EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
among
SUMMIT ACCEPTANCE CORPORATION
S-ACQUISITION CORP.
CAPITAL ONE FINANCIAL CORPORATION
and
THE SELLERS NAMED HEREIN
Dated as of July 13, 1998
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
SECTION 1.1 The Merger........................................1
SECTION 1.2 Effective Time....................................2
SECTION 1.3 Effects of the Merger.............................2
SECTION 1.4 Certificate of Incorporation; By-Laws.............2
SECTION 1.5 Directors and Officers............................2
SECTION 1.6 Conversion of Company Common Stock and
Warrants; Stock of Surviving Corporation.........2
SECTION 1.7 Treatment of Options..............................3
SECTION 1.8 Fractional Interests..............................4
SECTION 1.9 Surrender of Shares of Company Common Stock
and Base Warrants; Stock Transfer Books..........5
SECTION 1.10 Closing and Closing Date.........................6
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND STOCK
SELLERS
SECTION 2.1 Organization and Qualification; Subsidiaries......6
SECTION 2.2 Capitalization....................................7
SECTION 2.3 Actions and Authority; Enforceability; Title;
Written Consent..................................8
SECTION 2.4 Absence of Certain Changes........................9
SECTION 2.5 Financial Statements..............................9
SECTION 2.6 Consents and Approvals; No Violation.............11
SECTION 2.7 Brokers..........................................11
SECTION 2.8 Employee Benefit Matters.........................11
SECTION 2.9 Actions and Proceedings..........................14
SECTION 2.10 Tax Matters.....................................14
SECTION 2.11 Compliance with Law.............................16
SECTION 2.12 Intellectual Property...........................17
SECTION 2.13 Real Property; Personal Property................18
SECTION 2.14 Insurance.......................................19
SECTION 2.15 Material Contracts..............................19
SECTION 2.16 Related Party Transactions......................19
SECTION 2.17 Liens...........................................20
SECTION 2.18 State Takeover Statute Inapplicable.............20
SECTION 2.19 Required Action of Company Stockholders.........20
SECTION 2.20 Employee Relations..............................20
SECTION 2.21 Loans...........................................21
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SECTION 2.22 Year 2000.......................................22
SECTION 2.23 Environmental Matters...........................22
SECTION 2.24 Reorganization..................................22
SECTION 2.25 Disclosure......................................22
SECTION 2.26 Investment......................................22
SECTION 2.27 Representation Letters..........................23
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF WARRANT SELLERS
SECTION 3.1 Actions and Authority; Enforceability; Title.....23
SECTION 3.2 Consents and Approvals; No Violation.............23
SECTION 3.3 Brokers..........................................24
SECTION 3.4 Reorganization...................................24
SECTION 3.5 Investment.......................................24
SECTION 3.6 Representation Letters...........................24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
SECTION 4.1 Organization and Qualification...................24
SECTION 4.2 Capitalization...................................24
SECTION 4.3 Authority Relative to this Agreement.............25
SECTION 4.4 Consents and Approvals; No Violation.............25
SECTION 4.5 SEC Documents....................................26
SECTION 4.6 Reorganization...................................26
SECTION 4.7 Issuance of Parent Common Stock..................27
SECTION 4.8 Brokers..........................................27
SECTION 4.9 Form S-3........................................27
ARTICLE V
COVENANTS
SECTION 5.1 Conduct of Business of the Company...............27
SECTION 5.2 Alternative Transactions.........................30
SECTION 5.3 Access to Information............................30
SECTION 5.4 Reasonable Best Efforts..........................31
SECTION 5.5 Indemnification of Officers and Directors........32
SECTION 5.6 Certain Employee Matters.........................32
SECTION 5.7 State Takeover Statutes..........................32
SECTION 5.8 Notification of Certain Matters..................32
SECTION 5.9 Public Announcements.............................33
SECTION 5.10 Repayment of Indebtedness; Operative
Documents; Base Warrants.......................33
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ARTICLE VI
CONDITIONS OF MERGER
SECTION 6.1 Conditions to Obligation of the Company,
Parent and Sub to Effect the Merger.............34
SECTION 6.2 Conditions to Obligations of the Company
to Effect the Merger............................34
SECTION 6.3 Conditions to Obligations of Parent and
Sub to Effect the Merger........................35
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination......................................36
SECTION 7.2 Effect of Termination............................37
SECTION 7.3 Expenses.........................................37
SECTION 7.4 Amendment........................................37
SECTION 7.5 Waiver...........................................37
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Survival of Representations and Warranties.......37
SECTION 8.2 Terms of Indemnification.........................38
SECTION 8.3 Procedures.......................................38
SECTION 8.4 Limitation on Indemnification Obligations;
Indemnification Threshold.......................39
SECTION 8.5 Indemnification Payments.........................40
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Notices..........................................40
SECTION 9.2 Certain Definitions..............................42
SECTION 9.3 Severability.....................................46
SECTION 9.4 Entire Agreement; Assignment.....................46
SECTION 9.5 Parties in Interest..............................47
SECTION 9.6 Restrictions on Transfer........................47
SECTION 9.7 Governing Law and Consent to Jurisdiction........48
SECTION 9.8 Headings.........................................48
SECTION 9.9 Counterparts.....................................48
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EXHIBIT A Articles of Incorporation
EXHIBIT B By-Laws
EXHIBIT C Warrant Amounts
EXHIBIT D Registration Rights Agreement
EXHIBIT E Form of Individual's Representation Letter
EXHIBIT F Form of Trust's Representation Letter
EXHIBIT G Form of Corporation/Partnership's Representation
Letter
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of July 13,
1998 (this "Agreement"), among CAPITAL ONE FINANCIAL CORPORATION,
a Delaware corporation ("Parent"), S-ACQUISITION CORP., a Texas
corporation and a wholly-owned subsidiary of Parent ("Sub"),
SUMMIT ACCEPTANCE CORPORATION, a Texas corporation (the
"Company"), the Stock Sellers listed on the signature pages
hereto (the "Stock Sellers") and the Warrant Sellers listed on
the signature pages hereto (the "Warrant Sellers," and
collectively with the Stock Sellers, the "Sellers"). Certain
terms used herein are defined in Section 9.2 hereof.
WHEREAS, the Boards of Directors of Parent, Sub and
the Company have each adopted resolutions approving this
Agreement, the merger of Sub with and into the Company, and the
Company becoming a wholly-owned, direct subsidiary of Parent (the
"Merger") in accordance with the Texas Business Corporation Act,
as amended (the "TBCA"), and upon the terms and subject to the
conditions set forth herein;
WHEREAS, the Sellers desire to exchange their shares
of the Company's common stock and their warrants to purchase
shares of the Company's common stock for the common stock of
Parent on the terms set forth herein; and
WHEREAS, for federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of
1986, as amended (the "Code"), and that this Agreement should
constitute a "plan of reorganization" for the purposes of Section
368 of the Code.
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements herein contained, and
intending to be legally bound hereby, each of Parent, Sub, the
Company and the Sellers hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to
the conditions of this Agreement and in accordance with the TBCA,
at the Effective Time (as defined in Section 1.2 hereof), 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 corporation of the
Merger (the "Surviving Corporation"). At Parent's election, the
Merger alternatively may be structured so that any direct,
wholly-owned Subsidiary of Parent which is incorporated in Texas
may be substituted for Sub as a constituent corporation in the
Merger. In the event of such an election, the parties agree to
execute an appropriate amendment to this Agreement in order to
reflect such election.
SECTION 1.2 Effective Time. The parties hereto shall
cause the Merger to be consummated by filing duly executed and
verified articles of merger (the "Articles of Merger") on the
Closing Date with the Secretary of State of the State of Texas,
in such form as is required by, and executed in accordance with,
the TBCA. The Merger shall become effective upon filing of the
Articles of Merger and the taking of any required action by the
Secretary of State of the State of Texas as provided under
applicable law. The date and time at which the Merger becomes so
effective is referred to herein as the "Effective Time."
SECTION 1.3 Effects of the Merger. The Merger shall
have the effects set forth in this Agreement and the applicable
provisions of the TBCA. Without limiting the generality of the
foregoing and subject thereto, at the Effective Time all the
property, rights, privileges, immunities, powers and franchises
of the Company and Sub shall vest in the Surviving Corporation,
and all debts, liabilities and duties of the Company and Sub
shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.4 Certificate of Incorporation; By-Laws. (a)
At the Effective Time, and without any further action on the part
of Parent, the Company or Sub, the text of the Articles of
Incorporation of the Surviving Corporation shall be as set forth
in Exhibit A hereto until thereafter amended as provided therein
and under the TBCA.
(b) At the Effective Time and without any further
action on the part of Parent, the Company or Sub, the By-Laws of
Sub as set forth in Exhibit B hereto shall be the By-Laws of the
Surviving Corporation and thereafter may be amended or repealed
in accordance with their terms or the Articles of Incorporation
of the Surviving Corporation or as provided by law.
SECTION 1.5 Directors and Officers. The directors of
Sub immediately prior to the Effective Time, who shall be Messrs.
Fairbank, Morris, Liberson, Willey, Xxxx and Xxxxxx, shall be the
initial directors of the Surviving Corporation, each to hold
office in accordance with the Articles of Incorporation and
By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation each to hold office
in accordance with the Articles of Incorporation and By-Laws of
the Surviving Corporation, in each case until their respective
successors are duly elected or appointed (as the case may be) and
qualified.
SECTION 1.6 Conversion of Company Common Stock and
Warrants; Stock of Surviving Corporation. At the Effective Time,
by virtue of the Merger and without any action on the part of
Parent, Sub, the Company or the Sellers:
(a) Subject to Section 1.8 hereof, each share of
common stock, par value $0.01 per share, of the Company ("Company
Common Stock"), issued and outstanding immediately prior to the
Effective Time (other than shares of Company Common Stock to be
canceled in accordance with Section 1.6(c) hereof), shall be
converted into and represent the right to receive a number of
fully paid and nonassessable shares of common stock, par value
$0.01 per share, of Parent ("Parent Common Stock") equal to the
quotient of (i) 7.5855004, divided by (ii) the Market Price. Such
number of shares of Parent Common Stock issuable with respect to
a share of Company Common Stock is referred to herein as the
"Merger Consideration." The Merger
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Consideration shall be payable upon the surrender of the
certificate formerly representing a share of Company Common
Stock. As of the Effective Time, all such shares of Company
Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist,
and each holder of a certificate representing any such shares of
Company Common Stock shall cease to have any rights with respect
thereto, except the right to receive (A) the Merger Consideration
and any cash in lieu of fractional shares of Parent Common Stock
to be issued or paid in consideration therefor upon surrender of
such certificate in accordance with Section 1.9(a) hereof and (B)
any dividends and distributions payable in accordance with
Section 1.9(c) hereof, in each case without interest and subject
to any applicable withholding obligations.
(b) Subject to Section 1.8 hereof, all Base Warrants
held by a Warrant Seller that are issued and outstanding
immediately prior to the Effective Time shall be converted into
and represent the right to receive, in the aggregate, a number of
fully paid and nonassessable shares of Parent Common Stock equal
to the quotient of (i) the number set forth on Exhibit C hereto
with respect to the applicable Warrant Seller (the "Warrant
Amount"), divided by (ii) the Market Price. Such number of shares
of Parent Common Stock issuable with respect to a Warrant
Seller's Base Warrants is referred to herein as the "Warrant
Consideration." As of the Effective Time, all Base Warrants shall
no longer be outstanding and shall automatically be canceled and
retired and shall cease to exist, and each holder of a
certificate representing any such Base Warrants shall cease to
have any rights with respect thereto, except the right to receive
the Warrant Consideration in accordance with this Section 1.6(b)
and any cash in lieu of fractional shares of Parent Common Stock
to be issued or paid in consideration therefor upon surrender of
such certificate in accordance with Section 1.9 hereof, without
interest and subject to any applicable withholding obligations.
As of the Effective Time, all Contingent Warrants and Additional
Warrants shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist, without any
consideration of any sort paid or due in respect thereof. The
terms "Contingent Warrant" and "Additional Warrant" shall have
the meanings assigned to such terms in the 1997 Agreement and the
1998 Agreement, as applicable.
(c) Each share of Company Common Stock that is (i)
held in the treasury of the Company or (ii) owned by Parent, Sub,
any other direct or indirect Subsidiary of Parent or any direct
or indirect Subsidiary of the Company, in each case immediately
prior to the Effective Time, shall be canceled and retired
without any conversion thereof and no payment or distribution
shall be made with respect thereto.
(d) Each share of common, preferred or other capital
stock of Sub issued and outstanding immediately prior to the
Effective Time shall remain outstanding and shall be unchanged
after the Merger and shall thereafter constitute all of the
issued and outstanding capital stock of the Surviving
Corporation.
SECTION 1.7 Treatment of Options. (a) Prior to the
Effective Time, the Board of Directors of the Company and the
Board of Directors of Parent shall adopt appropriate resolutions
and take all other actions necessary to provide that, effective
as of the Effective Time, all the outstanding stock options (the
"Company Stock Options") heretofore granted under any stock
option, performance incentive or similar plan of the Company and
its Subsidiaries (the
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"Stock Plans") shall be assumed by Parent and converted
automatically into options (collectively, "Parent Stock Options")
to purchase shares of Parent Common Stock in an amount and at an
exercise price determined as provided below:
(i) The number of shares of Parent Common Stock to be
subject to a Parent Stock Option shall be equal to the
product of (A) the number of shares of Company Common Stock
subject (immediately prior to the Effective Time) to the
related Company Stock Option, multiplied by (B) the Option
Exchange Ratio, provided that any fractional share of
Parent Common Stock resulting from such multiplication
shall be rounded down to the nearest whole share; and
(ii) The exercise price per share of Parent Common
Stock under a Parent Stock Option shall be equal to the
quotient of (C) the exercise price per share of the Company
Common Stock under the related Company Stock Options,
divided by (D) the Option Exchange Ratio, provided that
such exercise price shall be rounded down to the nearest
cent (except that with respect to any "incentive stock
options" (as defined in Section 422 of the Code) such
exercise price shall be rounded up to the nearest cent).
The adjustment provided herein with respect to any options which
are "incentive stock options" (as defined in Section 422 of the
Code) shall be and is intended to be effected in a manner which
is consistent with Section 424(a) of the Code. After the
Effective Time, each Parent Stock Option shall be exercisable and
shall vest upon the same terms and conditions as were applicable
to the related Company Stock Option immediately prior to the
Effective Time.
(b) Following the Effective Time no holder of a
Company Stock Option or any participant in any Stock Plan shall
have any right thereunder to acquire capital stock of the
Company, Sub, or the Surviving Corporation. As of the Effective
Time, none of Sub, the Company, the Surviving Corporation or any
of their respective Subsidiaries is or will be bound by any
Company Stock Options, other options, warrants, rights or
agreements which would entitle any Person, other than Sub or its
Affiliates, to own any capital stock of the Company, Sub, the
Surviving Corporation or any of their respective Subsidiaries or
to receive any payment in respect thereof, except as otherwise
provided herein.
(c) Parent agrees that it shall take all action
necessary, on or prior to the Effective Time, to authorize and
reserve a number of shares of Parent Common Stock sufficient for
issuance upon exercise of Parent Stock Options as contemplated by
this Section 1.7.
SECTION 1.8 Fractional Interests. Notwithstanding
anything to the contrary contained herein, no certificates or
scrip representing fractional shares of Parent Common Stock shall
be issued in connection with the Merger, and such fractional
interests shall not entitle the owner thereof to any rights of a
shareholder of Parent. In lieu of any such fractional interests,
each holder of shares of Company Common Stock or Base Warrants
exchanged pursuant to Section 1.6 hereof who would otherwise have
been entitled to receive a fraction of a share of Parent Common
Stock (after taking into account all shares of Company Common
Stock and Base Warrants then held by such holder) shall receive
cash (without interest) in an amount equal to the
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product of (i) such fractional part of a share of Parent Common
Stock, multiplied by (ii) the Market Price.
SECTION 1.9 Surrender of Shares of Company Common
Stock and Base Warrants; Stock Transfer Books. (a) At the
Effective Time, each holder of an outstanding certificate or
certificates that prior thereto represented shares of Company
Common Stock or Base Warrants shall surrender such certificate or
certificates to Parent, and Parent shall deliver to each such
holder in exchange therefor, without cost to such holder, a
certificate for the number of shares of Parent Common Stock into
which the shares of Company Common Stock or Base Warrants
theretofore represented by the certificate or certificates so
surrendered shall have been converted and any cash payable in
lieu of any fractional shares of Parent Common Stock as provided
in this Article I. If any certificate for shares of Parent Common
Stock is to be issued in a name other than that in which the
certificate for shares or warrants surrendered in exchange
therefor is registered, it shall be a condition of such exchange
that the holder requesting such exchange shall pay to Parent any
transfer taxes required by reason of the issuance of certificates
for such shares of Parent Common Stock in a name other than the
registered holder of the certificate surrendered, or shall
establish to the satisfaction of Parent that such taxes have been
paid or are not applicable. Notwithstanding the foregoing, no
party hereto shall be liable to a holder of shares of Company
Common Stock or Base Warrants for any Parent Common Stock or
dividends or distributions thereon delivered to a public official
pursuant to any applicable abandoned property, escheat or similar
law.
(b) At the Effective Time, the stock transfer books of
the Company shall be closed and thereafter there shall be no
further registration of transfers of shares of Company Common
Stock on the records of the Company. From and after the Effective
Time, the holders of certificates evidencing ownership of shares
of Company Common Stock or Base Warrants outstanding immediately
prior to the Effective Time shall cease to have any rights with
respect to such shares of Company Common Stock or Base Warrants
except as otherwise provided for herein or by applicable law. If
after the Effective Time, certificates representing shares of
Company Common Stock or Base Warrants are presented to the
Surviving Corporation, they shall be canceled and exchanged for
certificates representing Parent Common Stock and, if required
pursuant to Section 1.8 hereof, cash, pursuant to the provisions
of this Article I.
(c) No dividends or other distributions declared or
made after the Effective Time with respect to shares of Parent
Common Stock shall be paid to the holder of any unsurrendered
certificate representing shares of Company Common Stock or Base
Warrants with respect to the shares of Parent Common Stock that
such holder is entitled to receive and no cash payment in lieu of
fractional interests shall be paid pursuant to Section 1.8 hereof
until such holder shall surrender such certificate in accordance
with the provisions of this Agreement. Upon such surrender,
Parent shall cause to be paid to the Person in whose name the
certificates representing such shares of Parent Common Stock
shall be issued, any dividends or distributions with respect to
such shares of Parent Common Stock which have a record date after
the Effective Time and which have become payable between the
Effective Time and the time of such surrender. In no event shall
the Person entitled to receive such dividends or distributions be
entitled to receive interest thereon.
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(d) If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other
actions or things are necessary or desirable to vest, perfect or
confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights,
properties or assets of either Sub or the Company acquired or to
be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out the
purposes of this Agreement, the officers of the Surviving
Corporation shall be authorized to execute and deliver, in the
name and on behalf of each of Sub and the Company, all such
deeds, bills of sale, assignments and assurances and to take and
do, in such names and on such behalves or otherwise, all such
other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest
in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out the purposes of
this Agreement.
SECTION 1.10 Closing and Closing Date. Unless this
Agreement shall have been terminated and the transactions herein
contemplated shall have been abandoned pursuant to and in
accordance with the provisions of Article VII hereof, the closing
(the "Closing") of the transactions contemplated by this
Agreement shall take place (a) at 10:00 a.m. (Virginia time) on
the second business day after all of the conditions to the
respective obligations of the parties set forth in Article VI
hereof shall have been satisfied or waived or (b) at such other
time and date as Parent and the Company shall agree (such date
and time on and at which the Closing occurs being referred to
herein as the "Closing Date"). The Closing shall take place at
the offices of Parent located in Falls Church, Virginia.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND STOCK SELLERS
The Stock Sellers and the Company, jointly and
severally, hereby represent and warrant to Parent and Sub that:
SECTION 2.1 Organization and Qualification;
Subsidiaries. Each of the Company and its Subsidiaries is a duly
organized and validly existing corporation in good standing under
the laws of its jurisdiction of incorporation, with all corporate
power and authority to own or lease all of its properties and
assets and conduct its business as currently conducted and is
duly qualified and in good standing as a foreign corporation
authorized to do business in each of the jurisdictions in which
the character of the properties owned or held under lease by it
or the nature of the business transacted by it makes such
qualification necessary, except where the failure to be so
qualified would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect. Schedule 2.1 sets
forth a complete and correct list of all the Company's
Subsidiaries. The Company has heretofore delivered to Parent and
Sub accurate and complete copies of the Articles of Incorporation
and By-Laws (or similar governing documents) as currently in
effect of the Company and each of its Subsidiaries. All of the
outstanding shares of capital stock of each of the Company's
Subsidiaries are duly authorized and validly issued, and are
fully paid and nonassessable. Except with respect to the
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Company's ownership of its Subsidiaries, or the ownership of one
of the Company's Subsidiaries by another of the Company's
Subsidiaries, and except as set forth in Schedule 2.1, neither
the Company nor any of its Subsidiaries, directly or indirectly,
owns any interest in any Person.
SECTION 2.2 Capitalization. (a) The authorized capital
stock of the Company consists of 10,000,000 shares of Company
Common Stock. As of the date hereof: (i) 5,000,000 shares of
Company Common Stock are issued and outstanding; (ii) no shares
of Company Common Stock are held in the Company's treasury; (iii)
there are outstanding Company Stock Options to purchase an
aggregate of 250,000 shares of Company Common Stock under the
Stock Plans; (iv) there are outstanding Base Warrants to purchase
an aggregate of 2,146,971 shares of Company Common Stock; (v)
there are outstanding Additional Warrants to purchase 811,404
shares of Company Common Stock; (vi) there are outstanding
Contingent Warrants to purchase 1,410,815 shares of Company
Common Stock; and (vii) there are no stock appreciation rights or
limited stock appreciation rights or other similar rights or
securities granted under the Stock Plans or otherwise
outstanding. Schedule 2.2(a) contains a true, accurate and
complete list of the name of each holder of Company Stock
Options, the number of outstanding Company Stock Options held by
such holder, the grant date of each such Company Stock Option,
the number of shares of Company Common Stock such holder is
entitled to receive upon the exercise of each such Company Stock
Option and the corresponding exercise price. Schedule 2.2(a)
contains a true, accurate and complete list of the name of each
beneficial owner of shares of Company Common Stock or Warrants
(and in the case of Warrants, whether each such Warrant is a Base
Warrant, Contingent Warrant or Additional Warrant) and the number
of outstanding shares of Company Common Stock beneficially owned
by such Person or the number of shares of Company Common Stock
such Person would be entitled to receive upon the exercise of
each such Warrant. Except for this Agreement and as set forth in
this Section 2.2(a), there are no outstanding (A) shares of
capital stock or other voting securities of the Company, (B)
securities of the Company convertible into or exchangeable for
shares of capital stock or voting securities or ownership
interests in the Company or (C) options, warrants, rights or
other agreements or commitments to acquire from the Company, and
no obligation of the Company to issue, any capital stock, voting
securities or other ownership interests in, or securities
convertible into or exchangeable for capital stock or voting
securities or other ownership interests in, the Company, and no
obligation of the Company to grant, extend or enter into any
subscription, warrant, right, convertible or exchangeable
security or other similar agreement or commitment (the items in
clauses (A), (B) and (C) being referred to herein collectively as
the "Company Securities"). Except as set forth in this Section
2.2(a), there are no outstanding obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise
acquire any Company Securities and there are no performance
awards outstanding under the Company's Stock Plans or any other
outstanding stock related awards. Except the Second Amended and
Restated Stockholders Agreement, dated April 10, 1998, to which
the Sellers are parties, there are no voting trusts or other
agreements or understandings to which the Company or any of its
Subsidiaries is a party or concerning which the Company is aware
with respect to the voting of capital stock of the Company or any
of its Subsidiaries. No Persons other than the Sellers
beneficially own any Company Securities.
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(b) Except as set forth in Schedule 2.1, the Company
is, directly or indirectly, the record and beneficial owner of
all the outstanding shares of capital stock of each of its
Subsidiaries, free and clear of any lien, mortgage, pledge,
charge, security interest or encumbrance of any kind. There are
no outstanding (i) securities of the Company or any of its
Subsidiaries convertible into or exchangeable for shares of
capital stock or other voting securities or ownership interests
in any Subsidiary of the Company, (ii) options, warrants, rights
or other agreements or commitments to acquire from the Company or
any of its Subsidiaries, or other obligation of the Company or
any of its Subsidiaries to issue, any capital stock, voting
securities or other ownership interests in, or any securities
convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any Subsidiary of the
Company, or other obligation of the Company or any of its
Subsidiaries to grant, extend or enter into any subscription,
warrant, right, convertible or exchangeable security or other
similar agreement or commitment with respect to a Subsidiary of
the Company (the items in clauses (i) and (ii) being referred to
herein collectively as the "Subsidiary Securities"). There are no
outstanding obligations of the Company or its Subsidiaries to
repurchase, redeem or otherwise acquire any outstanding
Subsidiary Securities.
