AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
This AMENDED AND RESTATED ASSET PURCHASE AGREEMENT ("Agreement") is
made and entered into as of the 31st day of December 2002, ("Effective Date") by
and between HOME GOLD, INC., a South Carolina corporation ("Seller"); and
EMMCO,LLC, a South Carolina limited liability company ("Purchaser"). Seller and
Purchaser are sometimes referred to individually as "Party" and collectively as
the "Parties."
RECITALS
A. The purpose of this Agreement is to substitute Emmco, LLC for Emmco
Credit Corp, Inc. as Purchaser and to restate in amended form that certain Asset
Purchase Agreement dated November 19, 2002 between Seller and Emmco Credit
Corp., Inc. for the terms and conditions upon which Purchaser will purchase the
retail mortgage loan origination division (the"Business") of Seller. The
Business is sometimes hereinafter called "HGI". It is generally described and
defined by Seller as follows:
Seller is a South Carolina corporation. It is primarily in the business
of operating a retail mortgage loan origination business. That retail mortgage
loan origination business is operated separately and constitutes HGI. All of the
assets (except for Excluded Assets, if any) of the Business are to be sold by
Seller to Purchaser pursuant to this Agreement.
HGI originates mortgage loans secured by first and second lien
mortgages (or deeds of trust). Approximately seventy-five percent (75%) of the
loans are to subprime borrowers. The average loan is for approximately
$80,000.00, and the monthly origination volume currently is approximately $80
Million.
HGI operates a number of retail loan origination centers (seventeen at
the present time) at locations noted below. HGI generates income from
origination fees, the sale of loans to third parties and interest income earned
during the typically short period during which HGI holds the notes prior to
sale.
HGI has adopted and implemented a marketing plan to generate loan
production. The marketing plan consists of the following:
1. HGI produces weekly direct mailings to potential borrowers.
The mailing lists are compiled from data collected from various sources
based on HGI's experience as to the profiles of the most likely
borrowers. Two and a half weeks after the mailing, each recipient of a
mailer is called by a telemarketer to follow up and identify
prospective borrowers from whom loan applications can be obtained.
Between 425 and 500 loan applications are generated each day in this
manner. For some time, HGI was sending out 325,000 direct mailings per
week, but in the last six months, that number has been cut in half with
2
no associated loss in applications. Loan closings attributable to
direct mailings result in approximately 45% of HGI's loan closings.
2. HGI solicits loans through the Internet, utilizing both its
own website and Internet mortgage loan leads from a variety of sources.
Loan applications through that source result in approximately five
percent (5%) of HGI's loan closing.
3. HGI does direct telemarketing consisting of outbound calls
and cold calls from call centers. That telemarketing results in
approximately 50% of the loan closings.
Presently, HGI has seventeen office locations, each of which is
equipped to solicit and accept home mortgage loans. Those locations are:
Office Has Been Open
--------------------
City/State Continuously Since
---------- ------------------
Columbia, S.C. 1998
Greenville, S.C. 0000
Xxxxxxxxxx, XX Xxxxxxx 0000
Xxxxxxx, XX April 0000
Xxx Xxxxxxx, XX November 0000
Xxxxxxxxxx Xxxxxx, XX** January 0000
Xx. Xxxxx, XX February 2002
Indianapolis, IN ** March 0000
Xxxxxxxx Xxxx, XX April 0000
Xxxx Xxxxxx, XX ** April 0000
Xxxxxxxxx, XX April 0000
Xxxxxxxxx, XX ** May 0000
Xxx Xxxxx, XX ** May, 0000
Xxxxxxxx, XX ** May, 0000
Xxxxxxxxxx, XX May, 0000
Xxxx Xxxxxx Xxxxxx, 0000
Xxxxxxx, XX ** September, 2002
** These office locations will not be made a part of the Asset Purchase
Agreement.
B. The purpose of this Agreement is to set forth the terms and
conditions upon which Seller has agreed to sell to Purchaser, and Purchaser has
agreed to purchase, such assets and assume certain specified obligations in
connection therewith, all as hereinafter set forth.
NOW, THEREFORE, FOR A VALUABLE CONSIDERATION, including the mutual
agreements contained herein, the Parties do hereby agree as follows:
1. DEFINITIONS. Except as otherwise expressly provided herein or unless
the context otherwise requires, the following terms, for all purposes of this
Agreement, shall have the following respective meanings hereinafter specified:
3
"AFFILIATE" means a Person, directly or indirectly, under the
control of, controlled by or under common control with another Person.
"ASSETS" means all of the property, business and assets of
Seller existing and owned by Seller on the Closing Date and used solely
in the Business on the Closing Date, and shall include without
limitation:
(i) the vehicles, trade fixtures, machinery and
equipment, computers, office equipment and supplies, other
supplies, furniture, parts and other tangible personal
property owned or used solely in the conduct of the Business,
as set forth on Schedule 1(i), and any additions or accessions
thereto or substitutions therefore or proceeds thereof
(collectively the "Equipment");
(ii) to the extent assignable, all right, title and
interest of Seller under the written contracts, agreements and
understandings related solely to servicing the Equipment and
Intellectual Property, including as set forth on Schedule
1(ii) (collectively the "Contracts") provided that the
obligations of any such Contracts to be assigned are limited
to obligations accruing or occurring after the Closing. The
Contracts to be assigned to Purchaser and accepted by it are
expressly limited to those Contracts listed on said Schedule
1(ii);
(iii) all (A) loan production processes and
techniques, research and development information,
copyrightable works, financial, marketing and business data,
pricing and cost information, business and marketing plans,
techniques, procedures and studies, customer lists,
requirements and other information, (B) other proprietary
rights relating to any of the foregoing (including without
limitation remedies against infringements thereof and rights
of protection of interests therein under the Laws of all
jurisdictions) and (C) copies and tangible embodiments
thereof, in each case only if used solely in the Business
(collectively the "Intellectual Property");
(iv) all records, invoices and other documents and
information necessary to the ownership of the Assets and/or
operation of the Business and used solely in the Business,
whether stored in or readable or accessible by computer or
otherwise, including, without limitation; (A) all customer and
vendor purchase orders and invoices related to the Assets; (B)
all records, correspondence and accountings related to the
Business, all marketing and statistical information pertaining
to the retail mortgage loan origination programs (including
the purchase, administration, collection practices and sales
thereof) of Seller and, to the extent in its possession at the
Closing, of its competitors and customers for not less than
one (1) year prior to the date hereof and bills of sale and
warranties received by Seller upon its acquisition of
machinery and equipment of the Business (collectively, the
"Books and Records");
(v) all of Seller's right and interest in its
Pre-paid marketing expense in the approximate amount of $6.4
million;
(vi) all Broker Agreements as defined below;
4
(vii) all Seller's capital stock in Surety Mortgage,
Inc.;
(viii) all membership interest of Seller in Xxxxxxx
Montana, LLC;
(ix) the 49% membership interest of Seller in
Connected Information Services, Inc; and
(ixi) to the extent transferable, all
existing telephone numbers now used solely in connection with
the Business and all related cable and/or telephone lines
which may be required to utilize existing telephone lines with
such existing numbers.
"ASSUMED LIABILITIES" means those Liabilities of Seller
assumed at Closing by Purchaser and which are limited to the
Liabilities of Seller set forth on Schedule 1(a).
"BOOKS AND RECORDS" has the meaning set forth in the
definition of Assets.
"BROKER AGREEMENTS" are all contracts between Seller and real
estate lenders listed on Schedule 1(b) attached hereto and by this
reference made a part hereof who are associated with the Business in
any way.
"BUSINESS" (also sometimes referred to herein as "HGI") means
the business as outlined in Paragraph A of Recitals and includes
expansions of the Business made by Purchaser after the Date of Closing.
"CLOSING" means the consummation of the transactions
contemplated by this Agreement.
"CLOSING DATE" means December 31, 2002, or any other date
which the Parties hereto agree as being the date on which the Closing
is to take place, subject to reasonable adjournments requested by any
Party hereto in order to satisfy the conditions required to be
satisfied by it, or in order for conditions, which are not in the
control of either Party, to be satisfied.
