Exhibit 2.12
AGREEMENT AND PLAN OF MERGER
by and between
HOME CREDIT ACQUISITION INC.,
U.S. HOME SYSTEMS, INC.
and
FIRST CONSUMER CREDIT, LLC,
and its
MEMBERS LISTED HEREIN
Dated as of September 28, 2001
TABLE OF CONTENTS
ARTICLE I Definitions ...................................................................... 1
Section 1.1 Defined Terms ........................................................... 1
ARTICLE II The Merger ...................................................................... 7
Section 2.1 The Merger .............................................................. 7
Section 2.2 Filing .................................................................. 8
Section 2.3 Effectiveness of the Merger ............................................. 8
Section 2.4 Merger Consideration .................................................... 8
Section 2.5 Calculation Formula; Termination ........................................ 8
Section 2.6 Asset Sale and Distribution ............................................. 9
Section 2.7 Current Liabilities ..................................................... 9
Section 2.8 Effects of Merger ....................................................... 10
Section 2.9 Closing ................................................................. 10
ARTICLE III Representations and Warranties of Parent and Sub ............................... 10
Section 3.1 Validity and Capitalization ............................................. 10
Section 3.2 Formation of Sub ........................................................ 10
Section 3.3 Corporate Authorization ................................................. 11
Section 3.4 Compliance with Applicable Law .......................................... 11
Section 3.5 Litigation, Actions and Proceedings ..................................... 11
Section 3.6 Non-Contravention ....................................................... 11
Section 3.7 Issuance of Stock ....................................................... 12
Section 3.8 SEC Documents and Filing Requirements ................................... 12
Section 3.9 NASDAQ SmallCap Market Requirements ..................................... 13
ARTICLE IV Representations and Warranties of Company ....................................... 13
Section 4.1 Validity and Capitalization ............................................. 13
Section 4.2 Corporate Records ....................................................... 14
Section 4.3 Corporate Authorization ................................................. 14
Section 4.4 Compliance with Applicable Law .......................................... 14
Section 4.5 Required Licenses and Permits ........................................... 15
Section 4.6 Governmental Notices .................................................... 15
Section 4.7 Non-Contravention ....................................................... 15
Section 4.8 Government Approvals; Required Consents ................................. 15
Section 4.9 Material Contracts ...................................................... 16
Section 4.10 Subsidiaries and Affiliates ............................................. 17
Section 4.11 Actions and Proceedings ................................................. 17
Section 4.12 Tax Matters. ............................................................ 17
Section 4.13 Title to Properties; Encumbrances ....................................... 18
Section 4.14 Intellectual Property ................................................... 19
Section 4.15 Employee Matters ........................................................ 19
Section 4.16 Environmental Matters ................................................... 19
Section 4.17 Labor Matters; Employee Benefit Plans; Employment, Termination and
Severance Agreements .................................................... 20
Section 4.18 Leased Premises ......................................................... 23
Section 4.19 Financial Data .......................................................... 23
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Section 4.20 Ownership of Parent's Common Stock ..................... 24
Section 4.21 Disclosure ............................................. 24
Section 4.22 Brokers ................................................ 24
Section 4.23 Adverse Agreements ..................................... 24
Section 4.24 Insurance .............................................. 25
Section 4.25 Purchase for Investment ................................ 25
Section 4.26 Investor Qualifications ................................ 25
ARTICLE V Covenants ....................................................... 25
Section 5.1 Parent's and Sub's Covenants .......................... 25
Section 5.2 Covenants of the Company and Shareholders .............. 27
Section 5.3 Mutual Covenants ....................................... 29
Section 5.4 "Piggy Back" Registration Rights ....................... 31
ARTICLE VI Conditions to Closing .......................................... 32
Section 6.1 Conditions to Each Party's Obligation .................. 32
Section 6.2 Conditions to Obligation of the Company ................ 33
Section 6.3 Conditions to Obligation of Parent and Sub ............. 33
ARTICLE VII Closing Deliveries ............................................ 34
Section 7.1 Closing Deliveries of the Company ...................... 34
Section 7.2 Closing Deliveries of Parent and Sub ................... 35
ARTICLE VIII Indemnification .............................................. 36
Section 8.1 Survival of Representations, Warranties and Covenants .. 36
Section 8.2 Indemnification ........................................ 36
Section 8.3 Procedures for Indemnification ......................... 38
Section 8.4 Escrow Amount .......................................... 40
Section 8.5 Termination of Indemnification Obligations ............. 41
ARTICLE IX Dispute Resolution ............................................. 41
Section 9.1 Dispute Resolution ..................................... 41
ARTICLE X Miscellaneous ................................................... 43
Section 10.1 Termination ............................................ 43
Section 10.2 Costs, Expenses and Legal Fees ......................... 44
Section 10.3 Notices and Payments ................................... 44
Section 10.4 Third Party Beneficiaries .............................. 45
Section 10.5 Independent Contractors ................................ 45
Section 10.6 Successors and Assigns ................................. 45
Section 10.7 Amendments and Waivers ................................. 45
Section 10.8 Severability of Provisions ............................. 45
Section 10.9 Counterparts; Delivery ................................. 45
Section 10.10 Governing Law .......................................... 46
Section 10.11 Captions ............................................... 46
Section 10.12 Entire Agreement ....................................... 46
Section 10.13 Gender and Number ...................................... 46
Section 10.14 Reference to Agreement ................................. 46
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") is dated as of
September 28, 2001 (the "Signing Date") and is entered by and between FIRST
CONSUMER CREDIT, LLC, a Texas limited liability company ("FCC"), all of the
equity owners of FCC as identified on the signature page of this Agreement
(collectively, the "Members"), U.S. HOME SYSTEMS, INC., a Delaware corporation
("Parent") and HOME CREDIT ACQUISITION INC., a Texas corporation ("Sub") and a
wholly-owned Subsidiary of Parent.
WHEREAS, FCC is in the business of originating and selling loans to provide
residential home improvements (the "Business");
WHEREAS, FCC will enter into an agreement with Sub prior to Closing to sell
certain FCC assets to Sub (the "Asset Sale") and will close the Asset Sale prior
to the Closing Date;
WHEREAS, after the Signing Date and upon consummation of the Asset Sale,
FCC shall convert from a Texas limited liability company to a Texas corporation
(the "Company") and the Members of FCC listed herein shall become shareholders
of the Company (the "Shareholders");
WHEREAS, Parent, Sub and the Company intend to effect a merger of Sub with
and into the Company in accordance with this Agreement and the TBCA (the
"Merger"). Upon consummation of the Merger, Sub shall cease to exist and the
Company shall be the surviving corporation (the "Surviving Company") and a
wholly-owned Subsidiary of Parent upon the terms and subject to the conditions
set forth herein;
WHEREAS, the respective boards of directors of each of Parent and Sub and
the managers of FCC have approved and adopted this Agreement, the Operative
Documents and the transactions contemplated hereby upon the terms and subject to
the conditions set forth herein;
WHEREAS, for U.S. federal income tax purposes, it is intended that (a) the
Merger shall qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations promulgated thereunder (the "Regulations"), (b) this Agreement
constitutes a plan of reorganization, and (c) Parent, Sub and the Company shall
each be a party to such reorganization within the meaning of Section 368(b) of
the Code; and
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants contained herein, the parties agree as
follows:
ARTICLE I
Definitions
Section 1.1 Defined Terms. As used in this Agreement, the following terms
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shall have the following meanings:
(a) "Adjusted Average Closing Price" shall have the meaning set
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forth in Section 2.5(a).
AGREEMENT AND PLAN OF MERGER - Page 1
(b) "Affiliate" means, with respect to any Person, any other Person
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directly or indirectly controlling, controlled by or under common control with
such Person. For purposes of the immediately preceding sentence, term "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
ownership of voting securities, by contract or otherwise.
(c) "Agreement" means this Agreement, including all schedules and
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exhibits hereto, and, if amended, modified or supplemented, as the same may be
so amended, modified or supplemented from time to time.
(d) "Applicable Law" shall have the meaning set forth in Section 2.1
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(b).
(e) "Articles of Merger" shall have the meaning set forth in Section
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2.2.
(f) "Assets" shall have the meaning set forth in Section 2.6.
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(g) "Asset Sale" shall have the meaning set forth in Preamble to the
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Agreement.
(h) "Average Closing Price" shall have the meaning set forth in
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Section 2.5(a).
(i) "Business" shall have the meaning set forth in the Preamble to
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this Agreement.
(j) "Cash Compensation" shall have the meaning set forth in Section
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4.15(a).
(k) "Cash Consideration" shall have the meaning set forth in Section
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2.4.
(l) "Change in Control" shall have the meaning set forth in Section
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8.4.
(m) "Closing" shall have the meaning set forth in Section 2.9.
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(n) "Closing Date" shall have the meaning set forth in Section 2.9.
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(o) "Code" means the Internal Revenue Code of 1986, as amended.
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(p) "Company" means FCC prior to and upon conversion into a Texas
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corporation.
(q) "Company's Balance Sheets" shall have the meaning set forth in
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Section 4.19(a).
(r) "Company's Financial Statements" shall have the meaning set forth
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in Section 4.19(a).
AGREEMENT AND PLAN OF MERGER - Page 2
(s) "Company's Knowledge" means the actual knowledge of Xxxxx X.
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Borschow.
(t) "Company's Leases" shall have the meaning set forth in Section
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4.18(a).
(u) "Company's Material Contracts" shall have the meaning set forth
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in Section 4.9.
(v) "Company's Plans" shall have the meaning set forth in Section
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4.17(b).
(w) "Company Shares" shall mean all the issued and outstanding
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capital stock of the Company on the Closing Date.
(x) "Competing Transaction" shall have the meaning set forth in
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Section 5.2(c)(ii)
(y) "Contracts" shall have the meaning set forth in Section 4.9.
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(z) "Conversion" shall have the meaning set forth in Section 4.1.
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(aa) "Current Liabilities" shall have the meaning set forth in Section
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2.7.
(bb) "Debt" means (i) any amount or other obligation payable by the
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Company in respect to indebtedness for borrowed money or interest-bearing
liabilities of the Company, including without limitation, the aggregate
principal amount of and accrued but unpaid interest on any outstanding
borrowings under any document or instrument evidencing interest-bearing,
short-term or long-term liabilities or indebtedness of the Company or any other
indebtedness of the Company (including capitalized leases), (ii) deferred
compensation obligations of the Company, (iii) accrued but unfunded
post-retirement benefits of the Company, and (iv) any other long-term
liabilities of any kind or nature of the Company required to be set forth on the
Company's Balance Sheets in accordance with GAAP.
(cc) "DGCL" means the General Corporation Law of the State of
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Delaware, as it may be amended from time to time, and any successor to such act.
(dd) "Dispute" shall have the meaning set forth in Section 9.1.
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(ee) "Effective Time" shall have the meaning set forth in Section 2.3.
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(ff) "Employment Agreements" shall have the meaning set forth in
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Section 4.15(b).
(gg) "Encumbrance" means all liens, charges, security interests and
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similar rights of third parties with respect to property.
(hh) "Environmental Law" means all applicable federal, state or local
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laws, rules, regulations or principles of common law relating to protection of
health and safety, pollution, and environmental matters of any kind whatsoever,
including with respect to the
AGREEMENT AND PLAN OF MERGER - Page 3
storage, treatment, generation, transportation, spillage, discharge, leakage or
other release or threatened release of any material, substance or waste of any
kind whatsoever.
(ii) "Environmental Permit" any permits, licenses, notifications,
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consents or approvals required under any Environmental Law.
(jj) "ERISA" shall have the meaning set forth in Section 4.17.
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(kk) "Escrow Agent" shall have the meaning set forth in Section 8.4.
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(ll) "Escrow Agreement" shall have the meaning set forth in Section
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8.4.
(mm) "Escrowed Shares" shall have the meaning set forth in Section
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8.4.
(nn) "Exchange Act" means the Securities Exchange Act of 1934, as
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amended.
(oo) "Executives" shall have the meaning set forth in Section 9.1(a).
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(pp) "FCC" means First Consumer Credit, LLC, a Texas limited liability
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company.
(qq) "FSB" means First Savings Bank.
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(rr) "GAAP" shall have the meaning set forth in Section 4.19(a).
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(ss) "Governmental Entity" means any federal, state, local, foreign or
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multinational court, arbitral tribunal, administrative agency or commission or
other governmental or regulatory authority or administrative agency or
commission.
(tt) "Governmental Permit" means any franchise, consent, license,
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marketing right, permit, authorization, approval or other operating authority
issued by any governmental or regulatory body.
(uu) "HOEPA" means Home Owners Equity Protection Act.
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(vv) "Indemnifiable Claim" shall have the meaning set forth in Section
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8.2(a)(ii).
(ww) "Indemnitee" shall have the meaning set forth in Section 8.2.
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(xx) "Indemnifying Party" shall have the meaning set forth in Section
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8.3(a).
(yy) "Intellectual Property" means inventions, patents, trademarks,
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service marks, trade names, copyrights, trade secrets, technology and know-how,
software and other intellectual property rights.
(zz) "IRS" means the Internal Revenue Service.
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AGREEMENT AND PLAN OF MERGER - Page 4
(aaa) "Laws" means all foreign, federal, state and local statutes,
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laws, ordinances, regulations, rules, resolutions, orders, determination, writs,
injunctions, awards (including, without limitation, awards of any arbitrator),
judgments and decrees applicable to the specified persons or entities and to the
businesses and assets thereof (including, without limitation, Laws relating to
securities registration and regulation; the sale, leasing, ownership or
management of real property; employment practices, terms and conditions, and
wages and hours; building standards, land use and zoning; safety, health and
fire prevention; and environmental protection).
(bbb) "Leases" shall have the meaning set forth in Section 2.7.
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(ccc) "Licenses" means all licenses, permits, authorizations,
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consents, certificates, registrations, variances, exemptions, waivers,
franchises and other approvals from any Governmental Entity, including, without
limitation, environmental Licenses.
(ddd) "Loss" or "Losses" means any and all out-of-pocket damages,
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costs, liabilities, losses, judgments, penalties, fines, expenses or other
costs, including reasonable attorney's fees, incurred by any party.
(eee) "Material Adverse Effect" means a material adverse effect on
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either (i) the assets, operations or financial condition of the Company, Parent
or Sub, as applicable, or (ii) the Company's, Parent's or Sub's ability to
consummate the transactions contemplated hereby; provided, however, for purposes
of the parties' representations and warranties in this Agreement, "Material
Adverse Effect" shall be deemed to include any event or circumstance which could
reasonably be expected to result in a liability to the Company, Parent or Sub in
excess of $50,000, individually or in the aggregate.
(fff) "Mediation" shall have the meaning set forth in Section 9.1(b).
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(ggg) "Mediator" shall have the meaning set forth in Section 9.1(b).
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(hhh) "Members" means all the equity owners of FCC listed as
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signatories herein.
(iii) "Merger" shall have the meaning set forth in the Preamble to
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this Agreement.
(jjj) "Merger Consideration" shall have the meaning set forth in
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Section 2.4.
(kkk) "Negotiation" shall have the meaning set forth in Section
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9.1(a).
(lll) Left Blank Intentionally.
(mmm) "Operative Documents" shall have the meaning set forth in
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Section 2.9.
(nnn) "Parent's and Sub's Knowledge" means the actual knowledge of
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Xxxxxx X. Xxxxx.
AGREEMENT AND PLAN OF MERGER - Page 5
(ooo) "Parent" means U.S. Home Systems, Inc., a Texas corporation.
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(ppp) "Parent's Common Stock" means Parent's common stock, $0.001 par
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value.
(qqq) "Parent's and Sub's Liability Limit" shall have the meaning set
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forth in Section 8.2(b)(iv).
(rrr) "Parent's and Sub's Fairness Opinion" shall have the meaning
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set forth in Section 5.1(c).
(sss) "Parent's Shares" shall have the meaning set forth in Section
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2.4.
