Exhibit 99.1
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
AMONG
IMPERIAL BUSINESS CREDIT, INC.,
AVCO LEASING SERVICES, INC.,
AVCO FINANCIAL SERVICES OF SOUTHERN CALIFORNIA, INC.
AND
AVCO FINANCIAL SERVICES, INC.
Dated as of August 30, 199 6
RECITALS ................................................................ 1
ARTICLE I ................................................................ 2
1.1 Acquisition and Transfer of Assets.............................. 2
1.2 Delivery of Assets; Instruments of Conveyance and Transfer...... 4
1.3 Excluded Assets................................................. 5
1.4 Assumed Liabilities............................................. 6
ARTICLE II ................................................................ 7
2.1 Purchase Price.................................................. 7
2.2 Payment of Purchase Price....................................... 7
2.3 Purchase Price Adjustment....................................... 8
2.4 Additional Adjustments.......................................... 9
2.5 Assignment of Right To Purchase................................. 9
ARTICLE III................................................................ 10
3.1 Organization.................................................... 10
3.2 Authority Relative to this Agreement............................ 10
ARTICLE IV ................................................................ 11
4.1 Organization.................................................... 11
4.2 Ownership....................................................... 11
4.3 Authority Relative to This Agreement............................ 12
4.4 Consents........................................................ 12
4.5 Financial Statements............................................ 12
4.6 Absence of Certain Changes or Events............................ 12
4.7 Title to Assets Other than Leased Real Property
and Leased Personal Property.................................... 13
4.8 Leased Real Property and Leased Personal Property............... 14
4.9 Assigned Leases; Lease Files; Bulk Purchase Agreements.......... 15
4.10 The Sellers Obligations Under the Assumed Liabilities........... 24
4.11 Material Contracts.............................................. 24
4.12 Intangible Property............................................. 25
4.13 Taxes........................................................... 25
4.14 Employees and Employee Benefits................................. 26
4.15 Litigation...................................................... 27
4.16 Compliance with Law............................................. 28
4.17 Receivables..................................................... 28
4.18 Reacquired Equipment............................................ 28
4.19 Environmental Matters........................................... 28
4.20 Brokers......................................................... 29
4.21 Additional Employee Information................................. 29
4.22 Section 341(f)(2)............................................... 29
4.23 Foreign Corrupt Practices Act................................... 29
4.24 Disclosure...................................................... 30
ARTICLE V ................................................................ 30
5.1 Cooperation..................................................... 30
5.2 Access to Documents; Opportunity to Ask Questions............... 30
5.3 Conduct of Business............................................. 31
5.4 Consents and Conditions; Assignment of Assets................... 32
5.5 Notices of Certain Events....................................... 32
i
ARTICLE VI ............................................................... 32
6.1 Cooperation.................................................... 32
6.2 Confidentiality................................................ 33
6.3 Consents and Conditions........................................ 33
6.4 No Action...................................................... 33
6.5 Notices of Certain Events...................................... 33
ARTICLE VII ............................................................... 33
7.1 Subleases...................................................... 33
7.2 Contributions, Taxes, etc...................................... 34
7.3 UCC Search and Filings......................................... 34
7.4 Employees...................................................... 34
7.5 Covenant Not To Compete........................................ 35
7.6 Administrative Services Agreement.............................. 35
7.7 HSR Act Compliance............................................. 35
ARTICLE VIII............................................................... 35
8.1 Conditions to Closing.......................................... 35
ARTICLE IX ............................................................... 37
9.1 Conditions to Closing.......................................... 37
ARTICLE X ............................................................... 38
10.1 The Closing Date............................................... 38
10.2 Items/Documents Delivered and Exchanged at the Closing......... 38
ARTICLE XI ............................................................... 40
11.1 Further Assurances............................................. 40
11.2 Public Announcements........................................... 41
11.3 Joint Post-Closing Covenant of the Sellers and
Purchaser...................................................... 41
11.4 Books and Records; Personnel................................... 41
11.5 Mutual Assurances.............................................. 42
11.6 Power of Attorney.............................................. 43
ARTICLE XII ............................................................... 44
12.1 Termination.................................................... 44
12.2 Effect of Termination.......................................... 44
12.3 Extension; Waiver.............................................. 44
ARTICLE XIII............................................................... 44
13.1 Survival of Representations and Warranties..................... 44
13.2 Indemnification................................................ 45
13.3 Notice of Indemnification...................................... 47
13.4 Indemnification Procedure for Third-Party Claims............... 48
13.5 Indemnification Payments and Tax Effects....................... 49
13.6 The Sellers' and AVCO's Purchase of Assigned Leases............ 49
ARTICLE XIV ............................................................... 49
14.1 Certain Definitions............................................ 49
14.2 Prorations..................................................... 58
14.3 Waiver of Compliance with Bulk Transfer Laws................... 59
14.4 Entire Agreement............................................... 59
ii
14.5 Governing Law.................................................. 59
14.6 Transfer and Other Taxes....................................... 59
14.7 Expenses....................................................... 60
14.8 Table of Contents and Headings................................. 60
14.9 Notices........................................................ 60
14.10 Severability................................................... 61
14.11 Binding Effect; No Assignment.................................. 61
14.12 Amendments..................................................... 61
14.13 Counterparts................................................... 61
iii
Schedules and Exhibits
----------------------
Schedule 1.1(a) - Furniture, Furnishings and Equipment
Schedule 1.1(b) - Trade Accounts and Notes Receivables
Schedule 1.1(c) - Leased Personal Property
Schedule 1.1(d) - Leased Real Property
Schedule 1.1(e) - Patents and Patent Applications
Schedule 1.1(f) - Intangible Assets
Schedule 1.1(g)(i) - Assigned Leases
Schedule 1.1(g)(ii) - Assigned Leases
Schedule 1.1(h) - Guarantees, Indemnitees and Warranties
Schedule 1.1(i) - Equipment Collateral
Schedule 1.1(j) - Material Contracts
Schedule 1.1(k) - Catalogs and Marketing Brochures
Schedule 1.1(m) - Deferred and Prepaid Charges
Schedule 1.1(n) - Claims, Credits and Causes of Action
Schedule 1.3(l) - Excluded Assets
Schedule 1.4(a) - Identified Liabilities
Schedule 2.1(a) - Asset Value Calculation Formula as of
- Determination Date
Schedule 2.3(a) - Agreed Upon Procedures
Schedule 4 - Exception Schedule
Schedule 4.5 - Financial Statements
Schedule 4.9 - Loss Experience
Schedule 4.13 - Taxes
Exhibit A - Form of Xxxx of Sale
Exhibit B - Form of Assumption Agreement
Exhibit C1 - Form of the Sellers' Sublease Regarding
- the Irvine Lease
Exhibit C2 - Form of the Sellers' Sublease Regarding
- the Danville Lease
Exhibit C3 - Form of the Sellers' Sublease Regarding
- the Atlanta Lease
Exhibit D - Form of Covenant Not to Compete
Exhibit E - Form of Administrative Services
- Agreement
Exhibit F - Form of Opinion of AVCO's General
- Counsel
Exhibit G - Forms of Leases
Exhibit H - Underwriting Guidelines
iv
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
---------------------------------------------
THIS AMENDED AND RESTATED ASSET PURCHASE AGREEMENT (the "Agreement"), dated
as of August 30, 1996, is by and among Imperial Business Credit, Inc., a
California corporation (the "Purchaser"), Avco Leasing Services, Inc., a
California corporation ("ALSI"), Avco Financial Services of Southern California,
Inc. ("AFS" and together with ALSI, the "Sellers"), and Avco Financial Services,
Inc., a Delaware corporation ("AVCO"), and is made with reference to the
following facts:
RECITALS:
--------
WHEREAS, ALSI is exclusively engaged in and AFS is in part engaged in the
business of originating and servicing business equipment leases (the
"Business");
WHEREAS, AVCO owns one hundred percent (100%) of the outstanding capital
stock of the Sellers;
WHEREAS, Purchaser, the Sellers and Avco entered into that certain Asset
Purchase Agreement (the "Asset Purchase Agreement") dated as of August 15, 1996;
WHEREAS, the obligations of the parties to the Asset Purchase Agreement
were subject to, among other things, the mutual satisfaction of the conditions
set forth in Article 8 thereof, and the conditions thereunder have been so
satisfied, and the parties wish to amend and restate the Asset Purchase
Agreement in its entirety to reflect their understanding with respect to the
subject matter hereof;
WHEREAS, this Agreement is intended to set forth all of the terms and
conditions upon which Purchaser intends to purchase, and the Sellers intend to
sell, substantially all of the assets of ALSI and substantially all of the
assets of AFS related to the Business, and Purchaser intends to assume certain
liabilities of the Sellers relating to the Business, and this Agreement
supersedes the Asset Purchase Agreement in its entirety; and
WHEREAS, certain capitalized terms used herein are defined in Section 14.1
hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth, and
upon the terms and subject to the conditions hereinafter set forth, Purchaser,
each of the Sellers and AVCO hereby agree as follows:
1
ARTICLE I
SALE AND PURCHASE OF ASSETS
1.1 Acquisition and Transfer of Assets. Upon the terms and subject to the
----------------------------------
conditions hereinafter set forth, on the Closing Date (as defined in Section
10.1 hereof) the Sellers shall sell, assign, transfer, convey and deliver to
Purchaser, and Purchaser shall purchase, acquire and accept from the Sellers,
free and clear of all Liens, except the Permitted Exceptions, all of the
Sellers' right, title and interest in and to all of the assets, properties,
rights, contracts and claims employed in, identified on the books and records
of, and owned by, the Sellers and used in the Business (except as otherwise set
forth in Section 1.3 hereof), of every kind and description, wherever located,
whether tangible or intangible, real, personal or mixed, as the same shall exist
on the Closing Date (collectively, the "Assets") and assume all Assumed
Liabilities as defined herein. Except as otherwise set forth in Section 1.3
hereof, the Assets shall include, without limitation, all of the Sellers' right,
title and interest in and to all assets, properties, rights, contracts and
claims set forth on Schedules 1.1(a) through 1.1(p) hereto which is a listing as
of May 31, 1996:
(a) all furnishings, furniture, office equipment and supplies, and
equipment and other tangible personal property set forth on Schedule 1.1(a)
hereto;
(b) all trade accounts receivable and all notes receivable (whether
short-term or long-term) from third parties and all deposits with third parties
owed to the Business, together with all unpaid interest accrued thereon from the
respective obligors and all security or collateral therefor, including those set
forth on Schedule 1.1(b) (collectively, the "Accounts Receivable");
(c) all of the leased tangible personal property (other than the
Equipment Collateral) set forth on Schedule 1.1(c) hereto (collectively, the
"Leased Personal Property"), which includes all prepayments, security deposits
and options to renew or purchase in connection therewith;
(d) all of the leased real property set forth on Schedule 1.1(d)
hereto (collectively, the "Leased Real Property"), including all buildings and
improvements located thereon, all of the fixtures attached thereto, all prepaid
rent, security deposits and options to renew or purchase in connection
therewith;
(e) (i) all patents and patent applications owned by the Sellers or
licensed to the Sellers by third parties relating to the Business, in each case
as listed on Schedule 1.1(e) hereto, (ii) all trade secrets, know-how,
inventions, and other technical information, whether owned by the Sellers or
licensed to the Sellers by third parties, and (iii) all notebooks,
2
records, reports and data relating thereto (the assets referred to in clauses
(i) through (iii) are collectively referred to herein as the "Patent-Related
Assets");
(f) except for Sellers' names, any use of "Textron," "Avco" and the
heart design used by Sellers, all trademarks, trade names, service marks and
copyrights, all applications and registrations for any of the foregoing, and all
computer systems, computer hardware, databases and software programs, including
any licenses or warranties, if any, used in the Business (including databases
and software programs developed by the Sellers in the operation of the Business,
source codes and user manuals), in each case, owned by the Sellers or licensed
to the Sellers by third parties listed on Schedule 1.1(f) hereto (collectively,
together with the Patent-Related Assets, the "Intangible Assets");
(g) all Leases relating to the Business that either of the Sellers
have entered into as lessor, or to which Sellers have the right to receive lease
payments under, including those listed on Schedule 1.1(g)(i) and 1.1(g)(ii)
hereto, together with the aggregate amount of rent installments payable by the
Obligor thereunder, and any supplemental and additional payment required by the
terms thereof with respect to insurance, maintenance, ancillary products and
services and other specific charges, including, but not limited to, recoverable
deposits, and sales and use and personal property tax and insurance receivables
from Obligors (each an "Assigned Lease" and collectively, the "Assigned
Leases");
(h) with respect to any Assigned Lease, the following (collectively,
the "Lease Security"):
(i) all security interests or liens and property subject
thereto from time to time purporting to secure payment of such Assigned
Lease;
(ii) the assignment of all UCC financing statements covering
the Equipment Collateral;
(iii) all Sellers' interest in guarantees, indemnities,
warranties, letters of credit, insurance proceeds and proceeds and premium
refunds thereof and other agreements or arrangements supporting or securing
payment of the Lease Receivable arising under such Assigned Lease,
including those listed on Schedule 1.1(h); and
(iv) all products and proceeds of the foregoing.
(i) all equipment subject to all Assigned Leases originated or
acquired by the Sellers in connection with the Business, (including the residual
value, if applicable, associated therewith, and all substitutions therefor and
products and proceeds thereof, including all payments under insurance or any
indemnity, warranty or guaranty, payable by reason of loss or
3
damage to or otherwise with respect to any of the foregoing) as listed on
Schedule 1.1(i) hereto (the "Equipment Collateral");
(j) in addition to the Assigned Leases, all other Contracts relating
to the Business to which either of the Sellers is a party listed on Schedule
1.1(j) hereto (including all bulk purchase contracts pursuant to which either of
the Sellers has purchased or agreed to purchase Assigned Leases on a bulk basis
from third parties (the "Bulk Purchase Contracts"), all force-placed insurance
policies pertaining to the Assigned Leases and all insurance management
agreements to which Sellers are parties), and all servicing rights with respect
to the Assigned Leases;
(k) all catalogues, marketing brochures and materials and other
printed and written materials relating to the Business as described on Schedule
1.1(k), excluding any materials bearing the Avco or Textron name;
(l) all of Sellers' interest in rights under or pursuant to all
warranties, representations and guarantees, if any, made by vendors, suppliers,
manufacturers and contractors in connection with or relating to the Business or
affecting the Assets;
(m) all deferred and prepaid charges, sums and fees, and all
insurance premiums relating to the Business, including those listed on Schedule
1.1(m);
(n) all claims, credits, causes of action or rights of set-off of the
Sellers relating to the Business against third parties, including those listed
on Schedule 1.1(n);
(o) other than as described in Section 1.3 herein, all customer and
vendor lists and all files, the Contract Files, documents, books, records,
papers, agreements, formulae, books of account and other data and records
(including all computer programs, tapes, discs, punch cards and similar media)
relating to the Assets, the Business and all Obligors under the Assigned Leases
(the "Records"); and
(p) all goodwill and going concern value, customer relationships and
vendor relationships relating to the foregoing Assets, but excluding the names
"Avco Leasing Services, Inc.," "Avco Financial Services of Southern California,
Inc.," "Avco" and "Textron, Inc." and the heart design used by Sellers.
1.2 Delivery of Assets; Instruments of Conveyance and Transfer. (a) At
----------------------------------------------------------
the Closing, the Sellers shall deliver possession of the Assets to Purchaser at
such place as may be agreed to in writing by Purchaser (and delivering to
Purchaser the keys to the Leased Real Property).
(b) The Sellers shall also at the Closing deliver title to the Assets
by delivering to Purchaser an executed xxxx
4
of sale in substantially the form of Exhibit "A" hereto (the "Xxxx of Sale").
1.3 Excluded Assets. Notwithstanding anything to the contrary contained
---------------
in Section 1.1 hereof, the Sellers, AVCO and Purchaser expressly understand and
agree that the Sellers are not hereunder selling, assigning, transferring,
conveying or delivering to Purchaser any of the following assets, properties,
rights, contracts and claims (collectively, the "Excluded Assets"):
(a) all cash and cash equivalent items on hand or on deposit as of
the Closing Date of this Agreement (except as described in Section 1.1 herein);
(b) all federal, state and local permits, licenses and other
authorizations relating to the Business to the extent they are not assignable or
transferable;
(c) all minute books and stock transfer ledgers of Sellers and all
Tax Returns, as hereinafter defined, of Sellers;
(d) all rights to or all claims for refunds, overpayments or rebates
of Taxes and other governmental charges for periods ending on or prior to the
Closing Date, all federal and state deferred tax assets and the benefit of net
operating loss carryforwards, carrybacks or other credits of Sellers;
(e) except as expressly provided herein, all insurance policies and
surety bonds;
(f) the right to use the names "Avco" and "Textron";
(g) pension or other funded employee benefit plan assets;
(h) all assets used exclusively by Sellers in other businesses or for
exclusive purposes other than the Business;
(i) all personal property in the possession of Sellers or any of
their affiliates which is subject to leases charged off prior to the Closing;
(j) Sellers' interest, if any, in that certain lease of real property
located at Redhill Corporate Plaza, 00000 Xxxxx Xxxxxx, Xxxxx 000, Xxxxxx,
Xxxxxxxxxx (the "Irvine Real Property") and dated April 14, 1995 by and between
Redhill-Metro VI, L.P. and Avco Financial Services Management Company in which
Sellers are conducting the Business (the "Irvine Lease");
(k) the rights and benefits under all agreements between Sellers and
either of them with any company affiliated with either of them.
