Exhibit 2.8
MASTER STOCK PURCHASE AGREEMENT
This Master Stock Purchase Agreement (the "Agreement") is entered into
as of the 12th day of December, 2001, by and between EFS, Inc., an Indiana
corporation (the "Company") and NELnet, Inc., a Nevada corporation (the
"Buyer").
RECITALS
A. The Shareholders identified in Schedule 2.1 attached hereto
are the owners of the issued and outstanding capital stock of the Company; and
B. Shareholders desire to sell to Buyer and Buyer desires to
purchase from Shareholders all of the Stock representing a 100.00% equity
interest in the Company immediately after all transactions contemplated or
referenced in this Agreement, and it is the intent of the parties to this
Agreement to facilitate and cause such sale and purchase.
NOW, THEREFORE, in consideration of the foregoing premises and in
consideration of and in reliance upon the representations, warranties and
obligations in this Agreement, the parties agree as follows:
ARTICLE I
PURCHASE OF STOCK
1.1 Definition Reference. Certain capitalized terms are defined in
Section 8.1.
1.2 Purchase of Stock. Subject to the terms and conditions of this
Agreement, the Company will use its best efforts to cause Shareholders to agree
to sell, transfer and assign to Buyer free of all Liens, and Buyer agrees to
purchase all of the Stock.
ARTICLE II
CONSIDERATION
2.1 Purchase Price. In consideration of the sale of the Stock,
Buyer will pay Shareholders the aggregate purchase price of One Hundred Forty
Six Million Dollars ($146,000,000) as reduced in accordance with Section 2.1.2
hereof (the "Purchase Price"), payable as set forth below. The Purchase Price,
expressed on a per share basis, is $403.786 per share, based on a total of
296,512.515 shares of currently issued and outstanding Stock, and 65,065 shares
of stock reserved for issuance upon exercise of the outstanding Stock Options
(which shall have been exercised immediately prior to Closing in accordance with
Section 6.13 hereof) for a total of 361,577.515 shares of Stock outstanding at
Closing.
1
A list of the Shareholders, their respective ownership of Stock and their
respective allocation of Purchase Price reduced in accordance with Section 2.1.2
hereof is set forth in Schedule 2.1 hereof.
2.1.1 Closing Payment. At the Closing, Buyer will pay
$403.786 per share for the Stock (including Stock issued upon exercise of the
Stock Options), by cashiers check or wire transfer in immediately available
funds, reduced in accordance with Section 2.1.2 hereof.
2.1.2 Adjustments of Purchase Price. The Purchase Price,
allocable to each of the Shareholders as set forth in Schedule 2.1, shall be
reduced by the sum of (i) the aggregate exercise price associated with
exercising the Stock Options (through the repayment of loans made by the Company
to the holders of options), in accordance with Section 6.13 hereof, if any, and
withholding taxes (including without limitation federal, state and employees
social security and medicare taxes) attributable to exercise of the Stock
Options, if any (which will be forwarded to the Company for remittance to the
appropriate taxing authority), (ii) with respect to Shareholders who have
obtained loans from the Company or any Subsidiaries (other than loans for the
exercise of options), the aggregate amount necessary to pay in full all such
indebtedness of any of such Shareholders to the Company or any Subsidiaries, if
any, and (iii) the sum of $19.36 per share of the Stock to be deposited with the
Escrow Agent in accordance with the terms of the Escrow Agreement, all as set
forth in Schedule 2.1 hereof.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
The Company represents, warrants and covenants to Buyer, with respect
to the Company and each of the Subsidiaries (which Subsidiaries, for the purpose
of this Article III, shall be included in the term "Company" except where
otherwise noted), as of the date of this Agreement and as of Closing, as
follows:
3.1 Ownership of Stock. The Shareholders hold of record and, to
the Company's knowledge, are (except for trustees of the ESOP Trust) the
beneficial owners of the shares of the Stock set forth next to their respective
names on Schedule 2.1. Upon the delivery to the Buyer of the endorsed Stock
certificates the Buyer will be the lawful, title and beneficial owner of the
Stock, which constitutes 100.00% of the issued and outstanding stock of the
Company, and which shall be, as of the Closing Date, to the Company's knowledge,
free and clear from all Liens of any nature. As of the date of this Agreement,
other than commitments related to the Stock Options and ESOP Documents, the
Employees Stock Plan (the applicable provisions of which have been waived with
respect to transactions contemplated under this Agreement) and this Agreement,
there are no authorized or outstanding Liens, subscriptions, options, warrants,
calls, contracts, demands, commitments, convertible securities, rights of first
refusal or other agreements of any nature whatsoever, under which the Company
or, to the Company's knowledge, Shareholders are or may become obligated to
issue, assign or transfer any shares of the capital stock of the Company. The
Company has no outstanding shares of any class or series other than the Stock.
Other than this Agreement, as of the Closing Date there will be no authorized or
outstanding subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities, rights of first refusal, or other
agreements or arrangements of any nature whatsoever, under which the Company or,
to the
2
Company's knowledge, Shareholders are or may become obligated to issue, assign
or transfer any shares of the capital stock of the Company.
3.2 Authorization; Organization and Standing; Non-Contravention.
The Company has the necessary power and authority to execute and deliver this
Agreement and to perform the obligations to be performed by the Company
hereunder, and this Agreement is valid and binding upon the Company and
enforceable in accordance with its terms. The execution and delivery of this
Agreement by the Company has been duly authorized by all necessary corporate
action and does not, and the consummation of the transactions contemplated
hereby and the performance by the Company of the terms of this Agreement will
not (a) violate any Law, (b) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any Person the right to
accelerate, modify or cancel, or require any notice under any contract to which
the Company is a party or by which the Company is bound or which any of its
assets are subject, except as disclosed in Schedule 3.6A, (c) violate provisions
of the Company's articles of incorporation or bylaws, or (d) result in
acceleration of any obligation under, or constitute an event of default under
any order, judgment or decree to which the Company is bound, except as disclosed
in Schedule 3.6A. Except as specifically set forth in this Agreement, no
approval, authorization, license, permit or other action by, or filing with, any
Governmental Authority or non-governmental third party, or of the Shareholders
or directors of the Company is required that has not been obtained in connection
with the execution and delivery of this Agreement by the Company or the
consummation by the Company of the transactions contemplated hereby.
3.3 Intellectual Property. Schedule 3.3 attached hereto sets forth
a complete list of all patents, pending patent applications and registration
certificates (including a brief description of the subject matter thereof, the
jurisdiction, the date of issue or filing and the patent or application number),
all trade names, trade marks and service marks and applications therefor, all
copyright registrations, all copyrights not registered, all internet domain name
registrations of the Company, and all source codes used in the business and
operations of the Company and the Subsidiaries as presently conducted
(collectively, the "Intellectual Property"). The Company is the sole and
exclusive owner of the entire right, title and interest in and to the
Intellectual Property (other than Intellectual Property in which the Company
merely holds an interest as licensee, as identified in Schedule 3.3 attached
hereto), free of any and all Liens, and there are no pending, or to the
Company's knowledge, threatened proceedings or litigation or other adverse
claims affecting or with respect to the Intellectual Property. To the knowledge
of the Company, no Person is infringing upon rights of the Company with respect
to the Intellectual Property, and none of the Intellectual Property is
infringing upon the intellectual property rights of any other Persons.
3.4 Organization and Standing of the Company.
(a) The Company is a corporation duly organized and
validly existing under the laws of the State of Indiana, its state of
incorporation, and is legally qualified to transact business in every
jurisdiction in which the nature of the business conducted by it or the
character or location of properties owned or leased by it makes such
qualification necessary, except in such jurisdiction where failure to
be so duly qualified would not have
3
a material adverse effect upon the Company. A list of the jurisdictions
in which the Company is qualified to transact business is set forth in
Schedule 3.4 attached hereto.
(b) Buyer has received from the Company a true and
complete copy of the Company's articles of incorporation and bylaws,
and any amendments thereto, presently in effect. The minute books of
the Company are in good order, true, complete, correct and up-to-date,
and with all necessary signatures, setting forth all meetings and
actions taken by the shareholders and directors of the Company. The
stock transfer books and stock ledgers of the Company are in good
order, true, complete, correct and up-to-date, with all necessary
signatures, and set forth all stock certificates issued, transferred
and surrendered. The Company is not in default under or in violation of
any provision of its articles of incorporation or bylaws.
(c) The Company's entire authorized capital stock
consists of one million shares of common stock, no par value per share,
of which (i) 296,512.515 shares are issued and outstanding and owned by
the Shareholders as of the date of this Agreement and will be owned by
the Shareholders as of the Closing Date, and (ii) 65,065 shares are
reserved for issuance upon exercise of currently outstanding Stock
Options which shall be exercised immediately prior to the Closing. The
Stock is duly authorized, validly issued, fully paid, non-assessable
and free of preemptive rights, and is subject to no restrictions with
respect to transferability (other than as provided in the ESOP
Documents and the Employees Stock Plan, the applicable provisions of
which have been waived with respect to transactions contemplated under
this Agreement). There are no outstanding or authorized stock
appreciation, phantom stock, profit participation or similar rights
with respect to the Company, other than the Stock Options and the
Company's gain sharing plan. To the Company's knowledge, there are no
voting trusts, proxies or other agreements or understandings with
respect to the voting of the Stock (other than as provided in the ESOP
Documents).