(ttt) "Person" means any individual, partnership, corporation,
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limited liability company, association, joint stock company, trust, joint
venture, unincorporated organization or other entity (including a Governmental
Entity).
(uuu) "Regulations" shall have the meaning set forth in the Preamble
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to this Agreement.
(vvv) "Representatives" shall have the meaning set forth in Section
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5.3(c)(i).
(www) "SEC" means the Securities and Exchange Commission.
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(xxx) "Securities Act" means the Securities Act of 1933, as amended.
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(yyy) "Shareholders" shall have the meaning set forth in the Preamble
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to the Agreement.
(zzz) "Shareholders' Liability Limit" shall have the meaning set
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forth in Section 8.2(a)(iv).
(aaaa) "Shareholder Percentage" shall mean the percentage set forth by
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each Shareholder's name in Section 2.4
(bbbb) "Signing Date" shall have the meaning set forth in the Preamble
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to the Agreement.
(cccc) "Standstill Period" shall have the meaning set forth in Section
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5.3(c).
(dddd) "Stock Consideration" shall have the meaning set forth in
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Section 2.4.
(eeee) "Sub" means Home Credit Acquisition, Inc., a Texas corporation.
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(ffff) "Sub's Common Stock" means Sub's common stock, $0.01 par value.
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(gggg) "Subsidiary" means with respect to any Person (i) any
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corporation at least a majority of whose outstanding voting stock is owned,
directly or indirectly, by such Person or by one or more of its Subsidiaries, or
by such Person and one or more of its Subsidiaries, (ii) any
AGREEMENT AND PLAN OF MERGER - PAGE 6
general partnership, joint venture or similar entity, at least a majority
of whose outstanding partnership or similar interests shall at the time be owned
by such Person, or by one or more of its Subsidiaries, or by such Person and one
or more of its Subsidiaries and (iii) any limited partnership of which such
Person or any of its Subsidiaries is a general partner. For purposes of this
definition, "voting stock" means shares, interests, participations or other
equivalents in the equity interest (however designated) in such Person having
ordinary voting power for the election of a majority of the directors (or the
equivalent) of such Person other than shares, interests, participations or other
equivalents having such power only by reason of the occurrence of a contingency.
(hhhh) "Surviving Company" shall have the meaning set forth in the
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Preamble to the Agreement.
(iiii) "Tax" means any federal, state, local or foreign income, gross
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receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, capital gains, environmental (pursuant to Section 59A
of the Code or otherwise), custom duties, capital stock, franchise, employee's
income withholding, foreign withholding, social security (or its equivalent),
unemployment, disability, real property, personal property, sales, use,
transfer, value added, registration, alternative or add-on minimum, estimated or
other tax, including any interest, penalties or additions to tax in respect of
the foregoing, whether disputed or not, and any obligation to indemnify, assume
or succeed to the liability of any other person in respect of the foregoing.
(jjjj) "Tax Liability" shall mean any liability (whether known or
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unknown, whether absolute or contingent, whether liquidated or unliquidated, and
whether due or to become due) with respect to Taxes.
(kkkk) "Tax Returns" means any return, declaration, report, claim for
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refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
(llll) "TBCA" means the Texas Business Company Act, as it may be
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amended from time to time, and any successor to such act.
(mmmm) "Third-Party Claim" shall have the meaning set forth in Section
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8.3.
ARTICLE II
The Merger
Section 2.1 The Merger. Upon the terms and subject to the conditions of
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this Agreement and the Articles of Merger, Sub shall be merged with and into the
Company in accordance with the applicable provisions of laws of the State of
Texas, the terms and conditions of this Agreement, and the Articles of Merger so
that:
(a) At the Effective Time, Sub shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of Sub
shall cease and the Company shall continue as the Surviving Company and a
wholly-owned Subsidiary of Parent in accordance with the laws of the State of
Texas.
AGREEMENT AND PLAN OF MERGER - Page 7
(b) The Articles of Incorporation of the Company in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
of the Surviving Company after the Effective Time unless and until further
amended in accordance with all applicable laws, ordinances, regulations,
judgments, decrees or orders ("Applicable Law").
(c) The Bylaws of the Company in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Company after the Effective
Time unless and until further amended in accordance with Applicable Law.
(d) The directors and officers of the Company immediately prior to
the Effective Time, as designated on Schedule 2.1(d), shall be the directors and
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officers of the Surviving Company after the Effective Time. Such directors and
officers shall serve in accordance with the Bylaws of the Surviving Company and
shall hold their positions until the next annual meeting of the stockholders of
the Surviving Company and until the election and qualification of their
respective successors or until their tenures are otherwise terminated in
accordance with the Bylaws of the Surviving Company.
Section 2.2 Filing. On the Closing Date, the Company, Parent and Sub will
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cause the Articles of Merger in the form of Exhibit A hereto (the "Articles of
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Merger") to be executed and filed with the Secretary of State of the State of
Texas pursuant to the applicable provisions of the TBCA.
Section 2.3 Effectiveness of the Merger. The Merger shall become effective
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immediately upon the filing and acceptance of the Articles of Merger with the
Secretary of State of the State of Texas (the "Effective Time").
Section 2.4 Merger Consideration. The consideration for the Merger (the
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"Merger Consideration") shall consist of $4,400,000 to be paid by Parent to the
Shareholders at Closing as follows: (i) $1,000,000 in lawful currency of the
United States by wire transfer in immediately available funds ("Cash
Consideration"), and (ii) $3,400,000 in the appropriate number of restricted
shares of Parent's Common Stock (the "Parent's Shares") as determined by Section
2.5 (the "Stock Consideration"). At Closing, the Merger Consideration shall be
divided among and delivered to the Shareholders in the percentage amount as set
forth next to their respective names: FSB - 47.06%; Xxxxx X. Xxxxxxxx - 47.06%;
and Xxxxxxx X. Xxxxxxxx - 5.88%. At Closing, certificates for the Company Shares
shall be delivered to Parent duly endorsed to Parent.
Section 2.5 Calculation Formula; Termination.
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(a) Calculation Formula. The number of Parent's Shares to be issued
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to the Shareholders at Closing shall be determined based upon the average
closing price per share of Parent's Common Stock as quoted on the Nasdaq Small
Cap Market System for the ten (10) trading days prior to the Closing Date (the
"Average Closing Price"). If the Average Closing Price is between $3.50 and
$4.50 per share, the number of Parent's Shares to be issued to the Shareholders
shall be computed using the actual Average Closing Price. If the Average Closing
Price is less than $3.50 per share, the number of Parent's Shares to be issued
to the Shareholders shall be computed using a price per share of $3.50, or if
the Average Closing Price per share is
AGREEMENT AND PLAN OF MERGER - Page 8
greater than $4.50, the number of Parent's Shares to be issued to the
Shareholders shall be computed using a price per share of $4.50 ("Adjusted
Average Closing Price"). The number of Parent's Shares to be issued to the
Shareholders at Closing shall be the quotient of dividing $3,400,000 by the
Average Closing Price or Adjusted Average Closing Price, as applicable. No
fractional shares shall be issued.
(b) Termination. If the Average Closing Price is less than $3.25
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per share or greater than $4.75 per share, this Agreement may be terminated by
either party without liability.
(c) Escrowed Shares. The Escrowed Shares, which shall represent 20%
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of Stock Consideration issued to the Shareholders, shall be delivered to the
Escrow Agent at Closing pursuant to the Escrow Agreement.
(d) Restricted Securities. Parent's Shares issued as part of the
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Merger Consideration shall be "restricted securities" as defined in Rule 144
under the Securities Act and shall bear a legend to such effect. Each share of
Sub's Common Stock, issued and outstanding immediately prior to the Effective
Time shall be converted, by virtue of the Merger and without any action on the
part of the holder thereof, into one share of common stock, par value $.01 per
share, of the Surviving Company. The parties expressly acknowledge and agree
that FSB will dividend the Stock Consideration that it receives pursuant to the
Merger to its parent company, SWS, Inc. ("SWS") and that nothing in this
Agreement or the Operative Documents shall prohibit such dividend.
Section 2.6 Asset Sale and Distribution. The parties acknowledge that prior
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to Closing FCC may purchase retail installment contracts and will sell such
contracts to third party purchasers in accordance with its operating procedures
until the day before Closing. On the day before Closing and prior to the
Conversion, Sub shall purchase from FCC not less than $1.2 million of retail
installment contracts which have been funded out of FCC's operating cash, free
and clear of any liens (the "Assets"). The purchase price that the Sub shall pay
to the Company for such Assets shall be equal to the retail installment
contracts receivable balance plus accrued interest, and shall be payable by wire
transfer in immediately available funds at the time of such sale. Any premium
from such subsequent sale or broker transaction shall run to Sub. The Asset Sale
shall be a separate portfolio transaction between FCC and Sub. FCC and Sub shall
execute documents similar to those used by FCC in sales of retail installment
contracts to third party purchasers, and such sale shall take place prior to
Conversion at a time and place mutually to be determined between FCC and Sub.
Following such sale of Assets and prior to the Conversion, the parties
acknowledge that FCC will, without restriction, distribute all of FCC's
operating cash to its Members, excluding cash subject to reserve or holdback
provisions relating to the Company's agreement with Bank One N.A., and that
nothing in this Agreement or the Operative Documents shall prohibit such
distribution.
Section 2.7 Current Liabilities. On the Closing Date, the Company has
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represented that the Current Liabilities shall not, singularly or in the
aggregate, exceed $130,000. "Current Liabilities" for purposes of this Agreement
shall include Company's liability for any borrowed money and any other current
liabilities of the Company which existed, occurred or were accrued
AGREEMENT AND PLAN OF MERGER - Page 9
on or prior to the Closing Date as a result of the operation of the Business,
including Company's payment obligations under all of its operating, capital and
equipment leases ("Leases").
Section 2.8 Effects of Merger. The Merger shall have the effects set forth
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in the TBCA. Without limiting the foregoing, on and after the Effective Time,
the Surviving Company shall possess all the assets and interests of every
description, wherever located, and all rights, privileges, immunities, powers,
franchises and authority, of a public as well as of a private nature, of each of
the Company and Sub, all of which shall be vested in the Surviving Company
without further act or deed, and on and after the Effective Time, all
liabilities and obligations of the Sub and the Company, including, but not
limited to, the Company's obligations under loan and servicing agreements with
Bank One N.A. and Old Republic, shall be allocated to the Surviving Company. The
parties acknowledge that the Shareholders have an obligation to provide
indemnification to Parent and Surviving Company pursuant to Article VIII of this
Agreement.
Section 2.9 Closing. Closing of the Merger (the "Closing") shall occur on
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or before October 2, 2001, or such other date as mutually agreed to by the
parties (the "Closing Date"), and shall take place either at the offices of
Xxxxxxx Xxxxxx, L.L.P., 000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000 or
through the exchange, via facsimile to be followed by hard copies via national
overnight courier (e.g. FedEx), of executed originals of this Agreement and all
other agreements, documents and instruments to be executed in connection
herewith (the "Operative Documents"), or at such other place or by such other
method as may be mutually agreed upon by the parties.
ARTICLE III
Representations and Warranties of Parent and Sub
Parent and Sub, jointly and severally, represent and warrant to the Company
and the Shareholders that the following are true and correct as of the Signing
Date and shall be true and correct at Closing as if made on the Closing Date:
Section 3.1 Validity and Capitalization. Parent is a corporation duly
---------------------------
organized, properly capitalized, validly existing and in good standing under the
laws of the State of Delaware and has the corporate power and authority to carry
on its business as it is now being conducted. Sub is a corporation duly
organized, properly capitalized, validly existing and in good standing under the
laws of the State of Texas and has the corporate power and authority to carry on
its business as it is now being conducted. Parent and Sub have the full
corporate power and authority to own, operate and lease their assets, to carry
on their businesses as currently conducted, to execute and deliver this
Agreement and the Operative Documents, and to carry out the transactions
contemplated hereby. Parent and Sub are duly qualified and licensed to conduct
business as foreign corporations and are in good standing in each jurisdiction
where the conduct of their respective businesses makes such qualification
necessary, except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect on Parent or Sub.
Section 3.2 Formation of Sub. Sub was formed solely for the purpose of
----------------
engaging in the transactions contemplated by this Agreement and the Operative
Documents. As of the date hereof and the Effective Time, except for obligations
or liabilities incurred in connection with its
AGREEMENT AND PLAN OF MERGER - Page 10
incorporation or organization and except for this Agreement and the Operative
Documents or in furtherance of the transactions contemplated hereby, including
the Asset Sale contemplated by Section 2.6 herein, Sub has not and will not have
incurred, directly or indirectly, through any Subsidiary or Affiliate, any
obligations or liabilities or engaged in any business activities of any type or
kind whatsoever or entered into any agreements or arrangements with any Person.
Section 3.3 Corporate Authorization. The execution, delivery and
-----------------------
performance by Parent and Sub of this Agreement is within the corporate powers
of Parent and Sub and have been duly authorized by all necessary corporate
action on the part of Parent and Sub. This Agreement and the Operative Documents
constitute a valid and binding obligation of Parent and Sub, enforceable against
Parent and Sub in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance and
transfers, and moratorium or similar laws of general application affecting the
enforcement of creditors' rights generally or the availability of equitable
remedies.
Section 3.4 Compliance with Applicable Law. To Parent's and Sub's
------------------------------
knowledge, (i) Parent and Sub have complied with and are in compliance with all
laws, statutes, governmental regulations and all judicial or administrative
tribunal orders, judgments, writs, injunctions, decrees or similar commands
applicable to Parent or Sub and (ii) Parent and Sub have not been charged with,
or been under investigation with respect to, any violation of any provision of
any federal, state or local law or administrative regulation, except in each of
the foregoing cases, where such failure to comply or such charge or
investigation has not caused, and would not reasonably be expected to cause, a
Material Adverse Effect on or to Parent or Sub or the ability of Parent or Sub
to consummate the transactions contemplated by this Agreement and the Operative
Documents.
Section 3.5 Litigation, Actions and Proceedings.
-----------------------------------
(a) There is no action, proceeding or investigation pending or, to
Parent's or Sub's knowledge, threatened before any court, governmental or
regulatory body, agency, commission, official or arbitrator which (a) questions
or calls into question the validity of this Agreement and the Operative
Documents, (b) if decided adversely to Parent or Sub, would materially impair
the ability of Parent or Sub to assume its rights and perform its obligations
under this Agreement and the Operative Documents, or (c) calls into question
Parent's or Sub's state or federal regulatory authority to consummate the
transactions contemplated hereby.
(b) To the knowledge of Parent or Sub, there are no outstanding
orders, judgments, injunctions, awards or decrees of any Governmental Entity
against Parent or Sub, any of their properties, assets or businesses, or, to the
knowledge of Parent or Sub, any of Parent's or Sub's current or former officers
or any other Person whom Parent or Sub have agreed to indemnify that would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. To Parent's or Sub's knowledge, there are no facts or
circumstances specific to Parent or Sub which, if known to a third party, would
reasonably be expected to result in such a suit or proceeding, which could be
expected to have a Material Adverse Effect.
Section 3.6 Non-Contravention. The execution and delivery of this Agreement
-----------------
and the Operative Documents do not, and the consummation of the transactions
contemplated hereby
AGREEMENT AND PLAN OF MERGER - Page 11
and compliance with the provisions hereof shall not, (i) result in any violation
of, or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to the Loss of a material benefit under any loan, guarantee of indebtedness
or credit agreement, note, bond, mortgage, indenture, lease, agreement,
contract, instrument, permit, concession, franchise, right or license applicable
to Parent or Sub, or result in the creation of any Encumbrance upon any of the
properties or assets of Parent or Sub, (ii) conflict or result in any violation
of any provision of the Articles of Incorporation or Bylaws or other equivalent
organizational document, in each case as amended, of Parent or Sub, (iii)
subject to the governmental filings referenced above, conflict with or violate
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Sub or any of its properties or assets, other than, in
the case of clauses (i) and (iii), any such violations, conflicts, defaults,
rights, Losses or Encumbrances that, individually or in the aggregate, would not
have a Material Adverse Effect.