(l) the assets listed on Schedule 1.3(l) hereto.
5
1.4 Assumed Liabilities.
-------------------
(a) Upon the terms and subject to the conditions hereinafter set
forth, effective as of the Closing, Purchaser shall assume and be liable for
only (i) security deposits from obligors under the Assigned Leases identical on
Schedule 1.4(a) hereto, (ii) holdbacks from vendors of personal property leased
under the Assigned Leases, (iii) all of Sellers' duties arising after the
Closing (but none of their liabilities existing at the Closing) under the
Danville Lease and the Atlanta Lease (if the Consents to Assignment with respect
to such leases are obtained), (iv) all of Sellers' duties arising after the
Closing (but none of their liabilities existing at the Closing) under the Bulk
Purchase Contracts, (v) all of Sellers' duties arising after the Closing (but
none of their liabilities existing at the Closing) under the Assigned Leases and
(vi) those additional liabilities and obligations identified on Schedule 1.4(a)
hereto (the "Identified Liabilities"), and no others (collectively, the "Assumed
Liabilities"); and
(b) Notwithstanding any provisions in this Agreement or any other
writing to the contrary, Purchaser is assuming only the Assumed Liabilities and
is not assuming any other liability or obligation of the Sellers, AVCO or the
Business (or any predecessor owner of all or part of the Business) of whatever
nature whether in existence on the Closing Date or arising thereafter. All such
other liabilities and obligations shall be retained by and remain obligations
and liabilities of the Sellers and AVCO. Without limiting the liabilities that
Purchaser is not assuming, Purchaser will not assume or agree to pay or
discharge (i) liabilities, if any, incurred by the Sellers or AVCO as a result
of any act performed or transaction entered into in violation of any of the
terms and conditions of this Agreement; (ii) liabilities for any federal, state
or local tax, including, without limitation, any sales tax, income tax franchise
tax liability, or other tax of any nature whatsoever, including, but not limited
to, any tax based upon or arising out of or resulting from or measured by income
or gain arising out of or resulting from the sale, conveyance, transfer,
assignment or delivery of the Assets as provided herein; (iii) liabilities
arising out of or related to Assigned Leases or other Contracts assumed
hereunder to the extent such liabilities arise as the result of the operation of
the Business prior to the Closing; (iv) accrued employee vacations and accrued
payroll amounts including commissions and bonuses; (v) liabilities of the
Sellers or AVCO arising out of or in connection with the negotiation, execution
or performance of this Agreement, including costs and expenses of consultants
and brokers, if any; and (vii) liabilities arising out of or related to any
litigation set forth in the Exception Schedule (as defined herein). All such
liabilities and obligations not being assumed being herein referred to as the
"Excluded Liabilities."
6
ARTICLE II
PURCHASE PRICE
2.1 Purchase Price.
--------------
(a) In reliance on the representations and warranties of the Sellers
and AVCO contained herein, and subject to all of the terms and conditions of
this Agreement, Purchaser agrees to purchase the Assets from the Sellers for the
following consideration (collectively, the "Purchase Price"):
(i) (A) Payment of that value of the Assets determined as of
a date no later than eight (8) business days prior to the Closing Date (the
"Determination Date") in accordance with the formula set forth in Schedule
2.1(a) (the "Asset Value") hereto less the amount reflected on the Closing
----
Cash Payment Adjustment Certificate (as defined in Section 2.1(a)(ii)
hereof); and
(B) The assumption and agreement of Purchaser to pay and
discharge in due course the Assumed Liabilities.
(ii) On the Closing, the Sellers shall deliver to Purchaser a
certificate (the "Closing Cash Payment Adjustment Certificate"), dated as
of the Closing Date, signed by the Chief Accounting Officer of AVCO,
certifying as to the Sellers' estimate of (A) the amount, if any, of any
payments, payoffs, or other monies or credits with respect to Assigned
Leases which had been received by the Sellers for the period from the
Determination Date until and through the Closing Date hereof and which are
not deemed to be amounts which the Sellers are entitled to retain pursuant
to the Settlement Certificate attached pursuant to Schedule 2.1(a) hereto
(the "Settlement Certificate"); (B) the aggregate amount of security
deposits underlying the Assigned Leases and vendor holdbacks as of the
Closing Date and (C) the amount of each of the Identified Liabilities as of
the Closing Date; and
(iii) On the Closing, the Sellers shall deliver to Purchaser the
Settlement Certificate (the "Settlement Certificate") dated as of Closing
Date, signed by the Chief Accounting Officer of AVCO, as to the amounts to
be reflected pursuant to that form of settlement certificate attached to
Schedule 2.1(a) attached hereto.
2.2 Payment of Purchase Price. The Purchase Price shall be paid by
-------------------------
Purchaser at the Closing as follows:
(a) The delivery to the Sellers of cash or other immediately
available funds in an amount equal to the sum of the Asset Value as of the
Determination Date determined further to
7
and in accordance with Section 2.1(a) hereof and Schedule 2.1(a) hereto (the
"Closing Cash Payment"); and
(b) The execution and delivery to the Sellers of a valid and binding
undertaking, substantially in the form of Exhibit "B" hereto, whereby Purchaser
assumes and agrees to pay and discharge in due course the Assumed Liabilities
(the "Assumption of Liabilities").
2.3 Purchase Price Adjustment.
-------------------------
(a) As promptly as practicable following the Closing, Peat Marwick
LLP ("Peat Marwick") shall complete certain agreed upon procedures set forth in
Schedule 2.3(a) for the purpose of rendering its report that the Asset Value as
of the Determination Date and the amounts referenced on the Closing Cash Payment
Adjustment Certificate (together, the "Closing Calculation"), as prepared and
presented by the Sellers at the Closing, with such adjustments, if any, as may
required in order to render such report, as well as the Settlement Certificate,
have been prepared in accordance with GAAP (as applicable), are accurate and
complete, and that each of the Asset Value and Settlement Certificate has been
calculated in accordance with the procedures set forth in Schedule 2.3(a) and
the formula set forth in Schedule 2.1(a) hereof, respectively. The Closing
Calculation, with such adjustments, if any, as Peat Marwick may require in order
to render its report, is hereinafter referred to as the "Certified Closing
Calculation". Peat Marwick shall deliver such calculation to Purchaser and the
Sellers as promptly as practicable, but in no event later than 120 days after
the Closing Date. All expenses of Peat Marwick in connection with the
preparation of the Certified Closing Calculation pursuant to this subsection (a)
shall be borne by Purchaser;
(b) If the Sellers or Purchaser disagrees with the Certified Closing
Calculation as delivered pursuant to Section 2.3(a) hereof, then, within 30 days
after Peat Marwick's delivery thereof, either or both of the Sellers on the one
hand and Purchaser on the other hand may deliver a notice to the other and to
Peat Marwick of such disagreement and setting forth such disagreeing party's
calculation of the Closing Calculation. Any such notice of disagreement shall
specify those items or amounts as to which the Sellers or Purchaser disagrees,
and the Sellers or Purchaser, as the case may be, shall be deemed to have agreed
with all other items and amounts contained in the Certified Closing Calculation;
(c) If a notice of disagreement shall be timely delivered pursuant to
Section 2.3(b) hereof, the parties shall, during the 30 days following such
delivery, use their reasonable best efforts to reach agreement on the disputed
items or amounts in order to determine, as may be required, the amount of
Closing Calculation. If, during such period, the parties are unable to reach
such agreement, they shall promptly thereafter cause Ernst & Young or, if such
firm declines to act in such capacity, such
8
other firm of independent nationally recognized accountants (other than Peat
Marwick or Xxxxxx Xxxxxxxx LLP) agreed upon by the parties (the "Accounting
Referee") promptly to review this Agreement, and the disputed items or amounts
for the purpose of calculating the Closing Calculation. In making such
calculation, the Accounting Referee shall consider only those times or amounts
in the Certified Closing Calculation as to which the Sellers or Purchaser has
disagreed. The Accounting Referee shall deliver to the Sellers and Purchaser,
as promptly as practicable, a report setting forth such calculation. Such
report shall be final and binding upon the parties hereto. The cost of such
review and report pursuant to this Section 2.3(c) shall be borne equally by the
Sellers and Purchaser. As used herein "Final Closing Calculation" means (i) the
Certified Closing Calculation, if no notice of disagreement is delivered by the
Sellers or Purchaser during the period provided in this Section 2.3(c), or (ii)
if such a notice of disagreement is delivered by the Sellers or Purchaser,
either (A) as agreed by the Sellers and Purchaser or (B) as shown in the
Accounting Referee's calculation delivered pursuant to this Section 2.3(c); and
(d) The Sellers and AVCO, jointly and severally, shall pay to
Purchaser, as an adjustment to the Purchase Price, the amount, if any, by which
the Final Closing Calculation is less than the sum of the Closing Cash Payment.
Purchaser shall pay to the Sellers, as an adjustment to the Purchase Price, the
amount, if any by which the Final Closing Calculation is greater than the
Closing Cash Payment. Any such payment under this Subsection (d) shall be made
by wire transfer of immediately available funds within 10 days after the
determination of the Final Closing Calculation. The amount of any such payment
shall bear interest for the period from and including the Closing Date to but
excluding the date of payment at the rate of 9.00% per annum. Such interest
shall be payable at the same time as the payment to which it relates and shall
be calculated daily on the basis of a year of 365 days and the actual number of
days elapsed.
2.4 Additional Adjustments. Purchaser and the Sellers hereby agree to
----------------------
promptly remit to the other any amounts received by either of them after the
Closing which are properly due and to the other as described in the Settlement
Certificate.
2.5 Assignment of Right To Purchase. Purchaser shall have the right to
-------------------------------
assign all or any portion of its rights to purchase the Assets hereunder to any
third party which controls, is controlled by, or is otherwise an affiliate of,
Purchaser. In the event of any such assignment:
(a) the assignee shall be liable for the obligations of Purchaser to
the extent of any Assets purchased hereunder as if such assignee were an
original signatory hereto;
(b) all references to Purchaser hereunder shall thereafter also
include assignee; and
9
(c) any consideration for Assets purchased by any assignee shall be
paid by such assignee and all Assets shall be assigned to such assignee,
provided, however, that notwithstanding such assignment, Purchaser shall remain
liable for the performance by the assignee of any of its obligations hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Sellers and AVCO as set forth in
this Article III below. Such representations and warranties are made on the
date hereof and shall be made again as of the Closing as if made on the date
thereof.
3.1 Organization. Purchaser is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of California and has
corporate power and authority to carry on its business as it is now being
conducted.
3.2 Authority Relative to this Agreement. Purchaser has the corporate
------------------------------------
power to enter into this Agreement and the other Transaction Documents to which
it is a party and to carry out its obligations hereunder and thereunder. The
execution and delivery of this Agreement and the other Transaction Documents to
which Purchaser is a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized and no other proceedings on the
part of Purchaser are necessary to authorize this Agreement, the other
Transaction Documents to which Purchaser is a party and the transactions
contemplated herein and therein. This Agreement and the other Transaction
Documents, when executed by the Purchaser, shall be valid and binding
obligations of the Purchaser, enforceable in accordance with their respective
terms, subject to the Enforceability Exceptions. Purchaser is not subject to or
obligated under any charter, bylaw or contract provision or any license,
franchise or permit, or subject to any order or decree, which would be breached
or violated by or in conflict with its executing and carrying out this Agreement
and the transactions contemplated hereunder and under the other Transaction
Documents, the violation of which would have a Material Adverse Effect. Except
for any required filings with the Federal Trade Commission and the Department of
Justice pursuant to the HSR Act and due expiration of the waiting period
(including any extensions thereunder), and as contemplated by this Agreement, no
consent of any person who is a party to a contract which is material to
Purchaser's business, nor consent of any governmental authority, is required to
be obtained on the part of Purchaser to permit the transactions contemplated
herein. This Agreement and the other Transaction Documents when executed by
Purchaser shall each be the valid and binding obligations of Purchaser
enforceable in accordance with its respective terms, subject to the effect that:
10
(a) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting generally the enforcement of
creditors' rights; and
(b) statutes or rules of equity concerning the enforcement of the
remedy of specific performance (collectively, the "Enforceability Exceptions").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND AVCO
Except as set forth on the Exception Schedule attached hereto as Schedule
4, each of the Sellers and AVCO jointly and severally represent and warrant to
Purchaser as set forth in this Article IV. The Exception Schedule shall state
each specific section of this Agreement to which each exception is made. Such
representations and warranties are made on the date hereof and shall be made
again as of the Closing as if made on the date thereof. No fact or circumstance
disclosed to or discovered or known by Purchaser shall constitute an exception
to these representations and warranties unless such fact or circumstance is set
forth on the Exception Schedule attached hereto.
4.1 Organization. Each of the Sellers is a corporation duly organized,
------------
validly existing and in good standing under the laws of the State of California
and has corporate power and authority to carry on its business as it is now
being conducted. Each of the Sellers is duly qualified or licensed to do
business in each jurisdiction in which the nature of its business or properties
makes such qualification or licensing necessary except to the extent that any
failures to qualify or obtain a license are not in the aggregate materially
adverse to the Sellers. The Exception Schedule contains a true and complete
listing of the following, as each relates to the Business:
(a) the locations of all sales offices, development and support
facilities, and any other offices or facilities of the Sellers;
(b) all states in which the Sellers maintain any employees;
(c) all states in which the Sellers are duly qualified to transact
business as a foreign corporation; and
(d) all names under which the Sellers have done business during the
three (3) years prior to the Closing.
4.2 Ownership. All of the outstanding capital stock of ALSI and AFS
---------
(together, the "Sellers' Shares") are owned, beneficially and of record, by
AVCO. Neither the Sellers nor AVCO is a party to any voting trust or other
voting agreement with respect to any of the Sellers' Shares or to any agreement
11
relating to the issuance, sale, redemption, transfer or other disposition of the
Seller's Shares.
4.3 Authority Relative to This Agreement. AVCO and each of the Sellers
------------------------------------
has the corporate power to enter into this Agreement and the other Transaction
Documents to which it is a party and to carry out its obligations hereunder and
thereunder. The execution and delivery of this Agreement and the other
Transaction Documents to which the Sellers and AVCO are a party and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized and no other proceedings on the part of the Sellers or AVCO are
necessary to authorize this Agreement, the other Transaction Documents to which
they are a party and the transactions contemplated herein and therein. This
Agreement and the other Transaction Documents, when executed by the Sellers and
AVCO, shall be the valid and binding obligations of each of the Sellers and of
AVCO, as the case may be, enforceable in accordance with its respective terms,
subject to the Enforceability Exceptions. Neither the Sellers nor AVCO is
subject to or obligated under any charter, bylaw or contract provision or any
license, franchise or permit, or subject to any order or decree, which would be
breached or violated by or in conflict with their executing and carrying out
this Agreement and the transactions contemplated hereunder and under the other
Transaction Documents; the violation of which would have a Material Adverse
Effect.
4.4 Consents. Except (a) for any required filings with the Federal Trade
--------
Commission and the Department of Justice pursuant to the HSR Act and due
expiration of the waiting period (including any extensions thereunder), and (b)
as set forth on the Exception Schedule, no consent of any Person, nor consent of
any Governmental Body, is required to be obtained on the part of either of the
Sellers or AVCO to permit the transactions contemplated herein or pursuant to
the Transaction Documents (the "Consents to Assignment").
4.5 Financial Statements. Set forth in Schedule 4.5 hereto is a true and
--------------------
complete copy of the unaudited balance sheet as at July 31, 1996 (the "Initial
Balance Sheet"). Except as set forth on Schedule 4.5, the Initial Balance Sheet
was prepared from the books and records of the Business and fairly and
accurately presents the financial position of the Business as of July 31, 1996,
and, except for the absence of notes to such Initial Balance Sheet, was prepared
in accordance with GAAP consistently applied throughout the period covered
thereby.
4.6 Absence of Certain Changes or Events. Since the date of the Initial
------------------------------------
Balance Sheet, neither of the Sellers has, as it relates to the Business:
(a) suffered any Material Adverse Change in the Assets or the
Business;
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(b) suffered any damage, destruction or loss, whether covered by
insurance or not, materially and adversely affecting the Assets or the Business;
(c) made any change in the accounting methods or practices it
follows, whether for general financial or tax purposes, or any change in
depreciation or amortization policies or rates adopted therein as it relates to
the Assets or the Business;
(d) sold, leased, abandoned or otherwise disposed of any machinery,
equipment or other operating property of the Business, other than in the
ordinary course of business;
(e) sold, assigned, transferred, licensed or otherwise disposed of
any patent, trademark, servicemark, tradename, brand name, copyright (or pending
application for any patent, trademark, servicemark or copyright), invention,
process, know-how, formulae or trade secret or interest thereunder or other
intangible asset used in the Business;
(f) engaged in any activity or entered into any material commitment
or transaction (including, without limitation, any borrowing or capital
expenditure) relating to the Business other than in the ordinary course of
business consistent with past practices;
(g) incurred any liabilities relating to the Business except in the
ordinary course of business and consistent with past practice;
(h) permitted or consented to any of the Assets or the Business to be
subjected to any mortgage, deed of trust, pledge, lien, security interest or
other encumbrance of any kind, except those permitted hereunder;
(i) made any capital expenditure or commitment for additions to
property, plant or equipment of the Business except in the ordinary course of
business;
(j) made any amendment to or terminated any agreement relating to the
Business which, if not so amended or terminated, would be required to be
disclosed on the Exception Schedule; or
(k) agreed to take any action described in this Section 4.6 or
outside of its ordinary course of business or which would constitute a breach of
any of the representations contained in this Agreement.