(c) As of the date hereof, the aggregate principal
amount outstanding (including accreted value, if any) under the
Notes and the Xxxxxxx Debenture is $54,525,000, plus unpaid
interest thereon accrued in accordance with the terms thereof. As
of the date hereof, all other outstanding indebtedness for money
borrowed of the Company and its Subsidiaries has been incurred
and is outstanding under the credit facilities listed on Schedule
2.2(c) (the "Credit Facilities"). The maximum principal amount
that may be outstanding under each Credit Facility at any time is
set forth on Schedule 2.2(c). Prior to the date hereof, the
Company provided Parent with true, correct and complete copies of
all agreements and instruments related to the Credit Facilities,
and no Credit Facility has been amended or modified except as set
forth in such agreements and instruments.
SECTION 2.3 Actions and Authority; Enforceability;
Title; Written Consent. (a) The Board of Directors of the Company
(at a meeting or meetings duly called and held or by unanimous
written consent effected in accordance with applicable law) has,
by the unanimous vote of all directors, (i) determined that the
Merger is fair to and in the best interests of the shareholders
of the Company, and (ii) resolved to recommend approval and
adoption of the plan of merger (within the meaning of Article
5.03 of the TBCA) contained in this Agreement by the shareholders
of the Company, (iii) taken all necessary steps to render Article
13.03 of the TBCA inapplicable to the transactions contemplated
hereby and (iv) resolved to elect, to the extent permitted by
law, not to be subject to any state takeover law that may purport
to be applicable to the transactions contemplated hereby. The
Company has all requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company and no other corporate
proceedings on the part of the Company (other than those
undertaken by the Stock Sellers hereby) are necessary to
authorize this Agreement or to consummate the transactions so
contemplated. This Agreement has been duly and validly
8
executed and delivered by the Company and, assuming this
Agreement constitutes the legal, valid and binding obligation of
each of Parent and Sub, constitutes a legal, valid and binding
agreement of the Company, enforceable against the Company in
accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and general principles of
equity (whether considered in a proceeding in equity or at law).
(b) Each Stock Seller which is a trust is validly
existing as a trust under the trust agreement or other documents
pursuant to which it was created and under applicable law and has
all requisite power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. Each Stock Seller that is
an individual has the legal capacity to execute, deliver and
perform his obligations under this Agreement. This Agreement has
been duly and validly executed and delivered by each Stock Seller
and, assuming this Agreement constitutes the legal, valid and
binding obligation of each of Parent and Sub, constitutes a
legal, valid and binding agreement of such Stock Seller,
enforceable against such Stock Seller in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally and general principles of equity (whether
considered in a proceeding in equity or at law).
(c) Each Stock Seller has good and marketable title to
and is the lawful owner of the securities listed with respect to
such Stock Seller on Schedule 2.2(a), free and clear of all
liens, encumbrances, equities and claims whatsoever.
(d) Pursuant to and in accordance with Article 5.03
and Article 9.10 of the TBCA, each Stock Seller, in its capacity
as a shareholder of the Company, hereby consents to the adoption
of, and approves, the plan of merger (within the meaning of
Article 5.03 of the TBCA) set forth herein and the transactions
contemplated hereby.
SECTION 2.4 Absence of Certain Changes. Except as set
forth in Schedule 2.4 and except for the transactions expressly
contemplated hereby, since December 31, 1997, (i) the Company and
its Subsidiaries have conducted their respective businesses only
in the ordinary and usual course of business consistent with past
practice, and (ii) there has not been any change in or
development with respect to the Company's business, operations,
condition (financial or otherwise), results of operations, assets
or liabilities, except for changes and developments contemplated
hereby or changes and developments which have not had and would
not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. Except as set forth in
Schedule 2.4, since December 31, 1997, neither the Company nor
any of its Subsidiaries has taken any of the actions prohibited
by Section 5.1 hereof.
SECTION 2.5 Financial Statements.
(a) The Company has delivered to Parent copies of the
audited consolidated financial statements of the Company as at
and for the year ended December 31, 1997, together with all
related schedules and notes, and copies of the unaudited
consolidated financial statements of the Company as at and for
the three months ended March 31, 1998, together with
9
all related schedules and notes (collectively, the "Financial
Statements"). Each of the consolidated balance sheets (including,
where applicable, the related notes and schedules) included in
the Financial Statements fairly presents the consolidated
financial position of the Company and its consolidated
Subsidiaries as of the date thereof, and each of the consolidated
statements of income (or statements of results of operations),
stockholders' equity and cash flows (including the related notes
and schedules) included in the Financial Statements fairly
presents the results of operations, stockholders' equity,
retained earnings and cash flows, as the case may be, of the
Company and its Subsidiaries (on a consolidated basis) for the
periods or as of the dates, as the case may be, set forth
therein, in each case in accordance with United States generally
accepted accounting principles applied on a consistent basis
throughout the periods covered (except as stated therein or,
where applicable, in the notes thereto and except, in the case of
the financial statements as at and for the three months ended
March 31, 1998, for normal and recurring audit adjustments).
(b) At December 31, 1997, and March 31, 1998, there
were no liabilities or obligations of any nature (whether
accrued, absolute, fixed, contingent, liquidated, unliquidated or
otherwise and whether due or to become due) required by United
States generally accepted accounting principles to be set forth
on the balance sheet of the Company and its Subsidiaries taken as
a whole that were not reflected or reserved against on such
balance sheet as of December 31, 1997, included in the Financial
Statements or on such balance sheet as of March 31, 1998,
included in the Financial Statements, respectively. Since
December 31, 1997, neither the Company nor any of its
Subsidiaries has incurred any liabilities other than liabilities
which (i) have been incurred in the ordinary course of business
consistent with past practice and (ii) have not had and would not
reasonably be expected to have, individually or in aggregate, a
Material Adverse Effect.
(c) When delivered pursuant to Section 5.3(c) hereof,
the consolidated balance sheet (including, if applicable, the
related notes and schedules) included in the June Statements (as
defined in Section 5.3(c) hereof) will fairly present the
consolidated financial position of the Company and its
consolidated Subsidiaries as of June 30, 1998, and, to the extent
applicable, the consolidated statements of income (or statements
of results of operations), stockholders' equity and cash flows
(including the related notes and schedules) included in the June
Statements will fairly present the results of operations,
stockholders' equity, retained earnings and cash flows, as the
case may be, of the Company and its Subsidiaries (on a
consolidated basis) for the periods or as of the date, as the
case may be, set forth therein, in each case in accordance with
United States generally accepted accounting principles applied on
a consistent basis throughout the periods covered (except as
stated therein or, where applicable, in the notes thereto and
except for normal and recurring audit adjustments). At June 30,
1998, there were no liabilities or obligations of any nature
(whether accrued, absolute, fixed, contingent, liquidated,
unliquidated or otherwise and whether due or to become due)
required by United States generally accepted accounting
principles to be set forth on the balance sheet of the Company
and its Subsidiaries taken as a whole that will not be reflected
or reserved against on such balance sheet as of June 30, 1998,
included in the June Statements.
10
SECTION 2.6 Consents and Approvals; No Violation.
Neither the execution and delivery of this Agreement by the
Company or any of the Stock Sellers nor the performance by the
Company or any of the Stock Sellers of its obligations hereunder,
nor the consummation of the transactions contemplated hereby will
(i) except with respect to the required consent of MBIA Insurance
Corporation with respect to SAC Receivables Investment
Corporation (as specified on Schedule 2.6) which consent will be
delivered and be in full force and effect at or prior to the
Closing, conflict with or result in any breach of any provision
of the respective Articles of Incorporation or By-Laws (or other
similar governing or trust documents) of the Company, any of its
Subsidiaries or any of the Stock Sellers, (ii) except as set
forth on Schedule 2.6, require any consent, waiver, approval,
authorization or permit of, or filing with or notification to,
any federal, state, local or foreign governmental or regulatory
authority, except as may be required under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
and the TBCA, (iii) except as set forth on Schedule 2.6, violate,
breach, be in conflict with or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a
default) under, or permit the termination of any provision of, or
result in the termination of, the acceleration of the maturity
of, or the acceleration of the performance of any obligation of
the Company, any of its Subsidiaries or any of the Stock Sellers,
or cause an indemnity payment to be made by the Company or any of
its Subsidiaries under, or result in the creation or imposition
of any lien upon any properties, assets or business of the
Company or any of its Subsidiaries under, any note, bond,
indenture, mortgage, deed of trust, lease, franchise, permit
authorization, license, contract, instrument or other agreement
or commitment or any order, judgment or decree to which the
Company, any of its Subsidiaries or any of the Stock Sellers is a
party or by which the Company, any of its Subsidiaries, any of
the Stock Sellers or any of their respective assets or properties
is bound or encumbered, or give any Person the right to require
the Company or any of its Subsidiaries to purchase or repurchase
any notes, bonds or instruments of any kind, or (iv) except as
set forth on Schedule 2.6, violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to the
Company, any of its Subsidiaries, any of the Stock Sellers or any
of their respective properties or assets, except in the case of
clauses (ii) through (iv) above, where failure to obtain such
consent, approval, authorization or permit, or failure to make
such filing or notification, or where such violation, breach,
conflict or default, would not, individually or in the aggregate,
be material to the Company and its Subsidiaries or cause a
material adverse effect on the ability of the Company, any of its
Subsidiaries or any of the Stock Sellers, to perform their
respective obligations hereunder or on the ability of the parties
hereto to consummate the transactions contemplated hereby.
SECTION 2.7 Brokers. No broker or finder, other than
X.X. Xxxxxx Securities, Inc., whose engagement letter has
heretofore been provided to Parent, is entitled to receive any
brokerage, finder's or other fee or commission in connection with
this Agreement or the transactions contemplated hereby based upon
agreements made by or on behalf of the Company, any of its
Subsidiaries or any of their respective officers, directors or
employees or any of the Stock Sellers.
SECTION 2.8 Employee Benefit Matters. (a) Except as
set forth on Schedule 2.8(a), neither the Company nor any of its
Subsidiaries maintains or contributes to, or has any
11
obligation to contribute to or has any liability (including a
liability arising out of an indemnification, guarantee, hold
harmless or similar agreement) with respect to any plan, program,
arrangement, agreement or commitment which is an employment,
consulting, severance pay, termination pay, change in control or
deferred compensation agreement, or an executive compensation,
incentive bonus or other bonus, employee pension, profit-sharing,
savings, retirement, stock option, stock purchase, stock
appreciation rights, severance pay, life, health, disability or
accident insurance plan, or other employee benefit plan, program,
arrangement, agreement or commitment, including any "employee
benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")
(individually, a "Plan," or collectively, the "Plans"). Each such
Plan is identified on Schedule 2.8(a) to the extent applicable,
as one or more of the following: an "employee pension plan" (as
defined in Section 3(2) of ERISA) or an "employee welfare plan"
(as defined in Section 3(1) of ERISA). No Plan is a "defined
benefit plan" (as defined in Section 414 of the Code), a
"multiemployer plan" (as defined in Section 3(37) of ERISA) or a
"multiple employer plan" (as defined in Section 4064 of ERISA).
No Plan is subject to Section 302 of ERISA, Section 412 of the
Code or Title IV of ERISA.
(b) Neither the Company nor any of its Subsidiaries is
subject to any actual or contingent liability under Title IV of
ERISA, Section 302 of ERISA, Section 412 or 4971 of the Code or
any similar provision of foreign law or regulation, whether in
respect of any employee benefit plan maintained by the Company or
any of its Subsidiaries or by any other employer or person or
otherwise.
(c) No event has occurred, and no circumstance exists,
in connection with which the Company, any of its Subsidiaries or
any Plan, directly or indirectly, could be subject to any
material liability under ERISA, the Code or any other law,
regulation or governmental order applicable to any Plan or under
any agreement, instrument, statute, rule of law or regulation
pursuant to or under which the Company or any of its Subsidiaries
has agreed to indemnify or is required to indemnify any Person
against liability incurred under, or for a violation or failure
to satisfy the requirements of, any such statute, regulation or
order.
(d) With respect to each Plan, (i) all material
payments due from the Company or any of its Subsidiaries to date
have been timely made and all material amounts properly accrued
to date or as of the Effective Time as liabilities of the Company
or any of its Subsidiaries which have not been paid have been and
will be properly recorded on the books of the Company; (ii) each
such Plan which is an "employee pension benefit plan" (as defined
in Section 3(2) of ERISA) and intended to qualify under Section
401 of the Code has received a favorable determination letter
from the Internal Revenue Service (the "IRS") with respect to
such qualification, its related trust has been determined to be
exempt from taxation under Section 501(a) of the Code, and, to
the knowledge of the Company, nothing has occurred since the date
of such letter that has or is likely to, and the consummation of
the transactions contemplated hereby will not, adversely affect
such qualification or exemption; (iii) there are no actions,
suits or claims pending (other than routine claims for benefits)
or, to the knowledge of the Company, threatened with respect to
such Plan or against the assets of such Plan and (iv) the Company
has
12
complied with, and such Plan conforms in form and operation to,
all applicable laws and regulations, including ERISA and the
Code, in all material respects.
(e) No Plan is under audit or is the subject of an
investigation by the IRS, the U.S. Department of Labor, the PBGC
or any other federal or state governmental agency.
(f) Except as set forth on Schedule 2.8(a), the
consummation of the transactions contemplated by this Agreement
(alone or together with any other event) will not (i) entitle any
Person to any benefit under any Plan, (ii) accelerate the time of
payment or vesting, or increase the amount, of any compensation
or other benefit due to any Person under any Plan, or (iii)
result in the payment or series of payments by the Company or any
of its subsidiaries to any Person of an "excess parachute
payment" within the meaning of Section 280G of the Code, or any
other payment which is not deductible for federal income tax
purposes under the Code, whether or not such payment is
considered to be reasonable compensation for services rendered.
(g) Except as disclosed in the Financial Statements,
neither the Company nor any of its Subsidiaries has any material
liability with respect to an obligation to provide benefits,
including death or medical benefits (whether or not insured) with
respect to any Person beyond their retirement or other
termination of service other than (i) coverage mandated by Part 6
of Title I of ERISA or Section 4980B of the Code or state law,
(ii) retirement or death benefits under any employee pension
plan, (iii) disability benefits under any employee welfare plan
that have been fully provided for by insurance or otherwise, (iv)
deferred compensation benefits accrued as liabilities on the
books of the Company, or (v) benefits in the nature of severance
pay.
(h) The Company has delivered to Parent and the Sub,
with respect to each Plan for which the following exists:
(i) a copy of the two most recent Forms 5500 with
respect to each Plan;
(ii) a copy of the Summary Plan Description, together
with each Summary of Material Modifications, required under
ERISA with respect to such Plan in the past two years, all
material employee communications relating to such Plan,
and, unless the Plan is embodied entirely in an insurance
policy to which the Company or any of its Subsidiaries is a
party, a true and complete copy of such Plan;
(iii) if the Plan is funded through a trust or any
third party funding vehicle (other than an insurance
policy), a copy of the trust or other funding agreement;
and
(iv) the most recent determination letter received
from the IRS with respect to each Plan that is intended to
be a "qualified plan" under Section 401 of the Code.
(i) With respect to each Plan for which financial
statements are required by ERISA, there has been no material
adverse change in the financial status of such Plan since the
date of the most recent such statements provided to Parent.
13
(j) Neither the Company nor any of its Subsidiaries
has any announced plan or legally binding commitment to create
any additional Plans or to amend or modify any existing Plan,
other than amendments required by law or those that would not
materially increase costs under any such Plan.
SECTION 2.9 Actions and Proceedings. Except as set
forth in Schedule 2.9, there is no claim, suit, action,
proceeding or investigation pending or, to the knowledge of the
Company, threatened, against or relating to the Company or any of
its Subsidiaries that involves a claim against the Company or any
of its Subsidiaries in excess of $100,000 or that would
reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect or that in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the Merger or
any of the other transactions contemplated hereby. Neither the
Company nor any Subsidiary of the Company is subject to any
outstanding judgment, order, writ, injunction, decree or ruling
of any legal or administrative body or arbitrator that has had or
reasonably would be expected to have, individually or in the
aggregate, a Material Adverse Effect.
SECTION 2.10 Tax Matters. (a) Except as set forth on
Schedule 2.10(a) (with paragraph references corresponding to
those set forth below):
(i) the Company and its Subsidiaries (and each Stock
Seller, in respect of income derived from the Company under
Section 1366 of the Code (such income, "Derived Income"))
have timely filed (taking into account all available
extensions) all Tax Returns concerning Taxes (or such Tax
Returns have been filed on behalf of the Company and its
Subsidiaries) required to be filed by applicable law and
have paid all amounts due in respect of Taxes (whether or
not actually shown on such Tax Returns); all such Tax
Returns are true, correct and complete in all material
respects and accurately set forth all items to the extent
required to be reflected or included in such Tax Returns by
applicable federal, state, local or foreign Tax laws,
regulations or rules;
(ii) as of the date hereof, neither the Company nor
any of its Subsidiaries has executed any outstanding
waivers or comparable consents regarding the application of
the statute of limitations with respect to any material
Taxes or Tax Returns; and the period during which any
assessment against the Company or any of its Subsidiaries
may be made by the IRS or other appropriate authority has
expired without waiver or extension of any such period for
each such authority;
(iii) since January 1, 1995, no claim has been made,
and, to the best knowledge of the Company and the Stock
Sellers, prior to January 1, 1995, no claim was made, by
any authority in a jurisdiction where neither the Company
nor any of its Subsidiaries files Tax Returns that it is or
may be subject to taxation by that jurisdiction;
(iv) as of the date hereof, there are no liens with
respect to any material Taxes upon any of the assets and
properties of the Company or its Subsidiaries;
(v) the Company and its Subsidiaries and each Stock
Seller (in respect of Derived Income) has paid in full or
set up reserves in accordance with United States
14
generally accepted accounting principles in respect of all
Taxes for the periods covered by such Tax Returns, as well
as all other Taxes, penalties, interest, fines,
deficiencies, assessments and governmental charges that
have become due or payable (including, without limitation,
all Taxes that the Company and its Subsidiaries are
obligated to withhold from amounts paid or payable to or
benefits conferred upon employees, creditors and third
parties); as of the date hereof, there is no proposed
liability for any material Tax to be imposed upon a Stock
Seller (in respect of Derived Income) or upon the Company
or any of its Subsidiaries for the year ended December 31,
1997, and all prior years for which there is not an
adequate reserve; and
(vi) adequate provisions in accordance with United
States generally accepted accounting principles
consistently applied to each of the Company and its
Subsidiaries have been made in the audited consolidated
financial statements included in the Financial Statements
for the payment of all Taxes for which each of the Company
and its Subsidiaries may be liable for the periods covered
thereby that were not yet due and payable as of the dates
thereof, regardless of whether the liability for such Taxes
is disputed.
(b) There is no contract, agreement or intercompany
account system in existence under which the Company or any of its
Subsidiaries has, or may at any time in the future have, an
obligation to contribute to the payment of any portion of a Tax
(or pay any amount calculated with reference to any portion of a
Tax) of any group of corporations of which the Company or its
Subsidiaries is or was a part.
(c) Set forth on Schedule 2.10(c) is a complete list
of income and other Tax Returns filed by the Company or any of
its Subsidiaries pursuant to the laws or regulations of any
federal, state, local or foreign Tax authority that have been
examined or audited by the IRS or other appropriate authority
during the preceding three years, and a list of all adjustments
resulting from each such examination or audit. Except as set
forth on Schedule 2.10(c), no such examination or audit is in
progress. Except as set forth on Schedule 2.10(c), all
deficiencies proposed as a result of such examinations or audits
have been paid or finally settled and no issue has been raised in
any such examination or audit that, by application of similar
principles, reasonably can be expected to result in the assertion
of a deficiency for any other year not so examined or audited.
Except for Taxes payable with Tax Returns not yet due and filed,
there are no grounds for any further Tax liability, beyond
amounts accrued with respect to the years that have not been
examined or audited.
(d) The Company is not a United States Real Property
Holding Corporation (a "USRPHC") within the meaning of Section
897 of the Code and was not a USRPHC on any "determination date"
(as defined in ss.1.897-2(c) of the United States Treasury
Regulations promulgated under the Code (the "Treasury
Regulations")) that occurred in the five-year period preceding
the Closing.
15
(e) The Company has not executed any closing agreement
pursuant to Section 7121 of the Code or any predecessor provision
thereof, or any similar provision of state or local law.
(f) Each of the Company and its Subsidiaries has
disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code Section 6662.
(g) The Company has not filed a consent pursuant to
Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code) owned by
the Company.
(h) None of the assets owned by the Company or any of
its Subsidiaries is property that is required to be treated as
owned by any other Person pursuant to Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended, as in effect
immediately prior to the enactment of the Tax Reform Act of 1986
or is "tax-exempt use property" within the meaning of Section
168(h) of the Code.
(i) Neither the Company nor any if its Subsidiaries
has agreed or is required to make any adjustments pursuant to
Section 481(a) of the Code or any similar provision of state or
local law by reason of a change in accounting method initiated by
it or any other relevant party and neither the Company nor any of
its Subsidiaries has any knowledge that the IRS has proposed any
such adjustment or change in accounting method, nor has any
application pending with any governmental or regulatory authority
requesting permission for any changes in accounting methods that
relate to the business or assets of the Company or any of its
Subsidiaries.
(j) Neither the Company nor any of its Subsidiaries
has filed an election under Rev. Proc. 95-39, 1995-2 C.B. 399.
(k) The Company has made available to Parent and the
Sub complete and accurate copies of the portions applicable to
each of the Company and its Subsidiaries of all
income and franchise Tax returns, and any amendments thereto,
filed by or on behalf of the Company or any of its Subsidiaries
or any member of a group of corporations including the Company or
any of its Subsidiaries for the taxable years ending 1994 through
1997.
(l) The Company has maintained the books and records
required to be maintained pursuant to Section 6001 of the Code
and the rules and regulations thereunder, and comparable laws,
rules and regulations of the countries, states, counties,
provinces, localities and other political divisions wherein it is
required to file returns and reports relating to Taxes.
SECTION 2.11 Compliance with Law. (a) Except as set
forth on Schedule 2.11, neither the Company nor any of its
Subsidiaries is, in any material respect, in conflict with, in
default under or in violation of, (i) any statute, law,
ordinance, rule, regulation, order, judgment or decree applicable
to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is
bound or affected, or (ii) any note, bond, mortgage,
16
indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which the Company or any of
its Subsidiaries is a party or by which any property or asset of
the Company or any of its Subsidiaries is bound or affected. The
Company and its Subsidiaries have all permits, licenses,
authorizations, consents, approvals and franchises from
governmental agencies required to conduct their businesses as
currently conducted (the "Company Permits"), except for such
permits, licenses, authorizations, consents, approvals and
franchises the absence of which have not had and would not
reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect. The Company and its Subsidiaries are
in compliance with the terms of the Company Permits, except for
failures so to comply that have not had and would not reasonably
be expected to have, individually or in the aggregate, a Material
Adverse Effect. Without limiting any other provision herein, the
Company and its Subsidiaries have timely filed with the relevant
federal, state, local or foreign governmental authorities or
agencies thereof all forms, reports and documents required to be
filed by them pursuant to all relevant laws, rules and
regulations since December 31, 1994, except for failures to file
that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
(b) Without limiting the generality of the foregoing,
neither the Company nor any of its Subsidiaries has any
continuing liability resulting from (A) any citations, notices of
violations, written complaints, consent orders (or amendments to
or modifications of such orders), compliance schedules or other
similar enforcement orders received from any governmental
authority or agency thereof since January 1, 1995, or (B) any
notice, including inspection reports, received from any
governmental authority or agency thereof since January 1, 1995,
which in any case would indicate that the Company or any of its
Subsidiaries was not then or is not currently in compliance with
all applicable statutes, laws, ordinances, rules and regulations.
SECTION 2.12 Intellectual Property. (a) Schedule
2.12(a) sets forth a true, correct and complete list of all
Intellectual Property (as hereinafter defined) (other than that
Intellectual Property included in clauses (vi) and (vii) of
Section 2.12(c) hereof) owned or held by the Company or any of
its Subsidiaries (or otherwise used in the business of the
Company and its Subsidiaries) on the date hereof and identifies
all license agreements in effect on the date hereof pursuant to
which any such Intellectual Property is licensed to or by the
Company or its Subsidiaries, in each case, which have been, are,
or may in the foreseeable future be, material to the Company and
its Subsidiaries taken as a whole. Except as otherwise indicated
on Schedule 2.12(a), (i) the Company and its Subsidiaries at the
Effective Time will be the sole and exclusive owners or holders
of such Intellectual Property free and clear of any royalty or
other payment obligation, lien, charge or other encumbrance, (ii)
such Intellectual Property is fully assignable, without
conditions, limitations or restrictions of any kind, and (iii)
there are no agreements which restrict or limit the use by the
Company or its Subsidiaries of such Intellectual Property.