(d) The Company has all licenses, permits and
authorizations necessary to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it. None of
the licenses, permits and authorizations of the Company will be
terminated or are terminable due to consummation of the transaction
provided for herein.
(e) From and after July 1, 1999, the Company is and has
been duly qualified as an "S" Corporation under the Code and Treasury
Regulations promulgated thereunder, and the Company and Shareholders
are eligible shareholders of an "S" Corporation in accordance with
provisions of the Code.
(f) The Company is a for-profit corporation and, to the
knowledge of the Company, the Company accomplished its conversion from
a not-for-profit public state agency to a for-profit corporation in
material compliance with applicable Law.
4
3.5 Good Title to Assets. The Company is the sole and
unconditional owner of, and has good and marketable title to, or a valid
leasehold interest in, free and clear of any Liens (other than Liens
specifically described in the Company's most recent financial statements), the
properties and assets used by it, located on its premises, or shown in the most
recent financial statements. The properties and assets owned by the Company as
of the Closing Date shall permit the Company to continue and carry on business
and operations in the Ordinary Course of Business.
3.6 Material Contracts. Schedule 3.6 attached hereto is a true and
complete schedule of all of the agreements which are binding upon the Company,
and which either are (i) agreements under the Company's FlexServ I or FlexServ
II program, (ii) forward purchase commitments to purchase FFELP Loans with an
aggregate outstanding balance in excess of $1,000,000 per agreement, or (iii)
agreements relating to matters other than FFELP Loan servicing or purchases
which individually involve consideration having a value aggregating in excess of
$1,000,000. True, correct and complete copies of all documents referred to in
Schedule 3.6 have been delivered or made available to Buyer. No Person has
claimed that any of such agreements listed in Schedule 3.6 are invalid or
unenforceable or in default. Except as set forth in Schedule 3.6A attached
hereto, none of such agreements or any other agreement to which the Company is a
party or by which it is bound contain any provision which will or could result
in termination or modification of any term upon change in control of the
Company. With respect to each of the agreements listed in Schedule 3.6, and any
other agreement to which the Company is a party or by which it is bound, such
agreement is legal, valid, binding, enforceable in accordance with its terms and
in full force and effect and will continue to be so following consummation of
the transaction contemplated hereby, and, to the Company's knowledge, no party
is in material breach or default and no event has occurred which with notice or
lapse of time, would constitute a breach or default, or permit termination,
modification or acceleration under such agreement.
3.7 Subsidiaries. The Company has no direct or indirect Subsidiary
with the exception of those set forth in the definition of "Subsidiaries"
contained in Section 8.1 hereof, and each of the representations and warranties
made with respect to the Company shall be fully applicable to each of the
Subsidiaries. The Company is the record and beneficial owner, either directly or
indirectly through a Subsidiary, of all of the issued and outstanding stock of
each Subsidiary free of any restrictions on transfer and, as of the Closing
Date, free and clear of all Liens.
3.8 Litigation. There are no actions, claims, proceedings,
litigation, state or federal Equal Employment Opportunity Commission proceedings
or investigations pending, or, to the Company's knowledge, threatened against
the Company with respect to its business, that could reasonably be expected to
have, directly or indirectly, individually or in aggregate, a material adverse
effect upon the Company. All pending litigation is identified in Schedule 3.8
attached hereto. The Company is not subject to any outstanding order or judgment
of any Governmental Authority directed at the Company.
3.9 Compliance with Laws. The Company has complied in all material
respects and is complying in all material respects with all Laws, and the
Company has not received notice of violation of any applicable Law. The Company
is in material compliance with all requirements of federal statutes and
5
regulations enacted under the Higher Education Act in connection with the
Company's business. Buyer has received from the Company true and accurate copies
of all Department of Education review results and Inspector General audit
reports in connection with the Company. Except as disclosed on Schedule 3.9,
each of the FFELP Loans held by or on behalf of the Company or which are to be
transferred to the Company is fully guaranteed or insured to the maximum extent
permitted under the Higher Education Act.
3.10 Compensation of Employees. Buyer has received from the Company
a true, correct and complete list of the names and job titles of all persons who
are employees of the Company, together with annual base salaries, bonuses,
commissions and leave accruals of such employees; provided, however, that as of
January 1, 2002, increases in such compensation to employees may be made in the
Ordinary Course of Business for regular annual increases averaging up to 4% of
the aggregate wages (with increases in excess of 4% permissible only for
individual employees receiving promotions in the Ordinary Course of Business,
provided, however, that Buyer must approve any increases in excess of 4% for any
promotions of employees with titles of assistant vice president or higher
following such promotion, which approval shall not be unreasonably withheld).
The Company shall not pay or agree to pay any bonuses, commissions or other
compensation (other than wages as set forth above) without prior written
approval of Buyer. There are no arrearages in the payment of wages or salaries
to such employees. Other than as previously disclosed, as of the Closing Date
the Company will have no employment agreements, compensation or deferred
compensation arrangements or consulting agreements with any employee or other
person or entity which is in writing or which is not terminable at will.
3.11 Taxes. All material Tax returns required to be filed prior to
the Closing Date have been filed in a timely manner and are true, complete and
correct in all material respects. All Taxes relating to the Company due on or
before the Closing Date have been timely and fully paid. The charges, accruals
and reserves for Taxes due, or accrued but not yet due, relating to the Company
for any Tax period prior to the Closing Date as reflected on the books of the
Company are adequate to cover such Taxes. No penalties or other charges of any
nature are or will become due with respect to the late filing of any Tax returns
required to be filed on or before the Closing Date. All material Taxes that the
Company is required by Law to withhold or collect have, in all respects, been
duly withheld or collected and have been timely paid over to the extent due and
payable. Any Tax Liability arising from the Company's election under Section
338(h)(10), including without limitation Tax Liability, if any, Taxes on
"built-in" gains, if any, shall be the responsibility of the Company and will be
reported on the final Tax return of the Company as an S Corporation. The gain
arising from the Section 338(h)(10) Election shall be reported on the final S
Corporation tax return filed by the Company and reported to the S Corporation
Shareholders. There are no Tax sharing agreements to which the Company is now a
party other than the intercompany agreement between EMT Corporation and EFS
Finance Co. The Company is not, and has never been, a party to any agreement
that would result, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code. The Company
is not a party to any joint venture, partnership or other arrangement or
contract that could be treated as a partnership for federal income tax purposes.
After the date hereof, no election or any other act with respect to Taxes will
be made without the prior written consent of Buyer.
6
3.12 Employee Benefit Plans Except as identified and described in
Schedule 3.12 attached hereto, the Company does not have "employee benefit
plans" as that term is defined in the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), that currently are maintained by, sponsored in whole
or in part by or contributed to, by or on behalf of the Company for the benefit
of its employees, retirees, dependents, spouses, directors, independent
contractors or other beneficiaries. Schedule 3.12 consists of a true, correct
and complete copy of the employee handbook in effect with respect to the
Company's employees as of the date hereof, which handbook contains true and
complete summaries of all material pension, retirement, profit-sharing, deferred
compensation, stock option, employee stock ownership, severance pay, vacation,
bonus or other material incentive plans, all other material written employee
programs, arrangements or agreements, whether arrived at through collective
bargaining or otherwise, all material medical, vision, dental or other health
plans, all life insurance plans and all other material employee benefit plans or
fringe benefit plans, including, without limitation, all "employee benefit
plans" as that term is defined in Section 3(3) of ERISA, currently adopted,
maintained by, sponsored in whole or in part by, or contributed to by, or on
behalf of, the Company for the benefit of its employees, retirees, dependents,
spouses, directors, independent contractors or other beneficiaries who are
eligible to participate therein (the "Benefit Plans"). Neither the Company nor
any ERISA Affiliate of the Company (which for purposes of this Agreement shall
mean any entity required to be aggregated with the Company under the Code
Sections 414(b) or (c)) has misrepresented any provision of such Benefit Plans
to any Persons, such Benefit Plans have been administered substantially in
accordance with their terms, and all required premium payments and contributions
to and payments from such Benefit Plans have been made in accordance with the
terms of the Benefit Plans and on a timely basis. In addition, for purposes of
any provision of this Agreement that relates to Code Section 412(n), the term
ERISA Affiliate shall mean any entity aggregated with a person under Code
Sections 414(b), (c), (m) or (o) which maintains or has maintained any
multi-employer plan within the meaning of Section 3(37) of ERISA. All Benefit
Plans have been administered and are in compliance in all material respects with
the applicable terms of ERISA, the Code and any other applicable Law. No Benefit
Plan which is a Defined Benefit Pension Plan (within the meaning of ERISA) has
any "unfunded current liability," as that term is defined in Section
302(d)(8)(A) of ERISA, and the present fair market value of the assets of any
such plan exceeds the plan's "benefit liabilities," as that term is defined in
Section 4001(a)(16) of ERISA, when determined under actuarial factors that would
apply if the plan terminated in accordance with all applicable legal
requirements. No Benefit Plan has an "accumulated funding deficiency" as defined
in Code Section 412. No event has occurred with respect to a Benefit Plan that
could subject the Company to liability under ERISA, other than Liabilities for
contributions due under such Benefit Plans in the Ordinary Course of Business
which arose from actions taken in compliance with ERISA. No Benefit Plan has
been funded or administered in a manner that would result in Liability for any
Tax or penalty with respect to excise Taxes for overfunding or prohibited
transactions under applicable Law. On the Closing Date, contributions to the
ESOP Trust shall be discontinued (except for a contribution of 8% of eligible
wages for plan year 2001 already accrued for and to be made in the Ordinary
Course of Business, and the distributions from the Escrow Agent as provided in
the Escrow Agreement), and the existing trustees of the ESOP Trust will be
retained at the sole cost of such ESOP Trust to determine, in accordance with
the agreement establishing the ESOP Trust, the appropriate course of action as
to assets held in the ESOP Trust for the benefit of the plan participants and
beneficiaries. Subject to terms of the ESOP Documents and applicable Law,
trustees
7
of the ESOP Trust may appoint successor trustees in order to fill vacancies. At
the sole cost of the ESOP Trust, the trustees of the ESOP Trust may terminate,
modify or amend the plan or roll the trust assets into a new plan in any manner
such trustees deem appropriate; provided, however, that such activities of the
ESOP Trust shall be in compliance with applicable Law and shall not increase the
cost of pension plan commitments or potential liabilities undertaken by Buyer or
the Company.
