EXHIBIT 2.5
STOCK PURCHASE AGREEMENT
By and Among
CAROLINA FIRST BANK,
a South Carolina corporation
XXXX X. XXXXXXX, III
an individual resident in South Carolina, and
And
XXXXX X. XXXXXXXXX,
an individual resident in South Carolina
SEPTEMBER 20, 2002
NOTICE: THIS CONTRACT IS SUBJECT TO ARBITRATION PURSUANT
TO THE SOUTH CAROLINA UNIFORM ARBITRATION ACT
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TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS.......................................................2
ARTICLE 2 SALE AND TRANSFER OF SHARES; CLOSING...............................5
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF SELLERS.........................7
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER..........................15
ARTICLE 5. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE..............17
ARTICLE 6. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE.............18
ARTICLE 7. INDEMNIFICATION; REMEDIES........................................18
ARTICLE 8. GENERAL PROVISIONS...............................................20
Exhibit A: Form of Escrow Agreement
Exhibit B: Form of Registration Rights Agreement
Exhibit C: Principles for Calculation of EBITDA
Exhibit D: Form of Sellers' Releases
Exhibit E-1: Form of Employment and Noncompetition Agreements for Sellers
Exhibit E-2: Form of Employment and Noncompetition Agreements for Key Employees
Exhibit F: Form of Lease
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is entered as of September
20, 2002 and is effective as of the Effective Time (hereinafter defined) by
Carolina First Bank, a South Carolina corporation ("Buyer"), Xxxx X. Xxxxxxx,
III, an individual resident in South Carolina ("Xxxxxxx"), and Xxxxx X.
Xxxxxxxxx, an individual resident in South Carolina ("Xxxxxxxxx"). Xxxxxxxxx and
Xxxxxxx are collectively referred to as the "Sellers" and individually as a
"Seller."
RECITALS
Sellers desire to sell, and Buyer desires to purchase, all of the
issued and outstanding shares (the "Shares") of capital stock of Xxxxxxx
Associates, Inc., a South Carolina corporation (the "Company"), for the
consideration and on the terms set forth in this Agreement.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
ARTICLE 1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified below:
"Adverse Consequences"--means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and attorneys' fees and expenses.
"Applicable Contract"--any Contract (a) under which the Company has or
may acquire any rights, (b) under which the Company has or may become subject to
any obligation or liability, or (c) by which the Company or any of the assets
owned or used by it is or may become bound.
"Applicable Rate"--means the prime corporate rate of interest publicly
announced from time to time by Carolina First Bank.
"Breach"--a breach of a representation, warranty, covenant, obligation,
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision.
"Closing Date"--the date and time as of which the Closing actually
takes place.
"Consent"--any approval, consent, ratification, waiver, or other
authorization (including any governmental authorization).
"Contract"--any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Disclosure Letter"--the disclosure letter delivered by Sellers to
Buyer concurrently with the execution and delivery of this Agreement.
"EBITDA" -- the Company's earnings before interest, income taxes,
depreciation, and amortization, calculated in accordance with the principles set
forth on Exhibit C.
"Effective Time"--11:59 p.m. South Carolina time on September 20, 2002.
"Encumbrance"--any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership, other than Permitted Encumbrances.
"ERISA"--the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued
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pursuant to that Act or any successor law.
"Escrow Agreement" means the Escrow Agreement to be entered into at
Closing as provided in Article 2. A form of the Escrow Agreement is attached
hereto as Exhibit A.
"Fair Market Value" of the TSFG Common Stock will be equal to the
rolling 10 trading day average ending the second trading day immediately prior
to the date Closing Date.
"GAAP"--generally accepted United States accounting principles, applied
on a basis consistent with the basis on which the Balance Sheet and the other
Financial Statements referred to in Section 3.4 were prepared.
"IRC"--the Internal Revenue Code of 1986, as amended or any successor
law, and regulations issued by the IRS pursuant to the Internal Revenue Code or
any successor law.
"IRS"--the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"Knowledge"--an individual will be deemed to have "Knowledge" of a
particular fact or other matter if: (a) such individual is actually aware of
such fact or other matter; or (b) a prudent individual could be expected to
discover or otherwise become aware of such fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning the existence of
such fact or other matter.
"Legal Requirement"--any applicable federal, state, local, municipal,
foreign, international, multinational, or other administrative order,
constitution, law, ordinance, principle of common law, regulation, statute, or
treaty.
"Material Adverse Effect"; "Material Adverse Event"--means any event,
effect, occurrence or circumstance which, alone or when taken with other
breaches, events, effects, occurrences or circumstances existing concurrently
therewith (including, without limitation, any breach of a representation or
warranty contained herein by such party) (i) has or is reasonably expected to
involve more than $50,000 in the case of the Company (or $2,500,000 in the case
of TSFG and Buyer), or otherwise have a material adverse effect on the
properties, financial condition, results of operations, or business of such
party and its subsidiaries, taken as a whole, or (ii) would materially hinder
such party's, or an affiliated party's ability to perform its obligations under
this Agreement or the consummation of any of the transactions contemplated
hereby; provided however, in determining whether a Material Adverse Effect or
Material Adverse Event has occurred, there shall be excluded any effect the
cause of which is (A) any change in laws of general applicability or
interpretations thereof by courts or governmental authorities, (B) any change in
GAAP or regulatory accounting requirements applicable to the parties hereto, (C)
any action or omission of the Sellers or Buyer taken with the prior written
consent of Buyer or the Sellers, as applicable, in contemplation of the
transaction contemplated herein, or (D) any changes in general economic
conditions affecting companies generally.
"Net Tangible Value"--means the excess of assets over liabilities as
shown on the Effective Date Balance Sheet of the Company.
"Order"--any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other governmental body or by any arbitrator.
"Ordinary Course of Business"--an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if (a) such
action is consistent with the past practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person; (b) such
action is not required to be authorized by the board of directors of such Person
(or by any Person or group of Persons exercising similar authority) unless such
action involves liabilities of less than $50,000; and (c) such action is similar
in nature and magnitude to actions customarily taken, without any authorization
by the board of directors (or by any Person or group of Persons exercising
similar authority), in the ordinary course of the normal day-to-day operations
of other Persons that are in the same line of business as such Person.
"Parties" - the parties to this Agreement.
"Permitted Encumbrances" -- with respect to Company properties,
interests and assets, (1) mortgages or security interests shown on the Balance
Sheet or the Interim Balance Sheet as securing specified liabilities or
obligations, with respect to which no material default (or event that, with
notice or lapse of time or both, would constitute a material default) exists,
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(2) mortgages or security interests incurred in connection with the purchase of
property or assets (such mortgages and security interests being limited to the
property or assets so acquired), with respect to which no default (or event
that, with notice or lapse of time or both, would constitute a default) exists,
(3) liens for current taxes not yet due, and (4) with respect to real property
interests, (i) minor imperfections of title, if any, none of which is
substantial in amount, materially detracts from the value or impairs the use of
the property subject thereto, or impairs the operations of the Company, (ii)
zoning laws and other land use restrictions that do not materially impair the
present use of the property subject thereto, and (iii) all matters of public
record. All buildings, plants, and structures owned by the Company lie wholly
within the boundaries of the real property owned by the Company and do not
encroach upon the property of, any other Person, subject to matters which would
be disclosed by a current and accurate survey of the properties owned by the
Company.
"Person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or governmental body.
"Proceeding"--any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any governmental body or arbitrator.
"Pro Rata" shall mean with respect to Xxxxxxx and Xxxxxxxxx, 99% and
1%, respectively.
"Registration Rights Agreement" shall mean the registration rights
agreement of TSFG, to be delivered at Closing, substantially in the form
attached hereto as Exhibit B.
"Related Person"--with respect to a particular individual shall mean:
(a) each other member of such individual's Family; (b) any Person that is
directly or indirectly controlled by such individual or one or more members of
such individual's Family; (c) any Person in which such individual or members of
such individual's Family hold (individually or in the aggregate) a Material
Interest; and (d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer, partner,
executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual: (a) any
Person that directly or indirectly controls, is directly or indirectly
controlled by, or is directly or indirectly under common control with such
specified Person; (b) any Person that holds a Material Interest in such
specified Person; (c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar capacity); (d)
any Person in which such specified Person holds a Material Interest; (e) any
Person with respect to which such specified Person serves as a general partner
or a trustee (or in a similar capacity); and (f) any Related Person of any
individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse and former spouses,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means direct or
indirect beneficial ownership (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting securities or other voting interests
representing at least 5% of the outstanding voting power of a Person or equity
securities or other equity interests representing at least 5% of the outstanding
equity securities or equity interests in a Person.
"Representative"--with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Securities Act"--the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"Tax"--any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, utility, stamp, occupation,
premium, windfall profits, environmental (including taxes under IRC Section
59A), customs duties, capital stock, franchise, profits, gains, withholding,
social security (or similar), unemployment, workers' compensation, disability,
real property, personal property, ad valorem, sales, use, service, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax, duty, impost or charge of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Return"--any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any governmental
body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
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"Threatened"--a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if any demand or statement has been
made (orally or in writing) or any notice has been given (orally or in writing),
or if any other event has occurred or any other circumstances exist, that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute,
action, or other matter is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
"TSFG" shall mean The South Financial Group, Inc., a South Carolina
corporation and the parent corporation of Buyer.
"TSFG Common Stock" shall mean the common stock, par value $1.00 per
share, of TSFG.