(b) Except as set forth on Schedule 2.12(b): (i) (A)
the Intellectual Property disclosed on Schedule 2.12(a) is valid
and enforceable, (B) to the best knowledge of the Company and the
Stock Sellers, such Intellectual Property does not infringe on
any patents, trademarks, copyrights or any other intellectual
property or proprietary rights of any Person in any country, (C)
all use by and disclosure of such Intellectual Property to any
other Person has
17
been pursuant to the terms of a written agreement with such
Person and all use by the Company or its Subsidiaries of
Intellectual Property that is owned by another Person has been
pursuant to the terms of a written agreement with such Person or
is otherwise lawful, and (D) all maintenance taxes, annuities and
renewal fees have been paid and all other necessary actions to
maintain such Intellectual Property have been taken through the
date hereof and will continue to be paid or taken by the Company
through the Effective Time; (ii) the Company and its Subsidiaries
have taken all reasonable and appropriate steps to record and
protect such Intellectual Property and, where applicable, to
preserve the confidentiality of such Intellectual Property; (iii)
to the best knowledge of the Company and the Stock Sellers,
during the two-year period immediately preceding the date of this
Agreement, neither the Company nor any of its Subsidiaries has
interfered with, infringed upon or misappropriated any
Intellectual Property rights of third parties, or received any
written notice of claim that any of its Intellectual Property has
expired, is not valid or enforceable in any country or that it
infringes upon, conflicts with or misappropriates any patent,
trademark, service xxxx, copyright or trade name of any third
party, and no such claims or controversies currently exist; and
(iv) during the two-year period immediately preceding the date of
this Agreement, neither the Company nor any of its Subsidiaries
has given any notice of infringement to any third party with
respect to any of such Intellectual Property or has become aware
of facts or circumstances evidencing the infringement by any
third party of any of such Intellectual Property.
SECTION 2.13 Real Property; Personal Property. (a)
Neither the Company nor any of its Subsidiaries owns any real
property in fee or otherwise (except for the leasehold interests
referred to in this Section 2.13).
(b) Schedule 2.13(b) sets forth a true, correct and
complete list of all leases, subleases and other agreements under
which the Company or any of its Subsidiaries uses or occupies or
has the right to use or occupy any real property (the "Real
Property Leases" and the property governed by such Real Property
Leases is referred to herein as the "Real Property"). The Company
has heretofore delivered to Parent true, correct and complete
copies of all Real Property Leases (including all written
modifications, amendments, supplements, waivers and side letters
thereto). Each Real Property Lease is valid, binding and in full
force and effect, all rent and other sums and charges payable by
the Company and its Subsidiaries as tenants thereunder are
current, and no termination event or condition or uncured default
of a material nature on the part of the Company or any such
Subsidiary exists under any Real Property Lease. Each of the
Company and its Subsidiaries has a good and valid leasehold
interest in each parcel of Real Property leased by it, free and
clear of all mortgages, pledges, liens, encumbrances and security
interests, except (i) those reflected or reserved against in the
balance sheet of the Company as of December 31, 1997, or March
31, 1998, included in the Financial Statements, (ii) Taxes and
general and special assessments not in default and payable
without penalty and interest, and (iii) other liens, mortgages,
pledges, encumbrances and security interests which do not
materially interfere with the Company's or such Subsidiary's use
of such Real Property or materially detract from or diminish the
value thereof.
18
(c) Except as disclosed in Schedule 2.13(c), the
buildings and improvements on the Real Property are adequate and
suitable for the purposes for which they are currently being
used.
(d) The Company and its Subsidiaries are in possession
of and have good title to, or have valid leasehold interests in,
all tangible personal property used in the business of the
Company and its Subsidiaries. All such tangible personal property
is owned by the Company and its Subsidiaries, free and clear of
all liens and other encumbrances other than those which do not
materially interfere with the current use of such property or
materially detract from the value thereof, or is leased under
valid and subsisting leases, and in any case, is adequate and
suitable for the purpose for which it is currently being used.
SECTION 2.14 Insurance. Set forth on Schedule 2.14 is
a list of all insurance policies maintained by the Company and
its Subsidiaries (including the providers of such insurance
policies). Such policies provide coverage for the operations
conducted by the Company and its Subsidiaries of a scope
consistent with customary industry practice. All such insurance
policies are in full force and effect and none of the Company or
any of its Subsidiaries is in default thereunder. The Company has
previously provided Parent with copies of such policies and of
outstanding claims thereunder. All claims thereunder have been
filed in a due and timely fashion.
SECTION 2.15 Material Contracts. Set forth on Schedule
2.15, is a true, correct and complete list of all Material
Contracts, and the Company has made available to Parent, true,
correct and complete copies of all written Material Contracts.
Other than Material Contracts which have terminated or expired in
accordance with their terms, each of the Material Contracts
identified on Schedule 2.15 is valid, binding and enforceable in
accordance with its terms (subject to the effects of bankruptcy,
insolvency and similar laws affecting creditors' rights generally
and general principles of equity (whether considered in a
proceeding in equity or at law)) and is in full force and effect,
and assuming all consents required by the terms thereof or
applicable law have been obtained, such Material Contracts will
continue to be valid, binding and enforceable in accordance with
their respective terms and in full force and effect immediately
following the consummation of the transactions contemplated
hereby, in each case except where the failure to be valid,
binding, enforceable and in full force and effect would not
reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect. Except as described on Schedule 2.15,
neither the Company nor any of its Subsidiaries is, or has
received any notice or has any knowledge that any other party is,
in default in any material respect under any Material Contract,
and, to the knowledge of the Company, there has not occurred any
event that with the lapse of time or the giving of notice or both
would constitute such a default. No party to any of the Material
Contracts has made any claims against, or sought indemnification
from, the Company or any of its Subsidiaries as to any matter
arising under or with respect to any Material Contract, and
neither the Company nor any of its Subsidiaries nor any of their
respective directors or officers has been advised of any alleged
basis for any such claims.
SECTION 2.16 Related Party Transactions. Except as set
forth on Schedule 2.16, no director, officer, partner, employee,
Affiliate or "associate" (as such term is used in the
19
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
of the Company or any of its Subsidiaries (i) has borrowed any
monies from or has outstanding any indebtedness or other similar
obligations to the Company or any of its Subsidiaries; (ii) owns
any direct or indirect interest of any kind in, or is a director,
officer, employee, partner, affiliate or associate of, or
consultant or lender to, or borrower from, or has the right to
participate in the management, operations or profits of, any
Person or entity which is (x) a competitor, supplier, customer,
distributor, lessor, tenant, creditor or debtor of the Company or
any of its Subsidiaries, (y) engaged in a business related to the
business of the Company or any of its Subsidiaries or (z)
participating in any transaction to which the Company or any of
its Subsidiaries is a party; or (iii) otherwise is or has been a
party to any contract, arrangement, understanding or transaction
with the Company or any of its Subsidiaries.
SECTION 2.17 Liens. Except as set forth on Schedule
2.17 or on another Schedule provided by the Company herewith, and
other than liens, mortgages, security interests, pledges and
encumbrances which do not materially interfere with the Company's
or its Subsidiaries' use of their property or assets or
materially diminish or detract from the value thereof, neither
the Company nor any of its Subsidiaries has granted, created or
suffered to exist with respect to any of its assets or
properties, any mortgage, pledge, charge, hypothecation,
collateral, assignment, lien (statutory or otherwise),
encumbrance or security agreement of any kind or nature
whatsoever.
SECTION 2.18 State Takeover Statute Inapplicable. As
of the date hereof and at all times on or prior to the Effective
Time, Article 13.03 of the TBCA shall be inapplicable to the
transactions contemplated by this Agreement.
SECTION 2.19 Required Action of Company Shareholders.
The only action of the shareholders of the Company required to
adopt the plan of merger (within the meaning of Article 5.03 of
the TBCA) contained in this Agreement and approve the Merger and
the transactions contemplated hereby is the consent and approval
granted by such shareholders pursuant to Section 2.3(d) hereof.
No other vote or action of the shareholders of the Company is
required by law, the Articles of Incorporation or By-Laws of the
Company as currently in effect or otherwise to adopt such plan of
merger contained in this Agreement and approve the Merger.
SECTION 2.20 Employee Relations. (a) Since December
31, 1997, there has not occurred or, to the knowledge of the
Company, been threatened any strikes, slow downs, picketing, work
stoppages, concerted refusals to work overtime or other similar
labor activities by employees of the Company or any of its
Subsidiaries. The employees of the Company and its Subsidiaries
are not represented by any labor union or other labor
representative, and there are no collective bargaining agreements
or other arrangements in effect with respect to such employees.
To the knowledge of the Company, there are no Persons attempting
to represent or organize or purporting to represent any employees
employed by the Company and its Subsidiaries.
(b) Except as set forth on Schedule 2.20(b) there are
no complaints, charges or claims against the Company or any of
its Subsidiaries or, to the knowledge of the Company or any of
its Subsidiaries, threatened, based on, arising out of, in
connection with or otherwise
20
relating to the employment (or termination of employment) by the
Company of any individual, including individuals classified as
independent contractors or "leased employees" (within the meaning
of section 414 (n) of the Code), or the failure to employ any
individual, including any claim relating to employment
discrimination, equal pay, employee safety and health,
immigration, wages and hours or workers' compensation.
(c) Neither the Company nor any of its Subsidiaries is
a contractor or subcontractor with obligations under any federal,
state, local or foreign government contracts.
SECTION 2.21 Loans. (a) Except as set forth on
Schedule 2.21(a), (i) all currently outstanding loans of, or
current extensions of credit by, or outstanding loans or current
extensions of credit acquired or purchased by, the Company and
its Subsidiaries (including, without limitation, all Automobile
Finance Contracts, auto finance receivables, interest-only strip
receivables and subordinated certificate receivables), and any
such outstanding loans or extensions of credit previously sold,
pledged or conveyed by the Company or its Subsidiaries in any
Securitization (individually, a "Loan," and collectively, the
"Loans"), were solicited, originated and currently exist in
material compliance with all applicable federal and state law and
regulations promulgated thereunder (including, without
limitation, all applicable regulations promulgated by the Board
of Governors of the Federal Reserve System); (ii) each note or
other instrument evidencing a Loan or loan or credit agreement or
security instrument or retail installment contract related to a
Loan constitutes a valid, legal and binding obligation of the
obligor thereunder, enforceable against such obligor in
accordance with its terms (subject to the effects of bankruptcy,
insolvency and similar laws affecting creditors' rights generally
and general principles of equity (whether considered in a
proceeding in equity or at law)), except for any failure to
constitute such an obligation that would not be, individually or
in the aggregate, material to the Company and its Subsidiaries
taken as a whole; (iii) to the knowledge of the Company, there
are no oral modifications or amendments related to the Loans that
are not reflected in the Company's records, no defenses as to the
enforcement of any Loan have been asserted and there have been no
acts or omissions which would give rise to any claim or rights of
rescission, set-off, counterclaim or defense, except any of the
foregoing that would not be, individually or in the aggregate,
material to the Company and its Subsidiaries taken as a whole;
and (iv) none of the Loans are presently serviced by third
parties and there is no obligation which could result in any Loan
becoming subject to any third party servicing. The reserves
established against the Loans have been established consistent
with the Company's prior loss experience in accordance with
United States generally accepted accounting principles.
(b) Except as set forth in Schedule 2.21(b), none of
the ten automobile dealerships or other similar businesses (the
"Major Customers") from which the Company has acquired the most
Loans (based on total Loan volume for the fiscal year ended
December 31, 1997) has, since December 31, 1997, canceled or
otherwise terminated or, to the Company's knowledge, made any
threat to cancel or otherwise terminate its relationship with the
Company, nor has any such Person indicated to the Company an
intent to materially decrease the volume of business it conducts
with the Company.
21
SECTION 2.22 Year 2000. Except as set forth in
Schedule 2.22, to the best knowledge of the Company and the Stock
Sellers, all of the computer software, computer firmware,
computer hardware (whether general or special purpose) and other
similar or related items of automated, computerized and/or
software systems(s) that are used or relied on by the Company or
any of its Subsidiaries in the conduct of their respective
businesses will not, in any material respect, malfunction, cease
to function, generate incorrect data or produce incorrect results
when processing, providing and/or receiving (i) date-related data
into and between the twentieth and twenty-first centuries and
(ii) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
SECTION 2.23 Environmental Matters. To the best
knowledge of the Company and the Stock Sellers, the Company and
its Subsidiaries are (i) in compliance with any and all
applicable Environmental Laws, (ii) have received and are in
compliance with all permits, licenses or other approvals required
under applicable Environmental Laws for the conduct of their
respective businesses, and (iii) have not received notice of any
actual or potential liability for the investigation or
remediation of any disposal or release of Hazardous Materials,
except where such non-compliance with Environmental Laws, failure
to receive required permits, licenses or other approvals, or
liability would not reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect.
SECTION 2.24 Reorganization. Neither the Stock Sellers
nor the Company nor any of the Company's Subsidiaries nor any of
such Persons' respective Affiliates, has taken or agreed to take
any action, or knows of any circumstances, that (without regard
to any action taken or agreed to be taken by Parent, Sub, the
Warrant Sellers or any of their respective Affiliates) would
prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code, or this Agreement from
constituting a "plan of reorganization" for the purposes of
Section 368 of the Code.
SECTION 2.25 Disclosure. No representation or warranty
by the Company or the Stock Sellers in this Agreement, and no
exhibit, certificate or schedule furnished or to be furnished to
Parent or Sub pursuant hereto, or in connection with the
transactions contemplated hereby, contains or will contain any
untrue statement of a material fact, or omits or will omit to
state a material fact necessary to make the statements or facts
contained herein or therein not misleading or necessary to
provide Parent or Sub with adequate and complete information as
to the Company and its Subsidiaries or the businesses, assets and
liabilities of the Company and its Subsidiaries.
SECTION 2.26 Investment. Each Stock Seller is
acquiring the Parent Common Stock issued under this Agreement for
its own account solely for the purpose of investment and not with
a view to, or for sale in connection with, any distribution
thereof in violation of the Securities Act. Each Stock Seller
acknowledges that such securities have not been registered under
the Securities Act and may be sold or disposed of in the absence
of such registration only pursuant to an exemption from the
registration requirements of the Securities Act.
22
SECTION 2.27 Representation Letters. Each Stock Seller
has, or prior to the Closing will have, delivered to Parent an
executed Representation Letter, and each such Representation
Letter is, or at the time of delivery will be, complete, true and
accurate in all material respects.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF WARRANT SELLERS
Each Warrant Seller, severally but not jointly, hereby
represents and warrants to Parent and Sub that:
SECTION 3.1 Actions and Authority; Enforceability;
Title. (a) Such Warrant Seller is validly existing, and to the
extent applicable, is in good standing, as a corporation or
partnership under the jurisdiction in which it was incorporated
or organized and has all requisite corporate or partnership power
and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by such Warrant Seller and, assuming this
Agreement constitutes the legal, valid and binding obligation of
each of the Company, Parent and Sub, constitutes a legal, valid
and binding agreement of such Warrant Seller, enforceable against
such Warrant Seller in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy,
insolvency and similar laws affecting creditors' rights generally
and general principles of equity (whether considered in a
proceeding in equity or at law).
(b) Such Warrant Seller has good and marketable title
to and is the lawful owner of the securities listed with respect
to such Warrant Seller on Schedule 2.2(a), free and clear of all
liens, encumbrances, equities and claims whatsoever.
SECTION 3.2 Consents and Approvals; No Violation.
Neither the execution and delivery of this Agreement by such
Warrant Seller nor the performance by such Warrant Seller of its
obligations hereunder, nor the consummation of the transactions
contemplated hereby will (i) conflict with or result in any
breach of any provision of the respective Articles of
Incorporation or By-Laws or partnership agreement (or other
similar governing documents) of such Warrant Seller, (ii) require
any consent, waiver, approval, authorization or permit of, or
filing with or notification to, any federal, state, local or
foreign governmental or regulatory authority, except as may be
required under the TBCA, (iii) violate, breach, be in conflict
with or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under any
obligation of such Warrant Seller or any order, judgment or
decree to which such Warrant Seller is a party or by which such
Warrant Seller or any of its assets or properties is bound or
encumbered, or (iv) violate any order, writ, injunction, decree,
law, statute, rule or regulation applicable to such Warrant
Seller or any of such Warrant Seller's properties or assets,
except in the case of clauses (ii) through (iv) above, where
failure to obtain such consent, approval, authorization or
permit, or failure to make such filing or notification, or where
such violation, breach, conflict or default, would not,
individually or in the aggregate, cause a material
23
adverse effect on such Warrant Seller's ability to perform its
obligations hereunder or on the ability of the parties hereto to
consummate the transactions contemplated hereby.
SECTION 3.3 Brokers. No broker or finder is entitled
to receive any brokerage, finder's or other fee or commission
(other than fees or commissions payable by such Warrant Seller)
in connection with this Agreement or the transactions
contemplated hereby based upon agreements made by or on behalf of
such Warrant Seller.
SECTION 3.4 Reorganization. Such Warrant Seller has
not taken or agreed to take any action, and has no actual
knowledge, without any independent investigation, of any
circumstances, that (without regard to any action taken or agreed
to be taken by Parent, Sub, the Company, the Stock Sellers or any
of their respective Affiliates) would prevent the Merger from
qualifying as a reorganization within the meaning of Section
368(a) of the Code, or this Agreement from constituting a "plan
of reorganization" for the purposes of Section 368 of the Code.
SECTION 3.5 Investment. Such Warrant Seller is
acquiring the Parent Common Stock issued under this Agreement for
its own account solely for the purpose of investment and not with
a view to, or for sale in connection with, any distribution
thereof in violation of the Securities Act. Such Warrant Seller
acknowledges that such securities have not been registered under
the Securities Act and may be sold or disposed of in the absence
of such registration only pursuant to an exemption from the
registration requirements of the Securities Act.
SECTION 3.6 Representation Letters. Such Warrant
Seller has, or prior to the Closing will have, delivered to
Parent an executed Representation Letter, and such Representation
Letter is, or at the time of delivery will be, complete, true and
accurate in all material respects.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub, jointly and severally, hereby
represent and warrant to the Company and Sellers that:
SECTION 4.1 Organization and Qualification. Each of
Parent and Sub is a duly organized and validly existing
corporation in good standing under the laws of its jurisdiction
of incorporation, with all corporate power and authority to own
its properties and conduct its business as currently conducted.
SECTION 4.2 Capitalization. (a) The authorized capital
stock of Parent consists of 300,000,000 shares of Parent Common
Stock and 50,000,000 shares of preferred stock, par value $0.01
per share (the "Preferred Stock"). As of June 30, 1998: (i)
65,538,122 shares of Parent Common Stock were issued and
outstanding; (ii) 1,020,608 shares of Parent Common Stock were
held in Parent's treasury; (iii) there were outstanding options
to purchase an aggregate of 9,188,014 shares of Parent Common
Stock under Parent's stock option,
24
performance incentive and similar plans (the "Parent Plans"); and
(iv) there were no stock appreciation rights or limited stock
appreciation rights or other similar rights or securities granted
under the Parent Plans or otherwise outstanding. Since June 30,
1998, no additional shares of Parent Common Stock or options to
purchase Parent Common Stock have been issued except under the
Parent Plans or in connection with Parent's dividend reinvestment
program. Except for this Agreement and as set forth in this
Section 4.2(a) and in the SEC Reports (as defined in Section 4.5
hereof), there are no outstanding (A) shares of capital stock or
other voting securities of Parent, (B) securities of Parent
convertible into or exchangeable for shares of capital stock or
voting securities or ownership interests in Parent, or (C)
options, warrants, rights or other agreements or commitments to
acquire from Parent, and no obligation of Parent to issue, any
capital stock, voting securities or other ownership interests in,
or securities convertible into or exchangeable for capital stock
or voting securities or other ownership interests in, Parent, and
no obligation of Parent to grant, extend or enter into any
subscription, warrant, right, convertible or exchangeable
security or other similar agreement or commitment.
(b) The authorized capital stock of Sub consists of
1,000 shares of common stock, par value $0.01 per share, all of
which shares are duly authorized, validly issued and fully paid
and nonassessable and are owned directly by Parent, free and
clear of all liens, encumbrances, equities and claims whatsoever.
Sub was formed solely for the purpose of engaging in a business
combination transaction with the Company and has engaged in no
other business activities and has conducted its operations only
as contemplated hereby.
SECTION 4.3 Authority Relative to this Agreement. Each
of Parent and Sub has all requisite corporate power and authority
to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and by the Registration Rights
Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate
proceedings on the part of Parent and Sub. No vote of Parent's
stockholders is required to approve this Agreement or the
transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each of Parent and Sub and,
assuming this Agreement constitutes the legal, valid and binding
obligation of the Company and Sellers, this Agreement constitutes
a legal, valid and binding agreement of each of Parent and Sub,
enforceable against each of Parent and Sub in accordance with its
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally and general principles of equity (whether
considered in a proceeding in equity or at law).
SECTION 4.4 Consents and Approvals; No Violation.
Neither the execution and delivery of this Agreement by Parent or
Sub nor the consummation of the transactions contemplated hereby
will (i) conflict with or result in any breach of any provision
of the respective Certificate of Incorporation or By-Laws (or
other similar governing documents) of Parent or Sub; (ii) require
any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority,
except as may be required under the HSR Act, the Exchange Act,
the Securities Act, the TBCA, or the "takeover" or "blue sky"
laws of various states; (iii) result in a default (or give rise
to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, license,
agreement,
25
contract or other instrument or obligation to which Parent or Sub
is a party or by which any of their respective assets may be
bound; (iv) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Parent or Sub or any of their
respective assets, except in the case of clauses (ii) through
(iv) above, where failure to obtain such consent, approval,
authorization or permit, or failure to make such filing or
notification, or where such violation, breach, conflict or
default, would not, individually or in the aggregate, cause a
material adverse effect on Parent's or Sub's ability to perform
its obligations hereunder or on the ability of the parties hereto
to consummate the transactions contemplated hereby.
SECTION 4.5 SEC Documents. (a) Parent has delivered or
made available to the Company and Sellers true and complete
copies of each registration statement, proxy or information
statement, form, report and other documents filed by it with the
SEC since January 1, 1998 (collectively, the "SEC Reports"). As
of their respective dates, the SEC Reports (i) complied in all
material respects with the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and
the Exchange Act and (ii) did not contain any untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated balance sheets
(including, where applicable, the related notes and schedules)
included in the SEC Reports fairly presents the consolidated
financial position of Parent and its consolidated Subsidiaries as
of the date thereof, and each of the consolidated statements of
income (or statements of results of operations), stockholders'
equity and cash flows (including the related notes and schedules)
included in the SEC Reports fairly presents the results of
operations, stockholders' equity, retained earnings and cash
flows, as the case may be, of Parent and its Subsidiaries (on a
consolidated basis) for the periods or as of the dates, as the
case may be, set forth therein, in each case in accordance with
United States generally accepted accounting principles applied on
a consistent basis throughout the periods covered (except as
stated therein or, where applicable, in the notes thereto).
(c) At December 31, 1997, and March 31, 1998, there
were no liabilities or obligations of any nature (whether
accrued, absolute, fixed, contingent, liquidated, unliquidated or
otherwise and whether due or to become due) required by United
States generally accepted accounting principles to be set forth
on the balance sheet of Parent and its consolidated Subsidiaries
except as reflected or reserved against on such balance sheet as
of December 31, 1997, included in the SEC Reports or on such
balance sheet as of March 31, 1998, included in the SEC Reports,
respectively.
SECTION 4.6 Reorganization. Neither Parent nor Sub has
taken or agreed to take any action, or knows of any
circumstances, that (without regard to any action taken or agreed
to be taken by the Company, any of its Subsidiaries, the Sellers
or any of their respective Affiliates) would prevent the Merger
from qualifying as a reorganization within the meaning of Section
368(a) of the Code, or this Agreement from constituting a "plan
of reorganization" for the purposes of Section 368 of the Code.
26
SECTION 4.7 Issuance of Parent Common Stock. The
shares of Parent Common Stock to be issued in connection with the
Merger have been duly authorized and, when issued in accordance
with this Agreement, will be validly issued, fully paid and
nonassessable.
SECTION 4.8 Brokers. No broker or finder is entitled
to receive any brokerage, finder's or other fee or commission
(other than any fees or commissions payable by Parent) in
connection with this Agreement or the transactions contemplated
hereby based upon agreements made by or on behalf of Parent.
SECTION 4.9 Form S-3. Parent is eligible to use Form
S-3 to register offers and sales of its Common Stock under the
Securities Act.
ARTICLE V
COVENANTS
SECTION 5.1 Conduct of Business of the Company. (a)
Except as expressly contemplated by this Agreement, during the
period from the date of this Agreement to the Effective Time, the
Stock Sellers shall cause the Company and its Subsidiaries to
conduct, and the Company shall conduct and shall cause each of
its Subsidiaries to conduct, its operations according to its
ordinary and usual course of business consistent with past
practice, and the Stock Sellers shall cause the Company and its
Subsidiaries to use, and the Company shall use and shall cause
each of its Subsidiaries to use, its best efforts to preserve
intact its business organization, to keep available the services
of its current officers and employees and to preserve the
goodwill of and maintain satisfactory relationships with those
Persons and entities having business relationships with the
Company and its Subsidiaries, and the Stock Sellers and the
Company shall promptly advise Parent in writing of any material
change in the Company's or any of its Subsidiaries' business,
condition (financial or otherwise), properties, customer or
supplier relationships, assets, liabilities, prospects or results
of operations. Without limiting the generality of the foregoing
and except as otherwise expressly provided in or contemplated by
this Agreement, during the period specified in the preceding
sentence, without the prior written consent of Parent, the
Company shall not and shall not permit any of its Subsidiaries
to:
(i) other than as expressly required pursuant to
the terms of Company Stock Options outstanding on the date
hereof and the Stock Plans as in effect on the date hereof,
issue, sell, grant options or rights to purchase, pledge,
or authorize or propose the issuance, sale, grant of
options or rights to purchase or pledge any Company
Securities or Subsidiary Securities, or grant or accelerate
any right to convert or exchange any Company Securities or
Subsidiary Securities.
