief under, any Law or any Order to which any
Acquired Company or Seller, or any of the assets owned or used by any
Acquired Company, is subject;
(c) contravene, conflict with, or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any material
Governmental Authorization held by any Acquired Company;
(d) contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance
of, or to cancel, terminate, or modify, any Material Contract; or
(e) result in the imposition or creation of any Encumbrance upon or with
respect to any Acquired Company assets.
2.2.3. Consents. Other than the termination or expiration of the
applicable waiting period under the HSR Act and as stated in Schedule
2.2.3, neither Seller, nor any Acquired Company, is or will be required
to give any notice to or obtain any Consent from any Person in
connection with the execution, delivery or performance of this Agreement
or the consummation of the Transactions.
2.3. Capitalization. The authorized shares of the Company consist only of (a)
2,500,000 shares of Common Stock, par value $.10 per share, of which
958,684 shares are issued and outstanding and constitute the Common
Shares; and (b) 100,000 shares of 10% Preferred Stock, $1,000 par value
per share, of which 40,000 shares are issued and outstanding and
constitute the Preferred Shares. FGC and FGCC are, and will be on the
Closing Date, the record and beneficial owners and holders of the
Preferred Shares and the Common Shares, respectively, free and clear of
all encumbrances, adverse claims and restrictions on transfer other than
under applicable securities laws. With the exception of the Common
Shares and the Preferred Shares, all of the outstanding equity
securities and other securities of each Acquired Company are owned of
record and beneficially by one or more of the other Acquired Companies,
free and clear of all encumbrances, adverse claims and restrictions on
transfer other than under applicable securities laws. No legend or other
reference to any purported encumbrance appears upon any certificate
representing equity securities of any Acquired Company. All of the
outstanding equity
4
securities of each Acquired Company have been duly authorized and
validly issued and are fully paid and non-assessable and were not issued
in violation of any preemptive rights. Neither of the Sellers, and no
Acquired Company, is party to any Contract relating to the issuance,
sale, or transfer of any equity or other securities of any Acquired
Company. None of the outstanding equity or other securities of any
Acquired Company was issued in violation of the Securities Act or any
other Law. No Acquired Company owns, or has any Contract to acquire, any
equity or other securities of any Person (other than Acquired Companies)
or any direct or indirect equity or ownership interest in any other
business. At the Closing, the Buyer will receive title to all of the
Shares free and clear of any encumbrances, adverse claims and
restrictions on transfer other than under applicable securities laws.
2.4. Financial Statements. The Sellers have delivered to the Buyer: (a) an
unaudited consolidated balance sheet of the Company at October 31, 1999
(the "Interim Balance Sheet"), and the related unaudited consolidated
statements of income and changes in stockholder's equity for the ten
months then ended (collectively with the Interim Balance Sheet, the
"Interim Financial Statements") and (b) a consolidated balance sheet of
the Acquired Companies at December 31, 1998 (including the notes to it,
the "Balance Sheet"), and the related consolidated statements of income,
changes in stockholder's equity, and cash flow for the fiscal year then
ended, together with the report on those statements of Ernst & Young
LLP, independent certified public accountants. These financial
statements and notes fairly present the consolidated financial condition
and the consolidated results of operations, changes in stockholder's
equity, and cash flow of the Acquired Companies as at the respective
dates of and for the periods referred to in the financial statements,
all in accordance with GAAP, subject, in the case of the Interim
Financial Statements, to normal recurring year-end adjustments and the
absence of notes. The financial statements referred to in this Section
2.4 reflect the consistent application of GAAP throughout the periods
involved, except as disclosed in the notes to those financial
statements.
2.5. Books and Records. The books of account, minute books, stock record
books, and other Acquired Company records are complete and correct in
all material respects. At the Closing, all of those books and records
will be in the Acquired Companies' possession.
2.6. Title To Properties; Encumbrances. Schedule 2.6 accurately lists (a) the
only parcel of real property owned in fee by any Acquired Company (the
"Owned Real Property"), and (b) all leasehold interests owned by or any
other interests in real property used by any Acquired Company (the
"Leased Real Property"). The Acquired Companies own (with good and
marketable title in the case of the Owned Real Property, subject only to
the matters permitted by the following sentence) all the properties and
assets (whether real, personal, or mixed and whether tangible or
intangible) reflected as owned in the Acquired Companies' books and
records, including all properties and assets reflected in the Balance
Sheet and the Interim Balance Sheet (except for assets held under
capitalized leases disclosed or not required to be disclosed in Schedule
2.6 and personal property sold since the date of the Balance Sheet and
the Interim Balance Sheet, as the case may be, in the Ordinary Course),
and all properties and assets acquired by the Acquired
5
Companies since the date of the Balance Sheet (except for personal
property acquired and sold since the date of the Balance Sheet in the
Ordinary Course). All material properties and assets reflected in the
Balance Sheet and the Interim Balance Sheet are free and clear of all
Encumbrances and are not, in the case of the Owned Real Property,
subject to any rights of way, building use restrictions, exceptions,
variances, reservations, or limitations of any nature except, with
respect to all such properties and assets, (a) mortgages or security
interests shown on the Balance Sheet or the Interim Balance Sheet as
securing specified liabilities or obligations, with respect to which no
default (or event that, with notice or lapse of time or both, would
constitute a default) exists, and (b) mortgages or security interests
incurred in the Ordinary Course in connection with the purchase of
property or assets in the Ordinary Course after the date of the Interim
Balance Sheet (these mortgages and security interests being limited to
the property or assets so acquired), with respect to which no default
(or event that, with notice or lapse of time or both, would constitute a
default) exists.
2.7. Condition of Assets. The Acquired Companies' tangible assets are in good
operating condition and repair in all material respects.
2.8. Loans.
2.8.1. Lists. Schedule 2.8.1 contains the 11/30/99 version of the "Loan
Portfolio Listing Report" for the Acquired Companies' core asset-based
lending portfolio and the 11/30/99 version of the "Rating Summary
Report" for the Acquired Companies' syndicated loan portfolio. On the
Closing Date, the Sellers will deliver to the Buyer an updated Schedule
2.8.1 containing each of these two reports prepared as of two Business
Days before the Closing Date.
2.8.2. Documentation. To the Sellers' Knowledge, the Acquired Companies'
files contain complete originals or accurate copies of each Loan
Document, except files for certain Loans in the core asset-based lending
portfolio with respect to which original Loan Documents may be in the
possession of a custodian on behalf of the trustee of the Fremont Small
Business Loan Master Trust. The Sellers have made all of their Loan
Document files available to the Buyer. With respect to each item of
collateral that secures a Loan for which a security interest can be
perfected by filing a UCC-1 financing statement, the Acquired Companies
have filed UCC-1 financing statements in the proper filing office in
each jurisdiction in which, to the Sellers' Knowledge, such filing is
required under applicable Law, and such security interest has the
priority indicated in the Loan files. With respect to each item of
collateral that secures a Loan for which a security interest can be
perfected by filing a mortgage or deed of trust, the Acquired Companies
have filed a mortgage or deed of trust in the proper filing office in
each jurisdiction in which, to the Sellers' Knowledge, such filing is
required under applicable Law, and such security interest has the
priority indicated in the Loan files.
2.8.3. Validity and Enforceability. Each Loan Document is valid and
enforceable, subject to the Enforceability Exceptions. For purposes of
this Section 2.8.3 only, the term "enforceable" means that while each
and every provision of a Loan Document may
6
not be enforceable in accordance with its terms under applicable Laws,
there are remedies adequate for the substantial realization of the
principal benefits intended to be provided by the Loan Document.
2.8.4. Compliance. Each Acquired Company is in compliance in all
material respects with all applicable terms and requirements of each
Loan Document. Schedule 2.8.4 lists the Loans for which an Acquired
Company, or, in the case of participation or syndicated loans, the lead
lender or agent has, to the Sellers' Knowledge, given written notice to
the borrower of an event of default under the related Loan Documents.
2.8.5. Claims. There are no pending, or to the Seller's Knowledge,
Threatened claims, offsets, recoupments, defenses or senior Encumbrances
involving the Loans that, if decided adversely to the Acquired
Companies, would materially impair the Acquired Companies' ability to
realize the current book value of the Loans.
2.8.6. No Escrow or Tax Items. The Acquired Companies do not engage in
the handling of escrowed items (such as property Taxes). The Acquired
Companies have properly handled all pass-through items (such as payments
of expenses for properties in foreclosure) in accordance with their
contractual obligations and internal procedures, and have submitted
invoices substantiating all pass-through items to their servicing
clients in connection with their requests for reimbursement for those
items.
2.9. Certain Liabilities.
2.9.1. No Undisclosed Liabilities. To the Sellers' Knowledge, and except
as stated in Schedule 2.9.1, the Acquired Companies have no material
liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Balance
Sheet or the Interim Balance Sheet and current liabilities incurred in
the Ordinary Course since the respective dates of those balance sheets.
2.9.2. Certain Scheduled Liabilities. With respect to all of the
Acquired Companies' obligations for borrowed money, Schedule 2.9.2 lists
(a) the credit facility or program, (b) the current principal and
interest outstanding, (c) interest rate or formula, (d) maturity date
and (e) prepayment penalties if repaid before maturity. On the Closing
Date, the Sellers will deliver to the Buyer an updated Schedule 2.9.2 as
of two Business Days before the Closing Date.
2.10. Taxes.
2.10.1. Returns, Payments, Etc. FGC has filed as part of a consolidated
return, has caused each of the Acquired Companies to file, or will file
or cause to be filed on or prior to the Closing Date, all federal,
state, local, and foreign Tax (as defined in Section 2.10.7) returns and
Tax reports that are required to be filed by, or with respect to, any
Acquired Company on or prior to the Closing Date (taking into account
any extension of time to file granted to or on behalf of the Company)
(collectively, the "Tax Returns"). At the time filed, such Tax Returns
were, or will be when filed, true, complete and
7
correct in all material respects. FGC, and each Acquired Company has
timely paid all Taxes shown as due on each such Tax Return. The accruals
and reserves reflected in the Interim Balance Sheet are adequate to
cover all Taxes of the Acquired Companies accrued through such date for
that and any prior periods in accordance with GAAP. There are no liens
for Taxes upon the assets of any Acquired Company except liens for Taxes
not yet due. There are no outstanding deficiencies, assessments or
Proceedings for the collection of Taxes against or involving any
Acquired Company or any of their respective assets. Except for this
Agreement, all Tax-sharing, Tax indemnity or Tax allocation agreements
or similar Contracts or arrangements with respect to or involving any
Acquired Company will be terminated as to each Acquired Company on or
prior to the Closing Date, and after such date, no Acquired Company will
be bound thereby or have any liability thereunder. All federal, state,
local and foreign Taxes due and payable by or with respect to any
Acquired Company have been, or prior to the Closing Date will be, paid.
There are no waivers in effect of the applicable statutory period of
limitation for Taxes of any Acquired Company for any taxable period. No
deficiency assessment or proposed adjustment with respect to any Tax
liability of any Acquired Company for any Taxable period is pending or,
to the Sellers' Knowledge, Threatened. The statute of limitations for
the collection or assessment of federal income Taxes due from each
Acquired Company for all periods through December 31, 1993 are closed.
2.10.2. Elections, Consents, Etc. No election under any of Section 108,
168, 338, 441, 172, 1017, 1033, or 4977 of the IRC (or any predecessor
provisions) has been made or filed by or with respect to any Acquired
Company. No consent to the application of Section 341(f)(2) of the IRC
(or any predecessor provision) has been made or filed by or with respect
to any Acquired Company or any of their assets. None of the assets of
any Acquired Company is an asset or property that is or will be required
to be treated as being (i) owned by a Person (other than an Acquired
Company) pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately before the
enactment of the Tax Reform Act of 1986, or (ii) tax-exempt use property
within the meaning of Section 168(h)(1) of the IRC.
2.10.3. Adjustment, Accounting Change. No Acquired Company has agreed to
or, to the Sellers' Knowledge, is required to make any adjustment
pursuant to Section 481(a) of the IRC or under any similar provision
relating to Subchapter L of the IRC (or any predecessor provisions) or
any similar provisions of Law, and there is no application pending with
any governmental authority, domestic or foreign, having jurisdiction
over the assessment, determination, collection or other imposition of
Taxes (each, a "Taxing Authority") requesting permission for any changes
in any accounting method of any Acquired Company. Neither the IRS nor
any other Taxing Authority has proposed any such adjustment or change in
accounting method.
2.10.4. Consolidated Return. For the Tax years of the Acquired Companies
ending on the Closing Date, each Acquired Company will be included in a
consolidated federal income Tax Return that includes FGC.