3.13 Absence of Certain Events. Since the date of the financial
statements of the Company dated October 31, 2001, there has not been:
(a) an amendment to the Company's articles of
incorporation or bylaws, or merger with or into or consolidation with
any Person, a change or agreement to change any agreements to which the
Company is a party except in the Ordinary Course of Business, or a
change in the character or the business of the Company;
(b) any dividends declared or paid or other distributions
of any kind to the Company's shareholders declared or made (except as
provided in Section 6.4(m) hereof), or any direct or indirect
redemption, purchase, retirement or other acquisition of any of the
Stock or Stock Equivalents, without the prior written consent of Buyer
in its discretion;
(c) any loan or advance made to any of the Company's
officers, directors, employees, consultants, agents, shareholders or
any other loan or advance made otherwise than in the Ordinary Course of
Business;
(d) any change in the financial condition, properties,
business or operations of the Company or any event or circumstance
which is, or with reasonable likelihood may result in, singly or in the
aggregate, a material adverse effect on the Company;
(e) any loss affecting any asset of the Company, unless
such loss could not reasonably be expected to result in a material
adverse effect upon the Company;
(f) any strike or other labor trouble or dispute has
resulted in or may result in a material adverse effect upon the
Company;
(g) any loss or threatened loss of any permit, license,
qualification or certificate of authority held by the Company;
(h) any material indebtedness, Liability or obligation
incurred by the Company or any transaction entered into by the Company,
other than in the Ordinary Course of Business, or any guarantee by the
Company of any indebtedness, Liability or obligation of any other
Person;
8
(i) any material obligation, Liability or Lien, paid,
discharged or satisfied by or on behalf of the Company other than the
current Liabilities reflected in the October 31, 2001 financial
statement;
(j) any sale, transfer or other disposition of any asset
of the Company including, without limitation, FFELP Loans, except in
the Ordinary Course of Business (and thus transfers of FFELP Loans to
guarantee agencies pursuant to the claims process or to another Person
pursuant to the consolidation process are permissible) or except as
approved in writing by Buyer;
(k) any material change in, or any oral or written
contract or arrangement to materially change, the compensation or other
direct or indirect remuneration payable to any officer, employee or
agent of the Company or any bonus, incentive or deferred compensation,
profit sharing, retirement, pension, group insurance, death benefit or
other fringe benefit plan, or any employment or consulting agreement,
granted, entered into or materially amended or altered, other than in
the Ordinary Course of Business (or other than as provided in Section
3.10 hereof);
(l) any capital expenditure, addition or improvement made
or committed to be made by or on behalf of the Company in excess of
$100,000.00 with respect to any single expenditure, addition or
improvement of the Company;
(m) any termination or failure to renew, or receipt of a
threat (that was not subsequently withdrawn) by a third party to
terminate or fail to renew any material agreement to which the Company
is a party;
(n) any material failure to maintain the books and
records of the Company in the usual, regular and ordinary manner,
consistent with past practice, or any material change in the accounting
principle or practice of the Company;
(o) any material adverse change in the business,
financial condition, operations, results of operations or reasonably
foreseeable future prospects of the Company;
(p) any write-off as uncollectible of any FFELP Loan or
other student loan, servicing fee or other receivable, or any portion
thereof, not reflected on the most recent financial statement of the
Company, except in the Ordinary Course of Business;
(q) any issuance of additional stock, Stock Equivalents
or interests of any nature whatsoever in stock with respect to the
Company, except as required in order to accomplish the exercise of the
Stock Options pursuant to Section 6.13 hereof; or
(r) any agreement or understanding to do any of the
foregoing.
9
3.14 Financial Statements. Schedule 3.14 attached hereto contains
an accurate and complete consolidated balance sheet, statements of operation,
changes in shareholder equity and cashflows relating to the Company
(collectively, the "Financial Statements") for: June 30, 1999; June 30, 2000;
June 30, 2001; and the four months ended October 31, 2001. Such information
fairly presents the financial condition and results of operation of the Company
as of and for such periods, have been prepared on a consistent basis throughout
the periods covered thereby, are correct and complete, and are consistent with
the books and records of the Company. All of the Financial Statements prior to
July of 2001 are statements prepared in accordance with GAAP on a consistent
basis throughout the periods covered thereby and are audited by a nationally
recognized firm of independent accountants.
3.15 Absence of Undisclosed Liabilities. The Company does not have
any direct or indirect, primary or secondary, Liability of any type, whether
accrued, absolute or contingent, liquidated or unliquidated, matured or
unmatured, or otherwise that will have, or is reasonably likely to have,
individually or in the aggregate, a material adverse effect upon the Company, or
that is required by GAAP to be set forth on a financial statement or notes
thereto except for the Liabilities which are accrued or reserved against and
reflected upon the Financial Statements of the Company or Liabilities incurred
in the Ordinary Course of Business since October 31, 2001.
3.16 Brokers and Finders. The Company has not employed any broker
or finder or incurred any Liability for any brokerage fees, commissions or
finder's fees in connection with this Agreement.
3.17 Conflicts of Interest. No officer or director of the Company
(or any member of any family of such officer or director) has any direct or
indirect interest in any creditor, competitor, supplier, customer or agent of
the Company, except as previously disclosed to Buyer and except for ownership of
less than 1% of the equity stock of any publicly traded entity.
3.18 Student Loan Servicing. The FFELP Loans serviced by the
Company or any Subsidiary for other Persons and the FFELP Loans held by or on
behalf of the Company or any Subsidiary have been originated (if originated by
the Company), serviced and collected in material compliance with applicable
servicing agreements, rules of guarantee agencies and the Higher Education Act,
except as disclosed in Schedule 3.9 attached hereto. The Private Loans serviced
by the Company or its Subsidiary for other Persons have been serviced and
collected in material compliance with applicable servicing agreements and Law,
except as disclosed in Schedule 3.9. None such FFELP Loans or Private Loans are
subject to any material error or deficiency in origination (if originated by the
Company), servicing or collection which may result in either a loss of
eligibility to receive any portion of principal, interest, special allowance
payments (or guarantee or insurance payments with respect thereto), or may give
rise to material Liability on the part of Company or its Subsidiaries, except as
disclosed in Schedule 3.9.
3.19 Student Loan Portfolio Characteristics. Schedule 3.19 attached
hereto sets forth the portfolio characteristics for all FFELP Loans which are
owned by or on behalf of the Company or its Subsidiaries as of October 31, 2001,
and such characteristics shall not vary, other than as a result of operations in
the Ordinary Course of Business or other than in a nonmaterial manner as of the
Closing Date.
10
Such portfolio characteristics accurately show the aggregate principal balances
of FFELP Loans by loan type, status, servicer, guarantor and owner. The amount
of the unpaid principal balance and accrued and unpaid interest of each FFELP
Loan held by or on behalf of the Company or its Subsidiary is due and owing, and
no counterclaim, offset, defense or right of rescission exists with respect to
any such FFELP Loan or which, with notice, lapse of time or the occurrence or
failure to occur of any act or event could be asserted and maintained by the
borrowers thereon against the Company or any Subsidiary. Except as described in
the details on the Company's borrower benefit programs set forth in Schedule
3.19A attached hereto, no FFELP Loan held by or on behalf of the Company or any
Subsidiary carries a rate of interest less than, or in excess of, the applicable
rate of interest required by the Higher Education Act. Each FFELP Loan held by
or on behalf of the Company or any Subsidiary has been duly executed and
delivered and constitutes the legal, valid and binding obligations of the maker
(and endorser, if any) thereof, enforceable in accordance with its terms. The
Company is not in default in the performance of any of its covenants and
agreements made in any guarantee agreement with respect to FFELP Loans, and all
FFELP Loans held by or on behalf of the Company or any Subsidiary are covered by
a guarantee agreement with a guarantee agency in accordance with the Higher
Education Act. Each FFELP Loan originated by or held by or on behalf of the
Company or its Subsidiary complies in all material respects with, and does not
violate in any material respect, applicable Law. The Company owns no record,
title or beneficial interest in or to any Private Loans, and has not originated
any Private Loans on its own behalf or for other Persons.