"CONTRACTS" has the meaning set forth in the definition of
Assets.
"DEFAULT" means an event of default, as defined in this
Agreement, or any event which, with the passage of time or the giving
of notice or both, would constitute an event of default or other breach
under such document or instrument.
"EMPLOYMENT AGREEMENTS" means any agreement, understanding or
contract with any Person to which Seller is a party relating to
employment, non-competition, management, agency or consulting.
"ENCUMBRANCES" means all claims, mortgages, pledges, liens,
encumbrances, security interests and adverse interests of every nature
whatsoever, but shall not mean Permitted Encumbrances.
5
"EQUIPMENT" has the meanings set forth in the definition of
Assets.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" means a corporation that is or was a member
of a controlled group of corporations with Seller within the meaning of
Section 4001(a) or (b) of ERISA or Section 414(b) of the Code, a trade
or business (including a sole proprietorship, partnership, trust,
estate, limited liability company or corporation) that is under common
control with Seller within the meaning of Section 414(m) of the Code,
or a trade or business which, together with Seller, is treated as a
single employer under Section 414(o) of the Code.
"EXCLUDED ASSETS" means those assets listed in Schedule 1(c).
"GOVERNMENTAL BODY" means any federal, state, provincial,
municipal or other governmental department, commission, board, bureau,
authority, court, agency or instrumentality, domestic or foreign.
"INDEBTEDNESS" means with respect to any Person, (a) all
obligations of such Person for borrowed money, or with respect to
deposits or advances of any kind (including amounts by reason of
overdrafts and the face amount and all un-reimbursed obligations under
letters of credit), (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, (c) all obligations of
such Person under conditional sale or other title retention agreements
relating to property purchased by such Person, (d) all obligations of
such Person issued or assumed as the deferred purchase price of
property or services (other than accounts payable to creditors for
goods and services incurred in the ordinary course of business), (e)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Encumbrance on property owned or acquired by such
Person, whether or not the obligations secured thereby have been
assumed, (f) all obligations of such Person under leases required to be
accounted for as capital leases under GAAP and (g) all guarantees by
such Person.
"INTELLECTUAL PROPERTY" has the meaning set forth in the
definition of Assets.
"KNOWLEDGE" means with respect to each party (i.e., Seller and
Purchaser) to the knowledge of any Person who had an actual working
relationship with and/or actual knowledge of the Business and the
transactions/matters to which such Knowledge applies or such knowledge
as should have put such person on notice of any fact or claim.
"LAWS" means statutes, rules, regulations and ordinances of
any Governmental Body and the case law determined by appellate courts
in applicable jurisdictions.
"LIABILITY" or "LIABILITIES" means any liability (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or un-accrued, whether liquidated or
6
unliquidated, and whether due or to become due), including Indebtedness
and liability for Taxes.
"MATERIAL ADVERSE EFFECT" means a materially adverse effect on
the business, customers, assets, operations, properties or condition,
financial or otherwise, of the Person to which it refers, taken as a
whole, other than changes that may affect the mortgage industry
generally.
"ORDER" means any order, writ, injunction, decree, judgment,
award, determination, direction or demand of a Governmental Body.
"PERMITTED ENCUMBRANCES" means Encumbrances that (i) arise out
of Taxes not in default and payable without penalty or interest or the
validity of which is being contested in good faith by appropriate
proceedings, (ii) are mechanics', carriers', workers', repairmen's, or
other similar liens that do not, individually or in the aggregate,
exceed $1,000.00, (iii) do not have a Material Adverse Effect, or (iv)
are scheduled on Schedule 1(d) attached hereto.
"PERSON" means any natural person, corporation, limited
liability company, partnership, unincorporated association, firm, trust
or other entity.
"SELLER'S PARENT" means HomeGold Financial, Inc.
"TAXES" means all types of taxes of any kind, including,
without limitation, income, franchise, gross receipt, transfer, value
added, sales, use, wage and/or employment or unemployment, excise,
disability, real and personal property, superfund, capital or other
taxes, levies, imports, duties, license and registration fees,
assessments and governmental charges of any nature whatsoever relating
to or in lieu of any of the foregoing, together with any interest,
penalties, fines, assessments and deficiencies related thereto.
2. PURCHASE PRICE. The "Purchase Price" shall be comprised of (i)
$150,000 cash at Closing, (ii) a $35 million 8% cumulative preferred capital
interest in Purchaser (the "Preferred Capital Interest in Purchaser") during the
period set forth in Section 3 below, and (iii) a non-voting economic interest in
Purchaser during the period set forth in Section 3 below. The Preferred Capital
Interest of Seller in Purchaser and the non-voting economic interest of Seller
in Purchaser shall have the rights and preferences set forth in the Operating
Agreement of Purchaser, a copy of which is attached hereto as Exhibit A.
3. DURATION OF SELLER'S PREFERRED CAPITAL INTEREST AND NON-VOTING
ECONOMIC INTEREST IN PURCHASER. The non-voting economic interest of Seller in
Purchaser shall continue until the aggregate distributions to Seller with
respect to such interest equal $170 million or until the Business is sold by
Purchaser. In the event of a sale by Purchaser of the Business, Purchaser shall
cause the agreement for the purchase and sale of the Business to provide that
50% of the gross proceeds of such sale shall be paid by the buyer of the
Business from Purchaser directly to Seller; provided, however, that the sum of
the aggregate distributions to Seller with respect to the non-voting economic
interest and the payment of sales proceeds to Seller shall not exceed $170
million. After distributions to Seller with respect to its non-voting economic
interest in Purchaser shall be equal to $170 million, the distributions formerly
applicable to the non-voting economic interest shall apply to the Preferred
7
Capital Interest in Purchaser until Seller shall have received an additional $35
million together with accrued interest thereon. The Preferred Capital Interest
in Purchaser shall also be entitled to a preference in the liquidation of
Purchaser until Seller shall have received aggregate distributions with respect
to the Preferred Capital Interest in Purchaser of $35 million plus accrued
interest thereon.
4, PRE-CLOSING COVENANTS, MANAGEMENT AND ADMINISTRATION OF SELLER
PENDING CLOSING. In order to complete the purchase of the Business during the
period from the Effective Date to the Closing Date, the parties agree to do the
following:
4.1 GENERAL. Each of the Parties will use its commercially
reasonable efforts to take all action and to do all things necessary,
proper or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction,
but not waiver, of the closing conditions set forth in Sections 10 and
11 below).
4.2 NOTICES AND CONSENTS. Seller will give any notices to
third parties and use its commercially reasonable efforts to obtain any
third-party consents required by the matters referred to in Section
5(b) below. Each of the Parties will give any notices to, make any
filings with, and use its commercially reasonable efforts to obtain any
required authorizations, consents, and approvals of Governmental
Bodies.
4.3 MANAGEMENT OF BUSINESS. (a) Upon execution of this
Agreement Xxxxxx X. Xxxxxxxx, Chairman of the Board and CEO of Seller's
Parent shall resign from the Board of Directors and from all offices in
Seller or Seller's Affiliates. From the date this Agreement is executed
until the Closing, Purchaser is hereby given the right to manage the
Business and direct its operations, utilizing its business offices,
employees and the Assets. Purchaser will use its commercially
reasonable efforts to maintain the Business in the ordinary course of
such business and at not less than the level of activity existing
during the third quarter of the calendar year 2002. Seller will pay
Purchaser management fees at the rate of Fifty Thousand Dollars
($50,000.00) per month from the execution of this Agreement to the
Closing Date. Purchaser will use commercially reasonable efforts to
maintain normal relations with Seller's customers (i.e., brokers,
investment bankers, and others who purchase and sell loans to, for or
on behalf of, Seller) up to the Closing. Purchaser as manager will
cause Seller not to engage in any practice or undertake any policy not
in the ordinary course of business pending the Closing which would have
the effect of reducing the volume of its purchase and/or sale of
mortgage loans of a quality similar to (or better than) the quality of
loans presently in the pipeline to be purchased and sold.