4.7 Title to Assets Other than Leased Real Property and Leased Personal
-------------------------------------------------------------------
Property.
--------
(a) The Sellers own and have good and valid, marketable title to all
of the Assets other than the Leased Real Property and Leased Personal Property,
including but not limited
13
to the Assigned Leases and any and all property covered by the Assigned Leases,
including, but not limited to, the Equipment Collateral (to the extent the
Sellers' interest in such Equipment Collateral), and including but not limited
to all of such Assets reflected on the Initial Balance Sheet, except Assets
disposed of in the ordinary course of business after July 31, 1996, free and
clear of all Liens, except the Permitted Exceptions;
(b) Upon consummation of the transactions contemplated hereby,
Purchaser will have acquired, on and as of the Closing Date, good and valid
first priority ownership interest in and to the Assets other than the Leased
Personal Property and Leased Real Property, free and clear of all Liens, except
the Permitted Exceptions;
(c) No effective financing statement or other instrument similar in
effect filed or permitted to be filed by the Sellers covering any Assets with
respect thereto other than the Leased Personal Property shall at any time be on
file in any recording office except as such may be filed in favor of Purchaser
or its assignees in accordance with this Agreement; and
(d) All Assets, other than the Leased Real Property, whether or not
covered by Assigned Leases, are in good condition and repair (excepting ordinary
and customary wear and tear), contain no latent defects, and are leasable,
saleable or useable in the ordinary course of the Business as heretofore
conducted.
4.8 Leased Real Property and Leased Personal Property.
-------------------------------------------------
(a) The Sellers have a valid leasehold interest in all of the Leased
Real Property, the Irvine Real Property and the Leased Personal Property free
and clear of all Liens, except the Permitted Exceptions. All leases in respect
of the Leased Real Property, the Irvine Real Property and the Leased Personal
Property are valid, binding and enforceable in accordance with their respective
terms, and there does not exist under any such lease any default on the part of
either of the Sellers or any event which with notice or lapse of time or both
would constitute such a default, except for possible defaults which do not have
a Material Adverse Effect. No such lease has been modified or amended in
writing except as set forth on the Exception Schedule. Neither of the Sellers
has received from any party to any such lease any written notice of, or written
claim with respect to, any breach or default thereof. Neither of the Sellers
has granted any sublease, license or other agreement granting to any person or
entity any right to the use or occupancy of the Leased Real Property, the Irvine
Real Property or the Leased Personal Property or any portion thereof, or the
right to purchase such Leased Real Property, the Irvine Real Property or the
Leased Personal Property or any portion thereof, and neither has any knowledge
of any such grant by any other Person;
(b) The plants, buildings, structures and equipment, if any, included
in the Leased Real Property and the Irvine Real
14
Property are substantially suited for their present uses (giving due account to
the age and length of use the same);
(c) No violation of any law, regulation or ordinance (including laws,
regulations or ordinances relating to zoning, city planning or similar matters)
relating to the Leased Real Property or the Irvine Real Property currently
exists, except for violations which would not have a Material Adverse Effect.
Neither of the Sellers has received notice of any contemplated governmental
actions which might reasonably be expected to materially detract from the value
of any Leased Real Property or the Irvine Real Property, materially interfere
with any present use of any Leased Real Property or the Irvine Real Property,
respectively, or materially adversely affect the marketability of any Leased
Real Property or the Irvine Real Property, respectively. There is no action
pending or, to the Sellers' knowledge, threatened to initiate a condemnation in
respect of any Leased Real Property or the Irvine Real Property; and
(d) Upon consummation of the transactions contemplated hereby,
Purchaser will have acquired, on and as of the Closing Date, a valid leasehold
interest in the Leased Personal Property, the Leased Real Property and the
Irvine Real Property, free and clear of all Liens, except the Permitted
Exceptions.
4.9 Assigned Leases; Lease Files; Bulk Purchase Agreements. With respect
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to each Assigned Lease, the Lease Files and the Bulk Purchase Agreements:
(a) Such Assigned Lease and all accompanying documents are complete
and authentic and all signatures thereon are genuine.
(b) All amounts represented to be payable on such Assigned Lease, as
indicated on the Lease Schedules, are, in fact, payable in accordance with the
provisions of such Assigned Lease.
(c) Except for defaults in the payment of money, none of the Obligors
with respect to the Assigned Leases are in default thereunder and no condition,
event, state of facts or circumstances exist which with notice or lapse of time
or both, would constitute an event of default by either of the Sellers or any
Obligor under the Assigned Leases.
(d) Each of the Assigned Leases permits assignment by the lessor
thereunder without the consent of any person.
(e) The Sellers hold good, valid and marketable title to, and are the
sole owners of, such Assigned Lease, the related Equipment Collateral and Lease
Security, subject to no Lien, except for the Lien created by this Agreement, and
upon the Closing, Purchaser will hold good, valid and marketable title to, and
be the sole owner of, such Assigned Lease, the related Equipment Collateral and
Lease Security, subject to no Lien.
15
(f) Such Assigned Lease conforms to the description thereof as set
forth on the Lease Schedules.
(g) As of the date hereof and the Closing Date, no Scheduled Payment
or any other payment or any part thereof, other than late charges, on such
Assigned Lease has been charged off or has been delinquent for more than 60
days.
(h) The Assigned Lease Rate for each Assigned Lease is not less than
10% per annum.
(i) As of the Closing Date, no Assigned Lease to be acquired will
have a remaining term of more than 60 months.
(j) The Assigned Lease provides for substantially equal monthly
payments.
(k) Each Assigned Lease complies with the general written
underwriting guidelines of the Sellers as in effect on the date hereof, a copy
of which is attached hereto as Exhibit H .
(l) Each Assigned Lease had an original term of not less than 12
months and not more than 72 months.
(m) Each Assigned Lease is for the item(s) of Equipment Collateral
identified therein and no certificate of title is required for any such item(s)
of Equipment Collateral.
(n) The information with respect to each Assigned Lease and the
related Equipment Collateral in the Lease Schedules and in all other lists
furnished in connection with or attached as an exhibit to this Agreement is true
and correct.
(o) No material provision of any Assigned Lease has been waived,
altered or modified in any respect except by written instruments or documents
contained in the Lease File.
(p) Each Assigned Lease is a legal, valid and binding full recourse
payment obligation of the related Obligor, is enforceable in accordance with its
terms (except as may be limited by applicable insolvency, bankruptcy,
moratorium, reorganization, or other similar laws affecting enforceability of
creditors' rights generally and the availability of equitable remedies as they
relate to the Obligor) and is in full force and effect and no Assigned Lease has
been satisfied, subordinated or rescinded.
(q) Each Assigned Lease is a net Assigned Lease and the Obligor's
obligations under each Assigned Lease are non-cancelable and unconditional and
not subject to any right of set-off, counterclaim, reduction or recoupment; no
Assigned Lease is subject to rights of rescission, setoff, counterclaim or
defense, and each Assigned Lease provides for acceleration of the Scheduled
Payments upon default by the Obligor such that the
16
amount payable by the Obligor is greater than or equal to the Prepayment Amount
relating to such Assigned Lease.
(r) All requirements of federal, State and local laws, and
regulations thereunder, including, without limitation, usury laws, if any, in
respect of the Assigned Leases have been complied with, and the Assigned Leases
complied at the time they were originated or made and as of the Closing Date
will comply with all legal requirements of the jurisdiction in which they were
originated.
(s) At the time that any interest in any item of Equipment Collateral
is assigned pursuant to the terms hereof, such Equipment Collateral has not
suffered any uninsured loss or damage except for such Equipment Collateral that
has been restored to its original value, ordinary wear and tear excepted.
(t) Each Assigned Lease contains provisions requiring the Obligor to
pay all sales, use, excise, rental, property or similar taxes imposed on or with
respect to the Equipment Collateral and to assume all risk of loss or
malfunction of the related Equipment Collateral and each Assigned Lease requires
the Obligor to maintain the Equipment Collateral in good and workable order and
to obtain and maintain physical damage insurance on the Equipment Collateral
subject thereto.
(u) The assignment to Purchaser of the Assigned Leases and any item
of Equipment Collateral will not violate the terms or provisions of any such
Assigned Lease or any other agreement to which the Sellers then are a party or
by which either is bound.
(v) Any party executing a Assigned Lease on behalf of the lessor
thereunder had the legal capacity to execute such Assigned Lease and, to the
best of Sellers' and Avco's knowledge, all other parties to the Assigned Lease
had the legal capacity to execute such Assigned Lease;
(w) Each Assigned Lease and the related Equipment Collateral have not
been satisfied, subordinated, rescinded or sold, transferred, assigned or
pledged by the Sellers to any other Person (or any such pledge has been released
as evidenced by releases of lien).
(x) No Assigned Lease provides for the substitution, addition or
exchange of any item of Equipment Collateral subject to such Assigned Lease
which would result in any reduction, or change the timing of, payments due, or
modification of the Obligor's other obligations, under such Assigned Lease.
(y) Each Assigned Lease is "chattel paper" or an "instrument" or an
"account" (under the UCC in effect in the jurisdiction whose law governs the
Assigned Lease). There is only one executed counterpart of each Assigned Lease
that constitutes "chattel paper" or an "instrument" or an "account". The sole
17
executed counterpart of each Assigned Lease is in the possession of Purchaser
and has been properly endorsed through the proper chain of title to Purchaser.
(z) The Sellers have duly fulfilled all material obligations on their
part to be fulfilled under, or in connection with, each Assigned Lease and have
done nothing to materially impair the rights of Purchaser in such Assigned
Lease, the Equipment Collateral, the Scheduled Payments or any income or
proceeds with respect thereto.
(aa) Except as otherwise reflected in the Lease Schedules, no Assigned
Lease has been amended prior to the Closing Date such that the amount of any
Scheduled Payment or the aggregate Scheduled Payments have been decreased, or
any other obligations of the Obligor under the Assigned Lease have been
diminished;
(ab) No proceedings or investigations are pending or have been
threatened before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality asserting the invalidity of any
Assigned Lease, seeking to prevent payment and performance of any Assigned
Lease, or seeking any determination or ruling that might adversely and
materially affect the validity or enforceability of any Assigned Lease.
(ac) No Obligor is subject to bankruptcy or other insolvency
proceedings.
(ad) Each Obligor is a corporation, partnership or unincorporated
business association, no item of Equipment Collateral has been repossessed and,
to the best of Sellers' and Avco's knowledge, no Obligor is using the related
Equipment Collateral for personal, family or household purposes.
(ae) Each Obligor's billing address is in the United States, and each
item of Equipment Collateral relating to a Assigned Lease is maintained in the
United States, and no Equipment Collateral is permitted to be maintained outside
the United States.
(af) All payments under each Assigned Lease are required to be made in
United States dollars.
(ag) At least 65% of the Assigned Leases conform, in all material
respects, to one of the forms of leases set forth as Exhibit "G" hereto.
(ah) No one Obligor (including its affiliates) as of the date hereof
has, or as of the Closing Date will have, Assigned Leases with an aggregate
Discounted Assigned Lease Principal Balance plus an aggregate Discounted Booked
Residual Value that exceeds the greater of (i) $200,000 or (ii) 0.5% of the
Aggregate Discounted Assigned Lease Value.
18
(ai) The origination and collection practices used by Sellers with
respect to each Assigned Lease have been in all respects legal, proper, prudent
and customary in equipment financing and servicing business;
(aj) No Assigned Lease permits the early termination or prepayment
thereof at the option of the Obligor for an amount that is less than the
Prepayment Amount related to such Assigned Lease.
(ak) No Assigned Lease is the subject of litigation.
(al) The Assigned Leases were originated or purchased by the Sellers
in the ordinary course of its business.
(am) Each Obligor has accepted the Equipment Collateral under its
Assigned Lease therefore as being in good working condition and to the best of
the Sellers' and Avco's knowledge has had adequate opportunity to test and
inspect, has not notified the Sellers of any defects therein and the Sellers
have no knowledge of any material Equipment Collateral malfunction or other
claim by the Obligor with respect to the material performance of the Equipment
Collateral under the Assigned Lease.
(an) No Assigned Lease is a "consumer lease", as defined in the
applicable UCC.
(ao) No Assigned Lease was originated nor was it subject to the laws
of any jurisdiction the laws of which would make unlawful the assignment of such
document under this Agreement.
(ap) With respect to all Assigned Leases, no Obligor is a Person
involved in the business of selling goods of the same kind as the Equipment
Collateral subject to such Assigned Lease.
(aq) With respect to all Assigned Leases, the sum of the aggregate
Discounted Assigned Lease Principal Balance plus the aggregate Discounted Booked
Residual Value of all Assigned Leases with Obligors (i) in the state of
California shall not exceed 50% of the Aggregate Discounted Assigned Lease Value
and (ii) shall not exceed 10% of the Aggregate Discounted Assigned Lease Value
in any other state.
(ar) The Sellers and Avco warrant that each Assigned Lease is a True
Lease or a Finance Lease and as of the Closing Date, (i) Sellers have obtained
appropriate UCC financing statements on Form UCC-1 executed by the Obligor of
such Assigned Lease where the Original Cost of Equipment for the Equipment
Collateral under such Assigned Lease is in excess of $10,000, which UCC
financing statements have been filed in all applicable jurisdictions, and (ii)
Purchaser will have a first priority, perfected security interest in the
Assigned Leases and the related Equipment Collateral with an Original Equipment
Cost over $10,000, and the Sellers and Avco warrant that they will defend
19
the security interest of Purchaser to such Assigned Leases and Equipment
Collateral against all Persons, claims and demands.
(as) As of the Closing Date, no Obligor will have been released, in
whole or in part, from any of its obligations in respect of any such Assigned
Lease; no such Assigned Lease will have been satisfied, cancelled, extended or
subordinated, in whole or in part, or rescinded, and no Equipment Collateral
covered by any such Assigned Lease will have been released from such Assigned
Lease, in whole or in part, nor will any instrument have been executed that
would effect any such satisfaction, release, cancellation, subordination or
rescission.
(at) With respect to each Assigned Lease, any payments made by the
Obligor of the related Equipment Collateral in connection with any maintenance
or any other obligations of the Sellers, or the vendor with respect to such
Equipment Collateral are not part of the Assigned Lease and are shown separately
on the invoice.
(au) To the best of the Sellers' and Avco's knowledge, no item of
Equipment Collateral has been relocated from the jurisdiction set forth in the
Assigned Lease or, if the Borrower has knowledge of any such relocation and the
item of Equipment Collateral has an Original Equipment Collateral Cost in excess
of $10,000, all UCC filings necessary to continue Purchaser's first priority
perfected security interest in such Equipment Collateral have been made.
(av) No Assigned Lease is a Defaulted Assigned Lease.
(aw) With the exception of the years 1993 and 1994, the level of
charge-offs and delinquencies on the Sellers' portfolio of Leases as shown in
Schedule 4.9 were calculated in accordance with the Sellers' policies and
procedures and are true, complete and accurate in all material respects. As of
December 31, 1994, all charge-offs which should have been taken on the portfolio
in accordance with Sellers' policies and procedures have been taken and the
level of charge-offs shown in Schedule 4.9 for such year is true, complete and
accurate in all material respects. Sellers' policies and procedures (i) dictate
charging off at a point in time no later than when any amount payable under such
Assigned Lease has not been paid in full for more than 180 days and (ii)
consider Sellers' delinquent if any amount payable thereunder has not been paid
in full when due.
(ax) The Lease Files are true and complete and all statements of fact
to be contained in the Assigned Lease or the Lease Files are true and correct
(including but not limited to the description and serial number of equipment,
location of equipment, prepayment amounts, number of payments due, and dates of
payments), with the terms of the Assigned Leases as stated in such Assigned
Lease or Lease Files and representations contained therein being in all respects
true, correct and substantially complete.
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(ay) All of the Assigned Leases were originated or acquired by the
Sellers in the ordinary course of the Sellers' businesses.
(az) All of the Assigned Leases are evidenced by written agreements,
and there are no understandings, agreements, undertakings or arrangements
between either of the Sellers and the Obligors under such Assigned Leases which
are not set forth in such Assigned Leases and the related Lease File.
(ba) No payments required to be made under the Assigned Leases have
been paid, at the request or suggestion of the Sellers, more than sixty (60)
days in advance of the due dates thereof.
(bb) Neither of the Sellers are currently in default with regard to
payment of any sales, personal property, intangible, stamp or other taxes or
fees due or owing to the state of origination of the Assigned Leases, or any
political subdivision thereof.