Section 3.7 Issuance of Stock. The authorized capital stock of Parent
-----------------
consists of 30,000,000 shares of common stock, par value $0.001 per share and
1,000,000 shares of preferred stock, $0.001 par value. As of the date hereof,
4,926,386 shares of Parent's Common Stock are issued and outstanding and no
shares of preferred stock are outstanding. All of such issued shares are validly
issued, fully paid and nonassessable. Except as set forth on Schedule 3.7,
------------
Parent does not have outstanding, and is not bound by, any subscriptions,
options, warrants, calls, commitments or agreements to issue any additional
shares of its capital stock, including any right of conversion or exchange under
any outstanding security or other instrument, and Parent is not obligated to
issue any shares of its capital stock for any purpose. There are no unsatisfied
preemptive rights in respect to the capital stock of Parent. Parent has no
obligation to repurchase any of its securities, and there are no agreements
restricting the transfer of or otherwise relating to shares of its capital stock
of any class, except for the prospectus dated July 6, 2001 relating to the
offering of up to 4,070,633 shares of the Parent's Common Stock by certain
selling stockholders of the Parent and the escrow agreement between the Parent
and certain stockholders of the Parent dated February 13, 2001.
The Parent's Shares, when issued and delivered to the Shareholders of the
Company as a result of the Merger and pursuant to the terms of this Agreement,
will be duly and validly authorized and issued, fully paid, nonassessable and
free of preemptive rights or other restrictions other than those imposed
pursuant to securities laws and those expressly provided for in this Agreement.
The issuance of the Parent's Shares at Closing pursuant to the Agreement is a
transaction exempt from the registration requirements of the Securities Act.
Section 3.8 SEC Documents and Filing Requirements. Parent has filed on a
-------------------------------------
timely basis all documents and reports required to be filed prior to the Signing
and Closing Dates with the SEC since January 1, 2001 (the "SEC Documents").
Complete and correct copies of the SEC Documents have been made available to the
Company and Shareholders. The SEC Documents (i) at the time filed, complied in
all material respects with the applicable requirements of the Securities Act and
the Exchange Act, as the case may be, and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such SEC
Documents, in light of the circumstances under which they were made, not
misleading.
AGREEMENT AND PLAN OF MERGER - Page 12
Each of the Parent Financial Statements (including, in each case, any
related notes) contained in the SEC Documents, including any SEC Documents filed
after the date of this Agreement until the Effective Time, complied or will
comply as to form in all material respects with the applicable published rules
and regulations of the SEC with respect thereto, was or will be prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC),
and fairly presented or will fairly present the consolidated financial position
of Parent and its Affiliates at the respective dates and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring adjustments which were not or are not expected to be material in
amount or effect.
Section 3.9 NASDAQ SmallCap Market Requirements. Parent's Common Stock is
-----------------------------------
duly listed on the NASDAQ SmallCap Market System and to the knowledge of Parent
no inquiry or proceeding has been initiated or threatened for the purpose of
causing such listing to be terminated or restricted.
ARTICLE IV
Representations and Warranties of Company
Prior to Closing, FCC shall have converted into the Company and all of
FCC's representations and warranties shall merge at Closing into the Company's
representations and warranties. FCC and the Company, as the
successor-in-interest of FCC (FCC together with the Company is collectively
referred to herein as the "Company") represent and warrant to Parent and Sub
that the following are true and correct as of the Signing Date and shall be true
and correct at Closing as if made on the Closing Date:
Section 4.1 Validity and Capitalization. FCC is a limited liability
---------------------------
company, duly organized, properly capitalized, validly existing and in good
standing under the laws of the State of Texas. Except as set forth in Schedule
--------
4.1, FCC has all requisite power and authority, and is duly qualified and
---
licensed, to own and operate its assets and carry on the Business as now being
conducted and to enter into and perform this Agreement and the Operative
Documents, and to carry out the transactions contemplated hereby. FCC is in good
standing in each state where the conduct of the Business requires it to be so
qualified. The Company's conversion from a Texas limited liability company to a
Texas corporation (the "Conversion") shall comply with the TBCA and all
applicable federal and state statutes. Prior to Closing and upon the Conversion,
the Company shall be a corporation duly organized, properly capitalized, validly
existing and in good standing under the laws of the State of Texas. The Company
shall have all requisite corporate power and authority, and shall be duly
qualified and licensed, to carry on the Business as it is now being conducted
and to enter into and perform this Agreement and the Operative Documents. On the
Closing Date, the Company Shares shall be validly issued, fully paid and
nonassessable. The Company does not have outstanding, and is not bound by, any
subscriptions, options, warrants, calls, commitments or agreements to issue any
additional shares of its capital stock. There are no unsatisfied preemptive
rights in respect to the capital stock of the Company. The Company has no
obligation to repurchase any of its securities, and there are no agreements
restricting the transfer of the Company Shares. The Company shall be qualified
as a foreign corporation in good standing in each jurisdiction where the conduct
of the Business makes such
AGREEMENT AND PLAN OF MERGER - Page 13
qualification necessary, except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect.
Section 4.2 Corporate Records. Complete and correct copies of FCC's
-----------------
Articles of Organization and Regulations, each as amended to date, have been
made available to Parent and Sub and are in full force and effect. To the
Company's knowledge, FCC is not in violation of any provision of its
organizational documents. To the Company's knowledge, the minute books of FCC,
copies of which have been made available to Parent and Sub, contain accurate
minutes of all meetings of, and accurate consents to all actions taken without
meetings by Members (and any committees thereof) of FCC since the formation of
FCC. Prior to Closing and upon Conversion, the Company shall provide Parent and
Sub with complete and correct copies of its Articles of Incorporation and Bylaws
or equivalent organizational documents, each as amended to date and will be in
full force and effect. The Company shall not be in violation of any provision of
its organizational documents. The minute books of the Company shall be made
available to Parent and shall contain accurate minutes of all meetings of, and
accurate consents to all actions taken without meetings by the Shareholders and
the board of directors (and any committees thereof) since the formation of the
Company.
Section 4.3 Corporate Authorization. The execution, delivery and
-----------------------
performance by FCC of this Agreement and the Operative Documents, and the
consummation of the transactions contemplated hereby, have been duly authorized
by FCC and its Members and, prior to Closing and upon Conversion, shall be duly
authorized by the Company and the Shareholders. This Agreement and the Operative
Documents have been duly executed and delivered by FCC and constitute legal,
valid and binding obligations of FCC and the Company, enforceable against FCC
and the Company in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance and transfers, and moratorium or similar laws of general application
affecting the enforcement of creditors' rights generally or the availability of
equitable remedies.
Section 4.4 Compliance with Applicable Law.
------------------------------
(a) To the Company's knowledge, the Company has complied with and
is in compliance with (i) all laws, statutes, governmental regulations and all
judicial or administrative tribunal orders, judgments, writs, injunctions,
decrees or similar commands applicable to the Company and the Business,
(including without limitation, the Truth-In-Lending Act, Real Estate Settlement
Procedures Act and HOEPA, and (ii) all unwaived terms and provisions of all
Contracts, and agreements to which FCC or the Company is a party, or by which
FCC or the Company is subject; and
(b) The Company has not been charged with, or to the Company's
knowledge, been under investigation with respect to, any violation of any
provision of any federal, state or local law or administrative regulation in
respect of the Company and the Business, except in each of the foregoing cases,
where such failure to comply or such charge or investigation has not caused, and
would not reasonably be expected to cause, a Material Adverse Effect on or to
the Company and the Business or the ability of the Company or the Shareholders
to consummate the transactions contemplated by this Agreement.
AGREEMENT AND PLAN OF MERGER - Page 14
Section 4.5 Required Licenses and Permits. Except as set forth in Schedule
----------------------------- --------
4.5, the Company has all Licenses and Governmental Permits as are necessary for
---
the operation of the Business in a manner consistent with good business practice
and in compliance with all laws applicable to such operation, except for
Licenses or Governmental Permits the absence of which would not have,
individually or in the aggregate, a Material Adverse Effect. All such Licenses
and Governmental Permits are identified on Schedule 4.5 and are validly held by
------------
the Company and are in full force and effect. To the knowledge of the Company,
no action or proceeding is pending or threatened with respect to the such
Licenses and Governmental Permits that would reasonably be expected to have a
Material Adverse Effect. No such Licenses or Governmental Permits are subject to
suspension, modification, revocation or non-renewal as a result of the
execution, delivery and performance of this Agreement, the Operative Documents
or the consummation of the transactions contemplated hereby, except that where
such failure to hold such Licenses and Governmental Permits would not have,
individually or in the aggregate, a Material Adverse Effect. To the Company's
knowledge, the Company is in compliance with all Licenses and Governmental
Permits identified on Schedule 4.5.
------------
Section 4.6 Governmental Notices. The Company has not received notice from
--------------------
any federal, state or other governmental agency or regulatory body indicating
that such agency or regulatory body would oppose or not grant or issue its
consent or approval, if required with respect to the transactions contemplated
by this Agreement and the Operative Documents.
Section 4.7 Non-Contravention. Except as set forth in Schedule 4.7, the
----------------- ------------
execution and delivery of this Agreement and the Operative Documents do not, and
the consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, (i) result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the Loss of a
material benefit under any loan, guarantee of indebtedness or credit agreement,
note, bond, mortgage, indenture, lease, agreement, contract, instrument, permit,
concession, franchise, right or license applicable to the Company, or result in
the creation of any Encumbrance upon any of the properties or assets of the
Company, (ii) conflict or result in any violation of any provision of the
Articles of Incorporation or Bylaws or other equivalent organizational document,
in each case as amended, of the Company, (iii) subject to the governmental
filings referenced above, conflict with or violate any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any of
its properties or assets, other than, in the case of clauses (i) and (iii), any
such violations, conflicts, defaults, rights, Losses or Encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect.
Section 4.8 Government Approvals; Required Consents.
---------------------------------------
(a) No filing or registration with, or authorization, consent or
approval of, any Governmental Entity is required by or with respect to the
Company or its Members in connection with the execution and delivery of this
Agreement by the Company and its Members or is necessary for the consummation of
the transactions contemplated hereby (including, without limitation, the Merger)
except for: (i) the filing of the Articles of Merger with the Secretary of State
of the State of Texas, (ii) required filings by the Shareholders with the SEC as
a result of the Merger; (iii) such consents, approvals, authorizations, permits,
filings and notifications listed on Schedule 4.8(a) and (iv) such other
---------------
consents, orders, authorizations, registrations, declarations
AGREEMENT AND PLAN OF MERGER - Page 15
and filings the failure of which to obtain or make would not, individually or in
the aggregate, have a Material Adverse Effect.
(b) Except as set forth on Schedule 4.8(b), no affirmative consent
---------------
or affirmative approval is required by virtue of the execution of this Agreement
and the Operative Documents or the consummation of any of the transactions
contemplated hereby to avoid the violation or breach of, or the default under,
or the creation of a lien on any of the assets pursuant to the terms of, any
law, regulation, order, decree or award of any court or governmental agency or
any lease, agreement, contract, mortgage, note, license. or any other instrument
to which the Company is a party or to which it or any of its assets is subject.
Section 4.9 Material Contracts. Except as listed or described on Schedule
------------------ --------
4.9, as of the date hereof, the Company is not a party to or bound by any
---
written or oral leases, agreements or other contractual commitments
("Contracts") that are of a type described below (collectively, the "Company's
Material Contracts"):
(a) any collective bargaining arrangement with any labor union or
any employment contract;
(b) any Contract for capital expenditures or the acquisition or
construction of fixed assets in excess of $25,000;
(c) any Contract for the purchase or sale of inventory, materials,
supplies, merchandise, machinery, equipment, parts or other property or services
requiring aggregate future payments in excess of $25,000 (other than standard
inventory purchase orders executed in the ordinary course of business);
(d) any Contract relating to the borrowing of money, or the
guaranty of another person's borrowing of money;
(e) any Contract granting any person a lien on all or any part of
assets;
(f) any Contract granting to any person a first refusal, first
offer or similar preferential right to purchase or acquire any of its stock or
assets or to register any securities under federal or state securities laws;
(g) any Contract under which the Company is a lessee or sublessee
of any machinery, equipment, vehicle (including fleet equipment) or other
tangible personal property, or a lessor of any property, in either case having
an original value in excess of $10,000;
(h) any Contract limiting, restricting or prohibiting it from
conducting business anywhere in the United States or elsewhere in the world;
(i) any joint venture or partnership Contract or any Contract with
any officer, director, stockholder or other Affiliate of the Company; and
(j) any Contract requiring future payments of $10,000 or more that
requires the consent of the other party thereto in connection with the
transactions contemplated hereby.
AGREEMENT AND PLAN OF MERGER - Page 16
The Company has made available to Parent a true and complete copy of
each written Company Material Contract, including all amendments or other
modifications thereto. Except as set forth on Schedule 4.9, to the Company's
------------
knowledge, each Company Material Contract is a valid and binding obligation of
the Company enforceable in accordance with its terms, subject only to
bankruptcy, reorganization, receivership and other laws affecting creditors'
rights generally. Except as set forth on Schedule 4.9, to the Company's
------------
knowledge, the Company have performed all obligations required to be performed
by it under the Company Material Contracts and the Company is not in breach or
default thereunder, except for breaches or defaults which will not, individually
or in the aggregate, have a Material Adverse Effect.
Section 4.10 Subsidiaries and Affiliates. The Company does not own,
---------------------------
directly or indirectly, any of the capital stock of any other corporation or any
equity, profit sharing, participation or other interest in any corporation,
partnership, joint venture or other entity.
Section 4.11 Actions and Proceedings.
-----------------------
(a) To the Company's knowledge, there is no action,
proceeding or investigation pending or threatened before any court, governmental
or regulatory body, agency, commission, official or arbitrator or against any of
the Company's current or former officers, Members, Shareholders or any other
Person whom the Company has agreed to indemnify which (a) questions or calls
into question the validity of this Agreement and the Operative Documents, (b) if
decided adversely to the Company, would materially impair the ability of the
Company to conduct the Business and assume its rights and perform its
obligations under this Agreement and the Operative Documents, or (c) calls into
question the Company's state or federal regulatory authority to consummate the
transactions contemplated hereby.
(b) To the Company's knowledge, there are no outstanding
orders, judgments, injunctions, awards or decrees of any Governmental Entity
against the Company, any of its properties, assets or businesses, or, to the
knowledge of the Company, any of the Company's current or former officers,
Members, Shareholders or any other Person whom the Company has agreed to
indemnify that would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect with respect to the Company. To the
Company's knowledge, there are no facts or circumstances specific to the Company
which, if known to a third party, would reasonably be expected to result in such
a suit or proceeding, which could be expected to have a Material Adverse Effect.
Section 4.12 Tax Matters.
-----------
(a) To the Company's knowledge, (i) there have been
properly completed and filed on a timely basis and in correct form all Tax
Returns required to be filed by the Company, and (ii) as of the time of filing,
the Tax Returns correctly reflected the facts regarding the income, business,
assets, operations, activities, status or other matters of the Company or any
other information required to be shown thereon. An extension of time within
which to file any Tax Return which has not been filed has not been requested or
granted.
(b) With respect to all amounts in respect of Taxes imposed
upon the Company, or for which the Company is or to the Company's knowledge,
could be liable,
AGREEMENT AND PLAN OF MERGER - Page 17
whether to taxing authorities (as, for example, under law) or to other persons
or entities (as, for example, under tax allocation agreements), with respect to
all taxable periods or portions of periods ending on or before the Closing Date
to the Company's knowledge, all applicable tax laws and agreements have been
fully complied with, and all amounts required to be paid by the Company of which
the Company is aware, to taxing authorities or others, on or before the Closing
Date have been paid or accrued on the Company's financial statements.