(ii) acquire or redeem, directly or indirectly,
or amend the terms of any Company Securities or Subsidiary
Securities;
(iii) split, combine or reclassify its capital
stock or declare, set aside, make or pay any dividend or
distribution (whether in cash, stock or property) on any
27
shares of its capital stock (other than cash dividends paid
to the Company by its wholly-owned Subsidiaries with regard
to their capital stock);
(iv) (A) except in connection with the purchase
of Automobile Finance Contracts in the ordinary course of
business consistent with past practice (other than
portfolio purchases of such contracts), make or offer to
make any acquisition, by means of a merger or otherwise, of
assets or securities, or any sale, lease, encumbrance or
other disposition of assets or securities, or (B) enter
into any material contract, agreement, commitment,
arrangement, lease (including with respect to personal
property), instrument or understanding or amend any
Material Contract, or grant any release or relinquishment
of any rights under any Material Contract; provided, that
nothing in this Section 5.1 shall prohibit the Company from
entering into any agreement pursuant to which the Company
has the right, but not the obligation, to purchase
Automobile Finance Contracts, if such agreement may be
terminated by the Company without any material payment or
penalty;
(v) (A) except for borrowings under any Credit
Facility incurred in the ordinary course of business
consistent with past practice in amounts so that the
aggregate amount of principal outstanding thereunder does
not exceed the maximum principal amount set forth with
respect to such Credit Facility on Schedule 2.2(c), incur
or assume any long-term debt or short-term debt except for
short-term accounts payable and accrued liabilities (as
such term is used in the Financial Statements) incurred in
the ordinary course of business consistent with past
practice, or (B) enter into any financing arrangements or
modify the terms of any existing indebtedness or financing
arrangements (including the Credit Facilities); provided,
that the Company may enter into an amendment of the
Specified Credit Facility (as defined on Schedule 2.2(c))
in order to increase the maximum principal amount that may
be outstanding thereunder (I) by up to $20 million at any
time on or after August 10, 1998, and prior to September
10, 1998, and (II) by up to $30 million (in addition to any
increase made pursuant to the preceding clause (I)) at any
time on or after September 10, 1998, and prior to the
Closing; provided, further, that the Company shall not
enter into either such amendment unless not more than seven
business days nor less than five business days prior
thereto, the Company shall have offered Parent (a "Parent
Offer") the right to provide the financing contemplated by
such amendment on substantially similar terms as set forth
in such amendment (including, without limitation, fees
payable to the lenders thereunder), and Parent shall have
refused to provide such financing; and provided, further,
that the terms set forth in any such amendment shall be no
more favorable to the lenders thereunder, in any material
respect, than those offered to Parent pursuant to the
relevant Parent Offer;
(vi) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other
Person except wholly-owned Subsidiaries of the Company;
(vii) except in connection with the purchase of
Automobile Finance Contracts in the ordinary course of
business consistent with past practice (other than
portfolio purchases of such contracts), make any loans,
advances or capital contributions
28
to, or investments in, any other Person (other than wholly-
owned Subsidiaries of the Company);
(viii) materially change any of the accounting
principles or practices used by it;
(ix) make any tax election or settle or
compromise any material federal, state or local income tax
liability;
(x) propose or adopt any amendments to its
Articles of Incorporation or By-Laws (or similar governing
documents);
(xi) grant any stock-related, performance or
similar awards or bonuses;
(xii) forgive any loans to employees, officers or
directors or any of their respective affiliates or
associates;
(xiii) except for the Employment Agreements,
enter into any new, or amend any existing, employment,
severance, consulting or salary continuation agreements
with any officers, directors or employees, or grant any
increases in the compensation or benefits payable to
officers, directors or employees, except for
regularly-scheduled increases to employees in the ordinary
course of business consistent with past practice;
(xiv) enter into any collective bargaining or
other labor agreement;
(xv) adopt, amend or terminate any Plan or other
employee benefit plan or arrangement;
(xvi) settle or agree to settle any suit, action,
claim, proceeding or investigation (including any suit,
action, claim, proceeding or investigation relating to this
Agreement or the transactions contemplated hereby) or pay,
discharge or satisfy or agree to pay, discharge or satisfy
any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise) other than
the payment, discharge or satisfaction of liabilities (A)
reflected or reserved against in full in the Financial
Statements as at March 31, 1998, or incurred in the
ordinary course of business subsequent to March 31, 1998,
or (B) in an aggregate amount not to exceed $50,000;
(xvii) consummate, or enter into any agreement
with respect to, any Securitization; or
(xviii) agree to take any of the foregoing
actions or any action which would make any representation
or warranty in this Agreement untrue or incorrect as of the
date when made or as of a future date or which would result
in any of the conditions set forth in Section 6.3 hereof
not being satisfied.
29
(b) No Seller shall take any action which would make
any representation or warranty in this Agreement untrue or
incorrect as of the date when made or which would result in any
of the conditions set forth in Section 6.3 hereof not being
satisfied.
(c) Neither the Company nor any of its Subsidiaries
shall make a general distribution of any communication to their
respective employees relating to the transactions contemplated
hereby, without the prior consent of Parent which consent shall
not be unreasonably withheld.
SECTION 5.2 Alternative Transactions. Neither the
Sellers, the Company nor any of their respective Subsidiaries or
Affiliates, nor any of any such Person's directors, officers,
employees, agents or representatives (the "Covered Persons"),
will, directly or indirectly, (i) solicit or encourage any
inquiries, discussions or proposals regarding, (ii) continue,
propose or enter into negotiations with respect to, or (iii)
enter into any contract, agreement, commitment, arrangement,
instrument or understanding providing for, or consummate, any
Alternative Transaction; nor shall any of the Covered Persons
provide any information to any other Person for the purpose of
making, evaluating or determining whether to make or pursue any
inquiries or proposals with respect to any Alternative
Transaction. The Sellers and the Company will immediately advise
Parent of, and communicate to Parent all terms of, any such
inquiry or proposal and the identity of the Persons making any
such inquiry or proposal that any Covered Person may receive or
of which any of them may become aware.
SECTION 5.3 Access to Information. (a) From and after
the date hereof, the Company and the Stock Sellers will (i)
afford Parent and Sub and their authorized accountants,
investment bankers, counsel and other representatives complete
access (during regular business hours upon reasonable advance
notice) to all employees, offices and other facilities and to all
books, contracts, commitments and records (including tax returns)
of the Company and its Subsidiaries and cause the Company's and
its Subsidiaries' independent public accountants to provide
access to their work papers and such other information as Parent
or Sub may reasonably request, (ii) permit Parent and Sub to make
such inspections as they may require, and (iii) cause the
officers of the Company and those of its Subsidiaries to furnish
Parent and Sub with such financial and operating data and other
information with respect to the business, properties and
personnel of the Company and its Subsidiaries as Parent or Sub
may from time to time reasonably request. Nothing herein
contained shall affect the continuing applicability of the
Confidentiality Agreement.
(b) No investigation pursuant to this Section 5.3
shall affect, add to or subtract from any representations or
warranties of the parties hereto or the conditions to the
obligations of the parties hereto to effect the Merger.
(c) As soon as reasonably practicable after the date
hereof and in no event later than the fifth business day prior to
the Closing Date, the Company shall deliver to Parent financial
statements (the "June Statements") for the Company and its
Subsidiaries (on a consolidated basis) as at, and for the three
and six months ended, June 30, 1998, substantially in
30
the form of the Company's financial statements as at, and for the
three months ended, March 31, 1998, included in the Financial
Statements.
SECTION 5.4 Reasonable Best Efforts. (a) Subject to
the terms and conditions herein provided for, each of the parties
hereto agrees to use its reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do, or cause to
be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective,
in the most expeditious manner practicable, the transactions
contemplated by this Agreement; provided, however, that nothing
in this Agreement shall obligate Parent, Sub or any of their
respective Subsidiaries or Affiliates to agree (i) to limit or
not to exercise any rights of ownership of any securities
(including the Company Common Stock), or to divest, dispose of or
hold separate any securities or all or any portion of their
respective businesses, assets or properties or of the business,
assets or properties of the Company or any of its Subsidiaries or
(ii) to limit in any manner whatsoever the ability of such
entities (A) to conduct their respective businesses or own such
assets or properties or to conduct the businesses or own the
properties or assets of the Company and its Subsidiaries or (B)
to control their respective businesses or operations or the
businesses or operations of the Company and its Subsidiaries. In
connection with and without limiting the foregoing, each of the
Company, Parent and Sub shall use its reasonable best efforts to
make promptly any required submissions under the HSR Act which
the Company, Parent and Sub determine should be made, in each
case, with respect to the transactions contemplated by this
Agreement, and Parent, Sub and the Company shall cooperate with
one another (I) in promptly determining whether any filings are
required to be or should be made or consents, approvals, permits
or authorizations are required to be or should be obtained under
any other federal, state or local law or regulation or whether
any consents, approvals or waivers are required to be or should
be obtained from other parties to loan agreements or other
contracts or instruments material to the business of the Company
and its Subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement and (II) in promptly
making any such filings, furnishing information required in
connection therewith and seeking to obtain timely any such
consents, permits, authorizations, approvals or waivers. In case
at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this
Agreement, the parties to this Agreement (or as applicable, their
officers and directors) shall take all such necessary action as
may be reasonable in the context thereof.
(b) The Company shall use its best efforts to assist
Parent in obtaining all necessary regulatory approvals from
federal, state and local governmental and regulatory authorities
in connection with the transfer of all the equity interests in
the Surviving Corporation, or the businesses or assets of the
Surviving Corporation, to Capital One, F.S.B.
(c) The Company, Sellers and Parent shall use their
reasonable best efforts to effect a transfer of all the equity
interests in SAC Receivables Investment Corp. to a Subsidiary of
Parent, free and clear of all liens, encumbrances, equities and
claims whatsoever, for no additional consideration to that
otherwise provided herein in connection with the Merger;
provided, that Parent shall have no obligation to effect any such
transfer unless Parent shall have confirmed to its reasonable
satisfaction that (i) such transfer would not violate the terms
of any Securitization and (ii) no nationally-recognized
statistical rating organization that then rates any
31
securities issued in connection with any Securitization effected
by the Company would downgrade such securities as a result of
such transfer.
(d) In the event that any action, suit, proceeding or
investigation relating hereto or to the transactions contemplated
hereby or thereby is commenced, whether before or after the
Effective Time, the parties hereto agree to cooperate and use
their reasonable best efforts to defend vigorously against it.
SECTION 5.5 Indemnification of Officers and Directors.
(a) Parent and Sub agree that all rights to indemnification
existing in favor of the present or former directors, officers
and employees of the Company (as such) or any of its Subsidiaries
as provided in the Company's Articles of Incorporation or
By-Laws, or the articles of incorporation, by-laws or similar
documents of any of the Company's Subsidiaries as in effect as of
the date hereof with respect to matters occurring prior to the
Effective Time shall survive the Merger and shall continue in
full force and effect for a period of not less than two years,
and Parent agrees to cause the Surviving Corporation to comply
fully with its obligations hereunder and thereunder.
(b) This Section 5.5 shall survive the consummation of
the Merger and is intended to benefit, and shall be enforceable
by, any person or entity entitled to be indemnified pursuant to
Section 5.5(a) (whether or not parties to this Agreement).
SECTION 5.6 Certain Employee Matters. (a) Prior to the
Effective Time, the Company will, and will cause its Subsidiaries
to, and from and after the Effective Time, Parent will, and will
cause the Surviving Corporation to, honor, in accordance with
their terms, the Employment Agreements and all existing
employment and severance agreements or similar arrangements
specified in Schedule 5.6(a) between the Company or any of its
Subsidiaries and any officer, director or employee of the Company
or any of its Subsidiaries, for the remainder of the term of each
such agreement, or if no term is specified therein, for the
one-year period immediately following the Effective Time.
(b) The Company and the Stock Sellers shall take, or
cause to be taken, all action necessary, as promptly hereafter as
reasonably practicable, to amend any Plan maintained by the
Company or any of its Subsidiaries to eliminate, as of the date
hereof, all provisions for the purchase of shares of Company
Common Stock, other Company Securities or Subsidiary Securities
from the Company or any of its Subsidiaries.
SECTION 5.7 State Takeover Statutes. The Company and
the Stock Sellers shall, upon the request of Parent or Sub, take
all reasonable steps to assist in any challenge by Parent or Sub
to the validity, or applicability of any state takeover law to
any of the transactions contemplated by this Agreement.
SECTION 5.8 Notification of Certain Matters. The
Company and Sellers shall give prompt notice to Parent and Sub,
and Parent or Sub, as the case may be, shall give prompt notice
to the Company and Sellers, of the occurrence or non-occurrence
of any event, the occurrence or non-occurrence of which is likely
(i) to cause any representation or warranty of such party
contained in this Agreement to be untrue or inaccurate in any
material respect at or
32
prior to the Effective Time, or (ii) to result in any material
failure of such 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 5.8 shall not limit or otherwise affect
the remedies available hereunder to any of the parties receiving
such notice.
SECTION 5.9 Public Announcements. Parent and the
Company shall consult with each other before issuing any press
release or otherwise making any public statements with respect to
this Agreement or the Merger and shall not issue any such press
release or make any such public statement prior to such
consultation, except as may be required by law or any listing
agreement with any securities exchange. None of the Sellers shall
issue any press release or otherwise make any public statement
with respect to this Agreement or the Merger, except as may be
required by law, without the prior written consent of Parent and
the Company.
SECTION 5.10 Repayment of Indebtedness; Operative
Documents; Base Warrants. (a) The Company and the Sellers shall
take all actions necessary so that the Notes may be redeemed as
of the Effective Time in accordance with the terms thereof, and
upon the Effective Time, Parent shall fund, and the Company shall
effect, the redemption of the Notes in whole in accordance with
the terms thereof (including payment of all interest accrued
thereon to the time of such redemption in accordance with the
terms thereof), in full satisfaction thereof. Upon the Effective
Time, Parent shall repay all amounts outstanding under the
Xxxxxxx Debenture, at the face amount thereof, plus unpaid
interest accrued thereon in accordance with the terms thereof, in
full satisfaction thereof.
(b) The Company and the Sellers shall use their
reasonable best efforts to cancel, retire or terminate each of
the Operative Documents at or prior to the Closing.
(c) By executing this Agreement, each of the Sellers
hereby consents to the transactions contemplated hereby to the
extent that such consent may be required under the Operative
Documents or any other agreement or instrument to which such
Seller is a party, and such Seller hereby waives any and all
rights such Seller may have under the Operative Documents or any
other agreement or instrument to prevent the consummation of such
transactions or to participate in such transactions other than as
a Seller on the terms set forth herein.
(d) Each Warrant Seller agrees not to exercise or
transfer such Warrant Seller's Base Warrants.
(e) Parent agrees to defend, indemnify and hold
harmless G. Xxxxxx Xxxxxxx, III and the G. Xxxxxx Xxxxxxx, III
Management Trust (the "Xxxxxxx Indemnitees") against all amounts
that may at any time be due and payable by the Xxxxxxx
Indemnitees under the guaranty provided by the Xxxxxxx
Indemnitees in respect of the Specified Credit Facility. The
Xxxxxxx Indemnitees shall not amend or modify such guaranty in
any respect without the prior written consent of Parent.
33
ARTICLE VI
CONDITIONS OF MERGER
SECTION 6.1 Conditions to Obligation of the Company,
Parent and Sub to Effect the Merger. The respective obligations
of the Company, Parent and Sub to effect the Merger shall be
subject to the satisfaction at or prior to the Closing Date of
the following conditions:
(a) No statute, rule, regulation, executive order,
decree, ruling, injunction or other order (whether
temporary, preliminary or permanent) shall have been
enacted, entered, promulgated or enforced by any court or
governmental authority of competent jurisdiction which
prohibits, restrains, enjoins or restricts the consummation
of the Merger; provided, however, that the parties shall
use their reasonable best efforts to cause any such decree,
ruling, injunction or other order to be vacated or lifted.
(b) Any waiting period applicable to the Merger under
the HSR Act shall have terminated or expired.
SECTION 6.2 Conditions to Obligations of the Company
to Effect the Merger. The obligation of the Company to effect the
Merger shall be subject to the fulfillment at or prior to the
Closing Date of the following additional conditions:
(a) Parent and Sub shall have performed or complied
with in all material respects their agreements and
covenants contained in this Agreement required to be
performed or complied with at or prior to the Closing Date;
(b) The representations and warranties of Parent and
Sub contained in this Agreement qualified as to materiality
shall be true and correct in all respects, and those not so
qualified shall be true and correct in all material
respects, in each case when made and on and as of the
Closing Date with the same force and effect as if made on
and as of such date, except as expressly contemplated or
otherwise expressly permitted by this Agreement;
(c) The Company shall have received a certificate
signed on behalf of Parent by two executive officers of
Parent to the effect that the conditions set forth in
clauses (a) and (b) above have been satisfied;
(d) The Company and the Sellers shall have received an
opinion of Xxxxxx & Xxxxxxx, A Professional Corporation,
dated the Effective Time, in form and substance reasonably
satisfactory to the Company, substantially to the effect
that, on the basis of the facts, representations and
assumptions set forth in such opinion which are consistent
with the state of facts existing as of the Effective Time,
the Merger will constitute a "reorganization" within the
meaning of Section 368(a) of the Code, and the Company, Sub
and Parent will each be a party to such reorganization
within the meaning of Section 368(b) of the Code; and in
rendering such opinion, such counsel may require and rely
34
upon representations and covenants including those
contained in certificates of the Company, Parent and
others;
(e) All amounts outstanding under the Notes and the
Xxxxxxx Debenture shall have been paid in full by Parent in
accordance with the terms hereof; and
(f) The Registration Rights Agreement shall have been
duly executed and delivered by Parent and shall be in full
force and effect as of the Effective Time.
SECTION 6.3 Conditions to Obligations of Parent and
Sub to Effect the Merger. The obligations of Parent and Sub to
effect the Merger shall be subject to the fulfillment at or prior
to the Closing Date of the following additional conditions:
(a) The Company and the Sellers shall have performed
or complied with in all material respects their agreements
and covenants contained in this Agreement required to be
performed or complied with at or prior to the Closing Date;
(b) The representations and warranties of the Company
and the Sellers contained in this Agreement qualified as to
materiality shall be true and correct in all respects, and
those not so qualified shall be true and correct in all
material respects, in each case when made and on and as of
the Closing Date with the same force and effect as if made
on and as of such date, except as expressly contemplated or
otherwise expressly permitted by this Agreement;
(c) Parent shall have received a certificate signed on
behalf of the Company by two executive officers of the
Company and signed by each Stock Seller to the effect that
the conditions set forth in clauses (a) and (b) above have
been satisfied;
(d) Parent shall have received an opinion of Cleary,
Gottlieb, Xxxxx & Xxxxxxxx, dated the Effective Time, in
form and substance reasonably satisfactory to Parent,
substantially to the effect that, on the basis of the
facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts
existing as of the Effective Time, the Merger will
constitute a "reorganization" within the meaning of Section
368(a) of the Code, and the Company, Sub and Parent will
each be a party to such reorganization within the meaning
of Section 368(b) of the Code; and in rendering such
opinion, such counsel may require and rely upon
representations and covenants including those contained in
certificates of the Company, Parent and others;
(e) The Registration Rights Agreement shall have been
duly executed and delivered by each of the Sellers and
shall be in full force and effect as of the Effective Time;
(f) Each of the Operative Documents shall have been
canceled, retired or terminated and shall be of no further
force or effect;
(g) Each of the Employment Agreements shall be in full
force and effect;
35
(h) All the equity interests in SAC Receivables
Investment Corp. shall have been transferred to a
Subsidiary of Parent (or such other Person as Parent shall
have designated), free and clear of all liens,
encumbrances, equities and claims whatsoever, and Parent
shall have confirmed to its reasonable satisfaction that
(i) such transfer would not violate the terms of any
Securitization and (ii) no nationally-recognized
statistical rating organization that then rates any
securities issued in connection with any Securitization
effected by the Company would downgrade such securities as
a result of such transfer; and
(i) Each Seller shall have delivered a Representation
Letter to Parent in accordance with the terms hereof.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be
terminated and the Merger contemplated hereby may be abandoned at
any time prior to the Effective Time:
(a) By mutual written consent of Parent and the
Company;
(b) By Parent or the Company, if the Merger shall not
have been consummated on or before September 30, 1998
(provided that the right to terminate this Agreement under
this Section 7.1(b) shall not be available to any party
whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the
failure of the Merger to be consummated on or before such
date);
(c) By Parent or the Company, if any court or other
governmental body of competent jurisdiction shall have
issued a final order, decree or ruling or taken any other
final action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or
other action is or shall have become final and
nonappealable;
(f) By the Company, if prior to the Closing Date (i)
there shall have been a breach of any of the
representations or warranties on the part of Parent or Sub
contained in this Agreement which, individually or in the
aggregate, has had or would reasonably be expected to have
a material adverse effect on the ability of Parent to
consummate the transactions contemplated hereby, or (ii)
there shall have been a breach of any covenant or agreement
on the part of Parent or Sub contained in this Agreement
which has had or would reasonably be expected to have a
material adverse effect on the ability of Parent to
consummate the transactions contemplated hereby, in either
case (i) or (ii) which breach shall not have been cured
prior to 30 days following notice thereof to Parent; or
(g) By Parent, if prior to the Closing Date (i) there
shall have been a breach of any of the representations or
warranties on the part of the Company or any Seller
contained in this Agreement which, individually or in the
aggregate, has had or would reasonably be expected to have
a Material Adverse Effect, or (ii) there shall have been a
36
breach of any covenant or agreement on the part of the
Company or any Seller contained in this Agreement which has
had or would be reasonably be expected to have a Material
Adverse Effect, in either case (i) or (ii) which breach
shall not have been cured prior to 30 days following notice
thereof to the Company or any Seller, as applicable.
SECTION 7.2 Effect of Termination. If this Agreement
is terminated in accordance with Section 7.1 hereof, this
Agreement shall become null and void and of no further force and
effect, except that (i) the terms and provisions of this Section
7.2, Section 5.9, Section 7.3 and Section 9.7 shall remain in
full force and effect and (ii) any termination of this Agreement
shall not relieve any party hereto from any liability for any
breach of its obligations hereunder.
SECTION 7.3 Expenses. Each of Parent and the Company
shall bear its own fees and expenses ("Costs") incurred in
connection with this Agreement and the transactions contemplated
hereby (including, but not limited to, fees and disbursements of
attorneys and financial advisors), and the Company shall bear the
Costs of the Stock Sellers and to the extent required by
agreements existing as of the date hereof and listed on Schedule
7.3, the Costs of the Warrant Sellers; provided, however, that in
the event the Merger is consummated, the Costs to be borne by the
Company pursuant to this Section 7.3 (including, without
limitation, Costs incurred by the Company and any Costs referred
to in Section 2.7 hereof) shall not exceed $250,000 in the
aggregate, and any Costs in excess of such amount shall be borne
pro rata by the Sellers.
SECTION 7.4 Amendment. This Agreement may not be
amended except by an instrument in writing signed by the parties
hereto.
SECTION 7.5 Waiver. At any time prior to the Closing
Date, any party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein; provided, that the
Company may waive compliance with the conditions set forth in
clauses (d), (e) and (f) of Section 6.2 only with the consent of
the Warrant Sellers. Any such extension or waiver shall be valid
if set forth in an instrument in writing signed by the party or
parties to be bound thereby. The failure of any party to this
Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Survival of Representations and
Warranties. (a) Notwithstanding any investigation conducted or
notice or knowledge obtained by or on behalf of Parent, each
representation and warranty in this Agreement, in the Schedules
hereto or in certificates delivered pursuant to this Agreement,
of the Company or any Seller, shall survive the Effective Time
for a period of two years (the "Survival Period").
37
(b) Notwithstanding any investigation conducted or
notice or knowledge obtained by or on behalf of the Company or
any Seller, each representation and warranty of Parent and Sub
made in Sections 4.3, 4.4, 4.7, 4.8 and 4.9 hereof (except to the
extent that any representation or warranty made in Section 4.8
hereof may be construed to relate to any statement made in or
omission from any filing made by Parent with the Commission), and
in any certificate delivered pursuant to this Agreement to the
extent such certificate relates to such Sections (except to the
extent that any representation or warranty made in Section 4.8
hereof may be construed to relate to any statement made in or
omission from any filing made by Parent with the Commission),
shall survive the Effective Time for the Survival Period. Except
as expressly set forth in the preceding sentence, all
representations and warranties of Parent and Sub made herein or
in any certificate delivered pursuant to this Agreement shall
terminate at, and not survive, the Effective Time.
(c) Any claim for indemnification under this Article
VIII arising out of the inaccuracy or breach of any
representation or warranty contained herein, in the Schedules
hereto or in the certificates delivered pursuant to this
Agreement must be made prior to the termination of the Survival
Period with respect thereto.