ARTICLE 2. SALE AND TRANSFER OF SHARES; CLOSING
2.1 SHARES. Subject to the terms and conditions of this Agreement, at
the Closing, Sellers will transfer the Shares to Buyer, and Buyer will receive
the Shares from Sellers, all in exchange for the TSFG Common Stock provided
below.
2.2 PURCHASE PRICE.
(a) Aggregate Purchase Price. The aggregate purchase price (the
"Purchase Price") for the Shares will be $3,325,000 (the "Closing
Consideration") plus the Calendar Year 2002 Earn Out Shares, the Five-Year
Annual Performance Earn Out Shares, and the Five-Year Cumulative Performance
Earn Out Shares. The Purchase Price shall be allocated among the Sellers in
proportion to their respective holdings of Shares as set forth in Part 2.2(a) of
the Disclosure Schedule. The Closing Consideration will be subject to the
post-Closing adjustment as set forth below in Section 2.2(g).
(b) Closing Consideration. The Closing Consideration shall be paid in
the form of TSFG Common Stock valued at its Fair Market Value.
(c) Year 2002 Earn Out Shares. An additional $463,500 in TSFG Common
Stock valued at the Fair Market Value (the "Year 2002 Earn Out Shares") will be
escrowed at Closing in accordance with the Escrow Agreement. All of the Year
2002 Earn Out Shares will be paid to the Sellers (Pro Rata) if the Company's
EBITDA for the calendar year 2002 is equal to or exceeds $578,000. If the
Company's EBITDA for the calendar year 2002 is less than $578,000, a portion of
the Year 2002 Earn Out Shares will be made in accordance with the following
formula:
[(Company's 2002 EBITDA - $457,159) / ($578,000 - $457,159)] * $463,500
(d) Five-Year Annual Performance Earn Out Shares. An additional
$1,229,500 in TSFG Common Stock valued at the Fair Market Value (the "Five-Year
Annual Performance Shares") will be escrowed at Closing in accordance with the
Escrow Agreement. Buyer agrees to pay up to $245,900 per year (in TSFG Common
Stock valued at the Fair Market Value) to the Sellers (Pro Rata) for each of the
calendar years 2003, 2004, 2005, 2006 and 2007 if the EBITDA Targets set forth
below for that particular year have been achieved. If the Company's EBITDA for a
particular year is less than the applicable EBITDA Target, a portion of that
year's Five-Year Annual Performance Shares will be made in accordance with the
following formula:
[(Company's actual annual EBITDA - Minimum EBITDA Threshold) /
Applicable Threshold Differential] * $245,900
Earn Out Table
(Subject to adjustment as set forth in Section 2.2(h)
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Calendar Year 2003 2004 2005 2006 2007
---- ---- ---- ---- ----
EBITDA Target $711,000 $816,000 $988,000 $1,194,000 $1,437,000
Minimum EBITDA Threshold 600,000 705,000 866,000 1,059,000 1,288,000
Original Threshold Differential 111,000 111,000 122,000 135,000 149,000
Applicable Threshold Differential 111,000 111,000 122,000 135,000 149,000
--------------------------------------------------------------------------------------------------------------------
Calculations will be made on a year-by-year basis and will not be cumulative.
(For example, if EBITDA in years 2003, 2004 and 2005 were $600,000 $700,000 and
$1,100,000 respectively, no amounts would be paid with respect to years 2003 and
2004, and $245,900 would be paid with respect to the year 2005.
(e) Five-Year Cumulative Performance Earn Out Shares. An additional
$275,000 in TSFG Common Stock (the "Five-Year Cumulative Performance Earn Out
Shares") will be escrowed at Closing under the Escrow Agreement. Buyer agrees to
pay $275,000 (in TSFG Common Stock valued at the Fair Market Value) to the
Sellers (Pro Rata) if the cumulative EBITDA of the Company for the years 2003
through 2007 exceeds $5,760,000.
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(f) EBITDA Calculation. EBITDA of the Company for each year shall be
determined promptly, and in any event within 30 days after year-end. EBITDA of
the Company for any relevant period will be determined in accordance with the
principles set forth in Exhibit C. The dispute resolution provisions of Section
2.5 will apply to EBITDA calculations.
(g) Closing Consideration Adjustment. The Closing Consideration will be
adjusted as follows:
(1) If the Net Tangible Value is less than $924,271, the
Sellers will pay to the Buyer an amount equal to such deficiency (plus interest
thereon at the Applicable Rate from the Closing Date) in the form of TSFG Common
Stock valued at the Fair Market Value within three (3) business days after the
date on which the Net Tangible Value for the Company is resolved pursuant to
Section 2.5. If the Net Tangible Value is greater than $924,271, the Buyer will
pay to the Sellers an amount equal to such overage (plus interest thereon at the
Applicable Rate from the Closing Date) by wire transfer or delivery of other
immediately available funds within three (3) business days after the date on
which the Net Tangible Value for the Company is resolved pursuant to Section
2.5.
(2) The Sellers (Pro Rata) agree to repurchase any receivables
existing on the Closing Date and not collected within 90 days immediately
following Closing Date.
(h) Adjustment of Earn Out Table and Five-Year Annual Performance
Shares. The EBITDA Target in the Earn Out Table and the amount of the Five-Year
Annual Performance Shares will be revised downward if the Company's actual
EBITDA for the calendar year 2002 is less than $578,000.
The revised EBITDA Targets for each year will be calculated as follows:
[((Actual 2002 EBITDA - $457,159) / $120,841) * Original Threshold
Differential] + Minimum EBITDA Threshold.
For the 2003 calculation, the prior year EBITDA Target will be the Company's
actual 2002 EBITDA, but not more than $578,000 nor less than $457,159.
Notwithstanding anything to the contrary, the EBITDA Targets for a particular
year shall never be less than the Minimum EBITDA Thresholds set forth in the
table in Section 2.2(d).
The revised amount of the Five-Year Annual Performance Shares will be calculated
as follows:
[(Company's 2002 EBITDA - $457,159) / ($578,000 - $457, 159) * $154,500]
+ $1,075,000
For example, if the Company's actual 2002 EBITDA is $507,159, then the Earn Out
Table would be adjusted as follows:
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Calendar Year 2003 2004 2005 2006 2007
---- ---- ---- ---- ----
EBITDA Target $645,928 $750,928 $916,480 $1,114,859 $1,349,651
Minimum EBITDA Threshold 600,000 705,000 866,000 1,059,000 1,288,000
Original Threshold Differential 111,000 111,000 122,000 135,000 149,000
Applicable Threshold Differential 45,928 45,928 50,480 55,859 61,651
--------------------------------------------------------------------------------------------------------------------
2.3 CLOSING. The purchase and sale (the "Closing") provided for in this
Agreement will take place at the principal executive offices of Buyer in
Greenville, South Carolina on September 20, 2002, or at such other time and
place as the parties may agree. It is contemplated that Closing will occur
simultaneous with execution of this Agreement.
2.4 CLOSING OBLIGATIONS. At the Closing:
(a) Sellers will deliver to Buyer:
(1) certificates representing the Shares, duly endorsed (or
accompanied by duly executed stock powers), for transfer to Buyer;
(2) releases in the form of Exhibit D executed by Sellers
(collectively, "Sellers' Releases");
(3) Employment and Noncompetition Agreements in the form of
Exhibit E-1, executed by Xxxxxxx, and Employment and Noncompetition Agreements
in the form of Exhibit E-2 executed by all key employees of the Company who
currently have written agreements with the Company to acquire any portion of
their book of business (collectively, "Employment and Noncompetition
Agreements");
(4) a certificate executed by Sellers representing and
warranting to Buyer that each of Sellers' representations and warranties in this
Agreement is accurate in all respects as of the Closing Date.
(b) The Company will execute and deliver to Buyer:
(1) copies of the Employment and Noncompetition Agreements,
signed by the Company;
(2) a copy of the Lease signed by the Company;
(3) a consent of directors and shareholders of the Company
terminating any and all buy-sell agreements
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and stock restriction agreements by and among the Company and its shareholders;
and
(4) a certified copy of the corporate resolutions of the
Company's board of directors and shareholders approving the transaction
contemplated by this Agreement and the actions relating to the transactions
contemplated herein.
(5) the lease of the Company's premises in the form of Exhibit
F (the "Lease");
(6) resignations of the Company's board of directors effective
as of Closing.
(c) Buyer will deliver to Sellers:
(1) the Closing Consideration to Xxxxxxx and Xxxxxxxxx, as
provided in Section 2.2(a);
(2) the Registration Rights Agreement executed by TSFG;
(3) the Escrow Agreement executed by Buyer and TSFG;
(4) a certificate executed by Buyer to the effect that each of
Buyer's representations and warranties in this Agreement is accurate in all
respects as of the Closing Date.
2.5 PREPARATION OF EFFECTIVE DATE BALANCE SHEET.
(a) Within 15 days after the Closing Date, the Buyer will prepare and
deliver to the Sellers a draft consolidated balance sheet (the "Initial
Effective Date Balance Sheet") for the Company as of the Effective Time
(determined on a pro forma basis as though the Parties had not consummated the
transactions contemplated by this Agreement). The Buyer will prepare the Initial
Effective Date Balance Sheet in accordance with GAAP applied on a basis
consistent with the preparation of the Company's financial statements referenced
in Section 3.4 (the "Financial Statements"); provided, however, that assets,
liabilities, gains, losses, revenues, and expenses in interim periods or as of
dates other than year-end (which normally are determined through the application
of so-called interim accounting conventions or procedures) will be determined,
for purposes of the Initial Effective Date Balance Sheet, through full
application of the procedures used in preparing the most recent audited balance
sheet included within the Financial Statements and the principles contained in
Exhibit C.