8
2.10.5. List of Returns. Schedule 2.10.5 contains a list of all material
state, local and foreign consolidated, combined and unitary Tax Returns
for the 1998 Tax year filed by or with respect to the Acquired
Companies.
2.10.6. No Foreign Person. Neither Seller is a "foreign person" within
the meaning of Section 1445(b)(2) of the IRC.
2.10.7. Definitions. "Tax" (including with correlative meaning, the
terms "Taxes" and "Taxable") means (a) any income, gross receipts, ad
valorem, premium, excises, value-added, sales, use, transfer, franchise,
license, severance, stamps, occupation, service, lease, withholding,
employment, payroll, property or windfall profits tax, alternative or
add-on minimum tax, or other tax fee or assessment, together with any
interest and any penalty, addition to tax or additional amount imposed
by any governmental authority responsible for the imposition of any such
tax, with respect to any Acquired Company and (b) any liability of any
Acquired Company for the payment of any amount of the type described in
clause (a) as a result of any Acquired Company being a member of an
affiliated or combined group with, or a successor to, or transferee of,
any other corporation prior to the Closing Date.
2.11. No Material Adverse Change. Since the date of the Interim Balance Sheet,
there has not been any change in the business, operations, assets or
condition of the Acquired Companies that would reasonably be expected to
have a Company Material Adverse Effect.
2.12. Employee Benefits.
2.12.1. Definitions. As used in this Section 2.12, the following terms
have the meanings stated below.
(a) "Company Plan" means all Plans of which an Acquired Company is or
was a Plan Sponsor.
(b) "ERISA Affiliate" means, with respect to an Acquired Company, any
other Person (other than another Acquired Company) that, together with
the Company, would be treated as a single employer under IRC SS 414.
(c) "Multi-Employer Plan" means a Plan that is also described in ERISA
SS 3(37)(A).
(d) "Non-Qualified Plan" means any Plan that is intended to be exempt
from the participation, vesting and funding provisions of ERISA and is
intended to be maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees.
(e) "Other Benefit Obligations" means all obligations, arrangements, or
customary practices, owed, adopted or followed by an Acquired Company
and whether or not legally enforceable, to provide benefits, other than
salary, as compensation for
9
services rendered, to present or former directors, employees, or agents,
other than obligations, arrangements, and practices that are Plans.
Other Benefit Obligations include consulting agreements under which the
compensation paid does not depend upon the amount of service rendered,
sabbatical policies, severance payment policies, and fringe benefits
within the meaning of IRC SS 132.
(f) "PBGC" means the Pension Benefit Guaranty Corporation, or any
successor to it.
(g) "Pension Plan" has the meaning given in ERISA SS 3(2)(A).
(h) "Plan" means a plan as defined in ERISA SS 3(3) maintained,
contributed to or sponsored by an Acquired Company.
(i) "Plan Sponsor" has the meaning given in ERISA SS 3(16)(B).
(j) "Qualified Plan" means any Plan that meets or purports to meet the
requirements of IRC SS 401(a).
(k) "Title IV Plans" means all Pension Plans that are subject to Title
IV of ERISA, 29 U.S.C. SS 1301 et. seq., other than Multi-Employer
Plans.
(l) "VEBA" means a voluntary employees' beneficiary association under
IRC SS 501(c)(9).
(m) "Welfare Plan" has the meaning given in ERISA ss. 3(1).
2.12.2. List. Schedule 2.12.2 contains a complete and accurate list of
all Plans and Other Benefit Obligations, and identifies as such all
Plans that are (a) defined benefit Pension Plans, (b) Qualified Plans,
(c) Title IV Plans, (d) Multi-Employer Plans, (e) Non-Qualified Plans or
(f) VEBA's.
2.12.3. Deliveries. The Sellers have delivered or made available to the
Buyer:
(a) all documents that state the terms of each Plan or Other Benefit
Obligation and of any related trust, including (i) all plan descriptions
and summary plan descriptions of Plans for which the Sellers or the
Acquired Companies are required to prepare, file, and distribute plan
descriptions and summary plan descriptions, and (ii) all summaries and
descriptions furnished to participants and beneficiaries regarding Plans
and Other Benefit Obligations for which a plan description or summary
plan description is not required;
(b) all personnel, payroll, and employment manuals and policies;
(c) all registration statements filed with respect to any Company Plan;
(d) all insurance policies purchased by or to provide benefits under any
Company Plan;
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(e) all contracts with third party administrators, actuaries, investment
managers, consultants, and other independent contractors that relate to
any Company Plan or Other Benefit Obligation;
(f) all reports submitted within the two years preceding the date of
this Agreement by third party administrators, actuaries, investment
managers, consultants, or other independent contractors with respect to
any Company Plan;
(g) the Form 5500 filed in each of the most recent two plan years with
respect to each Company Plan for which that form is required, including
all related schedules and the opinions of independent accountants;
(h) all notices that were given by the IRS, the PBGC, or the Department
of Labor to any Acquired Company, or any Company Plan within the two
years preceding the date of this Agreement; and
(i) copies of the most recent favorable determination letters issued
with regard to any Qualified Plan.
2.12.4. Representations.
(a) Performance. The Acquired Companies have performed their respective
material obligations under all Company Plans and Other Benefit
Obligations.
(b) Certain Plans. There is no Company Plan that is a Qualified Plan or
a VEBA. There is no Multi-Employer Plan and the Acquired Companies have
not been required to contribute to a Multi-Employer Plan or a Qualified
Plan subject to Title IV of ERISA within the past six years.
(c) Compliance.
(i) The Acquired Companies, with respect to all Company Plans and Other
Benefits Obligations, are, and each Company Plan and Other Benefit
Obligation is, in compliance with the material provisions of ERISA, the
IRC, and other applicable Laws including the provisions of those Laws
expressly mentioned in this Section 2.12, and with any applicable
collective bargaining agreement.
(ii) With respect to each Company Plan, there has not occurred any
transaction prohibited by Title I of ERISA or any "prohibited
transaction" under IRC SS 4975(c) that would create a material liability
on the part of any Acquired Company.
(iii) All filings required by ERISA and the IRC as to each Company Plan
have been timely filed, and all notices and disclosures to participants
required by either ERISA or the IRC have been timely provided.
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(iv) Favorable determination letters have been issued under the Tax
Reform Act of 1986 for any Qualified Plan, and timely applications will
be made for favorable determination letters for any Qualified Plan prior
to the expiration of the remedial amendment period for amendments
required by the Small Business Job Protection Act and any subsequent
legislation effective prior to the Closing Date.
(v) All notices and certifications required to be given concerning
continuation of group health coverage under ERISA SS 601 et. seq. and
concerning group health plan portability under ERISA SS 701 et. seq.
have been timely provided, and neither the Acquired Companies nor the
Buyer will have any liability concerning the continuation of group
health coverage or group health portability to any Employees who
terminate employment on or before the Closing Date.
(d) Termination. Each Company Plan can be terminated within thirty days,
without payment of any additional contribution or amount and without the
vesting or acceleration of any benefits promised by the Plan. The
Acquired Companies' participation in FGC's Qualified Plans and
Non-Qualified Plans will be terminated as of the Closing Date without
any costs to any Acquired Company or the Buyer, and FGC will have the
sole responsibility and liability for the payment of any benefits from
FGC's Qualified Plans and Non-Qualified Plans to any Employees who are
participants in those Plans.
(e) Claims. There are no pending Proceedings by any Governmental Body
involving or relating to any Company Plan and no Threatened or pending
claims (except for claims for benefits payable in the normal operation
of the Plan) or Proceedings against any Company Plan or asserting any
rights or claims to benefits under any Company Plan that could give rise
to a material liability to the Acquired Companies or the Buyer.
(f) Former Employees. Except to the extent required under ERISA SS 601
et. seq. and IRC -- --- SS 4980B, no Acquired Company provides health or
welfare benefits for any retired or former employee (or their
beneficiaries) or is obligated to provide health or welfare benefits to
any active employee following the employee's retirement or other
termination of service. FGC will assume any and all liability to provide
continuation coverage under ERISA SS 601 et. seq. and IRC -- --- SS
4980B for any Employees or former employees (or their beneficiaries) of
the Acquired Companies who terminate employment on or before the Closing
Date.
(g) Effect of Transactions. The consummation of the Transactions will
not result in the payment, vesting, or acceleration of any benefit, with
respect to any Company Plan.
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(h) Single Employer. No event has occurred that could result in
liability of an Acquired Company because of its treatment, together with
one or more ERISA Affiliates, as a single employer.
2.13. Compliance With Legal Requirements; Governmental Authorizations.
2.13.1. Compliance. Except as stated on Schedule 2.13.2, (a) each
Acquired Company is in compliance with each Law applicable to it or to
the conduct of its business, except for instances of non-compliance that
would not reasonably be expected to have a Company Material Adverse
Effect, and (b) since January 1, 1997, none of the Sellers nor any
Acquired Company has received any written notice that any of the
Acquired Companies have violated any Law.
2.13.2. Governmental Authorizations. Schedule 2.13.2 lists the
Governmental Authorizations held by each Acquired Company. Except as
stated on Schedule 2.13.2, each such Governmental Authorization is valid
and in full force and effect. Except as would not reasonably be expected
to have a Company Material Adverse Effect or as stated in Schedule
2.13.2:
(a) each Acquired Company is in compliance with each Governmental
Authorization listed in Schedule 2.13.2; and
(b) no event has occurred or circumstance exists that could reasonably
be expected to (i) constitute or result directly or indirectly in a
violation of or a failure to comply with any term or requirement of any
Governmental Authorization listed in Schedule 2.13.2 or (ii) result
directly or indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification to, any
Governmental Authorization listed in Schedule 2.13.2.
2.14. Environmental Matters. Without limiting Section 2.13:
2.14.1. Compliance. The Acquired Companies have complied with all
applicable federal, state, local and foreign Laws relating to the
generation, recycling, use, sale, storage, handling, transfer and
disposal of any Hazardous Substances, except for any non-compliance that
would not alone or in total have a Company Material Adverse Effect. The
Acquired Companies have not received notice that any of them is alleged
to be in violation of or been subject to any administrative, judicial or
regulatory proceeding relating to those Laws. "Hazardous Substances"
means any asbestos, petroleum, or any substance or material defined or
designated as a hazardous or toxic waste, material or substance by any
Laws, including without limitation the Federal Water Pollution Control
Act, the Federal Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act,
the Hazardous Material Transportation Act, and any amendments or
successor provisions to those Laws.
2.14.2. Claims. To the Sellers' Knowledge, there are no claims relating
to Hazardous Substances or compliance with the environmental Laws
pending or threatened against (a) any of the Acquired Companies, (b) any
Person for which any of the Acquired
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Companies may have assumed or retained liability for environmental
claims, including by operation of Law, or (c) against any real or
personal property or operations that any of the Acquired Companies owns,
leases, operates or manages, in whole or in part, or did so previously.
2.14.3. Basis for Proceedings. To the Sellers' Knowledge and except as
disclosed in the Acquired Companies' files related to the Loans and Loan
Documents, there are no facts that reasonably would form the basis of a
Proceeding or a material cost relating to any environmental matter
affecting any Acquired Company or any property securing any Loan that
would reasonably be expected to have a Company Material Adverse Effect.
2.15. Legal Proceedings. Schedule 2.15 lists all pending Proceedings to which
any Acquired Company is a party other than pending Proceedings for the
collection of accounts receivable collateral that do not include
counterclaims against any Acquired Company. There is no pending
Proceeding that has been commenced by or against any Acquired Company or
either Seller and that (a) would reasonably be expected to have a
Company Material Adverse Effect or (b) challenges or would reasonably be
expected to have the effect of preventing, delaying, making illegal or
otherwise interfering with, any of the Transactions. To the Sellers'
Knowledge, no such Proceeding has been Threatened.
2.16. Absence of Certain Changes and Events. Since the date of the Interim
Balance Sheet, the Acquired Companies have conducted the Business only
in the Ordinary Course and there has not been any:
(a) change in any Acquired Company's authorized or issued capital stock;
grant of any stock option or right to purchase shares of capital stock
of any Acquired Company; issuance of any security convertible into such
capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition by any Acquired Company of any shares
of any such capital stock;
(b) amendment to the Organizational Documents of any Acquired Company;
(c) damage to or destruction or loss of any Acquired Company tangible
asset, whether or not covered by insurance, that would reasonably be
expected to have a Company Material Adverse Effect;
(d) entry into, termination of, or receipt of notice of termination of
any Applicable Contract (other than Loans in the Ordinary Course)
involving a total remaining commitment by or to any Acquired Company of
more than $500,000;
(e) sale, lease, or other disposition of any asset or property of any
Acquired Company, or mortgage, pledge, or imposition of any lien or
other Encumbrance on any material asset or property of any Acquired
Company, other than in the Ordinary Course;
(f) material change in any Acquired Company's accounting methods; or
14
(g) incurrence of any liability or obligation whether absolute or
contingent whether for borrowed money, lease obligation or otherwise,
other than in the Ordinary Course;
(h) with respect to the Company, declaration or payment of any dividend
or other distribution in respect of its capital stock (other than the
dividend on the Preferred Shares contemplated by Section 5.11);
(i) agreement, whether oral or written, by any Acquired Company to do
any of the foregoing.