SECTION 8.2 Terms of Indemnification. Subject to
Sections 8.1 and 8.4 hereof, (i) the Stock Sellers agree, jointly
and severally, to indemnify Parent and its Affiliates (and their
respective directors, officers, agents and employees) against,
and to protect, defend and hold harmless Parent and its
Affiliates (and their respective directors, officers, agents and
employees) from, all Damages arising out of or resulting from any
inaccuracy in, or breach of, any of their respective
representations, warranties, covenants or other agreements of
each of them or the Company contained in or incorporated into
this Agreement, in the Schedules hereto or in certificates
delivered pursuant to this Agreement; (ii) each Warrant Seller,
severally and not jointly, agrees to indemnify Parent and its
Affiliates (and their respective directors, officers, agents and
employees) against, and to protect, defend and hold harmless
Parent and its Affiliates (and their respective directors,
officers, agents and employees) from, all Damages arising out of
or resulting from any inaccuracy in, or breach of, any of such
Warrant Seller's representations, warranties, covenants or other
agreements contained in or incorporated into this Agreement, in
the Schedules hereto or in certificates delivered pursuant to
this Agreement; and (iii) Parent agrees to indemnify Sellers and
their respective Affiliates (and their respective directors,
officers, agents and employees) against, and to protect, defend
and hold harmless Sellers and their respective Affiliates (and
their respective directors, officers, agents and employees) from,
all Damages arising out of or resulting from any inaccuracy in,
or breach of, any of Parent's or Sub's representations,
warranties, covenants or other agreements contained in this
Agreement, or in certificates delivered pursuant to this
Agreement.
SECTION 8.3 Procedures. The following provisions shall
apply to claims for Damages from claims by a third party
("Claim"). The indemnifying party shall have the absolute right,
in its sole discretion and expense, to elect to defend, contest
or otherwise protect against any such Claim with legal counsel of
its own selection. The indemnified party shall have the right,
but not the obligation, to participate, at its own expense, in
the defense thereof through counsel of its own choice and shall
have the right, but not the obligation, to assert any and all
38
crossclaims or counterclaims it may have. The indemnified party
shall, and shall cause their Affiliates (and their respective
directors, officers, agents and employees) to, at all times
cooperate in all reasonable ways with, make their relevant files
and records available for inspection and copying by, or otherwise
render reasonable assistance to, the indemnifying party (i) in
its defense of any action for which indemnity is sought under
this Article VIII and (ii) its prosecution under the last
sentence of this Section 8.3 of any related claim,
cross-complaint, counterclaim or right of subrogation. In the
event the indemnifying party fails to timely defend, contest or
otherwise protect against any such suit, action, investigation,
claim or proceeding, the indemnified party shall have the right,
but not the obligation, to defend, contest, assert cross-claims
or counterclaims or otherwise protect against the same. No claim
or action subject hereto may be settled unless the indemnified
party and the indemnifying party consent thereto, such consent
not to be unreasonably withheld. The indemnifying party shall be
subrogated to the claims or rights of an indemnified party with
respect to any Damages paid by the indemnifying party under this
Article VIII.
SECTION 8.4 Limitation on Indemnification Obligations;
Indemnification Threshold. (a) Notwithstanding any other
provision of this Agreement, (i) the maximum aggregate liability
of each Seller for claims made pursuant to this Article VIII
shall be limited to the aggregate value of the securities issued
to such Seller by Parent at the Closing, valued as set forth in
Section 8.4(c), and (ii) Parent shall not be entitled to make any
claim pursuant to this Article VIII unless and until Parent
reasonably believes that the aggregate amount of Damages with
respect to all such claims that may be made by Parent pursuant to
this Article VIII exceeds $500,000 (the "Parent Threshold
Amount") and then only to the extent that the aggregate amount of
Damages with respect to all such claims that may be made by
Parent pursuant to this Article VIII exceeds the Parent Threshold
Amount. Notwithstanding the foregoing, no claim with respect to
Damages relating to taxes due and owing as the result of any
unfavorable determination by the IRS with respect to the tax
treatment of any Securitization effected by the Company prior to
the date hereof shall be made by Parent or included in any
computation made to determine whether the Parent Threshold Amount
has been exceeded unless and until Parent reasonably believes
that the amount of Damages with respect to all such claims
exceeds the aggregate amount (the "NOL Threshold Amount") of tax
savings actually realized by Parent from the utilization of the
Company's net operating loss carryforwards in existence as of the
Closing, and then only to the extent that the aggregate amount of
Damages with respect to all such claims exceeds the NOL Threshold
Amount.
(b) Notwithstanding any other provision of this
Agreement, (i) the maximum aggregate liability of Parent for
claims made pursuant to this Article VIII shall be limited to the
aggregate value of the securities issued to the Sellers by Parent
at the Closing, valued as set forth in Section 8.4(c), and (ii)
no Seller shall be entitled to make any claim pursuant to this
Article VIII unless and until such Seller reasonably believes
that the aggregate amount of Damages with respect to all such
claims that may be made by the Sellers pursuant to this Article
VIII exceeds $500,000 (the "Seller Threshold Amount") and then
only to the extent that the aggregate amount of Damages with
respect to all such claims that may be made by the Sellers
pursuant to this Article VIII exceeds the Seller Threshold
Amount.
39
(c) For purposes of this Section 8.4, shares of Parent
Common Stock issued to a Seller in respect of Company Common
Stock or Base Warrants shall be valued at the Market Price per
share.
SECTION 8.5 Indemnification Payments. Indemnification
obligations of a Seller under this Article VIII may be satisfied,
at the election of such Seller, either by a cash payment or by
delivery of shares of Parent Common Stock (or a combination of
cash and Parent Common Stock) having a value equal to the amount
of such obligation. For purposes of this Section 8.5, Parent
Common Stock shall be deemed to have a value per share equal to
the average of the closing price of Parent Common Stock as
reported on the NYSE Composite Transaction Tape over the five
consecutive trading days for Parent Common Stock ending on the
last trading day for Parent Common Stock immediately preceding
the date of the payment of such indemnification obligation.
Indemnification obligations of Parent under this Article VIII
shall be satisfied by a cash payment in the amount of such
obligation.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Notices. All notices, requests, claims,
demands and other communications hereunder shall be in writing
and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in person, by cable, telecopy, telegram
or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as
shall be specified by like notice):
if to Parent or Sub:
Capital One Financial Corporation
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxx 0000
Xxxxx Xxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxx Xxxxxxxx, Esq.
Fax: (000) 000-0000
with an additional copy to:
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
40
if to the Company or any of the Stock Sellers:
Summit Acceptance Corporation
0000 Xxxx Xxxx Xxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
with additional copies to:
G. Xxxxxx Xxxxxxx III
0000 Xxxxx Xxxxx
Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
and
Xxxxxx & Xxxxxxx
0000 Xxxxx Xxxxx Tower
00 Xxxx 0xx Xxxxxx
Xxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxx, Esq
Fax: (000) 000-0000
if to Capital Resource Lenders III, L.P.:
Capital Resource Lenders III, L.P.
00 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Fax: (000) 000-0000
with an additional copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
High Street Tower
000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx Xx., Esq.
Fax: (000) 000-0000
41
if to Lincoln National Life Insurance Company
or Lincoln National Income Fund, L.P.:
c/o Lincoln Investment Management, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Investments/Private Placements
Fax: (000) 000-0000
if to X.X. Xxxxxx Capital Corporation or Sixty Wall
Street Fund, L.P.:
x/x X.X. Xxxxxx & Xx. Xxxxxxxxxxxx
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
Fax: (000) 000-0000
with an additional copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
SECTION 9.2 Certain Definitions. For purposes of this
Agreement, the term:
"Affiliate" shall have the meaning set forth in Rule
12b-2 under the Exchange Act.
"Alternative Transaction" means any (A) direct or
indirect acquisition or purchase of any voting securities
of, or equity interest in, the Company or any of its
Subsidiaries by any Person other than any party hereto, (B)
merger, consolidation, business combination, sale of a
material portion of the assets, recapitalization,
liquidation, dissolution or similar transaction involving
the Company or any of its Subsidiaries, or (C) other
transaction the consummation of which would reasonably be
expected to impede, interfere with, prevent or materially
delay the transactions contemplated hereby.
"Automobile Finance Contract" means a motor vehicle
installment sales contract originated by a retail dealer of
automobiles that is secured by title to, security interests
in, or liens on a motor vehicle under such contract and
applicable law.
"Base Warrants" means the Base Warrants issued by the
Company pursuant to the Senior Subordinated Note and
Warrant Purchase Agreement, dated as of April 7, 1997,
among the Company, Capital Resource Lenders III, L.P.
("CRL"), The Lincoln National Life Insurance Company
("Life") and Lincoln National Income Fund, Inc.
42
("Income," and collectively with Life, "Lincoln"), as
amended (the "1997 Agreement"), or the Senior Subordinated
Note and Warrant Purchase Agreement, dated as of April 10,
1998, among the Company, X.X. Xxxxxx Capital Corporation
("Xxxxxx Capital"), Sixty Wall Street Fund, L.P. ("Wall
Street," and collectively with Xxxxxx Capital, "Xxxxxx"),
CRL, and Life (the "1998 Agreement").
"Xxxxxxx Debenture" shall have the meaning set forth
in the 1998 Agreement.
"Commission" means the United States Securities and
Exchange Commission, or any successor thereto.
"Confidentiality Agreement" shall mean the
confidentiality agreement, dated March 6, 1998, between
Parent and the Company.
"Damages" shall mean any and all losses, claims,
damages, liabilities, obligations, judgments, settlements,
awards, demands, offsets, reasonable out-of-pocket costs,
expenses and attorneys' fees (including any such reasonable
costs, expenses and attorneys' fees incurred in enforcing a
party's right to indemnification against any indemnifying
party or with respect to any appeal) and penalties and
interests, if any.
"Employment Agreements" shall mean the Employment
Agreements of even date herewith between the Company and
each of Messrs. Lawson, Collins, Boyd, Lukken, Xxxxxx,
Xxxxxxxxx and Xxxxxxxx.
"Environmental Laws" shall mean any federal, state or
local law, statute, ordinance, order, decree, rule or
regulation relating to releases, discharges, emissions or
disposals to air, water, land or groundwater of Hazardous
Materials; to the use handling or disposal of
polychlorinated byphenyls, asbestos or urea formaldehyde or
any other Hazardous Material; to the treatment, storage,
disposal or management of Hazardous Materials; to exposure
to toxic, hazardous or other controlled, prohibited or
regulated substances; and to the transportation, release or
any other use of Hazardous Materials, including the
Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. 9601, et seq. ("CERCLA"), the
Resource Conservation and Recovery Act, 42 U.S.C. 6901, et
seq. ("RCRA"), the Toxic Substances Control Act, 15 U.S.C.
2601, et seq. ("TSCA"), the Occupational, Safety and Health
Act, 29 U.S.C. 651, et seq., the Clean Air Act, 42 U.S.C.
7401, et seq., the Federal Water Pollution Control Act, 33
U.S.C. 1251, et seq., the Safe Drinking Xxxxx Xxx, 00
X.X.X. 000x, et seq., the Hazardous Materials
Transportation act, 49 U.S.C. 1802 et seq. ("HMTA") and the
Emergency Planning and Community Right to Know Act, 42
U.S.C. 11001 et seq. ("EPCRA"), and other comparable state
and local laws and all rules, regulations and guidance
documents promulgated pursuant thereto or published
thereunder.
"Hazardous Materials" shall mean each and every
element, compound, chemical mixture, contaminant,
pollutant, material, waste or other substance which is
defined, determined or identified as hazardous or toxic
under Environmental Laws or the release of which is
regulated under Environmental Laws. Without limiting the
generality of the
43
foregoing, the term includes: "hazardous substances" as
defined in CERCLA; "extremely hazardous substances" as
defined in EPCRA; "hazardous waste" as defined in RCRA;
"hazardous materials" as defined in HMTA; "chemical
substance or mixture" as defined in TSCA; crude oil,
petroleum products or any fraction thereof; radioactive
materials including source, byproduct or special nuclear
materials; asbestos or asbestos-containing materials;
chlorinated fluorocarbons ("CFCs"); and radon.
"Intellectual Property" shall mean: (i) all
trademarks, service marks, trademark registrations, service
xxxx registrations, trade names and applications for
registration of trademarks and service marks; (ii) all
licenses which create rights in or to the trademark,
service xxxx or trade name properties described in clause
(i) above; (iii) all copyrights, copyright registrations
and applications for registration of copyrights; (iv) all
renewals, modifications and extensions of any items
referred to in clauses (i) through (iii) above; (v) all
patents, design patents and utility patents, all
applications for grant of any such patents pending as of
the date hereof or as of the Effective Date or filed within
five years prior to the date hereof, and all reissues,
divisions, continuations-in-part and extensions thereof;
(vi) all technical documentation, trade secrets, designs,
inventions, processes, rights in plant varieties, formulae,
know-how, operating manuals and guides, plans, new product
development, technical and marketing surveys, material
specifications, product specifications, invention records,
research records, labor routings, inspection processes,
equipment lists, engineering reports and drawing,
architectural or engineering plans, know-how agreements and
other know-how; (vii) all marketing and licensing records,
sales literature, customer lists, trade lists, sales forces
and distributor networks lists, advertising and promotional
materials, service and parts records, warranty records,
maintenance records and similar records; (viii) all rights
arising under, and rights to develop, use and sell under,
any of the foregoing and all licenses with respect thereto;
and (ix) all rights and incidents of interest in and to all
noncompetition or confidentiality agreements.
"Material Adverse Effect" shall mean a material
adverse effect on the business, operations, condition
(financial or otherwise), results of operations, assets or
liabilities of the Company and its Subsidiaries taken as a
whole, or a material adverse effect on the ability of the
Company or any Seller to consummate the transactions
contemplated by this Agreement.
"Market Price" shall mean the average of the closing
price of Parent Common Stock as reported on the NYSE
Composite Transaction Tape over the five consecutive
trading days for Parent Common Stock ending on the last
trading day for Parent Common Stock immediately preceding
the Effective Time.
"Material Contracts" shall mean all contracts,
agreements, commitments, arrangements, leases (including
with respect to personal property), policies, instruments
and understandings to which the Company or any of its
Subsidiaries is a party or by which the Company or any of
its Subsidiaries or any of their respective assets or
properties is bound (a) to which any Major Customer is a
party, (b) which involves or
44
could involve aggregate payments of more than $100,000
(other than contracts with automobile dealerships with
respect to the purchase and sale of Automobile Finance
Contracts), or (c) which is or could reasonably be expected
to be material to the Company and its Subsidiaries taken as
a whole.
"1998 Agreement" shall have the meaning set forth in
the definition of the term "Base Warrants."
"1997 Agreement" shall have the meaning set forth in
the definition of the term "Base Warrants."
"Notes" shall mean, collectively, the "Notes" as such
term is defined in the 1998 Agreement and the "Notes" as
such term is defined in the 1997 Agreement.
"Operative Documents" shall mean, collectively, the
"Operative Documents" as such term is defined in the 1998
Agreement and the "Operative Documents" as such term is
defined in the 1997 Agreement.
"Option Exchange Ratio" shall mean the quotient of (x)
7.50, divided by (y) the Market Price.
"Person" or "person" shall mean any individual,
corporation, partnership, limited liability company, joint
venture, governmental agency or instrumentality, or any
other entity.
"Registration Rights Agreement" shall mean the
Registration Rights Agreement, dated as of the Closing
Date, among certain of the parties hereto, in substantially
the form attached as Exhibit D hereto.
"Representation Letter" shall mean a Representation
Letter in substantially the form attached as Exhibit E,
Exhibit F or Exhibit G hereto as applicable.
"Securitization" shall mean a transaction wherein an
identified pool of Automobile Finance Contracts are sold,
pledged or conveyed by the Company or any of its
Subsidiaries to a trustee, grantor trust, or other special
purpose financing entity as collateral security for the
issuance of notes, certificates or other securities.
"Subsidiary" shall mean, with respect to any Person,
any corporation, partnership, limited liability company, or
other organization, whether incorporated or unincorporated,
of which such Person directly or indirectly owns or
controls at least a majority of the securities or other
interests having by their terms ordinary voting power to
elect a majority of the board of directors or others
performing similar functions.
"Tax" or "Taxes" shall mean, however denominated, all
federal, state, local, foreign and other taxes, levies,
imposts, assessments, impositions or other similar
government charges, including, without limitation, all net
income, gross income,
45
estimated income, gross receipts, business, occupation,
franchise, real property, payroll, personal property,
sales, transfer, stamp, use, employment, social security,
unemployment, worker's compensation, commercial rent,
withholding, occupancy, premium, gross receipts, profits,
windfall profits, deemed profits, license, lease,
severance, capital, production, corporation, ad valorem,
excise, duty or other taxes, including interest, penalties
and additions (to the extent applicable) thereto whether
disputed or not.
"Tax Return" shall mean any report, return, document,
declaration or other information or filing (including any
amendments) required to be supplied to any taxing authority
or jurisdiction (foreign or domestic) with respect to
Taxes, including, without limitation, information returns,
where permitted or required, combined or consolidated
returns for any group of entities that includes the Company
or any of its Subsidiaries, any documents with respect to
or accompanying payments of estimated Taxes, or with
respect to or accompanying requests for the extension of
time in which to file any such report, return, document,
declaration or other information.
"Warrant" shall mean a Base Warrant, Contingent
Warrant or Additional Warrant.
SECTION 9.3 Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected
in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the fullest extent possible.
SECTION 9.4 Entire Agreement; Assignment; Failure of
Certain Condition. (a) This Agreement, together with the
Confidentiality Agreement and the Registration Rights Agreement
(when executed and delivered), constitutes the entire agreement
among the parties with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written
and oral, among the parties, or any of them, with respect to the
subject matter hereof. This Agreement shall not be assigned by
any party hereto, by operation of law or otherwise; provided,
however, that Parent or Sub may assign any of their respective
rights and obligations to any wholly-owned Subsidiary of Parent
or Sub, as the case may be, but no such assignment shall relieve
Parent or Sub, as the case may be, of its obligations hereunder.
Any attempted assignment which does not comply with the
provisions of this Section 9.4 shall be null and void ab initio.
(b) The Company and Sellers hereby agree that failure
by Parent and Sub to satisfy the condition set forth in Section
6.2(f) hereof by reason of Parent's judgment (in its sole
discretion) that it is unable to make the representation
contained in Section 2.1(d) of the
46
Registration Rights Agreement (whether or not such inability
resulted from a voluntary act or failure to act by Parent), shall
not constitute a breach of this Agreement, and no remedy at law
or otherwise shall be available to the Company or any of the
Sellers in respect of such failure.
SECTION 9.5 Parties in Interest. This Agreement shall
be binding upon and inure solely to the benefit of each party
hereto, and, except as provided in the following sentence,
nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any rights, benefits or
remedies of any nature whatsoever under or by reason of this
Agreement. The parties hereto expressly intend the provisions of
Sections 5.5, 5.10(e) and 8.2 hereof to confer a benefit upon and
be enforceable by, as third party beneficiaries of this
Agreement, the third Persons referred to in, or intended to be
benefited by, such provisions.
SECTION 9.6. Restrictions on Transfer. Except as
otherwise specified in Section 9.6(d) hereof, the certificates
evidencing shares of Parent Common Stock issued to Sellers
pursuant to the terms hereof, shall bear a legend (the "Private
Placement Legend") to the following effect:
This Security was originally issued in a transaction
exempt from registration under Section 5 of the
Securities Act of 1933, as amended (the "Securities
Act"), and this security may not be offered, sold or
otherwise transferred in the absence of such
registration or an applicable exemption therefrom. By
accepting this security, the holder agrees for the
benefit of Capital One Financial Corporation that,
until the expiration of the holding period applicable
to offers and sales of the securities evidenced hereby
under Rule 144(k) under the Securities Act (or any
successor provision), (A) it will not resell or
otherwise transfer the security represented hereby
except pursuant to (i) a registration statement that
has been declared effective under the Securities Act
(and that continues to be effective at the time of
such transfer) or (ii) an applicable exemption from
registration under the Securities Act and (B) it will
deliver to each Person to whom the security evidenced
hereby is transferred (other than a transfer pursuant
to clause (A)(i) above) a notice substantially to the
effect of this legend.
(b) By its acceptance of any shares of Parent Common
Stock represented by a certificate bearing the Private Placement
Legend, the holder of such securities shall be deemed to have
acknowledged the restrictions set forth in the Private Placement
Legend and shall be deemed to have agreed with Parent that it
will transfer such shares of Parent Common Stock only in
accordance with the Private Placement Legend.
(c) In connection with any transfer of any shares of
Parent Common Stock represented by a certificate bearing the
Private Placement Legend, each holder agrees to deliver to Parent
such satisfactory evidence, which may include an opinion of
counsel, as reasonably may be requested by Parent, to confirm
that such transfer is being made in accordance with the
limitations set forth in the Private Placement Legend or that the
limitations set forth in the Private Placement Legend no longer
are applicable. In the event that Parent determines that any such
transfer is not in accordance with the Private Placement Legend
or the restrictions set forth
47
herein, Parent shall not effect such transfer or shall so inform
the transfer agent, if any, who shall not effect such transfer.
(d) The Private Placement Legend may be removed from a
certificate representing shares of Parent Common Stock, if there
is delivered to Parent such satisfactory evidence, which may
include an opinion of counsel, as reasonably may be requested by
Parent to confirm that neither such legend nor the restrictions
on transfer set forth therein are required to ensure that
transfers of such shares will not violate the registration and
prospectus delivery requirements of the Securities Act.
SECTION 9.7 Governing Law and Consent to Jurisdiction.
(a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.
(b) To the fullest extent permitted by applicable law,
each party hereto (i) agrees that any claim, action or proceeding
by such party seeking any relief whatsoever arising out of, or in
connection with, this Agreement or the transactions contemplated
hereby shall be brought only in the United States District Court
for the Eastern District of Virginia and in any Virginia state
court located in the Eastern District of Virginia and not in any
other state or Federal court in the United States of America or
any court in any other country, (ii) agrees to submit to the
exclusive jurisdiction of such courts located in the Commonwealth
of Virginia for purposes of all legal proceedings arising out of,
or in connection with, this Agreement or the transactions
contemplated hereby, (iii) irrevocably waives any objection which
it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an
inconvenient forum, and (iv) irrevocably waives the right to
trial by jury in any claim, action or proceeding by such party
seeking any relief whatsoever arising out of, or in connection
with, this Agreement or the transactions contemplated hereby.
SECTION 9.8 Headings. The descriptive headings
contained in this Agreement are included for convenience of
reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.9 Counterparts. This Agreement may be
executed in two or more counterparts, and by the different
parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
48
IN WITNESS WHEREOF, Parent, Sub, the Company and the
Sellers have caused this Agreement to be executed as of the date
first written above.
SUMMIT ACCEPTANCE CORPORATION
By: /s/ Xxxxx X. Xxxxxx
------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chief Executive Officer
CAPITAL ONE FINANCIAL CORPORATION
By: /s/ Xxxxx X. Xxxxxx
------------------------------
Name: Xxxxx X. Xxxxxx
Title: Senior Vice President,
Treasurer & Assistant Secretary
S-ACQUISITION CORP.
By: /s/ Xxxx X. Xxxxxxxx Xx.
------------------------------
Name: Xxxx X. Xxxxxxxx, Xx.
Title: Executive Vice President
& Secretary
49
STOCK SELLERS:
/s/ Xxxxx X. Xxxxxx
---------------------------------
Xxxxx X. Xxxxxx
/s/ G. Xxxxxx Xxxxxxx III
---------------------------------
G Xxxxxx Xxxxxxx III, as
Trustee of the G.
Xxxxxx Xxxxxxx III Management Trust
/s/ Xxxxxxx XxXxxx Xxxxxxx
---------------------------------
Xxxxxxx XxXxxx Xxxxxxx, as Trustee of the
Xxxxxxx XxXxxx Xxxxxxx, Xx. 1990
Qualified Subchapter S Trust
/s/ Xxxxxxx XxXxxx Xxxxxxx
---------------------------------
Xxxxxxx XxXxxx Xxxxxxx, as Trustee of
the Xxxxxx Xxxxxx Xxxxxxx XX 1997 Trust
/s/ Xxxxxx Xxxxxxx
---------------------------------
Xxxxxx Xxxxxxx, as Trustee of the Xxxxxxx
XxXxxx Xxxxxxx, Xx. 1994 Trust
/s/ Xxxxxx Xxxxxxx
---------------------------------
Xxxxxx Xxxxxxx, as Trustee of the
Xxxxxxxxx Xxxxxxxxx Xxxxxxx 1994 Trust
/s/ Xxxxxxx XxXxxx Xxxxxxx
---------------------------------
Xxxxxxx XxXxxx Xxxxxxx, as Trustee of the
Xxxxxxxxx Xxxxxxxxx Xxxxxxx 1990
Qualified Subchapter S Trust
50
/s/ Xxxxxxx XxXxxx Xxxxxxx
---------------------------------
Xxxxxxx XxXxxx Xxxxxxx, as Trustee of the
Xxxxxx Xxxxxx Xxxxxxx XX 1990 Qualified
Subchapter S Trust
WARRANT SELLERS:
CAPITAL RESOURCE LENDERS III, L.P.