(b) If the Sellers have any objections to the Initial Effective Date
Balance Sheet, the Sellers will deliver a detailed statement describing their
objections to the Buyer within 30 days after receiving the Initial Effective
Date Balance Sheet. The Buyer and the Sellers will use reasonable efforts to
resolve any such objections themselves. If the Parties do not obtain a final
resolution within 30 days after the Buyer has received the statement of
objections, an accounting firm selected by KPMG, LLP and reasonably acceptable
to the Sellers will resolve any remaining objections. The Buyer will revise the
Initial Effective Date Balance Sheet as appropriate to reflect the resolution of
any objections thereto pursuant to this Section 2.5(b). The "Effective Date
Balance Sheet" shall mean the Initial Effective Date Balance Sheet together with
any revisions thereto pursuant to this Section 2.5(b).
(c) In the event the Parties submit any unresolved objections to an
accounting firm for resolution as provided in Section 2.5(b) above, the Buyer
and the Sellers will share responsibility for the fees and expenses of the
accounting firm as follows:
(1) if the accounting firm resolves all of the remaining
objections in favor of the Buyer (the Net Tangible Value so determined is
referred to herein as the "Buyer's Determination"), the Sellers will be
responsible for all of the fees and expenses of the accounting firm;
(2) if the accounting firm resolves all of the remaining
objections in favor of the Sellers (the Net Tangible Value so determined is
referred to herein as the "Seller's Determination"), the Buyer will be
responsible for all of the fees and expenses of the accounting firm; and
(3) if the accounting firm resolves some of the remaining
objections in favor of the Buyer and the rest of the remaining objections in
favor of the Sellers (the Net Tangible Value so determined is referred to herein
as the "Actual Value"), the Sellers will be responsible for that percentage of
the fees and expenses of the accounting firm equal to (i) the difference between
the Seller's Determination and the Actual Value over (ii) the difference between
the Seller's Determination and the Buyer's Determination (up to 100% of such
fees and expenses), and the Buyer will be responsible for the remainder of the
fees and expenses.
(4) The Buyer will make the work papers and back-up materials
used in preparing the Initial Effective Date Balance Sheet, and the books,
records, and financial staff of the Company available to the Sellers and their
accountants and other representatives at reasonable times and upon reasonable
notice at any time during (i) the preparation by the Buyer of the Initial
Effective Date Balance Sheet, (ii) the review by the Sellers of the Initial
Effective Date Balance Sheet, and (iii) the resolution by the Parties of any
objections thereto.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of the Sellers represents and warrants to the Buyer that the
statements contained in this Section 3 are correct and complete as of the
Closing Date with respect to himself, except as set forth in the Disclosure
Letter. Except as set forth in the Disclosure Letter (which will specifically
identify the Section to which the exception applies), Sellers represent and
warrant to
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Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING. Part 3.1 of the Disclosure Letter
contains a complete and accurate list for the Company of its name, its
jurisdiction of incorporation, other jurisdictions in which it is authorized to
do business, and its capitalization (including the identity of each stockholder
and the number of shares held by each). The Company is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all its obligations
under Applicable Contracts. The Company is duly qualified to do business as a
foreign corporation and is in good standing under the laws of each state or
other jurisdiction in which either the ownership or use of the properties owned
or used by it, or the nature of the activities conducted by it, requires such
qualification. The Company does not own any subsidiaries and has never owned any
subsidiaries. Sellers have delivered to Buyer copies of the organizational
documents of the Company, as currently in effect.
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding obligation
of Sellers, enforceable against Sellers in accordance with its terms. Upon
execution, this Agreement, the Employment and Noncompetition Agreements, the
Sellers' Releases, and the Lease (collectively, the "Sellers' Closing
Documents") will constitute the legal, valid, and binding obligations of Sellers
(or the other parties to such documents), enforceable against Sellers (or the
other appropriate parties to such documents) in accordance with their respective
terms. Sellers have the right, power, authority, and capacity to execute and
deliver this Agreement and the Sellers' Closing Documents to which they are a
party and to perform their obligations under this Agreement and the Sellers'
Closing Documents (to which they are a party).
(b) Neither the execution and delivery of this Agreement by Sellers nor
the consummation or performance of any of the transactions contemplated herein
by Sellers will, directly or indirectly (with or without notice or lapse of
time):
(1) contravene, conflict with, or result in a violation of (A)
any provision of the organizational documents of the Company, or (B) any
resolution adopted by the board of directors or the stockholders of the Company;
(2) contravene, conflict with, or result in a violation of, or
give any governmental body or other Person the right to challenge any of the
transactions contemplated herein or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which the Company or either Seller,
or any of the assets owned or used by the Company, may be subject, except as
such shall not have a Material Adverse Effect;
(3) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any governmental body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by the Company or that otherwise relates to the
business of, or any of the assets owned or used by, the Company, except as such
shall not have a Material Adverse Effect;
(4) cause the Company to become subject to, or to become
liable for the payment of, any Tax for State or local tax purposes;
(5) [reserved];
(6) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any Applicable Contract, except as such shall
not have a Material Adverse Effect; or
(7) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets owned or used by the Company.
Neither the Sellers nor the Company is or will be required to give any
notice to or obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
transactions contemplated herein. Sellers have caused the Company to make all
filings required by Legal Requirements to be made by them in order to consummate
the transactions contemplated herein and to obtain all Consents identified in
Part 3.2 of the Disclosure Letter.
3.3 CAPITALIZATION. The authorized equity securities of the Company
consist of 100,000 shares of common stock, par value $1.00 per share, of which
10,000 shares are issued and outstanding and constitute the Shares. Sellers are
and will be on the Closing Date the sole record and beneficial owners and
holders of the Shares, free and clear of all Encumbrances (except those arising
under applicable state and federal securities laws and matters set forth in the
Company's Bylaws). Xxxxxxx owns 9,900 Shares and Xxxxxxxxx owns 100 Shares. No
legend or other reference to any purported Encumbrance appears upon any
certificate representing and evidencing equity securities of the Company. All of
the outstanding equity securities of the Company have been duly authorized and
validly issued and are fully paid and nonassessable. There are no Contracts
relating to the issuance, sale, or transfer of any equity securities or other
securities of the Company. None of the outstanding equity securities or other
securities of the Company was issued in violation of the Securities Act or any
other Legal Requirement. The Company does not own, or have any Contract to
acquire, any equity securities or other securities of any Person (other than the
Company) or any
8
direct or indirect equity or ownership interest in any other business.
3.4 FINANCIAL STATEMENTS. Sellers have delivered to Buyer: (a)
consolidated balance sheets of the Company as at December 31 for each of the
years 1998 through 2001 (the December 31, 2001 consolidated balance sheet is
referred to as the "Balance Sheet"), and the related consolidated statements of
income, changes in stockholders' equity, and cash flow for each of the fiscal
years then ended, together with the report thereon of Xxxxxx, Xxxx & Associates,
LLC, CPA, independent certified public accountants; and (b) an unaudited
consolidated balance sheet of the Company as at September 20, 2002 (the "Interim
Balance Sheet") and the related unaudited consolidated statements of income,
changes in stockholders' equity, and cash flow for the eight months ended August
31, 2002, including in each case the notes thereto, if any (the items in (a) and
(b) are collectively referred to as the "Financial Statements"). The Financial
Statements and notes fairly present the financial condition and the results of
operations, changes in stockholders' equity, and cash flow of the Company as at
the respective dates of and for the periods referred to in the Financial
Statements, all in accordance with GAAP, subject, in the case of interim
Financial Statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse) and the
absence of notes (that, if presented, would not differ materially from those
included in the Balance Sheet); the Financial Statements referred to in this
Section 3.4 reflect the consistent application of such accounting principles
throughout the periods involved, except as disclosed in the notes to the
Financial Statements. No Financial Statements of any Person is required by GAAP
to be included in the consolidated Financial Statements of the Company.
3.5 BOOKS AND RECORDS. All books of account, minute books, stock record
books, and other material records of the Company have been made available to
Buyer. At the Closing, all of those books and records will be in the possession
of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES.
(a) Part 3.6 of the Disclosure Letter contains a complete and accurate
list of all leaseholds or other material interests in real property owned by the
Company. Sellers have delivered or made available to Buyer copies of the
instruments (as recorded) by which the Company acquired such real property
interests, and copies of all title insurance policies, opinions, abstracts, and
surveys in the possession of Sellers or the Company and relating to such
interests.
(b) The Company owns (1) all the properties and assets (whether real,
personal, or mixed and whether tangible or intangible) that it purports to own
on its Financial Statements and which are located in the facilities owned or
operated by the Company or reflected as owned in the books and records of the
Company, including all of the properties, interests and assets reflected in the
Balance Sheet and the Interim Balance Sheet (except for assets held under
capitalized leases disclosed or not required to be disclosed in Part 3.6 of the
Disclosure Letter and personal property sold since the date of the Balance Sheet
and the Interim Balance Sheet, as the case may be, in the Ordinary Course of
Business), and (2) all of the properties, interests and assets purchased or
otherwise acquired by the Company since the date of the Balance Sheet (except
for personal property acquired and sold since the date of the Balance Sheet in
the Ordinary Course of Business and consistent with past practice). The
subsequently purchased or acquired properties, interests and assets (other than
inventory and short-term investments) are listed in Part 3.6 of the Disclosure
Letter. Properties that are not owned by the Company that are located in the
Company's facilities are owned by the owner of the real estate that is leased to
the Company and is included as part of the property leased to the Company by the
lessor and are described in Part 3.6 of the Disclosure Letter.
