1
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
DATED
JUNE 1, 1998
BY AND AMONG
INDEPENDENCE FUNDING COMPANY, LLC,
TELECAPITAL, L.P.
AND
AMRESCO INDEPENDENCE FUNDING CO., INC.,
AMRESCO COMMERCIAL LENDING CORP.,
AND
AMRESCO, INC.
2
TABLE OF CONTENTS
PAGE
----
ARTICLE I
Certain Definitions................................................................................ 1
1.1 Certain Definitions.............................................................. 1
1.2 Terms Defined in Other Articles.................................................. 9
1.3 Interpretation................................................................... 10
ARTICLE II
Purchase and Sale of Assets; Assumption of Liabilities;
Additional Covenants............................................................................... 10
2.1 Purchase and Sale of Assets...................................................... 10
2.2 Purchase Price................................................................... 10
2.3 Allocation of the Purchase Price................................................. 13
2.4 Closing.......................................................................... 13
ARTICLE III
Representations and Warranties of IFC.............................................................. 13
3.1 Organization and Qualification of IFC
and the IFC Subsidiaries....................................................... 13
3.2 Authorization.................................................................... 13
3.3 Non-contravention................................................................ 14
3.4 No Consents...................................................................... 13
3.5 The IFC Purchased Assets......................................................... 13
3.6 Personal Property................................................................ 13
3.7 Real Property.................................................................... 13
3.8 No Condemnation.................................................................. 13
3.9 Financial Statements............................................................. 15
3.10 Absence of Certain Developments.................................................. 15
3.11 Governmental Authorizations; Licenses; Etc....................................... 15
3.12 Litigation....................................................................... 16
3.13 Undisclosed Liabilities.......................................................... 16
3.14 Taxes............................................................................ 16
3.15 Insurance........................................................................ 16
3.16 Proprietary Rights............................................................... 16
3.17 Accounts and Loans Receivable ................................................... 17
3.18 Material Contracts............................................................... 17
3.19 Books and Records................................................................ 18
3.20 Brokers.......................................................................... 18
3.21 Disclosure....................................................................... 18
3.22 Agreements and Transactions with Related Parties................................. 18
3.23 Disclaimer of Warranties......................................................... 19
-i-
3
ARTICLE IV
Representations and Warranties of Telecapital...................................................... 19
4.1 Organization and Qualification of Telecapital.................................... 19
4.2 Authorization.................................................................... 19
4.3 Non-contravention................................................................ 19
4.4 No Consents...................................................................... 20
4.5 The Telecapital Purchased Assets................................................. 20
4.6 Personal Property................................................................ 20
4.7 Real Property.................................................................... 20
4.8 No Condemnation.................................................................. 20
4.9 Financial Statements............................................................. 20
4.10 Absence of Certain Developments.................................................. 21
4.11 Governmental Authorizations; Licenses; Etc....................................... 21
4.12 Litigation....................................................................... 22
4.13 Undisclosed Liabilities.......................................................... 22
4.14 Taxes............................................................................ 22
4.15 Insurance........................................................................ 22
4.16 Proprietary Rights............................................................... 22
4.17 Accounts and Loans Receivable.................................................... 22
4.18 Material Contracts............................................................... 23
4.19 Books and Records................................................................ 23
4.20 Brokers.......................................................................... 23
4.21 Disclosure....................................................................... 23
4.22 Agreements and Transactions with Related Parties................................. 23
4.23 Disclaimer of Warranties......................................................... 24
ARTICLE V
Representations and Warranties of the Purchaser Parties............................................ 24
5.1 Organization..................................................................... 24
5.2 Authorization.................................................................... 24
5.3 Non-contravention................................................................ 25
5.4 No Consents...................................................................... 25
5.5 Financial Resources.............................................................. 25
5.6 Financial Statements............................................................. 25
5.7 Absence of Certain Developments.................................................. 25
5.8 Litigation....................................................................... 25
5.9 Capitalization................................................................... 26
5.10 Compliance with Laws............................................................. 26
5.11 SEC Filings; Financial Statements................................................ 26
5.12 Undisclosed Liabilities.......................................................... 27
5.13 Brokers.......................................................................... 27
-ii-
4
ARTICLE VI
Covenants and Agreements........................................................................... 27
6.1 Access and Information........................................................... 27
6.2 Affirmative Covenants............................................................ 28
6.3 Negative Covenants............................................................... 28
6.4 Closing Documents................................................................ 29
6.5 Transfer and Property Taxes...................................................... 29
6.6 Best Efforts: Further Assurances................................................. 29
6.7 Employment Matters............................................................... 29
6.8 Registration Agreement........................................................... 30
6.9 Xxxx-Xxxxx-Xxxxxx Filings........................................................ 31
6.10 Unassignable Contracts or Licenses............................................... 31
6.11 Covenant Against Competition..................................................... 32
6.12 Publicity........................................................................ 33
6.13 Legending of Common Stock........................................................ 33
6.14 Rothschild....................................................................... 34
6.15 Transitional Services............................................................ 34
ARTICLE VII
Conditions to Closing.............................................................................. 34
7.1 Mutual Conditions................................................................ 34
7.2 Conditions to the Purchaser Parties' Obligations................................. 35
7.3 Conditions to the Sellers' Obligations........................................... 36
ARTICLE VIII
Termination........................................................................................ 38
8.1 Termination...................................................................... 38
8.2 Effect of Termination............................................................ 38
ARTICLE IX
Duration of Representations and Warranties; Indemnification........................................ 39
9.1 Duration of Representations and Warranties....................................... 39
9.2 Indemnification.................................................................. 39
9.3 Procedures for Third Party Claims................................................ 40
9.4 Procedures for Inter-Party Claims................................................ 41
ARTICLE X
Miscellaneous...................................................................................... 41
10.1 Notices........................................................................ 41
10.2 Expenses....................................................................... 42
-iii-
5
10.3 Governing Law; Consent to Jurisdiction......................................... 42
10.4 Assignment; Successors and Assigns; No Third Party Rights...................... 43
10.5 Counterparts................................................................... 43
10.6 Titles and Headings............................................................ 43
10.7 Entire Agreement............................................................... 43
10.8 Amendment and Modification..................................................... 43
10.9 Waiver......................................................................... 43
10.10 Severability................................................................... 43
10.11 Obligations Several............................................................ 44
10.12 No Strict Construction......................................................... 44
-iv-
6
SCHEDULES
Schedule 1.1(i) IFC Real Property
Schedule 1.1(ii) IFC Approvals
Schedule 1.1(iii) Telecapital Real Property
Schedule 1.1(iv) Telecapital Approvals
Schedule 1.1(v) IFC Assumed Related Liabilities
Schedule 1.1(vi) Telecapital Assumed Related Liabilities
Schedule 3.1 IFC Foreign Qualification
Schedule 3.3 IFC Non-contravention
Schedule 3.4 IFC Consents
Schedule 3.5 IFC Third Party Interests
Schedule 3.6 IFC Encumbrances
Schedule 3.7 IFC Real Property Encumbrances
Schedule 3.9 IFC GAAP Disclosures
Schedule 3.10 IFC Certain Developments
Schedule 3.12 IFC Litigation
Schedule 3.14 IFC Tax Contests
Schedule 3.15 IFC Insurance
Schedule 3.16 IFC Proprietary Rights
Schedule 3.17 IFC Accounts and Loans Receivable
Schedule 3.18 IFC Material Contracts
Schedule 3.22 IFC Related Party Agreements
Schedule 4.1 Telecapital Foreign Qualification
Schedule 4.3 Telecapital Non-contravention
Schedule 4.4 Telecapital Consents
Schedule 4.5 Telecapital Third Party Interests
Schedule 4.6 Telecapital Encumbrances
Schedule 4.7 Telecapital Real Property Encumbrances
Schedule 4.9 Telecapital GAAP Disclosures
Schedule 4.10 Telecapital Certain Developments
Schedule 4.12 Telecapital Litigation
Schedule 4.14 Telecapital Tax Contests
Schedule 4.15 Telecapital Insurance
Schedule 4.16 Telecapital Proprietary Rights
Schedule 4.17 Telecapital Accounts and Loans Receivable
Schedule 4.18 Telecapital Material Contracts
Schedule 4.22 Telecapital Related Party Agreements
Schedule 5.4 Purchaser Consents
Schedule 5.7 Purchaser Certain Developments
Schedule 5.8 Purchaser Litigation
Schedule 6.7 Employees
-v-
7
EXHIBITS
Exhibit A-1 IFC Allocation of Purchase Price
Exhibit A-2 Telecapital Allocation of Purchase Price
Exhibit B Form of Xxxx of Sale
Exhibit C Form of Blanket Assignment
Exhibit D Form of Assignment and Assumption Agreement
Exhibit E IFC Escrow Agreement
Exhibit F Telecapital Escrow Agreement
-vi-
8
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated June 1, 1998, by and among
Independence Funding Company, LLC, a Texas limited liability company ("IFC"),
Telecapital, L.P., a Delaware limited partnership ("Telecapital" and together
with IFC, "Sellers"), AMRESCO Independence Funding Co., Inc., a Delaware
corporation ("Purchaser1," each of Purchaser1 and Purchaser2 being a
"Purchaser"), AMRESCO Commercial Lending Corp. ("Purchaser 2") and AMRESCO,
Inc., a Delaware corporation ("Parent," and collectively with Purchaser1 and
Purchaser2, the "Purchaser Parties").