(b) To the extent that Seller has Agreements with
brokers and sales persons which are assignable at the Closing,
Purchaser will designate which of such agreements it may wish
to assume. In respect to those Agreements, Seller will execute
8
a written assignment as of the Closing, assigning Seller's
interest in such contracts which will be assumed.
4.4 INTENTIONALLY OMITTED.
4.5 NOTICE OF DEVELOPMENTS. Each Party will give prompt notice
to the other Party of any material adverse development causing a breach
of any of its own representations and warranties in this Agreement. No
disclosure by any Party pursuant to this Section 4.5, however, shall be
deemed to amend or supplement the Schedules hereto or to prevent or
cure any such misrepresentation, breach of warranty or breach of
covenant that might otherwise have existed hereunder by reason of the
development.
4.6 ADMINISTRATION OF PENDING LOAN PURCHASES AND SALES. Prior
to the Closing, Seller will have existing executory agreements in
relation to certain mortgage loans. In regard thereto, the following
understandings and allocations shall apply:
(A) FUNDED LOANS. All loans which have funded prior
to the Closing Date shall be the sole property of Seller, and
all rights (including the rights to income and profits
therefrom) and all obligations related thereto shall remain
with Seller.
(B) UNFUNDED LOANS. Purchaser shall review all
pending loans which are not likely to close and be funded by
the Closing Date. Purchaser shall as soon as reasonably
practicable notify Seller as to which of such loans Purchaser
desires to accept or reject the assignment. For purposes of
completing all agreements regarding loans in the pipeline
which Purchaser accepts, it may be necessary for the purchases
and/or sales of such loans to close in the name of Seller
although Purchaser will be administering the closing.
Therefore, for valuable consideration, receipt of which is
hereby acknowledged, Seller hereby appoints Purchaser as its
attorney-in-fact and in its place, name and stead to (i)
complete each such purchase or sale, (ii) enter into and
execute as attorney in fact for Seller all purchase and/or
sales agreements and/or amendments thereto related to such
transactions as have then been accepted by Purchaser, (iii)
enter into and execute any agreements with third parties
(including escrow holders, financial institutions, insurers,
government agencies, consultants, inspectors, brokers,
contractors, accountants, attorneys, engineers and the like)
as may be necessary to complete the respective transaction(s)
and (iv) enter into and execute agreements with any financial
institution(s) in any manner deemed necessary to complete the
monetary allocation(s) of funds and make deposits and
withdrawals in conjunction therewith. This power of attorney
herein granted is irrevocable and coupled with an interest and
survives the Closing of the transactions contemplated by this
Agreement.
4.7 EXISTING OFFICE LEASES. Presently, Seller is the
tenant/lessee of 8 office leases which will be assigned to Purchaser at
the Closing. Those leases are generally described in Schedule 4.7
attached hereto and by this reference made a part hereof. At the
Closing, the building leases to each of the offices described on
Schedule 4.7 will be assigned by Seller to Purchaser. Therefore, prior
9
to the Closing, Seller shall execute a standard form assignment of each
of the Office Leases to Purchaser and obtain the Landlord's consent
thereto (without changes to the respective leases), or shall execute a
sublease with Purchaser on substantially the same terms and conditions
as are contained in the respective office lease(s). All rents and other
obligations accruing under each Lease assigned to Purchaser will be
prorated as of the Closing Date. Seller shall be responsible for all
rents and other obligations accruing up to the Closing Date, and
Purchaser shall be responsible therefore after the Closing Date. Seller
will cooperate with Purchaser and use commercially reasonable efforts
in obtaining consents to assignments of all leases to be assigned.
4.8. EQUIPMENT LEASES. Attached hereto is Schedule 4.8 which
sets forth a schedule of all of the equipment leases to be assigned by
Seller to Purchaser at the Closing. Upon the Closing, Seller will
deliver to Purchaser an individual assignment of each such equipment
lease to be assigned, together with the lessor's unconditional consent
to such lease without any change in the lease's terms. The rent under
any such equipment lease shall be prorated to the Closing Date.
4.9 ASSETS. In regard to the Assets to be purchased by
Purchaser at the Closing, the Parties agree to do the following:
(a) At the Closing, Seller will deliver to Purchaser
a standard form xxxx of sale conveying to Purchaser title to
all of the Equipment. Title is to be conveyed free and clear
of any Encumbrance by any third party or by Seller or any of
Seller's Affiliates.
(b) At the Closing, Seller will deliver to Purchaser
a standard form assignment conveying to Purchaser all right,
title and interest to all of the Intellectual Property, free
and clear of any Encumbrances except the claim or lien of any
valid license agreement. (Said assignment also will include
Seller's rights in all such license agreements, if any).
4.10 SERVICE CONTRACTS. Seller has heretofore entered into the
Contracts as set forth on Schedule 1(ii). At the Closing, each Contract
is to be assigned to Purchaser (to the extent that it is assignable),
and any obligations to pay service charges thereunder shall be accrued
to the Closing. Seller shall be responsible for all charges accruing to
the Closing and Purchaser shall be responsible for all charges accruing
after the Closing. The Parties understand that Purchaser is not
assuming, and is not liable for, any obligation, activity or event
related to any such Contract which accrues, arises or is incurred prior
to the Closing.
4.11 EMPLOYEES. It is anticipated that Purchaser will offer
employment to certain present employees of the Business. Responsibility
for all such present employees of Seller as of the Closing is as
follows:
(a) There is attached hereto marked Schedule 4.11(a)
a list of Seller's present employees to whom Purchaser intends
to tender an employment offers (said tender in each instance
to be subject to the closing of the purchase and sale
contemplated by this Agreement and subject to such terms and
10
conditions as are acceptable to Purchaser). Such employment,
if it commences, will commence as of the Closing Date.
Purchaser is to be responsible for each such employee so
employed only after the Closing and only in respect to express
written obligations made by Purchaser which accrue or occur
after the Closing.
(b) Purchaser assumes no obligation accruing or
occurring up to the Closing nor any obligation arising out of
Seller's employment agreements with any employee. Thus, Seller
is to be responsible for all wages, salaries, employment and
unemployment taxes, workmen's compensation, health insurance,
vacation pay, sick leave or allowance/pay, and pension/profit
sharing benefits (if any) up to the Closing in respect to all
employees, and Purchaser will have no responsibility therefor.
Purchaser's obligations will be limited to the terms and
conditions of each new employment agreement it consummates
with the employees it elects to contract. Additionally, the
parties understand that Seller is not to be responsible or
liable for decisions which Purchaser makes, or may make,
regarding the employment of (or refusal to employ) any one or
more of the persons named on Schedule 4.11(a). In the event
that Purchaser violates, or is alleged to violate, any
employment law applicable to the employment or non-employment
of any such person(s) and Seller is made a party to any action
or proceeding as a result thereof, Purchaser hereby holds
Seller harmless for any loss pertaining to said action or
proceeding.
(c) Seller shall be responsible to pay for all sums
owing to all of its employees up to the Closing and shall be
responsible for severance benefits, if any, owing to all such
employees.
(d) Except as set forth in Section 4.11(a), Purchaser
shall have no responsibility for any Employees of Seller at
any time (whether before or after the Closing) where such
employees are not on Schedule 4.11(a) and employed by
Purchaser after the Closing.
4.12 PROVIDING INFORMATION. Seller agrees to make available to
Purchaser in a timely manner at Seller's place of business in Columbia,
South Carolina, and its other offices listed on Schedule 4.7 attached
hereto during normal business hours access to physically review all
documents, books of account, correspondence and other writings relating
to the Business and reasonably requested by Purchaser. Purchaser is to
be provided copies of any such written materials it may reasonably
request which are reasonably related to this Agreement, the purchase of
the Assets, Assumed Liabilities and the Business.
4.13 USE OF NAME. The Parties understand that Seller is to
retain exclusive legal rights in all states of the United States
wherein Seller is, or has been, doing business under the names
"HomeGold, Inc." and any other names which Seller has utilized in the
Business to use each and all such names.