3.20 Eligible Lender Status. Title to any FFELP Loans in which the
Company holds an interest is held by an "eligible lender" as defined in the
Higher Education Act pursuant to a trust agreement in accordance with the Higher
Education Act, and such eligible lender holds the lender identification numbers
set forth in Schedule 3.20 attached hereto on behalf of the Company.
3.21 Suppliers and Customers. No educational institution or lender
which refers or sells a material volume of FFELP Loans to the Company or engages
the Company to service a material volume of FFELP Loans has terminated, or, to
the knowledge of the Company, threatened to terminate or contract the scope of
its relationship with the Company. As of the Closing Date, the Company is not
required to provide any bonding or other financial security arrangements in
connection with any transactions with any customers or suppliers.
3.22 Real Estate. Schedule 3.23 attached hereto is a true and
complete schedule of all leases of real estate to which the Company is a party.
All such leases are in full force and effect, the Company shall have the quiet
and peaceful possession of the properties covered thereby, and to the Company's
knowledge, none of the lessors thereunder are in material default under any of
the terms thereof. The Company owns no title interest in or to any real estate.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER
Buyer represents, warrants and covenants to the Company, as of the date
of this Agreement and as of Closing, as follows:
11
4.1 Organization and Power. Buyer is a corporation duly organized
and validly existing under the laws of the State of Nevada. Buyer has full
corporate power to execute, deliver and perform this Agreement and all other
agreements and documents to be executed and delivered by it in connection
herewith.
4.2 Authority; Noncontravention. Buyer has the necessary corporate
powers and authority to execute and deliver this Agreement and to perform the
obligations to be performed by Buyer hereunder, and this Agreement is valid and
binding upon Buyer and enforceable in accordance with its terms. The execution
and delivery of this Agreement will not (a) violate any Law, (b) conflict with,
result in a breach of, constitute a default under, result in acceleration of,
create in any Person the right to accelerate, modify or cancel, or require any
notice under any contract to which Buyer is a party or by which Buyer is bound
or which any of its assets are subject, (c) violate the articles of
incorporation or bylaws of Buyer, or (d) result in acceleration of any
obligation under, or constitute an event of default under, any order, judgment
or decree to which Buyer is bound. Except as specifically set forth in this
Agreement, no approval, authorization, license, permit or other action by, or
filing with, any Governmental Authority or non-governmental third party, or of
the shareholders or directors of Buyer is required that has not been obtained in
connection with the execution and delivery of this Agreement by Buyer or the
consummation by Buyer of the transactions contemplated hereby.
4.3 Financial Ability. Buyer has the necessary financial resources
available to it which will allow it to consummate the transactions contemplated
herein.
4.4 No Defaults or Violations. Buyer is not in default under any
mortgage, deed of trust, indenture or other instrument or agreement to which
Buyer is a party or by which it or its properties are bound, or in violation of
any Law which default or violation could reasonably be expected to have a
material adverse effect upon Buyer's ability to perform its obligations
hereunder.
4.5 Brokers and Finders. Buyer has not employed any broker or
finder or incurred any Liability for any brokerage fees, commissions or finder's
fees in connection with this Agreement.
ARTICLE V
CLOSING
5.1 Closing. If the conditions to the parties' obligations
enumerated below in Sections 5.2 and 5.3 are satisfied, consummation of the
transactions contemplated hereby (the "Closing") shall take place on a date
which will be a business day within a maximum of two (2) days following the date
on which the last such condition is satisfied or waived by the party hereto
entitled to the benefit of such condition (the "Closing Date") at a place to be
mutually agreed upon by the parties, or on such other date or at such other
location as the parties may agree. The parties shall use best efforts in good
faith to accomplish Closing and thus achieve a Closing Date as of December 19,
2001.
12
5.2 Conditions to Buyer's Obligation to Close. The obligation of
Buyer to close is subject to satisfaction (or written waiver by Buyer in Buyer's
sole discretion, provided, however, that no such waiver of a condition shall
constitute waiver by Buyer of any of its other rights if the Company, any
Shareholder or any Option Holder shall be in default of any of their respective
representations, warranties or covenants under this Agreement or any of the
Seller Agreements) of the following conditions at or before the Closing, it
being an explicit condition that all agreements and documents to be delivered to
Buyer which are not attached as Schedules (and therefore deemed satisfactory to
Buyer) must be in form and substance reasonably satisfactory to Buyer:
5.2.1 Deliveries of Company. Buyer will have received the
following: (i) Stock certificates duly endorsed in blank or with stock powers so
endorsed and attached thereto ready for immediate transfer into Buyer's name,
representing the transfer of Stock from 100% of the Shareholders of the Company
to Buyer, free of all Liens, (ii) certified copies of resolutions of the
directors of the Company and trustee(s) of the ESOP Trust authorizing execution,
delivery and performance of the Agreement; (iii) incumbency certificates of the
Company and the ESOP Trust; (iv) a favorable opinion of counsel to the Company,
the ESOP Trust, Xxxx X. Xxxxxxxxx, Xxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxx and Xxxxxx
X. Xxxxxx, in the form of Schedule 5.2.1 attached hereto; (v) all documents
necessary to make a unanimous (A) election by 100% of the Shareholders and the
Company under Section 338(h)(10) of the Code in accordance with Section 6.10
hereof, (B) consent by the Company and 100% of the Shareholders to allocation of
the Purchase Price in accordance with Section 6.11 hereof, and (C) irrevocable
exercise by holders of all Stock Options held by Stockholders; (vi) a current
certificate of existence from the Secretary of State of Indiana indicating the
Company and each Subsidiary is in existence as a corporation; (vii) certificates
of the Company, dated as of the Closing Date, to the effect that this Agreement
and related agreements have been performed and that representations and
warranties are accurate in all material respects as if made as of the Closing,
as contemplated in Sections 5.2.2 and 5.2.3 hereof, and signed by the Company
and Xxxx X. Xxxxxxxxx, Xxxxxxx X. Xxxxxx, Xxxxx X. Xxxxxx, Xxxxxx X. Xxxxxx and
Xxxxxx X. Xxxxxxx, as applicable; (viii) Books and Records of the Company and
its Subsidiaries including, without limitation, the stock books, stock ledgers,
minute books and contracts; (ix) the Escrow Agreement in the form of Schedule
5.2.1A attached hereto, executed by all parties intended to be signatories
thereon except Buyer; and (x) all Seller Agreements (and all deliveries required
to be made by Shareholders pursuant thereto) executed by Shareholders.
5.2.2 Agreements Performed. The Company shall have
performed all of the obligations under this Agreement to be performed by it
before Closing and the Shareholders shall have performed all of their respective
obligations under the Seller Agreements to be performed by them at or before the
Closing;
5.2.3 Representations Accurate The representations and
warranties of the Company contained herein and of the Shareholders contained in
the Seller Agreements will continue to be accurate in all material respects as
if made as of the Closing, without giving effect to any supplemental disclosure,
update or modification of any Schedule hereto;
13
5.2.4 No Change. Between October 31, 2001, and the Closing
Date, there will have been no material adverse changes in the financial
condition, results of operations, assets, business or reasonably foreseeable
prospects of the Company, and no pending Governmental Authority proceedings or
legal action which challenges the validity or legality of or seeks or is
reasonably expected to prevent, delay or impose conditions on the consummation
of the transactions contemplated by this Agreement or any of the Seller
Agreements;
5.2.5 HSR Act Compliance. The applicable waiting period,
together with any extensions thereof, under the HSR Act shall have expired or
been terminated;
5.3 Conditions to the Company's Obligations to Close. The
obligation of the Company to close is subject to satisfaction (or written waiver
by the Company in the Company's sole discretion, provided, however, that no such
waiver of a condition shall constitute waiver by the Company of any of its other
rights if Buyer shall be in default of any of its representations, warranties or
covenants under this Agreement) of the following conditions at or before the
Closing, it being an explicit condition that all agreements and documents to be
delivered to the Company which are not attached as Schedules (and therefore
deemed satisfactory to the Company) must be in form and substance reasonably
satisfactory to the Company:
5.3.1 Deliveries of Buyer. The Company or Shareholders, as
applicable under Schedule 2.1, will have received: (i) immediately available
funds by cashiers check or wire transfer in the amount of the Purchase Price
(pursuant to wiring instructions which the Company shall furnish or cause to be
furnished to Buyer at least two (2) days prior to the Closing Date); (ii) copy
of resolutions of Buyer's board of directors authorizing Buyer's execution,
delivery and performance of this Agreement; (iii) a favorable opinion of counsel
in the form of Schedule 5.3 attached hereto; (iv) a certificate of Buyer, dated
as of the Closing Date, to the effect that this Agreement and related agreements
have been performed and representations and warranties are accurate in all
material respects as if made as of Closing; and (iv) the Escrow Agreement with
the Escrow Agent in the form of Schedule 5.2.1A attached hereto and executed by
Buyer;
5.3.2 Agreements Performed Buyer will have performed all
of the obligations under this Agreement and the Seller Agreements attached
hereto to be performed by it at or before the Closing;
5.3.3 Representations Accurate. The representations and
warranties of Buyer contained herein will continue to be accurate in all
material respects as if made as of the Closing without giving effect to any
supplemental disclosure, update or modification of any Schedule hereto;
5.3.4 Legal Action. There will be no pending Governmental
Authority proceedings or legal action which challenges the validity or legality
of or seeks or is reasonably expected to prevent, delay or impose conditions on
the consummation of the transactions contemplated by this Agreement or the
Seller Agreements; and
14
5.3.5 HSR Act Compliance. The applicable waiting period,
together with any extensions thereof, under the HSR Act shall have expired or
been terminated.