(bc) No Assigned Lease is in the possession of any attorney for
collection or a collection agency; no Assigned Lease and/or Equipment Collateral
subject thereof is the subject of any actual or threatened bankruptcy or other
legal or administrative proceedings, whether either of the Sellers are defendant
or plaintiff, including any stage of litigation commencing with any written
notification from any attorney or agency advising of any legal problem, through
final judgment.
(bd) To Sellers' and AVCO's knowledge, all Assigned Leases have had
payments made only by the party who is the named Obligor thereunder.
(be) No more than one percent (1%) of the outstanding net lease
receivables of the Assigned Leases shall by their terms constitute "sale-
leasebacks" or "inventory financing transactions" with the Obligors.
(bf) To Sellers' and AVCO's knowledge, no Assigned Lease or related
transaction is the subject of a fraudulent scheme by the Obligor, any guarantor
thereof, or by the supplier of the Equipment Collateral.
(bg) No Obligor of any Assigned Lease is an Affiliate of either of the
Sellers or AVCO.
(bh) No Assigned Lease has been amended, altered or modified for
negative credit reasons or in any other way that would individually or in the
aggregate materially adversely affect Purchaser's rights thereunder or would
prohibit payment by the Obligor to Purchaser, and no material provision of which
has been waived except in writing, copies of which are attached to such Assigned
Lease.
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(bi) No Assigned Lease contractually provides for a final payment in
excess of 25% of the original purchase price of the related Equipment
Collateral;
(bj) No Assigned Lease relates to an equipment upgrade under an
existing Assigned Lease unless additional schedules thereto have been attached
to such Assigned Lease;
(bk) Each Assigned Lease contains enforceable provisions sufficient to
enable the Sellers to realize against the Equipment Collateral related thereto;
(bl) No Assigned Lease constitutes a "consumer lease" within the
meaning of Article 2A of the UCC in any jurisdiction where Article 2A has been
adopted and governs the construction thereof;
(bm) The Bulk Purchase Contracts and all accompanying documents are
complete and authentic and all signatures thereon are genuine.
(bn) The Sellers hold good and indefeasible title to, and are the
sole owners of, the Bulk Purchase Contracts, subject to no Lien, except for the
Lien created by this Agreement, and upon the Closing, Purchaser will hold good
and indefeasible title to, and be the sole owner of, the Bulk Purchase
Contracts, subject to no Lien, to the extent legally permissible.
(bo) Each Bulk Purchase Agreement is a legal, valid and binding
obligation of the parties thereto, is enforceable in accordance with its terms
(except as may be limited by applicable insolvency, bankruptcy, moratorium,
reorganization, or other similar laws affecting enforceability of creditors'
rights generally and the availability of equitable remedies as they relate to
the Obligor) and is in full force and effect and no Bulk Purchase Agreement has
been satisfied, subordinated or rescinded.
(bp) The Bulk Purchase Contracts are true and complete and all
statements of fact to be contained in the Bulk Purchase Contracts are true and
correct (including but not limited to the description and serial number of
equipment, location of equipment, payment amounts, number of payments due, and
dates of payments), with the terms of the Bulk Purchase Contracts as stated in
such Bulk Purchase Contracts and representations contained therein being in all
respects true, correct and substantially complete.
(bq) The assignment to Purchaser of the Bulk Purchase Agreements will
not violate the terms or provisions of any such Bulk Purchase Agreement or any
other agreement to which the Sellers then are a party or by which either is
bound.
(br) Any party executing a Bulk Purchase Agreement on behalf of the
Sellers had the legal capacity to execute such Bulk
22
Purchase Agreement and, to the best of Sellers' and Avco's knowledge, all other
parties to the Bulk Purchase Agreement had the legal capacity to execute such
Bulk Purchase Agreement.
(bs) The Sellers have duly fulfilled all material obligations on
their part to be fulfilled under, or in connection with, each Bulk Purchase
Agreement and have done nothing to materially impair the rights of Purchaser
under such Bulk Purchase Agreement.
(bt) No proceedings or investigations are pending or have been
threatened before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality asserting the invalidity of any Bulk
Purchase Agreement, seeking to prevent performance under any Bulk Purchase
Agreement, or seeking any determination or ruling that might adversely and
materially affect the validity or enforceability of any Bulk Purchase Agreement.
(bu) The remaining installments on the Assigned Leases outstanding at
December 31, 1990, 1991, 1992, 1993, 1994, 1995 and July 31, 1996 are set forth
on Schedule 4.9(bu) hereto.
(bv) The average balance of Assigned Leases originated during the
years ended December 31, 1992, 1993, 1994, 1995 and the seven months ended July
31, 1996 are set forth on Schedule 4.9(bv) hereto.
(bw) The average balances of the Assigned Leases outstanding as of
December 31, 1992, 1993, 1994, 1995 and July 31, 1996 are set forth on Schedule
4.9(bw) hereto.
(bx) The vendors that the Sellers were doing business with as of July
31, 1996 are set forth on Schedule 4.9(bx) hereto, together with the aggregate
balance of Assigned Leases attributable to each as of such date.
(by) The percentage of Assigned Leases outstanding in each state at
July 31, 1996 is stated on Schedule 4.9(by) hereto.
(bz) The dollar amount and percentage of Assigned Leases outstanding
by type of Equipment Collateral at July 31, 1996 is set forth on Schedule
4.9(bz) hereto.
(ca) The total revenue as a percentage of average net Assigned Leases
at December 31, 1992, 1993, 1994 and 1995 and July 31, 1996 is set forth on
Schedule 4.9(ca) hereto.
(cb) The total service fees and interest on force-placed insurance
policies for the Assigned Leases for years ended December 31, 1992, 1993, 1994
and 1995 and for the seven months ended July 31, 1996 are set forth on Schedule
4.9(cb) hereto.
23
4.10 The Sellers Obligations Under the Assumed Liabilities. With
-----------------------------------------------------
respect to the Assumed Liabilities:
(a) The Sellers are not in default with respect to, or delinquent in
the performance or payment of, any of the Assumed Liabilities and have made all
payments and performed all obligations with respect thereto as and when due;
(b) No condition, event, state of facts or circumstance exists
which, with notice or lapse of time or both, would constitute an event of
default by either of the Sellers with respect to such Assumed Liabilities;
(c) All approved, but unclosed Leases on which documentation has been
forwarded to the Obligor, but has not been returned are set forth on the
Exception Schedule together with the name and address of the prospective
Obligor, amount of approved credit, nature of equipment and projected time prior
to closing; and
(d) All approved, but unclosed Leases on which documentation has not
been prepared and forwarded to the Obligor are set forth on the Exception
Schedule together with the name and address of the prospective Obligor, amount
of approved credit, nature of equipment and projected time prior to closing.
4.11 Material Contracts.
------------------
(a) Schedule 1.1(j) hereto accurately identifies each Contract with
respect to the Assets or the Business to which either of the Sellers are a
party, which is being assigned to Purchaser hereunder and which involves the
payment to or from either of the Sellers of amounts in excess of Ten Thousand
Dollars ($10,000.00) per year or the term of which is greater than one year
(collectively, the "Material Contracts");
(b) All of the Material Contracts are valid, binding and enforceable
in accordance with their respective terms, subject to the Enforceability
Exceptions, and there does not exist under any Material Contract any default on
the part of the Sellers or any event which with notice or lapse of time or both
would constitute such a default. Neither of the Sellers has received from any
other party to any Material Contract any written notice of, and neither the
Sellers nor AVCO have any knowledge of, any default on the part of such other
party or any event which with the notice or lapse of time or both would
constitute such a default. No Material Contract has been modified or amended in
writing except as described in instruments attached to Schedule 1.1 (j) hereto;
(c) Neither of the Sellers has received any notice or communication
from any party to a Material Contract relating to such party's intent to modify,
terminate or fail to renew the arrangements and relationships set forth therein;
24
(d) Except as set forth on Schedule 1.1(j) hereto, the Sellers are
not a party to or subject to:
(i) any agency, dealer, sales representative, resale or similar
agreement; or
(ii) any agreement, contract or commitment that substantially
limits the freedom of the Sellers to compete in any line of business or
with any Person or in any area, or to own, operate, sell, transfer, pledge
or otherwise dispose of or encumber any Asset or which would so limit the
freedom of Purchaser after the Closing Date.
(e) From and after the Closing, Purchaser shall be entitled to all of
the benefits of each of the Material Contracts without the necessity of any
consent, authorization or agreement from or with any Person, except insofar as
Purchaser's entitlement to such benefits have been jeopardized by Purchaser's
actions or inactions.
4.12 Intangible Property. Each of the Intangible Assets owned by the
-------------------
Sellers are owned by the Sellers free and clear of any and all Liens, except the
Permitted Exceptions, and no other Person has any claim of ownership or rights
with respect thereto. The Sellers have adequate licenses or other valid rights
to use all of the Intangible Assets which it does not own and which are material
to the conduct of the Business as presently conducted. To the best of Sellers'
knowledge, the Sellers' use of the Intangible Assets does not conflict with,
infringe upon, violate or interfere with any intellectual property rights of any
other Person.
4.13 Taxes.
-----
(a) Each of the Sellers, or the affiliated, combined or unitary tax
group of which each of the Sellers is or was a member, as the case may be
(collectively, the "Tax Affiliates") has (i) timely paid all taxes that are due
and payable with respect to the Sellers and relating to the Business and the
Assets, except for taxes, the nonpayment of which, would not (A) result in a
Lien on any of the Assets after the Closing Date, (B) have a Material Adverse
Effect, or (C) result in Purchaser becoming liable therefor, and (ii)
established (up to and including the Closing Date will establish) reserves that
are adequate for the payment of all taxes not yet due and payable with respect
to the results of operations up to and including the Closing Date, the
nonpayment of which would (A) result in a Lien on any of the Assets after the
Closing Date, (B) have a Material Adverse Effect, or (C) result in Purchaser
becoming liable therefor;
(b) As it relates to the Business and the Assets, the Sellers (or a
Tax Affiliate on behalf of the Sellers) have complied with all applicable laws,
rules and regulations relating to the payment and withholding of taxes relating
to Employee
25
wages, salaries and other compensation and has timely withheld and paid over to
the proper governmental authorities all amounts required to be so withheld and
paid over for all periods under all applicable laws;
(c) Except as otherwise disclosed on Schedule 4.13 none of the Assets
constitutes property that Purchaser or any of its affiliates are or will be
required to treat as being owned by another person pursuant to the provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Return Act of 1986, or is "tax-
exempt use property" within the meaning of Section 168(h)(1) of the Code;
(d) Neither of the Sellers are a "foreign person" within the meaning
of Section 1445 of the Code; and
(e) There is no contract, agreement, plan or arrangement covering any
Person that, individually or collectively, could give rise to the payment of any
amount that would not be deductible by Purchaser by reason of Section 28OG of
the Code.
4.14 Employees and Employee Benefits.
-------------------------------
(a) (i) As it relates to the Business, neither of the Sellers are
engaged in any unfair labor practice and is not in violation of any applicable
laws respecting employment and employment practices, terms and conditions of
employment, or wages and hours which would have a Material Adverse Effect;
(ii) There is no unfair labor practice complaint against either
of the Sellers actually pending or threatened before the National Labor
Relations Board or any similar state authority, as it relates to the
Business which would have a Material Adverse Effect;
(iii) There is no strike, labor dispute, slowdown, or stoppage
actually pending or threatened against either of the Sellers, as it relates
to the Business which would have a Material Adverse Effect;
(iv) No union representation question exists respecting the
employees of either of the Sellers, no union organizing activities are
taking place and neither of the Sellers are a party to any collective
bargaining or union agreement;
(v) No grievance that might have a Material Adverse Effect on
the Assets, nor any arbitration proceeding arising out of or under any
collective bargaining agreement, as it relates to the Assets or the
Business, is pending and no claims therefor exist; and
26
(vi) Neither of the Sellers has experienced any material work
stoppage or other material labor difficulty, as it relates to the Business;
(b) The Exception Schedule lists each employee benefit plan as
defined in Section 3(3) of ERISA of each of the Sellers covering any employee or
former employee of the Business (an "Employee Benefit Plan"). The Exception
Schedule hereto lists each employment or severance contract or arrangement, each
plan or arrangement providing for insurance coverage, severance, termination or
similar coverage and all written compensation policies and practices maintained
by either of the Sellers covering any employee or former employee of the
Business and that is not an Employee Benefit Plan (a "Benefit Arrangement");
(c) There is no unfunded prior service cost with respect to any bonus,
deferred compensation, pension, profit-sharing, retirement, or other employee
benefit or fringe benefit plans, whether formal or informal, maintained by
either of the Sellers and relating to the Business. Each bonus, deferred
compensation, pension, profit sharing, retirement, and other employee benefit or
fringe benefit plans, whether formal or informal, maintained by either the
Sellers and relating to the Business conforms to all applicable requirements of
the Employees Retirement Income Security Act of 1974;
(d) Each Employee Benefit Plan is in compliance with the applicable
requirements of ERISA and the Code; and
(e) The Sellers have each provided adequate accruals for all employee
benefits relating to the Business payable as of the Closing Date.
4.15 Litigation.
----------
(a) There is no Legal Proceeding pending or, to the knowledge of the
Sellers, threatened:
(i) against either of the Sellers in connection with the
operation of the Business or in respect of any of the Assets;
(ii) that seeks to enjoin or obtain damages in respect of the
consummation of the transactions contemplated by this Agreement and the
Transaction Documents; or
(iii) that questions the validity of this Agreement, any of the
Transaction Documents or any action taken or to be taken by either of the
Sellers in connection with the consummation of the transactions
contemplated hereby or thereby;
(b) Neither of the Sellers is in default under or in breach or
violation of, nor, to their knowledge, is there any valid basis for any claim of
default by either of the Sellers
27
under, or breach or violation by either of the Sellers of, any contract,
commitment or restriction to which either of the Sellers is a party. To the
Sellers' and AVCO's knowledge, no other party is in default under or in breach
or violation of, nor is there any valid basis for any claim of default by any
other party under or any breach or violation by any other party of, any material
contract, commitment, or restriction to which either of the Sellers is bound and
which relates to the Business or the Assets.
4.16 Compliance with Law.
-------------------
(a) The Business, including, but not limited, to its leasing
activities, is currently operating in compliance with all applicable Laws and
Orders of Governmental Bodies, the failure to be in compliance with which would
have a Material Adverse Effect. The Sellers have neither received, nor know of
the issuance of, any notice of any violation or alleged violation of any
applicable Laws and Orders of Governmental Bodies, where the consequences of
such violation would have a Material Adverse Effect; and
(b) To the Sellers' knowledge, neither of the Sellers is under
investigation with respect to any violation of any Law, order or judgment
entered by any court, arbitrator or Governmental Body, applicable to the Assets
or the conduct of the Business.
4.17 Receivables. All of the Accounts Receivable reflected on the Initial
-----------
Balance Sheet have arisen from bona fide transactions in the ordinary course of
business consistent with past practice. To the Sellers' knowledge and except as
consistent with the Sellers' ordinary bad debt experience, all of the Accounts
Receivable are collectible in the ordinary course of business consistent with
past practice.
4.18 Reacquired Equipment.
--------------------
(a) The reacquired equipment of the Business reflected on the Initial
Balance Sheet is of a quality sufficient for its use in the ordinary course of
the Business consistent with past practice; and
(b) The reacquired equipment of the Business set forth in the Initial
Balance Sheet was properly stated therein at the lesser of cost or fair market
value, determined in accordance with GAAP. Since July 31, 1996, all such
reacquired equipment has been maintained in the ordinary course of business, and
is owned free and clear of all Liens, except the Permitted Exceptions.
4.19 Environmental Matters.
---------------------
(a) There are no pending or, to the best of the Sellers' or AVCO's
knowledge, threatened claims, suits or
28
proceedings arising out of or related to any noncompliance with any
environmental law in connection with the Business or the ownership or use of the
Assets, including, without limitation, statutes related to air quality, water
quality, solid waste management, hazardous or toxic substances or protection of
health or the environment, including, but not limited to, the Federal
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. 136 et seq. as amended),
-- ---
the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq. as amended), the
-- ---
Resource Conservation and Recovery Act (42 U.S.C. 6901 et seq. as amended), the
-- ---
Comprehensive Environmental Response Compensation and Liability Act ("CERCLA")
(42 U.S.C. 9601 et seq. as amended), the Clean Air Act (42 U.S.C. 7401 et seq.
-- --- -- ---
as amended), the Toxic Substances Control Act (15 U.S.C. 2601 et seq. as
-- ---
amended), and any similar state or local laws, rules and regulations
(collectively, "Environmental Laws"). The Sellers has kept all records and made
all filings required by applicable Law with respect to emissions into the
environment (including solids, liquids and gases) and the proper disposal of
such materials (including solid waste materials); and
(b) Neither of the Sellers is in violation of any Environmental Laws
with respect to the Assets or the conduct of the Business.
4.20 Brokers. Neither of the Sellers has engaged any Person to act
-------
directly or indirectly as a broker, finder or financial advisor for the Sellers
or AVCO in connection with the negotiations relating to or the transactions
contemplated by this Agreement, and no Person is entitled to any fee, commission
or like payment in respect thereof based in any way by virtue of any agreement,
arrangement or understanding made by or on behalf of the Sellers or AVCO.