2.17. Contracts; No Defaults.
2.17.1. List. Schedule 2.17.1 lists the following types of Applicable
Contracts (the "Material Contracts"):
(a) each Applicable Contract that was not entered into in the Ordinary
Course and that involves expenditures or receipts of one or more
Acquired Companies in excess of $500,000;
(b) each Applicable Contract relating to the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any real or
personal property (except personal property leases and installment and
conditional sales agreements having a value per item or aggregate
payments of less than $25,000 and with terms of less than one year);
(c) each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of profits, losses, costs, or
liabilities (whether or not contingent) by any Acquired Company with any
other Person;
(d) each Applicable Contract containing covenants that in any way
purport to restrict the business activity of any Acquired Company or any
Affiliate of an Acquired Company or limit the freedom of any Acquired
Company or any Affiliate of an Acquired Company to engage in any line of
business or to compete with any Person;
(e) any power of attorney outstanding or any obligations or liabilities
(whether contingent, absolute, accrued or otherwise) as guarantor,
surety, cosigner, endorser, co-maker, indemnitor or otherwise in respect
of the obligations of any Person (other than an Acquired Company);
(f) each Applicable Contract providing for the borrowing of more than
$5,000,000;
(g) each Applicable Contract for personnel services which is either (i)
written or (ii) not terminable without cost or obligation at an Acquired
Company's option;
15
(h) each license or software contract that is material to an Acquired
Company (other than shrink-wrap licenses of commercially available
software); and
(i) each amendment, supplement or modification in respect of any of the
foregoing.
2.17.2. Validity. Each Material Contract, is in full force and effect
and is valid and enforceable against the relevant Acquired Company and,
to the Sellers' Knowledge, against the other party to such Material
Contract.
2.17.3. Compliance. Except as would not reasonably be expected to have a
Company Material Adverse Effect:
(a) each Acquired Company is in compliance in all material respects with
all applicable terms and requirements of each Material Contract under
which that Acquired Company has any obligation or liability or by which
that Acquired Company, or any Acquired Company asset, is bound;
(b) to the Sellers' Knowledge, each other Person that has or had any
obligation or liability under any Material Contract under which an
Acquired Company has or had any rights is in compliance in all respects
with all applicable terms and requirements of that Material Contract;
and
(c) no event has occurred or circumstance exists that (with or without
notice or lapse of time) would result in a violation or breach of, or
give any Acquired Company or other Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Material
Contract.
2.18. Insurance. The only insurance applicable to the Acquired Companies is
provided through the Sellers' policies. Other than as described in
Sections 5.15 and 9.8, the Acquired Companies will cease to be covered
by those policies at the time of Closing. To the Sellers' Knowledge, a
Seller or an Acquired Company has given notice to the Sellers' insurers
of all Acquired Company-related claims that could be insured by such
policies.
2.19. Employees. All employees who work for the Acquired Companies (the
"Employees") are employees of the Company. Schedule 2.19 states the
following information for each Employee: name; job title; current annual
compensation; vacation accrued; annual bonus, special retention bonus
and any other bonuses or commission amounts accrued and payable; and
service credited for purposes of vesting and eligibility to participate
under any Acquired Company employee benefit plan. The Acquired Companies
would have no liability as a result of the termination of any Employee
other than as described on Schedule 2.19, as required by COBRA or as set
forth in Section 5.10. To the Sellers' Knowledge, no Employee is a party
to, or is otherwise bound by, any agreement or arrangement that in any
way adversely affects or will affect (a) the performance of his or her
duties as an Employee, or (b) the ability of any Acquired Company to
conduct its business. As of the date of this Agreement, to the Sellers'
Knowledge, no Employee
16
intends to terminate his or her employment with any Acquired Company as
a result of the consummation of the Transactions other than those
persons identified as "excluded employees" on Schedule 2.19. As of the
date of this Agreement, each individual performing services for any of
the Acquired Companies is properly classified as an employee or
independent contractor under applicable Law.
2.20. Labor Relations; Compliance. No Acquired Company is a party to any
collective bargaining or other labor Contract. There is not presently
pending or existing, and to the Seller's Knowledge there is not
Threatened, (a) any strike, slowdown, picketing, work stoppage, or
employee grievance process, (b) any Proceeding against or affecting any
Acquired Company relating to the alleged violation of any Law pertaining
to labor relations or employment matters, or (c) any application for
certification of a collective bargaining agent. There is no lockout of
any Employees by any Acquired Company, and no Acquired Company
contemplates such an action. Each Acquired Company has complied with all
Laws relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes,
occupational safety and health, and plant closing, except for instances
of non-compliance that would not reasonably be expected to have a
Company Material Adverse Effect.
2.21. Intellectual Property.
2.21.1. Trademarks.
(a) Description. Schedule 2.21.1 lists all Acquired Company business
names, trading names, registered and unregistered trademarks, service
marks, and applications and the owner of such Marks (collectively,
"Marks"). One or more of the Acquired Companies is the owner of all
right, title, and interest in and to each such Xxxx, free and clear of
all Encumbrances.
(b) Compliance. All Marks that have been registered with the United
States Patent and Trademark Office are currently in compliance in all
material respects with all formal legal requirements (including the
timely post-registration filing of affidavits of use and
incontestability and renewal applications), and are valid and
enforceable.
(c) Proceedings; Interference; Infringement. No Xxxx is involved in any
opposition, invalidation, or cancellation Proceeding and, to the
Sellers' Knowledge, no such Proceeding is Threatened with respect to any
Xxxx. To the Sellers' Knowledge, there is no potentially interfering
trademark or trademark application of any third party. No Xxxx is
infringed or, to the Sellers' Knowledge, has been challenged or
threatened in any way. No Xxxx used by any Acquired Company infringes or
is alleged to infringe any trade name, trademark, or service xxxx of any
third party.
17
(d) Rights to Software. As of the Closing Date, the Acquired Companies
will have all rights to use all software currently used in the Business
except as would not reasonably be expected to have a Company Material
Adverse Effect.
2.21.2. Trade Secrets. The Acquired Companies have taken reasonable
precautions to protect the secrecy, confidentiality, and value of their
know-how, trade secrets, business methods, customer lists and other
confidential information (collectively, "Trade Secrets"). One or more of
the Acquired Companies has the right to use the Trade Secrets. To the
Sellers' Knowledge, no material Trade Secrets have been used, divulged,
or appropriated to the detriment of the Acquired Companies.
2.22. Certain Payments. Since November 30, 1996, no Acquired Company or
director, officer, agent, or Employee of any Acquired Company or, to the
Sellers' Knowledge, any other Person associated with or acting for or on
behalf of any Acquired Company, has directly or indirectly made any
contribution, gift, bribe, rebate, payoff, influence payment, kickback,
or other payment to any Person, private or public, regardless of form,
whether in money, property, or services, in violation of any Law. Since
November 30, 1996, no Acquired Company has maintained any fund or asset
not recorded in the Acquired Companies' books and records.
2.23. Relationships With Related Persons. Neither Seller, nor any Related
Person of either Seller or of any Acquired Company, has any interest in
any property (whether real, personal, or mixed and whether tangible or
intangible), used in or pertaining to the Business. Neither Seller, nor
any Related Person of either Seller or of any Acquired Company owns an
equity interest or any other financial or profit interest in, a Person
that has business dealings or a material financial interest in any
transaction with any Acquired Company, other than inter-company charges,
services and transactions in the Ordinary Course. Except as stated in
Schedule 2.23, neither Seller, nor any Related Person of either Seller
or of any Acquired Company, is a party to any Contract with, or has any
claim or right against, any Acquired Company.
2.24. Year 2000. The Acquired Companies have taken reasonable steps to
identify and analyze their computer software, hardware and embedded
chips in other equipment to assure that those items will not be affected
by the "Year 2000 Problem" (that is the risk that computer software,
hardware and embedded chips in other equipment may be unable to
recognize and perform properly date-sensitive functions involving
certain dates before and after December 31, 1999). The Acquired
Companies have also surveyed their borrowers, suppliers, service
providers and others on whom the Acquired Companies significantly depend
(the "Business Contacts") to ascertain the measures taken by the
Business Contacts with respect to the Year 2000 Problem. To the Sellers'
Knowledge, the Year 2000 Problem would not reasonably be expected to
have a Company Material Adverse Effect.
2.25. Brokers Or Finders. The Sellers and their agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions
18
or other similar payment in connection with this Agreement. The Acquired
Companies have incurred no material costs related to the Transactions.
2.26. Full Disclosure. To the Sellers' Knowledge, they have not failed to
disclose to Buyer any facts material to the Business. No representation
or warranty by the Sellers in this Agreement (including the Disclosure
Schedules and any supplement thereto) or in any certificate delivered by
the Sellers pursuant to this Agreement contains or will contain any
untrue statement of material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it
was made, in order to make those statements not misleading.
3. REPRESENTATIONS AND WARRANTIES OF BUYER
The Buyer represents and warrants to the Sellers as follows:
3.1. Organization and Good Standing. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Delaware.
3.2. Validity; No Conflict.
3.2.1. Validity. This Agreement constitutes the legal, valid, and
binding obligation of the Buyer, enforceable against the Buyer in
accordance with its terms, subject to the Enforceability Exceptions. The
Buyer has the corporate power and authority to execute and deliver this
Agreement and to perform its obligations under it.
3.2.2. No Conflict. Other than the termination or expiration of the
applicable waiting period under the HSR Act, neither the execution and
delivery of this Agreement by the Buyer nor the consummation or
performance of any of the Transactions by the Buyer will give any Person
the right to prevent, delay, or otherwise interfere with any of the
Transactions pursuant to: (a) any provision of the Buyer's
Organizational Documents; (b) any Law or Order to which the Buyer is
subject; or (c) any material Contract to which the Buyer is a party or
by which the Buyer is or could be bound. Other than the termination or
expiration of the applicable waiting period under the HSR Act, the Buyer
is not and will not be required to obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the
consummation of any of the Transactions.
3.3. Investment Intent. The Buyer is acquiring the Shares for its own account
and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act.
3.4. Certain Proceedings. There is no pending Proceeding that has been
commenced against the Buyer and that challenges, or would reasonably be
expected to have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Transactions. To the Buyer's
knowledge, no such Proceeding has been Threatened.
19
3.5. Brokers Or Finders. The Buyer and its officers and agents have incurred
no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in
connection with this Agreement.
4. CERTAIN SELLER COVENANTS
4.1. Access and Investigation. Between the date of this Agreement and the
Closing Date, the Sellers will, and will cause each Acquired Company and
its Representatives to, (a) give the Buyer and its Representatives and
prospective lenders and their Representatives (collectively, the
"Buyer's Advisors") access, upon reasonable advance notice, to each
Acquired Company's personnel, properties, Contracts, books and records,
and other documents and data, (b) furnish the Buyer and the Buyer's
Advisors with copies of all these Contracts, books and records, and
other existing documents and data the Buyer reasonably requests, and (c)
furnish the Buyer and the Buyer's Advisors with any additional
financial, operating, and other data and information as the Buyer
reasonably requests, in each case subject to any applicable legal or
contractual requirements. From time to time prior to the Closing, the
Sellers will supplement the Disclosure Schedules with respect to any
matter not reflected that, if existing at, or occurring on, the date of
this Agreement would be required to be set forth or described in the
Disclosure Schedules. No supplement or amendment of the Disclosure
Schedules made after the execution of this Agreement will be deemed to
cure any breach of any representation or warranty of the Sellers in this
Agreement or limit the rights and remedies provided in Section 9.1. The
Sellers will give the Buyer notice promptly after either of them becomes
aware of (i) the occurrence or non-occurrence of any event whose
occurrence or non-occurrence would reasonably be expected to cause (A)
any representation or warranty in this Agreement to be untrue or
inaccurate in any material respect, (B) any condition to Closing not be
satisfied, and (ii) any material failure of either Seller to perform or
comply with any covenant or agreement to be complied with or satisfied
by it under this Agreement but (x) the delivery of any notice pursuant
to this section will not limit or otherwise affect the remedies
available under this Agreement and (y) giving of such notice will not be
required from and after the time that the Buyer has actual knowledge of
the information required to be included in such notice.