(c) Except for one Company copy machine that is held under a
lease-purchase arrangement, all material properties, interests and assets
reflected in the Balance Sheet and the Interim Balance Sheet are free and clear
of all Encumbrances.
3.7 CONDITION AND SUFFICIENCY OF ASSETS. The buildings, plants,
structures, and equipment of the Company are structurally sound, are in good
operating condition and repair, and are adequate for the uses to which they are
being put, and none of such buildings, plants, structures, or equipment is in
need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost.
3.8 ACCOUNTS RECEIVABLE. All accounts receivable of the Company that
are reflected on the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date (collectively, the
"Accounts Receivable") represent or will represent valid obligations arising
from sales actually made or services actually performed in the Ordinary Course
of Business. A total of 100% (by principal amount) of the Accounts Receivable
either has been or will be collected in full, without any set-off, within 120
days after the day on which it first becomes due and payable. There is no
contest, claim, or right of set-off, other than returns in the Ordinary Course
of Business, under any Contract with any obligor of an Accounts Receivable
relating to the amount or validity of such Accounts Receivable. Part 3.8 of the
Disclosure Letter contains a complete and accurate list of all Accounts
Receivable as of the date of the Interim Balance Sheet, which list sets forth
the aging of such Accounts Receivable.
9
3.9 BROKERS OR FINDERS. Except as set forth in Part 3.9 of the
Disclosure Letter, Sellers and their agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
3.10 NO UNDISCLOSED LIABILITIES. The Company has no liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) except for liabilities or obligations
reflected or reserved against in the Interim Balance Sheet and current
liabilities incurred in the Ordinary Course of Business since the date thereof.
3.11 TAXES.
(a) The Company has filed or caused to be filed all Tax Returns that
are or were required to be filed pursuant to applicable Legal Requirements.
Sellers have delivered or made available to Buyer copies of, and Part 3.11 of
the Disclosure Letter contains a complete and accurate list of, all such Tax
Returns relating to income or franchise taxes filed since 1997. The Company has
paid all Taxes whether or not shown on any Tax Return that the Company is
obligated to pay, other than Taxes that are not yet due that are reflected on
the Interim Balance Sheet (including deferred taxes) or that have accrued in the
Ordinary Course of Business since the date of the Interim Balance Sheet. The
Company has provided adequate reserves (determined in accordance with GAAP) for
all Taxes which may have become due except such Taxes as are being contested in
good faith and are listed in Part 3.11 of the Disclosure Letter. Except as
described in Part 3.11 of the Disclosure Letter, the Company is not the
beneficiary of any extension of time within which to file any Tax Return. The
Company will not be liable for any deferred taxes as a result of transactions
that occur prior to the Closing Date.
(b) The United States federal and state income Tax Returns of the
Company subject to such Taxes have been audited by the IRS or relevant state tax
authorities or are closed by the applicable statute of limitations for all
taxable years through 1997. Part 3.11 of the Disclosure Letter contains a
complete and accurate list of all audits of all such Tax Returns, including a
reasonably detailed description of the nature and outcome of each audit. All
deficiencies proposed as a result of such audits have been paid, reserved
against, settled, or, as described in Part 3.11 of the Disclosure Letter, are
being contested in good faith by appropriate proceedings. Part 3.11 of the
Disclosure Letter describes all adjustments to the United States federal income
Tax Returns filed by the Company or any group of corporations including the
Company for all taxable years since 1995, and the resulting deficiencies
proposed by the IRS. Except as described in Part 3.11 of the Disclosure Letter,
neither the Sellers nor Company has given or been requested to give waivers or
extensions (or is or would be subject to a waiver or extension given by any
other Person) of any statute of limitations relating to the payment of Taxes of
the Company or for which the Company may be liable.
(c) The charges, accruals, and reserves with respect to Taxes on the
respective books of the Company are adequate (determined in accordance with
GAAP) and are at least equal to the Company's liability for Taxes. There exists
no proposed tax assessment against the Company except as disclosed in the
Balance Sheet or in Part 3.11 of the Disclosure Letter. No Consent to the
application of Section 341(f)(2) of the IRC has been filed with respect to any
property or assets held, acquired, or to be acquired by the Company. All Taxes
that the Company is or was required by Legal Requirements to withhold or collect
have been duly withheld or collected and, to the extent required, have been paid
to the proper governmental body or other Person.
(d) The Company (and any predecessor of the Company) has been a validly
electing S corporation within the meaning of IRC sections 1361 and 1362 since
January 1, 2000 and from the time of incorporation through January 1, 2000 the
Company was a C corporation. The Company will be an S corporation up to and
including the Closing Date.
(e) The Company will not be liable for any Taxes related to the
operations of the Company prior to the Closing Date or as a result of the
transfer of the Shares by the Sellers to the Buyer.
(f) To the best Knowledge of the Sellers, all Tax Returns filed by the
Company are true, correct, and complete in all material respects. There is no
tax sharing agreement that will require any payment by the Company after the
date of this Agreement.
3.12 NO MATERIAL ADVERSE EVENT AND OPERATION OF THE BUSINESSES OF THE
COMPANY. Since December 31, 2001, there has not been any Material Adverse Event
with respect to the business, operations, properties, prospects, assets, or
condition of the Company not otherwise reflected in the Financial Statements.
Since the Interim Balance Sheet Date, the Company has (a) conducted the business
of the Company only in the Ordinary Course of Business; and (b) used its best
efforts to preserve intact the current business organization of the Company,
kept available the services of the current officers, employees, and agents of
the Company, and maintained the relations and good will with suppliers,
customers, landlords, creditors, employees, agents, and others having business
relationships with the Company.
3.13 EMPLOYEE BENEFITS. Except as set forth on Part 3.13 of the
Disclosure Letter, the Company does not have any employee benefit plans that are
subject to ERISA (hereinafter referred to as a "Plan"). The Company does not
have any pension benefit plans, stock bonus plans or qualified profit sharing
plans within the meaning of IRC section 401(a). Part 3.13(i) of the Disclosure
Letter contains a complete and accurate list of all Company Plans. A copy of all
Company Plans provided or
10
sponsored by the Company and all other documents, instruments, insurance
policies, summary plan descriptions and related materials have been provided to
Buyer. No transaction prohibited by ERISA section 406 and no "prohibited
transaction" under IRC section 4975(c) have occurred with respect to any Company
Plan. All filings required by ERISA and the IRC as to each Plan have been timely
filed, and all notices and disclosures to participants required by either ERISA
or the IRC have been timely provided. The Company does not have any unfunded
liability under any Company Plan. Except for the Company's 401(k) plan, each
Company Plan can be terminated within thirty days, without payment of any
additional contribution or amount and without the vesting or acceleration of any
benefits promised by such Plan. Other than claims for benefits submitted by
participants or beneficiaries, no claim against, or legal proceeding involving
any Company Plan is pending or, to Sellers' Knowledge, is Threatened. No Company
Plan is subject to Title IV of ERISA. Any exceptions to the foregoing are set
forth on the Disclosure Letter.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
(a) Except as set forth in Part 3.14 of the Disclosure Letter:
(1) the Company is, and at all times since January 1, 1998 has
been, in full compliance with each Legal Requirement that is or was applicable
to it or to the conduct or operation of its business or the ownership or use of
any of its assets, except for such non-compliance as shall not have a Material
Adverse Effect;
(2) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) constitutes or will result in a violation
by the Company of, or a failure on the part of the Company to comply with, any
Legal Requirement, or (B) will give rise to any obligation on the part of the
Company to undertake, or to bear all or any portion of the cost of, any remedial
action of any nature; and
(3) the Company has not received, at any time since January 1,
1998, any notice or other communication (whether oral or written) from any
governmental body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of, or failure to comply with, any Legal
Requirement by the Company, or (B) any actual, alleged, possible, or potential
obligation on the part of the Company to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and accurate
list of each governmental authorization that is held by the Company. Each
governmental authorization listed or required to be listed in Part 3.14 of the
Disclosure Letter is valid and in full force and effect. The governmental
authorizations listed in Part 3.14 of the Disclosure Letter collectively
constitute all of the governmental authorizations necessary to permit the
Company to lawfully operate its business in the manner it currently operates
such business in all material respects. Except as set forth in Part 3.14 of the
Disclosure Letter:
(1) the Company is, and at all times since January 1, 1998 has
been, in material compliance with all of the terms and requirements of each
governmental authorization identified or required to be identified in Part 3.14
of the Disclosure Letter;
(2) no event has occurred or circumstance exists that will
(with or without notice or lapse of time) (A) constitute or result directly or
indirectly in a violation of or a failure to comply in all material respects
with any material term or requirement of any governmental authorization listed
or required to be listed in Part 3.14 of the Disclosure Letter, or (B) result
directly or indirectly in the revocation, withdrawal, suspension, cancellation,
or termination of, or any material modification to, any governmental
authorization listed or required to be listed in Part 3.14 of the Disclosure
Letter;
(3) the Company has not received, at any time since January 1,
1998, any notice or other communication (whether oral or written) from any
governmental body or any other Person regarding (A) any actual, alleged,
possible, or potential violation of or failure to comply with any term or
requirement of any material governmental authorization by the Company, or (B)
any actual, proposed, possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any material governmental
authorization of the Company; and
(4) all applications required to have been filed for the
renewal of the governmental authorizations listed or required to be listed in
Part 3.14 of the Disclosure Letter have been duly filed on a timely basis with
the appropriate Governmental Bodies, and all other filings required to have been
made with respect to such governmental authorizations have been duly made on a
timely basis with the appropriate Governmental Bodies.