(c) No issues have been raised (and are currently pending) by
any taxing authority in connection with any of the Tax Returns filed by the
Company. No waivers of statutes of limitation with respect to such Tax Returns
have been given by or requested from the Company. Schedule 4.12(c) sets forth
----------------
those years for which examinations are presently being conducted and those years
for which required Tax Returns have not yet been filed. All deficiencies
asserted or assessments made as a result of any examinations have been fully
paid, or are fully reflected as a liability in the Company Financial Statements
provided to Parent or are being contested in good faith and an adequate reserve
therefor has been established and is fully reflected in such Company Financial
Statements.
(d) The Company is not a party to or bound by any tax
indemnity, tax sharing or tax allocation agreement.
(e) The Company has not agreed to make, and is not required
to make, any adjustment under section 481(a) of the Code by reason of a change
in accounting method or otherwise.
(f) The Company is not a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code.
(g) To the Company's knowledge, the unpaid Taxes of the
Company do not exceed (and at the Effective Time will not exceed) the reserve
for tax liability with respect to the Company (excluding any reserve for
deferred Taxes to the extent such reserve reflects timing differences between
book and tax income) set forth or included in the financial statements provided
to Parent as adjusted in accordance with the past practices of the Company for
items of income, gain, Loss, and expense arising and accruals and transactions
occurring after the balance sheet date provided to Parent.
(h) To the Company's knowledge, the transactions contemplated
herein will not result in restorations into income of amounts deferred under the
consolidated return regulations, such as those relating to intercompany
transactions, excess Loss accounts, and the like.
Section 4.13 Title to Properties; Encumbrances. The Company does not
---------------------------------
own any real estate. The Company has a valid leasehold interest in its material
properties and assets (personal, tangible and intangible), except for such
interest the failure of which to have would not have, individually or in the
aggregate, a Material Adverse Effect. The Company's assets are not subject to
any Encumbrances (whether absolute, accrued, contingent or otherwise), except
(i) as set forth on Schedule 4.13 or (ii) Encumbrances, if any, which do not
-------------
detract from the value of
AGREEMENT AND PLAN OF MERGER - Page 18
the Company's assets subject thereto in a manner material to the Company and do
not materially impair the business or operations of the Company taken as a
whole.
Section 4.14 Intellectual Property. To the Company's knowledge, the
---------------------
Company owns or has a valid license to use all Intellectual Property necessary
to carry on its business as currently conducted except where the failure to own
or have a valid license to use such would not have a Material Adverse Effect;
and the Company has not received any notice of infringement of or conflict with,
and, to the Company's knowledge, there are no infringements of or conflicts
with, the rights of others with respect to the use of any of the Intellectual
Property that, in either such case, has had or would reasonably be expected to
have a Material Adverse Effect. Notwithstanding the foregoing, the Company has
not taken any action to register any rights it may have with regard to any
Intellectual Property, nor has it conducted any investigation into whether the
Company's use of any Intellectual Property infringes on the rights of any
Person.
Section 4.15 Employee Matters.
----------------
(a) Schedule 4.15(a) contains a complete and accurate list of
----------------
the names, titles and annual cash compensation as of Signing Date and Closing
Date, including without limitation, wages, salaries, bonuses (discretionary and
formula) and other cash compensation (the "Cash Compensation") of all employees
of the Company. In addition, Schedule 4.15(a) contains a complete and accurate
----------------
description of any and all promised increases in Cash Compensation of employees
of the Company that have not yet been effected.
(b) Except as set forth on Schedule 4.17(m), the Company is
----------------
not a party to any employment agreement ("Employment Agreements") with respect
to any of its employees. Employment Agreements include, without limitation,
employee leasing agreements, employee services agreements and noncompetition
agreements.
(c) To the Company's knowledge, the Company has complied in
all material respects with, and there are no lawsuits, claims or other actions
against the Company for violating, any labor or employment related legal
requirements, including wages, hours, benefits, nondiscrimination, the payment
of employment related taxes or penalties and similar requirements under any
other statute.
Section 4.16 Environmental Matters. To the Company's knowledge, the
---------------------
Company is, and all operations or activities of the Company are, and at all
times have been, in compliance with and not subject to any liability or
obligation under any Environmental Law or Environmental Permit except where any
of the foregoing would not have a Material Adverse Effect. To the Company's
knowledge, there is no condition or circumstance regarding the Company or its
business which may give rise to a violation of, or liability or obligation
under, any Environmental Law or Environmental Permit which would have a Material
Adverse Effect. To the Company's knowledge, the Company, has not, nor has it
arranged to have, any material, substance or waste generated, released, treated,
stored or disposed of at, or transported to, any facility or property the
remediation or cleanup of which, or the response costs related thereto, could
become or result in a Material Adverse Effect. To the Company's knowledge, there
are no allegations, claims, demands, citations, notices of violation, or orders
of noncompliance made
AGREEMENT AND PLAN OF MERGER - Page 19
against, issued to or received by the Company relating or pursuant to any
Environmental Law or Environmental Permit except those which have been corrected
or complied with or which are not material to the Company, and to the knowledge
of the Company no such allegation, claim, demand, citation, notice of violation
or order of noncompliance is threatened, imminent or likely. No breach of any of
the foregoing representations and warranties in this Section 4.16 shall be
deemed to exist unless such breach would have a Material Adverse Effect.
Section 4.17 Labor Matters; Employee Benefit Plans; Employment,
--------------------------------------------------
Termination and Severance Agreements.
------------------------------------
(a) The Company is not a party to any collective bargaining
agreement or other contract with or commitment to any labor union or association
representing any employee of the Company, nor does any labor union or collective
bargaining agent represent any employee of the Company. No collective bargaining
agreement, contract or other commitment has been requested by, or is under
discussion by management of the Company with, any group of employees of the
Company, nor are there any representation proceedings or petitions seeking a
representation proceeding presently pending, or to the knowledge of the Company,
threatened to be brought or filed, against the Company with the National Labor
Relations Board or any labor relations tribunal, nor are there any other current
activities known to the Company to organize any employees of the Company into a
collective bargaining unit. During the past three (3) years, there has been no
labor strike, slowdown, lockout, work stoppage, arbitration, grievances, unfair
labor practice charges or complaints, or other work-related dispute involving
the Company, and no such dispute is now pending or, to the Company's knowledge,
there are no facts or circumstances which could form the basis of any of the
foregoing. To the Company's knowledge, the Company is in compliance in all
material respects with all Applicable Law, regulations and orders relating to
wages, hours, collective bargaining, employment, discrimination, civil rights,
safety and health, workers' compensation, pay equity and the collection and
payment of withholding, social security and similar Taxes. There are no
complaints, charges or claims against the Company pending or, to the knowledge
of the Company, threatened to be brought or filed with any public or
governmental authority, arbitrator or court based on, arising out of, or in
connection with or otherwise relating to the employment or services, or
termination of employment or services, by the Company of any individual,
including but not limited to Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), civil rights, Americans with Disabilities Act, Age
Discrimination in Employment Act (as amended by the Older Workers Benefit
Protection Act), Pregnancy Discrimination Act, Equal Pay Act, Fair Labor
Standards Act, Worker Adjustment and Retraining Notification Act, and Family and
Medical Leave Act and, to the knowledge of the Company, there are no facts and
circumstances which could form the basis for any of the foregoing.
(b) Schedule 4.17(b) sets forth a true, accurate and complete
----------------
list of each "employee benefit plan," as defined in Section 3(3) of ERISA, and
any other pension, retirement, savings, profit sharing, deferred compensation,
hospitalization, medical, vision, dental, disability, accident and life
insurance, bonus, stock award, stock option, stock purchase, phantom stock,
incentive and special compensation, employee loan, salary continuation,
severance, retention, change in control, vacation, sick leave, educational
assistance, leave of absence, and other plan and each other employee benefit
plan, program, contract, arrangement, agreement and understanding (whether
written or oral) to which the Company contributes or is
AGREEMENT AND PLAN OF MERGER - Page 20
required to contribute, or which the Company maintains or administers or which
is otherwise applicable to employees or categories of employees of the Company
(hereinafter referred to collectively as the "Company's Plans"). To the
Company's knowledge, the Company has maintained and operated the Company's Plans
in all material respects in accordance with their terms, the Code, ERISA and
other Applicable Law. In particular, to the Company's knowledge, no individual
who has performed services for the Company has been improperly excluded from
participation in any Company's Plan.
(c) Except as set forth on Schedule 4.17(c), none of the
----------------
Company's Plans is subject to Title IV of ERISA or Section 412 of the Code. To
the Company's knowledge, all Company's Plans of the Company and any related
trust agreements or annuity agreements (or any other funding document) comply
and have complied in all material respects with ERISA, the Code (including,
without limitation, the requirements for Tax qualification described in Section
401 thereof), and all other Laws. To the Company's knowledge, the trusts
established under such Company's Plans are exempt from federal income taxes
under Section 501(a) of the Code.
(d) To the Company's knowledge, each Company's Plan intended
to qualify under Section 401 of the Code, so qualify, and to the Company's
knowledge, nothing has occurred with respect to the administration of operation
of such Company's Plan which could cause the Loss of such qualification or the
imposition of any liability, penalty or Tax under ERISA or the Code. There are
no audits or proceedings initiated pursuant to the Employees Company's Plans
Compliance Resolution System or similar proceedings with the IRS or Department
of Labor with respect to any Company's Plan.
(e) True and complete copies of the following documents (if
applicable) with respect to each of the Company's Plans have been made available
to Parent: (i) the most recent document constituting the Company's Plan and all
amendments thereto, and any related trust documents; (ii) the most recent
summary plan description, and all related summaries of material modifications;
(iii) the most recent IRS determination letter and all IRS rulings, opinions or
technical advice relating to any Company's Plan; (iv) all contracts with service
providers or fiduciaries for providing services on behalf of any Company's Plan
(v) for the most recent plan year, all annual reports (Form 5500 series,
including schedules and attachments) on each Company's Plan that have been filed
with any governmental agency; (vi) a description of any nonwritten Company's
Plan; and (vii) all Department of Labor opinions on any Company's Plan and all
correspondence relating to the request for and receipt of each opinion.
(f) For each Company's Plan, the Company has furnished or
otherwise made available to the Company true and complete copies of each policy,
contract or other document setting forth or explaining the terms of the
Company's Plan.
(g) To the Company's knowledge, the Company has made all
contributions and other payments required by and due under the terms of each
Company's Plan and has taken no action (including, without limitation, actions
required by Law) relating to any Company's Plan that will increase the Company's
obligation under any Company's Plan.
AGREEMENT AND PLAN OF MERGER - Page 21
(h) No Company's Plan is an "employee stock ownership plan"
as such term is defined in Section 407(d)(6) of ERISA or Section 4975(e)(7) of
the Code.
(i) The Company is not required or obligated to contribute,
or has ever been required or obligated to contribute, to any "multiemployer
plan" (as defined in Section 4001(a)(3) of ERISA).
(j) Each Company's Plan that is an employee welfare benefit
plan within the meaning of Section 3(1) of ERISA may be amended or terminated at
any time without liability to the Company. None of the welfare Company's Plans
of the Company is funded through a trust or a similar arrangement.
(k) To the Company's knowledge, all welfare Company's Plans
of the Company that are subject to Section 4980B(f) of the Code and Sections 601
through 607 of ERISA comply with and have been administered in compliance with
the health care continuation coverage requirements for tax-favored status under
Section 4980B(f) of the Code (formerly Section 162(k) of the Code), Sections 601
through 607 of ERISA, except where a failure to comply, singly or in the
aggregate, would not have a Material Adverse Effect on the Company.
(l) To the Company's knowledge, except as set forth on
Schedule 4.17(l), or as required under Section 4980B of the Code, the Company
----------------
has no obligation to provide post-retirement health or life insurance benefits
to employees of the Company.
(m) Schedule 4.17(m) sets forth a true, accurate and complete
----------------
list of each employment, termination, retention and severance agreement,
contract, arrangement, policy and understanding (whether written or oral) with
or for the benefit of any employees of the Company. To the Company's knowledge,
all such agreements, Contracts, arrangements, policies and understandings are
valid and enforceable, and the Company is not and, to the knowledge of the
Company, none of its employees is in default in any material respect under any
thereof. Except as separately set forth on Schedule 4.17(m), to the Company's
----------------
knowledge, this Agreement shall not (i) result in any payment becoming due, or
increase the amount of any compensation due, to any current or former employee
of the Company; (ii) increase any benefits otherwise payable under any Company's
Plan; (iii) result in the acceleration of the time of payment or vesting of any
such benefits or compensation; or (iv) result in the failure of any amount
payable to be deductible for federal income tax purposes by virtue of Section
280G or 162(m) of the Code.
(n) To the Company's knowledge, neither the Company nor any
of the Company's Plans has engaged in a violation of Section 406(a) or 406(b) of
ERISA for which no exemption exists under Section 408 of ERISA or in a
"prohibited transaction" (as such term is defined in Section 4975(c)(1) of the
Code), for which no exemption under 4975(c)(2) or 4975(d) of the Code.
(o) To the Company's knowledge, the Company has (i) filed or
caused to be filed all returns and reports on the Company's Plans in which
employees of the Company participate that they are required to file and (ii)
paid or made adequate provision for all fees, interest, penalties, assessments
or deficiencies that have become due pursuant to those returns or
AGREEMENT AND PLAN OF MERGER - Page 22
reports or pursuant to any assessment or adjustment that has been made relating
to those returns or reports, except where a failure to file or pay, singly or in
the aggregate, would not have a Material Adverse Effect on the Company. To the
Company's knowledge, all other fees, interest, penalties and assessments that
are payable by or for the Company have been timely reported, fully paid and
discharged. To the Company's knowledge, there are no unpaid fees, penalties,
interest or assessments due from the Company or from any other Person that are
or could become a lien on any asset of the Company or could otherwise adversely
affect the business or assets of the Company.
Section 4.18 Leased Premises.
---------------
(a) Leased Premises. The Company owns no real estate. All real
---------------
estate leased by the Company (the "Company's Leases") is leased pursuant to
written leases, and to the Company's knowledge, the Company is not in default
under any material term of any agreement relating to the Company's Leases nor,
to the Company's knowledge, is any other party thereto in default thereunder,
which in any case would have a Material Adverse Effect. No party to any
Company's Lease has repudiated any provision thereof and the Company has no
reason to believe that the other party or parties to any such Company's Lease
intends to exercise any right of cancellation, termination or non-renewal
thereof. The Company has heretofore delivered to Parent and Sub true and
complete copies of all Company's Leases. The Company has obtained, or shall have
obtained by the Closing Date, all consents required under the Company's Leases.
(b) Condemnation. There are no condemnation proceedings pending
------------
or, to the Company's knowledge, threatened with respect to any portion of the
Company's Leases. All Company's Leases are supplied with utilities and other
services necessary for the operation of such facilities as presently operated.
(c) Condition of Buildings. To the knowledge of the Company, the
----------------------
buildings and other facilities located on the Company's Leases are free of any
patent structural or engineering defects and, to the Company's knowledge, are
free of any latent structural or engineering defects.
Section 4.19 Financial Data.
--------------
(a) The Company shall furnish to Parent prior to Closing certain
financial data including, but not limited to, copies of the Company's audited
balance sheets and related statements of income and cash flows as of and for the
fiscal year ended June 30, 2001 and within fifteen (15) calendar days after
Closing Company shall furnish to Parent its unaudited balance sheet and related
statements of income and cash flows as of and for the period from July 1, 2001
to the Closing Date (the "Company's Balance Sheets") (collectively, the
"Company's Financial Statements"). The Company's Financial Statements (i) fairly
present the financial condition of the Company as of the dates thereof and the
results of operations of the Company for the periods covered thereby; (ii) in
the case of audited Company's Financial Statements, have been prepared in
accordance with generally accepted accounting principles consistently applied
("GAAP"); and (iii) in the case of unaudited interim Company's Financial
Statements, have been prepared in accordance with the Company's historical
accounting practices consistently applied and are subject to normal year-end
adjustments. Since June 30, 2001, there has been no material
AGREEMENT AND PLAN OF MERGER - Page 23
change in the financial condition or results of operations of the Company, which
taken as a whole would have a Material Adverse Effect on the Company, its
Business or the Transferred Assets.