4.2. Operation of The Businesses of The Acquired Companies. Between the date
of this Agreement and the Closing Date, the Sellers will cause each
Acquired Company to:
(a) conduct the Business only in the Ordinary Course;
(b) use its Best Efforts to (i) preserve intact the Acquired Company's
current business organization, (ii) keep available the services of its
current officers, employees, and agents, and (iii) maintain good
relations with suppliers, customers, landlords, creditors, employees,
agents, and others having business relationships with the Acquired
Company;
(c) confer with the Buyer concerning operational matters of a material
nature not in the Ordinary Course;
20
(d) maintain full accruals (without regard to the time for payment or
proper accrual under GAAP) associated with its fiscal 1999 annual bonus
program, the special retention bonuses described on Schedule 2.19 and
any additional bonus programs instituted before the Closing; and
(e) not offer to or make any change in the compensation payable or to be
payable to any officer, director, employee, agent or consultant of any
Acquired Company;
(f) not enter into any Applicable Contract that provides for payments by
one or more Acquired Companies in an amount in excess of $500,000 (other
than Loans in the Ordinary Course);
(g) not to permit any Encumbrance to be placed upon on any material
asset of any Acquired Company;
(h) except as discussed in Schedule 4.2, not terminate, modify or waive
any substantial rights under any Material Contract;
(i) maintain asset quality review and underwriting standards consistent
with practices in effect during the third quarter of 1999;
(j) maintain the Acquired Companies' consolidated allowance for credit
losses at a level not less than 1.85 percent of ending net finance
receivables consistent with past practices of the Acquired Companies;
(k) change any tax or accounting practice (except as required by a
change in applicable Law or GAAP);
(l) otherwise report periodically or upon reasonable request to the
Buyer concerning the Business; and
(m) not make, or commit to make, any capital expenditure in excess of
$100,000.
4.3. Negative Covenant. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, the
Sellers will not, and will cause each Acquired Company not to, without
the Buyer's prior written consent, take any affirmative action, or fail
to take any reasonable action within their or its control, as a result
of which any change or event listed in Section 2.16 is likely to occur.
4.4. No Negotiation. Until this Agreement is terminated under Section 8, the
Sellers will not, and will cause each Acquired Company and each of its
and their Representatives not to, directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or
negotiate with, provide any non-public information to, or consider the
merits of any inquiries or proposals from, any Person (other than the
Buyer) relating to any transaction involving the sale of any Acquired
Company's business or assets (other than sales of non-material Assets in
the Ordinary Course) or capital stock, or any merger,
21
consolidation, business combination, or similar transaction involving
any Acquired Company.
4.5. Non-Competition and Non-Solicitation.
4.5.1. Basic Covenant. For five years after the Closing Date, neither
Seller, nor any Seller Affiliate, will, directly or indirectly, as an
owner, partner, shareholder, manager or joint venturer (a) engage in the
business of originating asset-based commercial business loans (provided
that this provision will not restrict the right of the Sellers and their
Affiliates to engage in the businesses of (i) participating in
commercial business loan credit facilities, or (ii) originating
commercial real estate loans or commercial insurance premium loans); or
(b) solicit, divert or take away, or attempt to solicit, divert or take
away, the business or patronage of any of the asset-based commercial
loan customers of any Acquired Company or the Buyer.
4.5.2. Locations. The restrictions in this Section 4.5 will be effective
(a) in the California counties listed in Schedule 4.5.2, (b) in the
states of Arizona, Georgia, Illinois, Michigan, Missouri, New York,
Oregon, Pennsylvania, Texas and Virginia, and (c) throughout the United
States of America (each a "Location"). The Sellers acknowledge that the
asset-based commercial loan business of the Acquired Companies is
national, rather than local, in scope. The Parties intend that the
covenants in this Section 4.5 will be construed as a series of separate
covenants, each consisting of the covenants in Section 4.5 for each
Location. Except for the Locations, all such separate covenants will be
deemed identical.
4.5.3. Non-Solicitation. For three years after the Closing, the Sellers
will not, and will cause their Affiliates not to, directly or
indirectly, solicit any Company employees other than those Company
employees designated as "excluded employees" on Schedule 2.19. This
covenant will not prohibit the Sellers and their Affiliates from making
general solicitations of employment not directed to employees of any
Acquired Company, or from hiring employees identified through
third-party employment agencies or recruiting firms.
4.5.4. Injunction. The Sellers acknowledge and agree that any Breach of
or default under this Section 4.5 will cause damage to the Buyer and the
Acquired Companies in an amount difficult to ascertain. Accordingly, in
addition to any other relief to which the Buyer may be entitled, the
Buyer and the Acquired Companies will be entitled, without proof of
actual damages, to seek any injunctive relief ordered by any court of
competent jurisdiction including, but not limited to, an injunction
restraining any violation of this Section 4.5.
4.5.5. No Disclosure. Subsequent to the Closing, the Sellers will not,
directly or indirectly, disclose any Confidential Information of or
relating to any of the Acquired Companies to the detriment of any
Acquired Company, except as required by Law. In addition, the foregoing
restrictions will not apply to information that (a) was generally
available to the public prior to disclosure by the Sellers or any of
their Representatives or
22
(b) became generally available to the public or generally known in the
Acquired Companies' industry, other than as a result of a disclosure by
the Sellers or their Representatives.
4.5.6. Proprietary Information. The Sellers will, until the Closing
Date, use their Best Efforts to cause the Acquired Companies to ensure
compliance with all of their existing policies and procedures with
respect to Trade Secrets.
5. CERTAIN ADDITIONAL COVENANTS
5.1. Approvals of Governmental Bodies. As promptly as practicable after the
date of this Agreement, the Parties will, and will cause each of their
Related Persons to, make all filings required by Laws to be made by them
to consummate the Transactions (including all filings under the HSR
Act). Between the date of this Agreement and the Closing Date, each
Party will, and will cause each Related Person to, cooperate with the
other Party with respect to all filings that the Other Party is required
by Laws to make in connection with the Transactions, and cooperate with
the other Party in obtaining all Consents identified in Schedules 2.2.3
and 3.2.2.
5.2. Best Efforts. Between the date of this Agreement and the Closing Date,
each of the Parties will use their Best Efforts to cause their
respective conditions in Section 6 and 7 to be satisfied.
5.3. Accrued Bonuses. The Buyer will cause the Acquired Companies to pay (a)
the accrued Employee bonuses with respect to calendar 1999, with such
payments to be made on or before February 18, 2000, in the amounts
specified in Schedule 2.19; (b) the accrued special Employee retention
bonuses described on Schedule 2.19, with such payments to be made within
forty-five days after the Closing in the amounts specified on that
Schedule to those Employees who continue to be employed by either the
Acquired Companies, Buyer, or any Buyer Affiliate during the forty-five
day period following the Closing and who otherwise satisfy the terms of
that plan; and (c) any accrued commissions earned and payable through
the Closing, with such payments to be made in accordance with the
relevant commission plan.
5.4. Change of Name; Marks. On the Closing Date, the Buyer will change the
name of each Acquired Company to a name that does not include "Fremont."
From and after the Closing Date, the Buyer will cause the Acquired
Companies not to use this or any other Marks belonging to the Sellers or
any of their Affiliates, or any documents bearing any such Marks,
provided that the Acquired Companies may (a) use letterhead, --------
business cards, signage, etc. bearing such Marks for a reasonable period
(not to exceed sixty days) after the Closing and (b) use the Marks for
the purposes of continuations of UCC filings, endorsements of payments,
other loan administration functions and similar purposes that do not
relate to the origination of new business. The Buyer will indemnify and
hold harmless the Seller Indemnified Persons and will pay to the Seller
Indemnified Persons the amount of any Damages arising, directly or
indirectly, from or connection with the use of any Xxxx by the Buyer
and/or Acquired Companies after the Closing Date.
23
5.5. Section 338(h)(10).
5.5.1. Section 338(h)(10) Elections. With respect to the Buyer's
acquisition of the Shares under this Agreement, the Sellers and the
Buyer will jointly make all available Section 338(h)(10) Elections (as
defined in Section 10.1.12) in accordance with applicable Tax Laws on a
timely basis and as required by this Agreement (unless the Buyer
notifies the Sellers in writing within thirty days after the Closing
that any such elections will not be made). The Sellers and the Buyer
will supply in advance to one another copies of all correspondence,
filings or communications (or memoranda setting forth the substance
thereof) to be sent or made by the Buyer or the Sellers or their
respective Representatives to or with the IRS relating to any Section
338(h)(10) Elections. The Buyer and the Sellers each agree to report the
transfers under this Agreement consistent with any Section 338(h)(10)
Elections, and will take no position contrary thereto unless required to
do so by applicable Tax Laws pursuant to a "determination" (as described
in Section 1313 of the IRC).
5.5.2. Section 338 Forms. The Sellers will be responsible for the
preparation and filing of all Section 338 Forms (as defined in Section
10.1.12) in accordance with applicable Tax Laws and the terms of this
Agreement, and the Sellers will deliver such forms and related documents
to the Buyer at least forty days prior to the date such Section 338
Forms are required to be filed under applicable Tax Laws for the Buyers'
review and approval (such approval not to be unreasonably withheld). If
reasonably acceptable to the Buyer in all respects, the Buyer will
execute and deliver to the Sellers such documents or forms as are
reasonably requested by the Sellers to complete the Section 338 Forms.
5.5.3. Allocation. If the Section 338(h)(10) Election is made, the
Sellers and the Buyer will allocate the "Modified Aggregate Deemed Sale
Price," as computed under applicable Treasury Regulations (or similar
state law provisions), among the Acquired Companies' assets for Tax
purposes in accordance with the Buyer's and the Sellers' joint
reasonable determination of their fair market values, such determination
not to be unreasonably withheld or delayed.
5.6. Transition Services. Before the Closing, the Parties will negotiate in
good faith, and enter into, a mutually acceptable transition services
agreement. Under this agreement, FGC or its Affiliates will provide to
the Acquired Companies, to the extent reasonably requested, agreed
transition services for up to nine months, at the costs to be included
in the transition services agreement.
5.7. Excluded Assets.
5.7.1. Management of Excluded Assets. On and after the Closing Date, the
Acquired Companies will continue to manage and account for the loans and
other financial accommodations listed on Schedule 5.7 (the "Excluded
Assets") in a manner consistent with the manner in which the Buyer
manages similar assets. So long as the Excluded Assets are outstanding
and owned by the Acquired Companies, the Excluded Assets will
24
be serviced by (x) in the case of the Lease Excluded Assets, U.S.A.
Capital LLC, and (y) in the case of the other Excluded Assets, FGC or
its Affiliates (in such capacity, together with, U.S.A. Capital LLC, the
"Servicers"). The Acquired Companies will direct the applicable
Servicers to remit no less often than monthly, all Net Proceeds into the
Collection Account. On each Payment Date, the Acquired Companies will
remit or cause to be remitted, all amounts in the Collection Account as
follows: (a) all Net Proceeds allocable to principal will be paid to the
Acquired Companies to reduce the outstanding principal balance of the
related Excluded Asset, and (b) all other amounts will be paid to FGC.
Within five Business Days after the end of each calendar month, the
Acquired Companies will invoice FGC for an amount equal to (x) the
applicable Servicing Fee to the extent not previously received by the
Servicers, (y) the average outstanding principal balance of the Excluded
Assets multiplied by the Carrying Charge, computed on a monthly basis,
and (z) the Acquired Companies' out-of-pocket costs related to the
Excluded Assets incurred during that calendar month, and FGC will pay
such amount to the Acquired Companies within ten Business Days after
receipt of such invoice. So long as the Excluded Assets are outstanding
and owned by the Acquired Companies, the Buyer and the Acquired
Companies will cooperate with the Sellers to make information available
to the Sellers related to the Excluded Assets, and, to the extent
required by the Sellers (whether or not the Excluded Assets have been
sold) will make a mutually agreed upon employee(s) or independent
contractor(s) available (but in no case in excess of twenty-five hours
per week) to assist Sellers with the management and administration of
the Excluded Assets, and the costs of such employee(s) or independent
contractor(s) will be addressed in the transition services agreement
described in Section 5.6..
5.7.2. Payment. If any Excluded Asset is repaid, whether pursuant to the
terms of the related documents, voluntarily by the borrower or lessee,
or in connection with collection efforts (including in connection with
the sale of the related collateral): (a) upon receipt of notice from any
of the Acquired Companies (which notice will include the relevant facts
related to such repayment, including the amount repaid (the "Realized
Amount"), FGC will pay to such Acquired Company any shortfall between
(i) the principal balance of the related Excluded Assets outstanding
immediately prior to such repayment and (ii) the Realized Amount, or (b)
the Acquired Companies will pay FGC, any amount to the extent the
Realized Amount exceeds the principal balance of the related Excluded
Asset outstanding immediately prior to such repayment.