3.15 LEGAL PROCEEDINGS; ORDERS.
(a) There is no pending Proceeding (1) that has been commenced by or
against the Company or to Sellers' actual Knowledge that otherwise relates to or
may affect the business of, or any of the assets owned or used by, the Company
(other than litigation affecting the Company's industry as a whole); or (2) that
challenges, or that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the transactions contemplated herein. To
the Knowledge of Sellers and the Company, no such Proceeding has been
Threatened, and no event has occurred or circumstance exists that may give rise
to or serve as a basis for the commencement of any such Proceeding.
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(1) there is no Order to which the Company, or any of the
assets owned or used by the Company, is subject other than general Orders
applicable to a broader range of companies similar to the Company;
11
(2) neither Seller is subject to any Order that relates to the
business of, or any of the assets owned or used by, the Company other than
general Orders applicable to a broader range of individuals such as the Sellers;
and
(3) to the actual Knowledge of the Sellers, no officer,
director, agent, or employee of the Company is subject to any Order that
prohibits such officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the business of the
Company.
(c) Except as set forth in Part 3.15 of the Disclosure Letter:
(1) the Company is, and at all times since January 1, 1998 has
been, in compliance with all of the terms and requirements of each Order to
which it, or any of the assets owned or used by it, is or has been subject,
except for such non-compliance as shall not have a Material Adverse Effect;
(2) no event has occurred or circumstance exists that may
constitute or result in (with or without notice or lapse of time) a violation of
or failure to comply with any term or requirement of any Order to which the
Company, or any of the assets owned or used by the Company, is subject, except
for such violation or failure as shall not have a Material Adverse Effect; and
(3) the Company has not received, at any time since January 1,
1998, any notice or other communication (whether oral or written) from any
governmental body or any other Person regarding any actual, alleged, possible,
or potential violation of, or failure to comply with, any material term or
requirement of any Order to which the Company, or any of the assets owned or
used by the Company, is or has been subject which violation or failure could
reasonably be expected to have a Material Adverse Effect.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Since December 31, 2001 and
except as reflected in Part 3.16 of the Disclosure Letter, the Company has
conducted its business only in the Ordinary Course of Business and there has not
been any:
(a) change in the Company's authorized or issued capital stock; grant
of any stock option or right to purchase shares of capital stock of the Company;
issuance of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other acquisition by
the Company of any shares of any such capital stock; or declaration or payment
of any dividend or other distribution or payment in respect of shares of capital
stock, except as set forth on Part 3.16(a) of the Disclosure Letter;
(b) amendment to the organizational documents of the Company;
(c) payment or increase by the Company of any bonuses, salaries, or
other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of the
Company;
(e) damage to or destruction or loss of any asset or property of the
Company, whether or not covered by insurance, materially and adversely affecting
the properties, assets, business, financial condition, or prospects of the
Company, taken as a whole;
(f) entry into, termination of, or receipt of notice of termination of
(i) any material license, distributorship, dealer, sales representative, joint
venture, credit, or similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to the Company of at least $50,000;
(g) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset or property of the Company
or mortgage, pledge, or imposition of any lien or other encumbrance on any
material asset or property of the Company;
(h) cancellation or waiver of any claims or rights with a value to the
Company in excess of $50,000;
(i) material change in the accounting methods used by the Company; or
(j) agreement, whether oral or written, by the Company to do any of the
foregoing.
Except as otherwise expressly permitted by this Agreement, since the
Interim Balance Sheet Date, Sellers have not, and the Company has not taken any
affirmative action, or failed to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Section
3.16 is likely to occur.
3.17 CONTRACTS; NO DEFAULTS.
(a) Part 3.17(a) of the Disclosure Letter contains a complete and
accurate list, and Sellers have delivered to Buyer true and complete copies, of:
(1) each Applicable Contract that involves performance of
services or delivery of goods or materials by the Company of an amount or value
in excess of $50,000;
(2) each Applicable Contract that involves performance of
services or delivery of goods or materials to the Company of an amount or value
in excess of $50,000;
(3) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that
12
involves expenditures or receipts of the Company in excess of $50,000;
(4) each lease, rental or occupancy agreement, license,
installment and conditional sale agreement, and other Applicable Contract
affecting the ownership of, leasing of, title to, use of, or any leasehold or
other interest in, any real or personal property (except personal property
leases and installment and conditional sales agreements having a value per item
or aggregate payments of less than $50,000 and with terms of less than one
year);
(5) each licensing agreement or other Applicable Contract with
respect to material patents, trademarks, copyrights, or other intellectual
property, including agreements with current or former employees, consultants, or
contractors regarding the appropriation or the non-disclosure of any of the
Intellectual Property Assets;
(6) each collective bargaining agreement and other Applicable
Contract to or with any labor union or other employee representative of a group
of employees;
(7) each material joint venture, partnership, and other
Applicable Contract (however named) involving a sharing of profits, losses,
costs, or liabilities by the Company with any other Person;
(8) each Applicable Contract containing covenants that in any
way purport to restrict the business activity of the Company or limit the
freedom of the Company to engage in any line of business or to compete with any
Person;
(9) each Applicable Contract involving more than $50,000 and
providing for payments to or by any Person based on sales, purchases, or
profits, other than direct payments for goods;
(10) each power of attorney that is currently effective and
outstanding;
(11) each Applicable Contract entered into other than in the
Ordinary Course of Business that contains or provides for an express undertaking
by the Company to be responsible for consequential damages;
(12) each Applicable Contract for capital expenditures in
excess of $50,000;
(13) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by the Company
other than in the Ordinary Course of Business; and
(14) each material amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.17(b) of the Disclosure Letter:
(1) neither Seller (nor any Related Person of either Seller)
has any rights under, and neither Seller (nor any Related Person of either
Seller) has any obligation or liability under, any Contract that relates to the
business of, or any of the assets owned or used by, the Company; and
(2) no officer, director, employee, consultant, or contractor
of the Company is bound by any Contract with the Company that purports to limit
the ability of such officer, director, employee, consultant, or contractor to
(A) engage in or continue any conduct, activity, or practice relating to the
business of the Company, or (B) assign to the Company or to any other Person any
rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure Letter, each
Contract identified or required to be identified in Part 3.17(a) of the
Disclosure Letter is in full force and effect and is valid and enforceable in
accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure Letter:
(1) the Company is, and at all times since January 1, 1998 has
been, in material compliance with all applicable terms and requirements of each
material Contract under which the Company has or had any obligation or liability
or by which the Company or any of the assets owned or used by the Company is or
was bound;
(2) to the actual Knowledge of the Sellers and the persons who
are entering into the Employment and Noncompetition Agreements each other Person
that has or had any obligation or liability under any Contract under which the
Company has or had any rights is, and at all times since January 1, 1998 has
been, in material compliance with all applicable terms and requirements of such
Contract;
(3) no event has occurred or circumstance exists that (with or
without notice or lapse of time) may, in any material respect, contravene,
conflict with, or result in a violation or breach of, or give the Company or
other Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any Applicable Contract and no notice has been received of such event or
circumstance or declaring a default; and
(4) the Company has not given to nor have the Sellers in their
capacity as employees, officers or directors or otherwise received from any
other Person, at any time since January 1, 1998 any notice or other
communication (whether oral or written) regarding any actual, alleged, possible,
or potential violation or breach of, or default under, any material Contract.
(e) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid or payable to the
Company under current or completed Contracts with any Person and no such Person
has made written demand for any such renegotiation.
(f) The Contracts relating to the sale, design, manufacture, or
provision of products or services by the Company have been entered into in the
Ordinary Course of Business and have been entered into without the commission of
any act alone or in concert with any other Person, or any consideration having
been paid or promised, that is or would be in violation of any Legal Requirement
except for such violations as shall not have a Material Adverse Effect.
13
3.18 INSURANCE.
(a) Sellers have made available to Buyer: (1) true and complete copies
of all policies of insurance to which the Company is a party or under which the
Company, or any director of the Company, is or has been covered at any time
within the four years preceding the date of this Agreement; (2) true and
complete copies of all pending applications for policies of insurance; and (3)
any statement by the auditor of the Company's Financial Statements with regard
to the adequacy of such entity's coverage or of the reserves for claims.
(b) Part 3.18(b) of the Disclosure Letter describes (1) any
self-insurance arrangement by or affecting the Company, including any reserves
established thereunder; (2) any contract or arrangement, other than a policy of
insurance, for the transfer or sharing of any risk by the Company; and (3) all
obligations of the Company to third parties with respect to insurance (including
such obligations under leases and service agreements) and identifies the policy
under which such coverage is provided.
(c) Part 3.18(c) of the Disclosure Letter sets forth, by year, for the
current policy year and each of the four preceding policy years: (1) a summary
of the loss experience under each policy; (2) a statement describing each claim
under an insurance policy for an amount in excess of $50,000, which sets forth:
(A) the name of the claimant; (B) a description of the policy by insurer, type
of insurance, and period of coverage; and (C) the amount and a brief description
of the claim; and (3) a statement describing the loss experience for all claims
that were self-insured, including the number and aggregate cost of such claims.
(d) Except as set forth on Part 3.18(d) of the Disclosure Letter:
(1) All policies to which the Company is a party or that
provide coverage to either Seller, the Company, or any director or officer of
the Company: (A) are valid, outstanding, and enforceable; (B) taken together,
provide adequate and typical insurance coverage for the assets and the
operations of the Company for all risks normally insured against by a Person
carrying on the same business or businesses as the Company; (C) are sufficient
for material compliance with all Legal Requirements and Contracts to which the
Company is a party or by which any of them is bound; (D) will continue in full
force and effect following the consummation of the transactions contemplated
herein; and (E) do not provide for any retrospective premium adjustment or other
experienced-based liability on the part of the Company.