By: Capital Resource Partners III, L.L.C.
its General Partner
By: /s/ Xxxxxx X. Ammern
------------------------------
Name: Xxxxxx X. Ammern
Title: General Partner
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: Lincoln Investment Management, Inc.
its Attorney-in-Fact
By: /s/ Xxxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice President
LINCOLN NATIONAL INCOME FUND, L.P.
By: /s/ Xxxxx X. Xxxxxxx
------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
X.X. XXXXXX CAPITAL CORPORATION
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Managing Director
00
XXXXX XXXX XXXXXX FUND, L.P.
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Managing Director
52
EXHIBIT A
ARTICLES OF INCORPORATION
OF
S-ACQUISITION CORP.
I, the undersigned natural person of the age of eighteen
years or more, acting as the incorporator of a corporation under
the Texas Business Corporation Act, do hereby adopt the following
Articles of Incorporation for such corporation:
ARTICLE ONE
The name of the corporation is S-Acquisition Corp.
ARTICLE TWO
The period of its duration shall be perpetual.
ARTICLE THREE
The purpose for which the corporation is organized is to
engage in the transaction of any or all lawful business for which
corporations may be incorporated under the Texas Business
Corporation Act.
ARTICLE FOUR
The aggregate number of shares which the corporation shall
have authority to issue is one thousand (1,000) shares of common
stock, and the par value of each share is one cent ($0.01) per
share.
ARTICLE FIVE
The corporation shall not commence business until it has
received for the issuance of its shares consideration of the
value of one thousand dollars ($1,000).
A-1
ARTICLE SIX
The street address of the initial registered office of the
corporation is c/o CT CORPORATION SYSTEM, 000 X. Xx. Xxxx Xxxxxx,
Xxxxxx, Xxxxx 00000, and the name of its initial registered agent
at such address is CT CORPORATION SYSTEM.
ARTICLE SEVEN
The number of directors of the corporation shall be fixed
in the by-laws of the corporation. The number of directors
constituting the initial board of directors of the corporation
(the "Board of Directors") is two (2), and the names and
addresses of the initial members of the Board of Directors until
the first annual meeting of the shareholders or until their
successors are elected and qualified are as follows:
NAME ADDRESS
Xxxx Xxxxxxxx c/o Capital One Financial Corporation
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxx 0000
Xxxxx Xxxxxx, Xxxxxxxx 00000
Xxxxx Xxxxxx c/o Capital One Financial Corporation
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxx 0000
Xxxxx Xxxxxx, Xxxxxxxx 00000
ARTICLE EIGHT
The election of directors need not be by written ballot
except and to the extent provided in the by-laws of the
corporation.
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ARTICLE NINE
Any action required or permitted to be taken at any meeting
of the Board of Directors may be taken without a meeting if all
members of the Board of Directors consent thereto in writing, and
the writing is filed with the minutes of the proceedings of the
Board of Directors.
ARTICLE TEN
The Board of Directors may from time to time adopt, amend
or repeal by-laws of the corporation, but the stockholders may
adopt additional by-laws and may amend or repeal any by-law,
whether adopted by them or otherwise.
ARTICLE ELEVEN
No director of the corporation shall be liable to the
corporation or its stockholders for monetary damages for any
breach of any fiduciary duty as a director, provided that the
provisions of this Article Eleven shall not eliminate or limit
the liability of a director (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law, (iii) under Section
2.41(A)(1) of the Texas Business Corporation Act, or (iv) for any
transaction from which the director derived an improper personal
benefit.
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ARTICLE TWELVE
The name and address of the incorporator is:
NAME ADDRESS
Xxxxxxx X. Xxxxxxxxx c/o Capital One Financial Corporation
00000 Xxxx Xxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxxx 00000
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EXHIBIT B
BY-LAWS
of
S-ACQUISITION CORP.
Incorporated under the Laws of the State of Texas
ARTICLE I
OFFICES AND RECORDS
Section 1.1. Principal Office. The principal office of
S-Acquisition Corp. (the "Corporation") shall be located in Falls
Church, Virginia.
Section 1.2. Other Offices. The Corporation may have such
other offices, either within or without the State of Texas
("Texas"), as the board of directors of the corporation (the
"Board") may from time to time designate or as the business of
the Corporation may from time to time require.
Section 1.3. Books and Records. The books and records of
the Corporation may be kept at 0000 Xxxxxxxx Xxxx Xxxxx, Xxxxx
0000, Xxxxx Xxxxxx, Xxxxxxxx or at such other locations inside or
outside Texas as may from time to time be designated by the
Board.
ARTICLE II
STOCKHOLDERS
Section 2.1. Annual Meeting. The annual meeting of
stockholders of the Corporation shall be held for the election of
directors at such date, time and place, either within or without
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Texas, as may be designated by resolution of the Board from time
to time. Any other proper business may be transacted at the
annual meeting.
Section 2.2. Special Meeting. Special meetings of
stockholders for any purpose or purposes, unless otherwise
prescribed by statute, by the articles of incorporation or by
these by-laws, may be called at any time by the Chairman of the
Board, if any, the Vice Chairman of the Board, if any, the
President or the Board, or by a committee of the Board which has
been duly designated by the Board, and whose powers and
authority, as expressly provided in a resolution of the Board,
include the power to call meetings, and shall be called by any of
them at the written request of the holders of record of not less
than 50% of all the shares then outstanding and entitled to vote
thereof. Such request shall state the purpose or purposes of such
meeting. Such special meetings shall be held at such date, time
and place either within or without the Texas as may be stated in
the notice of the meeting or in a duly executed waiver of notice
thereof. The business transacted at any special meeting of
stockholders shall be limited to the purposes stated in such
notice.
Section 2.3. Notice of Meetings. Whenever stockholders are
required or permitted to take any action at a meeting, a written
notice of the meeting shall be given which shall state the place,
date and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called
and the name of the person by whom or at whose direction the
meeting is being called. Unless otherwise provided by law, the
written notice of any meeting shall be given either personally or
by mail, telegram, cable or telephone, by or at the direction of,
the President, the Secretary, or the persons calling the meeting,
not less than ten nor more than sixty days before the date of the
meeting to each stockholder of record entitled to vote at such
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meeting. If mailed, such notice shall be deemed to be given when
deposited in the United States mail, postage prepaid, directed to
the stockholder at his address as it appears on the records of
the Corporation. Such further notice shall be given as may be
required by law. Meetings may be held without notice if all
stockholders entitled to vote are present, or if notice is waived
by those not present. Any previously scheduled meeting of the
stockholders may be postponed by resolution of the Board upon
public notice given prior to the time previously scheduled for
such meeting of stockholders.
Section 2.4. Adjournment. At any meeting of stockholders,
annual or special, the Chairman of the meeting or the holders of
record of a majority of the shares of stock issued and
outstanding and entitled to vote at the meeting (the "Voting
Stock") may adjourn from time to time, whether or not there is a
quorum, to reconvene at the same or some other place, and notice
need not be given of any such adjourned meeting if the time and
place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the Corporation
may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the
meeting.
Section 2.5. Quorum. At each meeting of stockholders,
except where otherwise provided by law or the articles of
incorporation or these by-laws, the holders of a majority of the
Voting Stock, represented in person or by proxy, shall constitute
a quorum for the transaction of business thereat. For purposes of
the foregoing, two or more classes or series of stock shall be
considered a single class if the holders thereof are entitled to
vote together as a single class at the
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meeting. In the absence of a quorum, a majority of the
stockholders entitled to vote so present, or if no such
stockholder is present in person or by proxy, any officer
entitled to preside at or act as secretary of such meeting, shall
have the power to adjourn the meeting from time to time in the
manner provided in Section 2.4 of these by-laws until a quorum
shall be present or represented. Shares of its own stock
belonging to the Corporation or to another corporation, if a
majority of the shares entitled to vote in the election of
directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote
nor be counted for quorum purposes; provided, however, that the
foregoing shall not limit the right of any corporation to vote
stock, including but not limited to its own stock, held by it in
a fiduciary capacity.
Section 2.6. Organization. Meetings of stockholders shall
be presided over by the Chairman of the Board, if any, or in his
absence by the Vice Chairman of the Board, if any, or in his
absence by the President, or in his absence by a vice president,
or in the absence of the foregoing persons by a chairman
designated by the Board, or in the absence of such designation,
by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the
meeting may appoint any person to act as secretary of the
meeting.
Section 2.7. Voting; Proxies. (a) Unless otherwise provided
in the articles of incorporation, each stockholder of record
entitled to vote at any meeting of stockholders shall be entitled
to one vote for each share of stock registered in such
stockholder's name on the books of the Corporation, which has
voting power upon the matter in question.
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(b) Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action
in writing without a meeting, may vote, or consent, as the case
may be, in person or may authorize another person or persons to
act for him by proxy, but no such proxy shall be voted or acted
upon after eleven months from its date, unless the proxy provides
for a longer period.
(c) Without limiting the manner in which a stockholder may
authorize another person or persons to act for him as proxy
pursuant to subsection (b) of this Section, the following shall
constitute a valid means by which a stockholder may grant such
authority:
(1) A stockholder may execute a writing authorizing
another person or persons to act for him as proxy.
Execution may be accomplished by the stockholder or his
authorized officer, director, employee or agent signing
such writing or causing his or her signature to be affixed
to such writing by any reasonable means including, but not
limited to, by facsimile signature.
(2) A stockholder may authorize another person or
persons to act for him as proxy by transmitting or
authorizing the transmission of a telegram, telex,
cablegram or other means of electronic transmission to the
person who will be the holder of the proxy or to a proxy
solicitation firm, proxy support service organization or
like agent duly authorized by the person who will be the
holder of the proxy to receive such transmission, provided
that any such telegram, cablegram or other means of
electronic transmission must either set forth or be
submitted with information from which it can be determined
that the telegram, cablegram, or other electronic
transmission was authorized by the stockholder. If it is
determined that such telegrams, cablegrams or other
electronic transmissions are
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valid, the inspectors or, if there are no inspectors, such
other persons making that determination shall specify the
information upon which they relied.
(d) Any copy, facsimile, telecommunication or other
reliable reproduction of the writing or transmission created
pursuant to subsection (c) of this Section, may be submitted or
used in lieu of the original writing or transmission for any and
all purposes for which the original writing or transmission could
be used, provided that such copy, facsimile, telecommunication or
other reproduction shall be a complete reproduction of the entire
original writing or transmission.
(e) A duly executed proxy shall be irrevocable if it states
that it is irrevocable and if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable
power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock
itself or an interest in the corporation generally. A stockholder
may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in
writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary of the Corporation. Voting at
meetings of stockholders need not be by written ballot and need
not be conducted by inspectors unless the holders of a majority
of the outstanding shares of all classes of stock entitled to
vote thereon present in person or by proxy at such meeting shall
so determine. At all meetings of stockholders for the election of
directors, a plurality of the votes cast shall be sufficient to
elect. All other elections and questions shall, unless otherwise
provided by law or by the articles of incorporation or these
by-laws, be decided by the vote of the holders of a majority of
the outstanding shares of stock entitled to vote thereon present
in person or by proxy at the meeting, provided that (except as
otherwise required by law
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or by the articles of incorporation) the Board may require
decision by a supermajority vote upon any election or question.
Section 2.8. Fixing Date for Determination of Stockholders
of Record.
(a) Notice and Voting Rights: In order that the Corporation
may determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof, the
Board may fix a record date, which record date shall not precede
the date upon which the resolution fixing the record date is
adopted by the Board, and which record date shall not be more
than sixty nor less than ten days before the date of such
meeting. Only such stockholders of record on the date so fixed
shall be entitled to receive notice of, or to vote at, such
meeting or any adjournment thereof. If no record date is fixed by
the Board, the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be the
date on which notice of the meeting is mailed, or, if notice is
waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of stockholders
of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) Consents: In order that the Corporation may determine
the stockholders entitled to consent to corporate action in
writing without a meeting, the Board may fix a record date, which
record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board, and which date
shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board. If no
record date has been fixed by the Board, the record date for
determining stockholders entitled to consent to corporate action
in
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writing without a meeting, when no prior action by the
Board is required by law, the articles of incorporation or these
by-laws, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered
office, principal place of business, or an officer or agent of
the Corporation having custody of the book in which proceedings
of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified
mail, return receipt requested. If no record date has been fixed
by the Board and prior action by the Board is required by law,
the articles of incorporation or these by-laws, the record date
for determining stockholders entitled to consent to corporate
action in writing without a meeting shall be at the close of
business on the day on which the Board adopts the resolution
taking such prior action.
(c) Other Lawful Action: In order that the Corporation may
determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board may fix a record date, which
record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be
not more than sixty days prior to such action. If no record date
is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on
which the Board adopts the resolution relating thereto.
Section 2.9. List of Stockholders Entitled to Vote. The
Secretary shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list
shall
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be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a
place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The
list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by
any stockholder who is present.
Section 2.10. Consent of Stockholders in Lieu of Meeting.
Unless otherwise restricted by the articles of incorporation, any
action required or permitted to be taken at any annual or special
meeting of the stockholders may be taken without a meeting,
without prior notice and without a vote, if a consent or consents
in writing, setting forth the action so taken, shall be signed by
the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon
were present and voted. The consent or consents shall be
delivered to the Corporation by delivery to its registered
office, principal place of business, or an officer or agent of
the Corporation having custody of the book in which proceedings
of meetings of stockholders are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified
or registered mail, return receipt requested. Every written
consent shall bear the date of signature of each stockholder who
signs the consent and no written consent shall be effective to
take the corporate action referred to therein unless, within
sixty days of the earliest dated consent delivered in the manner
required by law, to the Corporation, written consents signed by a
sufficient number of holders to take action are delivered to the
corporation in the manner indicated above. Prompt notice of the
taking of the corporate action without a meeting by less
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than unanimous written consent shall be given to those
stockholders who have not consented in writing.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1. General Powers and Compensation. The business
and affairs of the Corporation shall be managed by or under the
direction of the Board. In addition to the powers and authorities
by the by-laws expressly conferred upon them, the Board may
exercise all such powers of the Corporation and do all such
lawful acts and things as are not by law or by the articles of
incorporation or by these by-laws required to be exercised or
done by the stockholders.
Section 3.2. Number; Qualifications. The Board shall
consist of one or more members, the number thereof to be
determined from time to time by resolution of the Board.
Directors need not be stockholders.
Section 3.3. Election; Resignation; Removal; Vacancies. The
Board shall initially consist of the persons elected as such by
the incorporator. At the first annual meeting of stockholders and
at each annual meeting thereafter, the stockholders shall elect
Directors to replace those Directors whose terms then expire. Any
Director may resign at any time upon written notice to the
Corporation. Stockholders may remove Directors with or without
cause by vote of a majority of the shares then entitled to vote
at an election of directors. Any vacancy occurring in the Board
for any cause may be filled by the affirmative vote of a majority
of the remaining members of the Board, although such majority is
less than a quorum, or by a plurality
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of the votes cast at a meeting of stockholders, and each Director
so elected shall hold office until the expiration of the term of
office of the Director whom he has replaced.
Section 3.4. Regular Meetings. A regular meeting of the
Board shall be held without other notice than this by-law
immediately after, and at the same place as, each annual meeting
of stockholders. Additional regular meetings of the Board may be
held at such places within or without Texas and at such times as
the Board may from time to time determine, by resolution, and if
so determined, notices thereof, other than such resolution, need
not be given.
Section 3.5. Special Meetings. Special meetings of the
Board may be held at any time or place within or without Texas
whenever called by the Chairman of the Board, the Vice Chairman
of the Board, the President, any vice president, the Secretary,
or by a plurality of directors in office. Reasonable notice
thereof shall be given by the person or persons calling the
meeting personally or by mail, telegram, cable or telephone not
later than the second day before the date of the special meeting.
Neither the business to be transacted at, nor the purpose of, any
special meeting of the Board need be specified in the notice of
such meeting or waiver of notice thereof.
Section 3.6. Telephonic Meetings Permitted. Members of the
Board, or any member of any committee designated by the Board,
may participate in a meeting of such Board or committee by means
of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear
each other at the same time, and participation in a meeting
pursuant to this Section 3.6 shall constitute presence in person
at such meeting.
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Section 3.7. Quorum; Vote Required for Action. At all
meetings of the Board a majority of the entire Board shall
constitute a quorum for the transaction of business. Except in
cases in which the articles of incorporation or these by-laws
otherwise provide, the affirmative vote of a majority of the
directors present at a meeting at which a quorum is present shall
be the act of the Board. If a quorum shall not be present at any
meeting of the Board, a majority of the directors present may
adjourn the meeting from time to time, without notice other than
by announcement at the meeting, until a quorum shall be present.
Section 3.8. Organization. Meetings of the Board shall be
presided over by the Chairman of the Board, if any, or in his
absence by the Vice Chairman of the Board, if any, or in his
absence by the President, or in his absence by a chairman chosen
at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 3.9. Action by Directors Without a Meeting. Unless
otherwise restricted by the articles of incorporation or these
by-laws, any action required or permitted to be taken at any
meeting of the Board, or of any committee thereof, may be taken
without a meeting if all members of the Board or such committee,
as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the
Board or committee.
ARTICLE IV
COMMITTEES
Section 4.1. Committees. The Board may from time to time,
by resolution passed by a majority of the whole Board, designate
one or more committees, each committee to consist of
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one or more of the directors of the Corporation. The Board may
designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification
of a member of the committee, the member or members thereof
present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in place of any
such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board, and except as
otherwise required by law, shall have and may exercise all the
powers and authority of the Board in the management of the
business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have power or authority
in reference to amending the articles of incorporation, adopting
an agreement of merger, share exchange, conversion or
consolidation, recommending to the stockholders the sale, lease
or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of dissolution,
removing or indemnifying directors or amending, altering, or
repealing these by-laws or any other actions barred by law; and,
unless the resolution expressly so provides, no such committee
shall have the power or authority to declare a dividend or to
authorize the issuance of stock.
Section 4.2. Committee Rules. Unless the Board otherwise
provides, each committee designated by the Board may make, alter
and repeal rules for the conduct of its business. In the absence
of such rules each committee shall conduct its business in the
same manner as the Board conducts its business pursuant to
Article III of these by-laws.
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ARTICLE V
OFFICERS
Section 5.1. Executive Officers; Election; Qualifications.
As soon as practicable after the annual meeting of stockholders
in each year, at the regular meeting of the Board, the Board
shall elect a president and secretary, and it may, if it so
determines, elect a chairman of the Board and a vice chairman of
the Board from among its members. The Board may also elect one or
more vice presidents, one or more assistant vice presidents, one
or more assistant secretaries, a treasurer and one or more
assistant treasurers and may give any of them such further
designations or alternate titles as it considers desirable. Any
number of offices may be held by the same person.
Section 5.2. Term of Office; Resignation; Removal;
Vacancies. Except as otherwise provided in the resolution of the
Board electing any officer, each such officer shall hold office
and until his successor is elected and qualified or until his
earlier death or disability, or resignation or removal. Any
officer may resign at any time upon written notice to the
Corporation. The Board may remove any officer whenever in its
judgment the best interests of the Corporation would be served
thereby at any time by a majority of the members of the entire
Board, but such removal shall be without prejudice to the
contractual rights of such officer, if any, with the Corporation.
Any vacancy occurring in any office of the Corporation by death,
resignation, removal or otherwise may be filled for the unexpired
portion of the term by the Board at any regular or special
meeting.
Section 5.3. Powers and Duties of Executive Officers. The
officers of the Corporation shall have such powers and duties in
the management of the Corporation as may be prescribed by
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the Board and, to the extent not so provided, as generally
pertain to their respective offices, subject to the control of
the Board. The Secretary shall have the duty to record the
proceedings of the meetings of the stockholders, the Board and
any committees in a book to be kept for that purpose. The Board
may require any officer, agent or employee to give security for
the faithful performance of his duties.
Section 5.4. Compensation. The Board shall fix the
compensation of the Chairman of the Board, if any, and of the
President and shall fix, or authorize the Chairman of the Board
or the President to fix, the compensation of any or all other
officers. The Board may allow compensation to members of any
committee and may vote compensation to any director for
attendance at meetings or for any special services.
ARTICLE VI
STOCK CERTIFICATES AND TRANSFERS
Section 6.1. Certificates. Every holder of stock shall be
entitled to have a certificate signed by or in the name of the
Corporation by the Chairman or Vice Chairman of the Board of
Directors, if any, or the President or a Vice President, and by
the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary, of the Corporation, certifying the number of
shares owned by him in the Corporation. Any of or all the
signatures on the certificate may be a facsimile. In case any
officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before
such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue.
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Section 6.2. Transfer of Stock. Upon surrender to the
Corporation or the transfer agent of the Corporation for
cancellation of a certificate for shares endorsed or accompanied
by a written assignment signed by the holder of record or by his
duly authorized attorney-in-fact, it shall be the duty of the
Corporation, or its duly appointed transfer agent, to issue a new
certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 6.3. Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificates. The Corporation may issue a new
certificate of stock in the place of any certificate theretofore
issued by it, alleged to have been lost, stolen or destroyed, and
the Corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim
that may be made against it on account of the alleged loss, theft
or destruction of any such certificate or the issuance of such
new certificate.
ARTICLE VII
INDEMNIFICATION
Section 7.1. Indemnification and Insurance. (a) Each person
who was or is made a party or is threatened to be made a party to
or is involved in any action, suit, or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she or a person
of whom he or she is the legal representative is or was a
director, officer or employee of the Corporation or is or was
serving at the request of the Corporation as a director, officer,
employee or agent of any other corporation or of a partnership,
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joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity
while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest
extent authorized by the Texas Business Corporation Act as the
same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including,
without limitation, attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred by such person in connection
therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that except as provided in
paragraph (b) of Section 7.1 of this by-law with respect to
proceedings seeking to enforce rights to indemnification, the
Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part
thereof) initiated by such person was authorized by the Board.
(b) If a claim under paragraph (a) of this by-law is not
paid in full by the Corporation within thirty (30) days after a
written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action
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brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Texas Business
Corporation Act for the Corporation to indemnify the claimant for
the amount claimed, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation
(including its Board, independent legal counsel or stockholders)
to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the
circumstances because he or she has met the applicable standard
of conduct set forth in the Texas Business Corporation Act, nor
an actual determination by the Corporation (including its Board,
independent legal counsel or stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense
to the action or create a presumption that the claimant has not
met the applicable standard of conduct.
(c) Following any "change in control" of the Corporation of
the type required to be reported under Item 1 of Form 8-K
promulgated under the Securities Exchange Act of 1934, as
amended, any determination as to entitlement to indemnification
shall be made by independent legal counsel selected by the
claimant which independent legal counsel shall be retained by the
Board on behalf of the Corporation.
(d) The right to indemnification and the payment of
expenses incurred in defending a proceeding in advance of its
final disposition conferred in this by-law shall not be exclusive
of any other right which any person may have or hereafter acquire
under any statute, provision of the articles of incorporation,
by-laws, agreement, vote of stockholders or disinterested
directors or otherwise.
B-18
(e) The Corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability
or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss
under the Texas Business Corporation Act.
(f) The Corporation may, to the extent authorized from time
to time by the Board, grant rights to indemnification, and rights
to be paid by the Corporation the expenses incurred in defending
any proceeding in advance of its final disposition, to any agent
of the Corporation to the fullest extent of the provisions of
this by-law with respect to the indemnification and advancement
of expenses of directors, officers and employees of the
Corporation.
(g) The right to indemnification conferred in this by-law
shall be a contract right and shall include the right to be paid
by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided,
however, that if the Texas Business Corporation Act requires, the
payment of such expenses incurred by a director or officer in his
or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such person while
a director or officer, including, with limitation, service to an
employee benefit plan) in advance of the final disposition of a
proceeding shall be made only upon delivery to the Corporation of
an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be
indemnified under this by-law or otherwise.
B-19
(h) Any amendment or repeal of this Article VII shall not
adversely affect any right or protection existing hereunder in
respect of any act or omission occurring prior to such amendment
or repeal.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Fiscal Year. The fiscal year of the
Corporation shall be determined by resolution of the Board.
Section 8.2. Corporate Seal. The Corporate seal shall have
the name of the Corporation inscribed thereon and shall be in
such form as may be determined by resolution from time to time by
the Board. Said Seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise
imprinted upon the subject document or paper.
Section 8.3. Waiver of Notice of Meetings of Stockholders,
Directors and Committees. Any written waiver of notice, signed by
the person entitled to notice, whether before or after the time
stated therein, shall be deemed equivalent to notice. Attendance
of a person at a meeting shall constitute a waiver of notice of
such meeting, except when the person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to
the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be
transacted at, nor the purpose of any regular or special meeting
of the stockholders, directors, or members of a committee of
directors need be specified in any written waiver of notice.
B-20
Section 8.4. Interested Directors; Quorum. No contract or
transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any other
corporation, partnership, association, or other entity in which
one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer
is present at or participates in the meeting of the Board or
committee thereof which authorizes the contract or transaction,
or solely because his or their votes are counted for such
purpose, if any of the following are satisfied: (1) the material
facts as to his relationship or interest and as to the contract
or transaction are disclosed or are known to the Board or the
committee, and the Board or committee in good faith authorized
the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (2) the
material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the
stockholders; or (3) the contract or transaction is fair as to
the Corporation as of the time it is authorized, approved or
ratified, by the Board, a committee thereof, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board or of a committee
which authorizes the contract or transaction.