W I T N E S S E T H:
WHEREAS, prior to the date hereof, IFC has engaged, among
other things, in the business of originating and servicing loans including,
without limitation, loans originated pursuant to certain loan programs of the
United States Small Business Administration ("SBA") and selling interests in
such loans (collectively, the "IFC Business") and Telecapital has engaged in the
business of originating, acquiring and servicing loans to the independent
payphone industry and other incidental financing and servicing (collectively,
the "Telecapital Business"); and
WHEREAS, Sellers desire to sell and transfer to Purchaser1 and
Purchaser2, and Purchaser1 and Purchaser2 desire to purchase and assume from
Sellers, all of the IFC Purchased Assets (as defined) and Telecapital Purchased
Assets (as defined), respectively, and all of the IFC Assumed Liabilities (as
defined) and Telecapital Assumed Liabilities (as defined), respectively, all as
more specifically provided herein; and
WHEREAS, each Purchaser is a wholly-owned subsidiary of
Parent, and Sellers are relying upon Parent being a party to this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and intending to be legally bound, Sellers and the Purchaser
Parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Certain Definitions. As used in this Agreement,
the following terms have the respective meanings set forth below.
"Accounts Receivable" means all accounts and notes receivable
and other claims for money payable and all reserves related thereto, deposits,
and advances.
"Accountants" means Ernst & Young LLP, independent accountants
to IFC and Telecapital.
9
"Affiliate" means, with respect to any Person, any other
Person who directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such Person. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, and the
terms "controlled" and "controlling" have meanings correlative thereto.
"Agreement" means this Asset Purchase Agreement and the
exhibits and schedules referred to herein.
"Business Day" means a day, other than a Saturday or Sunday,
on which commercial banks in Texas are open for the general transaction of
business.
"Code" means the Internal Revenue Code of 1986, as amended.
"GAAP" means generally accepted accounting principles as in
effect in the United States from time to time.
"Governmental Authority" means any national, federal, state,
provincial, county, municipal or local government, foreign or domestic, or the
government of any political subdivision of any of the foregoing, or any entity,
authority, agency, ministry or other similar body exercising executive,
legislative, judicial, regulatory or administrative authority or functions of or
pertaining to government and any authority or other quasi-governmental entity
established to perform any of such functions, including the SBA.
"IFC Assumed Liabilities" means all liabilities and
obligations of IFC, whether absolute, contingent, mature, or otherwise, known or
unknown, (i) reflected in any IFC Financial Statements (including any notes
thereto), (ii) disclosed on any Schedule hereto, (iii) arising or incurred in
the ordinary course of business of the IFC Business to the extent such
liabilities or obligations are not required to be reflected in the IFC Financial
Statements (including any notes thereto) as of the date thereof or were incurred
or arose since April 30, 1998, and (iv) liabilities and obligations due or owing
on the Closing Date to any employee of the IFC Business that is employed by
Purchaser1 after the Closing Date for accrued compensation, vacation, sick leave
and holiday pay, severance pay set forth in the memorandum dated May 15, 1998
regarding a termination package to IFC's employees (a copy of which is included
as part of Schedule 3.18 hereto) and other benefits.
"IFC Excluded Assets" means:
(a) any books and records that IFC or any of its Affiliates is
required to retain pursuant to any statute, rule, regulation or ordinance, or
which do not relate to the IFC Purchased Assets, IFC Assumed Liabilities or IFC
Business (it being agreed that copies of any such materials relating to the IFC
Purchased Assets or the IFC Business shall be provided to the Purchaser Parties
upon their reasonable request);
-2-
10
(b) all payments and consideration to be received by IFC from
the Purchaser Parties and their Affiliates, and all rights and remedies of IFC,
under this Agreement or any agreement, instrument or other document delivered by
or on behalf of any Purchaser Party pursuant hereto; and
(c) any assets, property, or rights which by law cannot be
transferred, subject to Section 6.10 hereof.
"IFC Purchased Assets" means all of the right, title and
interest of IFC in and to all assets owned, held or used in the conduct of the
IFC Business of every kind and description, whether tangible or intangible,
except for the IFC Excluded Assets. The IFC Purchased Assets include, without
limitation, the following:
(a) all of IFC's cash, cash equivalents, money on deposit or
in the process of collection with banks, factors and others, certificates of
deposit, commercial paper, letters of credit, stock, bonds and other investment
securities;
(b) all real property and real estate ("Real Property") owned
or leased by IFC and all buildings and improvements thereto, including those
assets listed on Schedule 1.1(i);
(c) all authorizations, consents, approvals, licenses, orders,
permits, exemptions of, filings or registrations with, any Governmental
Authority ("Governmental Licenses") held by IFC, including those assets listed
on Schedule 1.1(ii), to the extent transferable;
(d) all right, title and interest of IFC in loans, mortgages,
indentures, promissory notes, evidences of indebtedness, other debt, deeds of
trust, loan or credit agreements, certificates of interest in all or part of the
foregoing, or similar agreements or instruments evidencing indebtedness of
borrowers, other than Accounts Receivable;
(e) all IFC Servicing Rights;
(f) the IFC Class B Certificate;
(g) all right, title and interest in Independence Funding
Holding Company, LLC, Independence Funding Holding Corporation and any other
direct or indirect subsidiary of IFC;
(h) all computer equipment, computer terminals, machinery, and
other equipment (including spare parts), automobiles and other vehicles,
furniture, fixtures, supplies, capital improvements in process, and all other
tangible personal property employed in the conduct of the IFC Business;
(i) all easements, rights of way, servitudes, leases, permits,
licenses or options used or held by the IFC Business;
-3-
11
(j) all Accounts Receivable;
(k) all prepaid rentals, deposits, advances and other prepaid
expenses;
(l) all rights and claims of IFC, whether mature, contingent
or otherwise, against third parties, whether in tort, contract or otherwise,
including causes of action, unliquidated rights and claims under or pursuant to
all warranties, representations and guarantees made by manufacturers, suppliers
or vendors, claims for refunds, rights of off-set and credits of all kinds and
all other general intangibles;
(m) all trademarks, service marks, trademark and service xxxx
registrations and applications therefor, copyrights, copyright registrations,
copyrights applications, trade names, corporate names, technology, inventions,
computer software, data and documentation (including electronic media), trade
secrets, know-how, customer lists, processes, other intellectual property and
proprietary information or rights, and permits, licenses or other agreements to
or from third parties regarding the foregoing, (collectively the "Proprietary
Rights") related to or used in the conduct of the IFC Business and all goodwill
associated therewith;
(n) all rights under any executory contract related to the IFC
Business to which IFC or any of its Affiliates is a party, including the
Material Contracts listed on Schedule 3.18; and
(o) all other assets used in the conduct of the IFC Business,
whether or not reflected on the books and records of IFC, including, the IFC
Business as a going concern, its goodwill and franchises, all credit balances of
or inuring to IFC under any state unemployment compensation plan or fund, its
employment contracts, restrictive covenants and obligations of present and
former employees, agents, representatives, independent contractors and others,
all books, records, files and papers relating to, or necessary to the conduct
of, the IFC Business, including operating and training manuals, computer
programs, manuals and data, catalogs, quotations, bids, sales and promotional
materials, correspondence, trade association memberships (to the extent
transferable), lists of present and former customers and suppliers, customer
credit information, customers' pricing information, business plans, studies and
analyses, whether prepared by IFC or a third party, relating to the IFC
Business, books of account, accounting records and personnel, employment and
other records relating to the IFC Business.
"IFC Retained Liabilities" means any obligation or liability
of IFC of any kind except for IFC Assumed Liabilities. IFC Retained Liabilities
shall include, without limitation, the following obligations and liabilities:
(a) any liability of IFC or its Affiliates relating to or
arising out of any IFC Excluded Assets;
(b) any liability of IFC or its Affiliates to any member of
IFC in his capacity as a member, including without limitation with respect to
distributions to members and the purchase of the membership interest of any
member of IFC;
-4-
12
(c) any liability of IFC or its Affiliates to Bear Xxxxxxx
arising out of the transactions contemplated by this Agreement and all expenses
and costs of IFC and its Affiliates incident to the transactions contemplated by
the Agreement;
(d) any liability of IFC to any Purchaser Party resulting from
any breach by IFC of any representation or warranty or resulting from any
default by IFC of its obligations under this Agreement or any other agreement
delivered by or on behalf of IFC pursuant hereto;
(e) any liability arising out of any business activity of IFC
that is not part of the IFC Business;
(f) any lien, claim or encumbrance on any IFC Purchased Asset,
except as set forth on Schedule 3.5;
(g) any liability of IFC for any federal, state or local
income or franchise taxes or taxes relating to the payment of the IFC Purchase
Price (other than the taxes for which the Purchaser Parties are responsible
under Section 6.5) and any penalties or other payments with respect thereto;
(h) except as may be included as IFC Assumed Liabilities, any
liability of any Seller for vacation, sick leave, holiday or severance
obligations or compensation, if any, to any employee or former employee of IFC,
including any severance and other post-Closing obligation to Xxxxxxx X. Xxxx,
Xx., W. Xxxxx Xxxxxxx, Xxxxxx Xxxxxxx, and Xxxxxx Xxxxxxxx; and
(i) any liability of IFC to any Affiliate of IFC, including
without limitation those disclosed on Schedule 3.22 except as specifically set
forth on Schedule 1.1(v).
"IFC Servicing Rights" means the rights and responsibilities
of IFC with respect to the servicing or subservicing of loans originated,
acquired or sold, in whole or in part, by IFC and any right to receive servicing
fees and ancillary income relating thereto.
"IFC Subsidiaries" means Independence Funding Holding Company,
LLC, Independence Funding Holding Corporation, and any other direct or indirect
subsidiary owned by IFC.
"Material Adverse Change" means a material adverse change in
the financial condition or results of operations of the applicable party.
"Person" means an individual, partnership, corporation,
limited liability company, joint stock company, unincorporated organization or
association, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Rothschild" means Rothschild, Inc.
-5-
13
"Seller Principals" means Xxxxx X. Xxxxx and Xxxxx X. Xxxxx.
"Telecapital Assumed Liabilities" means all liabilities and
obligations of Telecapital, whether absolute, contingent, mature, or otherwise,
known or unknown, (i) reflected in any Telecapital Financial Statements
(including any notes thereto), (ii) disclosed on any Schedule hereto, (iii)
arising or incurred in the ordinary course of business of the Telecapital
Business to the extent such liabilities or obligations are not required to be
reflected in the Telecapital Financial Statements (including any notes thereto)
as of the date thereof or were incurred or arose since April 30, 1998, and (iv)
liabilities and obligations due or owing on the Closing Date to any employee of
the Telecapital Business that is employed by Purchaser2 after the Closing Date
for accrued compensation, vacation, sick leave and holiday pay, severance pay in
accordance with the provisions of the memorandum dated May 15, 1998, which is
applicable to Telecapital, (a copy of which is included as part Schedule 3.18
hereto) and other benefits.