4.21 Additional Employee Information. The Exception Schedule sets forth a
-------------------------------
list, complete and accurate in all respects, of the names and current annual
salary or hourly rates or other basis for compensation for all present employees
or agents (excluding directors and officers) employed solely in the Business
together with a statement of the full amount of any bonuses, commissions, profit
sharing or other remuneration paid directly to each such person during the month
ended July 31, 1996, or payable to each such person in the future and the basis
therefor;
4.22 Section 341(f)(2). Neither of the Sellers has, with regard to any
-----------------
property or assets held, acquired or to be acquired by it, at any time, filed a
consent to the application of Section 341(f)(2) of the Code, as amended, nor
will any such consent be filed before the Closing.
4.23 Foreign Corrupt Practices Act. Neither of the Sellers has made,
-----------------------------
offered or agreed to offer anything of value to any government official,
political party or candidate for political office (or any person that either of
the Sellers knows or has reason to know will offer anything of value to any such
person)
29
in violation of the Foreign Corrupt Practices Act of 1977, as amended.
4.24 Disclosure. No statements by the Sellers or AVCO contained in this
----------
Agreement and the Schedules and Exhibits attached hereto, any other Transaction
Document or any written statement or certificate furnished or to be furnished
pursuant hereto or in connection with the transactions contemplated hereby and
thereby (when read together) contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made.
ARTICLE V
COVENANTS OF THE SELLERS AND AVCO
From and after the date hereof and until the Closing, the Sellers and AVCO
hereby jointly and severally covenant and agree with Purchaser that:
5.1 Cooperation.
-----------
(a) The Sellers and AVCO shall use their respective reasonable best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with the terms and conditions hereof; provided, that neither the
Sellers nor Avco shall be liable for Purchaser's failure to obtain the
Financing; and
(b) At the request of Purchaser on a case-by-case basis, the Sellers
shall execute and deliver instruments sufficient to constitute and appoint,
effective as of the Closing Date, Purchaser and its successors and assigns as
the true and lawful attorney of the Sellers with full power of substitution in
the name of Purchaser or in the name of the Sellers and for the benefit of
Purchaser:
(i) to collect for the account of Purchaser any Assets as Purchaser
may request; and
(ii) to institute and prosecute all proceedings which Purchaser may in
its sole discretion deem proper in order to assert or enforce any right,
title or interest in, to or under the Assets, and to defend or compromise
any and all actions, suits or proceedings in respect of such Assets or the
Assumed Liabilities.
5.2 Access to Documents; Opportunity to Ask Questions. The Sellers and
-------------------------------------------------
AVCO shall provide Purchaser with such information as Purchaser from time to
time reasonably may request with respect to the Business, and prior to Closing
shall permit Purchaser and any of the directors, officers, employees, counsel,
representatives, accountants and auditors (collectively, the
30
"Purchaser Representatives") reasonable access, during normal business hours and
upon reasonable prior notice, to the properties, corporate records and books of
accounts of the Business, as Purchaser from time to time reasonably may request.
Until the Closing Date, all information obtained by Purchaser, and the manner in
which it is obtained, in connection with the transactions contemplated by this
Agreement shall be subject to the terms regarding confidentiality of the letter
agreement, dated July 17, 1996, between the Sellers and Purchaser (the "Letter
Agreement"). No investigation pursuant to this Section shall affect any
representation or warranty given by the Sellers in this Agreement.
5.3 Conduct of Business.
-------------------
(a) The Sellers and AVCO shall use their respective best efforts to
cause the Business to be operated in compliance with applicable Laws and Orders
of Governmental Bodies. The Sellers and AVCO shall cause the Business to be
operated in the ordinary course consistent with past practice and use reasonable
efforts consistent with past practice to (i) preserve the present business
operations, organization and goodwill of the Business, (ii) keep available the
services of the present employees of the Business, (iii) preserve the present
relationships with persons having business dealings with the Business, (iv)
maintain all of the Assets in their current condition, normal wear and tear
excepted, and (v) maintain insurance in such amounts and of such kinds as is
comparable to that in effect on the date hereof (with insurers of substantially
the same or better financial condition); and
(b) Neither the Sellers nor AVCO shall do, or agree or commit to do,
any of the following:
(i) (A) increase the rate of compensation payable or to become
payable to any of the employees or agents of the Business other than in the
ordinary course of business, (B) amend in any material respect any bonus,
profit sharing, deferred compensation, pension, retirement or other similar
plan or arrangement to or in respect of any such employee or agent, other
than as may be required to maintain compliance with ERISA and/or the Code
or (C) enter into any new, or amend in any material any existing,
employment, severance or consulting agreement, sales agency, or other
Contract with respect to the performance of personal services for the
Business, other than as may be required to maintain compliance with ERISA
and/or the Code;
(ii) (A) incur or become subject to, or agree to incur or become
subject to, any obligation or liability (contingent or otherwise) relating
to the Business, except (1) normal trade or business obligations (including
Contracts) incurred in the ordinary course of business and consistent with
past practice and (2) obligations under Contracts listed on any Schedule to
this Agreement, (B)
31
sell, assign, transfer, convey, lease or otherwise dispose of any of the
Assets, other than in the ordinary course of business, (C) cancel or
compromise any debt or claim or waive or release any material right
relating to the Business or the Assets, except for adjustments or
settlements made in the ordinary course of business consistent with past
practice, or (D) acquire any assets relating to the Business other than in
the ordinary course of business; or
(iii) take any action that would cause any representation or
warranty contained in this Agreement not to be true and correct as of the
Closing Date, as if made on the Closing Date.
5.4 Consents and Conditions; Assignment of Assets. The Sellers and AVCO
---------------------------------------------
shall use their respective reasonable best efforts to obtain all Consents to
Assignment and all other approvals, consents or waivers from all Persons,
including, without limitation, Governmental Bodies, necessary to assign to
Purchaser all of the Sellers' interest in the Assets or any claim, right or
benefit arising thereunder or resulting therefrom (each, an "Interest") as soon
as practicable.
5.5 Notices of Certain Events. The Sellers and AVCO shall promptly notify
-------------------------
Purchaser of:
(a) any notice or other communication (i) alleging that the consent of
any person is or may be required in connection with this Agreement, or (ii)
from any person to the effect that such person intends not to continue to
conduct business with Purchaser (as successor to the Business) after the
Closing;
(b) any notice or other communication from any Government Body in
connection with the transactions contemplated by this Agreement; and
(c) any action, suits, claims, investigations or proceedings commenced
or, to its knowledge, threatened against, relating to or involving or otherwise
affecting the Sellers or the Business that relate to the consummation of the
transactions contemplated by this Agreement.
ARTICLE VI
COVENANTS OF PURCHASER
From and after the date hereof, and until the Closing Date, Purchaser
hereby covenants and agrees with the Sellers that:
6.1 Cooperation. Purchaser shall use its best reasonable efforts to cause
-----------
the consummation of the transactions contemplated hereby in accordance with the
terms and conditions hereof.
32
6.2 Confidentiality. Purchaser shall comply with the terms regarding
---------------
confidentiality set forth in the Letter Agreement.
6.3 Consents and Conditions. Purchaser shall use its reasonable best
-----------------------
efforts to obtain all approvals, consents or waivers from Persons, including,
without limitation, Governmental Bodies, necessary to assign to Purchaser all of
the Sellers' interest in the Assets or any claim, right or benefit arising
thereunder or resulting therefrom as soon as practicable.
6.4 No Action. Purchaser shall not take, or agree to take, any action
---------
that would cause any representation or warranty contained in this Agreement not
to be true and correct as of the Closing Date, as if made on the Closing Date.
6.5 Notices of Certain Events. The Purchaser shall promptly notify the
-------------------------
Sellers and AVCO of:
(a) any notice or other communication alleging that the consent of any
person is or may be required in connection with this Agreement;
(b) any notice or other communication from any Government Body in
connection with the transactions contemplated by this Agreement; and
(c) any action, suits, claims, investigations or proceedings commenced
or, to its knowledge, threatened against, relating to or involving or otherwise
affecting the Purchaser that relate to the consummation of the transactions
contemplated by this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Subleases. The Sellers and Avco shall cause to be executed and
---------
delivered at the Closing a sublease (the "Irvine Sublease") substantially in the
form of Exhibit "C(1)" hereto, pursuant to which Purchaser will sublease from
the Sellers or their affiliate, Avco Financial Services Management Company, the
Irvine Real Property. Additionally, the Sellers and Avco shall cause to be
executed and delivered at the Closing a Consent to Assignment for the assignment
to Purchaser of each of the following leases: (i) that certain lease regarding
the real property located at 000 Xxxxxx Xxxx, Xxxxx 000, Xxxx 00, Xxxxxxxx,
Xxxxxxxxxx and dated as of September 9, 1993 by and between Diablo Partnership
and Avco Financial Services of Southern California, Inc. (the "Danville Lease"),
and (ii) that certain lease regarding the real property located at 0000 Xxxxxxx
Xxxx Xxxxx, Xxxxx 000, Xxxxxx Xxxxxxxx, Xxxxxxx, Xxxxxxx and dated as of
November 30, 1992, and amended as of April 22, 1994, by and between Xxxxx
Equity, Inc. and Avco Leasing Services, Inc. (the "Atlanta Lease"). In the
event any such Consent to
33
Assignment cannot be obtained, the Sellers shall cause to be executed and
delivered at the Closing, as applicable, subleases (together with the Irvine
Sublease, the "Sellers' Subleases"), substantially in the forms of Exhibit
"C(2)" and "C(3)" hereto, pursuant to which Purchaser will sublease from the
Sellers the office space currently leased by the Sellers at each of the
locations subject to the Danville Lease and the Atlanta Lease, respectively.
7.2 Contributions, Taxes, etc. The Sellers shall certify to Purchaser
--------------------------
that as of the Closing: (a) no contributions or payments relating to employees
of the Sellers(including any interest or penalties) are due or payable by the
Sellers to any Governmental Body (or if due or payable, have been adequately
provided for by the Sellers); and (b) any sales or other taxes payable to any
local authority by Sellers (including any interest or penalties) in respect of
the Assets or the Business have been or will be paid by Sellers (collectively,
the "Sellers' Certificates").
7.3 UCC Search and Filings. Sellers, at their own cost and expense, shall
----------------------
conduct a certified UCC filing search in all applicable jurisdictions with
respect to the Sellers, AVCO and the Assets and shall provide Purchaser with the
result of such search no later than ten (10) days prior to the Closing. Any
claim which does not constitute a Permitted Exception or an Assumed Liability
and which is secured in whole or in part by the Assets shall be discharged at
Closing from the Closing Cash Payment and any amount so paid shall be deemed
payment of a portion of the Purchase Price. Notwithstanding the foregoing,
Sellers, shall at their own cost and expense file (i) immediately upon the
Closing, UCC-2 financing statements in favor of Purchaser with respect to each
of the Assigned Leases with an Original Equipment Cost in excess of ten thousand
dollars ($10,000) and for which a UCC-1 financing statement is in effect, which
statements will assign to Purchaser all of Sellers' rights under UCC-1 financing
statements with respect to such Assigned Leases, (ii) a UCC-1 financing
statement executed by Sellers as debtors/sellers and Purchaser as secured
party/purchaser, which financing statement will constitute a "chattel paper"
filing under Article IX of the UCC and will be made for the purpose of
perfecting the sale of the Assets from debtors/sellers to secured
party/purchasers hereunder, and which will name the Assigned Leases, the related
Equipment Collateral and the income and proceeds therefrom as collateral for the
Financing and the lender with respect to the Financing as assignee from secured
party/purchaser, and (iii) all UCC financing statements pursuant to Section
11.1(a)(i) herein.
7.4 Employees. The parties hereto acknowledge and agree that, the hiring
---------
of any of the current employees and working solely in the Business by Purchaser
shall be determined by Purchaser in the sole exercise of its discretion; and
such parties further acknowledge and agree that Purchaser has no obligations to
provide continuing employment to the foregoing
34
under any circumstances. Each of AVCO and the Sellers jointly and severally
agree to indemnify and hold Purchaser harmless against any loss, liability, cost
or expense which is paid or incurred by Purchaser as a result of any claims by
any current or former employees of the Sellers resulting from their termination
as of the result of the Sellers' sale of the Assets.
7.5 Covenant Not To Compete. As additional consideration for the purchase
-----------------------
by Purchaser of the Assets, each of the Sellers, AVCO, Textron, Inc. ("Textron")
and Textron Financial Corporation ("TFC"), shall execute and deliver at the
Closing an agreement, substantially in the form of Exhibit "D" hereto (the
"Covenant Not To Compete").
7.6 Administrative Services Agreement. At the Closing, each of Avco
---------------------------------
Financial Services Management Company, Newport Management Corporation and
Purchaser shall execute and deliver an administrative services agreement,
substantially in the form of Exhibit "E" hereto at such rate of compensation as
shall be mutually agreed upon by Purchaser and Avco Financial Management
Services Company and Newport Management Corporation (the "Administrative
Services Agreement").
7.7 HSR Act Compliance. Each party hereto hereby agrees with each other
------------------
party hereto that, with respect to each reportable transaction to which it is a
party, each shall, as soon as reasonably practicable, take all action (to the
extent not previously taken) necessary in order to file with the Federal Trade
Commission and the Department of Justice all filings, reports and other
information required under the HSR Act in order to commence the running of the
waiting period thereunder, to continue the running of said waiting period
(including any extensions) and prevent or minimize any tolling thereof, to cause
such waiting period to expire without enforcement action, to seek early
termination and to provide to each other such cooperation as may be reasonably
necessary in order to cause such filings and reports to be prepared and duly
filed and all waiting periods to expire.
ARTICLE VIII
CONDITIONS TO CLOSING BY PURCHASER
8.1 Conditions to Closing. Each and every obligation of Purchaser under
---------------------
this Agreement to be performed by it on or before the Closing shall be subject
to the satisfaction, on or before the Closing (or such earlier date as may be
specified herein), of each of the following conditions, unless otherwise waived
in writing by Purchaser:
(a) The Sellers shall have performed, complied with and fulfilled in
all material respects all agreements, obligations and conditions required by
this Agreement to be performed, complied with or fulfilled by such parties on
or prior to the Closing including, without limitation, the delivery of all
35
items required to be delivered pursuant to Section 10.2(b) hereof; each
representation and warranty of the Sellers contained in this Agreement, in any
other Transaction Document or otherwise made in connection with the transactions
contemplated herein (including, without limitation any financial statement,
deed, certificate or schedule) shall be true and correct on and as of the
Closing as if made again on the date of such Closing; and the Sellers shall have
delivered to Purchaser a Certificate of the President of the Sellers dated the
date of the Closing, certifying to each of the foregoing effects;
(b) Purchaser shall have received the Consents to Assignment;
(c) There shall be no litigation pending or threatened by any
regulatory body or private party in which:
(i) an injunction is or may be sought against the transactions
contemplated hereby, or
(ii) relief is or may be sought against any party hereto as a
result of this Agreement or the other Transaction Documents and in which,
in the good faith judgment of such party (relying on the advice of their
respective legal counsel), such regulatory body or private party has a
reasonable possibility of prevailing and such relief would have a material
adverse effect on such party.
(d) The Sellers and AVCO shall have delivered to Purchaser an opinion
of the General Counsel of AVCO dated the date of the Closing satisfactory to
Purchaser and containing the opinions set forth in Exhibit "F" hereto.
(e) Each Employee designated for hire by Purchaser following the
Closing shall have tendered his or her written resignation to the Sellers,
effective on or prior to the Closing Date, and Purchaser shall have entered into
employment arrangements on terms and conditions acceptable to Purchaser with
those Employees and independent contractors of the Sellers designated by
Purchaser;
(f) The Sellers, AVCO, Textron and TFC shall have entered into the
Covenant not to Compete as of the Closing Date;
(g) All waiting periods applicable to this Agreement and the
transactions contemplated hereby under this HSR Act shall have expired or been
waived;
(h) True and complete copies of the Contract Files shall have been
delivered to Purchaser or its designee as of the Closing;
(i) Purchaser shall have, no later than ten (10) Business Days from
the date of the Agreement, entered into a definitive agreement or agreements
with a lending institution
36
pursuant to which such lending institution will have agreed to provide Purchaser
with all funds required to consummate the transactions contemplated by this
Agreement, upon terms and conditions acceptable to Purchaser (the "Financing");
and
(j) Avco Financial Management Services Company and Newport Management
Corporation shall have entered into the Administrative Services Agreement.
ARTICLE IX
CONDITIONS TO CLOSING BY THE SELLERS
9.1 Conditions to Closing. Each and every obligation of the Sellers under
---------------------
this Agreement to be performed by it on or before the Closing shall be subject
to the satisfaction, on or before the Closing (or such earlier date as may be
specified herein), of each of the following conditions, unless otherwise waived
in writing by the Sellers:
(a) Purchaser shall have performed, complied with and fulfilled in all
material respects all agreements, obligations and conditions required by this
Agreement and the other Transaction Documents to be performed, complied with or
fulfilled by it on or prior to the Closing including, without limitation, the
delivery of all items required to be delivered pursuant to Section 10.2(a)
hereof and the representations and warranties of Purchaser contained in this
Agreement, in any other Transaction Document or otherwise made in connection
with the transactions contemplated herein shall be true and correct on and as of
the Closing as if made again on the date of such Closing; and Purchaser shall
have delivered to the Sellers a Certificate of an officer of Purchaser, dated
the date of the Closing, certifying to each of the foregoing effects;
(b) There shall be no litigation pending or threatened by any
regulatory body or private party in which (i) an injunction is or may be sought
against the transactions contemplated hereby, or (ii) relief is or may be sought
against any party hereto as a result of this Agreement or other Transaction
Documents and in which, in the good faith judgment of such party (relying on the
advice of their respective legal counsel), such regulatory body or private party
has a reasonable possibility of prevailing and such relief would have a material
adverse effect on such party; and
(c) All waiting periods applicable to this Agreement and the
transactions contemplated hereby under the HSR Act shall have expired or been
waived.