5.7.3. Repurchase. Upon ten days prior notice to the Acquired Companies,
FGC will have the right to repurchase any Excluded Asset for its then
current outstanding principal balance and any unpaid Carrying Charge on
the average outstanding principal balance of such Excluded Asset since
the last payment with respect to such Excluded Asset.
5.7.4. Definitions. For purposes of this Section 5.7, the following
terms will have the following respective meanings: "Net Proceeds" means
all collections on or in respect of the Excluded Assets, net of the
applicable Servicing Fee; "Servicing Fee" means, in the case of the
Lease Excluded Assets, the monthly servicing fee charged from time to
time by U.S.A. Capital LLC for servicing such Excluded Assets, and in
the case of the Non-Lease Excluded Assets, a monthly servicing fee for
servicing such Excluded Assets in an
25
amount that is mutually acceptable to the Servicer and the Acquired
Companies; "Lease Excluded Assets" means the Excluded Assets consisting
of equipment leases, and "Non-Lease Excluded Assets" means all of the
Excluded Assets not consisting of the Lease Excluded Assets; "Collection
Account" means the segregated bank account established and maintained by
one or more of the Acquired Companies, and titled "Collection Account in
trust for the Company and Fremont General Corporation"; "Payment Date"
means the third Business Day after the receipt of any payment from the
Servicers; "Carrying Charge" means the percentage equal to (a) the
thirty day London Interbank Offering Rate as reported on the Telerate
Screen 3750 on the Business Day immediately preceding the 16th of the
applicable calendar month, plus (b) 0.10%.
5.8. Inter-Company Obligations. All inter-company obligations and accounts
involving an Acquired Company and either Seller or any Affiliate of
either Seller other than an Acquired Company (including the
Inter-Company Notes) will be paid off at or prior to the Closing at
their book value.
5.9. Asset Securitization Program; Letter of Credit Facilities. After the
Closing, the Parties will work in good faith to make mutually acceptable
arrangements concerning the continuation or disposition of the Company's
asset securitization program and related commercial paper facility, as
well as the Company's outstanding letter of credit facilities described
on Schedule 5.9.
5.10. Severance, etc. The Company will be responsible for the severance
expenses (computed in accordance with Schedule 2.19) due any Employee
terminated after the Closing Date. The Company or the Buyer will be
responsible for any employee benefit plan-related costs or payments due
such Employees under the Buyer's employee benefit plans. The Sellers
will be responsible for severance expenses, other than those accrued on
the Closing Date Balance Sheet, due (a) any Employee terminated at or
prior to the Closing Date, (b) for the employer-paid extended Company
Welfare Plan Coverage provided by FGC under Section 5.15, and (c) under
the Sellers' Plans and Other Benefit Obligations.
5.11. Indebtedness; Preferred Share Dividends. In conjunction with the
Closing, (a) the Buyer will cause the Company to pay all of its
obligations under, and terminate, the Second Amended and Restated Credit
Agreement dated June 23, 1997 among the Company, The Chase Manhattan
Bank as Agent, and Xxxxx Fargo Bank N.A. and Fleet Bank National
Association as Co-Agents (the "Credit Facility") and the Inter-Company
Notes (all without impacting the Company's Closing Date Book Value), and
(b) the Parties will cause the Company to obtain a release of any and
all commitments of FGC or its Affiliates under the Credit Facility. In
addition, the Company will, before the Closing, pay the accrued but
unpaid dividends on the Preferred Shares through the Closing Date, and
such payment will be reflected in the Closing Date Balance Sheet.
5.12. Real Property Leases.
5.12.1. Santa Xxxxxx. The Buyer desires that the Company continue to
occupy, after the Closing, the fifth floor of the Santa Monica,
California facility currently leased by the
26
Company. FGC desires to have the rest of the space at that facility
available after the Closing for itself or certain Affiliates.
Accordingly, the Parties will use their best efforts to arrange for the
Company to assign to FGC or an Affiliate, at the Closing, the Company's
rights and obligations under the existing lease as it pertains to all
the space at the facility, except the fifth floor, which would continue
to be leased to the Company. If this cannot be done for any reason, the
Parties will cooperate to reach the same result through sub-leases or
other arrangements, all on mutually acceptable terms.
5.12.2. Atlanta, New York and Princeton; Sales Offices. After the
Closing, the Company will retain the leases associated with the
Company's facilities in Atlanta, New York and Princeton, as well as the
Company's satellite sales offices in Richmond and Philadelphia.
5.12.3. Chicago. At the Closing, FGC will assume the lease pertaining to
the Company's Chicago office.
5.13. Restricted Stock. Before the Closing, FGC will purchase for cash from
the Company, at book value, all right, title and interest of the Company
in and to the unamortized portion which would be reflected for GAAP as
of December 31, 1999, of all restricted FGC stock held by Employees. FGC
will release to all Persons who are Employees as of the Closing Date and
who hold restricted FGC stock ten percent of their shares in accordance
with the customary timing and procedures for FGC's restricted stock
benefit plans. From and after the Closing Date, no Acquired Company will
have any liability or obligation to any such employees with respect to
such plans.
5.14. Maintenance of Books and Records. Each of Sellers and the Buyer will
preserve until at least the seventh anniversary of the Closing Date all
records possessed or to be possessed by it relating to any of the
assets, liabilities or business of the Acquired Companies before the
Closing Date. Prior to the end of the seventh anniversary of the Closing
Date, the Parties, upon written request from any other Party, will
either maintain the records beyond the seventh anniversary or send the
records to the requesting Party. After the Closing Date, where there is
a legitimate purpose, a Party will provide the other Party with access,
upon prior reasonable written request specifying the need therefor,
during regular business hours, to (a) the officers and employees of that
Party and (b) the books of account and records of that Party, but, in
each case, only to the extent relating to the assets, liabilities or
business of the Acquired Companies before the Closing Date. The other
Party and its Representatives will have the right to make copies of
those books and records. Records may be destroyed by a Party if the
Party sends to the designated representative of the other Parties
written notice of its intent to destroy the records, specifying with
particularity the contents of the records to be destroyed. Those records
may then be destroyed after the 30th day after the notice is given
unless another Party objects to the destruction. If an objection is
received, the Party seeking to destroy the records will deliver the
records to the objecting Party at the objecting Party's expense.
5.15. Company Welfare Plans. After the Closing, FGC will continue to cover the
Employees, other than the individuals listed on Schedule 5.15, under the
Company Welfare Plans
27
until the end of the first full calendar month after the month in which
the Closing occurs unless the Buyer otherwise requests in writing.
5.16. Tax Sharing Arrangements. Except as provided in this Agreement, all tax
sharing arrangements between either Seller and any Acquired Company will
be terminated at or prior to the Closing Date.
6. CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATION TO CLOSE
The Buyer's obligation to purchase the Shares and to take the
other actions required to be taken by the Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which could be waived by the Buyer, in its sole discretion, in whole or
in part):
6.1. Accuracy of Representations. The Sellers' representations and warranties
in this Agreement must be accurate in all material respects as of the
Closing Date as if made on the Closing Date, without giving effect to
any supplement to the Disclosure Schedules.
6.2. Sellers' Performance. The covenants and obligations that the Sellers are
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing must have been duly performed and complied with in
all material respects. Each document required to be delivered pursuant
to Section 1.4.1 must have been delivered.
6.3. Consents. Each Consent identified in Schedule 2.2.3 must have been
obtained and must be in full force and effect.
6.4. No Order. There must not be in effect any Law or Order that (a)
prohibits the sale of the Shares by the Sellers to the Buyer, and (b)
has been adopted or issued, or has otherwise become effective, since the
date of this Agreement.
6.5. No Material Adverse Change. Since October 31, 1999, there must not have
been a material deterioration of the size (other than seasonal
fluctuations consistent with historical patterns) and quality of the
Company's Loan portfolio. Since October 31, 1999, there must not have
been any event, change or development unrelated to the Company's Loan
portfolio that has had a material adverse effect on the business,
financial condition, results of operations or assets of the Acquired
Companies and that individually or in the aggregate exceeds $2,000,000.
6.6. Corporate Proceedings. The Buyer must have received a Secretary's
certificate from each Seller, in form reasonably satisfactory to the
Buyer, certifying as to the completion of all necessary corporate
proceedings and the incumbency of the persons executing this Agreement
on behalf of each Seller. The Buyer must have received Secretary's
certificates from each Acquired Company, in form and substance
reasonably satisfactory to the Buyer, certifying as to that Acquired
Company's Organizational Documents, incumbent directors and officers,
stock ledger and good standing in the jurisdiction of its incorporation
and good standing as a foreign corporation in California and Georgia, if
applicable.
28
6.7. Resignation of Directors. The Buyer must have received resignations of
each director of each Acquired Company, other than independent directors
of Acquired Companies that are special purpose entities. These
resignations will be effective upon the Closing.
6.8. HSR Act. Any applicable waiting period under the HSR Act must have
expired or terminated.
7. CONDITIONS PRECEDENT TO THE SELLERS' OBLIGATION TO CLOSE
The Sellers' obligation to sell the Shares and to take the other
actions required to be taken by the Sellers at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which can be waived by the Sellers, in their sole discretion, in whole
or in part):
7.1. Accuracy of Representations. The Buyer's representations and warranties
in this Agreement, must have been accurate in all material respects as
of the Closing Date as if made on the Closing Date.
7.2. Buyer's Performance. The covenants and obligations that the Buyer is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing, must have been performed and complied with in all
material respects. The Buyer must have delivered each document required
to be delivered by the Buyer pursuant to Sections 1.4.2(b) and 1.4.2(c)
and must have made the Estimated Payment required to be made by the
Buyer pursuant to Section 1.4.2(a).
7.3. No Order. There must not be in effect any Law or Order that (a)
prohibits the sale of the Shares by the Sellers to the Buyer, and (b)
has been adopted or issued, or has otherwise become effective, since the
date of this Agreement.
7.4. Corporate Proceedings. The Sellers must have received a Secretary's
certificate from the Buyer, in form reasonably satisfactory to the
Sellers, certifying as to the completion of all necessary corporate
proceedings and the incumbency of the person executing this Agreement on
behalf of the Buyer.
7.5. HSR Act. Any applicable waiting period under the HSR Act must have
expired or terminated.
8. TERMINATION
8.1. Termination Events. This Agreement can, by notice given before or at the
Closing, be terminated:
(a) by either Party, if the other has committed a material Breach of
this Agreement, and the Breach has not been waived and that Party was
not in material Breach of this Agreement prior to the Breach that is
forming the basis for the proposed termination; provided, however, that
the Party that has committed a material Breach will have ten Business
Days after receipt of notice from the other Party of
29
its intention to terminate this Agreement pursuant to this Section
8.1(a) to cure such Breach before the other Party may so terminate this
Agreement;
(b) by the Buyer, if any condition in Section 6 has not been satisfied
on or before January 14, 2000 or if satisfaction of the condition is or
becomes impossible (other than through the Buyer's failure to comply
with its obligations under this Agreement) and the Buyer has not waived
the condition on or before the Closing Date;
(c) by the Sellers, if any condition in Section 7 has not been satisfied
on or before January 14, 2000 or if satisfaction of a condition is or
becomes impossible (other than through the Sellers' failure to comply
with their obligations under this Agreement) and the Sellers have not
waived the condition on or before the Closing Date;
(d) by mutual consent of the Buyer and the Sellers; or
(e) by either the Buyer or the Sellers, if the Closing has not occurred
(other than through the failure of any Party seeking to terminate this
Agreement to comply fully with its obligations under this Agreement) on
or before January 14, 2000, or any later date the Parties agree on.
8.2. Effect of Termination. Each Party's right of termination under Section
8.1 is in addition to any other rights it has under this Agreement or
otherwise, and the exercise of a right of termination will not be an
election of remedies. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the Parties under this Agreement
will terminate, except that the obligations in Sections 11.1 and 11.3
will survive; provided, however, that if this Agreement is terminated by
a Party because of the Breach of the Agreement by the other Party or
because one or more of the conditions to the terminating Party's
obligations under this Agreement is not satisfied as a result of the
other Party's failure to comply with its obligations under this
Agreement, the terminating Party's right to pursue all legal remedies
will survive such termination unimpaired.