"Telecapital Excluded Assets" means:
(a) any books and records that Telecapital or any of its
Affiliates is required to retain pursuant to any statute, rule, regulation or
ordinance, or which do not relate to the Telecapital Purchased Assets,
Telecapital Assumed Liabilities or Telecapital Business (it being agreed that
copies of any such materials relating to the Telecapital Purchased Assets or the
Telecapital Business shall be provided to the Purchaser Parties upon their
reasonable request);
(b) all payments and consideration to be received by
Telecapital from the Purchaser Parties and their Affiliates, and all rights and
remedies of Telecapital, under this Agreement or any agreement, instrument or
other document delivered by or on behalf of any Purchaser Party pursuant hereto;
and
(c) any assets, property, or rights which by law cannot be
transferred, subject to Section 6.10 hereof.
"Telecapital Purchased Assets" means all of the right, title
and interest of Telecapital in and to all assets owned, held or used in the
conduct of the Telecapital Business, of every kind and description, wherever
located, whether tangible or intangible, except for the Telecapital Excluded
Assets. The Telecapital Purchased Assets include, without limitation, the
following:
(a) all of Telecapital's cash, cash equivalents, money on
deposit or in the process of collection with banks, factors and others,
certificates of deposit, commercial paper, letters of credit, stock, bonds and
other investment securities;
(b) all Real Property owned or leased by Telecapital and all
buildings and improvements thereto, including those assets listed on Schedule
1.1(iii);
(c) all Government Licenses of Telecapital, including those
assets listed on Schedule 1.1(iv), to the extent transferable;
-6-
14
(d) all right, title and interest of Telecapital in loans,
mortgages, indentures, promissory notes, evidences of indebtedness, other debt,
deeds of trust, loan or credit agreements, certificates of interest in all or
part of the foregoing or similar agreements or instruments evidencing
indebtedness of borrowers, other than Accounts Receivable;
(e) all Telecapital Servicing Rights;
(f) all computer equipment, computer terminals, machinery, and
other equipment (including spare parts), automobiles and other vehicles,
furniture, fixtures, supplies, capital improvements in process, and all other
tangible personal property employed in the conduct of the Telecapital Business;
(g) all easements, rights of way, servitudes, leases, permits,
licenses or options used or held by the Telecapital Business;
(h) all Accounts Receivable;
(i) all prepaid rentals, deposits, advances and other prepaid
expenses;
(j) all rights and claims of Telecapital, whether mature,
contingent or otherwise, against third parties, whether in tort, contract or
otherwise, including causes of action, unliquidated rights and claims under or
pursuant to all warranties, representations and guarantees made by
manufacturers, suppliers or vendors, claims for refunds, rights of off-set and
credits of all kinds and all other general intangibles;
(k) all Proprietary Rights related to or used in the
Telecapital Business and all goodwill associated therewith;
(l) all rights under any executory contract related to the
Telecapital Business to which Telecapital or any of its Affiliates is a party,
including the Material Contracts listed on Schedule 4.18; and
(m) all other assets used in the conduct of the Telecapital
Business, whether or not reflected on the books and records of Telecapital,
including, the Telecapital Business as a going concern, its respective goodwill
and franchises, all credit balances of or inuring to Telecapital under any state
unemployment compensation plan or fund, its employment contracts, restrictive
covenants and obligations of present and former employees, agents,
representatives, independent contractors and others, all books, records, files
and papers relating to, or necessary to the conduct of, the Telecapital
Business, including, operating and training manuals, computer programs, manuals
and data, catalogs, quotations, bids, sales and promotional materials,
correspondence, trade association memberships (to the extent transferable),
lists of present and former customers and suppliers, customer credit
information, customers' pricing information, business plans, studies and
analyses, whether prepared by Telecapital or a third party, relating to
-7-
15
the Telecapital Business, books of account, accounting records and personnel,
employment and other records relating to the Telecapital Business.
"Telecapital Retained Liabilities" means any obligation or
liability of Telecapital of any kind except for Telecapital Assumed Liabilities.
Telecapital Retained Liabilities shall include, without limitation, the
following obligations and liabilities:
(a) any liability of Telecapital or its Affiliates relating to
or arising out of any Telecapital Excluded Assets;
(b) any liability of Telecapital or its Affiliates to any
partner of Telecapital in his capacity as a partner, including without
limitation with respect to distributions to partners and the purchase of the
limited partnership interest of any partner of Telecapital;
(c) any liability of Telecapital or its Affiliates to Bear
Xxxxxxx arising out of the transactions contemplated by this Agreement and all
expenses and costs of Telecapital and its Affiliates incident to the
transactions contemplated by this Agreement; and
(d) any liability of Telecapital to any Purchaser Party
resulting from any breach by Telecapital of any representation or warranty or
resulting from any default by Telecapital of its obligations under this
Agreement or any other agreement delivered by or on behalf of Telecapital
pursuant hereto;
(e) any liability arising out of any business activity of
Telecapital that is not part of the Telecapital Business;
(f) any lien, claim or encumbrance on any Telecapital
Purchased Asset, except as set forth on Schedule 4.5;
(g) any liability of Telecapital for any federal, state or
local income or franchise taxes or taxes relating to the payment of the
Telecapital Purchase Price (other than the taxes for which the Purchaser Parties
are responsible under Section 6.5) and any penalties or other payments with
respect thereto;
(h) except as may be included as Telecapital Assumed
Liabilities, any liability of any Seller for vacation, sick leave, holiday or
severance obligations or compensation, if any, to any employee or former
employee of Telecapital, including any severance and other post-Closing
obligation to Xxxxx Xxxxxx;
(i) any liability of Telecapital to any Affiliate of
Telecapital, including without limitation those disclosed on Schedule 4.22
except as specifically set forth on Schedule 1.1(vi); and
-8-
16
(j) any liability of Telecapital to Rothschild arising under
Telecapital's agreement with Rothschild, dated as of January 17, 1997 (which is
described on Schedule 4.18), subject to the Purchaser Parties' obligations under
Section 6.14 hereof.
"Telecapital Servicing Rights" means the rights and
responsibilities of Telecapital with respect to the servicing of loans
originated, acquired, or sold, in whole or in part, by Telecapital and any right
to receive servicing fees and ancillary income relating thereto.
"Third Party Claim" has the meaning ascribed to such term in
Section 9.3.
Section 1.2. Terms Defined in Other Articles. The following
terms have the meanings set forth in the respective Sections set forth below:
Term Section
---- -------
Acceptable Letter of Credit 2.2
Antitrust Division 6.9
Bear Xxxxxxx 3.20
Closing 2.4
Closing Date 2.4
Continuation Coverage 6.7
Damages 9.2
Employees 6.7
Encumbrances 3.3
Exchange Act 5.9
FTC 6.9
HSR Act 6.9
Government Licenses Definition of IFC Purchased Assets
IFC Recitals
IFC Business Recitals
IFC Escrow Agreement 2.2
IFC Financial Statements 3.9
IFC Note 2.2
IFC Purchase Price 2.2
Indemnified Party 9.2
Indemnifying Party 9.2
Material Contracts 3.18
Parent Recitals
Parent Financial Statements 5.6
Proprietary Rights Definition of IFC Purchased Assets
Purchaser Recitals
Purchaser1 Recitals
Purchaser2 Recitals
Purchaser Parties Recitals
Purchaser Common Stock 5.9
Real Property Definition of IFC Purchased Assets
Registration Statement 6.8
Related Parties 3.22
-9-
17
Report 6.9
SBA Recitals
SEC 5.11
SEC Reports 5.11
Securities Act 6.8
Survival Period 9.1
Telecapital Recitals
Telecapital Business Recitals
Telecapital Escrow Agreement 2.2
Telecapital Financial Statements 4.9
Telecapital Note 2.2
Telecapital Purchase Price 2.2
Third Party Claim 9.3
Section 1.3. Interpretation. Unless otherwise indicated to the
contrary herein by the context or use thereof: (i) the words, "herein,"
"hereto," "hereof" and words of similar import refer to this Agreement as a
whole and not to any particular Section or paragraph hereof; (ii) words
importing the masculine gender shall also include the feminine and neutral
genders, and vice versa; (iii) words importing the singular shall also include
the plural, and vice versa; and (iv) the term "including" shall mean "including
without limitation."
ARTICLE II
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES;
ADDITIONAL COVENANTS
Section 2.1. Purchase and Sale of Assets. Upon the terms and
subject to the conditions of this Agreement, at the Closing (as defined in
Section 2.4), (a) IFC shall sell, assign, transfer, convey and deliver to
Purchaser1 all of IFC's right, title and interest in and to the IFC Purchased
Assets and Purchaser1 shall purchase such IFC Purchased Assets from IFC; and (b)
Telecapital shall sell, assign, transfer, convey and deliver to Purchaser2 all
of Telecapital's right, title and interest in and to the Telecapital Purchased
Assets and Purchaser2 shall purchase such Telecapital Purchased Assets from
Telecapital.
Section 2.2. Purchase Price.
(a) IFC Purchase Price. In consideration of the sale,
assignment, transfer and conveyance of the IFC Purchased Assets, and in reliance
upon the covenants, representations and warranties made herein by IFC, the
Purchaser Parties shall pay or assume the following (collectively, the "IFC
Purchase Price"):
(i) At the Closing the Purchaser Parties shall pay to IFC cash
in an amount equal to $34,610,000 in immediately available funds by
wire transfer to an account designated by IFC.