37
ARTICLE X
CLOSING
10.1 The Closing Date. The closing (the "Closing") will be held on a date
----------------
which is mutually satisfactory to the parties (but not later than the
Termination Date) (the "Closing Date"), at the offices of Freshman, Marantz,
Orlanski, Xxxxxx & Xxxxx, 0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000 Xxxx, Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000 (unless the parties hereto otherwise all agree in
writing), at which Closing the items referred to in Section 10.2 hereof (and in
any other provision herein requiring the execution, delivery, exchange or
payment of any item at the Closing) shall be executed, delivered, exchanged or
paid.
10.2 Items/Documents Delivered and Exchanged at the Closing. At the
------------------------------------------------------
Closing, subject to the other terms and conditions of this Agreement, the
following items and documents as well as any other appropriate items and
documents specified herein, properly executed, shall be delivered by and to the
appropriate parties:
(a) To be delivered by Purchaser:
(i) immediately available funds in the amount of the Closing
Cash Payment;
(ii) the Assumption of Liabilities;
(iii) the Covenant Not To Compete, as executed by Purchaser;
(iv) the Administrative Services Agreement, as executed by
Purchaser;
(v) resolutions of Purchaser's Board of Directors authorizing
the transactions referenced herein, certified by Purchaser's Secretary;
(vi) the certificate required by Section 9.1(a) hereof; and
(vii) Certificates and other documents as requested by Sellers
pursuant to Section 14.6 hereof.
(b) To be delivered by the Sellers:
(i) the Closing Cash Payment Adjustment Certificate;
(ii) the Settlement Certificate;
(iii) the Closing Calculation including the Asset Value
determined as of the Determination Date and a list of their Assigned Leases
as required by the Lease Schedules;
38
(iv) the Xxxx of Sale;
(v) originals (or as permitted by Section 1.1 copies) of all
Records;
(vi) the Sellers' Sublease of the Irvine Real Property, as
executed by all required parties;
(vii) the Consent to Assignment of the Danville Lease and the
Consent to Assignment of the Atlanta Lease, as executed by all required
parties, or, as applicable, the Sellers' Subleases with respect to the
Danville Lease and the Atlanta Lease;
(viii) the Covenant Not To Compete, executed by the Sellers;
(ix) resolutions of each of the Sellers' Boards of Directors
authorizing the transactions referenced herein, certified by their
respective Secretaries;
(x) the certificate required by Section 8 hereof;
(xi) the opinion of counsel required by Section 8 hereof;
(xii) True and complete Contract Files, to either the
Purchaser or to its designee; and
(xiii) the Sellers' Certificates;
(xiv) the UCC financing statements required by Section 7.3
hereof;
(xv) Certificates and other documents as requested by Purchaser
pursuant to Section 14.6 hereof.
(c) To be delivered by AVCO:
(i) the opinion of counsel required by Section 8 hereof;
(ii) the Covenant Not To Compete, as executed by AVCO;
(iii) resolutions of AVCO's Board of Directors authorizing the
transactions referenced herein, certified by AVCO's Secretary;
(d) To be delivered by Textron:
(i) the Covenant Not to Compete, as executed by Textron;
39
(e) To be delivered by TFC:
(i) the Covenant Not to Compete, as executed by TFC; and
(f) To be delivered by Avco Financial Services Management Company and
Newport Management Corporation:
(i) the Administration Services Agreement, executed by each of
them.
ARTICLE XI
ADDITIONAL COVENANTS
11.1 Further Assurances.
------------------
(a) From time to time after the Closing Date, the Sellers shall, at
their sole cost and expense:
(i) execute and deliver such other and further instruments of
sale, assignment, assumption, transfer and conveyance and take such other
and further action as Purchaser may reasonably request in order to vest in
Purchaser and put Purchaser in possession of the Assets as of the Closing
and to transfer to Purchaser as of the Closing any Assigned Leases or
Material Contracts and rights of the Sellers relating to the Assets and
assure to Purchaser the benefits thereof, including, but not limited to,
the filing of any and all UCC financing statements with respect to the
Assigned Leases that had an Original Equipment Cost in excess of ten
thousand dollars ($10,000), and to give effect, as of the Closing, to
Purchaser's assumption of the Assumed Liabilities; and
(ii) remit to Purchaser any payments, payoffs, or other monies or
credits with respect to the Assets received by the Sellers after the
Closing Date within ten (10) days of the receipt thereof; the Sellers and
AVCO hereby grant Purchaser the specific right to negotiate any checks on
account of the Assets which are collected or received by Purchaser or by
any servicer of the Assigned Leases and made payable to the Sellers or
AVCO;
(b) To the extent any of the approvals, consents or waivers referred
to in Sections 5.4 and 6.3 hereof have not been obtained by the Sellers as of
the Closing, the Sellers shall:
(i) cooperate with Purchaser in any reasonable and lawful
arrangements designed to provide the benefits of such Interest to
Purchaser; and
(ii) will take all reasonable action to enforce, at the request of
and for the account of Purchaser, any and
40
all rights of the Sellers arising from such Interest against such issuer or
grantor thereof or the other party or parties thereto (including the right
to elect to terminate such Interest in accordance with the terms thereof
upon the written advice of Purchaser); and
(c) To the extent that the Sellers enter into lawful arrangements
designed to provide the benefits of any Interest as set forth in clause (b)(i)
above, such Interest shall be deemed to have been assigned to Purchaser as of
the Closing for purposes of Section 1.1 hereof.
11.2 Public Announcements. Neither the Sellers or AVCO on the one hand
--------------------
(nor any of their affiliates) nor Purchaser on the other hand (nor any of its
affiliates) shall make any public statement from the date of this Agreement
forward, including, without limitation, any press release, with respect to this
Agreement and the transactions contemplated hereby, without the prior written
consent of the other party (which consent may not be unreasonably withheld),
except as may be required (a) by Law, (b) in the case of Purchaser, pursuant to
the obligations of ICII resulting from the inclusion of its common stock in the
Nasdaq National Market, and (c) in the case of AVCO, pursuant to its obligations
resulting from the listing of its debt securities on to New York Stock Exchange,
in any case as advised by counsel.
11.3 Joint Post-Closing Covenant of the Sellers and Purchaser. The Sellers
--------------------------------------------------------
and Purchaser jointly covenant and agree that, from and after the Closing Date,
the Sellers and Purchaser will cooperate with each other in defending or
prosecuting any action, suit, proceeding, investigation or audit of the other
relating to (a) the preparation and audit of the Sellers' and Purchaser's tax
returns, and (b) any audit of Purchaser and/or the Sellers with respect to the
sales, transfer and similar taxes imposed by the laws of any state, in each of
cases (a) and (b) relating to the transactions contemplated by this Agreement,
and in each such case at the sole cost and expense of the party requesting
cooperation or assistance, provided that such costs and expenses are reasonable.
In furtherance hereof, Purchaser and the Sellers further covenant and agree to
respond to all reasonable inquiries related to such matters and to provide, to
the extent possible, substantiation of transactions and to make available and
furnish appropriate documents and personnel in connection therewith.
11.4 Books and Records; Personnel. For a period of three years after the
----------------------------
Closing Date (or such longer period as may be required by any Governmental Body
or ongoing Legal Proceeding):
(a) Purchaser shall not dispose of or destroy any of the business
records and files of the Business. If Purchaser wishes to dispose of or destroy
such records and files after that time, it shall first give 30 days' prior
written notice to the Sellers and the Sellers shall have the right, at their
option and expense, upon prior written notice to Purchaser within such 30
41
day period, to take possession of the records and files within 60 days after the
date of the Sellers' notice to Purchaser;
(b) Purchaser shall allow the Sellers and its representatives access
to all business records and files of the Business which are transferred to
Purchaser in connection herewith, during regular business hours and upon
reasonable notice at Purchaser's principal place of business or at any location
where such records are stored, and the Sellers shall have the right, at its own
expense, to make copies of any such records and files; provided, however, that
--------
any such access or copying shall be had or done in such a manner so as not to
unreasonably interfere with the normal conduct of Purchaser's business or
operations. To the extent commercially practicable, Purchaser shall send copies
of such business records and files to the Sellers, at the expense of Purchaser,
by overnight courier or other delivery service, as reasonably requested by the
Sellers; and
(c) Purchaser shall make available to the Sellers, upon written
request (i) Purchaser's personnel to assist the Sellers in locating and
obtaining records and files maintained by Purchaser and (ii) any of Purchaser's
personnel previously in the Sellers' employ whose assistance or participation is
reasonably required by the Sellers in anticipation of, or preparation for,
existing or future litigation, arbitration, administrative proceeding, tax
return preparation or other matters in which the Sellers or any of its
affiliates is involved and which is related to the Business.
(d) Sellers shall make available to the Purchaser, upon written
request Sellers' personnel (i) to assist the Purchaser in locating and obtaining
records and files maintained by Sellers and (ii) whose assistance or
participation is reasonably required by the Purchaser in anticipation of, or
preparation for, existing or future litigation, arbitration, administrative
proceeding, tax return preparation or other matters in which the Purchaser or
any of its affiliates is involved and which is related to the Business.
(e) At the written request of Sellers, Purchaser shall produce and
make available to Sellers on a timely basis (i) computer reports related to the
Business which are necessary for the preparation of Sellers' Tax Returns and
(ii) computer reports related to the Business that may be needed from time to
time in connection with the audits of the Sellers' tax returns.
11.5 Mutual Assurances. The parties hereto agree:
-----------------
(a) to furnish upon request to each other such further information;
(b) to execute and deliver, and to use their reasonable efforts to
cause other persons to execute and deliver, all such further documents and
instruments; and
42
(c) to do such other acts and things or use their reasonable efforts
to cause to be done such other acts and things, all as they may at any time
reasonably request for the purpose of carrying out the intent of this Agreement
and the documents referred to herein.
11.6 Power of Attorney.
-----------------
(a) The Sellers make, constitute and appoint, irrevocably, Purchaser,
as their true and lawful attorney for it and in their names, place and stead,
and for its use and benefit, to ask, demand, xxx for, recover, collect and
receive all sums of money, debts, due accounts, interest, and demands whatsoever
as are now or shall hereafter become due, owing, payable or belonging to the
Sellers and do authorize Purchaser as their said attorney to have, use and take
all lawful attachment, distress or otherwise, and to compromise and agree for
the same, and in their names to make, seal and deliver all instruments necessary
for said premises; to bargain, contract for, agree, receive and take possession
of all deeds and other assurances, and also to bargain and agree for, buy, sell,
mortgage, hypothecate and in any and every way and manner deal in and with
choses in action and other property in possession or in action. The Sellers
further constitute and appoint Purchaser as their said attorney to execute,
sign, deliver and acknowledge such bills, bonds, notes, receipts, evidences of
debts, judgements and other debts, and such other instruments in writing of
whatever kinds and nature as may be necessary or proper for said premises.
(b) Sellers further grant Purchaser as their said attorney the right
to endorse their names on any check, note draft or xxxx of exchange representing
any payment upon any Asset, including, but not limited to, any Assigned Lease
and Bulk Purchase Agreement, giving and granting unto Purchaser as their said
attorney full power and authority to do and perform all and every act and thing
whatsoever requisite and necessary to be done for said premises, as fully to all
intents and purposes at it might or could do if personally present, with full
power of substitution or revocation, hereby ratifying and confirming all that
Purchaser as their said attorney, or its substitute or substitutes, shall
lawfully do or cause to be done by virtue of these presents. This is a power
coupled with an interest.
(c) Purchaser covenants to Sellers that it will only use the power of
attorney set forth hereunder in connection with the Assets purchased by
Purchaser pursuant to this Agreement.
(d) The parties hereto agree that the power of attorney set forth
hereunder shall in no way diminish any duty or obligation of Sellers or AVCO
under this Agreement.
43
ARTICLE XII
TERMINATION AND WAIVER
12.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing:
(a) by mutual agreement of the parties hereto;
(b) by either party unilaterally if the Closing shall not have
occurred on or prior to September 30, 1996 (the "Termination Date") through no
fault of the terminating party;
(c) by Purchaser if at the Closing any of the conditions specified in
Article VIII have not been met or waived by Purchaser; and
(d) by the Sellers if at the Closing any of the conditions specified
in Article IX have not been met or waived by the Sellers.
12.2 Effect of Termination. In the event of termination of this Agreement
---------------------
pursuant to Sections 12.1 (a) or (b) hereof, this Agreement shall forthwith
become void and there shall be no liability on the part of any party or their
respective partners, officers or directors. In the event of termination of this
Agreement pursuant to Sections 12.1(c) or (d) hereof there shall be such
liability as may accrue because of a material default under or material breach
of this Agreement.
12.3 Extension; Waiver. At any time prior to the Closing the parties
-----------------
hereby 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 of 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. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid if set forth in an instrument in writing signed on behalf
of such party.
ARTICLE XIII
INDEMNIFICATION AND RELATED MATTERS
13.1 Survival of Representations and Warranties. The representations and
------------------------------------------
warranties of each of the parties as contained herein or in any other
certificate or document delivered by such parties at or in connection with this
Agreement or any other Transaction Document shall survive the Closing (without
44
regard to any investigation made by any other parties) for a period of three (3)
years; provided, however, that any representation or warranty hereunder
regarding the filing by Sellers of UCC financing statements with respect to the
Assets shall survive indefinitely.
13.2 Indemnification.
----------------
(a) Irrespective of any due diligence investigation conducted by
Purchaser or Purchaser Representatives with regard to the transactions
contemplated hereby, the Sellers and AVCO jointly and severally agree to
indemnify and hold Purchaser and each of Purchaser Representatives harmless from
and against any and all liabilities, obligations, damages, losses, deficiencies,
costs, penalties, interest and expenses (collectively, "Losses") incurred or
suffered by Purchaser or any Purchaser Representative arising out of, based
upon, attributable to or resulting from:
(i) any misrepresentation or breach of warranty made by the
Sellers or AVCO as of the Closing Date; any and all Losses incurred or
suffered by Purchaser resulting from or arising out of the failure of the
Sellers, AVCO, TFC, Textron, Avco Financial Services Management Company or
Newport Management Corporation to comply with any of the covenants
contained in this Agreement or in any of the Transaction Documents which
are required to be performed by the Sellers AVCO, TFC, Textron, Avco
Financial Services Management Company or Newport Management Corporation
respectively;
(ii) the Excluded Liabilities, including but not limited to all
sales taxes arising out of or resulting from the sale of the Assets
hereunder;
(iii) any claims for any injury to person or property
attributable to any goods sold or services rendered by the Sellers prior to
the Closing, regardless of whether such claims are asserted prior to or
after the Closing (it being understood and agreed that Losses under this
clause (iii) shall be net of any proceeds received by Purchaser under any
policy of insurance maintained by Purchaser in respect of such claims);
(iv) any claims for compensation and other employee benefits
(including, but not limited to, severance pay, disability benefits, health,
workers' compensation, and death benefits) (A) accruing at any time with
respect to persons who were employed in the Business and do not become
Transferred Employees and (B) accruing prior to the date a person becomes a
Transferred Employee, and related costs and liabilities, regardless of
whether such claims and related costs and liabilities are made or incurred
before, on or after the Closing Date;
45
(v) any Environmental Claim or any Remedial Action arising out
of or occurring with respect to the use of the Assets prior to the Closing,
or the operation of the Business prior to the Closing;
(vi) any third party claims with respect to occurrences or
events which occurred on or prior to the Closing Date and relate to the
Sellers and/or their respective Employees or AVCO or the conduct of the
Business prior to the Closing;
(vii) all actions, suits, proceedings, demands, assessments,
judgments, costs, penalties and expenses, including reasonable attorneys'
fees, incident to the foregoing;
(viii) the failure by the Sellers to file or the improper or
defective filing of any and all UCC financing statements with respect to
the Assets designed to put Purchaser in possession of the Assets as the
Closing Date, free and clear of all Liens, with a perfected first priority
security interest therein, and to assure Purchaser the benefits thereof;
and
(ix) all actions, suits, proceedings, demands, assessments,
judgments, costs, penalties and expenses, including reasonable attorneys'
fees, incident to Section 13.2(a)(viii) herein.
(x) to the extent that Purchaser or any Purchaser
Representative would not otherwise incur or suffer Losses but for the
consummation of the transactions contemplated by this Agreement, that
certain action known as Xx. Xxxxxx X. Xxxxxx and Xxxx X. Xxxxx vs. Great
------------------------------------------------
Western Bank, et. al., case number CV-94-7687KN filed in the United States
----------------------
District Court for the Central District of California.