Section 8.5. Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its
stock ledger, books of account, and minute books, may be kept on,
or be in the form of, punch cards, magnetic tape, photographs,
microphotographs, or any other information storage device,
provided that the records so kept can
B-21
be converted into clearly legible form within a reasonable time.
The Corporation shall so convert any records so kept upon the
request of any person entitled to inspect the same.
Section 8.6. Amendment of By-Laws. These by-laws may be
amended or repealed, and new by-laws made, by the Board but the
stockholders may make additional by-laws and may amend and repeal
any by-laws whether adopted by them or otherwise.
B-22
EXHIBIT C
Warrant Amounts
CRL $6,991,667
Life 3,738,512
Income 207,318
Xxxxxx Capital 4,480,023
Wall Street 235,791
C-1
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
dated as of July 31, 1998
among
CAPITAL ONE FINANCIAL CORPORATION
and
THE HOLDERS NAMED HEREIN
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of July 31,
1998 (this "Agreement"), by and among CAPITAL ONE FINANCIAL
CORPORATION, a Delaware corporation ("Parent"), and the Initial
Holders listed on the signature pages hereto (the "Initial Holders").
This Agreement is made in connection with the
Agreement and Plan of Merger, dated as of July 31, 1998 (the
"Merger Agreement"), by and among Parent, [S-Acquisition Corp.],
a Texas corporation and a wholly-owned subsidiary of Parent (the
"Subsidiary"), Summit Acceptance Corporation, a Texas corporation
("Summit"), and the Initial Holders, pursuant to which, among
other things, (i) the Subsidiary is merging with and into Summit
(the "Merger"), with Summit being the surviving corporation and
thereby becoming a wholly-owned subsidiary of Parent, and (ii)
Parent is issuing to the Initial Holders, in exchange for the
common stock and warrants of Summit, shares (the "Shares") of
Common Stock (as hereinafter defined) which will not be
registered under the Securities Act (as hereinafter defined). In
order to induce Summit and the Initial Holders to enter into the
Merger Agreement, Parent has agreed to provide certain
registration rights with respect to the Shares as set forth in
this Agreement.
NOW, THEREFORE, in consideration of the foregoing and
the mutual promises, covenants and agreements of the parties
hereto, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Capitalized Terms. Capitalized terms used
but not defined herein shall have the respective meanings given
to them in the Merger Agreement.
SECTION 1.2. Defined Terms. As used in this Agreement,
the following terms shall have the following meanings:
"Adverse Disclosure" means public disclosure of
material, non-public information, which disclosure, in the
reasonable, good faith judgment of the chief executive officer or
the chief financial officer of Parent, after consultation with
counsel, (i) would be required to be made in any Registration
Statement or filed with the Commission by Parent so that such
Registration Statement would not be materially misleading or so
that such Registration Statement would otherwise comply with the
Securities Act or applicable law; (ii) would not be required to
be made at such time but for the filing of such Registration
Statement; and (iii) Parent has a bona fide business purpose for
not disclosing publicly.
D-1
"Agreement" has the meaning set forth in the preamble
hereto.
"Commission" means the United States Securities and
Exchange Commission, or any successor thereto.
"Common Stock" means Parent's common stock, par value
$0.01 per share.
"Exchange Act" means the Securities Exchange Act of
1934, as amended, and any successor thereto, and any rules and
regulations promulgated thereunder, all as the same shall be in
effect from time to time.
"Filing Date" means the fifth business day following
the date hereof.
"Filing Delay" has the meaning set forth in Section
2.1(c) hereof.
A "holder" or "holders" means any holder or holders of
Registrable Securities (whether or not acquired pursuant to the
Merger Agreement) who is a party hereto or who becomes a party
hereto in accordance with Section 3.3 hereof.
"Indemnified Parties" has the meaning set forth in
Section 2.5(a) hereof.
"Loss" has the meaning set forth in Section 2.5(a)
hereof.
"Merger Agreement" has the meaning set forth in the
recitals hereto.
"Notice" has the meaning set forth in Section 2.1(c)
hereof.
"Parent" has the meaning set forth in the preamble
hereto, and shall include Parent's successors by merger,
acquisition, reorganization or otherwise.
"Person" or "person" means any individual, firm,
limited liability company or partnership, joint venture,
corporation, joint stock company, trust or unincorporated
organization, incorporated or unincorporated association,
government (or any department, agency or political subdivision
thereof) or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
"Prospectus" means the prospectus included in the
Shelf Registration Statement as amended or supplemented by any
prospectus supplement with respect to the terms of the offering
of any portion of the Registrable Securities covered by the Shelf
Registration Statement and all other amendments and supplements
to such prospectus, including post-effective amendments and all
other material incorporated by reference in such prospectus.
"Registrable Securities" means the Shares and any
securities that may be issued or distributed in respect of the
Shares by way of stock dividend, stock split or other
distribution, or by way of merger, consolidation, exchange offer,
recapitalization or reclassification or similar transaction;
provided, however, that any such Registrable Securities shall
cease to be Registrable Securities to the extent (i) a
Registration Statement with respect to the sale of such
Registrable
D-2
Securities has been declared effective under the Securities Act
and such Registrable Securities have been transferred pursuant to
such Registration Statement, (ii) such Registrable Securities
have been distributed pursuant to Rule 144 (or any similar
provision then in force) under the Securities Act, or (iii) such
Registrable Securities shall have been otherwise transferred and
new certificates for them not bearing a legend restricting
transfer under the Securities Act shall have been delivered by
Parent and such securities may be publicly resold without
registration or qualification of them under the Securities Act.
"Registration" means a registration of Parent's
securities for sale to the public under a Registration Statement.
"Registration Expenses" has the meaning set forth in
Section 2.4 hereof.
"Registration Statement" means any registration
statement of Parent filed with, or to be filed with, the
Commission under the rules and regulations promulgated under the
Securities Act, including the Prospectus therein and the
amendments and supplements to such registration statement,
including post-effective amendments, and all exhibits and all
material incorporated by reference in such registration
statement.
"Securities Act" means the Securities Act of 1933, as
amended, and any successor thereto, and any rules and regulations
promulgated thereunder, all as the same shall be in effect from
time to time.
"Shelf Period" has the meaning set forth in Section
2.1(b) hereof.
"Shelf Registration" means a Registration effected
pursuant to Section 2.1 hereof.
"Shelf Registration Statement" means the Registration
Statement of Parent filed with the Commission on Form S-3 (or any
successor form or other appropriate form under the Securities
Act) for an offering to be made on a continuous basis pursuant to
Rule 415 under the Securities Act (or any similar rule that may
be adopted by the Commission) covering the Registrable
Securities.
SECTION 1.3. General Interpretive Principles. Whenever
used in this Agreement, except as otherwise expressly provided or
unless the context otherwise requires, any noun or pronoun shall
be deemed to include the plural as well as the singular and to
cover all genders. Unless otherwise specified, the terms
"hereof," "herein" and similar terms refer to this Agreement as a
whole and references herein to Sections refer to Sections of this
Agreement.
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1. Shelf Registration.
D-3
(a) Filing. Subject to Section 2.1(c) hereof, Parent
shall use its reasonable best efforts to file with the Commission
on or before the Filing Date, the Shelf Registration Statement
relating to the offer and sale of the Registrable Securities by
the holders thereof from time to time in accordance with
reasonable and customary methods of distribution elected by such
holders and set forth in such Shelf Registration Statement.
Subject to Section 2.1(c) hereof, Parent shall use its reasonable
best efforts to cause such Shelf Registration Statement to be
declared effective under the Securities Act as soon as reasonably
practicable following such filing.
(b) Continued Effectiveness. Subject to Section 2.1(c)
hereof, so long as permitted by applicable law, Parent shall use
its reasonable best efforts to keep the Shelf Registration
Statement continuously effective in order to permit the
Prospectus forming a part thereof to be usable by holders until
the earlier of (i) the first anniversary of the date hereof or
(ii) the date as of which all of the Registrable Securities
covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement (but in no event
prior to the expiration of any applicable period referred to in
Section 4(3) of the Securities Act and Rule 174 thereunder) (such
period of effectiveness being referred to herein as the "Shelf
Period").
(c) Delay in Filing and Suspension of Registration;
Amendments. (i) If the filing, initial effectiveness or continued
use of the Shelf Registration Statement at any time would require
Parent to make an Adverse Disclosure, Parent may, upon giving
prompt notice (the "Notice") of such action to the holders, delay
the filing or initial effectiveness of the Shelf Registration
Statement (a "Filing Delay") or suspend the use thereof (a "Shelf
Suspension") for a reasonable period of time as determined in
good faith by Parent. Parent shall have no obligation to inform
the holders of the reason for such Filing Delay or Shelf
Suspension other than to inform such holders that such action is
being taken pursuant to this Section 2.1(c), and except as
required by law, the holders and their Affiliates shall not make
any public disclosure regarding, and shall treat as confidential,
any Filing Delay, Shelf Suspension or Notice. In the case of a
Filing Delay, Parent shall promptly notify the holders upon the
termination of such Filing Delay, and Parent shall use its
reasonable best efforts to file the Shelf Registration Statement
with the Commission within two business days of the termination
of such Filing Delay in accordance with the terms hereof or have
the Shelf Registration Statement declared effective as soon as
reasonably practicable following the termination of such Filing
Delay, as the case may be. In the case of a Shelf Suspension, the
holders agree to suspend use of the Prospectus related to the
Shelf Registration in connection with any sale or purchase of or
offer to sell or purchase Registrable Securities upon receipt of
the Notice. Parent shall promptly notify the holders upon the
termination of any Shelf Suspension, promptly amend or supplement
the Shelf Registration Statement following the termination of
such Shelf Suspension, if necessary, so it does not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein in order to make the
statements therein not misleading, and furnish to the holders
such numbers of copies of the Prospectus therein as so amended or
supplemented as the holders may reasonably request. (ii) Parent
agrees, if necessary, to supplement or make amendments to the
Shelf Registration Statement, if required by the registration
form used by Parent for the Shelf Registration Statement or by
the instructions applicable to such registration form or by the
Securities Act.
D-4
(d) Representation of Parent. Parent hereby represents
that it has no actual knowledge of any circumstances existing as
of the date hereof that would reasonably be expected to cause
Parent to implement a Filing Delay or Shelf Suspension.
SECTION 2.2. Registration Procedures.
(a) In connection with Parent's registration
obligations under Section 2.1 hereof, subject to the other
provisions set forth herein, Parent will use its reasonable best
efforts to effect such registration to permit the sale of such
Registrable Securities in accordance with the terms hereof, and
pursuant thereto Parent shall:
(i) prepare and use its reasonable best efforts to
cause the Shelf Registration Statement to become effective
under the Securities Act in accordance with the terms
hereof; provided, however, that Parent may discontinue any
Registration of its securities that are not Registrable
Securities;
(ii) prepare and file with the Commission such
amendments and post-effective amendments to the Shelf
Registration Statement and supplements to the Prospectus as
may be reasonably necessary to keep such Registration
Statement effective for the Shelf Period;
(iii) notify the holders of Registrable Securities, as
soon as reasonably practicable after notice thereof is
received by Parent (A) when the Shelf Registration
Statement or any amendment thereto has been filed or
becomes effective, and when the Prospectus or any amendment
or supplement to the Prospectus has been filed, (B) of the
receipt of any written comments by the Commission or any
request by the Commission or any other federal, state or
local governmental authority for amendments or supplements
to the Shelf Registration Statement or the Prospectus or
for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness
of the Shelf Registration Statement or any order preventing
or suspending the use of any preliminary or final
Prospectus or the initiation or threatening of any
proceedings for such purposes, and (D) of the receipt by
Parent of any notification with respect to the suspension
of the qualification of the Registrable Securities for
offering or sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose;
(iv) promptly notify each holder of Registrable
Securities when Parent becomes aware of the happening of
any event as a result of which the Shelf Registration
Statement or the Prospectus included in the Shelf
Registration Statement (as then in effect) contains any
untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein (in
the case of the Prospectus and any preliminary Prospectus,
in light of the circumstances under which they were made)
not misleading or, if for any other reason it shall be
necessary during such time period to amend or supplement
the Shelf Registration Statement or the Prospectus in order
to comply with the Securities Act and, in either case as
promptly as reasonably practicable thereafter and except as
otherwise permitted herein, prepare and file with the
Commission
D-5
an amendment or supplement to such Registration Statement
or Prospectus which will correct such statement or omission
or effect such compliance;
(v) use its reasonable best efforts to prevent or
obtain the withdrawal of any stop order or other order
suspending the use of any preliminary or final Prospectus
or suspending any qualification of the Registrable
Securities at the earliest possible moment;
(vi) furnish to each holder of Registrable Securities
as many conformed copies as such holder may reasonably
request of the Shelf Registration Statement and any
amendment or post-effective amendment thereto;
(vii) deliver to each holder of Registrable Securities
as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement
thereto as such holder may reasonably request (it being
understood that Parent consents to the use of the
Prospectus or any amendment or supplement thereto by each
of the holders of Registrable Securities in connection with
the offering and sale of the Registrable Securities covered
by the Prospectus or any amendment or supplement thereto);
(viii) on or prior to the date on which the Shelf
Registration Statement is declared effective, use its
reasonable best efforts to register or qualify, and
cooperate with the holders of Registrable Securities and
their respective counsel in connection with the
registration or qualification of such Registrable
Securities for offer and sale under the securities or "Blue
Sky" laws of each state and other jurisdiction of the
United States and do any and all other acts or things
reasonably necessary or advisable to keep such registration
or qualification in effect for the Shelf Period and so as
to permit the continuance of sales and dealings in such
jurisdictions for as long as may be necessary to complete
the distribution of the Registrable Securities covered by
the Shelf Registration Statement; provided that Parent will
not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take
any action which would subject it to taxation or general
service of process in any such jurisdiction where it is not
then so subject;
(ix) cooperate with the holders of Registrable
Securities to facilitate the timely preparation and
delivery of certificates not bearing any restrictive
legends representing Registrable Securities to be sold
under the Shelf Registration Statement;
(x) not later than the effective date of the Shelf
Registration Statement, provide a CUSIP number for all
Registrable Securities and provide the applicable transfer
agent with printed certificates for the Registrable
Securities which are in a form eligible for deposit with
The Depository Trust Company;
(xi) use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission and
make generally available to its security holders, as soon
as reasonably practicable (but not more than fifteen
months) after the effective date of the Registration
Statement, an earnings statement satisfying the provisions
of Section 11(a) of the Securities Act and the rules and
regulations promulgated thereunder;
D-6
(xii) provide and cause to be maintained a transfer
agent and registrar for all Registrable Securities covered
by the Shelf Registration Statement from and after a date
not later than the effective date of the Shelf Registration
Statement; and
(xiii) cause all Registrable Securities covered by the
Shelf Registration Statement to be listed on the primary
securities exchange or inter-dealer quotation system on
which such securities of that type are then listed or
quoted.
(b) Parent may require each seller of Registrable
Securities to furnish to Parent such information regarding the
distribution of such securities and such other information
relating to such holder and its ownership of Registrable
Securities as Parent may from time to time reasonably request.
Each holder of Registrable Securities agrees to furnish such
information to Parent and to cooperate with Parent as reasonably
necessary to enable Parent to comply with the provisions of this
Agreement. Parent shall have the right to exclude any holder that
does not comply with the preceding sentence from the Shelf
Registration Statement and to preclude such holder from selling
Registrable Securities thereunder.
(c) Each holder of Registrable Securities agrees by
acquisition of such Registrable Securities that, upon receipt of
any notice from Parent of the happening of any event of the kind
described in Section 2.2(a)(iv) hereof, such holder shall
forthwith discontinue disposition of Registrable Securities
pursuant to the Shelf Registration Statement until such holder's
receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 2.2(a)(iv) hereof, or until it is advised
in writing by Parent that the use of the Prospectus may be
resumed, and, if so directed by Parent, such holder will deliver
to Parent (at Parent's expense) all copies, other than permanent
file copies then in such holder's possession, of the Prospectus
covering such Registrable Securities current at the time of
receipt of such notice.
SECTION 2.3. Other Agreements. Parent will not
hereafter enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the holders of
Registrable Securities by this Agreement or otherwise conflicts
with the provisions hereof. Notwithstanding the foregoing, the
holders acknowledge and agree that Parent may be a party to or
may enter into other agreements providing for registration rights
which agreements may permit Persons other than the holders to
sell securities of Parent under the Shelf Registration Statement,
provided that no such agreement shall conflict with or limit the
rights of the holders hereunder.
SECTION 2.4. Registration Expenses. All expenses
incurred in connection with Parent's performance of or compliance
with this Agreement will be paid by Parent, including, without
limitation, (i) all registration and filing fees, and any other
fees and expenses associated with filings required to be made
with the Commission, (ii) all fees and expenses of compliance
with state securities or "Blue Sky" laws, (iii) all printing,
duplicating, word processing, messenger, telephone, facsimile and
delivery expenses incurred by Parent (including expenses of
printing certificates for the Registrable Securities in a form
eligible for deposit with The Depository Trust Company and of
printing prospectuses), (iv) all fees and disbursements of
counsel for Parent and of all independent certified public
accountants of Parent, (v) Securities Act liability
D-7
insurance or similar insurance if Parent so desires, (vi) all
fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange or quotation of
the Registrable Securities on any inter-dealer quotation system
(all such expenses being referred to herein as "Registration
Expenses"). Parent will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties),
the expense of any audit and the fees and expenses of any Person,
including special experts, retained by Parent. Notwithstanding
anything to the contrary contained herein, Parent shall not be
required to pay any costs or expenses incurred by any holder of
Registrable Securities in the course of the transactions
contemplated hereby, including, without limitation, costs and
expenses relating to underwriters' commissions and discounts in
respect of Registrable Securities to be sold by such holder, or
brokerage fees, transfer taxes or the fees or expenses of any
counsel, accountants or other representatives retained by the
holders, individually or in the aggregate.
SECTION 2.5. Indemnification.
(a) Indemnification by Parent. Parent agrees to
indemnify and hold harmless, to the full extent permitted by law,
each holder of Registrable Securities, its Affiliates and their
respective officers, directors and employees and each Person who
controls (within the meaning of the Securities Act or the
Exchange Act) such Persons (collectively, the "Indemnified
Parties"), from and against any and all losses, claims, damages,
liabilities (or actions or proceedings in respect thereof,
whether or not such Indemnified Party is a party thereto) and
expenses, joint or several (including reasonable costs of
investigation and reasonable attorneys' fees) (each, a "Loss" and
collectively "Losses"), arising out of or based upon (i) any
untrue or alleged untrue statement of a material fact contained
in the Shelf Registration Statement under which such Registrable
Securities were registered under the Securities Act (including
any final, preliminary or summary Prospectus contained therein or
any amendment thereof or supplement thereto or any documents
incorporated by reference therein), or (ii) any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in
the case of any final, preliminary, or summary Prospectus
contained therein, in light of the circumstances under which they
were made) not misleading; provided, however, that Parent shall
not be liable to any Indemnified Party in any such case to the
extent that any such Loss arises out of or is based upon an
untrue statement or alleged untrue statement or omission or
alleged omission made in the Shelf Registration Statement in
reliance upon and in conformity with written information
furnished to Parent by such holder of Registrable Securities
expressly for use in the preparation thereof; and provided,
further, that Parent will not be liable to any Indemnified Party
in any case to the extent that any such Loss arises out of or is
based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in any final, preliminary or
summary Prospectus if such untrue statement or alleged untrue
statement or omission or alleged omission is corrected in an
amendment or supplement to such Prospectus which has been made
available to such holder and the relevant holder of Registrable
Securities fails to deliver such Prospectus as so amended or
supplemented, if such delivery is required under applicable law
or the applicable rules of any securities exchange, prior to or
concurrently with the sales of the Registrable Securities to the
Person asserting such loss, claim, damage, liability or expense.
This indemnity shall be in addition to any liability Parent may
otherwise
D-8
have. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such
holder or any Indemnified Party and shall survive the transfer of
such securities by such holder.
(b) Indemnification by the Selling Holder of
Registrable Securities. Each holder of Registrable Securities
agrees (severally and not jointly) to indemnify and hold
harmless, to the full extent permitted by law, Parent, its
Affiliates and their respective directors, officers and
employees, and each Person who controls such Persons (within the
meaning of the Securities Act and the Exchange Act), from and
against any Losses resulting from (i) any untrue statement of a
material fact or any omission of a material fact required to be
stated in the Shelf Registration Statement (including any final,
preliminary or summary Prospectus contained therein or any
amendment thereof or supplement thereto or any documents
incorporated by reference therein), or necessary to make the
statements therein (in the case of any final, preliminary or
summary Prospectus contained therein, in light of the
circumstances under which they were made) not misleading, to the
extent, but only to the extent, that such untrue statement or
omission is contained in any written information furnished by
such holder to Parent specifically for inclusion in the Shelf
Registration Statement or (ii) any untrue statement or alleged
untrue statement or omission or alleged omission made in any
final, preliminary or summary Prospectus if such untrue statement
or alleged untrue statement or omission or alleged omission is
corrected in an amendment or supplement to such Prospectus which
has been made available to such holder and such holder fails to
deliver such Prospectus as so amended or supplemented, if such
delivery is required under applicable law or the applicable rules
of any securities exchange, prior to or concurrently with a sale
of the Registrable Securities. This indemnity shall be in
addition to any liability such holder may otherwise have. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of Parent or any indemnified
party. The liability of each holder under the indemnity set forth
in this Section 2.5(b) shall be limited to the amount of proceeds
received by such holder in connection with sales of Registrable
Securities pursuant to the Shelf Registration Statement.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party;
provided, however, that any Person entitled to indemnification
hereunder shall have the right to select and employ separate
counsel and to participate in the defense of such claim, but the
fees and expenses of such counsel shall be at the expense of such
Person unless (i) the indemnifying party has agreed in writing to
pay such fees or expenses, (ii) the indemnifying party shall have
failed to assume the defense of such claim within a reasonable
time after receipt of notice of such claim from the Person
entitled to indemnification hereunder and employ counsel
reasonably satisfactory to such Person, or (iii) in the
reasonable judgment of any such Person, based upon advice of its
counsel, a conflict of interest may exist between such Person and
the indemnifying party with respect to such claims (in which
case, if the Person notifies the indemnifying party in writing
that such Person elects to employ separate counsel at the expense
of the indemnifying party, the indemnifying party shall not have
the right to assume the defense of such claim on behalf of such
Person). If such defense is not assumed by the indemnifying
party, the
D-9
indemnifying party will not be subject to any liability for any
settlement made without its consent, which shall not be
unreasonably withheld; provided, that an indemnifying party shall
not be required to consent to any settlement involving the
imposition of equitable remedies on such indemnifying party or
involving the imposition of any material obligations on such
indemnifying party other than financial obligations for which
such indemnified party will be indemnified hereunder. If the
indemnifying party assumes the defense, the indemnifying party
shall have the right to settle such action without the consent of
the indemnified party; provided, however, that the indemnifying
party shall be required to obtain such consent (which shall not
be unreasonably withheld) if the settlement includes any
admission of wrongdoing on the part of the indemnified party or
any decree or restriction on the indemnified party or its
officers or directors. No indemnifying party shall consent to
entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the
claimant or plaintiff to the indemnified party of an
unconditional release from all liability in respect to such claim
or litigation. It is understood that the indemnifying party or
parties shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the
reasonable fees, disbursements and other charges of more than one
separate law firm admitted to practice in such jurisdiction at
any one time for all such indemnified parties unless (x) the
employment of more than one counsel has been authorized in
writing by the indemnifying party or parties, or (y) a conflict
or potential conflict exists or may exist (based on advice of
counsel to an indemnified party) between such indemnified party
and the other indemnified parties, in each of which cases the
indemnifying party shall be obligated to pay the reasonable fees
and expenses of such additional counsel or counsels.
(d) Contribution. If for any reason the
indemnification provided for in the paragraphs (a) and (b) of
this Section 2.5 is unavailable to an indemnified party or
insufficient to hold it harmless as contemplated by paragraphs
(a) and (b) of this Section 2.5, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified
party as a result of such Loss in such proportion as is
appropriate to reflect the relative fault of the indemnifying
party on the one hand and the indemnified party on the other. The
relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying
party or the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. The parties hereto
agree that it would not be just and equitable if contribution
pursuant to this Section 2.5(d) were determined by pro rata
allocation or by any other method of allocation that does not
take account of the equitable considerations referred to above in
this paragraph. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall
be entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation. If indemnification is
available under this Section 2.5, the indemnifying parties shall
indemnify each indemnified party to the full extent provided in
Sections 2.5(a) and 2.5(b) hereof without regard to the relative
fault of said indemnifying parties or indemnified party.