-10-
18
(ii) The Purchaser Parties shall deliver a convertible
promissory note (the "IFC Note") in the principal amount of
$28,320,000, convertible into the number of shares of common stock, par
value $.05 per share ("Common Stock"), of Parent which results from
dividing the principal amount plus accrued interest by the average
closing sales prices (adjusted for any stock splits, stock dividends,
reclassification, reorganization or similar event during the applicable
time period) for the Common Stock as reported on the Nasdaq National
Market System for the five (5) trading days immediately preceding the
effective date of the Registration Statement. The IFC Note shall be
convertible at the option of IFC or Parent at any time on or after the
effective date of the Registration Statement. The IFC Note shall bear
interest at the rate of 10% per annum payable monthly except that no
interest shall be due for the first two days of the term of the Note.
After the IFC Note has been outstanding for more than ninety (90) days,
the interest rate shall increase to twelve percent (12%) per annum. The
term of the IFC Note shall be six months from the Closing Date, at
which time all principal and accrued interest shall be due and payable.
Notwithstanding the foregoing, if the Registration Statement is not
effective by the fifteenth day after the Closing Date, on or after such
fifteenth day IFC shall have the right to convert the principal and
accrued interest of the IFC Note based on the five (5) trading days
immediately preceding the date of conversion; such a conversion shall
not relieve the Purchaser Parties of their obligations under Section
6.8. At the Closing $5,000,000 of the cash consideration payable under
subsection (a)(i) above or an irrevocable letter of credit issued by
Chase Manhattan Bank, N.A. or another United States financial
institution with over $10 billion in assets reasonably acceptable to
Parent, on terms acceptable to Parent, (an "Acceptable Letter of
Credit") shall be deposited into escrow under an escrow agreement (the
"IFC Escrow Agreement") between the Purchaser Parties, IFC and an
independent escrow agent selected by Parent and reasonably acceptable
to IFC, to be the exclusive source for all indemnification claims
against IFC under Article IX hereof. IFC shall be permitted to
substitute cash for an Acceptable Letter of Credit, or vice versa, as
the escrow fund once during the term of the IFC Escrow Agreement, and
in such event the parties shall make all necessary amendments to the
IFC Escrow Agreement to effect such substitution. At the Closing the
Purchaser Parties, IFC and the escrow agent shall execute and deliver
the IFC Escrow Agreement in the form of Exhibit E hereto. The IFC
escrow will be held and disbursed in accordance with the terms of the
IFC Escrow Agreement and Article IX hereof and shall not be deemed paid
to IFC until so disbursed to IFC under the IFC Escrow Agreement.
(iii) The Purchaser Parties shall assume at the Closing the
IFC Assumed Liabilities.
(b) Telecapital Purchase Price. In consideration of the sale,
assignment, transfer and conveyance of the Telecapital Purchased Assets, and in
reliance upon the covenants, representations and warranties made herein by the
Telecapital, the Purchaser Parties shall pay or assume the following
(collectively, the "Telecapital Purchase Price"):
-11-
19
(i) At the Closing the Purchaser Parties shall pay to
Telecapital cash in an amount equal to $10,047,000 in immediately
available funds by wire transfer to an account designated by
Telecapital.
(ii) The Purchaser Parties shall deliver a convertible
promissory note (the "Telecapital Note") in the principal amount of
$8,223,000, convertible into the number of shares of common stock, par
value $.05 per share ("Common Stock"), of Parent which results from
dividing the principal amount plus accrued interest by the average
closing sales prices (adjusted for any stock splits, stock dividends,
reclassification, reorganization or similar event during the applicable
time period) for the Common Stock as reported on the Nasdaq National
Market System for the five (5) trading days immediately preceding the
effective date of the Registration Statement. The Telecapital Note
shall be convertible at the option of Telecapital or Parent at any time
on or after the effective date of the Registration Statement. The
Telecapital Note shall bear interest at the rate of 10% per annum
payable monthly except that no interest shall be due for the first two
days of the term of the Note. After the Telecapital Note has been
outstanding for more than ninety (90) days, the interest rate shall
increase to twelve percent (12%) per annum. The term of the Telecapital
Note shall be six months from the Closing Date, at which time all
principal and accrued interest shall be due and payable.
Notwithstanding the foregoing, if the Registration Statement is not
effective by the fifteenth day after the Closing Date, on or after such
fifteenth day Telecapital shall have the right to convert the principal
and accrued interest of the Telecapital Note based on the five (5)
trading days immediately preceding the date of conversion; such a
conversion shall not relieve the Purchaser Parties of their obligations
under Section 6.8 At the Closing $2,500,000 of the cash consideration
payable under subsection (b)(i) above or an irrevocable letter of
credit issued by Chase Manhattan Bank, N.A. or another United States
financial institution with over $10 billion in assets reasonably
acceptable to Parent, on terms acceptable to Parent, (an "Acceptable
Letter of Credit") shall be deposited into escrow under an escrow
agreement (the "Telecapital Escrow Agreement") between the Purchaser
Parties, Telecapital and an independent escrow agent selected by Parent
and reasonably acceptable to Telecapital, to be the exclusive source
for all indemnification claims against Telecapital under Article IX
hereof. Telecapital shall be permitted to substitute cash for an
Acceptable Letter of Credit, or vice versa, as the escrow fund once
during the term of the Telecapital Escrow Agreement, and in such event
the parties shall make all necessary amendments to the Telecapital
Escrow Agreement to effect such substitution. At the Closing the
Purchaser Parties, Telecapital and the escrow agent shall execute and
deliver the Telecapital Escrow Agreement in the form of Exhibit F
hereto. The Telecapital escrow will be held and disbursed in accordance
with the terms of the Telecapital Escrow Agreement and Article IX
hereof and shall not be deemed paid to Telecapital until so disbursed
to Telecapital under the Telecapital Escrow Agreement.
(iii) The Purchaser Parties shall assume at the Closing the
Telecapital Assumed Liabilities.
-12-
20
Section 2.3. Allocation of the Purchase Price. The IFC
Purchase Price and the Telecapital Purchase Price shall be allocated amongst the
IFC Purchased Assets and Telecapital Purchased Assets, respectively, for
federal, state, local and foreign (if any) tax purposes as set forth in Exhibits
A-1 and A-2, respectively, which shall be reasonably agreed upon by the
Purchaser Parties and IFC and Telecapital, respectively, and attached hereto
within 10 days after the date hereof. The Purchaser Parties and IFC and
Telecapital shall use such allocation in filing their respective Internal
Revenue Service Form 8594s and such allocations will be controlling in
connection with any federal, state, local or foreign tax consequences resulting
from the transactions contemplated hereby.
Section 2.4. Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place at the offices of
XXXXXXXXXX XXXXXXX PC, 00 Xxxxxxxxxx Xxxxxx, Xxxxxxxx, Xxx Xxxxxx, at 10:00 A.M.
within five Business Days of the satisfaction or waiver of the conditions set
forth in Article VII, or at such other time and place as is mutually agreed by
the Purchaser Parties and the Sellers. The time and date of the Closing is
herein called the "Closing Date."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF IFC
IFC represents and warrants to the Purchaser Parties, with
respect to IFC, as follows:
Section 3.1. Organization and Qualification of IFC and the IFC
Subsidiaries. IFC is a limited liability company duly organized and validly
existing under the laws of the State of Texas, with full limited liability
company power and authority to own or lease its property and assets and to carry
on the IFC Business as presently conducted, and is duly qualified to do business
as a foreign limited liability company and is in good standing in each
jurisdiction listed in Schedule 3.1, which constitute all of the jurisdictions
in which IFC is currently conducting the IFC Business where the failure to be so
qualified and in good standing could reasonably be expected to result in a
Material Adverse Change. Each of the IFC Subsidiaries is duly organized and
validly existing and if a corporation, in good standing, under the laws of the
State of Delaware, with full limited liability or corporate, as the case may be,
power and authority to own or lease their property and to carry on their
business as presently conducted.
Section 3.2. Authorization. IFC has full limited liability
power and authority to execute and deliver this Agreement and the instruments of
transfer and to perform its obligations hereunder and thereunder, all of which
have been duly authorized by all requisite limited liability action. Each of
this Agreement and such instruments of transfer has been or, at the time of
delivery will be, duly authorized, executed and delivered by IFC and constitutes
or, at the time of delivery will constitute, a valid and binding agreement of
IFC, enforceable against IFC in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
-13-
21
Section 3.3. Non-contravention. Except as set forth in
Schedule 3.3, neither the execution and delivery of this Agreement nor the
instruments of transfer nor the performance by IFC of its obligations hereunder
and thereunder will (i) contravene any provision contained in IFC's Articles of
Organization or Regulations, (ii) materially violate or result in a material
breach (with or without the lapse of time, the giving of notice or both) of or
constitute a material default under (A) any contract, agreement, commitment,
indenture, mortgage, lease, pledge, note, license, permit or other instrument or
obligation or (B) any judgment, order, decree, law, rule or regulation or other
restriction of any Governmental Authority, in each case to which IFC is a party
or by which it is bound or to which any of its assets or properties are subject,
(iii) result in the creation or imposition of any lien, claim, charge, mortgage,
pledge, security interest, equity, restriction or other encumbrance
(collectively, "Encumbrances") on any of the IFC Purchased Assets, or (iv)
result in the acceleration of, or permit any Person to accelerate or declare due
and payable prior to its stated maturity, any IFC Assumed Liability.
Section 3.4. No Consents. Except as set forth in Schedule 3.4,
no notice to, filing with, or authorization, registration, consent or approval
of any Governmental Authority or other Person is necessary for the execution,
delivery or performance of this Agreement or the instruments of transfer or the
consummation of the transactions contemplated hereby or thereby by IFC.
Section 3.5. The IFC Purchased Assets. Except for any
Government Licenses which may not be transferable, the IFC Purchased Assets
constitute all of the rights, properties and assets (real, personal or mixed,
tangible or intangible) which are necessary for the conduct of the IFC Business
in the manner which it is conducted by IFC on the date of this Agreement. Except
as disclosed in Schedule 3.5, no third party (including any Affiliate) owns or
has any interest by lease, license or otherwise in any of the IFC Purchased
Assets. The documents of transfer to be executed and delivered by IFC at the
Closing will be sufficient to convey good title to the IFC Purchased Assets to
Purchaser1, free and clear of all Encumbrances, other than IFC Assumed
Liabilities.