(2) Neither the Sellers nor the Company has received (A) any
refusal of coverage or any notice that a defense will be afforded with
reservation of rights, or (B) any notice of cancellation or any other indication
that any insurance policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform its
obligations thereunder.
(3) The Company has paid all premiums due, and has otherwise
performed all of its respective material obligations, under each policy to which
the Company is a party or that provides coverage to the Company or director
thereof.
(4) The Company has given notice to the insurer of all claims
that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS. The Company is in material compliance with
all local, state and federal environmental statutes, laws, rules, regulations
and permits, including but not limited to United States Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. 9601 et seq.,
as amended ("CERCLA") and the Toxic Substances Control Act, 15 U.S.C. 2601 et
seq. Neither the Company, nor to the best of its knowledge have other parties,
used, stored, disposed of or permitted any "hazardous substance" (as defined in
CERCLA), petroleum hydrocarbon, polychlorinated biphenyl, asbestos or
radioactive material (collectively, "Hazardous Substances") to remain at, on, in
or under any of the real property owned or leased by the Company (including,
without limitation, the buildings or structures thereon) (the "Real Property").
Neither the Company, nor to the best of the Company's knowledge have other
parties, installed, used, or disposed of any asbestos or asbestos-containing
material on, in or under any of the Real Property. Neither the Company, nor to
the best of the Company's knowledge have other parties, installed or used
underground storage tanks in or under any of the Real Property. The Company has
provided Buyer with copies of all complaints, citations, orders, reports,
written data, notices or other communications sent or received by it with
respect to any local, state or federal environmental law, ordinance, rule or
regulation as any of them relate to the Company.
3.20 EMPLOYEES.
(a) Part 3.20 of the Disclosure Letter contains a complete and accurate
list of the following information for each employee or director of the Company,
including each employee on leave of absence or layoff status: name; job title;
current compensation paid or payable and any change in compensation since
December 31, 2001; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under the Company's pension, retirement,
profit-sharing, thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership (including investment credit or
payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, other Employee Pension Benefit Plan or Employee Welfare Benefit
Plan, or any other employee benefit plan or any director plan.
(b) To the actual Knowledge of the Sellers and the other persons who
are entering into Employment and Noncompetition Agreements on the Closing Date,
no employee or director of the Company is a party to, or is otherwise bound by,
any agreement or arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee or director and any other
Person ("Proprietary Rights Agreement") that in any way adversely affects or
will affect (i) the performance of his duties as an employee of the Company, or
(ii) the ability of the Company to conduct its business, including
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any Proprietary Rights Agreement with Sellers or the Company by any such
employee or director. To Sellers' actual Knowledge, no director, officer, or
other key employee of the Company intends to terminate his employment with the
Company.
(c) Part 3.20 of the Disclosure Letter also contains a complete and
accurate list of the following information for each retired employee or director
of the Company, or their dependents, receiving benefits or scheduled to receive
benefits in the future: name, pension benefit, pension option election, retiree
medical insurance coverage, retiree life insurance coverage, and other benefits.
3.21 LABOR RELATIONS; COMPLIANCE. The Company has not been nor is a
party to any collective bargaining or other labor Contract. Since the formation
of the Company, there has not been, there is not presently pending or existing,
and there is not Threatened, (a) any strike, slowdown, picketing, work stoppage,
or employee grievance process, (b) any Proceeding against or affecting the
Company relating to the alleged violation of any Legal Requirement pertaining to
labor relations or employment matters, including any charge or complaint filed
by an employee or union with the National Labor Relations Board, the Equal
Employment Opportunity Commission, or any comparable governmental body,
organizational activity, or other labor or employment dispute against or
affecting the Company or its premises, or (c) any application for certification
of a collective bargaining agent. No event has occurred or circumstance exists
that could provide the basis for any work stoppage or other labor dispute. There
is no lockout of any employees by the Company, and no such action is
contemplated by the Company. The Company has complied in all respects with all
Legal Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. The Company is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.22 CERTAIN PAYMENTS. Since the formation of the Company, neither the
Company nor a director, officer, agent, or employee of the Company, or any other
Person associated with or acting for or on behalf of the Company, has directly
or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of the Company or any Affiliate of the Company, or
(iv) in violation of any Legal Requirement, (b) established or maintained any
fund or asset that has not been recorded in the books and records of the
Company.
3.23 RELATIONSHIPS WITH RELATED PERSONS. Except for the lease of the
Company's principal offices, neither of the Sellers or any Related Person of
Sellers or of the Company has, or since January 1, 2002 has had, any interest in
any property (whether real, personal, or mixed and whether tangible or
intangible), used in or pertaining to the Company's business. Neither Seller nor
any Related Person of Sellers nor the Company is, or since January 1, 2000 has
owned (of record or as a beneficial owner) an equity interest or any other
financial or profit interest in, a Person that has (i) had business dealings or
a material financial interest in any transaction with the Company other than
business dealings or transactions conducted in the Ordinary Course of Business
with the Company at substantially prevailing market prices and on substantially
prevailing market terms, or (ii) engaged in competition with the Company with
respect to any line of the products or services of the Company (a "Competing
Business") in any market presently served by the Company. Except as set forth in
Part 3.23 of the Disclosure Letter, no Seller or any Related Person of Sellers
or of the Company is a party to any Contract with, or has any claim or right
against, the Company.
3.24 PAYMENT OF INDEBTEDNESS OF RELATED PERSONS. Except as expressly
provided in this Agreement, Sellers have caused all indebtedness owed to Company
by either Seller or any Related Person of either Seller to be paid in full prior
to Closing.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer and TSFG are corporations
duly organized, validly existing, and in good standing under the laws of the
state of South Carolina, with full corporate power and authority to conduct
their businesses as are now being conducted. Buyer and TSFG (as applicable) are
duly qualified to do business as a foreign corporation and are in good standing
under the laws of each state or other jurisdiction in which either the ownership
or use of the properties owned or used by either of them, or the nature of the
activities conducted by either of them, requires such qualification.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms. Upon
execution, this Agreement, the Employment and Noncompetition Agreements and the
other
15
documents executed by Buyer in connection herewith (collectively, the "Buyer's
Closing Documents") will constitute the legal, valid, and binding obligations of
Buyer, enforceable against Buyer in accordance with their respective terms.
Buyer has the right, power, authority, and capacity to execute and deliver this
Agreement and the Buyer's Closing Documents to which it is a party and to
perform its obligations under the Buyer's Closing Documents.
(b) Neither the execution and delivery of this Agreement by Buyer nor
the consummation or performance of any of the transactions contemplated herein
by Buyer will, directly or indirectly (with or without notice or lapse of time):
(1) contravene, conflict with, or result in a violation of (A)
any provision of the organizational documents of the Buyer, or (B) any
resolution adopted by the board of directors or the stockholders of the Buyer;
(2) contravene, conflict with, or result in a violation of, or
give any governmental body or other Person the right to challenge any of the
transactions contemplated herein or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which Buyer, or any of the assets
owned or used by the Buyer, may be subject, except as such shall not have a
Material Adverse Effect;
(3) contravene, conflict with, or result in a violation of any
of the terms or requirements of, or give any governmental body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any governmental
authorization that is held by the Buyer or TSFG or that otherwise relates to the
business of, or any of the assets owned or used by, the Buyer or TSFG, except as
such shall not have a Material Adverse Effect.
(4) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate, or modify, any material contract of TSFG or Buyer, except
as such shall not have a Material Adverse Effect.
The Buyer is not required to give any notice to or obtain any Consent
from any Person or governmental body in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
transactions contemplated herein, except such as have been obtained. Buyer has
made all filings required by Legal Requirements to be made by it in order to
consummate the transactions contemplated herein.
4.3 CAPITALIZATION. At August 31, 2002, the authorized equity
securities of TSFG consisted of 100,000,000 shares of common stock, par value
$1.00 per share, of which approximately 44,317,801 shares were issued and
outstanding and (ii) 10,000,000 shares of preferred stock, none of which is
outstanding. All of the issued and outstanding shares of TSFG are validly issued
and fully paid and nonassessable. Except for shares or options to be issued in
connection with pending or contemplated acquisitions or existing employee
benefit arrangements, or as reflected in TSFG's public filings under the
Exchange Act, or otherwise in the ordinary course of business, there are no
outstanding Contracts relating to the additional issuance of equity securities
of TSFG, or pursuant to which TSFG is or may become obligated to issue any
shares of equity securities. None of the shares of the TSFG Common Stock
issuable hereunder is subject to any restrictions as to the transfer thereof,
except as set forth in TSFG's Articles of Incorporation or Bylaws or its
Shareholders' Rights Plan and except for restrictions on account of applicable
federal or state securities laws. The TSFG Common Stock to be issued in
connection with this Agreement will, when issued, (i) be validly issued, fully
paid and nonassessable, and (ii) have been properly registered for trading on
the Nasdaq National Market.