(b) Purchaser agrees to indemnify and hold the Sellers harmless from
and against any and all Losses incurred or suffered by the Sellers arising
out of, based upon, attributable to or resulting from:
(i) any misrepresentation or breach of warranty made by
Purchaser as of the Closing Date;
(ii) the failure of Purchaser to comply with any of the
covenants contained in this Agreement or in any of the Transaction
Documents which are required to be performed by Purchaser;
(iii) the Assumed Liabilities, excluding any Losses incurred or
suffered by Purchaser or any of Purchaser Representatives resulting from or
arising out of any inaccuracy contained in the Closing Cash Payment
Adjustment Certificate;
46
(iv) any Environmental Claim or any Remedial Action arising out of
or occurring with respect to the use of the use of the Assets after the
Closing, or the operation of the Business after the Closing;
(v) any third party claims with respect to occurrences or events
which occur after the Closing Date and relate to the operation of the
Business by Purchaser after the Closing; and
(vi) all actions, suits, proceedings, demands, assessments,
judgments, costs, penalties and expenses, including reasonable attorneys'
fees, incident to the foregoing.
(c) Notwithstanding anything to the contrary contained in this
Agreement, neither the Sellers or AVCO, on the one hand, nor the Purchaser, on
the other hand, shall be liable for any Losses under this Article XIII unless
and only to the extent such Losses exceed One Hundred Thousand Dollars
($100,000) in the aggregate and the aggregate liability of the Sellers and AVCO
under this Article XIII and Section 13.6 hereof shall not exceed Thirty Million
Dollars ($30,000,000); provided, however, that these limitations shall in no way
apply to indemnification pursuant to Section 13.2(a)(viii) and 13.2(a)(ix)
herein.
13.3 Notice of Indemnification. In the event any legal proceeding (an
-------------------------
"Indemnity Claim") shall be threatened or instituted or any claim or demand
shall be asserted by any person in respect of which payment may be sought by one
party hereto from the other party under the provisions of this Article XIII, the
party seeking indemnification (the "Indemnitee") shall promptly cause written
notice of the assertion of any such claim of which it has knowledge which is
covered by this indemnity to be forwarded to the other party (the "Indemnitor")
which notice in respect of any Indemnity Claims must be received by the
Indemnitor prior to February 28, 2000; provided, however, that the time
limitation in this sentence shall in no way apply to indemnification pursuant to
Sections 13.2(a)(viii) or 13.2(a)(ix). Any notice of a claim by reason of any
of the representations, warranties or covenants contained in this Agreement
shall state specifically the representation, warranty or covenant with respect
to which the Indemnity Claim is made, the facts giving rise to an alleged basis
for the claim, and the amount of the liability asserted against the Indemnitor
by reason of the Indemnity Claim. Within fifteen (15) days of the receipt of
such written notice, the Indemnitor shall notify the Indemnitee in writing of
its intent to contest its obligation to indemnify or reimburse under this
Agreement (a "Contest") or to accept liability hereunder. If the Indemnitor
does not respond within fifteen (15) days to such written notice, the Indemnitor
will be deemed to accept liability. In the event of a Contest, within ten (10)
business days of the receipt of the written notice thereof, the parties will
select an arbitrator and submit the dispute to binding arbitration in
California. The arbitrator
47
shall be selected by the mutual agreement of the parties. If the parties can
not agree on an arbitrator, each may select one arbitrator and the two
designated arbitrators shall select the third arbitrator. If the third
arbitrator can not be agreed upon, the Federal District Court for the Southern
District of California shall select the third arbitrator. A decision by the
individual arbitrator or a majority decision by the three arbitrators shall be
final and binding upon the parties. Such arbitration shall follow the rules of
the American Arbitration Association and must be resolved by the arbitrators
within thirty (30) days after the matter is submitted to arbitration.
13.4 Indemnification Procedure for Third-Party Claims. In the event of any
------------------------------------------------
Indemnity Claim brought by a third party, Indemnitor shall promptly notify the
Indemnitee of such Indemnity Claim, specifying in reasonable detail the
Indemnity Claim and the circumstance it arose, and the amount of the liability
asserted against the Indemnitee by reason of the Indemnity Claim. Within ten
(10) business days of the receipt of the such notice (or sooner if the nature of
the Indemnity Claim so requires) the Indemnitor shall notify the Indemnitee of
its intent to compromise or defend such Indemnity Claim or to Contest. Any
Contest shall be governed by the provisions of Section 13.3 herein. The
Indemnitor may elect to compromise or defend, at its own expense and by its own
counsel, any such Indemnity Claim. If the Indemnitor elects to compromise or
defend such Indemnity Claim, the Indemnitee shall cooperate, at the expense of
the Indemnitor, in the compromise of, or defense against, such Indemnitee Claim.
If the Indemnitor fails to notify the Indemnitee of its election as herein
provided or loses the Contest as provided in 13.3 herein, the Indemnitee may
pay, compromise or defend such Indemnity Claim. Except as otherwise provided
herein, in the event of the initiation of any Indemnity Claim against an
Indemnitee by a third party and the Indemnitor elects to compromise or defend,
the Indemnitor shall have the absolute right after the receipt of notice, at its
option and at its own expense, to be represented by counsel of its choice, and
to defend against, negotiate, settle or otherwise deal with any Indemnity
Claim,; provided, however, that the Indemnitee may participate in any such
-------- -------
proceeding with counsel of its choice and at its expense and the Indemnitor
shall not settle any such Indemnity Claim unless the Indemnitor is fully
released without any admission of liability. The parties hereto agree to
cooperate fully with each other in connection with the defense, negotiation or
settlement of any such Indemnity Claim. To the extent the Indemnitor elects not
to defend such Indemnity Claim, and the Indemnitee defends against or otherwise
deals with any such Indemnity Claim, the Indemnitee may retain counsel, at the
expense of the Indemnitor, and control the defense of such Indemnity Claim. If
the Indemnitee shall settle any such Indemnity Claim without the consent of the
Indemnitor, the Indemnitee shall thereafter have no claim against the Indemnitor
under this Article XIV with respect to any loss, liability, claim, obligation,
damage and expense occasioned by such settlement.
48
13.5 Indemnification Payments and Tax Effects. The Indemnitor shall pay
----------------------------------------
any sums due and owing by it to the Indemnitee by wire transfer or certified
check within ten (10) days after the date of the determination of liability
pursuant to this Article XIII. Any overdue amounts payable by the Indemnitor
shall bear interest at an annual rate of 9% per annum, based on a year of 365
days and the number of days elapsed.
13.6 The Sellers' and AVCO's Purchase of Assigned Leases. In the event
---------------------------------------------------
that any agreements, representations, warranties, and covenants made by the
Sellers or AVCO herein contained shall be or become untrue or unperformed with
respect to any Assigned Leases and such inaccuracy or nonperformance materially
---
and adversely affects the value of any Assigned Lease or the interest of
Purchaser thereof, then, the Sellers and AVCO agree, jointly and severally, upon
ten (10) days' written notice from Purchaser, to purchase such Assigned Leases,
including an assignment of each such Assigned Lease and any rights held by
Purchaser in the Equipment Collateral at a purchase price equal to the value of
the Assigned Lease as of the Closing Date as shown on the books and records of
the Sellers, less any payments, payoffs, or other monies or credits actually
----
received by Purchaser with respect to said Assigned Lease from the Closing Date
through the date or repurchase of said Assigned Lease, provided, however, that
-------- -------
the amount of such purchase price shall be applied against the payment
obligations with regard to indemnification that the Sellers and AVCO shall have
to Purchaser further to and subject to the limitations and provisions of Section
13.2(c) herein, meaning that repurchases further to Sections 13.2(a)(viii) or
13.2(a)(ix) herein shall not be subject to any limitations on the amount of
indemnification.
ARTICLE XIV
MISCELLANEOUS
14.1 Certain Definitions. As used in this Agreement, the following terms
-------------------
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Accounting Referee" has the meaning set forth in Section 2.3(c) hereof.
"Accounts Receivable" has the meaning set forth in Section 1.1(b) hereof.
"Administrative Services Agreement" has the meaning set forth in Section
7.6 hereof.
"AFS" has the meaning set forth in the recitals hereof.
"Agreement" has the meaning set forth in the recitals hereof.
49
"Aggregate Discounted Contract Value" means, as of any date of
determination, the sum of the Discounted Contract Principal Balance of all
Assigned Leases then pledged to the Lender as collateral pursuant to the terms
of this Agreement.
"ALSI" has the meaning set forth in the recitals hereof.
"ALSI Stock" has the meaning set forth in Section 4.2 hereof.
"Asset Purchase Agreement" has the meaning set forth in the recitals
hereof.
"Asset Value" has the meaning set forth in Section 2.1(a)(i) hereof.
"Assets" has the meaning set forth in Section 1.1 hereof.
"Assigned Leases" has the meaning set forth in Section 1.1(g) hereof.
"Assigned Lease Rate" means, means with respect to an Assigned Lease, the
implicit internal rate of return relating to such Assigned Lease as calculated
by the Sellers employing the same method of calculation as the Sellers use in
the ordinary course of its business taking into consideration Booked Residual
Values and security deposits, if any.
"Assumed Liabilities" has the meaning set forth in Section 1.4(a) hereof.
"Assumption of Liabilities" has the meaning set forth in Section 2.2(b)
hereof.
"Atlanta Lease" has the meaning set forth in Section 7.1 hereof.
"AVCO" has the meaning set forth in the recitals hereof.
"Benefit Arrangement" has the meaning set forth in Section 4.14(b) hereof.
"Xxxx of Sale" has the meaning set forth in Section 1.2 hereof.
"Broker" means any party other than Sellers that originated any Assigned
Lease.
"Broker Contract" means any Assigned Lease which was originated by any
Broker.
"Booked Residual Value" means (i) for Equipment Collateral subject to a
True Lease other than an Assigned Contract referred to in clause (ii) below, the
amount reflected on the books and records of the Sellers (or the originator of
such Assigned Lease
50
if other than the Sellers, as the case may be) on the Closing Date representing
the Sellers' (or the originator's, as the case may be) estimate (determined as
of the origination date of such Assigned Lease) of the fair market value of such
Equipment on the scheduled expiration date of such True Lease, and (ii) zero (A)
for Equipment Collateral for which a security deposit is held by the Sellers,
(B) for Equipment Collateral subject to an Assigned Lease other than those
referred to in clause (i) above and (C) for Equipment Collateral sold following
the termination of an Assigned Lease.
"Bulk Purchase Contracts" has the meaning set forth in Section 1.1(j)
hereof.
"Business" has the meaning set forth in the recitals hereof.
"Business Day" means any day other than a Saturday, Sunday or on which
banking institutions in Los Angeles, California are authorized or obligated by
law or executive order to be closed.
"CERCLA" has the meaning set forth in Section 4.19(a) hereof.
"Certified Closing Calculation" has the meaning set forth in Section 2.3(c)
hereof.
"Closing" means the consummation of the transactions contemplated by this
Agreement.
"Closing Calculation" has the meaning set forth in Section 2.3(a) hereof.
"Closing Cash Payment" has the meaning set forth in Section 2.2(a) hereof.
"Closing Cash Payment Adjustment Certificate" has the meaning set forth in
Section 2.1(a) hereof.
"Closing Date" has the meaning set forth in Section 10.1 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consents to Assignment" has the meaning set forth in Section 4.4 hereof.
"Contest" has the meaning set forth in Section 13.3 hereof.
"Contract" means any contract (including, without limitation, leases, any
resale agreement and any manufacturer authorization or medallion or sales or
distribution contract), agreement, indenture, note, bond, loan, instrument,
lease, conditional sale contract, mortgage, license, franchise, insurance
policy, commitment or other arrangement or agreement, whether written or oral.
51
"Covenant Not To Compete" has the meaning set forth in Section 7.5 hereof.
"Danville Lease" has the meaning set forth in Section 7.1 hereof.
"Defaulted Assigned Lease" means, an Assigned Lease with respect to which
any Scheduled Payment (or any portion thereof) is delinquent for more than one
hundred and eighty (180) days.
"Determination Date" has the meaning set forth in Section 2.1(a)(i) hereof.
"Discounted Booked Residual Value" means, with respect to an Assigned Lease
and the related Equipment, an amount, on any date of determination, equal to the
present value (discounted monthly at a rate of 25% per annum from the date on
which such Assigned Lease is scheduled to expire) of the Booked Residual Value
of the related Equipment.
"Discounted Contract Principal Balance" means, with respect to each
Assigned Lease as of any date, an amount equal to the present value of the
remaining Scheduled Payments due under such Assigned Lease, discounted monthly
at the applicable Discount Rate for such Assigned Lease; provided, however, that
the Discounted Contract Principal Balance of any Defaulted Assigned Lease, or an
Assigned Lease that is required to be repurchased by the Sellers pursuant to
Section 13.6 hereof, shall be equal to zero.
"Employee Benefit Plan" has the meaning set forth in Section 4.14(b)
hereof.
"Employees" means all persons employed in the Business on the day
immediately prior to the Closing Date, including any persons on disability, sick
leave, layoff or leave of absence from the Business.
"Enforceability Exceptions" has the meaning set forth in Section 3.2(b)
hereof.
"Environmental Claim" means any allegation, notice of violation, action,
claim, Lien, demand, abatement or other Order or direction (conditional or
otherwise) by any Governmental Body or any other Person for personal injury
(including sickness, disease or death), tangible or intangible property damage,
damage to the environment, nuisance, pollution, contamination or other adverse
effects on the environment, or for fines, penalties, or restrictions resulting
from or based upon (a) the existence, or the continuation of the existence, of a
release (including, without limitation, sudden or non-sudden accidental or non-
accidental releases) of, or exposure to, any Hazardous Material or other
substance, chemical, material, pollutant, contaminant, odor, audible noise, or
other Release in, into or onto the environment (including, without limitation,
the air, soil,
52
surface or groundwater) at, in, by, from or related to any of the Leased Real
Estate or any activities conducted thereon; (b) the environmental aspects of the
transportation, storage, treatment or disposal of Hazardous Materials in
connection with the operation of any of the Business; or (iii) the violation, or
alleged violation, of any Environmental Law, Order or Permit of or from any
Governmental Body relating to environmental matters connected with the Business.
"Environmental Law" has the meaning set forth in Section 4.19(a) hereof.
"Equipment Collateral" has the meaning set forth in Section 1.1(i) hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exception Schedule" has the meaning set forth in Article IV hereof.
"Excluded Assets" has the meaning set forth in Section 1.3 hereof.
"Excluded Liabilities" has the meaning set forth in Section 1.4(b) hereof.
"Final Closing Calculation" has the meaning set forth in Section 2.3(c)
hereof.
"Financing" has the meaning set forth in Section 8.1(i) hereof.
"Finance Lease" means any Assigned Lease that is not a True Lease.
"GAAP" means generally accepted accounting principles in the United States
as in effect from time to time.
"Governmental Body" means any government or governmental or regulatory body
thereof, or political subdivision thereof, whether federal, state, local or
foreign, or any agency or instrumentality thereof, or any court or arbitrator
(public or private).
"Hazardous Material" means any substance, material or waste, or any
constituent thereof, which is regulated by any local Governmental Body,
Governmental Body in any jurisdiction in which the Sellers or any Subsidiary or
affiliate of the Sellers conducts business, or the United States or other
national government, or is regulated by or forms the basis of liability under
any Environmental Law, including, without limitation, any material or substance
which is defined as a "hazardous waste," "hazardous material," "hazardous
substance," "extremely hazardous waste" or "restricted hazardous waste,"
"subject waste,"
53
"contaminants," "toxic waste" or "toxic substance" under any provision of Law,
including but not limited to, petroleum products, asbestos and polychlorinated
biphenyls.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"ICII" means Imperial Credit Industries, Inc., a California corporation,
the parent of the Purchaser.
"Indemnitee" has the meaning set forth in Section 13.3 hereof.
"Indemnitor" has the meaning set forth in Section 13.3 hereof.
"Indemnity Claim" has the meaning set forth in Section 13.3 hereof.
"Identified Liabilities" has the meaning set forth in Section 1.4(a)
hereof.
"Initial Balance Sheet" has the meaning set forth in Section 4.5(a)
hereof.
"Intangible Assets" has the meaning set forth in Section 1.1(f) hereof.
"Interest" has the meaning set forth in Section 5.4 hereof.
"Irvine Lease" has the meaning set forth in Section 1.3(j) hereof.
"Irvine Real Property" has the meaning set forth in Section 1.3(j) hereof.
"Irvine Sublease" has the meaning set forth in Section 7.1 hereof.
"Law" means any federal, state, local or foreign law (including common
law), statute, code, ordinance, rule, or regulation, including but not limited
to the Truth-in-Lending Act.
"Lease" means any contract in existence on the Closing Date (including any
assignments, certificates, exhibits or schedules provided for therein, and any
amendments thereto and assumptions thereof), or any commitment to enter into a
contract in existence on or prior to the Closing, which is in the form of a
lease of or rental agreement with respect to equipment, any sale contract
(including an installment sale contract) arising out of the sale of equipment or
any financing of Property, and under which either of the Sellers is the lessor,
seller, lender or obligee (whether initially or as an assignee).