5.4 Termination. This Agreement may be terminated:
(a) by written agreement of Buyer and the
Company;
(b) by the Buyer, if there has been a material
breach by any of the Shareholders or the Company or its
Subsidiaries of any of the Shareholders' or Company's (or its
Subsidiaries') respective representations, warranties,
covenants or agreements set forth in this Agreement or in the
Seller Agreements which breach is not or cannot be cured
promptly by the Shareholders or the Company or its
Subsidiaries;
(c) by the Company if there has been a material
breach by Buyer of any of Buyer's representations, warranties,
covenants or agreements set forth in this Agreement or in the
Seller Agreements which breach is not or cannot be cured
promptly by Buyer;
(d) by the Company, under the provisions of
Section 9.1 hereof;
(e) by the Company if the conditions set forth
in Section 5.3 hereof (other than Section 5.3.5) are not
satisfied or waived on or before January 14, 2002;
(f) by Buyer if the conditions set forth in
Section 5.2 hereof (other than Section 5.2.5) are not
satisfied or waived on or before January 14, 2002;
(g) by the Company or by Buyer if the conditions
set forth in Section 5.2.5 or Section 5.3.5 hereof are not
satisfied on or before January 14, 2002, or such other date as
the parties hereto may agree upon.
If this Agreement is terminated pursuant to paragraph (a), (e), (f) or (g) of
this Section, all provisions of this Agreement will become void without any
Liability on the part of any party. If this Agreement is terminated pursuant to
paragraph (d) of this Section, all provisions of this Agreement will become void
without any Liability on the part of any party, except for Section 9.1 hereof.
If this Agreement is terminated pursuant to paragraph (b) or (c) of this
Section, all rights and remedies of each party hereunder and all other
provisions hereof related thereto, including without limitation the provisions
of Section 9.1 hereof, will survive termination to the extent required so that
any party responsible for any breach or nonperformance of its obligations
hereunder prior to termination will remain liable for the damages resulting
therefrom. All rights and remedies of each party hereunder and all other
provisions hereof related thereto will survive
15
termination to the extent required so that any party responsible for any breach
or nonperformance of its obligations hereunder prior to termination will remain
liable for the damages resulting therefrom.
5.5 Closing Deliveries. As soon as possible following the date of
this Agreement, the parties hereto will obtain the items required for delivery
in Sections 5.2.1 and 5.3.1 hereof, and on the Closing Date the parties hereto
will make or cause to be made, the transfers and deliveries set forth in
Sections 5.2.1 and 5.3.1 hereof. The transfers and deliveries herein
contemplated will be mutually interdependent and regarded as occurring
simultaneously; and no such transfer or delivery will become effective until all
of the transfers and deliveries provided for hereunder have been consummated.
The transfers and deliveries herein contemplated will be deemed to have occurred
and the Closing will be effective as of the close of business on the Closing
Date. The Company will provide to Buyer information with respect to the progress
of obtaining items necessary for Closing and as reasonably requested by Buyer
from time to time.
ARTICLE VI
COVENANTS
6.1 Miscellaneous Covenants.
6.1.1 Publicity. The parties shall cooperate and agree as
to the form, timing and substance of all public announcements relating to this
Agreement or the transactions contemplated hereby and such announcements will be
made only as may be authorized mutually by Buyer and the Company or as required
by Law.
6.1.2 Expenses. Except to the extent otherwise specifically
provided herein, each party will pay all of its own respective expenses incident
to the transactions contemplated by this Agreement which are incurred by such
party or its representatives, except that the Company shall pay the expenses of
the Shareholders, with respect to fees of attorneys (other than counsel to the
ESOP Trust), accountants and valuation agents engaged in connection with this
Agreement, up to a maximum aggregate of $250,000.
6.1.3 No Assignment. No assignment of any part of this
Agreement or any right or obligation hereunder may be made without the prior
written consent of the other party, and any assignment attempted without that
consent will be void.
6.1.4 Further Assurances. The parties shall use their best
efforts to fulfill all conditions to the obligation of the other parties to
consummate the transactions contemplated hereby and, after the Closing, take
such further actions as may be reasonably requested by the other party to
accomplish the intent set forth herein.
6.2 Confidentiality.
16
6.2.1 Confidentiality Obligation. Except for a Required
Disclosure (as defined below) each party hereto agrees not to disclose or use,
directly or indirectly, any Confidential Information (as defined below), at any
time after execution of this Agreement, and the Closing. In the event of a
contemplated Required Disclosure of Confidential Information by a party, such
party agrees to use his, her or its best efforts to provide the other party and
the Company an opportunity to object to the disclosure and as much prior written
notice as is possible under the circumstances. For purposes of this Section
6.2.1, "Confidential Information" means (i) all information belonging to, used
by, or which is in the possession of any party hereto relating to the Company's
or its Subsidiaries' or another party hereto's business to the extent such
information is not intended to be disseminated to the public or is otherwise not
generally known to competitors of the Company or its Subsidiaries, including,
but not limited to, information relating to the Company's or its Subsidiaries'
products, services, strategies, pricing, customers, representatives, suppliers,
distributors, technology, finances, employee compensation, computer software and
hardware, inventions, developments, or trade secrets and (ii) all information
relating to the acquisition of the Stock by Buyer hereunder, including, without
limitation, all strategies, negotiations, discussions, terms, conditions and
other information relating to this Agreement and each other document and
agreement delivered in connection herewith. Each party hereto acknowledges that
following the Closing all of the Confidential Information will be the exclusive
proprietary property of the Company or of the appropriate other parties hereto,
as the case may be, whether or not prepared in whole or in part by any party
hereto and whether or not disclosed to or entrusted to the custody of any party
hereto. Nothing herein shall require any party to withhold from disclosure of
any Confidential Information hereunder where disclosure is required by Law,
required to be included in either party's financial statements or required for
the preparation and submission of any report for any agency, commission or board
requiring such information in connection with such party's business (a "Required
Disclosure"). Notwithstanding any other provision contained in this Agreement to
the contrary, the Buyer may furnish information (including Confidential
Information) to third Persons who are agents or employees of the Buyer.
6.3 Access to Information. Upon reasonable notice and subject to
applicable Laws relating to the exchange of information, the Company shall
afford to the officers, employees, accountants, counsel and other
representatives of Buyer access, during normal business hours during the period
prior to the Closing Date, to all of the properties of the Company and, during
such period, the Company shall make available to Buyer all information and Books
and Records concerning the Company and its properties, business and employees as
Buyer may reasonably request.