4.14 OTHER CONSENTS . At the Closing Seller will provide to
Purchaser the following: (i) a certificate from the Secretary of
Carolina Investors, Inc. certifying that its Board of Directors has
duly approved the transaction herein set forth, and (ii) a certificate
from the Secretary of Seller that Seller's Board of Directors and sole
11
shareholder (Seller's Parent) has duly approved the Agreement. In each
Certificate, the respective Secretary shall include the specific
resolution approved.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER.
Seller hereby represents, warrants and covenants that the statements
contained in this Section 5 are correct as of the date of this Agreement and
will be correct as of the Closing.
(A) ORGANIZATION. Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of
South Carolina. Seller has all requisite power and authority to own or
lease its properties and Assets in the Business in the manner now owned
or leased, to carry on the Business as and where now being conducted
and to enter into this Agreement, and perform its obligations
hereunder.
(B) ENFORCEABLE OBLIGATION. Except as set forth on Schedule
5(b), the execution, delivery and performance of this Agreement and all
instruments and documents to be delivered by Seller hereunder, (i) are
within the power and authority of Seller, (ii) do not require the
consent or approval of, or filing, registration or qualification with,
any Governmental Body or any other Person other than as otherwise
provided herein, (iii) will not conflict with, result in the breach of,
or constitute a Default under, any of the terms, conditions or
provisions of the Articles of Incorporation or Bylaws of Seller, (iv)
will not violate any Laws or Orders of any Governmental Body, (v) will
not conflict with, result in the breach of, or constitute a Default
under any material indenture, mortgage, deed of trust, lease,
agreement, contract, license or other instrument to which Seller is a
party or by which it or any of its property is bound and (vi) will not
result in the creation or imposition of any Encumbrance upon any
property of Seller, other than as contemplated by this Agreement and
the documents executed in connection with the transactions contemplated
hereby, provided that if the loss arises as a result of a breach of any
warranty in part (iv), (v) or (vi) hereof, there shall not be deemed to
be a Default if the breach did not result in a Material Adverse Effect.
This Agreement and the other agreements and other instruments attached
as Exhibits and Schedules hereto to which Seller or any of its
Affiliates is a signatory have been duly authorized, executed and
delivered by Seller and/or its Affiliate(s) as the case may be, and
constitute the legal, valid and binding obligations of Seller and/or
its Affiliate(s), enforceable in accordance with their terms, except as
(A) such enforcement may be limited by the laws of bankruptcy,
insolvency, reorganization, moratorium, or other similar laws which
affect the enforceability of creditors' rights generally, and (B)
general equitable principles and general standards of commercial
reasonableness whether considered in a proceeding in equity or at law.
(C) QUALIFICATION; LOCATION OF BUSINESS AND ASSETS. Seller is
duly qualified and in good standing as a foreign corporation, duly
authorized to do business in the jurisdictions in which it has its
offices.
12
(D) TITLE TO ASSETS; CONDITION; POSSESSION UNDER LEASE.
(i) As of the Closing, Seller will have good and
valid title to all of the Assets except those disposed of in
the ordinary course of business after this Agreement is
executed but before the Closing; and none of such properties
or Assets is subject to any Encumbrance, except Permitted
Encumbrances.
(ii) The Assets are in good order and proper repair,
except for (A) minor items of Equipment which will require
replacement or repair in the ordinary course of business, the
temporary lack of use of which will not materially disrupt
normal production, (B) minor defects which do not interfere in
a material way with the continued use thereof; and (c)
reasonable wear and tear.
(iii) Each lease or license of an Asset is a valid
and existing obligation and, except as set forth in Schedule
5(b), enforceable in accordance with its terms and, to the
knowledge of Seller, fully transferable to Purchaser at
Closing.
(iv) Except as set forth on Schedule 5(d)-1, no third
Person owns or has any rights in any Asset.
(E) LITIGATION; OBSERVANCE OF LAWS.
(i) LITIGATION. Except as set forth on Schedule 5(e)
hereto, there is no litigation, at law or in equity, or any
proceeding before any Governmental Body or any arbitration
pending, or, to the knowledge of Seller, threatened against or
relating to the Assets or the Business, which is likely to
involve any material risk of any judgment or Liability not
covered by insurance, which, if adversely decided, would have
a Material Adverse Effect, or which seeks to enjoin the
consummation of, or questions the validity of, any of the
transactions contemplated hereby, or which would question the
validity or enforceability or impair the validity or
enforceability of or the ability of Seller to perform its
obligations under this Agreement or any agreement contemplated
hereby, and no Order of any Governmental Body or arbitrator
has been issued against or binds Seller which has, or could
have, a Material Adverse Effect or the Business or the Assets.
(ii) GOVERNMENTAL ORDER VIOLATIONS. Seller is not in
violation or Default with respect to any Order of any
arbitrator or Governmental Body relating to the Business where
such violation or Default is likely to have a Material Adverse
Effect on any of the Assets or Assumed Liabilities, and to the
Knowledge of Seller, there is no basis for there to be
declared any such violation or Default.
(iii) VIOLATIONS OF LAWS. To Seller's Knowledge,
Seller is not in violation of any Laws relating to the
Business (including, without limitation, environmental laws),
the violations of which would have a Material Adverse Effect.
(iv) EFFECT OF AGREEMENT. The execution of this
Agreement, the transfer of the Business to Purchaser, and the
operation of the Business by Purchaser after the Closing is
13
not in violation of any agreement to which Seller is a party
(or will be a party at the Closing) and which is transferred
to Purchaser at the Closing.
(F) LICENSES, PERMITS, ETC. Seller possesses adequate
Licenses, to conduct the Business substantially as now and heretofore
conducted, and, to the Knowledge of Seller, except as otherwise set
forth on Schedule 5(f) hereto, without any conflict with the rights of
others in any such license, except where such conflict would not have a
Material Adverse Effect. Except for matters previously remedied, Seller
has no Knowledge of any termination, revocation or limitation of, or of
the pendency or threatened commencement of any proceeding to terminate,
revoke or limit any such licenses, by the Governmental Body issuing the
same.
(G) ERISA COMPLIANCE. For purposes of this section the term
Plan means each pension, profit sharing, thrift or other retirement
plan, employee stock ownership plan, deferred compensation, stock
option, stock purchase, performance share, bonus or other incentive
plan, severance plan, health, group insurance or other welfare plan, or
other similar plan, agreement, policy or understanding, including
without limitation, any "employee benefit plan" within the meaning of
Section 3(3) of ERISA, under which Seller or any ERISA Affiliate has
any current or future obligation or Liability or under which any
employee of Seller or any ERISA Affiliate has any current or future
right to benefits. Each such Plan shall remain the sole responsibility
of Seller after the Closing, and Seller hereby warrants and represents
that Purchaser shall have no responsibility therefore nor be required
to assume the same.
(H) DEALINGS WITH OFFICERS, DIRECTORS AND SHAREHOLDERS. Except
as set forth on Schedule 5(h), to the knowledge of Seller, no officer,
director or shareholder of Seller, or any Affiliate of any such
officer, director or shareholder (each, a "Related Party"), (i) has any
interest in any Assets (iii) has loaned to or borrowed funds from
Seller which relates to the Assets in the Business, which funds remain
outstanding or (iv) has any contractual or other claim, express or
implied, of any kind whatsoever against Seller's Assets or the
Business.
(I) COMPLIANCE. Except as set for in Schedule 5(i), Seller has
obtained all permits, licenses and other authorizations which are
required by any applicable laws ("Laws") related solely to (i) its
method of operation and (ii) the loans in the pipeline at the Closing
which are assigned to Purchaser.
(J) EMPLOYMENT AGREEMENTS. Other than those Employment
Agreements related to those Persons listed on Schedule 5(j) to this
Agreement, there are no Employment Agreements between Seller and those
employees of Seller listed on Schedule 4.11(a) that are not terminable
at will without cause.
(K) LABOR DISPUTES. There is neither pending nor to the
knowledge of Seller, threatened any labor dispute, strike or work
stoppage involving employees of Seller which affects or which may
14
affect its Business. To the knowledge of Seller, there are no union
organization efforts relating to employees of the Business or any
representation question involving recognition as a collective
bargaining agent for any employees of the Business. There is not
pending or, to the Knowledge of Seller, threatened any charge or
complaint against Seller by the National Labor Relations Board or any
representative thereof which relates to the Business. There have been
no strikes, walkouts or work stoppages involving employees of the
Business in the last five years.