Section 3.6. Personal Property. Except as disclosed in
Schedule 3.6, IFC has good title to (or valid leasehold or contractual interests
in) all personal property included in the IFC Purchased Assets, free and clear
of any Encumbrances, other than those which, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Change or
materially impair the value or usefulness of the IFC Purchased Assets taken as a
whole.
Section 3.7. Real Property. Except as disclosed in Schedule
3.7, IFC has good, marketable and insurable fee simple (or leasehold title) to
the Real Property included in the IFC Purchased Assets, free and clear of all
Encumbrances, other than those which, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Change or materially
impair the value or usefulness of the IFC Purchased Assets taken as a whole.
Section 3.8. No Condemnation. To IFC's knowledge, neither the
whole nor any portion of the Real Property included in the IFC Purchased Assets
is subject to any governmental
-14-
22
decree or order to be sold nor have any proceedings for the condemnation,
expropriation or other taking of all or any portion of such Real Property been
instituted or overtly threatened by any Governmental Authority, with or without
payment therefor.
Section 3.9. Financial Statements. IFC has previously
furnished to the Purchaser Parties (i) a true and complete copy of IFC's balance
sheet as of December 31, 1997 and the related statements of operations, cash
flows and changes in members' capital for the year then ended, certified by the
Accountants, (ii) a true and complete copy of IFC's balance sheet as of December
31, 1996 and the related statements of operations, cash flows and changes in
members' capital for the year then ended, certified by Xxxxxx Xxxxxxxx LLP, and
(iii) a true and complete copy of IFC's unaudited balance sheet as of April 30,
1998 and the related unaudited statements of operations, cash flows and changes
in members' capital for the four month period then ended (collectively, the "IFC
Financial Statements"). Except as disclosed in Schedule 3.9, the IFC Financial
Statements have been prepared in conformity with GAAP, applied on a consistent
basis except as described in the notes thereto and except, in the case of the
Financial Statements for the four month period ended April 30, 1998, for
year-end adjustments consisting only of normal recurring accruals and presents
fairly the financial condition and results of operations of the Seller as of and
for the periods included therein.
Section 3.10. Absence of Certain Developments. Except as set
forth in Schedule 3.10 or any other Schedule hereto, since April 30, 1998, (a)
there has not been any Material Adverse Change with respect to IFC except for
(i) changes in general economic or financial conditions or in generally
prevailing commercial interest rates, (ii) changes resulting from the actions of
any Purchaser Party or any of its Affiliates or representatives, and (iii)
changes contemplated by this Agreement; (b) IFC has not transferred or disposed
of any material properties or assets used in the IFC Business except in the
ordinary course of business of the IFC Business consistent with past practices
or as contemplated by this Agreement; (c) except for actions contemplated by
this Agreement, IFC has conducted the IFC Business in the ordinary course
consistent with past practice, including, without limitation, with respect to
repayment of subordinated debt and other obligations to Affiliates and
distributions to members out of excess working capital; (d) IFC has not
increased the compensation of any officer, director or employee except for
annual salary or wage increases consistent with past practices; (e) IFC has not
adopted any new benefit program, plan or similar arrangement for officers,
directors or employees; (f) IFC has not changed its accounting methods or
practices; and (g) IFC has paid, discharged and satisfied claims, liabilities
and obligations relating to the IFC Business in the ordinary course of business
of the IFC Business consistent with past practices (including as referred to in
(c) above) except as may otherwise be contemplated by this Agreement.
Section 3.11. Governmental Authorizations; Licenses; Etc. The
IFC Business has been operated in compliance in all material respects with all
applicable laws, rules, regulations, codes, ordinances, orders, policies and
guidelines of all Governmental Authorities. IFC has and has made all
notifications, registrations, certifications and filings with all Governmental
Authorities with respect to Governmental Licenses necessary or, to its
knowledge, advisable for the operation of the IFC Business as currently
conducted by IFC. As of the date of this Agreement, there is no action, case or
proceeding pending or, to IFC's knowledge, overtly
-15-
23
threatened by any Governmental Authority with respect to (i) any alleged
violation by IFC of any law, rule, regulation, code, ordinance, order, policy or
guideline of any Governmental Authority, or (ii) any alleged failure by IFC to
have any Government License required in connection with the operation of the IFC
Business. As of the date of this Agreement, no notice of any violation of such
laws has been received by IFC which, to IFC's knowledge, has not been cured in
all material respects.
Section 3.12. Litigation. Except as set forth in Schedule
3.12, as of the date of this Agreement there are no lawsuits, actions,
proceedings, claims, orders or investigations by or before any Governmental
Authority pending or, to the IFC's knowledge, overtly threatened against IFC or
its Affiliates relating to the IFC Business, the IFC Purchased Assets, or the
IFC Assumed Liabilities or seeking to enjoin the transactions contemplated
hereby, other than litigation incident to the normal conduct of the IFC Business
which, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Change.
Section 3.13. Undisclosed Liabilities Other than those
reflected in any of the IFC Financial Statements (including the notes thereto)
or disclosed on any Schedule hereto, there are no material liabilities of IFC of
any kind or nature whatsoever, whether known or unknown, absolute, accrued,
contingent or otherwise, whether due or to become due, that are required to be
disclosed on financial statements prepared in accordance with GAAP, other than
liabilities which have been incurred or which have arisen in the ordinary course
of business since the date of the IFC Financial Statements or which have been
incurred or have arisen in connection with this Agreement or the transactions
contemplated herein.
Section 3.14. Taxes. Except as set forth in Schedule 3.14, all
federal, state, county, local and foreign tax returns and reports of IFC or any
Affiliate required to be filed which relate to or affect the IFC Business have
been filed. Except as set forth in Schedule 3.14, all federal, state, county,
local, foreign and any other taxes (including all income, withholding and
employment taxes), assessments (including interest and penalties), fees and
other governmental charges relating to or affecting the IFC Business have been
paid or duly provided for, or are being contested in good faith by appropriate
proceedings as disclosed on Schedule 3.14 and adequate reserves therefor have
been established pursuant to GAAP, or have arisen after the date hereof in the
ordinary course of business.
Section 3.15. Insurance. Schedule 3.15 sets forth a true and
correct list of all insurance policies or binders maintained by IFC on the date
hereof. Such policies and binders are, as of the date hereof, in full force and
effect.
Section 3.16. Proprietary Rights. All of IFC's Proprietary
Rights are listed in Schedule 3.16. Except as disclosed therein, IFC owns and
possesses all right, title and interest in and to the Proprietary Rights. To
IFC's knowledge, no claim by any third party contesting the validity,
enforceability, use or ownership of any Proprietary Right of IFC is pending or
overtly threatened as of the date of this Agreement.
-16-
24
Section 3.17. Accounts and Loans Receivable. Schedule 3.17
sets forth a true and complete listing of all Accounts Receivable and loans
receivable as of the date of this Agreement and an aging schedule as of such
date for the loans receivable reflecting the aggregate amount of all Accounts
Receivable outstanding and loans receivable past due (i) 30 days or less, (ii)
more than 30 days but less than or equal to 60 days, (iii) more than 60 days but
less than or equal to 90 days, and (iv) more than 90 days. All of the Accounts
Receivable and loans receivable have arisen in the ordinary and regular course
of business and represent bona fide transactions with third parties.
Section 3.18. Material Contracts. (a) Schedule 3.18 describes
all contracts agreements, leases, commitments, instruments, plans, permits or
licenses (except for loans originated or acquired (and the promissory notes,
credit agreements, mortgages, security agreements and other agreements and
instruments related thereto) or servicing rights which have arisen in the
ordinary course of the Seller's business), whether written or oral, of the type
described below (the "Material Contracts"), with respect to the IFC Business to
which IFC is a party or is otherwise bound on the date of this Agreement and
which are not described on Schedule 3.5, 3.6, 3.7, 3.15 or 3.16 hereto:
(i) all agreements or commitments for the purchase by IFC
of machinery, equipment or other personal property other than those
that are for amounts not to exceed $25,000;
(ii) all capitalized leases, pledges, conditional sale or
title retention agreements;
(iii) all employment agreements and commitments and all
consulting or severance agreements or arrangements;
(iv) all agreements relating to the consignment or lease of
personal property, other than such agreements that provide for annual
payments of less than $((25,000));
(v) all license, royalty or other agreements relating to
Proprietary Rights;
(vi) all agreements prohibiting the free engagement of
business in any geographic area; and
(vii) any agreement other than those covered by clauses (i)
through (vi) above relating to the IFC Business and involving payment
or receipt of more than $150,000 in the aggregate.
(b) Except as disclosed in Schedule 3.18, all of the
Material Contracts which are intended to be assigned hereunder to Purchaser1 by
IFC are fully assignable to Purchaser1 by IFC without the consent of any third
party. Except as disclosed in Schedule 3.18, all consents of third parties
required for the assignment of such Material Contracts to Purchaser1 have been
obtained or will have been obtained prior to or on the Closing Date. To IFC's
knowledge on the date of this Agreement, none of the other parties to any such
Material Contracts intends to terminate or
-17-
25
materially alter such Material Contracts either as a result of the transactions
contemplated hereby or otherwise.
(c) Except as disclosed in Schedule 3.18, as of the date of
this Agreement IFC is not in, nor has IFC given or received notice of, any
default or claimed, purported or alleged default, or facts that, with notice or
lapse of time, or both, would constitute a default (or give rise to a
termination right) on the part of any party in the performance of any obligation
to be performed under any of the Material Contracts of IFC.
(d) True and complete copies of all written Material
Contracts, with respect to the IFC Business, including any amendments thereto,
have been delivered to the Purchaser Parties.