(b) To the Company's knowledge, the Company has no liabilities
except for liabilities set forth or reserved on the Company's Balance Sheets (or
referred to in the notes thereto) or arising in the ordinary course of business
consistent with past practice since June 30, 2001 and which have not had and
cannot reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. Schedule 4.19(b) hereof lists all of the Debt of the
----------------
Company as of August 31, 2001. On the Closing Date, the Current Liabilities of
the Company shall not exceed $130,000.
(c) The receivables of the Company arose from bona fide sales and
deliveries of goods or performance of services in the ordinary course of
business. All such receivables are currently due and payable and, to the
Company's knowledge, not subject to any performance obligations by the Company
prior to collection. All such receivables have been adequately reserved in
accordance with GAAP (and all such reserves have been disclosed in writing to
Parent). Except as has been reserved against in the Company's Balance Sheets, to
the Company's knowledge, there is no dispute with respect to the amount or
validity of any receivables of the Company. Schedule 4.19(c) hereof lists all
----------------
receivables of the Company as of August 31, 2001.
(d) All accounts payable of the Company reflected in the Company's
Balance Sheets or arising after the date thereof are the result of bona fide
transactions in the ordinary course of business and have been paid or are not
yet due and payable. Schedule 4.19(d) hereof lists all payables of the Company
----------------
as of August 31, 2001.
Section 4.20 Ownership of Parent's Common Stock. Except as set forth on
----------------------------------
Schedule 4.20 and other than pursuant to this Agreement, neither the Company nor
-------------
the Shareholders (i) beneficially own, directly or indirectly, or (ii) are
parties to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of, Parent's Common Stock.
Section 4.21 Disclosure. To the Company's knowledge, no information
----------
supplied by the Company in this Agreement or the schedules or exhibits hereto,
or certificates or other writings furnished by the Company to Parent and Sub
prior to the date hereof, contains any untrue statement of material fact or
omits or shall omit to state any material fact necessary in order to make the
statements herein or therein, in the light of circumstances under which they
were made, not misleading.
Section 4.22 Brokers. There is no broker, finder or investment banker that
-------
has been retained by or is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated hereby based upon
arrangements made by the Company or Members.
Section 4.23 Adverse Agreements. To the Company's knowledge, the Company is
------------------
not a party to any agreement nor subject to any judgment, order, writ,
injunction, decree, rule or
AGREEMENT AND PLAN OF MERGER - Page 24
regulation, that could reasonably be expected, now or in the future, to have a
Material Adverse Effect on the operations or the Business of the Company.
Section 4.24 Insurance. The Company has maintained in full force and effect
---------
and shall continue until Closing to maintain insurance on its assets and the
Business, including but not limited to liability and property insurance, of the
kinds and in the amounts customarily carried by responsible companies of the
size of the Company engaged in a business similar to the Business of the
Company.
Section 4.25 Purchase for Investment. The Shareholders shall acquire
-----------------------
Parent's Shares for investment and not with a view to resale or for distributing
all or any part thereof in any transaction, which would constitute a
distribution within the meaning of the Securities Act; provided, however, that
-----------------
FSB intends, and is expressly permitted, to distribute the Parent's Shares that
it receives to its parent company, SWS, Inc.. The offering of Parent's Shares to
the Shareholders as part of the Merger Consideration was made only through
direct, personal communication between the Shareholders and a duly authorized
officer of each of Parent and Sub and not through public solicitation or
advertising. The Shareholders acknowledge that Parent's Shares are "restricted
securities" and have not been registered under the Securities Act and that
Parent and Sub are not under any obligation to file a registration statement
with the Securities and Exchange Commission ("SEC") or any state securities
agency with respect to Parent's Shares other than pursuant to Section 5.4 of
this Agreement.
Section 4.26 Investor Qualifications. Each Shareholder (a) has such
-----------------------
knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of his investment in Parent's Shares and has the
financial ability to assume the monetary risk associated therewith, (b) is able
to bear the complete Loss of his investment in Parent's Shares, (c) has received
such other documents and information as he has requested and has had the
opportunity to ask questions of, and receive answers from, Parent and its
management concerning Parent, (d) is not an entity formed solely to make this
investment, and (e) is not relying upon any statements or instruments made or
issued by any Person other than Parent and its officers in making his decision
to accept Parent's Shares as part of the Merger Consideration except for a
valuation of the Parent Common Stock prepared by SWS Securities, Inc.
ARTICLE V
Covenants
Section 5.1 Parent's and Sub's Covenants.
----------------------------
(a) Confidentiality of Information. If this Agreement is
------------------------------
terminated, Parent and Sub shall, upon the written request of the Company,
return all copies of any information delivered to Parent and Sub or their
employees, agents, attorneys or other representatives relating to the Company.
Parent and Sub shall not use or disclose the Company's confidential information,
unless such disclosure is required by applicable federal and state securities
laws, for any purpose other than the evaluation and implementation of the
transactions contemplated hereby. For purposes of this Section 5.1,
"confidential" information does not include information which: (i) is or becomes
generally available to the public other than as a result of disclosure which is
in violation of this Section 5.1; (ii) was known by Parent or Sub on a non-
AGREEMENT AND PLAN OF MERGER - Page 25
confidential basis prior to the disclosure thereof; or (iii) becomes available
to Parent or Sub on a non-confidential basis from a third party who is not known
by Parent or Sub to be bound by a confidentiality agreement with the Company, or
is not otherwise prohibited from transmitting the information to Parent or Sub.
(b) Notice of Breach or Potential Breach. Parent or Sub shall
------------------------------------
promptly notify the Company of any change, circumstance or event that may
prevent Parent or Sub from complying with any of its obligations, agreements or
covenants hereunder.
(c) Parent's and Sub's Fairness Opinion. On or prior to the Closing
-----------------------------------
Date, Parent and Sub shall provide a fairness opinion to the respective boards
of directors of Parent and Sub from a business valuation firm or investment bank
reasonably acceptable to the Company that the terms of the transactions
contemplated hereby are fair to Parent and Sub from a financial point of view
(the "Parent's and Sub's Fairness Opinion"). Parent and Sub shall pay the
expenses and fees related to the procurement of Parent's and Sub's Fairness
Opinion.
(d) Conduct of Business. Except as required or contemplated herein or
-------------------
in connection with the Merger or as required by law, during the period from the
date of this Agreement to the Closing Date, Parent and Sub shall not, without
written notice to the Company, amend their organizational documents unless the
amendments are necessary to comply with the terms of this Agreement; or effect
any material transaction which is inconsistent with the past practices of Parent
and Sub or not in furtherance of the business or the Merger.
(e) Parent's and Sub's Standstill Agreement. During the Standstill
---------------------------------------
Period, Parent and Sub and their respective officers, directors and shareholders
will not negotiate or enter into any agreement of any type with any party other
than this Agreement providing for (a) the acquisition of any other business
entity engaging in the same line of business as the Company, through any type of
corporate reorganization, stock acquisition, asset purchase or other similar
transaction, or (b) the sale of stock of Parent or any merger, sale of material
assets or transfer of material liabilities of Parent or any other similar
transaction unless such transaction expressly provides for the acquisition of
the Company by Parent or a successor entity on the same terms and conditions as
provided for in this Agreement.
(f) SEC Filings. Parent shall timely file with the SEC all documents
-----------
and reports required under the Securities Act relating to the Parent and under
the Exchange Act relating to the transactions contemplated by this Agreement.
Parent shall timely file with the SEC in the future all periodic and annual
reports required to be filed by the Parent under the Exchange Act.
(g) Listing of Parent's Shares. Parent shall timely file with the
--------------------------
NASDAQ Stock Market such notices, reports and documents required under the rules
and regulations of the NASDAQ Stock Market and will cause the Parent's Shares to
be listed in the NASDAQ Stock Market within 30 days after the Effective Time.
(h) Asset Purchase. Prior to the Conversion, Sub shall purchase
--------------
Assets from the Company pursuant to Section 2.6 of this Agreement.
AGREEMENT AND PLAN OF MERGER - Page 26
Section 5.2 Covenants of the Company and Shareholders.
-----------------------------------------
(a) Conduct of Business.
-------------------
(i) Except as required or contemplated herein or in
connection with the Merger or as required by law, during the period from the
date of this Agreement to the Closing Date, the Company shall carry on and
conduct the Business only in the ordinary course consistent with past practices,
without any change in the policies, practices and methods that the Company
pursued before the date of this Agreement. The Company and Members shall use
their best efforts to preserve the Business organization intact; to preserve the
relationships with the Company's customers, suppliers, and others having
business dealings with it; and to preserve the services of the Company's
employees, agents and representatives. The Company shall not undertake any
action without the prior written consent of Parent and Sub that would result in
any material change in the assets or liabilities of the Company, other than in
the ordinary course of business consistent with past practices, except for the
distribution of cash to the Members as contemplated by Section 2.6 herein and
for adjustments to accrued expenses.
(ii) The Company shall immediately advise Parent and Sub in
writing if any of the Company's representations or warranties are untrue or
incorrect in any material respect or the Company becomes aware of the occurrence
of any event or of any state of facts that results in any of the representations
and warranties of the Company being untrue or incorrect. The Company shall not
intentionally take any action, or intentionally omit to take any action, that is
inconsistent with the manner in which the Company has conducted business in the
past that would result in any of the Company's representations and warranties
set forth in this Agreement to be untrue or incorrect as of the Closing Date.
The Company shall immediately notify Parent and Sub in writing if it enters into
any Material Company Contract.
(iii) The Company shall not sell or hypothecate its assets,
except for retail installment contracts held for sale in the ordinary course of
business.
(b) Confidentiality of Information. If this Agreement is
------------------------------
terminated, the Company shall, upon the written request of Sub or Parent, return
all copies of any information delivered to the Company or its employees, agents,
attorneys or other representatives relating to Parent and Sub. The Company shall
not use or disclose Sub's or Parent's confidential information, unless such
disclosure is required by applicable federal and state securities laws, for any
purpose other than the evaluation and implementation of the transactions
contemplated hereby. For purposes of this Section 5.2, "confidential"
information does not include information which: (i) is or becomes generally
available to the public other than as a result of disclosure which is in
violation of this Section 5.2; (ii) was known by the Company on a
non-confidential basis prior to the disclosure thereof; or (iii) becomes
available to the Company on a non-confidential basis from a third party who is
not known by the Company to be bound by a confidentiality agreement with Parent
and Sub, or is not otherwise prohibited from transmitting the information to the
Company.
(c) Standstill. During the Standstill Period (defined below), the
----------
Company shall not, and the Company shall cause each of the Company's agents and
representatives
AGREEMENT AND PLAN OF MERGER - Page 27
(including, without limitation, investment bankers, attorneys and accountants,
Shareholders, directors and officers of the Company) not to:
(i) take any action to, directly or indirectly, solicit,
encourage or initiate proposals, inquiries or offers from any Person (other than
Parent and Sub, or its employees or representatives or Governmental Entities
with respect to the transactions contemplated hereby), concerning any purchase
or sale of the assets of the Company (other than sales of assets in the ordinary
course of business consistent with past practices) or similar transaction or
otherwise facilitate in any other manner any effort or attempt by any Person to
do or seek to do any of the foregoing without the express written consent of
Parent and Sub;
(ii) enter into any agreement, agreement in principle or other
commitment (whether or not legally binding) relating to any acquisition,
business combination with, recapitalization of, or merger or purchase of all or
a significant portion of the assets of, or any material equity interest in the
Company, except this Agreement (a "Competing Transaction");
(iii) solicit, initiate or encourage the submission of any
proposal or offer from any Person or entity (including any of its Members,
officers, employees and agents) relating to any Competing Transaction; or
(iv) participate in any discussions or negotiations, furnish to
any other Person or entity any information with respect to, or otherwise assist,
facilitate or cooperate in any way with any effort or attempt by any other
Person or entity to effect a Competing Transaction.
The Company shall immediately notify Parent and Sub if, at any time prior
to the Closing Date, any proposal, offer, inquiry or contact with respect to any
of the foregoing is made, provided that such notification does not violate any
pre-existing confidentiality agreements. The Company shall immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any Person conducted heretofore with respect to any of the foregoing. As used
herein, "Standstill Period" shall mean the period commencing as of the Signing
Date and ending on the Closing Date or, if applicable, the termination date of
this Agreement.
(d) Notice of Breach or Potential Breach. The Company shall promptly
------------------------------------
notify Parent and Sub of any change, circumstance or event that may prevent
Company from complying with any of its obligations, agreements or covenants
hereunder.
(e) Representations and Warranties. The Company shall not
------------------------------
intentionally take or agree or commit to take any action that is inconsistent
with the manner in which the Company has conducted business in the past that
would result in any of the Company's representations or warranties hereunder
being untrue or that would result in the failure of the conditions set forth in
Article VI to be satisfied.
(f) Transfer of Goodwill and Confidential Information. FCC and
-------------------------------------------------
Members acknowledge and agree that all Confidential Information (as defined
herein) and goodwill between FCC and its customers, employees, loan servicing
agents, loan purchasers, as well as other parties with whom it has business
relationships, shall belong exclusively to the Surviving Company as a wholly
owned subsidiary of Parent, as of the Closing. FSB and Xxxxxxx X.
AGREEMENT AND PLAN OF MERGER - Page 28
Xxxxxxxx ("Xxxxxxxx") agree that, for a period of two years following the
Closing, none of them, whether singly or in combination with one another, will
use or disclose the Confidential Information, without the express written
permission of the Surviving Company. "Confidential Information" means all
information, research, computer software, or programs and related documentation,
practices, technical plans, customer lists, loan servicing agreements, loan
purchasing and re-sale agreements and programs, pricing techniques, marketing
plans, development plans, feasibility studies, acquisition programs, financial
information or all other compilations of information related to the Business and
owned by the Surviving Company, and that has not been disclosed by the Surviving
Company to the general public or that does not exist in the public market.
(g) Noncompetition. Ancillary to the promises contained in this
--------------
Agreement, and to preserve the goodwill and Confidential Information of FCC
transferred to the Parent and the Surviving Company, FSB and Xxxxxxxx agree that
none of them, whether singly or in combination, will, (i) for a period of three
(3) years after the Effective Time, directly engage in (except for Section
5.2(g)(ii) herein), or establish a subsidiary to engage in, the business of
purchasing retail installment contracts for home improvement loans from
contractors, and (ii) for a period of two years after the Effective Time,
purchase any company or other business entity whose portfolio of home
improvement loans is more than twenty percent (20%) of the total loan portfolio
of such target company. Notwithstanding any other provision of this Agreement or
the Operative Documents, the provisions of this Section 5.2(g) shall terminate
if the Parent or the Surviving Company ceases to conduct the Business,
dissolves, or files or becomes subject to a petition in bankruptcy.
FSB and Xxxxxxxx agree that that Surviving Company (or Parent or its
Affiliates) may, in addition to any remedy which the Surviving Company (or
Parent or its Affiliates) may have at law or in equity, apply to any court of
competent jurisdiction for the entry of an immediate order to restrain or enjoin
the breach of this covenant and to otherwise specifically enforce the provisions
of this covenant. Further, the existence of any potential or alleged claim or
cause of action of the Members against the Surviving Company, the Parent or any
other party, whether predicated on this Agreement or otherwise, except as
provided in the Escrow Agreement, will not constitute a defense to the
enforcement by any party of the covenants contained in Sections 5.2(f) and
5.2(g). Nothing in this Agreement shall be construed to limit any obligation of
confidentiality or noncompetition contained in any Employment Agreement, and if
any Member has such an Employment Agreement, such two agreements shall be
construed so as to provide the greater protection for the Surviving Company,
Parent, and its Affiliates.