(L) INTELLECTUAL PROPERTY.
(i) To Seller's knowledge, Seller owns or has the
right to use all Intellectual Property used solely in the
operation of its Business. Seller has taken reasonable
measures to protect the proprietary nature of each item of
Intellectual Property used solely in its Business and to
maintain in confidence all trade secrets and confidential
information that it owns or uses in connection with its
Business. To the knowledge of Seller no other Person has any
rights to any of the Intellectual Property used in Seller's
Business (except pursuant to agreements or licenses specified
in Schedule 5(l)-(1), and, no other Person is infringing,
violating or misappropriating any of the Intellectual Property
used in Seller's Business.
(ii) The Business, operations and activities of
Seller's Business as presently conducted or as conducted at
any time within the three years prior to the date of this
Agreement, have not infringed or violated, or constituted a
misappropriation of, and do not now infringe or violate, or
constitute a misappropriation of, any Intellectual Property
rights of any other Person. Seller has received no complaint,
claim or notice alleging any such infringement, violation or
misappropriation.
(iii) Schedule 5(l)-2 identifies each copyright,
trademark or trade name registration which has been issued to
or is owned by Seller with respect to any Intellectual
Property solely used in, relating to or arising out of
Seller's Business; identifies each pending patent, domain
name, trade name or trademark application for registration
which Seller has made or which Seller owns with respect to any
Intellectual Property used solely in, relating to or arising
out of Seller's Business; identifies, with respect to each
such patent, domain name, trade name or trademark registration
or application, the jurisdiction or jurisdictions where such
filings have been made and identifies each license or other
agreement pursuant to which Seller has granted any rights to,
or has been granted any rights by, a third Person with respect
to any such Intellectual Property. Seller has made available
to Purchaser correct and complete copies of all such licenses
and agreements (as amended to date) and has made available to
Purchaser correct and complete copies of all other written
documentation evidencing ownership of, and any claims or
disputes relating to, each such item, as well as all patents
and trademark registrations and applications.
(M) BOOKS OF ACCOUNT; AUDITS AND INVESTIGATIONS. Seller has
made available to Purchaser all responses to auditors' inquiry letters
received in the past three years, if available, and all letters to
15
Seller from the auditors during such period related to the Business
and/or any related activity.
(N) DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES NOT
CONTAINED IN THE AGREEMENT; KNOWLEDGE. Seller does not make, and has
not made, any representations or warranties relating to Seller, the
Assets, or the Business, or otherwise in connection with the
transactions contemplated hereby, or any agreements attached as
Exhibits hereto and the transactions contemplated thereby, other than
those expressly set forth herein. No Person has been authorized by
Seller to make any representation or warranty relating to Seller, the
Business or the Assets or otherwise in connection with the transactions
contemplated hereby and, if made, such representation or warranty must
not be relied upon as having been authorized hereunder. Moreover,
certain disclosures made herein are for informational purposes only and
are not intended to signify materiality.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER. Purchaser
represents, warrants and covenants to Seller that the statements contained in
this Section 6 are correct and complete as of the date of this Agreement and
shall be correct and complete as of the Closing.
(A) ORGANIZATION AND AUTHORIZATION. Purchaser is a limited
liability company duly organized and validly existing and in good
standing under the laws of South Carolina and has all requisite power
and authority to enter into this Agreement and the agreements
contemplated hereunder and to consummate the transactions contemplated
hereby.
(B) TRANSACTIONS ARE LEGAL AND AUTHORIZED; ENFORCEABLE
OBLIGATION. The execution, delivery and performance of this Agreement
and all other instruments and documents contemplated hereunder to be
executed by the Purchaser and the compliance with all the provisions
hereof and thereof are within the power and authority of Purchaser.
This Agreement and the other agreements and other instruments attached
as Exhibits and Schedules hereto to which Purchaser is a signatory have
been duly authorized, executed and delivered by Purchaser as the case
may be, and constitute the legal, valid and binding obligations of
Purchaser, enforceable in accordance with their terms, except as (A)
such enforcement may be limited by the laws of bankruptcy, insolvency,
reorganization, moratorium, or other similar laws which affect the
enforceability of creditors' rights generally, and (B) general
equitable principles and general standards of commercial
reasonableness.
(C) POWER AND AUTHORITY RELATIVE TO TRANSACTION. Purchaser has
full corporate power and authority and has taken all required action
necessary to permit it to execute and deliver and to carry out the
terms of this Agreement and all other documents or instruments required
or contemplated hereby and none of such actions will materially violate
any law, rule, statute or ordinance applicable to Purchaser, violate
any provisions of Purchaser's Certificate or Articles of Incorporation
or Bylaws, as amended, or result in any breach of any material
agreement, instrument, order or judgment to which Purchaser is a party
or by which its assets may be bound.
16
(D) SELLER'S PREFERRED CAPITAL INTEREST AND ECONOMIC INTEREST
IN PURCHASER. The Preferred Capital Interest and economic interest in
Purchaser represented in Purchaser's Operating Agreement have been duly
authorized, validly issued, and constitute valid interests in Purchaser
enforceable in accordance with the terms of said Operating Agreement.
7. CLOSING. The Closing shall take place at the offices of Purchaser
on Closing Date, or at such other place as the Parties may mutually agree. The
address of Purchaser is 000 Xxxx Xxx., Xxxxxxxxx, XX. All documents and
consideration shall be exchanged between the parties on that date.
8. CLOSING AND POST-CLOSING COVENANTS. The Parties agree as follows
with respect to the Closing and the period thereafter:
(a) COOPERATION. Seller will cooperate with Purchaser
in regard to loans that are in the pipeline as of the Closing
and as more particularly set forth in subpart 4.6(b) above. In
conjunction therewith, unless Purchaser rejects a particular
transaction at or prior to the Closing as set forth in subpart
4.6(b), Seller will deliver to Purchaser at the Closing all
documents required after the Closing to complete any purchase
and/or sale and will allow Purchaser to close the transaction
in Seller's name after the Closing. In such event, Seller is
to be reimbursed at the close of the respective purchase
and/or sale for any moneys advanced by Seller to the seller
and/or purchaser of the mortgage loans as a part of the
purchase and/or sales price. The remaining net cash recovery,
if any, from the respective purchase and/or sale is allocated
to, and the property of, Purchaser.
(b) LICENSING. If requested by Purchaser, Seller will
continue to provide licensing to Purchaser as a dba (or will
allow loans to be closed in its name and using its licenses
with appropriate controls to protect Seller) for up to 180
days after the Closing Date while Purchaser and Seller
complete the transfer of the loan pipeline of unfunded loans
of Seller which Purchaser elects to accept.
(c) EMPLOYEE MATTERS.
(i) OFFER OF EMPLOYMENT. On the Closing
Date, Purchaser will offer employment to the
employees of Seller listed on Schedule 4.11(a) on
terms and conditions determined by Purchaser in its
sole discretion. All employees of Seller accepting
Purchaser's offers of employment shall be employed on
an "at will" basis including those employees listed
on both Schedule 4.11(a) and Schedule 5(j). The
parties understand that if an employee listed on both
Schedules is offered employment by Purchaser and
accepts such employment, his or her employment
contract listed on Schedule 5(j) will be terminated
concurrently with the Closing.
(ii) EMPLOYEE FILES. To the extent permitted
by law and to the extent that releases have been
obtained from the employee, on the Closing Date,
Seller shall deliver to a designee of Purchaser a
copy of all historical personnel and medical records
of each of Seller's employees listed on Schedule
4.11(a), including, but not limited to, employment
17
agreements, confidentiality and noncompete
agreements, employment applications, corrective
action reports, disciplinary reports, notices of
transfer, notices of salary/wage changes and other
similar documents.