6.4 Conduct of Business. The Company agrees that, from the date
hereof through the Closing, except to the extent otherwise permitted by this
Agreement or consented to in writing by Buyer, the Company shall:
(a) operate its business only in the Ordinary Course of
Business;
(b) not enter into or assume any material agreement,
contract or instrument relating to the Company or enter into or permit
any material amendment, supplement, waiver or other modification in
respect thereof;
17
(c) pay accounts payable and other obligations of the
Company when they become due and payable in the Ordinary Course of
Business;
(d) use its reasonable efforts to preserve its business
organizations intact, to retain the services of its employees and to
preserve its goodwill and relationships with customers, suppliers,
creditors and others having business relationships with it;
(e) take such action as may be reasonably necessary to
preserve its properties and assets and to maintain its permits and
licenses;
(f) maintain its insurance policies in full force and
effect;
(g) comply with any applicable Law;
(h) promptly advise Buyer in writing of any material
adverse effect on the Company or its business, financial condition or
properties and of any event or circumstance which will, or with
reasonable certainty will, result in such a material adverse effect on
the Company or which will, or with reasonable certainty will,
constitute a violation or breach of any representation, warranty or
covenant contained in this Agreement;
(i) review with Buyer all decisions regarding new
contracts or extensions or amendments of existing contracts, equipment
purchases and sales and other operational decisions involving
individually or in the aggregate more than $100,000.00;
(j) except as required by applicable Law, and except as
provided in Section 3.10 hereof, not make or commit to make any salary
or wage increase with respect to any officer, employee or agent or
enter into, amend or alter any Benefit Plan, trust agreement or
arrangement or any employment or consulting contract;
(k) not pay, discharge or satisfy any Liability or Lien
other than current Liabilities reflected in the most recent financial
statements of the Company, and current Liabilities incurred since the
date of the most recent financial statements of the Company in the
Ordinary Course of Business;
(l) not sell, transfer or otherwise dispose of or
encumber any of its cash, assets (including, without limitation, FFELP
Loans) or properties, or engage in any activity in connection with any
securitization of assets owned by the Company or its Subsidiaries,
without the prior written approval of Buyer;
(m) not declare or pay any dividend or make any
distribution with respect to the Stock, or redeem, purchase or
otherwise acquire any of its capital stock, except as provided in
Section 6.16 hereof;
18
(n) not modify or amend any of the terms of any of the
contracts to which the Company is a party;
(o) not issue any new or additional shares of Stock or
any Stock Equivalents;
(p) not make any contract or understanding to take any
action referred to in Sections 6.4(a) through 6.4(n) above; and
(q) not take any affirmative action, or fail to take any
reasonable action within its control, which would result in any of the
changes or events listed in Sections 3.13(a) through 3.13(r).
6.5 Seller Agreements The Company shall recommend that
Shareholders of the Company execute the Seller Agreements and perform all
covenants undertaken by Shareholders thereunder. In any event, this Agreement
shall be binding upon the Company, irrespective of whether all Shareholders of
the Company sign the Seller Agreements.
6.6 Employee Benefits. To the extent permitted by applicable Law,
Buyer or its Affiliates shall provide employees of the Company and its wholly
owned Subsidiaries who may be retained subsequent to the Closing Date employee
benefits to the same extent that Buyer or its Affiliates provides such benefits
to their similarly situated employees, subject to the eligibility requirements
for such benefits. Each such employee will be credited with the same vesting
years of service as existed under the Company's plan as of the Closing Date
under the rules of the applicable plan of Buyer or its affiliates.
6.7 Financial Information. From and after the date hereof, the
Company shall provide Buyer with copies of monthly financial statements of the
Company. Such financial statements shall be delivered to Buyer within five (5)
days after such statements become generally available to management of the
Company.
6.8 Officers and Employees. Without incurring any Liability with
respect to the Company, the Company shall use its best efforts to cause all
officers and employees of the Company to remain with the Company after the
Closing Date. Prior to the Closing Date, the Company shall use best efforts to
enter into employment agreements with key employees under terms as designated or
requested by Buyer, including noncompete covenants.
6.9 Final Tax Return. The Company shall engage either the
accounting firm of KPMG Peat Marwick LLP or Xxxxx Xxxxxx and Company to prepare
the final "S" Corporation return for the Company following Closing, so long as
the terms of such engagement do not vary materially from terms of prior
engagements of Xxxxx Xxxxxx and Company and the contents of such final return
shall be conclusive only with the consent and concurrence of the accountants not
so engaged.
19
6.10 Section 338(h)(10) Election. The Company agrees to join in,
and to use best efforts to cause Shareholders to join in, making a unanimous,
timely, effective and irrevocable election under Section 338(h)(10) of the Code
(and any corresponding election under state, local or foreign Tax Law)
(collectively, the "Section 338(h)(10) Election") with respect to the
transaction contemplated by this Agreement and to file such Section 338(h)(10)
Election in accordance with applicable Law. Buyer and the Company agree to
cooperate (and to use best efforts to cause Shareholders to cooperate) in all
respects for the purpose of effecting a timely and effective Section 338(h)(10)
Election, including without limitation, the execution and filing of any forms,
consents or returns.
6.11 Allocation of Purchase Price. At and following the Closing,
Buyer and the Company shall make (and the Company shall use best efforts to
cause Shareholders to make) a good faith, unanimously approved allocation of the
Purchase Price among the assets of the Company substantially as set forth in
Schedule 6.11 attached hereto (the "338 Allocation") within the requirements of
Treasury Regulation Section 1.338(b)-2T with the knowledge and understanding
that the 338 Allocation will be used by Buyer, the Company, Shareholders for
federal income tax reporting purposes. The Company and Buyer shall report (and
the Company shall use best efforts to cause Shareholders to report) the
transactions contemplated by this Agreement for federal income tax purposes in
accordance with the 338 Allocation. Neither Buyer nor the Company, nor any
consolidated or unitary Tax reporting group of which either of them is a party,
shall take (and the Company shall use best efforts to cause the Shareholders not
to take) any position inconsistent with the 338 Allocation except with the
written consent of the other parties to this Agreement.
6.12 HSR Act Filings. On November 30, 2001, the parties caused to
be prepared and filed, with the appropriate Governmental Authorities, a
notification with respect to the transactions contemplated by this Agreement
pursuant to the HSR Act. Each party will promptly provide all additional
information requested, and take all other actions necessary or appropriate, to
comply with notification requirements under the HSR Act and to cause the
expiration of all waiting periods under the HSR Act. The filing fee under the
HSR Act shall be paid 50% by the Company and 50% by the Buyer.
6.13 Exercise of Stock Options. The Company shall use best efforts
to cause any holders of Stock Options to make an irrevocable exercise of such
Stock Options which is effective immediately prior to Closing. If Closing does
not occur, the exercise of the Stock Options will not be effective. Holders of
Stock Options shall be responsible for paying the exercise price attributable to
the exercise of Stock Options hereunder, and for any withholding taxes
(including without limitation federal, state and employees social security and
medicare taxes) attributable to the exercise of the Stock Options, and such
Liabilities shall reduce the Purchase Price as provided in Section 2.1.2(i)
hereof. The Company shall not exercise any right of first refusal, option,
redemption rights or other rights of similar nature with respect to the Stock,
unless Buyer requests the Company to exercise any such rights. The Company is
authorized to loan each holder of Stock Options the exercise price of such Stock
Options, which loans shall be repaid by a reduction in Purchase Price as
provided in Section 2.1.2 hereof.
20
6.14 Payment of Indebtedness. On or before the Closing Date, the
full outstanding principal balance and accrued and unpaid interest with respect
to any and all outstanding indebtedness owed by any of the Shareholders to the
Company or any Subsidiary shall be paid by reduction of the Purchase Price in
accordance with Section 2.1.2(ii) hereof. In addition, prior to Closing, the
Company shall pay in full the outstanding principal balance and accrued and
unpaid interest with respect to any and all unsecured or general obligation
indebtedness owed by the Company, including, without limitation, the
indebtedness owed by the Company to Bank One, N.A.
6.15 Separate Seller Agreements. The Company shall use best efforts
to cause Shareholders to execute and deliver to Buyer the Seller Agreements
attached in the form of Schedule 6.15 attached hereto, as requested by Buyer.
6.16 Permitted Dividends. If the Closing occurs on or before
December 31, 2001, no distributions or dividends of any nature shall be made by
the Company through Closing. If Closing occurs after December 31, 2001, then the
Company shall be permitted to make dividend distributions to all Shareholders,
as follows: (i) with respect to 2001 operations, the Company shall at any time
after December 31, 2001 and prior to Closing, distribute cash dividends of up to
40% of estimated 2001 Taxable income from the Company's operations, reduced by
the amount of $9,165,725 (which represents the cumulative dividends attributable
to 2001 estimated taxable income paid through September 30, 2001); (ii) in
addition, within thirty (30) days of the Closing Date, the Company shall make
dividend distributions of up to 45% of the Company's estimated Taxable income
from the Company's operations for 2002, pro-rated for the number of days in 2002
that the Company remained an S Corporation; and (iii) in addition, after the
final 2001 S Corporation Taxable income has been determined by the parties'
respective accountants, an additional distribution attributable to 2001 Taxable
income shall be made by the Company to all Shareholders by February 15, 2002, in
an amount determined by multiplying 2001 S Corporation Taxable income by 45% and
reducing that product by the sum of $9,165,725 and the dividends paid pursuant
to clause (i) above. The distributions permitted in clauses (i), (ii) and (iii)
above shall be reduced by the amount of $6,000,000. In any event, and
notwithstanding any provision herein to the contrary, any element of reportable
gain attributable to the transactions contemplated herein, as well as
compensation expense recognized upon exercise of all Stock Options, shall be
excluded from Taxable income in determining the amount of dividends payable, and
the determination of Taxable income shall be reduced by the "Built-In Gains
Tax," if any, described in Section 3.11 hereof. The foregoing notwithstanding,
Shareholders shall have no obligation to repay or refund any of the $9,165,725
dividend distributions made prior to September 30, 2001.
6.17 Supplemental Disclosure. Until the Closing, the parties hereto
will immediately notify the other party of any event or circumstance that:
(a) makes it necessary to correct any representation and
warranty in Article III or IV that has been rendered inaccurate
thereby; or
21
(b) arises hereafter and which, had it existed on or
prior to the date hereof, would have resulted in an inaccuracy in a
representation and warranty in Article III or IV.