(h) Audit of the Company. The Company shall have completed an audit
--------------------
of its financial statements for the fiscal year ended June 30, 2001, at its
expense, by an independent accounting firm prior to Closing.
Section 5.3 Mutual Covenants.
----------------
(a) Filings; Third Party Consents. Each of the Company, Parent and
-----------------------------
Sub shall exercise reasonable efforts to take or cause to be taken all actions,
and to do or cause to be done all things necessary, proper or advisable under
Applicable Law to consummate and make effective, as soon as reasonably
practicable, the transactions contemplated hereby. Without
AGREEMENT AND PLAN OF MERGER - Page 29
limiting the generality of the foregoing, each of the Company, Parent and Sub
shall exercise reasonable efforts to (a) obtain all necessary Governmental
Permits and any other authorizations, consents, licenses, waivers, and approvals
from third parties, parties to contracts or Governmental Entities including the
delivery of any required notice thereto, (b) oppose, lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby, and (c)
otherwise fulfill all conditions to this Agreement within reasonable control. In
case at any time after Closing Date any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and directors
of each party to this Agreement shall take all such necessary action.
(b) Public Announcements and Press Release. Except as may otherwise be
--------------------------------------
required by law or regulation or by court or administrative agency order, the
parties hereto agree that no press release or similar public announcements shall
be made with respect to the proposed transactions unless the parties hereto have
consented in writing to such disclosure. In addition, except as may be necessary
or desirable to disclose to any party's advisors, financiers, lenders,
directors, officers, employees and representatives involved in this transaction,
without the prior written consent of the other party, no party shall disclose to
any Person any of the terms, conditions or other facts with respect to the
transactions contemplated hereby.
(c) Access to Information.
---------------------
(i) The parties hereto agree to afford each other and their
respective accountants, counsel, financial advisors and other representatives
(the "Representatives") full access during normal business hours through the
Closing Date to each other's properties, books, contracts, commitments and
records (including, but not limited to, Tax Returns) and, during such period,
shall furnish promptly to the other (i) a copy of each report, schedule and
other document filed or received by any of them which may have a material effect
on its businesses, properties or personnel, and (ii) such other information
concerning their businesses, operations, properties, assets, condition
(financial or other) results of operations and personnel as the other party
shall reasonably request.
(ii) In the event that this Agreement is terminated in accordance
with its terms, all non-public material in written or machine readable form
provided in connection herewith and all documents, memoranda, notes and other
writings in written or machine readable form prepared by the parties based on
the information in such material shall be destroyed (and such party shall use
its reasonable best efforts to cause their Representatives to similarly destroy
their documents, memoranda and notes), and such destruction (and reasonable best
efforts) shall be certified in writing by an authorized officer supervising such
destruction.
(iii) The parties shall promptly advise each other in writing of
any change or the occurrence of any event after the date of this Agreement
having, or which, insofar as can reasonably be foreseen, in the future may have,
a Material Adverse Effect on the business, operations, properties, assets,
condition (financial or other) or results of operations of such party.
(d) Notification of Certain Matters. The Company, Parent and Sub shall
-------------------------------
promptly notify each other of:
AGREEMENT AND PLAN OF MERGER - Page 30
(i) any notice or other communication from any person
alleging that the consent of such person is required or contemplated by this
Agreement;
(ii) any notice or other communication from any Governmental
Entity in connection with the transactions contemplated by this Agreement;
(iii) any action, suits, claims, investigations or proceedings
commenced or, to the actual knowledge of the executive officers of the notifying
party, threatened against, relating to or involving or otherwise affecting such
party;
(iv) any administrative or other order or notification
relating to any material violation or claimed violation of law;
(v) the occurrence or non-occurrence of any event or
occurrence or non-occurrence of which would cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at or prior to the Closing Date; and
(vi) any material failure of any party to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder;
provided, however, that the delivery of any notice pursuant to this Section 5.3
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
Section 5.4 "Piggy Back" Registration Rights.
--------------------------------
(a) If Parent decides, including as required under any demand
registration rights agreement, to register any of its common stock or securities
convertible into or exchangeable for common stock under the Securities Act on a
form which is suitable for an offering for cash or shares of the Parent held by
third parties and which is not a registration solely to implement an employee
benefit plan, a registration statement on Form S-4 (or successor form) or a
transaction to which Rule 145 or any other similar rule of the SEC is
applicable, the Parent will promptly give written notice to the Shareholders of
its intention to effect such a registration. Subject to Section 5.4(b) below,
Parent shall include all Parent's Shares that the Shareholder(s) request(s) be
included in such registration by a written notice delivered to the Parent within
fifteen (15) days after the notice given by the Parent. The Shareholders agree
that any securities they request to be included in a Parent registration
pursuant to this Section 5.4 shall be included by the Parent on the same form of
registration statement as has been selected by the Parent for the securities the
Parent is registering for sale for its own account.
(b) If the registration involves an underwritten offering, the
Parent will not be required to register Parent's Shares in excess of the amount
that the principal underwriter reasonably and in good faith recommends may be
included in such offering (a "Cutback"), which recommendation, and supporting
reasoning, shall be delivered to the Shareholders. If such a Cutback occurs, the
number of shares that are entitled to be included in the registration and
underwriting shall be allocated in the following manner: (i) first, to the
Parent for any securities it proposes to sell for its own account, (ii) second,
to the Shareholders requiring such registration pro rata among such Shareholders
on the basis of the number of shares of Parent's Shares held by the Shareholders
for which each such Shareholder requested registration, and (iii)
AGREEMENT AND PLAN OF MERGER - Page 31
third, to the other holders requesting inclusion in the registration, pro rata
among the respective holders thereof on the basis of the number of shares for
which each such requesting holder has requested registration.
(c) If the Company elects to terminate any registration filed
pursuant to this Section 5.4, the Parent will have no obligation to register the
securities sought to be included by the Shareholders in such registration. If
the Parent includes in such registration any securities to be offered by it, all
registration expenses of the Shareholders, except for underwriting discounts and
commissions attributable to the Parent's Shares and fees and expenses of
Shareholders' attorneys and accountants, will be borne by the Parent.
(d) Parent and each Shareholder agree that during any 90-day period
after the effective date of any registration statement covering the Parent's
Shares, each Shareholder shall be allowed to sell up to 25% of the Parent's
Shares owned of record and beneficially by each Shareholder on the effective
date of the registration statement; provided, however, that none of the Escrowed
Shares shall be sold by any Shareholder(s) until such Escrowed Shares shall have
been released to Shareholders pursuant to the provisions of the Escrow
Agreement. The number of Parent's Shares allowed to be sold during any 90-day
period shall not be cumulative with any Parent's Shares which could have been
sold in any prior 90-day period. Except for the Escrowed Shares, the restriction
on sales of Parent's Shares by Shareholders in this Section 5.4(d) shall not
apply to any Shareholder who owns of record and beneficially 50,000 shares or
less of Parent's Shares. The restrictions in this Section 5.4(d) shall terminate
two years after the Closing Date, subject to terms of the Escrow Agreement. The
Company in its sole discretion may waive at any time the restrictions set forth
in this Section 5.4(d), subject to restrictions of the Escrow Agreement.
ARTICLE VI
Conditions to Closing
Section 6.1 Conditions to Each Party's Obligation. The respective
-------------------------------------
obligations of each party to effect the transactions contemplated hereby are
subject to the satisfaction or waiver prior to the Closing Date of the following
conditions:
(a) No statute, rule, regulation or order shall be enacted,
promulgated, entered or enforced by any court or governmental authority which
would prohibit consummation by such party of the transactions contemplated
hereby.
(b) Such party shall not be prohibited by any order, ruling,
consent, decree, judgment or injunction of a court or regulatory agency of
competent jurisdiction from consummating the transactions contemplated hereby.
(c) Other than as contemplated herein, there shall have been no
changes in the business, operations, properties, assets or condition (financial
or otherwise) of the parties' businesses that would constitute a Material
Adverse Effect.
(d) No investigation, action, suit or proceeding shall be pending
or threatened before any court or governmental body which seeks to restrain,
prohibit or otherwise challenge or interfere with the consummation of the
transactions contemplated hereby;
AGREEMENT AND PLAN OF MERGER - Page 32
Section 6.2 Conditions to Obligation of the Company. The obligation of the
---------------------------------------
Company to effect the transactions contemplated hereby shall be subject to the
fulfillment and satisfaction, prior to or at Closing, of the following
additional conditions, unless waived by the Company:
(a) The Company's determination that the representations and
warranties of Parent and Sub set forth in this Agreement (i) that are qualified
as to materiality shall be true and correct in all respects and (ii) that are
not so qualified, shall be true and correct in all material respects, as of the
Signing Date and the Closing Date; and, since the Signing Date and prior to the
Closing Date, the representations and warranties of Parent and Sub shall not
have been intentionally breached or breached by reason of actions taken by
Parent and Sub that were inconsistent with the manner in which Parent and Sub
have conducted business in the past; and Parent and Sub shall have delivered to
the Company a certificate signed by the chief executive officer of Parent and
Sub confirming the foregoing as of the Closing Date. Parent and Sub shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by it on
or prior to the Closing Date.
(b) All Governmental Permits and any other third party approvals,
consents, licenses, or waivers which, if not obtained, would have a Material
Adverse Effect or a material adverse effect on either the assets, operations,
financial condition or prospect of Parent shall have been obtained in form and
substance reasonably satisfactory to the Company.
(c) The Company's determination that there has been no material
adverse disclosure or development in the business condition (financial or
otherwise), assets, liabilities or prospects of Parent and Sub;
(d) The Company shall have received a valuation of the Parent
Common Stock prepared by SWS Securities, Inc. and acceptable to the
Shareholders.
(e) The Parent's Shares shall be duly authorized and validly
issued, fully paid and nonassessable, issued free of preemptive rights and free
and clear of all liens and encumbrances created by or through Parent, except as
provided in the Escrow Agreement, under Article VIII herein and Section 5.4(d)
herein. Within 30 days after the Effective Time, the Parent's Shares shall have
been authorized for listing on the NASDAQ Stock Market.
(f) The cash distribution to Members as contemplated by Section
2.6 shall have occurred and the Conversion shall have been completed.
Section 6.3 Conditions to Obligation of Parent and Sub. The obligation of
------------------------------------------
Parent and Sub to effect the transactions contemplated hereby shall be subject
to the fulfillment and satisfaction, prior to or at Closing, of the following
additional conditions, unless waived by Parent:
(a) Parent's and Sub's determination that the representations and
warranties of the Company set forth in this Agreement (i) that are qualified as
to materiality shall be true and correct in all respects and (ii) that are not
so qualified, shall be true and correct in all material respects, as of the
Signing Date and the Closing Date; and, since the Signing Date and to the
Closing Date, the representations and warranties of the Company shall not have
been intentionally breached or breached by reason of actions taken by the
Company that were
AGREEMENT AND PLAN OF MERGER - Page 33
inconsistent with the manner in which Company has conducted business in the past
and that the disclosures on Company's Schedules are true and correct as of the
Closing Date. At Closing, Company shall have delivered to Parent and Sub a
certificate signed by the chief executive officer or managing member of the
Company confirming the foregoing as of the Closing Date. The Company shall have
performed and complied in all material respects with all covenants and
agreements required by this Agreement to be performed or complied with by the
Company on or prior to the Closing Date.
(b) Parent's and Sub's determination that there has been no material
adverse disclosure or development in the business condition (financial or
otherwise), assets, liabilities or prospects of the Company;
(c) Prior to Closing, FCC shall have completed the Conversion into a
Texas corporation.
(d) Obtaining by the Company of all approvals, consents, assignments
and waivers from third parties, including banking regulatory authorities which
have jurisdiction over Company and Members, which, in the view of Parent's and
Sub's counsel, are necessary or desirable to be obtained prior to the
consummation of the transactions contemplated hereby and including a release of
any Encumbrances on the Transferred Assets;
(e) Acceptance by Xxxxx X. Xxxxxxxx of an employment agreement with
Surviving Company in substantially the form of Exhibit B hereto (the "Employment
Agreement");
(f) The Company obtaining approval of Bank One N.A. to continue its
loan purchase and servicing agreements with the Company after the Merger;
(g) The Company obtaining a commitment from First Saving Bank
("FSB") to continue to purchase installment contracts originated in the State of
New York pursuant to the purchase agreement in substantially the same form of
Exhibit D attached hereto;
(h) Parent and Sub obtaining a credit line of at least $2.5 million
from a financial institution; and
(i) The cash distribution to Members as contemplated by Section 2.6
shall have occurred and the Conversion shall have been completed.
ARTICLE VII
Closing Deliveries
Section 7.1 Closing Deliveries of the Company. At Closing, the Company shall
---------------------------------
deliver to Parent and Sub the following:
(a) Required Governmental Approvals and Other Consents. Copies of
--------------------------------------------------
all required governmental approvals, authorizations and consents shall be
delivered by the Company to Sub. The Company shall deliver to Sub any of the
consents of other third parties required to consummate the transactions
contemplated hereby.
AGREEMENT AND PLAN OF MERGER - Page 34
(b) Escrow Agreement. The Shareholders and the Company shall have
----------------
executed and delivered to the Parent the Escrow Agreement and stock certificates
for the Escrowed Shares shall be delivered to the Escrow Agent.
(c) Employment Agreements. Xxxxx X. Xxxxxxxx shall execute and
---------------------
deliver to Parent and the Company the Employment Agreement.
(d) Member Resolutions. The Company shall deliver to Parent and Sub
------------------
the Company's board resolutions and shareholders resolutions approving this
Agreement, the Operative Documents and the transactions described herein
certified by the President or the Secretary of the Company in the form
acceptable to Parent's and Sub's counsel.
(e) Certificate of Good Standing. The Company shall deliver to Sub a
----------------------------
Certificate of Good Standing for the Company issued by the Secretary of State of
the State of Texas.
(f) Certificate of Executive Officer. The Company shall deliver to
--------------------------------
Sub the certificate required by Section 6.2(a) executed by the President or the
Secretary of the Company; and
(g) Documents Satisfactory in Form and Substance. The Company shall
--------------------------------------------
have executed and delivered to Sub all required agreements, certificates and
other documents in form and substance satisfactory to counsel of Sub, in the
exercise of such counsel's reasonable judgment.
(h) Company Shares. Shareholders shall deliver to Parent
--------------
certificates representing the Company Shares duly endorsed to Parent.
Section 7.2 Closing Deliveries of Parent and Sub. At Closing, Parent and
------------------------------------
Sub shall deliver to the Company the following:
(a) Required Governmental Approvals and Other Consents. Copies of
--------------------------------------------------
all governmental approvals, authorizations and consents shall be delivered to
the Company by Sub. Sub shall deliver to the Company any of the consents of
other third parties required to consummate the transactions contemplated hereby.
(b) Merger Consideration. Parent and Sub shall deliver to the
--------------------
Shareholders at Closing the Merger Consideration, including: (i) $1,000,000 as
required by Section 2.4; and (ii) Stock certificates evidencing Parent's Shares
issued in the name of each Shareholder in the number of Shares as computed
pursuant to Sections 2.4 and 2.5(a).
(c) Escrow Agreement. Parent shall have executed and delivered to
----------------
the Company and the Shareholders the Escrow Agreement and stock certificates for
the Escrowed Shares shall be delivered to the Escrow Agent.
(d) Employment Agreements. The Company shall execute and deliver to
---------------------
Xxxxx X. Xxxxxxxx a duly executed Employment Agreement.
AGREEMENT AND PLAN OF MERGER - Page 35
(e) Sub's Board Resolutions. Sub shall deliver to the Company
-----------------------
resolutions by its board of directors and its stockholder approving this
Agreement, the Operative Documents and the transactions contemplated hereby,
certified by the President or the Secretary of Sub in the form acceptable to the
Company's counsel.
(f) Parent's Board Resolutions. Parent shall deliver to the Company
--------------------------
its board resolutions approving this Agreement, the Operative Documents and the
transactions contemplated hereby and the issuance of Parent's Shares to the
Company certified by the President or the Secretary of Parent in the form
acceptable to the Company's counsel.