(d) TAX COOPERATION. After Closing, Purchaser and
Seller shall cooperate and exchange information relating to
the acquired Assets as is necessary in (A) filing any return
or report for Taxes, amended return or claim for refund
(herein "Tax Returns"), (B) determining any Tax liability or a
right to refund of Taxes, (C) conducting any audit or other
proceeding in respect of Taxes, or (D) effectuating the terms
of this Agreement related to Taxes. Any information obtained
shall be kept confidential except as may be otherwise
necessary in connection with filing any Tax Return,
determining any Tax liability or right to the refund of any
Taxes, or in conducting or defending any audit or other
proceeding in respect of Taxes.
(e) TRANSITION. Seller will not take any action that
is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier, or other business
associate of Seller from creating a business relationship with
Purchaser after the Closing. Seller will refer all customer
inquiries relating to the Business of Seller to Purchaser from
and after the Closing.
(f) LIMITATION ON RIGHT TO SELL THE BUSINESS.
Purchaser hereby agrees that it will not enter into a
consolidation or merger, a share exchange, a sale, lease
exchange, or transfer of all or substantially all of
Purchaser's assets unless Earn-out payments and proceeds
to Seller from such a transaction, together with satisfaction
of Seller's Preferred Capital Interest in Purchaser will be
equal to $205 million plus all accrued interest on such
Preferred Capital Interest in Purchaser.
(g) GENERAL. In case at any time after the Closing
any further action is necessary or desirable to carry out the
purposes of this Agreement, each of the Parties will take such
further action (including the execution and delivery of such
further instruments and documents) as the other Party
reasonably may request, all at the sole cost and expense of
the requesting Party (unless the requesting Party is entitled
to indemnification therefor under Section 13 below). On the
Closing Date or as soon after as practicable, and in no event
later than ten days after the Closing Date, Seller shall make
available to Purchaser all original Books and Records,
agreements and documents in its files pertaining to the
Equipment and Assumed Liabilities except that Seller may
retain copies of any tax returns and copies of other Books and
Records related thereto to the extent reasonably necessary for
the preparation of tax returns of Seller, and, where
necessary, to document the closing financial statements of
Seller and any representations or warranties provided by
Seller under this Agreement, provided that Seller agrees to
keep such information confidential except to the extent
disclosure is required by law.
(h) FURTHER ASSURANCES. At the Closing and from time
to time after the Closing, at the request of any Party and
without further consideration, the other Party shall promptly
18
execute and deliver such certificates and other instruments of
sale, conveyance, assignment and transfer, and take such other
action, as may reasonably be requested to more effectively
confirm (i) any right obtained by Purchaser hereunder, (ii)
any obligation expressly assumed by Purchaser herein, (iii)
the ownership of any Asset and (iv) placing Purchaser in
possession of the Assets at no expense to Purchaser. To the
extent that any consents, waivers or approvals necessary to
effectively transfer Seller's rights to contracts or avoid a
default thereunder are not obtained prior to the Closing,
Seller shall use its commercially reasonable efforts to: (A)
provide to Purchaser, at the request of Purchaser, the
benefits of any such Asset, and hold the same in trust for
Purchaser; (B) cooperate in any reasonable and lawful
arrangement approved by Purchaser which is designed to provide
such benefits to Purchaser; and (C) enforce and perform, at
the request of Purchaser and for the account of Purchaser, any
rights or obligations of Seller arising from any such Asset
against or in respect of any third person, including the right
to elect to terminate any contract, arrangement or agreement
in accordance with the terms thereof upon the advice of
Purchaser.
9. TAX INDEMNIFICATION. Pursuant to the provisions of Section 13,
Seller shall indemnify and hold harmless Purchaser and its Affiliates from and
against all Taxes of Seller attributable to its Assets or operations for any
taxable year or period ending on or before the Closing Date, including any
sales, use or other excise Tax arising as a result of the transactions
contemplated by this Agreement. Purchaser shall indemnify and hold harmless
Seller from and against any and all Taxes attributable to the Business for any
period beginning after the Closing Date. The Parties agree that the liability
for all ad valorem Taxes with respect to the Assets through the Closing shall be
allocated to Seller. Additionally, Seller shall indemnify Xxxxxx X. Xxxxxxxx
from and against any unexpected adverse tax consequences arising out of a
determination by the Internal Revenue Service that Xxxxxx X. Xxxxxxxx has
received taxable income upon the consummation of this Asset Purchase
transaction.
10. CONDITIONS TO OBLIGATION OF PURCHASER. The obligation of Purchaser
to consummate the transactions contemplated herein in connection with the
Closing is subject to satisfaction of the following conditions:
(A) the representations and warranties set forth in Section 5
above shall be true and correct in all material respects at and as of
the Closing Date;
(B) Seller shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(C) Seller shall have procured all of the third party consents
listed in Schedule 5(b); provided that Purchaser (in its sole
discretion) may elect to waive the failure to obtain one or more
consents. Seller shall have received all authorizations, consents, and
approvals of Governmental Bodies specified on Schedule 5(b), all on
terms reasonably satisfactory to Purchaser;
(D) no action, suit, or proceeding shall be pending or to the
Knowledge of Seller, threatened before any court or quasi-judicial or
administrative agency of any federal, state or local jurisdiction or
19
before any arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (i) prevent consummation of any
of the transactions contemplated by this Agreement, (ii) cause any of
the transactions contemplated by this Agreement to be rescinded
following consummation, or (iii) affect adversely the right of the
Purchaser to own the Assets and conduct the Business after the Closing
Date;
(E) Seller shall have delivered to Purchaser certificates
dated as of the Closing Date certifying (i) that attached thereto is a
true and complete copy of the Articles of Incorporation of Seller and
all amendments thereto, (ii) that attached thereto is a true and
complete copy of the bylaws of Seller and all amendments thereto, (iii)
that Seller has satisfied each of the closing conditions set forth in
Sections 10(a)-(d) of this Agreement, (iv) as to the incumbency and
genuineness of the signature of each officer of Seller executing this
Agreement or any of the other documents contemplated hereby, and (v) of
the Secretaries required by Section 4.14;
(F) Seller shall have delivered to Purchaser such documents as
are contemplated by Section 4 hereof;
(G) At least 80% of the employees listed on Schedule 4.11(a)
shall have entered into employment arrangements with Purchaser on terms
reasonably satisfactory to Purchaser; and
(H) Purchaser shall have entered into an assignment of the 8
leases (or such portion thereof it accepts) for the Real Property from
which the Business presently is conducted, pursuant to standard form
assignments or obtained subleases as set forth in Section 4.7 above.
Notwithstanding the above, if the landlord(s) is unwilling to enter
into an assignment, Seller, if permitted by the landlord, will enter
into a sublease agreement on substantially the same terms and
conditions as the lease. Nothing herein contained shall prevent
Purchaser from rejecting any lease without further consideration to
Seller. Purchaser may waive any condition specified in this Section 10
if it executes a writing so stating at or prior to the Closing.
(I) Seller shall have loaned $5 million to R-DOC, LLC, an
affiliate of Purchaser, and shall have caused property at 000 Xxxx
Xxxxxx in Lexington, South Carolina and property known as the Xxxxxxx
at West Columbia, SC be transferred to R-DOC, LLC in consideration of
$3,444,679.71. In consideration of such loan and such transfer, R-DOC,
LLC shall deliver to Seller at Closing its promissory note in the
amount of $8,444,679.71 payable in 60 equal quarterly payments of
principle and interest at 7 1/2 % per annum in the amount of
$234,849.66 (the "R-DOC Note") which note shall be secured by a
security interest in all assets of R-DOC, LLC (the "R-DOC Security
Agreement").
11. CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller to
consummate the transactions contemplated herein in connection with the Closing
is subject to satisfaction of the following conditions:
20
(A) The representations and warranties set forth in Section 6
above shall be true and correct in all material respects at and as of
the Closing Date;
(B) Purchaser shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(C) Purchaser shall have accepted the lease assignments and
sublease(s) or other documents contemplated by Section 4 hereof;
(D) Purchaser shall have delivered to Seller an executed copy
of the Operating Agreement of Purchaser in form attached hereto as
Exhibit A;
(E) Purchaser shall have delivered to Seller the R-DOC Note
and the R-DOC Security Agreement in form and substance satisfactory to
Seller and its counsel;
(F) Xxxxxx X. Xxxxxxxx shall have entered into the
Stockholders Agreement in the form attached hereto as Exhibit B.;
(G) Xxxxxx X. Xxxxxxxx shall have resigned as a director and
from all other offices of Seller, Seller's Parent and any affiliates
thereof; and
(h) Seller's Parent shall have received an opinion from Xxxxx
Capital, Inc. of Charlotte, NC that the transactions contemplated by
this Agreement are fair from a financial point of view to the
shareholders of Seller's Parent.
Seller may waive any condition specified in this Section 11 if
it executes a writing so stating at or prior to the Closing.
12. SIMULTANEOUS TRANSACTIONS. All transactions to be effected under
this Agreement at the Closing shall be deemed to occur in the order herein
specified, if any, but shall occur nearly simultaneously and no such transaction
shall be deemed to have occurred unless all such transactions have occurred. All
documents required to be delivered at the Closing by any Party hereunder,
including this Agreement, shall be delivered at (or prior to) the Closing. No
such document shall be released therefrom until all documents have been
delivered at the Closing, whereupon all shall be deemed released together.
13. INDEMNIFICATION.
(A) INDEMNIFICATION BY SELLER. Subject to Section 13(d),
Seller shall indemnify and hold harmless Purchaser from and against,
the entirety of any costs, fees, Liabilities, Taxes, charges, claims,
expenses and damages, including reasonable legal fees and expenses
(both those incurred in connection with the defense or prosecution of
the indemnifiable claim and those incurred in connection with the
enforcement of this provision) and reasonable costs of investigation,
actually incurred or as and actually paid by Purchaser or any of its
respective subsidiaries or Affiliates, or any of its respective
officers, directors or employees (collectively, "Purchaser Losses") as
a result of:
(i) the purchase, ownership, use, distribution or
other transfer related to the assets retained by Seller or
liabilities other than the Assumed Liabilities;
21
(ii) any and all actions, suits, proceedings, claims
or demands incident to any of the foregoing or such
indemnifications.
(B) INDEMNIFICATION BY PURCHASER. Subject to Section 13(d),
Purchaser agrees to indemnify and hold harmless the Seller from and
against, without duplication, all costs, fees, Liabilities, Taxes,
charges, claims, expenses and damages, including reasonable legal fees
and expenses (both those incurred in connection with the defense or
prosecution of the indemnifiable claim and those incurred in connection
with the enforcement of this provision) and reasonable costs of
investigation, as and actually incurred or as and actually paid by
Seller (collectively, "Seller Losses") as a result of:
(i) any misrepresentation contained in or breach of
or failure to perform any of Purchaser's representations,
warranties, covenants or agreements contained herein or in any
agreement, certification, schedule, exhibit or writing
delivered by it pursuant hereto, or in connection herewith;
(ii) any and all actions, suits, proceedings, claims
or demands incident to any of the foregoing or such
indemnifications.
Purchaser Losses and Seller Losses are referred to
collectively as "Losses." Purchaser Covered Actions and Seller Covered
Actions are referred to collectively as "Covered Actions."
(C) LOSS INDEMNITY PROCEDURE.
(i) Upon learning of the commencement of a Covered
Action or the actual receipt by the Party claiming a right of
indemnification (the "Indemnified Party") of information
relating to the purported existence of facts or circumstances
which could result in the commencement of a Covered Action or
other incurrence of Loss, the Indemnified Party shall
promptly, but no later than ten (10) working days after
learning of such commencement or receipt, give written notice
thereof, with reasonable specificity of the facts as then
known, to the Party or Parties having the indemnification
obligation (the "Indemnifying Party" without regard to number)
provided, however, failure to give timely notice shall not
release the Indemnifying Party of its obligations hereunder
except, and only, to the extent the Indemnifying Party suffers
actual prejudice as a proximate result of such failure.
(ii) The Indemnifying Party shall have the right to
assume the defense of any' such Covered Action by giving
written notice (the "Assumption Notice") to the Indemnified
Party within ten (10) working days after notice is given
pursuant to Subsection (c)(i) above, which Assumption Notice
shall state that (A) it agrees that the claimant is entitled
to indemnification hereunder and that any resulting Loss is a
Purchaser Loss or a Seller Loss, as the case may be, for which
it is or they are liable; and (B) it agrees to assume the
defense thereof in the name and on behalf of the Indemnified
Party with counsel reasonably satisfactory to the Indemnified
Party, in either event at the sole cost and expense of the
Indemnifying Party; provided, however, (1) all such costs and
22
expenses of the foregoing counsel, if not paid by the
Indemnifying Party and instead paid by the Indemnified Party
shall be Losses indemnifiable by the Indemnifying Party under
Section 13(a) or (b), as the case may be, (2) the Indemnified
Party, notwithstanding the timely delivery of an Assumption
Notice, may participate in such Covered Action through counsel
separately selected and paid for by the Indemnified Party, and
(3) if no Assumption Notice is timely given, or despite the
giving of the Assumption Notice the defendants in any Covered
Action include both the Indemnified Party and the Indemnifying
Party, and the Indemnified Party shall have reasonably
concluded that there may be legal defenses available to it
which are different from or additional to those available to
the Indemnifying Party, or if there is a conflict of interest
which would prevent counsel for the Indemnifying Party from
also representing the Indemnified Party, the Indemnified Party
shall have the right to select one separate counsel to conduct
the defense of such action on its behalf, and all such costs
and expenses shall be paid by the Indemnifying Party and, if
paid by the Indemnified Party, shall be Losses under Section
13(a) or (b), as the case may be. The Indemnified Party may
take such action with respect to a Covered Action as it may
deem appropriate to protect against further damage or default,
including obtaining an extension of time to answer the
complaint or other pleading or filing an answer thereto.
(iii) Where Seller is the Indemnifying Party, Seller
shall not consent to the entry of any judgment or enter into
any settlement without the prior written consent of Purchaser,
which shall not be unreasonably withheld or delayed. Where
Purchaser is the Indemnifying Party, Purchaser shall not
consent to the entry of any judgment or enter into any
settlement without the written consent of Seller, which shall
not be unreasonably withheld or delayed.
(D) CERTAIN LIMITATIONS. The liability of Seller and Purchaser for
claims under this Agreement shall be limited by the following:
(i) The amount of Losses otherwise recoverable under
this Section 13 shall be reduced to the extent to which any
Federal, state, local or foreign tax liabilities of Seller or
Purchaser, as applicable, or any of their respective
Affiliates, is decreased by reason of any Loss in respect of
which such Seller or Purchaser, as applicable, shall be
entitled to indemnity under this Agreement (taking into
consideration any income or gain for tax purposes resulting
from the indemnity payment).
(ii) Any payment required under this Section 13 paid
to the Purchaser or Seller, as the case may be, shall be
treated by Purchaser and Seller as a further adjustment of the
Purchase Price.
(iii) No Loss shall be recoverable by Seller or
Purchaser pursuant to this Agreement, and no claim therefor
shall be asserted for any purpose whatsoever hereunder, with
23
respect to any matter or matters unless the aggregate amount
thereof equals at least $50,000.
(iv) No Losses shall be recoverable by a Party with
respect to any matter which is covered by insurance, to the
extent proceeds of such insurance or other third party
indemnitor are paid or payable.
(E) REMEDIES. The sole and exclusive remedies of both Purchaser and Seller
hereunder or otherwise in connection with the transactions contemplated
by this Agreement shall be the remedies set forth in this Section 13.
14. CONFIDENTIALITY; PUBLIC ANNOUNCEMENTS. No Party hereto shall issue any
press release or announcement, or make any reference to the Closing or to the
transactions contemplated hereby to any third Person prior to the Closing
without the prior written consent of the other Party hereto except as required
by applicable law. Both Parties shall coordinate the announcement of the
Closing, as to both the manner and content thereof.