4.4 FINANCIAL STATEMENTS. Buyer has delivered to Sellers: (a)
consolidated balance sheets of TSFG as at December 31 for each of the years 1999
through 2001 (the December 31, 2001 consolidated balance sheet is referred to as
the "TSFG Balance Sheet"), and the related consolidated statements of income,
changes in stockholders' equity, and cash flow for each of the fiscal years then
ended, together with the report thereon of KPMG, LLP, independent certified
public accountants; and (b) an unaudited consolidated balance sheet of TSFG as
at June 30, 2002 (the "TSFG Interim Balance Sheet") and the related unaudited
consolidated statements of income, changes in stockholders' equity, and cash
flow for the six months then ended, including in each case the notes thereto, if
any (the items in (a) and (b) are collectively referred to as the "TSFG
Financial Statements"). The TSFG Financial Statements and notes fairly present
the financial condition and the results of operations, changes in stockholders'
equity, and cash flow of TSFG as at the respective dates of and for the periods
referred to in the TSFG Financial Statements, all in accordance with GAAP,
subject, in the case of interim TSFG Financial Statements, to normal recurring
year-end adjustments (the effect of which will not, individually or in the
aggregate, be materially adverse) and the absence of notes (that, if presented,
would not differ materially from those included in the TSFG Balance Sheet); the
TSFG Financial Statements referred to in this Section 4.4 reflect the consistent
application of such accounting principles throughout the periods involved,
except as disclosed in the notes to the TSFG Financial Statements. No Financial
Statements of any Person is required by GAAP to be included in the consolidated
Financial Statements of the Company.
4.5 BROKERS OR FINDERS. Except for Xxxxxx & Associates (which shall
have been paid in full at Closing), Buyer and its agents have incurred no
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
4.6 NO UNDISCLOSED LIABILITIES. TSFG has no liabilities or obligations
of any nature (whether known or
16
unknown and whether absolute, accrued, contingent, or otherwise) except for
liabilities or obligations reflected or reserved against in the Interim Balance
Sheet, current liabilities incurred in the Ordinary Course of Business since the
date thereof, or liabilities or obligations that will not have a Material
Adverse Effect.
4.7 NO MATERIAL ADVERSE CHANGE. Since January 1, 2002, there has not
been any material adverse change in the business, operations, properties,
prospects, assets, or condition of TSFG not otherwise reflected in the TSFG
Financial Statements.
4.8 LEGAL PROCEEDINGS; ORDERS. There is no pending Proceeding that has
been commenced by or against TSFG or to Buyer's actual Knowledge that otherwise
relates to or may have a material adverse affect on the business or operations
of TSFG; or that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the transactions
contemplated herein. To the Knowledge of Buyer, no such Proceeding has been
Threatened, and no event has occurred or circumstance exists that may give rise
to or serve as a basis for the commencement of any such Proceeding.
4.9. TSFG INFORMATION. Within the last two years, TSFG has filed on a
timely basis all reports, registrations, and statements, together with any
amendments, required under the Securities Act of 1933 and the Securities
Exchange Act of 1934, all of which, as of their respective dates, were in
compliance in all material respects with the rules and regulations of the
Securities and Exchange Commission.
ARTICLE 5. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part).
5.1 ACCURACY OF REPRESENTATIONS. All of Sellers' representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must be accurate in
all material respects as of the date of this Agreement.
5.2 SELLERS' PERFORMANCE. All of the covenants and obligations that
Sellers are required to perform or to comply with pursuant to this Agreement at
or prior to the Closing (considered collectively), and each of these covenants
and obligations (considered individually), must have been duly performed and
complied with in all material respects. Each document required to be delivered
pursuant to Section 2.4 must have been delivered.
5.3 CONSENTS. Each of the Consents identified in Part 3.2 of the
Disclosure Letter must have been obtained and must be in full force and effect.
5.4 ADDITIONAL DOCUMENTS. The Sellers shall have delivered such other
documents as Buyer may reasonably request for the purpose of (i) evidencing the
accuracy of any of Sellers' representations and warranties, (ii) evidencing the
performance by either Seller of, or the compliance by either Seller with, any
covenant or obligation required to be performed or complied with by such Seller,
(iii) evidencing the satisfaction of any condition referred to in this Section
5, or (iv) otherwise facilitating the consummation or performance of any of the
transactions contemplated herein.
5.5 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the transactions contemplated
herein, or (b) that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with any of the transactions contemplated herein.
5.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must not
have been made or Threatened by any Person any claim asserting that such Person
(a) is the holder or the beneficial owner of, or has the right to acquire or to
obtain beneficial ownership of, any stock of, or any other voting, equity, or
ownership interest in, the Company, or (b) is entitled to all or any portion of
the Purchase Price payable for the Shares.
5.7 NO PROHIBITION. Neither the consummation nor the performance of any
of the transactions contemplated herein will, directly or indirectly (with or
without notice or lapse of time), materially contravene, or conflict with, or
result in a material violation of, or cause Buyer or any Person affiliated with
Buyer to suffer any material adverse consequence under, (a) any
17
applicable Legal Requirement or Order, or (b) any Legal Requirement or Order
that has been published, introduced, or otherwise proposed by or before any
governmental body.
5.8 INSURANCE.
(a) The Company shall have in force errors and omissions insurance with
limits of liability satisfactory to Buyer, shall have purchased a tail or
run-off endorsement to such policy extending from the period within which claims
can be made to a date not sooner than 36 months following the date of sale, and
shall have paid the premium for such insurance in full.
(b) Buyer shall have obtained key man life insurance on Xxxxxxx (with
the Buyer as beneficiary) in a minimum amount of $5 million.
ARTICLE 6. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Shares and to take the other actions
required to be taken by Sellers at the Closing is subject to the satisfaction,
at or prior to the Closing, of each of the following conditions (any of which
may be waived by Sellers, in whole or in part):
6.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must be accurate in
all material respects as of the date of this Agreement.
6.2 BUYER'S PERFORMANCE. All of the covenants and obligations that
Buyer is required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects. Buyer must have delivered each of the documents
required to be delivered by Buyer pursuant to Section 2.4.
6.3 CONSENTS. Each of the Consents identified in Part 3.2 of the
Disclosure Letter must have been obtained and must be in full force and effect.
6.4 ADDITIONAL DOCUMENTS. Buyer must have delivered to Sellers such
other documents as Sellers may reasonably request for the purpose of (i)
evidencing the accuracy of any representation or warranty of Buyer, (ii)
evidencing the performance by Buyer of, or the compliance by Buyer with, any
covenant or obligation required to be performed or complied with by Buyer, (iii)
evidencing the satisfaction of any condition referred to in this Section 6, or
(iv) otherwise facilitating the consummation of any of the transactions
contemplated herein.
6.5 NO INJUNCTION. There must not be in effect any Legal Requirement or
any injunction or other Order that (a) prohibits the sale of the Shares by
Sellers to Buyer, and (b) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.
ARTICLE 7. INDEMNIFICATION; REMEDIES
7.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED OF KNOWLEDGE. All
representations, warranties, covenants, and obligations in this Agreement, the
Disclosure Letter, the supplements to the Disclosure Letter, the certificate
delivered pursuant to Section 2.4(a)(4) and Section 2.4(c)(4), and any other
certificate or document delivered pursuant to this Agreement will survive the
Closing except as limited by Section 7.5 below. The right to indemnification,
payment of Damages or other remedy based on such representations, warranties,
covenants, and obligations will not be affected by any investigation by Buyer or
the Sellers (as applicable) conducted with respect to, or any Knowledge acquired
(or capable of being acquired) by Buyer or the Sellers (as applicable) at any
time, whether before or after the execution and delivery of this Agreement or
the Closing Date, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant, or obligation. The waiver of
any condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
7.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS. Subject to the
limitations contained in this Article 7, Sellers, Pro Rata and severally (but
not jointly), will indemnify and hold harmless Buyer, the Company, and their
respective Representatives, stockholders, controlling persons, and affiliates
(collectively, the "Indemnified Persons") for, and will pay to the
18
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, "Damages"), arising, directly
or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Sellers in
this Agreement, the Disclosure Letter, or any other certificate delivered by
Sellers pursuant to this Agreement;
(b) any Breach by either Seller of any covenant or obligation of such
Seller in this Agreement;
(c) any services provided by the Company prior to the Closing Date;
(d) any Tax liability of the Company for periods prior to the Closing
Date;
(e) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by any such Person with either Seller or the Company
or any Person acting on their behalf in connection with any of the transactions
contemplated herein.
7.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Sellers, and will pay to Sellers the amount of any
Damages arising, directly or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by Buyer in this
Agreement or in any certificate delivered by Buyer pursuant to this Agreement;
(b) any Breach by Buyer of any covenant or obligation of Buyer in this
Agreement; or
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or understanding
alleged to have been made by such Person with Buyer (or any Person acting on
Buyer's behalf) in connection with any of the transactions contemplated herein.
7.4 TIME LIMITATIONS. If the Closing occurs, Sellers will have no
liability (for indemnification or otherwise) with respect to any representation
or warranty, or covenant or obligation to be performed and complied with prior
to the Closing Date, other than those in Sections 3.3, 3.11, 3.13, and 3.19
unless within a two-year period commencing on the Closing Date, the Buyer
notifies Sellers of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Buyer. A claim with respect to
Section 3.3, 3.11, 3.13 and 3.19, or a claim for indemnification or
reimbursement under Section 7.2(d) and Section 7.2(e) may be made at any time
until the expiration of the applicable statute of limitations.
7.5 LIMITATIONS ON AMOUNT--SELLERS. A Seller will have no liability
(for indemnification or otherwise) with respect to the matters described in
clause (a), clause (b) or clause (c) of Section 7.2 until the total of all
Damages with respect to such matters exceeds $50,000. A Seller will have no
liability (for indemnification or otherwise) with respect to the matters
described in clause (a), clause (b) or clause (c) of Section 7.2 to the extent
the Damages exceeds the Purchase Price. Notwithstanding anything in this Section
to the contrary, with respect to matters described in clause (a) of Section 7.2,
the calculation of Damages as a result of a breach of a representation or
warranty in Article 3 shall be made without reference to (i) any "materiality"
qualifier, (ii) any qualifier limited by Material Adverse Effect or Material
Adverse Event or (iii) similar qualification based on "materiality." The
limitations contained in this Section 7.5 will not apply to a breach of the
representation in Sections 3.1 or 3.2. Notwithstanding anything in this Section
to the contrary, a Seller's liability hereunder shall never exceed the amount of
the Purchase Price actually received by such Seller.