9. INDEMNIFICATION; REMEDIES
9.1. Indemnification and Payment of Damages by the Sellers. From and after
the Closing, the Sellers will jointly and severally indemnify and hold
harmless the Buyer, the Acquired Companies, and their respective
Representatives, stockholders, controlling Persons and Affiliates
(collectively, the "Buyer Indemnified Persons") for, and will pay to the
Buyer Indemnified Persons the amount of, any loss, liability, claim,
damage, setoff, recoupment, disgorgement expense (including costs of
investigation and defense and reasonable attorneys' fees), whether or
not involving a third-party claim (collectively, "Damages"), arising,
directly or indirectly, from or in connection with or otherwise by
virtue of:
30
(a) any Breach of any representation or warranty made by the Sellers in
this Agreement or in any certificate delivered by the Sellers pursuant
to this Agreement;
(b) any Breach by the Sellers of any of their covenants or obligations
in this Agreement; and
(c) any liability or obligation in respect of the lease obligations
retained or assumed by FGC or its Affiliates pursuant to Section 5.12.
The remedies provided in this Section 9.1 will be the exclusive
post-Closing remedies of the Buyer and the other Buyer Indemnified
Persons for the specified matters.
9.2. Indemnification and Payment of Damages by the Buyer. From and after the
Closing, the Buyer will indemnify and hold harmless the Sellers, and
their respective Representatives, stockholders, controlling Persons, and
affiliates (collectively, the "Seller Indemnified Persons") and will pay
to the Seller Indemnified Persons the amount of any Damages arising,
directly or indirectly, from or in connection with or otherwise by
virtue of :
(a) any Breach of any representation or warranty made by the Buyer in
this Agreement or in any certificate delivered by the Buyer pursuant to
this Agreement;
(b) any Breach by the Buyer of any of its covenants or obligations in
this Agreement; and
(c) any liability or obligation in respect of the lease obligations
retained or assumed by the Company pursuant to Section 5.12.
9.3. Time Limitations. If the Closing occurs, neither Party will have any
liability (for indemnification or otherwise) with respect to any of its
representations or warranties, (other than, as to the Sellers, those in
Sections 2.3, 2.10 and 2.12.4), unless on or before the date that is 24
months after the Closing the indemnified Party notifies the other Party
of a claim specifying the factual basis of that claim in reasonable
detail. A claim with respect to Section 2.3, 2.10 or 2.12.4, or a claim
for indemnification or reimbursement not based upon any representation
or warranty can be made at any time within the applicable statute of
limitations.
9.4. Limitations On Amount -- Sellers. The Sellers will have no liability
(for indemnification or otherwise) with respect to the matters described
in clause (a) of Section 9.1 (other than a Breach of the representations
and warranties in Section 2.10) until the total of all Damages with
respect to those matters exceeds $750,000 (the "Basket"), and then for
the entire amount of Damages, including the Basket amount. The Sellers
will have no liability (for indemnification or otherwise) with respect
to Damages related to liabilities that were accrued on the Closing Date
Balance Sheet as set
31
forth on Schedule 9.4 to be delivered by Sellers to Buyer concurrently
with the Closing Date Balance Sheet and any such Damages will not count
towards the Basket.
9.5. Limitations On Amount -- Buyer. The Buyer will have no liability (for
indemnification or otherwise) with respect to the matters described in
clause (a) of Section 9.2 until the total of all Damages with respect to
those matters exceeds $750,000, and then for the entire amount of
Damages, including the Basket amount.
9.6. Procedure For Indemnification -- Third Party Claims.
9.6.1. Notice. Promptly after receipt by an indemnified Party under
Section 9.1 or Section 9.2 of notice of the commencement of any
Proceeding against it, the indemnified Party will, if a claim is to be
made against an indemnifying Party under that Section, give notice to
the indemnifying Party of the commencement of the claim. The failure to
notify the indemnifying Party will not relieve the indemnifying Party of
any liability that it could have to any indemnified Party, except to the
extent that the indemnified Party demonstrates that the defense of the
action is prejudiced by the indemnifying Party's failure to give the
notice.
9.6.2. Participation. If any Proceeding referred to in Section 9.6.1 is
brought against an indemnified Party and it gives notice to the
indemnifying Party of the commencement of the Proceeding, the
indemnifying Party will be entitled to participate in the Proceeding
and, to the extent that it wishes (unless the indemnifying Party is also
a party to the Proceeding and the indemnified Party determines in good
faith that joint representation would be inappropriate), to assume the
defense of the Proceeding with counsel reasonably satisfactory to the
indemnified Party and, after notice from the indemnifying Party to the
indemnified Party of its election to assume the defense of the
Proceeding, the indemnifying Party will not, as long as it diligently
conducts the defense, be liable to the indemnified Party under this
Section 9 for any fees of other counsel or any other expenses with
respect to the defense of the Proceeding, in each case subsequently
incurred by the indemnified Party in connection with the defense of the
Proceeding, other than reasonable costs of investigation. If the
indemnifying Party assumes the defense of a Proceeding, (a) no
compromise or settlement of the claims will be effected by the
indemnifying Party without the indemnified Party's consent unless (i)
there is no finding or admission of any violation of Laws or any
violation of the rights of any Person and no adverse effect on any other
claims that could be made against the indemnified Party, and (ii) the
sole relief provided is monetary damages that are paid in full by the
indemnifying Party; and (b) the indemnified Party will have no liability
with respect to any compromise or settlement of the claims effected
without its consent. If notice is given to an indemnifying Party of the
commencement of any Proceeding and the indemnifying Party does not,
within ten days after the indemnified Party's notice is given, give
notice to the indemnified Party of its election to assume the defense of
the Proceeding, the indemnifying Party will be bound by any
determination made in the Proceeding or any compromise or settlement
effected by the indemnified Party.
32
9.7. Procedure for Indemnification -- Other Claims. A claim for
indemnification for any matter not involving a third-party claim can be
asserted by notice to the Party from whom indemnification is sought
within the periods specified in Section 9.3, if any.
9.8. Insurance. The Sellers will cause the Acquired Companies to continue, to
the extent applicable prior to the Closing, to be beneficiaries of the
Sellers' insurance coverage with respect to occurrences prior to the
Closing. To the extent that an Acquired Company receives any amounts
under any insurance policies for Damages otherwise indemnifiable under
Section 9.2, no claim will be made against the Sellers for such amounts
under Section 9.2.
9.9. No Limitation as a Result of Book Value Determination. The final
determination of Book Value under Section 1.5 will not, except to the
extent that a liability is recorded on the Closing Date Balance Sheet
(as finally determined), limit the Buyer Indemnified Parties' rights and
remedies under Section 9.1.
10. CERTAIN TAX MATTERS
10.1. Tax Returns.
10.1.1. Seller Obligations. The Sellers will cause to be prepared and
timely filed (or provided to the Buyer for execution and filing, if
applicable) when due (taking into account all extensions properly
obtained) all income and franchise Tax Returns of the Acquired Companies
for taxable periods ending on or before the Closing Date. The Acquired
Companies will pay, or reimburse the Sellers for the payment of, all
Taxes required to be paid in respect of such Tax Returns to the extent
(a) attributable to the Acquired Companies, and (b) not in excess of
liabilities for Taxes accrued on the Closing Date Balance Sheet.
10.1.2. Buyer Obligations. The Buyer will cause to be prepared and
timely filed all Tax Returns of the Acquired Companies required to be
filed after the Closing Date that are not described in Section 10.1.1.
If any such Tax Return covers a period beginning before the Closing
Date, the Sellers and their designated representatives will have the
right to review and approve such Tax Return before it is filed if it
could affect the Sellers' liability for Taxes to any Taxing Authority or
its indemnification obligations to Buyer under this Agreement. Any Tax
Return described in the preceding sentence will be provided to FGC not
less than fourteen days before the proposed filing date together with
any underlying information or records requested by FGC or its
representatives to assist their review.
10.1.3. Taxable Periods Ending On or Before the Closing Date. The
Sellers will be liable for, will pay and will indemnify and hold the
Buyer and the Acquired Companies harmless against, all Taxes of the
Acquired Companies for any taxable year or taxable period ending on or
before the Closing Date due or payable with respect to the operations,
assets or business of the Acquired Companies on or before the Closing
Date, including any Taxes resulting from the making of the Section
338(h)(10) Elections and
33
any liability for Taxes pursuant to Treasury Regulation ss.1.1502-6, (or
any similar provision of Law), but only to the extent that the amount of
such Taxes exceeds the amount of Taxes currently payable that will be
reserved for on the Closing Date Balance Sheet. The Sellers will
determine the amount of taxable income of the Acquired Companies for the
taxable year ending on the Closing Date on the basis of its permanent
records (including workpapers) in a manner consistent with Treasury
Regulation ss.1.1502-76(b)(4)(i) and (ii). Such determination will be
subject to the dispute resolution procedures of Section 10.1.11.
10.1.4. Taxable Periods Commencing After the Closing Date. The Buyer
will be liable for, will pay and will indemnify and hold the Sellers or
any of their Affiliates harmless against, any and all Taxes of any
Acquired Company for any taxable year or taxable period commencing after
the Closing Date and for any Taxes accrued on the Closing Date Balance
Sheet, other than any Taxes resulting from Section 338(h)(10) Elections.
10.1.5. Taxable Periods Commencing On or Before the Closing Date and
Ending After the Closing Date. Any Taxes for a taxable period beginning
on or before the Closing Date and ending after the Closing Date (the
"Closing Period") with respect to the Acquired Companies will be
apportioned between the Sellers and the Buyer based on the actual
operations of the Acquired Companies during the portion of such period
ending on the Closing Date (the "Pre-Closing Period") and the portion of
such period beginning on the day following the Closing Date, but with
the Sellers bearing the effect of all Section 338(h)(10) Elections, and
for purposes of Sections 10.1.3, 10.1.4 and 10.1.6, each portion of such
period will be deemed to be a taxable period. With respect to any Taxes
for the Closing Period:
(a) at least thirty days prior to the due date for the payment of Taxes
with respect to the Closing Period, the Buyer will present the Sellers
with a schedule detailing the computation of the Pre-Closing Period Tax;
(b) five days prior to the due date for the payment of any Pre-Closing
Period Tax, the Sellers will pay the Acquired Companies the amount of
the undisputed Pre-Closing Period Tax as computed by Buyer to the extent
such Taxes have not been reserved for on the Closing Date Balance Sheet,
and the Buyer will pay all other Taxes with respect to the Closing
Period; and
(c) in the event the Sellers dispute the Buyer's computation of the
Pre-Closing Period Tax or any of the payments described in clause (b)
above, the Sellers will not be required to pay any disputed amount
requested pending the resolution of such dispute in accordance with
Section 10.1.11. If upon such resolution it is determined that any of
such disputed amount is payable to the Buyer and such disputed amount
payable to the Buyer has not been paid to the Buyer as of the expiration
of the period described in clause (b) above (the "Due Date"), the
Sellers will pay to the Buyer, in addition to such disputed amount
payable to Buyer, interest computed thereon at the applicable federal
rate for underpayments
34
(within the meaning of Section 6621(a)(2) of the IRC) in effect from
time to time from the Due Date to the date of payment.
10.1.6. Refunds or Credits. Except as otherwise set forth in this
Agreement, any refunds or credits of Taxes, to the extent that such
refunds or credits are attributable to taxable periods ending on or
before the Closing Date and are in excess of those reflected on the
Closing Date Balance Sheet, will be for the account of the Sellers, and,
to the extent that such refunds or credits are attributable to taxable
periods beginning after the Closing Date or are reflected on the Closing
Date Balance Sheet, such refunds or credits will be for the account of
the Buyer. To the extent that such refunds or credits are attributable
to Taxes for the Closing Period that are described in Section 10.1.5,
such refunds and credits will be for the account of the party who bears
responsibility for such Taxes pursuant to Section 10.1.5. The Buyer will
cause the Acquired Companies promptly to forward to the Sellers or to
reimburse the Sellers for any such refunds or credits due Sellers
pursuant to this Section 10.1.6 after receipt thereof by any of the
Buyer or the Acquired Companies of an aggregate of at least $10,000 of
such refunds or credits that are for the account of Sellers hereunder,
and the Sellers will promptly forward to the Buyer or reimburse the
Buyer for any refunds or credits due the Buyer after receipt thereof by
Sellers of an aggregate of at least $10,000 of such refunds or credits
that are for the account of the Buyer hereunder; provided, however, that
the refunding party will be entitled to deduct from the amount to be
refunded all reasonable costs and expenses incurred by such refunding
party in obtaining such refund, but such deduction will not be included
in calculating whether the $10,000 refund and credit threshold noted
above has been reached. The Buyer agrees that, upon the reasonable
request of FGC and at FGC's expense, an Acquired Company or the Buyer
will file an amended return or claim for refund prepared by FGC relating
to Taxes attributable to any taxable period (or portion thereof) ending
on or before the Closing Date.
10.1.7. Tax Benefit. If any loss, Tax adjustment or other event giving
rise to a claim for indemnification under this Agreement also results in
any deduction or exclusion from income (a "Tax Benefit") to the
indemnified Party or any Affiliate thereof in the same or a later
taxable period, the amount of the claim will be reduced, or the
indemnified Party will pay the indemnifying Party, as applicable, the
amount of the Tax reduction attributable to such Tax Benefit at such
time or times as, and to the extent that, such Tax Benefit is realized.