Section 3.19. Books and Records. The books and records of IFC,
including financial records and books of account, are complete and accurate in
all material respects and have been maintained in accordance with GAAP, to the
extent applicable.
Section 3.20. Brokers. With the exception of Bear Xxxxxxx &
Co. Inc. ("Bear Xxxxxxx"), no Person is or will be entitled to a broker's,
finder's, investment banker's, financial adviser's or similar fee from IFC in
connection with this Agreement or any of the transactions contemplated hereby.
The fees and expenses of Bear Xxxxxxx are the sole responsibility of, and shall
be paid by, the Sellers.
Section 3.21. Disclosure. Certain matters reflected in the
Schedules referred to in this Article III are not necessarily required by this
Agreement to be reflected in such Schedules. Such additional matters are merely
set forth for informational purposes and do not necessarily include other
matters of a similar nature not required to be disclosed hereunder. In addition
to the foregoing, any matter disclosed pursuant to one provision of this
Agreement shall be deemed to be disclosed for all purposes hereunder to the
extent this Agreement requires such disclosure.
Section 3.22. Agreements and Transactions with Related
Parties. Except as set forth in Schedule 3.22, IFC is not directly or indirectly
a party to any contract, agreement or lease with, or any other commitment to,
(a) any Seller Principal and any other party owning, beneficially or of record,
any of the shares of or other equity interest in any Seller, (b) any person
related (as parent, child, grandchild, uncle, aunt, nephew or niece) by blood,
adoption or marriage to any Seller Principal or any such other party, (c) any
director or officer of any Seller, (d) any corporation or other entity in which
any of the foregoing parties has, directly or indirectly, at least a five
percent (5.0%) beneficial interest in the share capital or other type of equity
interest in such corporation or (e) any partnership in which any such party is a
general partner (any or all of the foregoing, other than IFC, being herein
referred to as "Related Parties"). Without limiting the generality of the
foregoing, except as disclosed in Schedule 3.22, (i) none of the Related
Parties, directly or indirectly, owns or controls any assets or properties which
are or within the preceding three (3) years have been used in the IFC Business
and (ii) to the knowledge of IFC and its officers and directors, none of the
Related Parties, directly or indirectly, engages in any business which is or
which, within the last three (3) years, has been a competitor of IFC or has done
business with IFC.
-18-
26
Section 3.23. Disclaimer of Warranties. EXCEPT AS EXPRESSLY
SET FORTH IN THIS ARTICLE III, NEITHER IFC NOR ANY OF ITS AFFILIATES MAKES ANY
WARRANTIES, EXPRESS OR IMPLIED, OF ANY KIND OR NATURE WHATSOEVER AND IFC AND ITS
AFFILIATES EXPRESSLY DISCLAIM ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, OR
ARISING BY COURSE OF DEALING OR PERFORMANCE, CUSTOM OR USAGE IN THE TRADE OR
OTHERWISE, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF FITNESS FOR
A PARTICULAR PURPOSE, MERCHANTABILITY OR OTHERWISE.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TELECAPITAL
Telecapital represents and warrants to the Purchaser Parties,
with respect to Telecapital, as follows:
Section 4.1. Organization and Qualification of Telecapital.
Telecapital is a limited partnership duly organized and validly existing under
the laws of the State of Delaware, with full limited partnership power and
authority to own or lease its property and assets and to carry on the
Telecapital Business as presently conducted, and is duly qualified to do
business as a foreign limited partnership and is in good standing in each
jurisdiction listed in Schedule 4.1, which constitute all of the jurisdictions
in which Telecapital is currently conducting the Telecapital Business where the
failure to be so qualified and in good standing could reasonably be expected to
result in a Material Adverse Change.
Section 4.2. Authorization. Telecapital has full limited
partnership power and authority to execute and deliver this Agreement and the
instruments of transfer and to perform its obligations hereunder and thereunder,
all of which have been duly authorized by all requisite limited partnership
action. Each of this Agreement and such instruments of transfer has been or, at
the time of delivery will be, duly authorized, executed and delivered by
Telecapital and constitutes or, at the time of delivery will constitute, a valid
and binding agreement of Telecapital, enforceable against Telecapital in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
Section 4.3. Non-contravention. Except as set forth in
Schedule 4.3, neither the execution and delivery of this Agreement nor the
instruments of transfer nor the performance by Telecapital of its obligations
hereunder and thereunder will (i) contravene any provision contained in
Telecapital's Limited Partnership Agreement, (ii) materially violate or result
in a material breach (with or without the lapse of time, the giving of notice or
both) of or constitute a material default under (A) any contract, agreement,
commitment, indenture, mortgage, lease, pledge, note, license, permit or other
instrument or obligation or (B) any judgment, order, decree, law, rule or
regulation or other restriction of any Governmental Authority, in each case to
which Telecapital is a party or by which it is bound or to which any of its
assets or properties are
-19-
27
subject, (iii) result in the creation or imposition of any Encumbrances on any
of the Telecapital Purchased Assets, or (iv) result in the acceleration of, or
permit any Person to accelerate or declare due and payable prior to its stated
maturity, any Telecapital Assumed Liability.
Section 4.4. No Consents. Except as set forth in Schedule 4.4,
no notice to, filing with, or authorization, registration, consent or approval
of any Governmental Authority or other Person is necessary for the execution,
delivery or performance of this Agreement or the instruments of transfer or the
consummation of the transactions contemplated hereby or thereby by Telecapital.
Section 4.5. The Telecapital Purchased Assets. Except for any
Government Licenses which may not be transferable, the Telecapital Purchased
Assets constitute all of the rights, properties and assets (real, personal or
mixed, tangible or intangible) which are necessary for the conduct of the
Telecapital Business in the manner which it is conducted by Telecapital on the
date of this Agreement. Except as disclosed in Schedule 4.5, no third party
(including any Affiliate) owns or has any interest by lease, license or
otherwise in any of the Telecapital Purchased Assets. The documents of transfer
to be executed and delivered by Telecapital at the Closing will be sufficient to
convey good title to the Telecapital Purchased Assets to the Purchaser2, free
and clear of all Encumbrances, other than Telecapital Assumed Liabilities.
Section 4.6. Personal Property. Except as disclosed in
Schedule 4.6, Telecapital has good title to (or valid leasehold or contractual
interests in) all personal property included in the Telecapital Purchased
Assets, free and clear of any Encumbrances, other than those which, individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Change or materially impair the value or usefulness of the Telecapital
Purchased Assets taken as a whole.
Section 4.7. Real Property. Except as disclosed in Schedule
4.7, Telecapital has good, marketable and insurable fee simple (or leasehold
title) to the Real Property included in the Telecapital Purchased Assets, free
and clear of all Encumbrances, other than those which, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Change or materially impair the value or usefulness of the Telecapital Purchased
Assets taken as a whole.
Section 4.8. No Condemnation. To Telecapital's knowledge,
neither the whole nor any portion of the Real Property included in the
Telecapital Purchased Assets is subject to any governmental decree or order to
be sold nor have any proceedings for the condemnation, expropriation or other
taking of all or any portion of such Real Property been instituted or overtly
threatened by any Governmental Authority, with or without payment therefor.
Section 4.9. Financial Statements. Telecapital has previously
furnished to the Purchaser Parties (i) a true and complete copy of its balance
sheet as of December 31, 1997 and the related statements of operations, cash
flows and changes in partners' capital for each of the years in the two year
period then ended, certified by the Accountants and (ii) a true and complete
copy of its unaudited balance sheet as of April 30, 1998 and the related
unaudited statements of
-20-
28
operations, cash flows and changes in partners' capital for the four month
period then ended, (collectively, the "Telecapital Financial Statements").
Except as disclosed in Schedule 4.9, the Telecapital Financial Statements have
been prepared in conformity with GAAP, applied on a consistent basis except as
described in the notes thereto and except, in the case of the Telecapital
Financial Statements for the four month period ended April 30, 1998, for
year-end adjustments consisting only of normal recurring accruals and presents
fairly the financial condition and results of operations of the Seller as of and
for the periods included therein.
Section 4.10. Absence of Certain Developments. Except as set
forth in Schedule 4.10, since April 30, 1998, (a) there has not been any
Material Adverse Change with respect to Telecapital, except for (i) changes in
general economic or financial conditions or in generally prevailing commercial
interest rates, (ii) changes resulting from the actions of any Purchaser Party
or any of its Affiliates or representatives, and (iii) changes contemplated by
this Agreement; (b) Telecapital has not transferred or disposed of any material
properties or assets used in the Telecapital Business except in the ordinary
course of business of the Telecapital Business consistent with past practices or
as contemplated by this Agreement; (c) except for actions contemplated by this
Agreement, Telecapital has conducted the Telecapital Business in the ordinary
course consistent with past practice, including, without limitation, with
respect to repayment of subordinated debt and other obligations to Affiliates
and distributions to members out of excess working capital; (d) Telecapital has
not increased the compensation of any officer, director or employee except for
annual salary or wage increases consistent with past practices; (e) Telecapital
has not adopted any new benefit program, plan or similar arrangement for
officers, directors or employees; (f) Telecapital has not changed its accounting
methods or practices; and (g) Telecapital has paid, discharged and satisfied
claims, liabilities and obligations relating to the Telecapital Business in the
ordinary course of business of the Telecapital Business consistent with past
practices (including as referred to in (c) above) except as may otherwise be
contemplated by this Agreement.
Section 4.11. Governmental Authorizations; Licenses; Etc.
Except as disclosed on Schedule 1.1(iv), the Telecapital Business has been
operated in compliance in all material respects with all applicable laws, rules,
regulations, codes, ordinances, orders, policies and guidelines of all
Governmental Authorities. Telecapital has and has made in all material respects
all notifications, registrations, certifications and filings with all
Governmental Authorities with respect to all Governmental Licenses necessary or,
to its knowledge, advisable for the operation of the Telecapital Business as
currently conducted by Telecapital. As of the date of this Agreement, there is
no action, case or proceeding pending or, to Telecapital's knowledge, overtly
threatened by any Governmental Authority with respect to (i) any alleged
violation by Telecapital of any law, rule, regulation, code, ordinance, order,
policy or guideline of any Governmental Authority, or (ii) any alleged failure
by Telecapital to have any permit, license, approval, certification or other
authorization required in connection with the operation of the Telecapital
Business. As of the date of this Agreement, no notice of any violation of such
laws has been received by Telecapital which, to Telecapital's knowledge, has not
been cured in all material respects.