(g) Parent's and Sub's Fairness Opinion. Parent and Sub shall
-----------------------------------
deliver to the Company and each Shareholder a copy of Parent's and Sub's
Fairness Opinion;
(h) Certificate of Executive Officer. Parent and Sub shall deliver
--------------------------------
to the Company the certificate required by Section 6.3(a) executed by the Chief
Executive Officer of Sub and by the Chief Executive Officer of Parent;
(i) Certificate of Good Standing. Parent and Sub shall deliver to
----------------------------
the Company a Certificate of Good Standing for Parent and Sub issued by the
Secretary of State of the State of Texas.
(j) Documents Satisfactory in Form and Substance. Parent and Sub
--------------------------------------------
shall have executed and delivered to the Company all agreements, certificates
and other documents in form and substance satisfactory to counsel of the
Company, in the exercise of such counsel's reasonable judgment.
ARTICLE VIII
Indemnification
Section 8.1 Survival of Representations, Warranties and Covenants. Except
-----------------------------------------------------
as provided herein, the representations, warranties and covenants of the parties
set forth herein shall remain operative and in full force until two (2) years
following the Closing Date (at which time such representations, warranties and
covenants shall expire and be of no further force and effect); provided,
however, that the sole remedy for any breach of such representations, warranties
and covenants shall be as set forth in this Article VIII. The covenants of each
respective party set forth in Sections 5.1(a), 5.1(f), 5.2(b), 5.2(f), 5.3(b),
5.3(c), and 5.4 of this Agreement shall survive termination and/or the Closing,
as applicable, and shall remain operative and in full force indefinitely.
Section 8.2 Indemnification.
---------------
(a) Indemnification by the Shareholders.
-----------------------------------
(i) Subject to the provisions of Section 8.1, Section 8.2(a)
and Section 8.4 hereof, the Shareholders, severally in accordance with their
respective Shareholder Percentage, shall indemnify and hold harmless Parent, Sub
and the Company and its directors, officers, employees, Affiliates, and agents
(collectively, an "indemnitee") at all times from and after the Closing Date,
against and in respect of Losses arising from or relating to: (A) any
AGREEMENT AND PLAN OF MERGER - Page 36
breach of any of the representations or warranties made by the Company or
Shareholders in this Agreement, including, but not limited to, Section 4.19(b);
(B) any breach of the covenants and agreements made by the Company or
Shareholders in this Agreement; (C) any claims made by third parties, including
any taxing authority, arising from the operations of the Business prior to and
through the Closing Date except for claims made for Current Liabilities which,
in the aggregate, are less than $130,000; (D) any liability for any transactions
or agreements between any of the Company's current or former members, managers,
shareholders, officers, directors or employees; and (E) the enforcement by
Parent and Sub or other Indemnitee of their rights to be indemnified, defended
and held harmless under this Agreement.
(ii) No claim for indemnification shall be asserted against the
Shareholders with respect to any single Loss in an amount less than $5,000, it
being understood that the aggregate amount of all Losses arising from the same
operative facts and circumstances shall be deemed a single Loss (a claim
asserted against the Shareholders for a single Loss in excess of $5,000 being
herein referred to as an "indemnifiable claim"). No Loss shall be deemed to have
been sustained to the extent of any proceeds received by Sub or Parent or any
other party indemnified by the Shareholders hereunder from any insurance policy
with respect thereto.
(iii) No amount shall be payable by the Shareholders with
respect to any Indemnifiable Claims unless and until the aggregate amount of
such Indemnifiable Claims payable by the Shareholders exceeds $17,500.
(iv) The Shareholders' aggregate liability for indemnification
hereunder shall not exceed the fair market value of the Escrowed Shares as
calculated on the Closing Date (the "Shareholders' Liability Limit"). Each
Shareholder's individual liability for indemnification hereunder shall not
exceed their Shareholder Percentage of the Shareholder's Liability Limit. The
Shareholder's liability for payment of Indemnifiable Claims hereunder shall be
limited exclusively to Parent's right to receive for cancellation an appropriate
number of Escrowed Shares pursuant to Section 8.4 of this Agreement and the
Escrow Agreement. Notwithstanding any other provision of this Agreement or the
Operative Documents, under no circumstances shall a Shareholder be required to
make any payment to Parent or Sub pursuant to this Agreement.
(v) An Indemnifiable Claim based upon a purported
misrepresentation or breach of warranty or covenant by the Company or
Shareholders must first be asserted within two (2) years from the Closing Date.
Any Indemnifiable Claim that is not asserted within the period provided above
therefor shall be forever barred.
(b) Indemnification by Parent and Sub.
---------------------------------
(i) Subject to the provisions of Section 8.1 and Section
8.2(b) hereof, Parent and Sub shall indemnify and hold harmless the
Shareholders, the Company and its Members, managers, officers, employees,
Affiliates, and agents (collectively an "indemnitee") at all times from and
after the Closing Date, against and in respect of Losses arising from or
relating to: (A) any breach of any of the representations or warranties made by
Sub or Parent in this Agreement, (B) any breach of the covenants and agreements
made by Sub or Parent in this
AGREEMENT AND PLAN OF MERGER - Page 37
Agreement, (C) claims made by third parties, including any taxing authorities,
arising from the operations of the Business after the Closing Date, and (D) the
enforcement by the Shareholders or the Company's Members, managers, officers,
employees, Affiliates, and agents of their rights to be indemnified, defended
and held harmless under this Agreement.
(ii) No claim for indemnification shall be asserted against Sub
or Parent with respect to any single Loss in an amount less than $5,000, it
being understood that the aggregate amount of all Losses arising from the same
operative facts and circumstances shall be deemed a single Loss (a claim
asserted against Sub or Parent for a single Loss in excess of $5,000 being
herein referred to as an "indemnifiable claim"). No Loss shall be deemed to have
been sustained to the extent of any proceeds received by the Company, its
members or any other party indemnified by Parent and Sub hereunder from any
insurance policy with respect thereto.
(iii) No amount shall be payable by Sub or Parent with respect
to any Indemnifiable Claims unless and until the aggregate amount of such
Indemnifiable Claims payable by Sub or Parent exceeds $17,500.
(iv) Parent's and Sub's aggregate liability for indemnification
hereunder shall not exceed $250,000 (being referred to herein as the "Parent's
and Sub's Liability Limit"). Notwithstanding the preceding sentence, any dispute
between Parent and Sub and the Shareholders over the proper release of the
Escrowed Shares under the Escrow Agreement shall not be subject to the Parent's
and Sub's Liability Limit.
(v) An Indemnifiable Claim based upon a purported
misrepresentation or breach of warranty or covenant by Sub or Parent must first
be asserted within two (2) years from the Closing Date. Any Indemnifiable Claim
that is not asserted within the period provided above therefor shall be forever
barred.
Section 8.3 Procedures for Indemnification.
------------------------------
(a) If a claim or demand is made against an Indemnitee, or an
Indemnitee shall otherwise learn of an assertion, by any Person who is not a
party to this Agreement (or an Affiliate thereof) (a "Third-Party Claim") as to
which a party (the "Indemnifying Party") may be obligated to provide
indemnification pursuant to this Agreement, such Indemnitee will notify the
Indemnifying Party in writing, and in reasonable detail, of the Third-Party
Claim reasonably promptly after becoming aware of such Third-party Claim;
provided, however, that failure to give such notification will not affect the
indemnification provided hereunder except to the extent the Indemnifying Party
shall have been actually prejudiced as a result of such failure.
(b) If a Third-Party Claim is made against an Indemnitee and the
Indemnifying Party unconditionally and irrevocably acknowledges in writing its
obligation to indemnify the Indemnitee therefor, the Indemnifying Party will be
entitled to assume the defense thereof (at the expense of the Indemnifying
Party) with counsel selected by the Indemnifying Party and reasonably
satisfactory to the Indemnitee. Should the Indemnifying Party so elect to assume
the defense of a Third-Party Claim, the Indemnifying Party shall take all steps
necessary in the defense or settlement thereof and shall at all times diligently
and promptly pursue the resolution thereof. If the Indemnifying Party so elects
to assume the defense of a Third-Party
AGREEMENT AND PLAN OF MERGER - Page 38
Claim, the Indemnifying Party will not be liable to the Indemnitee for any legal
or other expenses subsequently incurred by the Indemnitee in connection with the
defense thereof. If the Indemnifying Party assumes the defense of any
Third-Party Claim, the Indemnitee shall have the right to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Party. The Indemnifying Party shall be
liable for the fees and expenses of counsel employed by the Indemnitee for any
period during which the Indemnifying Party has failed to assume the defense
thereof or if it does not expressly elect to assume the defense thereof
(including acknowledging its indemnification obligation as aforesaid). If the
Indemnifying Party assumes the defense of any Third-Party Claim, the
Indemnifying Party will promptly supply to the Indemnitee copies of all
correspondence and documents relating to or in connection with such Third-Party
Claim and keep the Indemnitee fully informed of all developments relating to or
in connection with such Third-Party Claim (including, without limitation,
providing to the Indemnitee on request updates and summaries as to the status
thereof). If the Indemnifying Party chooses to defend a Third-Party Claim, all
the Indemnitees shall reasonably cooperate with the Indemnifying Party in the
defense thereof (such cooperation to be at the expense, including reasonable
legal fees and expenses, of the Indemnifying Party).
(c) If the Indemnifying Party unconditionally and irrevocably
acknowledges in writing its obligation to indemnify the Indemnitee for a
Third-Party Claim, the Indemnitee will agree to any settlement, compromise or
discharge of such Third-Party Claim which the Indemnifying Party may recommend
and which by its terms obligates the Indemnifying Party to pay the full amount
of Losses in connection with such Third-Party Claim and unconditionally and
irrevocably releases the Indemnitee completely from all liability in connection
with such Third-Party Claim, provided, however, that, without the Indemnitee's
prior written consent, the Indemnifying Party shall not consent to any
settlement, compromise or discharge (including the consent to entry of any
judgment), and the Indemnitee may refuse to agree to any such settlement,
compromise or discharge (x) that provides for injunctive or other nonmonetary
relief affecting the Indemnitee or (y) that, in the reasonable opinion of the
Indemnitee would otherwise materially adversely affect the Indemnitee. If the
Indemnifying Party unconditionally and irrevocably acknowledges in writing its
obligation to indemnify the Indemnitee for a Third-Party Claim, the Indemnitee
shall not (unless required by law) admit any liability with respect to, or
settle, compromise or discharge, such Third-Party Claim without the Indemnifying
Party's prior written consent (which consent shall not be unreasonably
withheld). If the Indemnifying Party does not assume the defense of any claim or
proceeding resulting therefrom in accordance with the terms of this Article XI,
the Indemnitee may defend against such claim or proceeding in such manner as it
may deem appropriate; provided, however, that the Indemnitee may not settle any
-----------------
such claim or proceeding without the express written consent of the Indemnifying
Party which consent shall not be unreasonably withheld
(d) Any claim on account of Losses which does not involve a Third-Party
Claim shall be asserted by reasonably prompt written notice given by the
Indemnitee to the Indemnifying Party from whom such indemnification is sought.
The failure by any Indemnitee so to notify the Indemnifying Party shall not
relieve the Indemnifying Party from any liability which it may have to such
Indemnitee under this Agreement, except to the extent that the Indemnifying
Party shall have been actually prejudiced by such failure. Any notice pursuant
to this Section 8.3(d) shall contain a statement, in prominent and conspicuous
type, that if the
AGREEMENT AND PLAN OF MERGER - Page 39
Indemnifying Party does not dispute its liability to the Indemnitee with respect
to the claim made in such notice by notice to the Indemnitee prior to the
expiration of a 30-calendar-day period following the Indemnifying Party's
receipt of notice of such claim, the claim shall be conclusively deemed a
liability of the Indemnifying Party. If the Indemnifying Party does not notify
the Indemnitee prior to the expiration of a 30-calendar-day period following its
receipt of such notice that the Indemnifying Party disputes its liability to the
Indemnitee under this Agreement, such claim specified by the Indemnitee in such
notice shall be conclusively deemed a liability of the Indemnifying Party under
this Agreement and the Indemnifying Party shall pay the amount of such liability
to the Indemnitee on demand or, in the case of any notice in which the amount of
the claim (or any portion thereof) is estimated, on such later date when the
amount of such claim (or such portion thereof) becomes finally determined. If
the Indemnifying Party has timely disputed its liability with respect to such
claim, as provided above, the Indemnifying Party and the Indemnitee shall
proceed in good faith to negotiate a resolution of such dispute and, if not
resolved through negotiations by the 90th day after notice of such claim was
given to the Indemnifying Party, the Indemnifying Party and the Indemnitee will
be free to pursue such remedies as may be available to such parties under this
Agreement or under Applicable Law.
Section 8.4 Escrow Amount. At Closing, Company, the Shareholders, Parent
-------------
and an escrow agent to be designated and approved by the parties (the "Escrow
Agent") shall execute the escrow agreement in substantially the form of Exhibit
C attached hereto (the "Escrow Agreement"). The Escrow Agreement shall provide,
among other terms, that 20% of Stock Consideration issued to the Shareholders
(the "Escrowed Shares") shall be held by the Escrow Agent for a period of
twenty-four (24) months after Closing to secure the Shareholders' obligations
under Section 8.2(a) herein. If the Shareholders become obligated to indemnify
Parent and Sub with respect to an Indemnifiable Claim and the amount of
liability with respect thereto shall have been finally determined, the Escrow
Agent shall release the appropriate number of Escrowed Shares to Parent for
cancellation pursuant to the terms of the Escrow Agreement. The fair market
value per share of the Escrowed Shares shall be the Average Closing Price or if
applicable the Adjusted Average Closing Price as calculated at Closing pursuant
to Section 2.5(a) herein. Notwithstanding any other provision of this Agreement,
the Escrow Agreement, or the Operative Documents, the Shareholders' liability
for indemnification shall be limited as set forth in Section 8.2(a)(iv) of this
Agreement.
The Escrowed Shares shall be automatically released to the Shareholders on
the second anniversary of the Closing Date if there are no pending Indemnifiable
Claims. Prior to such date, the Escrowed Shares shall be released to the
Shareholders within ten (10) business days after receipt by Escrow Agent of
written instructions signed by Parent and the Shareholders that any of the
following events have occurred, provided there are no pending Indemnifiable
Claims:
(i) a transaction occurs so that the Surviving Company is no
longer a wholly owned subsidiary of Parent;
(ii) Surviving Company sells all or substantially all of its
assets; or
(iii) the termination by the Company of the employment of
Xxxxx X. Xxxxxxxx other than for "Just Cause" as defined in the Employment
Agreement.
AGREEMENT AND PLAN OF MERGER - Page 40
If during the first year of the Escrow Agreement there is a transfer in a
single transaction of the right to control twenty-five percent (25%) or more of
the Parent's voting securities ("Change in Control") on the first anniversary
date of the Escrow Agreement the Escrow Agent shall release to the Shareholders
pro rata based on their Shareholders Percentage fifty percent (50%) of the
Escrowed Shares provided there are no Indemnifiable Claims on the first
anniversary date. If during the second year of the Escrow Agreement there is a
Change in Control, the Escrow Agent shall release to the Shareholders within ten
(10) business days after receipt by Escrow Agent of written instructions signed
by Parent and Shareholders all of the Escrowed Shares provided there are no
pending Indemnifiable Claims.
Section 8.5 Termination of Indemnification Obligations. The obligations of
------------------------------------------
each party to indemnify, defend and hold harmless the other party and other
Indemnitees pursuant to this Article VIII shall continue until the expiration of
the applicable representation or warranty pursuant to Section 8.5 herein;
provided, however, that the obligations of each party to indemnify, defend and
hold harmless the other party and Indemnitees shall not terminate with respect
to any individual item as to which an Indemnitee shall have before the
expiration of the applicable period, made a claim by a delivering a notice to
the Indemnifying Party.