Buyer will provide the Sellers with copies of Tax Returns and supporting
work papers sufficient to enable the Sellers to calculate any reduction
in the indemnification payments or payments to be made to the Sellers
pursuant to this paragraph.
10.1.8. Amended Returns. Without the Sellers' prior written consent, the
Buyer will not cause or permit to be filed any amended Tax Return
pertaining to an Acquired Company for taxable periods (or portions
thereof) ending on or before the Closing Date.
10.1.9. Mutual Cooperation. As soon as practicable, but in any event
within fifteen days after the Sellers' or the Buyer's request, as the
case may be, the Buyer will deliver to the Sellers, or the Sellers will
deliver to the Buyer, as the case may be, such information
35
and other data and assistance relating to the Tax Returns and Taxes of
any Acquired Companies and will make available such knowledgeable
employee of the Sellers, the Buyer, the Acquired Companies or any of
their Affiliates, as the case may be, as the Sellers or the Buyer, as
the case may be, may reasonably request, including providing the
information and other data customarily required by the Sellers or the
Buyer, as the case may be, to cause the completion and filing of all Tax
Returns for which it has responsibility or liability under this
Agreement or to respond to audits by any Taxing Authorities with respect
to any Tax Returns or Taxes for which it has any responsibility or
liability under this Agreement or to otherwise enable the Sellers or the
Buyer, as the case may be, to satisfy its accounting or tax
requirements.
10.1.10.Contests. Whenever any Taxing Authority asserts a claim, makes
an assessment, or otherwise disputes the amount of Taxes for which the
Sellers are or may be liable under this Agreement, the Buyer will
promptly inform FGC and FGC will have the right to control any resulting
proceedings and to determine whether and when to settle any such claim,
assessment or dispute to the extent such proceedings or determinations
would materially affect the amount of Taxes for which the Sellers are
liable under this Agreement. Whenever any Taxing Authority asserts a
claim, makes an assessment or otherwise disputes the amount of Taxes for
which Buyer is liable under this Agreement, the Sellers will promptly
inform the Buyer, and the Buyer will have the right to control any
resulting proceedings and to determine whether and when to settle any
such claim, assessment or dispute to the extent such proceedings would
materially affect the amount of Taxes for which the Buyer is liable
under this Agreement. Neither FGC nor the Buyer will enter into a
settlement described in this Section 10.1.10 with respect to Taxes
without the other Party's written consent, which will not be
unreasonably withheld or delayed.
10.1.11.Resolution of Tax Disagreements between Sellers and Buyer. If
the Sellers and the Buyer disagree as to the amount of Taxes for which
each is liable under this Agreement or as to the allocation required
pursuant to Section 5.5.3, the Sellers and the Buyer will promptly
consult each other in an effort to resolve such dispute. If any such
point of disagreement cannot be resolved within fifteen days of the date
of consultation, the Sellers and the Buyer will within ten days after
such fifteen-day period jointly engage an auditor (the "Tax Auditor")
other than Ernst & Young LLP or Deloitte & Touche LLP, to act as an
arbitrator to resolve all points of disagreement concerning tax
accounting matters with respect to this Agreement. If the Parties cannot
agree on the selection of a Tax Auditor within such ten-day period, then
the matter will be resolved pursuant to Section 11.5 except that the
arbitrator will be an attorney or certified public accountant proficient
in relevant Tax matters. All fees and expenses relating to the work
performed by any Tax Auditor or arbitrator in accordance with this
Section 10.1.11 will be borne equally by the Sellers and the Buyer,
unless otherwise ordered by the Tax Auditor or arbitrator.
10.1.12. Certain Definitions. For purposes of this Agreement, the
following terms will have the following meanings:
36
(a) "Section 338 Forms" means all returns, documents, statements, and
other forms that are required to be submitted to any federal, state,
county, or other local Taxing Authority in connection with a Section
338(h)(10) Election. Section 338 Forms will include, without limitation,
United States Internal Revenue Service Form 8023 together with any
schedules or attachments thereto that are required pursuant to
applicable Treasury Regulations.
(b) "Section 338(h)(10) Election" means an election described in Section
338(h)(10) of the IRC with respect to the Sellers' sale of the Shares to
the Buyer pursuant to this Agreement. The Section 338(h)(10) Election
will also include any substantially similar election under a state or
local statute corresponding to federal Laws.
(c) "Tax Laws" means the IRC and any other Laws relating to Taxes and
any official administrative pronouncements released thereunder.
11. GENERAL PROVISIONS
11.1. Expenses. Except as otherwise expressly provided in this Agreement, each
Party will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the
Transactions, including all fees and expenses of agents,
representatives, counsel and accountants. The Buyer will pay the HSR Act
filing fee. If this Agreement is terminated, the obligation of each
Party to pay its own expenses will be subject to any rights of that
Party arising from a Breach of this Agreement by another Party.
11.2. Public Announcements. Neither Party will make any public announcement
about, or otherwise disclose publicly, this Agreement, the Transactions
or the related negotiations without prior consultations and coordination
with the other Party; provided, however, that either Party can make any
public announcement that its counsel advises is required by Law. The
Parties will consult with each other concerning the means by which the
Acquired Companies' employees, customers, and suppliers and others
having dealings with the Acquired Companies will be informed of the
Transactions.
11.3. Confidentiality. Between the date of this Agreement and the Closing
Date, each Party will maintain in confidence, and will cause its
Affiliates, directors, officers, employees, agents, and advisors to
maintain in confidence, any written, oral, or other information obtained
from the other Party (or, in the case of the Buyer, an Acquired
Company), or generated by the Party (such as analyses, compilations,
studies or similar documents) in connection with the due diligence,
negotiations and regulatory filings relating to this Agreement or the
Transactions, and to use such information only in connection with the
evaluation and negotiation of the Transactions. A receiving Party can,
however, disclose such information to those of its Representatives who
have a need to know such information in connection with ongoing due
diligence, negotiations or regulatory filings with respect to this
Agreement or the Transactions. In addition, the foregoing restrictions
will not apply to information that (a) was generally available to the
public prior to
37
disclosure by the disclosing Party; (b) became generally available to
the public, other than as a result of a disclosure by the disclosing
Party or its Representatives; or (c) became available to the receiving
Party on a non-confidential basis from a source not known by the
receiving Party to be bound by a confidentiality agreement. If the
Transactions are not consummated, (i) each receiving Party will return
to the disclosing Party or destroy as much of the written information as
the other Party reasonably requests; and (ii) the foregoing
confidentiality provisions will remain in full force and effect for two
years, despite the termination of this Agreement.
11.4. Notices. All notices, consents, waivers, and other communications under
this Agreement must be in writing. They will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt),
(b) sent by telecopier (with written confirmation of receipt), so long
as a copy is mailed by registered mail, return receipt requested, or (c)
when received by the addressee, if sent by a nationally recognized
overnight delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers stated below (or as a Party
otherwise designates by notice to the other parties):
The Sellers:
Fremont General Corporation
0000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Attention: Chief Financial Officer
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
and
Fremont General Credit Corporation
0000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Attention: Chief Financial Officer
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
with a copy (which does not constitute notice) to:
O'Melveny & Xxxxx LLP
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
38
The Buyer:
FINOVA Capital Corporation
0000 Xxxxx Xxxxxxxxxx Xxxx, XX 6W90
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
and
FINOVA Capital Corporation
4800 North Scottsdale Road, MS 6W90
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
with a copy (which does not constitute notice) to:
Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP
00 Xxxxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
Notice to one Seller will be deemed notice to both Sellers.
11.5. Arbitration.
11.5.1. Resolution of Disputes. The Parties will submit all
controversies, disputes or claims for indemnification among them arising
out of or relating to this agreement or the Transaction to binding
arbitration as provided below. The arbitration and all related
preliminary proceedings will be agreed upon by the Parties, or, failing
agreement on those rules within thirty days of written request for
agreement, in accordance with the Rules for Commercial Arbitration of
the American Arbitration Association ("AAA"), as amended from time to
time and as modified by this agreement. The dispute will be presented to
a single arbitrator (the "Arbitrator"), sitting in Phoenix, Arizona, if
the action is initiated by the Sellers or Los Angeles, California, if
the action is initiated by the Buyer.
11.5.2. Selection of the Arbitrator. The Parties will jointly select the
Arbitrator within fifteen days after demand for arbitration is made by a
Party. If the Parties are unable to
39
agree on an Arbitrator within that period, then any Party may request
that the AAA select the Arbitrator in accordance with its then existing
rules for doing so. The Arbitrator must possess substantive legal
experience in the principal issues in dispute.
11.5.3. Discovery. Any discovery permitted will be limited to
information directly relevant to the controversy in arbitration. In the
event of discovery disputes, the Arbitrator is directed to issue orders
as are appropriate to limit discovery in accordance with the foregoing
and as are reasonable in light of the issues in dispute, the amount in
controversy, and other relevant considerations. To the extent the
Parties are unable to agree on the scope of discovery, the Arbitrator
will require the Party seeking discovery on an issue to present the
legal and factual basis for the dispute and will permit the Party
opposing discovery to respond. The Arbitrator will permit discovery on
an issue only if he or she concludes that there is a reasonable and good
faith basis in law and in fact for bringing the allegations and that the
discovery appears likely to present substantive evidence regarding that
dispute. The Arbitrator may allow limited discovery to permit
investigation of some of the disputes or to determine whether a claim
has sufficient basis in law or in fact to warrant further discovery. The
Arbitrator, however, will issue appropriate orders to restrict the scope
of that discovery. The federal or state rules of procedure and evidence
will not apply to the arbitration proceedings, including without
limitation the rules of discovery. The Arbitrator will consider claims
of privilege, work product and other restrictions on discovery as appear
to be warranted.
11.5.4. Fees. The Arbitrator will award the prevailing Party its
attorney's and experts' fees and disbursements incurred in resolving the
dispute and will award double costs and expenses or other sanctions to
the extent the Arbitrator finds any dispute advanced in the proceedings
to be frivolous or without a good faith basis in fact and in Law when
the dispute was first presented for arbitration.
11.5.5. Award/Consent to Jurisdiction. Except as may otherwise be agreed
in writing by the Parties or as ordered by the Arbitrator upon
substantial justification shown, the hearing for the dispute will be
held within ninety days of submission of the dispute to arbitration. The
Arbitrator will render a final award within thirty days following
conclusion of the hearing and any required post-hearing briefing or
other proceedings ordered by the Arbitrator. The Arbitrator will state
the factual and legal basis for the award. The decision of the
Arbitrator will be final and binding, except as provided in the Federal
Arbitration Act, 9 U.S.C. ss.1. et. seq., and except for errors of law
based on the findings of fact. Final judgment may be entered upon the
award in any court of competent jurisdiction but entry of judgment will
not be required to make the award effective. By signing below, the
Parties irrevocably submit to the exclusive jurisdiction and venue of
the state and federal courts and arbitration forums located in Maricopa
County, Arizona, if the action is initiated by the Sellers and in Los
Angeles, California, if the action is initiated by Buyer. THE PARTIES
EXPRESSLY WAIVE THEIR RIGHTS TO A TRIAL BY JURY.
11.6. Further Assurances. Each Party will (a) furnish upon request to the
other any further information, (b) execute and deliver to the other any
other documents, and (c) do
40
anything else, the other Party reasonably requests to carry out the
intent of this Agreement and the related documents.
11.7. Waiver. No failure or delay in exercising any right under this Agreement
or the related documents will operate as a waiver of that right. No
single or partial exercise of a right will preclude any other or further
exercise of it or any other right. To the maximum extent permitted by
applicable Law, (a) no claim or right arising out of this Agreement or
the related documents can be discharged by one Party, in whole or in
part, by a waiver or renunciation of the claim or right unless such
waiver or renunciation is in writing signed by the other Party; (b) no
waiver that can be given by a Party will apply except in the specific
instance for which it is given; and (c) no notice to or demand on one
Party will be deemed to be a waiver of any obligation of that Party or
of the right of the Party giving the notice or demand to take further
action without notice or demand as provided in this Agreement or the
related documents.
11.8. Entire Agreement and Modification. This Agreement supersedes all prior
agreements between the Parties with respect to its subject matter and
constitutes (along with the Disclosure Schedules) a complete and
exclusive statement of the agreement among the parties with respect to
its subject matter. This Agreement cannot be amended except by a written
agreement executed by the Party charged with the amendment.