-21-
29
Section 4.12. Litigation. Except as set forth in Schedule
4.12, as of the date of this Agreement there are no lawsuits, actions,
proceedings, claims, orders or investigations by or before any Governmental
Authority pending or, to Telecapital's knowledge, overtly threatened against
Telecapital or its Affiliates relating to the Telecapital Business, the
Telecapital Purchased Assets, or the Telecapital Assumed Liabilities or seeking
to enjoin the transactions contemplated hereby, other than litigation incident
to the normal conduct of the Telecapital Business which, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Change.
Section 4.13. Undisclosed Liabilities Other than those
reflected in the Telecapital Financial Statements (including the notes thereto)
or disclosed in any Schedule hereto, there are no material liabilities of
Telecapital of any kind or nature whatsoever, whether known or unknown,
absolute, accrued, contingent or otherwise, or whether due or to become due,
that are required to be disclosed on financial statements prepared in accordance
with GAAP, other than liabilities which have been incurred or which have arisen
in the ordinary course of business since the date of the Telecapital Financial
Statements or which have been incurred or have arisen in connection with this
Agreement or the transactions contemplated herein.
Section 4.14. Taxes. Except as set forth in Schedule 4.14, all
federal, state, county, local and foreign tax returns and reports of Telecapital
or any Affiliate required to be filed which relate to or affect the Telecapital
Business have been filed. Except as set forth in Schedule 4.14, all federal,
state, county, local, foreign and any other taxes (including all income,
withholding and employment taxes), assessments (including interest and
penalties), fees and other governmental charges relating to or affecting the
Telecapital Business have been paid or duly provided for, or are being contested
in good faith by appropriate proceedings as disclosed on Schedule 4.14 and
adequate reserves therefor have been established pursuant to GAAP, or have
arisen after the date hereof in the ordinary course of business.
Section 4.15. Insurance. Schedule 4.15 sets forth a true and
correct list of all insurance policies or binders maintained by Telecapital on
the date hereof. Such policies and binders are, as of the date hereof, in full
force and effect.
Section 4.16. Proprietary Rights. All of Telecapital's
Proprietary Rights are listed in Schedule 4.16. Except as disclosed therein,
Telecapital owns and possesses all right, title and interest in and to the
Proprietary Rights. To Telecapital's knowledge, no claim by any third party
contesting the validity, enforceability, use or ownership of any Proprietary
Right of Telecapital is pending or overtly threatened as of the date of this
Agreement.
Section 4.17. Accounts and Loans Receivable. Schedule 4.17
sets forth a true and complete listing of all Accounts Receivable and loans
receivable as of the date of this Agreement and an aging schedule as of such
date for the loans receivable. All of the Accounts Receivable and loans
receivable have arisen in the ordinary course of business and represent bona
fide transactions with third parties.
-22-
30
Section 4.18. Material Contracts. (a) Schedule 4.18 describes
the Material Contracts with respect to the Telecapital Business to which
Telecapital is a party or otherwise bound on the date of this Agreement and
which are not described on Schedule 4.5, 4.6, 4.7, 4.15 or 4.16 hereto.
(b) Except as disclosed in Schedule 4.18, all of the Material
Contracts which are intended to be assigned hereunder to Purchaser2 by
Telecapital are fully assignable to Purchaser2 by Telecapital without the
consent of any third party. Except as disclosed in Schedule 4.18, all consents
of third parties required for the assignment of such Material Contracts to
Purchaser2 have been obtained, or will have been obtained prior to or on the
Closing Date. To Telecapital's knowledge on the date of this Agreement, none of
the other parties to any such Material Contracts intends to terminate or
materially alter such Material Contracts either as a result of the transactions
contemplated hereby or otherwise, except as disclosed in Schedule 4.18.
(c) Except as disclosed in Schedule 4.18, as of the date of
this Agreement Telecapital is not in, nor has Telecapital given or received
notice of, any default or claimed, purported or alleged default, or facts that,
with notice or lapse of time, or both, would constitute a default (or give rise
to a termination right) on the part of any party in the performance of any
obligation to be performed under any of the Material Contracts of Telecapital.
(d) True and complete copies of all written Material Contracts
with respect to the Telecapital Business, including any amendments thereto, have
been delivered to the Purchaser Parties.
Section 4.19. Books and Records. The books and records of
Telecapital, including financial records and books of account, are complete and
accurate in all material respects and have been maintained in accordance with
GAAP, to the extent applicable.
Section 4.20. Brokers. With the exception of Bear Xxxxxxx, no
Person is or will be entitled to a broker's, finder's, investment banker's,
financial adviser's or similar fee from Telecapital in connection with this
Agreement or any of the transactions contemplated hereby. The fees and expenses
of Bear Xxxxxxx are the responsibility of, and shall be paid by, the Sellers.
Section 4.21. Disclosure. Certain matters reflected in the
Schedules referred to in this Article IV are not necessarily required by this
Agreement to be reflected in such Schedules. Such additional matters are merely
set forth for informational purposes and do not necessarily include other
matters of a similar nature not required to be disclosed hereunder. In addition
to the foregoing, any matter disclosed pursuant to one provision of this
Agreement shall be deemed to be disclosed for all purposes hereunder to the
extent this Agreement requires such disclosure.
Section 4.22. Agreements and Transactions with Related
Parties. Except as set forth in Schedule 4.22, Telecapital is not directly or
indirectly a party to any contract, agreement or lease with, or any other
commitment to, (a) any Seller Principal and any other party owning, beneficially
or of record, any of the shares of or other equity interest in any Seller, (b)
any person related (as parent, child, grandchild, uncle, aunt, nephew or niece)
by blood, adoption or marriage
-23-
31
to any Seller Principal or any such other party, (c) any director or officer of
any Seller, (d) any corporation or other entity in which any of the foregoing
parties has, directly or indirectly, at least a five percent (5.0%) beneficial
interest in the share capital or other type of equity interest in such
corporation or (e) any partnership in which any such party is a general partner
(any or all of the foregoing, other than Telecapital, being herein referred to
as "Related Parties"). Without limiting the generality of the foregoing, except
as disclosed in Schedule 4.22, (i) none of the Related Parties, directly or
indirectly, owns or controls any assets or properties which are or within the
preceding three (3) years have been used in the Telecapital Business and (ii) to
the knowledge of Telecapital and its officers and directors, none of the Related
Parties, directly or indirectly, engages in any business which is or which,
within the last three (3) years, has been a competitor of Telecapital or has
done business with Telecapital.
Section 4.23. Disclaimer of Warranties. EXCEPT AS EXPRESSLY
SET FORTH IN THIS ARTICLE IV, NEITHER TELECAPITAL NOR ANY OF ITS AFFILIATES
MAKES ANY WARRANTIES, EXPRESS OR IMPLIED, OF ANY KIND OR NATURE WHATSOEVER AND
TELECAPITAL AND ITS AFFILIATES EXPRESSLY DISCLAIM ALL OTHER WARRANTIES, EXPRESS
OR IMPLIED, OR ARISING BY COURSE OF DEALING OR PERFORMANCE, CUSTOM OR USAGE IN
THE TRADE OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF
FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY OR OTHERWISE.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER PARTIES
The Purchaser Parties, jointly and severally, represent and
warrant to each of the Sellers as follows:
Section 5.1. Organization. Each of the Parent and Purchaser1
is a Delaware corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full corporate power and
authority to own or lease its property and assets and to carry on its business
as presently conducted. Purchaser2 is a Nevada corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada and
has full corporate power and authority to own or lease its property and assets
and to carry on its business as presently conducted.
Section 5.2. Authorization. The Parent and each Purchaser has
full corporate power and authority, to execute and deliver this Agreement and
the instruments of transfer and to perform its obligations hereunder and
thereunder, all of which have been duly authorized by all requisite corporate
action. Each of this Agreement and the instruments of transfer has been or, at
the time of delivery will be, duly authorized, executed and delivered by the
Parent and each Purchaser and constitutes or, at the time of delivery will
constitute, a valid and binding agreement of the Parent and each Purchaser,
enforceable against the Parent and each Purchaser in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
-24-
32
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
Section 5.3. Non-contravention. Neither the execution and
delivery of this Agreement nor the instruments of transfer nor the performance
by the Parent or each Purchaser of their obligations hereunder and thereunder
will (i) contravene any provision in the Certificate of Incorporation or by-laws
of the Parent or any Purchaser or (ii) violate or result in a material breach of
or default under any agreement, instrument, law, rule, regulation, order, decree
or judgment of any Governmental Authority or other restriction that could
prevent the consummation of the transactions contemplated by this Agreement or
result in a Material Adverse Change as to the Parent and its consolidated
subsidiaries, taken as a whole.
Section 5.4. No Consents. Except as set forth in Schedule 5.4,
no notice to, filing with, or authorization, registration, consent or approval
of any Governmental Authority or other Person is necessary for the execution,
delivery or performance of this Agreement and the instruments of transfer or the
consummation of the transactions contemplated hereby and thereby by the
Purchaser Parties.
Section 5.5. Financial Resources. The Purchaser Parties have
cash or other committed financial resources presently available to meet all of
their payment obligations under this Agreement.
Section 5.6. Financial Statements. The Parent has previously
furnished to the Sellers (i) a true and complete copy of its balance sheet as of
December 31, 1997 and the related statements of operations, cash flows and
changes in stockholders equity for each of the years in the two year period then
ended, certified by its regular independent public accountants, and (ii) a true
and complete copy of the Parent's unaudited balance sheet as of March 31, 1998
and the related unaudited statements of operations, cash flows and changes in
stockholders' equity for the three month period then ended (collectively, the
"Parent Financial Statements"). The Parent Financial Statements have been
prepared in conformity with GAAP, applied on a consistent basis except as
described in the notes thereto except, in the case of the Financial Statements
for the three month period ended March 31, 1998, for year-end adjustments
consisting only of normal recurring accruals, and present fairly the financial
condition and results of operations of the Parent as of and for the periods
included therein.