15. TERMINATION; OPTION TO TERMINATE.
(A) TERMINATION OF AGREEMENT. The Parties may terminate this
Agreement as provided below:
(i) Purchaser and Seller may terminate this Agreement
by mutual written consent at any time prior to the Closing;
(ii) Purchaser may terminate this Agreement by giving
written notice to Seller at any time prior to the Closing (A)
in the event Seller or any Affiliate has breached any
representation, warranty, or covenant contained in this
Agreement in any material respect, provided Purchaser has
notified Seller of the breach, and the breach has continued
without cure for a period of five (5) business days after the
notice of breach or (B) if the Closing shall not have occurred
on or before December 31, 2002, by reason of the failure of
any condition precedent under Section 10 hereof (unless the
failure results primarily from Purchaser breaching any
representation, warranty, or covenant contained in this
Agreement); and
(iii) Seller may terminate this Agreement by giving
written notice to Purchaser at any time prior to the Closing
(A) in the event Purchaser has breached any material
representation, warranty, or covenant contained in this
Agreement in any material respect provided the Seller has
notified the Purchaser of the breach, and the breach has
continued without cure for a period of five (5) business days
after the notice of breach or (B) if the Closing shall not
have occurred on or before December 31, 2002, by reason of the
failure of any condition precedent under Section 11 hereof
(unless the failure results primarily from Seller or any
Affiliate breaching any representation, warranty, or covenant
contained in this Agreement).
24
16. INTERMEDIARIES. No broker or finder has been involved in this
transaction. Therefore, each party warrants and represents to the other that no
broker's or finder's fee has been incurred as a result of the activities of the
respective party hereto making the warranty.
17. NOTICES.
(A) All notices and other communications hereunder shall be in
writing and shall be given by delivery in person, facsimile or other
standard form of telecommunications, by overnight courier, or by
registered or certified mail, return receipt requested to the Parties
at their respective addresses set forth below, with copies as follows:
IF TO PURCHASER: EMMCO, LLC
000 Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Tel: (___)_________________
Fax: (___)_________________
E-Mail:____________________
WITH COPY TO: ___________________________
___________________________
Tel: ( )_________________
Fax: ( )_________________
E-Mail:____________________
ATTORNEYS FOR PURCHASER
IF TO SELLER: HOME GOLD, INC.
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, X.X. 00000
Tel: ( )_________________
Fax: ( )_________________
E-Mail:____________________
WITH A COPY TO: Wyche, Burgess, Xxxxxxx & Xxxxxx
00 X. Xxxxxxxxxx Xxx
X.X. Xxx 000 (29602-0728)
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Tel: (000)000-0000
Fax: (000)000-0000
E-Mail: xxxxx@xxxxx.xxx
ATTORNEYS FOR SELLER
25
Notice given by mail (registered or certified, return receipt
requested) shall be deemed given three (3) business days after deposit with the
United States Postal Service; notice given by facsimile after receipt of
telecopied confirmation thereof; notice given by overnight courier shall be
deemed given one business day after delivery into the custody and control of
such overnight courier service for next day delivery; and notice delivered in
person shall be deemed given on the business day of such delivery.
(B) Any Party hereto may change the address to which any
notice or other communication shall be given by a notice to such effect
complying with this Section 17(a).
18. MISCELLANEOUS.
(A) RIGHTS CONFINED TO PARTIES. Nothing expressed or implied
herein is intended or shall be construed to confer upon or give to any
Person, other than the Parties hereto, and their respective heirs,
executors, administrators, successors and assigns as permitted
hereunder, any right, remedy, or claim under or by reason of this
Agreement or of any term, covenant, or condition hereto, and all the
terms, covenants, conditions, promises, and agreements contained herein
shall be for the sole and exclusive benefit of the Parties hereto and
their successors and assigns as permitted hereunder. There is no third
party beneficiary of this Agreement.
(B) SURVIVAL. Except as otherwise specifically provided
herein, all representations, warranties, covenants and agreements shall
survive the Closing, regardless of any inspection or discovery, whether
by reason of due diligence or otherwise, for a period of one year from
Closing, except that representations, warranties, covenants and
agreements with respect to the authorization, enforceability and
validity of the execution and performance of this Agreement (Section
5(b) and 6(b)) shall survive for the maximum duration of the applicable
statute of limitations. Claims for indemnification or claims in respect
of anticipated Losses which are made during the appropriate survival
period shall survive termination of such periods.
(C) ENTIRE AGREEMENT. This Agreement, together with the
Exhibits and Schedules annexed hereto, and the agreements entered into
in accordance with the terms hereof and contemplated hereby, constitute
the entire understanding between the Parties hereto with respect to the
subject matter hereof and thereof and supersede any and all prior
agreements between the Parties hereto with respect to the subject
matter hereof and thereof
(D) ASSIGNMENT. This Agreement is not assignable by either
Party hereto and any purported assignment shall be null and void and of
no effect. Notwithstanding the foregoing, Purchaser may (i) assign any
or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases Purchaser
nonetheless shall remain primarily responsible for the payment and
performance of all of its obligations hereunder).
(E) SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall not affect the
26
validity or enforceability of any other provision in such jurisdiction
or the validity or enforceability of such provision in any other
jurisdiction.
(F) EFFECT OF HEADINGS. The Article, Section, Subsection,
Exhibit and Schedule headings contained herein or therein are for
convenience only and shall not affect the construction hereof.
(G) GOVERNING LAW. The provisions of this Agreement, and all
the rights and obligations of the Parties hereunder, shall be governed
by and construed in accordance with the laws of the State of South
Carolina applicable to agreements made and to be performed wholly
within such State, without giving effect to any choice or conflict of
law provision that would cause the application of the laws of any
jurisdiction other than the State of South Carolina..
(H) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, and all
such counterparts shall constitute but one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
27
(I) EXPENSES. Each party shall bear the respective legal,
accounting and other costs and expenses of any nature, relating to or
in connection with the negotiation of this Agreement and the
consummation of the transactions contemplated hereby, incurred by each
of them, whether or not this Agreement is consummated or terminated.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement or
caused same to be executed by their respective officers or other representatives
thereunto duly authorized, as of the date first above written.
HOME GOLD , INC.
a South Carolina corporation
By: /s/ Xxxxxxx Xxxxxxx
-----------------------------------
President
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------
Type Name: Xxxxx X. Xxxxxx
Title: Secretary
EMMCO, LLC
a South Carolina limited liability company
By: /s/ Xxxxxx Xxxxxxxx
-----------------------------------
Type Name: Xxxxxx Xxxxxxxx
Title: Manager
Emmco Credit Corp., Inc. hereby assigns to Emmco, LLC all of its right,
title and interest in that certain Asset Purchase Agreement dated November 19,
2002 between HomeGold, Inc. and Emmco Credit Corp., Inc. and hereby consents to
the substitution of Emmco, LLC as the purchaser under said agreement in place of
Emmco Credit Corp., Inc.
EMMCO CREDIT CORP, INC.
a South Carolina corporation
By: /s/ Xxxxxx Xxxxxxxx
-----------------------------------
Type Name: Xxxxxx X. Xxxxxxxx
Title: Manager
List of Exhibits
Exhibit A Operating Agreement of Emmco, LLC
Exhibit B Stockholders Agreement
28
List of Schedules
Schedule 1(i) Equipment
Schedule 1(ii) Contracts
Schedule 1(a) Assumed Liabilities
Schedule 1(b) Broker Agreements
Schedule 1(c) Excluded Assets
Schedule 1(d) Permitted Encumbrances
Schedule 4.7 Office Leases
Schedule 4.8 Equipment Leases
Schedule 4.11(a) Employees of Seller to be Employed by Purchaser
Schedule 5(b) Exceptions as to Enforceability
Schedule 5(d)-1 Third Party Rights in Assets
Schedule 5(e) Litigation
Schedule 5(f) Exceptions to Licensing and Permits
Schedule 5(h) Exceptions to Dealings with Officers, Directors and
Stockholders
Schedule 5(i) Exceptions as to Compliance
Schedule 5(j) Certain Employments not Terminable at Will
Schedule 5(l)-(1) Third Party Rights in Seller's IP
Schedule 5(l)-(2) Copyrights, Trade Names, Trademarks and Patents