11.9. Assignments, Successors, and No Third-Party Rights. No Party can assign
any of its rights under this Agreement without the prior consent of the
other parties, except that the Buyer can assign any of its rights under
this Agreement to any Buyer Subsidiary. Subject to the preceding
sentence, this Agreement will apply to, be binding in all respects upon,
and inure to the benefit of the successors and permitted assigns of the
Parties. Nothing expressed or referred to in this Agreement will be
construed to give any Person other than the Buyer Indemnified Parties
and the Seller Indemnified Parties any legal or equitable right, remedy,
or claim under or with respect to any provision of this Agreement. This
Agreement is for the sole and exclusive benefit of the Parties to it and
their successors and assigns.
11.10. Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction or arbitrator, the
other provisions of this Agreement will remain in full force and effect.
Any provision of this Agreement held invalid or unenforceable only in
part or degree will remain in full force and effect to the extent not
held invalid or unenforceable. If any provision of this Agreement is
held invalid or unenforceable the Parties intend that the court of
competent jurisdiction or arbitrator making such finding will substitute
a valid enforceable provision therefor which, to the fullest extent
permitted by Law, effects the economic benefits and burdens intended by
such invalid or unenforceable provision.
11.11. Section Headings, Construction. The headings of Sections in this
Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or
"Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of
the gender
41
or number the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or
terms.
11.12. Governing Law. This Agreement will be governed by the laws of the State
of California.
11.13. Counterparts. This Agreement can be executed (including facsimile
signatures) in one or more counterparts, each of which will be deemed to
be an original copy of this Agreement and all of which, when taken
together, will be deemed to constitute one and the same agreement.
42
The Parties have executed and delivered this Agreement as of the
date at the beginning of this Agreement.
THE BUYER: THE SELLERS:
FINOVA Capital Corporation Fremont General Corporation
By: By:
----------------------- -------------------------
Name: Name:
Title: Title:
Fremont General Credit Corporation
By:
--------------------------
Name:
Title:
S-1
EXHIBIT A - DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
given or referred to in this Exhibit A:
"Accountants" is defined in Section 1.5.2.
"Acquired Companies" means the Company and its Subsidiaries,
collectively.
"Affiliate" means, with respect to any Person, any Person that, directly
or indirectly, is in control of, is controlled by, or is under common control
with, that Person. For the purposes of this definition, "control" (including,
with correlative meanings, "controlled by" and "under common control with"), as
applied to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities or by contract or
otherwise.
"Applicable Contract" means any Contract (a) under which any Acquired
Company has any rights, (b) under which any Acquired Company has any obligation
or liability, or (c) by which any Acquired Company or any of the assets owned or
used by it is bound.
"Balance Sheet" is defined in Section 2.4.
"Basket" is defined in Section 9.4.
"Best Efforts" means the efforts a prudent Person who wanted to achieve
a result would use in similar circumstances to see that the result was achieved
as quickly as possible; provided, however, that an obligation to use Best
Efforts under this Agreement does not require the Person subject to that
obligation to take actions that would result in a materially adverse change in
the benefits to that Person of this Agreement and the Transactions.
"Book Value" means Company's consolidated stockholder's equity, as that
term is commonly used in the Company's consolidated balance sheets (including
Preferred Stock and Common Stock and paid-in capital and retained earnings
related thereto).
"Breach" means (a) any inaccuracy in or breach of, or any failure to
perform or comply with, a representation, warranty, covenant, obligation, or
other provision of this Agreement, or (b) any claim (by any Person) or other
occurrence or circumstance that is or was inconsistent with the representation,
warranty, covenant, obligation, or other provision.
"Business" means the business of the Acquired Companies as conducted on
the date of this Agreement, including their operations, results of operations,
financial or other condition, assets, liabilities and personnel.
"Business Day" means any day other than a Saturday, a Sunday or a day
when commercial banks in the City of Los Angeles, California are authorized by
law, rule or regulation to be closed.
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"Buyer" is defined in the first paragraph of this Agreement.
"Buyer's Advisors" is defined in Section 4.1.
"Buyer Indemnified Persons" is defined in Section 9.1.
"Closing" is defined in Section 1.3.
"Closing Date" means the date and time as of which the Closing actually
takes place.
"Closing Date Balance Sheet" is defined in Section 1.5.1.
"Common Shares" is defined in Recital No. 1 of this Agreement.
"Company" is defined in Recital No. 1 of this Agreement.
"Company Material Adverse Effect" means, for each specific
representation and warranty in which the term occurs, an adverse effect of more
than $500,000 on the Acquired Companies' business, financial condition, results
of operations or assets
"Company Plan" is defined in Section 2.12.1(a).
"Company Welfare Plan" means the benefits provided to eligible employees
of the Acquired Companies prior to the Closing Date consisting of: medical,
dental and vision programs; life, accidental death, disability and long-term
disability insurance programs; and, up to December 31, 1999, the Fremont
Executive Medical plan and flexible spending accounts. "Company Welfare Plan"
does not include FGC's Executive Disability Plan or, after December 31, 1999,
the Fremont Executive Medical plan or flexible spending accounts that had been
provided to eligible employees of the Acquired Companies prior to the Closing
Date, in each case for which Sellers retain all liability.
"Consent" means any approval, consent, filing, ratification, waiver, or
other authorization (including any Governmental Authorization).
"Contract" means any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Credit Facility" is defined in Section 5.11.
"Damages" is defined in Section 9.1.
"Disclosure Schedules" means the disclosure schedules the Sellers
delivered to the Buyer with this Agreement.
"Employees" is defined in Section 2.19.
"Encumbrance" means any charge, claim, community property interest,
condition, equitable interest, lien, mortgage, option, pledge, security
interest, right of first refusal, or
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restriction of any kind, including any restriction on use, voting, transfer,
receipt of income, or exercise of any other attribute of ownership. The term
"Encumbrance," as used in this Agreement, does not include: the lien of current
Taxes not yet due and payable; mechanics', carriers', workmens', repairmens',
landlord, statutory or common law liens either not delinquent or being contested
in good faith; the rights of lessors of personal property being leased to an
Acquired Company; and immaterial imperfections of title that do not interfere
with the use of the relevant property.
"Enforceability Exceptions" means bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or later in effect relating
to creditors' rights generally and by general principles of equity and
commercial reasonableness, regardless of whether the proceeding is in equity or
at law
"ERISA" means the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ERISA Affiliate" is defined in Section 2.12.1(b).
"Estimated Payment" is defined in Section 1.4.2(a).
"Excluded Assets" is defined in Section 5.7.1.
"FGC" is defined in the first paragraph of this Agreement.
"FGCC" is defined in the first paragraph of this Agreement.
"GAAP" means generally accepted United States accounting principles,
applied on a basis consistent with the basis on which the Balance Sheet and the
other financial statements referred to in Section 2.4 were prepared.
"Governmental Authorization" means any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Law.
"Governmental Body" means any: (a) nation, state, county, city, town,
village, district, or other jurisdiction of any nature; (b) federal, state,
local, municipal, foreign, or other government; (c) governmental or
quasi-governmental authority of any nature (including any governmental agency,
branch, department, official, or entity and any court or other tribunal); (d)
multi-national organization or body; or (e) body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative, police,
regulatory, or taxing authority or power of any nature.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976
or any successor Law, and regulations and rules issued pursuant to that Act or
any successor Law.
"Inter-Company Notes" means the two inter-company promissory notes, each
in the principal amount of $10 million, evidencing the Company's obligations to
pay principal and
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accrued interest to Fremont Indemnity Company and Fremont Compensation Insurance
Company.
"Interim Balance Sheet" is defined in Section 2.4.
"Interim Financial Statements" is defined in Section 2.4.
"IRC" means the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the IRC or any successor law.
"IRS" means the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge" means, as to the Sellers, the knowledge of the following
personnel of the Sellers and the Acquired Companies: Xxxxx Xxxxxx, Xxxxx
Xxxxxxx, Xxx Xxxxx, Xx Xxxx, Xxxx Xxxxx, Xxxxx Xxxx, Xxxx Xxxxxx and Xxxxxxx
Xxxx.
"Law" means any federal, state, local, municipal, foreign,
international, multinational, or other constitution, law, ordinance, principle
of common law, regulation, rule, statute, treaty, or administrative order.
"Leased Real Property" is defined in Section 2.6.
"Location" is defined in Section 4.5.2.
"Loan" means each outstanding loan or other financial accommodation
owing to an Acquired Company, other than loans or other financial accommodations
that are part of the Excluded Assets.
"Loan Documents" means, with respect to each Loan, the Loan Agreement,
Loan and Security Agreement or Credit Agreement, as applicable, any promissory
note evidencing such Loan, all documents granting a security interest or lien in
any collateral to an Acquired Company securing such Loan, all guaranties and
similar agreements in respect of such Loan, subordination agreements in respect
of such Loan, intercreditor agreements in respect of such Loan and all
amendments, waivers, extensions, accelerations and modifications of any of the
foregoing.
"Marks" is defined in Section 2.21.1(a).
"Material Contracts" is defined in Section 2.17.1.
"Multi-Employer Plan" is defined in Section 2.12.1(c).
"Net Income" means net income or loss as that term is used in the
Company's consolidated statements of income.
"Non-Qualified Plan" is defined in Section 2.12.1(d).
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"Order" means any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course" means an action taken in connection with the Business
that is (i) consistent with actions taken in the past by the Acquired Companies
and in the ordinary course of the normal day-to-day operations of the Business,
and (ii) complies with applicable Law.
"Organizational Documents" means (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of these documents.
"Other Benefit Obligations" is defined in Section 2.12(e).
"Owned Real Property" is defined in Section 2.6.
"Party" is defined in the first paragraph of this Agreement.
"PBGC" is defined in Section 2.12.1(f).
"Pension Plan" is defined in Section 2.12.1(g).
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or any Governmental Body.
"Plan" is defined in Sections 2.12.1(h).
"Plan Sponsor" is defined in Section 2.12.1(i).
"Post-Closing Payment" is defined in Section 1.5.3.
"Preferred Shares" is defined in Recital No. 1.
"Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"Purchase Price" is defined in Section 1.2.
"Qualified Plan" is defined in Section 2.12.1(j).
"Related Person" means with respect to a particular individual:
(a) each other member of his or her Family;
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(b) any Person directly or indirectly controlled by the individual or
one or more members of his or her Family;
(c) any Person in which the individual or members his or her Family hold
(individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which he or she or one or more members of
his or her Family serves as a director, officer, partner, executor, or trustee
(or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
the specified Person;
(b) any Person that holds a Material Interest in the specified Person;
(c) each Person that serves as a director, officer, partner, executor,
or trustee of the specified Person (or in a similar capacity);
(d) any Person in which the specified Person holds a Material Interest;
(e) any Person with respect to which the specified Person serves as a
general partner or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse, (iii) any other
natural person who is related to the individual or the individual's spouse
within the second degree, and (iv) any other natural person who resides with the
individual, and (b) "Material Interest" means direct or indirect beneficial
ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934,
as amended) of voting securities or other voting interests representing at least
10% of the outstanding voting power of a Person or equity securities or other
equity interests representing at least 10% of the outstanding equity securities
or equity interests in a Person.
"Representative" means with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of the Person, including legal counsel, accountants, and financial advisors.
"Section" or "Sections" is defined in Section 11.11.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor law, and regulations and rules issued pursuant to that act or any
successor law.
"Seller Indemnified Persons" is defined in Section 9.2.
"Sellers" is defined in the first paragraph of this Agreement.
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"Shares" is defined in Recital No. 1.
"Subsidiary" means with respect to any Person (the "Owner"), any
corporation or other Person of which securities or other interests having the
power to elect a majority of that corporation's or other Person's board of
directors or similar governing body, or otherwise having the power to direct the
business and policies of that corporation or other Person (other than securities
or other interests having that power only upon the happening of a contingency
that has not occurred) are held by the Owner or one or more of its Subsidiaries;
when used without reference to a particular Person, "Subsidiary" means a
Subsidiary of the Company.
"Tax" is defined in Section 2.10.7.
"Tax Benefit" is defined in Section 10.1.7.
"Tax Return" is defined in Section 2.10.1.
"Taxing Authority" is defined in Section 2.10.3.
"Threatened" means, with respect to a claim, Proceeding, dispute,
action, or other matter, that any written demand or statement has been made, any
written notice has been given, or that another event has occurred that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter has a substantial possibility of being asserted,
commenced, taken, or otherwise pursued in the future.
"Title IV Plans" is defined in Section 2.12.1(k).
"Transactions" means all of the transactions contemplated by this
Agreement, including (a) the sale of the Shares by the Sellers to the Buyer; and
(b) the performance by the Buyer and the Sellers of their respective covenants
and obligations under this Agreement.
"Trade Secrets" is defined in Section 2.21.2.
"VEBA" is defined in Section 2.12.1(l).
"Welfare Plan" is defined in Section 2.12.1(m).
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