6.18 Insurance. The Company and/or Buyer shall pay for continuation
of current or substantially equivalent insurance coverage of trustee(s) of the
ESOP Trust and for directors of the Company for up to three years following the
Closing of this Agreement at a maximum aggregate cost of approximately $40,000
annually, or such other amount as may be agreed upon by the parties.
ARTICLE VII
INDEMNIFICATION
7.1 Survival of Representations and Warranties With the exception
of the representations and warranties contained in Sections 3.5, 3.18 and 3.19
(which shall survive Closing), the representations and warranties of the Company
in Article III and Buyer in Article IV will not survive the Closing.
7.2 Indemnification by the Company. The Company will indemnify
Buyer and its Affiliates (exclusive of the Company, its Subsidiaries and the
Shareholders) and the shareholders, directors, employees and agents of Buyer and
its Affiliates (exclusive of the Company, its Subsidiaries and the Shareholders)
(collectively, the "Buyer Indemnified Parties") against and hold them harmless
from all Liability, loss, damage, deficiency or cost (including without
limitation reasonable attorneys fees) from or arising out of any breach or
nonperformance of any covenant or obligation made or incurred by the Company
herein including, without limitation, Liability arising from claims of other
Persons.
7.3 Indemnification by Buyer. The Buyer will indemnify the Company
and its agents, inclusive of the Shareholders only as to Section 7.3(b) hereof
(collectively, the "Company Indemnified Parties") against and hold them harmless
from:
(a) Covenants. All Liability, loss, damage, deficiency or
cost (including without limitation reasonable attorneys fees) resulting
from or arising out of any breach or nonperformance of any covenant or
obligation made or incurred by Buyer herein including, without
limitation, Liability arising from claims of other Persons.
(b) Built-In Gain Taxes. Such liability, loss, damage,
deficiency or cost (including without limitation reasonable attorneys
fees) resulting from or arising out of Tax liability for "built-in
gains" under Section 1374 of the Code and which arise from the
transactions contemplated herein, but the amount for which Buyer shall
be liable under this Section 7.3(b). If any claim or demand for
"built-in gain" Taxes in respect of which indemnity may be sought
pursuant to this Section 7.3(b) is asserted in writing against the
Company, the Company shall promptly notify Buyer of such claim or
demand within sufficient time that would allow Buyer to timely respond
to such claim or demand, and shall give Buyer such information with
respect thereto as Buyer may reasonably request. Buyer may discharge,
at any time, its indemnification obligation under this Section 7.3(b)
by
22
paying to the Company the amount of the applicable indemnification for
built-in gain Taxes, calculated on the date of such payment. Buyer may,
at its own expense, participate in and, upon notice to the Company,
assume the defense of any such claim, suit, action, litigation or
proceeding (including any Tax audit). The Company shall have the right
(but not the duty) to participate in the defense thereof and to employ
counsel, the reasonable cost of which will be at Buyer's expense,
separate from the counsel employed by Buyer. If Buyer chooses to defend
or prosecute any claim, all of the parties hereto shall cooperate in
the defense or prosecution of such claim. Buyer shall not be liable
under this Section 7.3(b), for (i) any Tax claimed or demanded by any
Governmental Authority, the payment of which was made without Buyer's
prior written consent, or (ii) any settlements effected without the
consent of Buyer, or resulting from any claim, suit, action, litigation
or proceeding in which Buyer was not permitted an opportunity to
participate.
7.4 Basket and Limitation of Liability. In connection with each of
the Shareholders' indemnity obligations (contained in the Seller Agreements)
arising solely from breaches by the Company of representations and warranties
contained in Sections 3.5, 3.18 and 3.19 hereof, no Shareholder shall have
indemnity obligation with respect to such breaches of Sections 3.5, 3.18 and
3.19 hereof until the aggregate amount of all "Claims" (as defined below)
exceeds $2,500,000. "Claims" shall mean (i) claims for breaches under Sections
3.5, 3.18 and 3.19 hereof and which are made in connection with matters other
than loan servicing errors of the Company or its Subsidiaries, and (ii) claims
for breaches under Sections 3.18 and 3.19 hereof made in connection with FFELP
Loan and Private Loan servicing errors committed by the Company or its
Subsidiaries prior to Closing and which (A) may reasonably be expected to result
in a loss of guarantee on FFELP Loans or Private Loans in the event a claim is
filed with a guarantor, (B) resulted from a systemic defect or series of defects
in the Company's (or its Subsidiaries') servicing operations, and (C) singly, or
in the aggregate, impact upon a material portion of the FFELP Loans or Private
Loans serviced by the Company or its Subsidiaries. The total amount of Claims
shall not exceed $7,000,000 ($19.36 per share of Stock acquired by Buyer
hereunder) and shall be payable only from funds held under the Escrow Agreement
for that purpose. Claims must be identified by Buyer and submitted to the Escrow
Agent prior to December 1, 2002. Buyer agrees to negotiate in good faith with
the agent for the Shareholders the total amount of the Claims to be paid
hereunder and, in connection with Claims relating to servicing errors, Buyer and
the agent for the Shareholders under the Escrow Agreement shall consider such
factors as historical default rates, historical cure rates, historical interest
penalties, potential Liabilities to the Department of Education, and costs to
cure. Settlement of Claims shall be further governed by the agreement with the
Escrow Agent as provided in Schedule 5.2.1A hereof.
ARTICLE VIII
CONSTRUCTION
8.1 Definitions. When used in this Agreement, the following terms
in all of their tenses and cases will have the meanings assigned to them below
or elsewhere in this Agreement as indicated below:
23
"Acquisition Proposal" means any proposal for any acquisition of all or
part of the Stock or assets or properties of the Company outside the Ordinary
Course of Business, or merger, consolidation or other combination involving the
Company.
"Affiliate" of any Person means any person directly or indirectly
controlling, controlled by, or under common control with, any such Person and
any officer, director or controlling person of such Person.
"Agreement" means this Stock Purchase Agreement and any amendments or
modifications thereof.
"Books and Records" means all books and records of the Company relating
to the Company's business and properties, including, but not limited to, (i) all
books and records relating to the purchase of materials and supplies, sales of
products, dealings with customers, invoices, suppliers' lists and personnel
records, (ii) all contracts, reports, opinions, maps and other documents
affecting the title to or the value of the properties of the Company, (iii) Tax
returns, and (iv) all financial and operating data, files and other information
with respect to the Company's business and properties.
"Buyer" means NELnet, Inc., a Nevada corporation.
"Buyer Indemnified Parties" is defined in Section 7.2.
"Closing" and "Closing Date" are defined in Section 5.1.
"Code" means the Internal Revenue Code of 1986, as amended, and shall
incorporate Treasury Regulations, private letter rulings and other regulatory
pronouncements.
"Company" means EFS, Inc., an Indiana corporation.
"Company Indemnified Parties" is defined in Section 7.3.
"Competitive Business" means engaging in, directly or indirectly
(including providing aid, assistance, or advice to any third party), business
operations with respect to the origination, referral, funding, financing,
marketing, solicitation, servicing, acquisition, transfer, sale or any other
venture connected with FFELP Loans or Private Loans.
"Confidential Information" is defined in Section 6.2.1.
"Escrow Agent" means Union Bank and Trust Company.
"Escrow Agreement" means the agreement among the Escrow Agent, certain
Shareholders and Buyer as shown in Schedule 5.2.1A.
24
"ESOP Documents" means, collectively, ESOP Trust's plan document and
promissory notes and related security documents given by the ESOP Trust to the
Company.
"ESOP Trust" means EFS, Inc. Employees' Retirement Plan.
"FFELP Loans" means student loans made and intended to be guaranteed
pursuant to the Higher Education Act.
"GAAP" means generally accepted accounting principles.
"Governmental Authority" means any federal, provincial, municipal,
state, regional or local authority, agency, body, court or instrumentality,
regulatory or otherwise, domestic or foreign, which, in whole or in part, was
formed by or operates under the auspices of any federal, provincial, municipal,
state, regional or local government, domestic or foreign.
"Higher Education Act" means Title IV, Parts B, F and G, of the Higher
Education Act of 1965, as amended or supplemented and in effect from time to
time, or any successor enactment thereto, and all regulations promulgated
thereunder and any directives issued by the United States Secretary of
Education.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Law" means any common law and any federal, provincial, municipal,
state, regional, local or foreign law, bylaw, rule, statutes, ordinance, rule,
order or regulation.
"Liabilities" means responsibilities, obligations, duties, commitments,
claims and liabilities of any and every kind, whether known or unknown, accrued,
absolute, contingent or otherwise.
"Lien" means any security interest, lien, charge, covenant, condition,
voting rights restriction, easement, adverse claim, demand, encumbrance,
limitation, security interest, option, pledge, warrant or any other title defect
or restriction of any kind.