54
"Lease File" means with respect to each Assigned Lease, the following
documents:
(i) The executed original counterpart of the Assigned Lease that
constitutes "chattel paper" for purposes of Sections 9-105(1)(b) and 9-305
of the UCC or an "instrument" for purposes of Sections 9-105(1)(i) and 9-
305 of the UCC or an "account" for purposes of Section 9-106 of the UCC
(together with an executed original counterpart of the loan agreement and
the security agreement);
(ii) Either the xxxx of sale or the invoice for the item(s) of
Equipment Collateral related to such Assigned Lease;
(iii) The inspection/verification certificate indicating the
acceptance of the Equipment Collateral by the Obligor;
(iv) With respect to Assigned Leases that had an Original Equipment
Cost in excess of $10,000, evidence of filing of a UCC-1 financing
statement executed by the related Obligor, or by the Sellers as the
Obligor's attorney-in-fact as filed with the Secretary of State in each
state where the Equipment Collateral is located and, if required by such
state, with the office of the County Clerk in the county where such
Equipment Collateral is located), naming the Sellers as secured party
(whether as original secured party or as assignee of Sellers) and the
Equipment Collateral;
(v) For each Assigned Lease for which the Sellers did not execute
as debtor a UCC-1 financing statement referred to in clause (iv) above, a
copy of the power of attorney executed by the Obligor (or such borrower)
appointing the Sellers as its attorney-in-fact for the purpose of executing
such financing statement;
(vi) A copy of each executed assignment agreement from each
predecessor Obligor of each Broker Contract to the immediately succeeding
Obligor up to and including the Sellers; and
(vii) A copy of each insurance policy if delivered by the Obligor to
the Sellers.
"Leased Personal Property" has the meaning set forth in Section 1.1(c)
hereof.
"Leased Real Property" has the meaning set forth in Section 1.1(d) hereof.
"Lease Schedules" means Schedules 1.1(g)(i) and 1.1(g)(ii) collectively.
55
"Lease Security" has the meaning set forth in Section 1.1(h) hereof.
"Legal Proceeding" means any judicial, administrative or arbitral action,
suit, proceeding (public or private), claim, investigation or governmental
proceeding.
"Letter Agreement" has the meaning set forth in Section 5.2 hereof.
"Lien" means any lien, pledge, mortgage, deed of trust, security interest,
claim, lease, charge, option, right of first refusal, easement or other real
estate declaration, covenant, condition, restriction or servitude, transfer
restriction under any shareholder or similar agreement or encumbrance.
"Losses" has the meaning set forth Section 13.2(a) hereof.
"Material Contract" has the meaning set forth in Section 4.11(a) hereof.
"Material Adverse Change" means any material adverse change on, or in, any
material portion of the Assets or the business, condition (financial or
otherwise), results of operations or liabilities of the Business.
"Material Adverse Effect" means an effect that results in or causes a
Material Adverse Change.
"Obligor" means a Person obligated to make payments on a Lease Receivable
pursuant to a Lease.
"Order" means any order, injunction, judgment, decree, ruling, writ,
assessment or arbitration award.
"Original Equipment Cost" means the original cost of Equipment Collateral
at the time of origination of the related Assigned Lease.
"Patent-Related Assets" has the meaning set forth in Section 1.1(e) hereof.
"Peat Marwick" has the meaning set forth in Section 2.3(a) hereof.
"Permitted Exceptions" means (a) statutory Liens for current taxes,
assessments or other governmental charges not yet delinquent or the amount or
validity of which is being contested in good faith by appropriate proceedings;
and (b) mechanics', carriers', workers', repairers' and similar Liens arising or
incurred in the ordinary course of business that are not in the aggregate
material to the Business or the Assets.
"Person" means any individual, corporation, partnership, firm, joint
venture, association, joint-stock company, limited
56
liability company, trust, unincorporated organization or Governmental Body.
"Prepayment Amount" means, with respect to an Assigned Lease and a calendar
month, means an amount equal to the sum of the Discounted Contract Principal
Balance plus the Booked Residual Value of such Assigned Lease as of the
beginning of such calendar month.
"Proceedings" has the meaning set forth in Section 14.5 hereof.
"Property" shall include all property and all other assets of whatsoever
nature including, without limitation, real and personal property, whether
tangible or intangible, and claims, rights and choses in action.
"Purchase Price" has the meaning set forth in Section 2.1 hereof.
"Purchaser" has the meaning set forth in the recitals hereof.
"Purchaser Representatives" has the meaning set forth in Section 5.2
hereof.
"Records" has the meaning set forth in Section 1.1(o) hereof.
"Remedial Action" means any action, including, without limitation, any
capital expenditure, required or voluntarily undertaken to (a) clean up, remove,
treat, or in any other way address any Hazardous Material or other substance in
the indoor or outdoor environment, (b) prevent the Release or threat of Release,
or minimize the further Release of any Hazardous Material or other substance so
it does not migrate or endanger or threaten to endanger public health or welfare
of the indoor or outdoor environment, (c) perform pre-remedial studies and
investigations or post-remedial monitoring and care, or (d) bring any Asset into
compliance with all Environmental Laws and Permits.
"Scheduled Payment" means, the periodic payment (reflecting any adjustment
for any partial prepayment) set forth in such Assigned Lease due from the
Obligor (including the application of any security deposit in respect thereof).
"Sellers" has the meaning set forth in the recitals hereof.
"Sellers' Certificates" has the meaning set forth in Section 7.2 hereof.
"Sellers' Shares" has the meaning set forth in Section 4.2 hereof.
57
"Sellers' Subleases" has the meaning set forth in Section 7.1 hereof.
"Settlement Certificate" has the meaning set forth in Section 2.1(a)(ii).
"Tax Affiliate" has the meaning set forth in Section 4.13(a) hereof.
"Tax Returns" means all tax returns and reports filed by or on behalf of
Sellers and include, tax return files and the contents thereof including tax
audit work papers and computer reports relating thereto. The term Tax Returns
shall not include tangible personal property tax returns filed by Sellers.
"Termination Date" has the meaning set forth in Section 12.1(b).
"Textron" has the meaning set forth in Section 7.5 hereof.
"TFC" has the meaning set forth in Section 7.5 hereof.
"Transaction Documents" means collectively this Agreement and all other
documents to be executed pursuant hereto and in accordance herewith, including,
without limitation, the "Sellers' Subleases", the "Covenant Not to Compete", the
"Bills of Sale", the "Assumption of Liabilities" and the "Administrative
Services Agreement, " as such terms are defined herein.
"Transferred Employees" means all Employees who accept offers of employment
from Purchaser on or after the Closing Date.
"True Lease" means any Assigned Lease treated as a "lease" for purposes of
UCC Article 2A and not as a "lease intended for security" within the meaning of
UCC Section 1-201(37), as in effect in the State of California.
"UCC" means the Uniform Commercial Code as from time to time in effect in a
specified jurisdiction.
14.2 Prorations.
----------
(a) Purchaser and the Sellers hereby agree as follows with regard to
prorations applicable to the consummation of the transactions contemplated
hereby. The parties agree that all operational expenses incurred directly in
the operation of the Business, including, without limitation, utility bills, the
expense of supplies, the expense of fuel, and the like, shall be prorated
between the parties as of the Closing Date, and as of the Closing Date shall
become the obligation and responsibility of Purchaser. Prorations which are to
be effected on the Closing Date shall be made on the Closing Date or, if such
prorations cannot reasonably be made as of the Closing Date, as soon thereafter
as possible and "as of" the Closing Date; and
58
(b) All personal and real property taxes and special and general
assessments relating to the Assets, shall be prorated by the parties as of the
Closing Date, all such taxes applicable to periods of time up to and including
the Closing Date shall be the sole obligation, responsibility and expense of the
Sellers, and shall be paid by the Sellers. All such assessments and taxes
applicable to periods following the Closing Date shall be the obligation,
responsibility and expense of Purchaser.
14.3 Waiver of Compliance with Bulk Transfer Laws. The Purchaser and the
--------------------------------------------
Sellers each hereby waive compliance by the Sellers with the provisions of the
"bulk sales", "bulk transfer" or similar laws of the state of California. The
Sellers agree to indemnify and hold Purchaser harmless against any and all
claims, losses, damages, liabilities, taxes, costs and expenses (other than the
Assumed Liabilities) incurred by Purchaser or any of its affiliates as a result
of a failure to comply with any such "bulk sales", "bulk transfer" or similar
laws.
14.4 Entire Agreement. This Agreement (with its Schedules and Exhibits)
----------------
contains, and is intended as, a complete statement of all of the terms and the
arrangements between the parties hereto with respect to the matters provided for
herein, and supersedes any and all previous agreements and understandings
between the parties hereto with respect to those matters, including but not
limited to the Asset Purchase Agreement.
14.5 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
-------------
AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS
MADE AND TO BE PERFORMED IN SUCH JURISDICTION. EXCEPT AS SET FORTH IN ARTICLE
XIII, ANY ACTION TO ENFORCE, WHICH ARISES OUT OF OR IN ANY WAY RELATES TO, ANY
OF THE PROVISIONS OF THIS AGREEMENT OR THE INSTRUMENTS, AGREEMENTS AND OTHER
DOCUMENTS CONTEMPLATED HEREBY SHALL BE BROUGHT AND PROSECUTED IN THE COURTS OF
THE STATE OF CALIFORNIA LOCATED IN THE COUNTY OF LOS ANGELES OR OF THE UNITED
STATES FOR THE SOUTHERN DISTRICT OF CALIFORNIA. EACH PARTY IRREVOCABLY: (A)
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS, AND (B) WAIVES
ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY SUIT,
ACTION OR PROCEEDING ("PROCEEDINGS") BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM
THAT SUCH PROCEEDINGS HAVE BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER
WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDINGS, THAT SUCH COURT
DOES NOT HAVE JURISDICTION OVER SUCH PARTY. THE PARTIES IRREVOCABLY CONSENT TO
SERVICE OF PROCESS GIVEN IN THE MANNER PROVIDED FOR NOTICES IN SECTION 14.9.
NOTHING IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW.
14.6 Transfer and Other Taxes. All sales, use, gains, excise and other
------------------------
transfer or similar taxes applicable to or resulting from the sale of Assets
hereunder shall be the sole responsibility and obligation of the Sellers.
Purchaser or the Sellers, as the case may be, shall execute and deliver to the
other at the Closing any certificates or other documents as the
59
other may reasonably request to perfect any exemption from any such transfer,
documentary, sales, gains, excise or use tax, provided that in no way shall any
such exemption cause Purchaser to be in any way responsible for any such tax
arising out of or resulting from the sale of the Assets hereunder.
14.7 Expenses. Each of the parties hereto shall bear its own expenses
--------
(including, without limitation, fees and disbursements of its counsel,
accountants, investment bankers, brokers and other experts), incurred by it in
connection with the preparation, negotiation, execution, delivery and
performance of this Agreement and the Transaction Documents, each of the other
documents and instruments executed in connection with or contemplated by this
Agreement and the consummation of the transactions contemplated hereby and
thereby.
14.8 Table of Contents and Headings. The table of contents and section
------------------------------
headings of this Agreement are for reference purposes only and are to be given
no effect in the construction or interpretation of this Agreement.
14.9 Notices. All notices and other communications under this Agreement
-------
shall be in writing (including, without limitation, telegraphic, telex, telecopy
or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or
delivered by hand or by a nationally recognized courier service guaranteeing
overnight delivery to a party at the following address (or to such other address
as such party may have specified by notice given to the other party pursuant to
this provision):
If to the Sellers or AVCO, to:
AVCO Financial Services, Inc.
000 Xxxxx Xxxxxxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: President, United States Division
with a copy to:
Xxxxxxx X. Xxxxx
Executive Vice President,
Secretary and General Counsel
If to Purchaser, to:
Imperial Business Credit, Inc.
00000 Xxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxx, President
60
with a copy to:
Freshman, Marantz, Orlanski, Xxxxxx & Xxxxx
Eighth Floor, East Tower
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Esq.
All such notices and communications shall, when mailed, telegraphed, telexed,
telecopied, cabled or delivered, be effective three days after deposit in the
mails, delivered to the telegraph company, confirmed by telex answerback,
telecopied with confirmation of receipt, delivered to the cable company,
delivered by hand to the addressee or one day after delivery to the courier
service.
14.10 Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validly or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
14.11 Binding Effect; No Assignment. This Agreement shall be binding
-----------------------------
upon and inure to the benefit of the parties and their respective successors and
assigns. Nothing in this Agreement shall create or be deemed to create any
third party beneficiary rights in any person or entity not party to this
Agreement. No assignment of this Agreement or of any rights or obligations
hereunder may be made by any party (by operation of law or otherwise) without
the prior written consent of each of the other parties hereto and any attempted
assignment without such required consents shall be void.
14.12 Amendments. (a) Any provision of this Agreement may be amended
----------
or waived prior to the Closing Date if, and only if, such amendment or waiver
is in writing and signed, (i) in the case of an amendment, by Purchaser, each of
the Sellers, and Shareholder, and (ii) in the case of a waiver, by the party
against whom the waiver is to be effective.
(b) No failure or delay by either party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
14.13 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
61
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Asset Purchase Agreement as of the date and year first above written.
PURCHASER:
IMPERIAL BUSINESS CREDIT, INC.
By: /s/ Xxxxxxx Xxxxx
---------------------------------------
Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
THE SELLERS:
AVCO LEASING SERVICES, INC.
By:_____________________________________
Name: Xxxx X. Xxxxxxxx
Title: President
AVCO FINANCIAL SERVICES OF SOUTHERN
CALIFORNIA, INC.
By:____________________________________
Name: Xxxx X. Xxxxxxxx
Title: President
AVCO:
AVCO FINANCIAL SERVICES, INC.
By:____________________________________
Name: Xxxx X. Xxxxxxxx
Title: Executive Vice President,
President-U.S. Finance Operations
63
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Asset Purchase Agreement as of the date and year first above written.
PURCHASER:
IMPERIAL BUSINESS CREDIT, INC.
By:_____________________________________
Name: Xxxxxxx Xxxxx
Title: Chief Financial Officer
THE SELLERS:
AVCO LEASING SERVICES, INC.
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: President
AVCO FINANCIAL SERVICES OF SOUTHERN
CALIFORNIA, INC.
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: President
AVCO:
AVCO FINANCIAL SERVICES, INC.
By: /s/ Xxxx X. Xxxxxxxx
-------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Executive Vice President,
President-U.S. Finance Operations
Schedule 2.1(a)
Asset Valuation Calculation Formula
A. The present value of the scheduled future contractual cashflows, net of
advance payments, if any, of those Assigned Leases to be transferred by
Sellers to Purchaser under the Agreement which, as of the Determination
Date, are no more than thirty (30) days contractually past due. The
aforementioned cashflows being discounted at a rate equal to the sum of (a)
the Two Year Treasury Rate plus (b) 4.30%, in arrears.
plus
B. The present value of the scheduled future contractual cashflows, net of
advance payments, if any, of those Assigned Leases to be transferred by
Sellers to Purchaser under the Agreement which, as of the Determination
Date, are more than thirty (30) and less than one hundred eighty one (181)
days contractually past due. The aforementioned cashflows being discounted
at a rate of 25.00%, in arrears.
less
C. Amounts owed under Assumed Liabilities (except for those advance payments,
if any, referred to in Subsection A and B of this Schedule 2.1(a)).
plus
D. The present value of the future expected residual cashflows, if any, of the
Assigned Leases to be transferred by Sellers to Purchaser under the
Agreement. Such residual cashflows are assumed to be received one month
after the end of the lease term and to be ten percent (10%) of the Original
Equipment Cost. The aforementioned cashflows being discounted at a rate of
25.00%, in arrears.
plus
E. Property taxes paid and not billed, in respect of the Assigned Leases, as
of the Determination Date limited, however, to a maximum of eighty thousand
dollars ($80,000).
plus
F. The sum of five million four hundred thousand dollars ($5,400,000).
Schedule 2.1(a)
Asset Valuation Calculation Formula
A. The present value of the scheduled future contractual cashflows, net of
advance payments, if any, of those Assigned Leases to be transferred by
Sellers to Purchaser under the Agreement which, as of the Determination
Date, are no more than thirty (30) days contractually past due. The
aforementioned cashflows being discounted at a rate equal to the sum of (a)
the Two Year Treasury Rate plus (b) 4.30%, in arrears.
plus
B. The present value of the scheduled future contractual cashflows, net of
advance payments, if any, of those Assigned Leases to be transferred by
Sellers to Purchaser under the Agreement which, as of the Determination
Date, are more than thirty (30) and less than one hundred eighty one (181)
days contractually past due. The aforementioned cashflows being discounted
at a rate of 25.00%, in arrears.
less
C. Amounts owed under Assumed Liabilities (except for those advance payments,
if any, referred to in Subsection A and B of this Schedule 2.1(a)).
plus
D. The present value of the future expected residual cashflows, if any, of the
Assigned Leases to be transferred by Sellers to Purchaser under the
Agreement. Such residual cashflows are assumed to be received one month
after the end of the lease term and to be ten percent (10%) of the Original
Equipment Cost. The aforementioned cashflows being discounted at a rate of
25.00%, in arrears.
plus
E. Property taxes paid and not billed, in respect of the Assigned Leases, as
of the Determination Date limited, however, to a maximum of eighty thousand
dollars ($80,000).
plus
F. The sum of five million four hundred thousand dollars ($5,400,000).