SECTION 2.6. Rules 144 and 144A. Parent covenants that
it will use its reasonable best efforts to timely file the
reports required to be filed by it under the Securities Act
D-10
and the Exchange Act and the rules and regulations adopted by the
Commission thereunder (or, if Parent is not required to file such
reports, it will, upon the request of any holder of Registrable
Securities, make publicly available other information so long as
necessary to permit sales of Registrable Securities pursuant to
Rule 144 or Rule 144A under the Securities Act, provided that
Parent shall not be required to make any Adverse Disclosure), and
it will take such further action as any holder of Registrable
Securities may reasonably request (including providing a written
acknowledgment to such holder that it has timely filed all such
reports), all to the extent required from time to time to enable
such holder to sell Registrable Securities without registration
under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144 or Rule 144A, as such Rules may be
amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the Commission.
ARTICLE III
MISCELLANEOUS
SECTION 3.1. Term. This Agreement shall terminate upon
the expiration of the Shelf Period, except for the provisions of
Sections 2.5, 2.6 and 3.4 hereof, which shall survive any such
termination; provided, that the provisions set forth in Section
2.6 hereof shall terminate two years after the date hereof.
Following the expiration of the Shelf Period, Parent shall have
the right to terminate the effectiveness of the Shelf
Registration Statement and the holders shall return to Parent all
copies of the Shelf Registration Statement and copies of any
final, preliminary or summary Prospectus contained therein (other
than permanent file copies).
SECTION 3.2. Notices. All notices, other
communications or documents provided for or permitted to be given
hereunder, shall be made in writing and shall be given either
personally by hand-delivery, by facsimile transmission, by
mailing the same in a sealed envelope, registered first-class
mail, postage prepaid, return receipt requested, or by air
courier guaranteeing overnight delivery:
if to Parent or Sub:
Capital One Financial Corporation
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxx 0000
Xxxxx Xxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxx Xxxxxxxx, Esq.
Fax: (000) 000-0000
with an additional copy to:
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxx, Esq.
Fax: (000) 000-0000
D-11
if to the Company or any of the Stock Sellers:
Summit Acceptance Corporation
0000 Xxxx Xxxx Xxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
with additional copies to:
G. Xxxxxx Xxxxxxx III
0000 Xxxxx Xxxxx
Xxxxx 000
Xxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
and:
Xxxxxx & Xxxxxxx
0000 Xxxxx Xxxxx Tower
00 Xxxx 0xx Xxxxxx
Xxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
if to Capital Resources Lenders III, L.P.:
Capital Resource Lenders III, L.P.
00 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Fax: (000) 000-0000
with an additional copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
High Street Tower
000 Xxxx Xxxxxx
Xxxxxx Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx Xx., Esq.
Fax: (000) 000-0000
D-12
if to Lincoln National Life Insurance Company
or Lincoln National Income Fund, L.P.:
c/o Lincoln Investment Management, Inc.
000 Xxxx Xxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Investments/Private Placements
Fax: (000) 000-0000
if to X.X. Xxxxxx Capital Corporation or Sixty Wall
Street Fund, L.P.:
x/x X.X. Xxxxxx & Xx. Xxxxxxxxxxxx
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
Fax: (000) 000-0000
with an additional copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
Each holder, by written notice given to Parent in
accordance with this Section 3.2 may change the address to which
notices, other communications or documents are to be sent to such
holder. All notices, other communications or documents shall be
deemed to have been duly given: (i) at the time delivered by
hand, if personally delivered; (ii) upon transmission, if by
facsimile transmission; (iii) five business days after being
deposited in the mail, postage prepaid, if mailed by first class
mail; and (iv) on the first business day with respect to which a
reputable air courier guarantees delivery; provided, however,
that notices of a change of address shall be effective only upon
receipt.
SECTION 3.3. Successors, Assigns and Transferees. (a)
The registration rights of any holder under this Agreement with
respect to any Registrable Securities may be transferred and
assigned; provided, that no such assignment shall be binding upon
or obligate Parent to any such assignee unless and until (i)
Parent shall have received an agreement in writing from such
assignee pursuant to which such assignee agrees to be bound by
the terms hereof and the terms of Section 9.6 of the Merger
Agreement, or such assignee, by the terms of the assignment, is
bound by such terms, and (ii) unless such assignee is already a
holder of Registrable Securities or such assignee is a partner of
a holder that is a partnership that has made a distribution of
Registrable Securities to the partners thereof, such assignee
acquires Registrable Securities with an estimated market value of
$1 million or more or, if less, all of the Registrable Securities
held by the assignor thereof; provided, that an assignor shall
notify Parent of any proposed assignment no less than three
business days prior to such assignment; and provided, further,
that in connection
D-13
with any assignment the assignor shall provide to Parent all
information relating to any assignee that Parent may reasonably
request in connection with Parent's obligations under this
Agreement. Any transfer or assignment made other than as provided
in the first sentence of this Section 3.3 shall be null and void.
(b) This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, and their respective
successors and permitted assigns.
SECTION 3.4. Governing Law; Service of Process;
Consent to Jurisdiction; Waiver of Jury Trial. (a) This Agreement
shall be governed by, and construed in accordance with, the laws
of the State of New York, without reference to the conflicts of
laws rules thereof.
(b) To the fullest extent permitted by applicable law,
each party hereto (i) agrees that any claim, action or proceeding
by such party seeking any relief whatsoever arising out of, or in
connection with, this Agreement or the transactions contemplated
hereby shall be brought only in the United States District Court
for the Eastern District of Virginia and in any Virginia state
court located in the Eastern District of Virginia and not in any
other state or Federal court in the United States of America or
any court in any other country, (ii) agrees to submit to the
exclusive jurisdiction of such courts located in the Commonwealth
of Virginia for purposes of all legal proceedings arising out of,
or in connection with, this Agreement or the transactions
contemplated hereby, (iii) irrevocably waives any objection which
it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an
inconvenient forum, and (iv) irrevocably waives the right to
trial by jury in any claim, action or proceeding by such party
seeking any relief whatsoever arising out of, or in connection
with, this Agreement or the transactions contemplated hereby.
SECTION 3.5. Headings. The section and paragraph
headings contained in this Agreement are for reference purposes
only and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 3.6. Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected
in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an
acceptable manner to the end that the transactions contemplated
hereby are fulfilled to the fullest extent possible.
SECTION 3.7. Amendment; Waiver.
(a) This Agreement may not be amended or modified
except by an instrument or instruments in writing making specific
reference to this Agreement and signed by Parent and each of the
holders of Registrable Securities then outstanding. Each holder
of any Registrable
D-14
Securities at the time or thereafter outstanding shall be bound
by any amendment, modification, waiver or consent authorized by
this Section 3.7(a), whether or not such Registrable Securities
shall have been marked accordingly.
(b) The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as
a further or continuing waiver of such breach or as a waiver of
any other or subsequent breach. Except as otherwise expressly
provided herein, no failure on the part of any party to exercise,
and no delay in exercising, any right, power or remedy hereunder,
or otherwise available in respect hereof at law or in equity,
shall operate as a waiver thereof, nor shall any single or
partial exercise of such right, power or remedy by such party
preclude any other or further exercise thereof or the exercise of
any other right, power or remedy.
SECTION 3.8. Counterparts. This Agreement may be
executed in any number of separate counterparts and by the
parties hereto in separate counterparts each of which when so
executed shall be deemed to be an original and all of which
together shall constitute one and the same agreement.
D-15
IN WITNESS WHEREOF, the parties hereto have caused
this instrument to be duly executed as of the date first written
above.
CAPITAL ONE FINANCIAL CORPORATION
By:_______________________________
Name:
Title:
INITIAL HOLDERS:
__________________________________
Xxxxx X. Xxxxxx
__________________________________
G Xxxxxx Xxxxxxx III, as
Trustee of the G.
Xxxxxx Xxxxxxx III Management Trust
__________________________________
Xxxxxxx XxXxxx Xxxxxxx, as Trustee of
the Xxxxxxx XxXxxx Xxxxxxx, Xx. 1990
Qualified Subchapter S Trust
__________________________________
Xxxxxxx XxXxxx Xxxxxxx, as Trustee of
the Xxxxxx Xxxxxx Xxxxxxx XX 1997 Trust
__________________________________
Xxxxxx Xxxxxxx, as Trustee of the
Xxxxxxx XxXxxx Xxxxxxx, Xx. 1994 Trust
D-16
__________________________________
Xxxxxx Xxxxxxx, as Trustee of the
Xxxxxxxxx Xxxxxxxxx Xxxxxxx 1994 Trust
__________________________________
Xxxxxxx XxXxxx Xxxxxxx, as Trustee of
the Xxxxxxxxx Xxxxxxxxx Xxxxxxx 1990
Qualified Subchapter S Trust
__________________________________
Xxxxxxx XxXxxx Xxxxxxx, as Trustee of
the Xxxxxx Xxxxxx Xxxxxxx XX 1990
Qualified Subchapter S Trust
CAPITAL RESOURCE LENDERS III, L.P.
By: Capital Resource Partners III, L.L.C.
its General Partner
By_________________________________
Name:
Title:
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: Lincoln Investment Management, Inc.
its Attorney-in-Fact
By_________________________________
Name:
Title:
LINCOLN NATIONAL INCOME FUND, L.P.
By_________________________________
Name:
Title:
D-17
X.X. XXXXXX CAPITAL CORPORATION
By_________________________________
Name:
Title:
SIXTY WALL STREET FUND, L.P.
By_________________________________
Name:
Title:
D-18
EXHIBIT E
Form of Individual Shareholder's Representation Letter
July _, 1998
Capital One Financial Corporation
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxx 0000
Xxxxx Xxxxxx, Xxxxxxxx 00000-0000
Ladies and Gentlemen:
I hereby acknowledge that I have received from Capital One
Financial Corporation (the "Company") a copy of the Company's
Private Placement Memorandum, dated July 8, 1998 (the "PPM"), and
I hereby further acknowledge that I have reviewed the PPM and the
draft Agreement and Plan of Merger (the "Agreement") included in
the PPM. I have so received and reviewed such materials in
connection with the Company's proposed acquisition of all the
outstanding capital stock of Summit Acceptance Corporation, a
Texas corporation ("Summit"), in exchange for shares of common
stock of the Company (the "Shares"). I am aware that the
representations and warranties contained herein are being
furnished to you in order for you to determine whether Shares may
be issued to me without registration thereof under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to
Section 4(2) of the Securities Act. I understand and acknowledge
that: (a) you will rely on the representations set forth herein
for purposes of such determination; (b) the Shares that I may
receive pursuant to the transactions contemplated by the
Agreement will not be registered under the Securities Act in
reliance upon the exemption afforded by Section 4(2) of the
Securities Act; (c) the Shares that I may receive cannot be
transferred and must be held indefinitely unless registered under
the Securities Act or unless an exemption from registration is
available; and (d) except as may be expressly set forth in any
registration rights agreement executed by the Company in
connection with the Agreement, the Company is under no obligation
to provide or take any action in connection with any such
registration or exemption.
With the above in mind, I hereby represent and warrant to
you, and agree with you, as follows:
1. I am acquiring the Shares solely for my own account,
and not for any other person, for the purpose of
investment and not with a view to, or for sale in
connection with, any distribution thereof.
E-1
2. I will not, directly or indirectly, offer, transfer,
sell, pledge, hypothecate or otherwise dispose of any
such Shares (or solicit any offers to buy, purchase or
take a pledge of any Shares), except in compliance
with the Securities Act and the rules and regulations
thereunder.
3. I will not, directly or indirectly, offer, transfer,
sell, pledge, hypothecate or otherwise dispose of any
such Shares (or solicit any offers to buy, purchase or
take a pledge of any such Shares), or remove any
legend that appears on any certificate evidencing such
Shares stating that such Shares, have not been
registered under the Securities Act and setting forth
or referring to the restrictions on transferability
and sale of such Shares without first providing the
Company with such certificates, opinions of legal
counsel or other documents as the Company may
reasonably request in connection with ensuring
compliance with the Securities Act and the rules and
regulations thereunder.
4. My financial situation is such that I can afford to
bear the economic risk of holding such Shares for an
indefinite period of time.
5. I have such knowledge and experience in financial and
business matters that I am capable of evaluating the
merits and risks of an investment in the Shares. I
have reviewed the PPM and the Agreement and understand
all the terms thereof and understand the risks
relating to an investment in the Shares.
6. I have been granted the opportunity to ask questions
of, and receive answers from, representatives of the
Company concerning the terms of the PPM and the
Agreement and to obtain any additional information
which I deem necessary to verify the accuracy of the
information supplied to me.
E-2
7. Either (check one):
___ I am an "accredited investor" as defined below;
___ I am not an "accredited investor," but I have
discussed with _____________________, as my purchaser
representative ("Purchaser Representative"), whether
an investment by me in the Shares is appropriate in
light of my financial circumstances, and I have
received the advice of such Purchaser Representative
with respect to the merits and risks of such an
investment. Such Purchaser Representative has reviewed
this letter, and together with such Purchaser
Representative, and with the benefit of his or her
advice, I have such knowledge and experience in
financial and business matters that I am capable of
evaluating the merits and risks of an investment in
Shares.
Definition of Accredited Investor.
A natural person is an "accredited investor" if, among
other things, any one of the following tests is met:
(a) Such person has an individual net worth, or joint
net worth with his or her spouse, in excess of $1,000,000
at the time of the purchase of Shares. For the purposes of
calculating "net worth" under this test, all assets should
be counted, including residences, furnishings, automobiles
and equity interests in Summit.
(b) Such person had an individual income in excess of
$200,000 in each of the two most recent years or joint
income with his or her spouse in excess of $300,000 in each
of those years and has a reasonable expectation of reaching
at least the same income level in the current year. The
term "income" for the purposes of this test is not limited
to taxable income, but may be adjusted for various
deductions, exemptions or exclusions utilized to reduce
gross income through legitimate tax planning. Income may
include contributions to a profit sharing or retirement
plan if such stockholder's rights in such plan have vested.
Income generally may not include any unrealized capital
appreciation.
E-3
8. The following are persons who will receive Shares
pursuant to the Agreement and whose principal
residence is the same as mine:
9. The following are trusts that will receive Shares
pursuant to the Agreement and in which I, together
with any of the persons listed in paragraph 8 above,
collectively have more than 50 percent of the
beneficial interest (excluding contingent interest):
10. I agree to notify you promptly of any events occurring
prior to the issuance of any Shares to me or any
circumstances that would make any of the
representations, warranties, agreements or other
information set forth herein untrue or inaccurate.
Very truly yours,
______________________________
Signature
______________________________
Print Name
______________________________
Street Address
______________________________
City, State and Zip Code
______________________________
Telephone Number
E-4
EXHIBIT F
Form of Trust's Representation Letter
July _, 1998
Capital One Financial Corporation
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxx 0000
Xxxxx Xxxxxx, Xxxxxxxx 00000-0000
Ladies and Gentlemen:
I am the trustee (the "Trustee") of the _____ Trust (the
"Trust"), pursuant to the Trust Agreement, dated ____________,
among ____________________________.
I hereby acknowledge that I have received from Capital One
Financial Corporation (the "Company") a copy of the Company's
Private Placement Memorandum, dated July 8, 1998 (the "PPM"), and
I hereby further acknowledge that I have reviewed the PPM and the
draft Agreement and Plan of Merger (the "Agreement") included in
the PPM. I have so received and reviewed such materials in
connection with the Company's proposed acquisition of all the
outstanding capital stock of Summit Acceptance Corporation, a
Texas corporation ("Summit"), in exchange for shares of common
stock of the Company (the "Shares"). I am aware that the
representations and warranties contained herein are being
furnished to you in order for you to determine whether Shares may
be issued to the Trust without registration thereof under the
Securities Act of 1933, as amended (the "Securities Act"),
pursuant to Section 4(2) of the Securities Act. I understand and
acknowledge that: (a) you will rely on the representations set
forth herein for purposes of such determination; (b) the Shares
that the Trust may receive pursuant to the transactions
contemplated by the Agreement will not be registered under the
Securities Act in reliance upon the exemption afforded by Section
4(2) of the Securities Act; (c) the Shares that the Trust may
receive cannot be transferred and must be held indefinitely
unless registered under the Securities Act or unless an exemption
from registration is available; and (d) except as may be
expressly set forth in any registration rights agreement executed
by the Company in connection with the Agreement, the Company is
under no obligation to provide or take any action in connection
with any such registration or exemption.
F-1
With the above in mind, in my capacity as Trustee, I hereby
represent and warrant to you, and agree with you, as follows:
1. The Trust is acquiring the Shares solely for the
account of the Trust, and not for any other person,
for the purpose of investment and not with a view to,
or for sale in connection with, any distribution
thereof.
2. The Trust will not, directly or indirectly, offer,
transfer, sell, pledge, hypothecate or otherwise
dispose of any such Shares (or solicit any offers to
buy, purchase or take a pledge of any such Shares),
except in compliance with the Securities Act and the
rules and regulations thereunder.
3. The Trust will not, directly or indirectly, offer,
transfer, sell, pledge, hypothecate or otherwise
dispose of any such Shares (or solicit any offers to
buy, purchase or take a pledge of any such Shares), or
remove any legend that appears on any certificate
evidencing such Shares stating that such Shares have
not been registered under the Securities Act and
setting forth or referring to the restrictions on
transferability and sale of such Shares without first
providing the Company with such certificates, opinions
of legal counsel or other documents as the Company may
reasonably request in connection with ensuring
compliance with the Securities Act and the rules and
regulations thereunder.
4. The financial situation of the Trust and the
beneficiaries thereof is such that the Trust and the
beneficiaries thereof can afford to bear the economic
risk of having the Trust hold such Shares for an
indefinite period of time.
5. The Trust will acquire the Shares at my direction. I
have such knowledge and experience in financial and
business matters that I am capable of evaluating the
merits and risks of an investment in the Shares. I
have reviewed the PPM and the Agreement and understand
all the terms thereof and understand the risks
relating to an investment in the Shares.
6. I have been granted the opportunity to ask questions
of, and receive answers from, representatives of the
Company concerning the Company and the terms of the
PPM and the Agreement and to obtain any additional
information which I deem necessary to verify the
accuracy of the information supplied to me.
F-2
7. Check one:
___ The Trust is an "accredited investor," as defined on
Annex A.
___ The Trust is not an "accredited investor," as defined
on Annex A.
8. The following is a list of the beneficiaries of the
Trust and the percentage of the beneficial interest in
the Trust held by each beneficiary:
9. The following is a list of those beneficiaries of the
Trust and those persons who share a principal
residence with a beneficiary of the Trust, who will
receive Shares in their individual capacity (i.e. not
as a beneficiary of the Trust or any other trust):
F-3
10. I agree to notify you promptly of any events occurring
prior to the issuance of any Shares regarding the
Trust or any circumstances that would make any of the
representations, warranties, agreements or other
information set forth herein untrue or inaccurate.
Very truly yours,
______________________________
Signature
______________________________
Print Name
______________________________
Street Address
______________________________
City, State and Zip Code
______________________________
Telephone Number
F-4
Definition of Accredited Investor.
A trust is an "accredited investor" if, among other
things, either of the following tests is met:
(a) Such trust has total assets (including equity
interests in Summit) in excess of $5,000,000, was not
formed for the specific purpose of acquiring the Shares,
and the purchase of the Shares by such trust will be
directed by a person who has such knowledge and experience
in financial affairs and business matters that he or she is
capable or evaluating the merits and risks of an investment
in the Shares; or
(b) All holders of beneficial interests in the trust
are "accredited investors."
A natural person is an "accredited investor" if, among
other things, either of the following tests is met:
(a) Such person has an individual net worth, or joint
net worth with his or her spouse, in excess of $1,000,000
at the time of the purchase of Shares. For the purposes of
calculating "net worth" under this test, all assets should
be counted, including residences, furnishings, automobiles
and equity interests in Summit; or
(b) Such person had an individual income in excess of
$200,000 in each of the two most recent years or joint
income with his or her spouse in excess of $300,000 in each
of those years and has a reasonable expectation of reaching
at least the same income level in the current year. The
term "income" for the purposes of this test is not limited
to taxable income, but may be adjusted for various
deductions, exemptions or exclusions utilized to reduce
gross income through legitimate tax planning. Income may
include contributions to a profit sharing or retirement
plan if such stockholder's rights in such plan have vested.
Income generally may not include any unrealized capital
appreciation.
F-5
EXHIBIT G
Form of Corporation/Partnership's Representation Letter
July _, 1998
Capital One Financial Corporation
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxx 0000
Xxxxx Xxxxxx, Xxxxxxxx 00000-0000
Ladies and Gentlemen:
_________ (the "Investor") hereby acknowledges that it has
received from Capital One Financial Corporation (the "Company") a
copy of the Company's Private Placement Memorandum, dated July 8,
1998 (the "PPM"), and the Investor further acknowledges that
responsible officials of Investor have reviewed the PPM and the
draft Agreement and Plan of Merger (the "Agreement") included in
the PPM. Such materials have been received and reviewed in
connection with the Company's proposed acquisition of all the
outstanding capital stock of Summit Acceptance Corporation, a
Texas corporation ("Summit"), in exchange for shares of common
stock of the Company (the "Shares"). The Investor is making the
representations and warranties contained herein to you in order
for you to determine whether Shares may be issued to the Investor
without registration thereof under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to Section 4(2) of the
Securities Act. The Investor understands and acknowledges that:
(a) you will rely on the representations set forth herein for
purposes of such determination; (b) the Shares that the Investor
may receive pursuant to the transactions contemplated by the
Agreement will not be registered under the Securities Act in
reliance upon the exemption afforded by Section 4(2) of the
Securities Act; (c) the Shares that the Investor may receive
cannot be transferred and must be held indefinitely unless
registered under the Securities Act or unless an exemption from
registration is available; and (d) except as may be expressly set
forth in any registration rights agreement executed by the
Company in connection with the Agreement, the Company is under no
obligation to provide or take any action in connection with any
such registration or exemption.
The Investor hereby represents and warrants to you, and
agrees with you, as follows:
1. The Investor is acquiring the Shares solely for the
account of the Investor, and not for any other person,
for the purpose of investment and not with a view to,
or for sale in connection with, any distribution
thereof.
2. The Investor will not, directly or indirectly, offer,
transfer, sell, pledge, hypothecate or otherwise
dispose of any such Shares (or solicit any offers to
buy,
G-1
purchase or take a pledge of any such Shares), except
in compliance with the Securities Act and the rules
and regulations thereunder.
3. The Investor will not, directly or indirectly, offer,
transfer, sell, pledge, hypothecate or otherwise
dispose of any such Shares (or solicit any offers to
buy, purchase or take a pledge of any such Shares), or
remove any legend that appears on any certificate
evidencing such Shares stating that such Shares have
not been registered under the Securities Act and
setting forth or referring to the restrictions on
transferability and sale of such Shares without first
providing the Company with such certificates, opinions
of legal counsel or other documents as the Company may
reasonably request in connection with ensuring
compliance with the Securities Act and the rules and
regulations thereunder.
4. The financial situation of the Investor is such that
the Investor can afford to bear the economic risk of
holding such Shares for an indefinite period of time.
5. The Investor will acquire the Shares at the direction
of responsible officials of the Investor. Such
officials have such knowledge and experience in
financial and business matters that they are capable
of evaluating the merits and risks of an investment in
the Shares on behalf of the Investor. Such officials
have reviewed the PPM and the Agreement and understand
all the terms thereof and understand the risks
relating to an investment in the Shares.
6. Officials of the Investor have been granted the
opportunity to ask questions of, and receive answers
from, representatives of the Company concerning the
Company and the terms of the PPM and the Agreement and
to obtain any additional information which such
officials deem necessary to verify the accuracy of the
information supplied to them.
7. Check one:
___ The Investor is an "accredited investor," as defined
on Annex A.
___ The Investor is not an "accredited investor," as
defined on Annex A.
G-2
8. If the Investor is not an "accredited investor" please
list all equity owners of the Investor.
9. The Investor hereby agrees to notify you promptly of
any events occurring prior to the issuance of any
Shares regarding the Investor or any circumstances
that would make any of the representations,
warranties, agreements or other information set forth
herein untrue or inaccurate.
Notwithstanding the foregoing, nothing herein shall be
construed so as to give any person other than the Investor
the right to dispose of the Shares.
Very truly yours,
[INVESTOR]
By___________________________
Name:
Title:
G-3
Definition of Accredited Investor.
A corporation or partnership is an "accredited
investor" if, among other things, either of the following
tests is met:
(a) Such entity has total assets (including equity
interests in Summit) in excess of $5,000,000, and was not
formed for the specific purpose of acquiring the Shares; or
(b) All equity owners of the Investor are "accredited
investors."
A natural person is an "accredited investor" if, among
other things, either of the following tests is met:
(a) Such person has an individual net worth, or joint
net worth with his or her spouse, in excess of $1,000,000
at the time of the purchase of Shares. For the purposes of
calculating "net worth" under this test, all assets should
be counted, including residences, furnishings, automobiles
and equity interests in Summit; or
(b) Such person had an individual income in excess of
$200,000 in each of the two most recent years or joint
income with his or her spouse in excess of $300,000 in each
of those years and has a reasonable expectation of reaching
at least the same income level in the current year. The
term "income" for the purposes of this test is not limited
to taxable income, but may be adjusted for various
deductions, exemptions or exclusions utilized to reduce
gross income through legitimate tax planning. Income may
include contributions to a profit sharing or retirement
plan if such stockholder's rights in such plan have vested.
Income generally may not include any unrealized capital
appreciation.
G-4