"Ordinary Course of Business" (or any similar reference) means, with
respect to the Company and its Subsidiaries, any servicing arrangements, FFELP
Loan acquisition activities and financing activities with respect to FFELP Loans
and any other activities incidental to such operations, to the extent that each
of the foregoing is conducted in a manner consistent with applicable Law, GAAP
and the Company's past practices.
"Person" means any individual, corporation, limited liability company,
partnership, association or any other entity or organization.
"Private Loan" means a student loan which is not made or guaranteed
pursuant to the Higher Education Act.
25
"Purchase Price" is defined in Section 2.1.
"S Corporation" means a corporation which satisfies the requirements
under Section 1361 of the Code and other provisions of the Code.
"Seller Agreements" means, collectively, the Stock Purchase Agreements,
Stock Purchase Agreement (ESOP) and Stock Purchase Agreements-A dated as of even
date herewith between Buyer and Shareholders.
"Shareholders" means, collectively, 100% of the holders of all Stock
and Stock Options (to be exercised by holders thereof).
"Stock" means 100.0% (361,577.515 shares) of all of the capital stock
and equity interest of and in the Company, issued and outstanding as of the
Closing, comprised as of the date of this Agreement by 296,512.515 shares which
are currently outstanding, and 65,065 shares which are reserved for issuance
upon exercise of the Stock Options (and which shall be exercised prior to
Closing).
"Stock Equivalents" means Stock Options, rights in connection with
unissued stock of the Company or stock of the Company not yet issued or
outstanding, and similar rights with respect to the Stock.
"Stock Options" means the 65,065 shares of unissued stock, reserved for
issuance upon exercise of options and which are to be exercised immediately
prior to Closing as provided in Section 6.13 hereof.
"Subsidiaries" means the following entities: EFS Finance Co., an
Indiana corporation, EFS Services, Inc., an Indiana corporation, EMT
Corporation, an Indiana corporation (which is an indirect Subsidiary of the
Company, and a wholly owned Subsidiary of EFS Finance Co.), and Advantage
Network Corp., an Indiana corporation.
"Tax" means any charge or assessment by or liability to any
Governmental Authority, including, but not limited to, any deficiency, interest
or penalty.
8.2 Notices. All notices or communications hereunder shall be in
writing and shall be deemed sufficiently given by any of the parties hereto to
the other parties if such notice or communication is delivered or mailed
(postage prepaid), by registered or certified mail, return receipt requested, as
follows:
(a) If to Buyer:
NELnet, Inc.
Attention: Xxxx Xxxxxx
0000 Xxxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
26
Telephone: 402/000-0000
Facsimile: 402/323-1286
with a copy to:
Xxxxxx X. Xxxxxx
Perry, Guthery, Xxxxx & Xxxxxxxx, P.C., L.L.O.
000 Xxxxx 00xx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: 402/ 000-0000
Facsimile: 402/ 476-0094
(b) If to the Company:
EFS, Inc.
Attention: President
0000 Xxxxxxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Telephone: 317/ 000-0000
Facsimile: 317/ 469-2088
27
with a copy to:
O. Xxxxx Xxxxx
Xxxxxxxxx Daily Xxxxxxx & Xxxxx
Xxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, Xxxxxxx 00000
Telephone: 317/ 000-0000
Facsimile: 317/ 639-0191
or to such other address as may be designated in a subsequent notice as provided
in this Section 8.2. Notices sent by registered or certified mail, postage
prepaid, return receipt requested, shall be deemed to have been given two
business days after being mailed, and otherwise notices shall be deemed to have
been given when received.
8.3 Binding Effect. Except as may be otherwise provided herein,
this Agreement will be binding upon and inure to the benefit of the parties and
their respective successors and permitted assigns. Nothing in this Agreement is
intended or will be construed to confer on any Person other than the parties any
rights or benefits hereunder, and there are no intended (or unintended) third
party beneficiaries of this Agreement other than (i) the Shareholders of record
under Section 7.3(b) hereof, (ii) directors of the Company only under Section
6.18 hereof, and (iii) trustees of the ESOP Trust only under Section 6.18
hereof.
8.4 Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same document.
8.5 Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against either party.
This Agreement shall be construed to be valid and enforceable to the full extent
allowed by law. It is agreed that if any part, term or provision of this
Agreement is determined to be illegal, unenforceable or in conflict with
applicable law, the validity of the remaining terms and provisions shall not be
affected, and the rights and obligations of the parties shall be construed and
enforced as if the Agreement did not contain the term or provision held to be
invalid.
8.6 Modification. No supplement, modification or amendment of this
Agreement will be binding unless made in a written instrument which is signed by
both parties and which specifically refers to this Agreement.
8.7 Entire Agreement. This Agreement and the agreements and
documents referred to in this Agreement or delivered hereunder are the exclusive
statement of the agreement between the parties concerning the subject matter
hereof. All negotiations between the parties are merged into this Agreement, and
there are no representations, warranties, covenants, understandings or
agreements, oral or otherwise, in relation thereto between the parties other
than those incorporated herein and to be delivered hereunder. This Agreement
shall specifically supersede any prior negotiations, understandings or
agreements between
28
the Company and Buyer including, without limitation, the letter of intent
executed by the Company, certain Shareholders and Buyer and dated as of November
8, 2001.
ARTICLE IX
EXCLUSIVITY
9.1 Exclusive Negotiation. During the period between the date of
this Agreement and the Closing Date (the "Exclusive Period"), the Company shall
not (and will use best efforts to cause the Shareholders to not), directly or
indirectly, solicit an Acquisition Proposal from or enter into or continue any
negotiations with respect to an Acquisition Proposal with any third parties. If
the Company or any Shareholder receives any unsolicited Acquisition Proposal,
the Company will immediately disclose to Buyer the terms thereof. If failure to
accept an Acquisition Proposal would result in a breach of fiduciary duty by the
trustees of the ESOP Trust or directors of the Company, the Company may
terminate this Agreement prior to Closing and, if such Acquisition Proposal is
accepted by the Company or any Shareholders, the Company shall pay to Buyer a
termination fee in the amount of Fifteen Million Dollars ($15,000,000) at or
upon consummation of such Acquisition Proposal or modification thereof.
Notwithstanding any other provision to the contrary herein, the Company shall
have no right under this Section 9.1 to consider or accept, and the Company
agrees not to consider or accept (or terminate this Agreement in connection
with), any Acquisition Proposal, the terms of which offer payment of an
aggregate purchase price for the Stock and Stock Options of $161 million or
less. The parties acknowledge that Buyer is expending substantial amounts of
resources, and foregoing substantial business opportunities, as a result of its
negotiation, due diligence review, and preparation for Closing, and that a
termination of this Agreement will result in substantial harm and damages to
Buyer. The parties acknowledge that the costs to Buyer arising from a failure to
consummate the transactions contemplated by this Agreement are substantial and
difficult to ascertain, and that the termination fee amount is a reasonable
liquidated damage amount in light of the size, complexities and nature of the
transactions contemplated herein. Such termination fee shall only be paid if
this Agreement is terminated by the Company under this Section 9.1. If Buyer
fails to close for the reason that Buyer has committed a material breach
hereunder, the termination fee provided for herein shall not be paid. Upon
execution of this Agreement, the Company shall reject (and shall use best
efforts to cause the Shareholders to reject) all currently outstanding
Acquisition Proposals other than this Agreement, unless Buyer otherwise provides
written consent. Following execution of this Agreement, the Company shall
consult with Buyer as to the timing and content of any response to any
Acquisition Proposal.
X
INDIANA PRESENCE
10.1 Indiana Presence. After the Closing Date, Buyer intends to
retain, as Company employees, all or a portion of the employees currently
administering the Company's operations as are commensurate with Buyer's long
term goals. In addition, Buyer will be permitted to enter into employment
agreements with certain key management personnel. It is Buyer's intention that
this will serve to maintain and promote the integrity of the Company as an
Indiana-based entity which is interested in the welfare of the people operating
it as well as the community in which it is located. Being permitted to maintain
employment for
29
people in Indiana is a consideration that is seen by Buyer to have a long
lasting, positive impact upon the Company's ability to remain competitive in the
Midwest. Buyer is also considering a potential transfer of a portion of its
servicing operation to Indianapolis. In addition, as positions in Buyer's
operations may arise in locations other than Indianapolis, employees of the
Company in Indianapolis will have the opportunity, at their option, to apply for
such positions.
[The balance of this page is intentionally left blank]
30
INTENDING TO BE LEGALLY BOUND, the parties have signed this Master
Stock Purchase Agreement as of the date first above written.
NELnet, Inc. EFS, Inc.
/s/ Xxxxx Xxxxxxxx By: /s/ Xxxx X. Xxxxxxxxx
---------------------------- ---------------------------
Xxxxx Xxxxxxxx Xxxx X. Xxxxxxxxx
Senior Vice President Chairman and Chief
Executive Officer
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------
Xxxxxxx X. Xxxxxx
Executive Vice President
By: /s/ Xxxxx X. Xxxxxx
---------------------------
Xxxxx X. Xxxxxx
Executive Vice President
By: /s/ Xxxxxx X. Xxxxxx
---------------------------
Xxxxxx X. Xxxxxx
Executive Vice President
31