ARTICLE IX
Dispute Resolution
Section 9.1 Dispute Resolution. The parties hereto agree that any
------------------
controversy or other than a claim for injunctive relief ("Dispute") arising out
of this Agreement shall be resolved in accordance with the following procedures.
A Dispute may include, without limitation, any claim with respect to either
party's obligations or its performance, failure to perform, adequacy of
performance or good faith exercise of its rights under the Agreement. The
parties shall endeavor in good faith to promptly, reasonably, and equitably
settle all Disputes on an informal basis in the normal course of business. All
Disputes which the parties cannot so settle in the normal course of business
shall be negotiated and mediated in accordance with the following terms:
(a) Either party (the "initiating party") may commence a
negotiation of a Dispute ("Negotiation") by serving on the other party (the
"responding party") a written statement of the nature and substance of the
Dispute, a brief summary of its position with respect to the Dispute, its
justifications therefor, and its proposal for resolution of the Dispute. Within
ten (10) days, the responding party shall prepare and serve on the initiating
party a written statement of its position in response. These position papers may
be served by facsimile transmission or such other means and to such parties and
at such addresses as the parties may designate from time to time ("Executives").
Within fourteen (14) days of exchanging position papers, the parties shall
conduct a face-to-face meeting of the Executives and appropriate members of
their respective management teams with knowledge of the matters underlying the
Dispute and full authority to resolve the Dispute. The first such meeting shall
be held at the office of the responding party, with succeeding meetings rotated
between the parties' offices, or at such other locations as the parties may
agree. The Executives shall conduct not less than two (2) meetings over a two
week period. If the Executives cannot agree to a resolution of the Dispute
within five (5) days thereafter, they may continue discussions or either party
may invoke the mediation procedures set forth hereafter by giving notice to the
other party.
AGREEMENT AND PLAN OF MERGER - Page 41
(b) Either party may invoke non-binding mediation ("Mediation") upon
conclusion of the Negotiation procedures described above by serving a notice of
mediation on the other party and proposing a mediator. The other party shall
respond within five (5) business days advising as to whether the proposed
mediator is acceptable and, if not, proposing an alternative mediator. If the
parties cannot agree within an additional two (2) business days to an acceptable
mediator, then on the second business day after delivery of the other party's
response, each party shall concurrently deliver to the other by an overnight
delivery service of general commercial use and acceptance (such as Airborne,
UPS, or Federal Express) a list of five proposed mediators in order of
preference. The Person ranking highest on the two lists (measured by a total
point system of 5 points for the first choice on each list, 4 points for the
second choice on each list, etc.) shall be designated the mediator unless such
Person refuses the designation, in which event the next highest ranking Person
shall be designated the mediator. If no Person appears on both lists, or no
Person who appears on both lists accepts the designation, and the parties cannot
within five (5) additional days agree to a mediator, the parties shall each then
designate a Person ("designee") who shall together decide on and confirm
appointment of the mediator. If the designees are unable to agree, the designees
shall apply to the Center for Public Resources to appoint a mediator in
accordance with its Model Procedure for Mediation of Business Disputes as then
in effect. The Person so appointed (the "Mediator") shall be compensated at an
hourly rate (or an alternative compensation arrangement) to be agreed upon
between the parties and the Mediator prior to appointment. The parties shall
each pay one half the Mediator's fee and expenses. Each party shall prepare a
written statement of the Dispute and its position, a summary of the prior
negotiations, and a final proposal of settlement. Within fifteen (15) days of
appointment of the Mediator, the parties shall submit such statement to the
Mediator, together with such supporting or evidentiary materials or other matter
as the parties deem appropriate to the Dispute. Concurrently, the parties shall
deliver a copy of all submitted materials to the other party. Any further
submissions shall be made only with the prior consent of the Mediator and all
submissions shall be copies to the other party. No "discovery" or other
proceeding shall be conducted except as directed by the Mediator. The Mediator
may, at his option, hold hearings or conduct interviews, discussions, or
negotiation sessions with any Person or entity, which he believes to be relevant
to the Dispute. The Mediator may in his discretion conduct such interviews or
discussions unilaterally or with the parties present. The Mediation shall be
generally conducted in accordance with the Model Procedures for Mediation of
Business Disputes as then in effect, or pursuant to such other procedures as the
parties may agree. The parties shall endeavor to assist the Mediator in
concluding the Mediation within a reasonable time, with a target of not later
than thirty (30) days after initial submission of materials to the Mediator. At
any time, after the parties have engaged in reasonable mediation activity, the
Mediator may declare the Mediation to be terminated, and either party may elect
to terminate the Mediation at any time by giving notice to the other party and
the Mediator, if the Dispute is not resolved within ninety (90) days after the
appointment of the Mediator. If, upon termination of the Mediation, the Dispute
remains unresolved, both parties shall reserve all rights to seek a judicial
resolution of the Dispute in accordance with Applicable Law, except as otherwise
restricted by this Agreement. The resolution of any Dispute shall not constitute
an amendment to the Agreement or a waiver or modification of either party's
rights.
AGREEMENT AND PLAN OF MERGER - Page 42
ARTICLE X
Miscellaneous
Section 10.1 Termination.
-----------
(a) This Agreement may be terminated at any time prior to the
Closing Date:
(i) by mutual written consent of the Company, the
Shareholders, Parent and Sub;
(ii) by the Company or Parent if (A) any Governmental Entity
which must grant a required regulatory approval has denied approval of the
transaction and such denial has become final and nonappealable or (B) any
Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement in the manner presented;
(iii) by the Company or Parent (provided that the terminating
party is not then in material breach of any representation, warranty, covenant
or other agreement contained herein) if there shall have been a material breach
of any of the covenants or agreements or any of the representations or
warranties set forth in this Agreement on the part of the other party which
breach is not cured within thirty (30) days following written notice to the
party committing such breach, or which breach, by its nature, cannot be cured
prior to Closing;
(iv) by the Company if the transaction shall not have been
consummated on or before October 12, 2001, unless the failure of Closing to
occur by such date shall be due to the failure of the Company to perform or
observe the covenants and agreements of the Company set forth herein;
(v) by Parent if the transaction shall not have been
consummated on or before October 12, 2001, unless the failure of Closing to
occur by such date shall be due to the failure of Sub to perform or observe the
covenants and agreements of Sub set forth herein; and
(vi) by the Company or Parent if the Average Closing Price
per share of Parent's Common Stock at the time of Closing is less than $3.25 or
greater than $4.75.
(b) In the event of termination of this Agreement by either
Company, Parent or Sub as provided in 10.1(a), this Agreement shall forthwith
become void and have no effect, and neither the Shareholders, the Company, Sub,
or Parent, nor any of their respective Subsidiaries or Affiliates or any of the
officers, directors or stockholders of any of them shall have any liability of
any nature whatsoever hereunder, or in connection with the transactions
contemplated hereby, except (i) the confidentiality provisions of Sections
5.1(a) and 5.2(b), the publicity provisions in Section 5.3(b) and the costs,
expenses and legal fees provisions of Section 10.2 shall survive any termination
of this Agreement, and (ii) notwithstanding anything to the contrary contained
in this Agreement, neither the Shareholders and Company nor Parent and Sub shall
be relieved or released from any liabilities or Losses arising out of its
willful breach of any provision of this Agreement.
AGREEMENT AND PLAN OF MERGER - Page 43
Section 10.2 Costs, Expenses and Legal Fees. Each party hereto shall bear
------------------------------
its own costs and expenses (including accounting costs and attorneys' fees),
except that each party hereto agrees to pay the costs and expenses (including
reasonable attorneys' fees and expenses) incurred by the other parties in
successfully (a) enforcing any of the terms of this Agreement or (b) proving
that another party breached any of the terms of this Agreement or related
documents.
Section 10.3 Notices and Payments. All notices, demands and other
--------------------
communications hereunder shall be in writing and shall be delivered (i) in
person, or (ii) by United States mail, certified or registered, with return
receipt requested, or (iii) by national overnight courier service, as follows:
If to Company: First Consumer Credit, LLC
00000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
ATTN: Xxxxx X. Xxxxxxxx, President
If to Shareholders: At their address as set forth on the
Signature Page of this Agreement
with a copy to
Xxxx Xxxxxx
Xxxxxx Rake & Xxxxxx, PC
00000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
If to Sub: Home Credit Acquisition Inc.
000 Xxxxx Xxxxxxx 000 Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000
ATTN: Xxxxxx X. Xxxxx, President
If to Parent: U.S. Home System, Inc.
000 Xxxxx Xxxxxxx 000 Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000
ATTN: Xxxxxx X. Xxxxx, President
with a copy to
Xxxxxxx Xxxxxx L.L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
ATTN: Xxxxxxx X. Xxxxxxx
The persons or addresses to which mailings or deliveries shall be made may be
changed from time to time by notice given pursuant to the provisions of this
Section 13.3. Any notice, demand or other communication given pursuant to the
provisions of this Section 13.3 shall be deemed to have been given on the date
actually delivered against proof of receipt therefor.
AGREEMENT AND PLAN OF MERGER - Page 44
Section 10.4 Third Party Beneficiaries. Nothing expressed or referred to in
-------------------------
this Agreement shall be construed to benefit or create any right or cause of
action in or on behalf of any Person (including any Transferred Employee) other
than Company, the Shareholders, the Parent and Sub. This Agreement and all of
its provisions and conditions are for the sole and exclusive benefit of the
parties to this Agreement and their successors and permitted assigns.
Section 10.5 Independent Contractors. Nothing contained in this Agreement
-----------------------
or any other Operative Document shall be construed as creating or constituting a
partnership, joint venture or agency between the parties to this Agreement.
Rather, the parties shall be deemed independent contractors with respect to each
other for all purposes.
Section 10.6 Successors and Assigns. All terms and provisions of this
----------------------
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns. This Agreement and
the rights, privileges, duties and obligations of the parties hereto may not be
assigned, delegated or otherwise transferred (by operation of law or otherwise)
by any party without the prior written consent of the other party; provided,
however, that such consent shall not be required (a) for the assignment by Sub
of its rights and privileges hereunder to an Affiliate of Sub (it being
understood that no such assignment shall relieve Sub of its duties or
obligations hereunder), or (b) for the assignment, delegation or other transfer
by Sub or Company of its rights, privileges, duties and obligations hereunder to
any Person into or with which Sub or Company shall merge or consolidate or to
which Sub or Company shall sell all or substantially all of its assets, provided
that the assignee formally agrees in writing to assume all the rights and
obligations of the assigning party created hereby. This Agreement shall not be
deemed to confer upon any Person not a party hereto any rights or remedies
hereunder.
Section 10.7 Amendments and Waivers. This Agreement, any of the instruments
----------------------
referred to herein and any of the provisions hereof or thereof shall not be
amended, modified or waived in any fashion except by an instrument in writing
signed by the parties hereto. No waiver by any party hereto of any default or
breach by another party of any representation, warranty, covenant or condition
contained in this Agreement, any exhibit or any document, instrument or
certificate contemplated hereby shall be deemed to be a waiver of any subsequent
default or breach by such party of the same or any other representation,
warranty, covenant or condition. No act, delay, omission or course of dealing on
the part of any party in exercising any right, power or remedy under this
Agreement or at law or in equity shall operate as a waiver thereof or otherwise
prejudice any of such party's rights, powers and remedies. All remedies, whether
at law or in equity, shall be cumulative and the election of any one or more
shall not constitute a waiver of the right to pursue other available remedies.
Section 10.8 Severability of Provisions. If any provision of this Agreement
--------------------------
or the application of any such provision to any Person or circumstances is
invalid or unenforceable, the remainder of this Agreement, or the application of
such provision to Persons or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected by such invalidity or
unenforceability.
Section 10.9 Counterparts; Delivery. This Agreement may be executed in
----------------------
multiple counterparts, each of which shall be deemed an original but all of
which taken together shall constitute a single instrument. The parties
acknowledge that delivery of executed counterparts of
AGREEMENT AND PLAN OF MERGER - Page 45
this Agreement may be effected by a facsimile transmission or other comparable
means, with an original document to be delivered promptly thereafter via
overnight courier.
Section 10.10 Governing Law. This Agreement is made and entered into under
-------------
the laws of the State of Texas without regard to its choice or conflicts of law
principles, and the laws of the State of Texas applicable to agreements made and
to be performed entirely shall govern the validity and interpretation hereof and
the performance by the parties hereto of their respective duties and obligations
hereunder.
Section 10.11 Captions. The captions contained in this Agreement are for
--------
convenience of reference only and do not form a part of this Agreement.
Section 10.12 Entire Agreement. The making, execution and delivery of this
----------------
Agreement by the parties hereto have been induced by no representations,
statements, warranties or agreements other than those herein expressed. This
Agreement and the other written instruments specifically referred to herein
embody the entire understanding of the parties and supersede in their entirety
all prior communication, correspondence, and instruments, and there are no
further or other agreements or understandings, written or oral, in effect
between the parties relating to the subject matter hereof.
Section 10.13 Gender and Number. When the context requires, the gender of
-----------------
all words used herein shall include the masculine, feminine and neuter and the
number of all words shall include the singular and plural.
Section 10.14 Reference to Agreement. Use of the words "herein", "hereof",
----------------------
"hereto" and the like in this Agreement shall be construed as references to this
Agreement as a whole and not to any particular Article, Section or provision of
this Agreement, unless otherwise noted.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
AGREEMENT AND PLAN OF MERGER - Page 46
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement as of the date first written above.
THE COMPANY:
------------
FIRST CONSUMER CREDIT, LLC, a Texas limited
liability company
By: /s/ Xxxxx X. Xxxxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Its: President
Address: 00000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
MEMBERS:
-------
/s/ Xxxxx X. Xxxxxxxx
----------------------------------------------
Xxxxx X. Xxxxxxxx
0000 Xxxxxxxxx
Xxxxxx, Xxxxx 00000
/s/ Xxxxxxx Xxxxxxxx
----------------------------------------------
Xxxxxxx Xxxxxxxx
0000 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
First Savings Bank, F.S.B.
By: /s/ Xxxxxxx Xxxxxxxx
-------------------------------------------
Its: President
Address: 000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx 00000
AGREEMENT AND PLAN OF MERGER - Page 47
SUB:
---
HOME CREDIT ACQUISITION INC.,
a Texas limited liability company
By: U.S. HOME SYSTEMS, INC., its sole Member
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------------
Its: President
Name: Xxxxxx X. Xxxxx
Address: 000 Xxxxx Xxxxxxx 000 Xxxxxx,
Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000
PARENT:
------
U.S. HOME SYSTEMS, INC., a Delaware corporation
By: /s/ Xxxxxx X. Xxxxx
---------------------------------------------
Its: President
Name: Xxxxxx X. Xxxxx
Address: 000 Xxxxx Xxxxxxx 000 Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000
AGREEMENT AND PLAN OF MERGER - Page 48
INDEX OF SCHEDULES AND EXHIBITS
SCHEDULES DESCRIPTION
---------------------- -----------------------------------------------------
2.1(d) Directors and Officers of the Company
3.7 Issuance of Stock
4.1 Validity and Capitalization
4.5 Required Licenses and Permits
4.7 Non-Contravention
4.8(a) Governmental Approvals
4.8(b) Required Consents
4.9 Material Contracts of the Company
4.12(c) Tax Matters
4.13 Encumbrances
4.15 List of Employees; Cash Compensation
4.17(b) Company's Plans
4.17(c) Company's Plans Subject to Title IV of ERISA
4.17(l) Post-Retirement Benefits
4.17(m) Agreements
4.19(b) Debt of the Company
4.19(c) Receivables of the Company
4.19(d) Payables of the Company
4.20 Ownership of Parent's Common Stock
EXHIBIT DESCRIPTION
---------------------- -----------------------------------------------------
A Articles of Merger
B Employment Agreement of Xxxxx Xxxxxxxx
C Escrow Agreement
D Retail Installment Contract Origination and
Indemnification Agreement