7.5 LIMITATIONS ON AMOUNT--BUYER. Buyer will have no liability (for
indemnification or otherwise) with respect to the matters described in clause
(a) or (b) of Section 7.3 until the total of all Damages with respect to such
matters exceeds $50,000.
7.7 PROCEDURE FOR INDEMNIFICATION--THIRD PARTY CLAIMS.
(a) Promptly after receipt by an indemnified party under Section 7.2 or
Section 7.3 of notice of the commencement of any Proceeding against it, such
indemnified party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the commencement of
such claim, but the failure to notify the indemnifying party will not relieve
the indemnifying party of any liability that it may have to any indemnified
party, except to the extent that the indemnifying party demonstrates that the
defense of such action is prejudiced by the indemnifying party's failure to give
such notice.
(b) If any Proceeding referred to in Section 7.8(a) is brought against
an indemnified party and it gives notice to the indemnifying party of the
commencement of such Proceeding, the indemnifying party will, unless the claim
involves Taxes, be entitled to participate in such Proceeding and, to the extent
that it wishes (unless (i) the indemnifying party is also a party to such
Proceeding and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party fails to
provide reasonable assurance to the indemnified party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel satisfactory
to the indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to
19
assume the defense of such Proceeding, the indemnifying party will not, as long
as it diligently conducts such defense, be liable to the indemnified party under
this Section 7 for any fees of other counsel or any other expenses with respect
to the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope of and
subject to indemnification; (ii) no compromise or settlement of such claims may
be effected by the indemnifying party without the indemnified party's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on any
other claims that may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without its consent. If
notice is given to an indemnifying party of the commencement of any Proceeding
and the indemnifying party does not, within ten days after the indemnified
party's notice is given, give notice to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will be bound by
any determination made in such Proceeding or any compromise or settlement
effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
7.8 PROCEDURE FOR INDEMNIFICATION--OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
ARTICLE 8. GENERAL PROVISIONS
8.1 EXPENSES. Except as otherwise expressly provided in this Agreement,
each Party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the transactions contemplated herein, including all fees and expenses of
agents, representatives, counsel, and accountants and all amounts payable in
connection with this Agreement and the transactions contemplated herein. Sellers
will cause the Company not to incur any out-of-pocket expenses in connection
with this Agreement. In the event of termination of this Agreement, the
obligation of each party to pay its own expenses will be subject to any rights
of such party arising from a breach of this Agreement by another party.
8.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the transactions contemplated herein will be
issued, if at all, at such time and in such manner as the Parties mutually
determine. Unless consented to by the Parties in advance or required by Legal
Requirements, prior to the Closing the Parties shall, and shall cause the
Company to, keep this Agreement strictly confidential and may not make any
disclosure of this Agreement to any Person. Sellers and Buyer will consult with
each other concerning the means by which the Company's employees, customers, and
suppliers and others having dealings with the Company will be informed of the
transactions contemplated herein, and Buyer will have the right to be present
for any such communication.
8.3 NOTICES. All notices and demands of any kind which any party hereto
may be required or desires to serve upon another party under the terms of this
Agreement shall be in writing and shall be served upon such other party: (a) by
personal service upon such other party at such other party's address set forth
below, (b) by sending a copy thereof by Federal Express or equivalent courier
service, addressed to such other party at the address of such other party set
forth below; or (c) by sending a copy thereof by facsimile to such other party
at the facsimile number, of such other party set forth below. Such service shall
be deemed complete upon reasonable evidence of actual receipt. The addresses and
facsimile numbers to which, and persons to whose attention, notices and demands
shall be delivered or sent may be changed from time to time by notice served, as
hereinabove provided, by any party upon the other parties.
If to Buyer or TSFG: Carolina First Bank
000 X. Xxxx Xxxxxx 00xx Xxxxx
Xxxxxxxxxx, XX 00000
(000) 000-0000
Attn: General Counsel
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If to Xxxxxxx and/or Xxxxxxxxx: Xxxx X. Xxxxxxx, III
000 Xxxxxxx Xxxx
Xxxxxx, XX 00000
Xxxxx X. Xxxxxxxxx
000 Xxxxx Xxxx
Xxxxxxxxx, XX 00000
with a copy to: M. Xxxx Peace
Tyler, Cassell, Jackson, Peace & Silver, L.L.P.
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
8.4 JURISDICTION; ARBITRATION. In the event that there shall be any
dispute arising out of or in any way relating to this Agreement, the Parties
covenant and agree as follows:
(a) The Parties shall first use their reasonable best efforts to
resolve such dispute among themselves, with or without mediation.
(b) If the Parties are unable to resolve such dispute among themselves,
such dispute shall be submitted to binding arbitration in Greenville, South
Carolina, under the auspices of, and pursuant to the rules, of the American
Arbitration Association's Commercial Arbitration Rules as then in effect, or
such other procedures as the Parties may agree to at the time, before a tribunal
of three arbitrators, one of which shall be selected by the Sellers, one of
which shall be selected by the Buyer, and the third of which shall be selected
by the two arbitrators so selected.
(c) Any award issued as a result of such arbitration shall be final and
binding between the Parties, and shall be enforceable by any court having
jurisdiction over the party against whom enforcement is sought. A ruling by the
arbitrators is shall be non-appealable. The Parties agree to abide by and
perform any award rendered by the arbitrators.
(d) If either the Sellers or the Buyer seeks enforcement of this
Agreement or seeks enforcement of any award rendered by the arbitrators, then
the prevailing Party (designated by the arbitrators) to such proceeding(s) shall
be entitled to recover all of its costs and expenses from the non-prevailing
Party, in addition to any other relief to which it may be entitled.
(e) If a dispute arises and one Party fails or refuses to designate an
arbitrator within thirty (30) days after receipt of a written notice that an
arbitration proceeding is to be held, then the dispute shall be resolved solely
by the arbitrator designated by the other Party and such arbitration award shall
be as binding as if three (3) arbitrators had participated in the arbitration
proceeding.
(f) Either the Sellers or the Buyer may cause an arbitration proceeding
to commence by giving the other Party notice in writing of such arbitration. The
Sellers and the Buyer covenant and agree to act as expeditiously as practicable
in order to resolve all disputes by arbitration.
(g) Notwithstanding anything in this Section to the contrary, neither
the Sellers nor the Buyer shall be precluded from seeking court action in the
event the action sought is either injunctive action, a restraining order or
other equitable relief.
(h) The arbitration proceeding shall be held in English.
(i) Legal process in any action or proceeding referred to in the
preceding Article may be served on any party anywhere in the world.
(j) Except as expressly provided herein and except for injunctions and
other equitable remedies that are required in order to enforce the binding
provisions of this Agreement, no action may be brought in any court of law and
EACH OF THE PARTIES WAIVES ANY RIGHTS THAT IT MAY HAVE TO BRING A CAUSE OF
ACTION IN ANY COURT OR IN ANY PROCEEDING INVOLVING A JURY TO THE MAXIMUM EXTENT
PERMITTED BY LAW.
8.5 FURTHER ASSURANCES. The Parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
8.6 WAIVER. The rights and remedies of the Parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right,
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power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
8.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and Sellers dated July 31, 2000)
and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the party to be charged with the
amendment.
8.8 DISCLOSURE LETTER. In the event of any inconsistency between the
statements in the body of this Agreement and those in the Disclosure Letter
(other than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
8.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other parties, which will not be unreasonably withheld, except that Buyer
may assign any of its rights under this Agreement to any Subsidiary of Buyer.
Subject to the preceding sentence, this Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the successors and permitted
assigns of the parties. Nothing expressed or referred to in this Agreement will
be construed to give any Person other than the parties to this Agreement any
legal or equitable right, remedy, or claim under or with respect to this
Agreement or any provision of this Agreement. This Agreement and all of its
provisions and conditions are for the sole and exclusive benefit of the parties
to this Agreement and their successors and assigns.
8.10 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
8.11 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
8.12 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
8.13 GOVERNING LAW. This Agreement will be governed by the laws of the
State of South Carolina without regard to conflicts of laws principles.
8.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement this 20th day of September, 2002.
CAROLINA FIRST BANK,
a South Carolina corporation
/s/
------------------------------
(name and title)
XXXX X. XXXXXXX, III
/s/
------------------------------
An individual resident in South Carolina
XXXXX X. XXXXXXXXX
/s/
------------------------------
An individual resident in South Carolina
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EXHIBIT C
The Effective Date Balance Sheet will not be adjusted to reflect direct
xxxx receivables, as provided by GAAP. Direct xxxx receivables for purposes of
all calculations, will be accounted for on a cash basis.
It is contemplated that subsequent to Closing, the Company will be
merged into an existing insurance subsidiary of Purchaser. If that occurs,
Purchaser shall maintain separate accounting records with respect to the
operations of the Company in accordance with GAAP, all as if such merger did not
occur.
In the event of ambiguity as to calculations of EBITDA, the Effective Date
Balance Sheet or any related calculations , the manner utilized to calculate the
pro forma financials generated by Buyer with respect to the Company (copies of
which have been provided to Xxxxxxx) will be utilized.
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