Section 5.7. Absence of Certain Developments. Except as set
forth in Schedule 5.7, since December 31, 1997, there has not been any Material
Adverse Change with respect to Parent and its consolidated subsidiaries, taken
as a whole, except for (i) changes in general economic or financial conditions
or in generally prevailing commercial interest rates, (ii) changes resulting
from the actions of Sellers or any of their Affiliates or representatives, and
(iii) changes contemplated by this Agreement.
Section 5.8. Litigation. Except as set forth in Schedule 5.8,
as of the date of this Agreement there are no lawsuits, actions, proceedings,
claims, orders or investigations by or before any Governmental Authority pending
or, to the Purchaser Parties' knowledge, overtly
-25-
33
threatened against the Purchaser Parties or their Affiliates seeking to enjoin
the transactions contemplated hereby or which could reasonably be expected to
result in a Material Adverse Change as to Parent and its consolidated
subsidiaries taken as a whole.
Section 5.9. Capitalization. The Parent is authorized to issue
150,000,000 shares of Common Stock and 5,000,000 shares of preferred stock, par
value $1.00 per share. As of May 31, 1998, the Parent had issued and outstanding
42,810,299 shares of Common Stock (including 24,339 shares held in treasury) and
no shares of preferred stock. All of the issued and outstanding shares of Common
Stock of the Parent have been duly and validly authorized and are validly
issued, fully paid and non-assessable. The shares of Common Stock to be issued
to Sellers pursuant to Section 2.2 will be duly authorized and reserved for
issuance at or before the Closing and when issued, will be validly issued, fully
paid and nonassessable. There are no preemptive rights to the issuance of the
shares of Common Stock of the Parent. Except as set forth in the SEC Reports,
there are no outstanding (a) securities of the Parent convertible into or
exchangeable for shares of capital stock or other securities of the Parent or
(b) options or other rights to acquire shares of capital stock or other
securities from the Parent. There are no outstanding obligations of the Parent
to repurchase, redeem or otherwise acquire any of its outstanding securities.
The Common Stock of the Parent (including those shares to be issued pursuant to
Section 2.2) are registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Purchaser1's authorized capital stock consists
solely of 1,000 shares of common stock, par value $1.00 per share, of which
1,000 are issued and outstanding. Purchaser2's authorized capital stock consists
solely of 5,000 shares of common stock, par value $5.00 per share. All
outstanding shares of the Common Stock of Purchaser1 and Purchaser2 are owned by
the Parent, free and clear of any liens, claims or encumbrances except for liens
granted to Parent's lenders pursuant to credit agreement(s) currently in effect.
Section 5.10. Compliance with Laws. Parent and its
consolidated subsidiaries have complied with all federal, state and local laws,
rules, regulations and ordinances with respect to their operations and the
conduct of their business except for any noncompliance which could not
reasonably be expected to result in a Material Adverse Change as to the Parent
and its consolidated subsidiaries, taken as a whole.
Section 5.11. SEC Filings; Financial Statements. The Parent
has heretofore made available to Sellers the following reports, documents and
other materials (as amended and including exhibits and documents incorporated by
reference, collectively, the "SEC Reports"):
(a) its Annual Report on Form 10-K for the fiscal
year ended December 31, 1997;
(b) its Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1998;
(c) any reports filed by it on Form 8-K since
December 31, 1997; and
-26-
34
(d) its proxy statement relating to its annual
meeting of stockholders which was held May 18, 1998.
The Parent has timely filed with the Securities and Exchange
Commission (the "SEC") the SEC Reports and any other documents required to be
filed by it since December 31, 1995. As of their respective dates, the SEC
Reports did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The SEC Reports complied in all material respects with the
Exchange Act and the regulations promulgated thereunder. The audited
consolidated financial statements and unaudited consolidated interim financial
statements of the Parent and its consolidated subsidiaries included or
incorporated by reference in the SEC Reports have been prepared in accordance
with GAAP applied on a basis consistent with prior years (except as may be
indicated in the notes thereto), and fairly present in all material respects in
accordance with GAAP the financial position, results of operations and changes
in financial position for the Parent and its consolidated subsidiaries for the
periods then ended, subject, in the case of unaudited interim financial
statements, to normal year-end adjustments.
Section 5.12. Undisclosed Liabilities. Other than those
reflected in any of the Parent Financial Statements (including the notes
thereto), the SEC Reports or disclosed on any Schedule hereto, there are no
material liabilities of the Parent of any kind or nature whatsoever, whether
known or unknown, absolute, accrued, contingent or otherwise, whether due or to
become due, that are required to be disclosed on financial statements prepared
in accordance with GAAP, other than liabilities which have been incurred or
which have arisen in the ordinary course of business since the date of the
Parent Financial Statements or which have been incurred or have arisen in
connection with this Agreement or the transactions contemplated herein.
Section 5.13. Brokers. No Person is or will be entitled to a
broker's, finder's, investment banker's, financial adviser's or similar fee from
the Purchaser Parties in connection with this Agreement or any of the
transactions contemplated hereby.
ARTICLE VI
COVENANTS AND AGREEMENTS
Section 6.1. Access and Information. Between the date hereof
and the Closing, the Purchaser Parties shall be entitled to make or cause to be
made such reasonable investigation of the IFC Business and the Telecapital
Business, and the financial and legal condition thereof, as the Purchaser
Parties reasonably deem necessary or advisable, and the Sellers shall cooperate
with any such investigation. In furtherance of the foregoing, but not in
limitation thereof, the Sellers shall permit the Purchaser Parties and their
agents and representatives or cause them to be permitted to have full and
complete access to the premises, books and records of the Sellers upon
reasonable notice during regular business hours and shall furnish such financial
and operating data, projections, forecasts, business plans, strategic plans and
other data relating to the IFC Business and the Telecapital Business, as the
case may be, as the Purchaser Parties shall reasonably request from time to
time. Prior to the Closing, the Purchaser Parties shall
-27-
35
use any information obtained pursuant to this Section 6.1 only for the purpose
of consummating the transactions contemplated by this Agreement and as otherwise
limited by the Confidentiality Agreement dated April 1, 1998 executed by Parent
in favor of Sellers (the "Confidentiality Agreement") and, if such transactions
are not consummated, it will hold all information and documents in accordance
with the Confidentiality Agreement. No investigation by the Purchaser Parties
heretofore or hereafter made shall modify or otherwise affect the conditions to
the obligation of the Purchaser Parties to consummate the transactions
contemplated hereby.
Section 6.2. Affirmative Covenants. Between the date of this
Agreement and the Closing, except as otherwise expressly provided herein or
disclosed on any Schedule hereto, IFC and Telecapital shall:
(a) conduct the IFC Business or the Telecapital Business, as
the case may be, only in the ordinary course of business consistent with past
practices;
(b) keep in full force and effect their respective corporate
existence and all material Government Licenses, Proprietary Rights and goodwill
relating or obtaining to their respective Business;
(c) reasonably endeavor to retain their respective employees,
to compensate such employees consistent with past practices, and to preserve
their respective present relationships with customers, suppliers, contractors,
and such employees;
(d) use commercially reasonable efforts to maintain the IFC
Purchased Assets or the Telecapital Purchased Assets, as the case may be, in
customary repair, order and condition and maintain insurance reasonably
comparable to that in effect on the date of this Agreement;
(e) maintain the books, accounts and records related to their
respective Business in accordance with GAAP, to the extent applicable,
consistent with past practices; and
(f) promptly inform the Purchaser Parties in writing of any
material breach of or material change in the representations and warranties
contained in Article III or Article IV hereof, as the case may be.
Section 6.3. Negative Covenants.
(a) Between the date of this Agreement and the Closing,
without the prior written consent of the Purchaser Parties, neither IFC nor
Telecapital shall:
(i) enter into any contract, agreement or commitment or take
any other action which, if entered into or taken prior to the date of this
Agreement, would cause any representation or warranty made by it to be untrue or
be required to be disclosed on one or more Schedules referred to in Article III
or Article IV, as the case may be; and
-28-
36
(ii) take any action, or permit its Affiliates to take any
action, which could reasonably be expected to result in a Material Adverse
Change to its respective business.
(b) Between the date of the Agreement and the Closing, IFC
shall not make any distributions to its members in their capacity as members and
Telecapital shall not make any distributions to its partners in their capacity
as partners.
Section 6.4. Closing Documents. IFC and Telecapital shall,
prior to or on the Closing Date, execute and deliver, or cause to be executed
and delivered to the Purchaser Parties, the documents or instruments described
in Section 7.2. The Purchaser Parties shall, prior to or on the Closing Date,
execute and deliver, or cause to be executed and delivered, to the Sellers, the
documents or instruments described in Section 7.3.
Section 6.5. Transfer and Property Taxes. Purchaser1 shall pay
any transfer, sales, purchase, use or similar tax under the laws of any
Governmental Authority arising out of or resulting from the purchase of the IFC
Purchased Assets and the assumption of the IFC Assumed Liabilities. Purchaser2
shall pay any transfer, sales, purchase, use or similar tax under the laws of
any Governmental Authority arising out of or resulting from the purchase of the
Telecapital Purchased Assets and the assumption of the Telecapital Assumed
Liabilities. The Purchaser Parties shall prepare and file all required tax
returns and other required documents with respect to the taxes and fees required
to be paid by it pursuant to this Section 6.5.
Section 6.6. Best Efforts; Further Assurances. Subject to the
terms and conditions herein provided, each of the parties hereto shall use its
best efforts to take, or cause to be taken, all action, and to do, or cause to
be done, all things reasonably necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement, including,
without limitation, in the case of the Purchaser Parties, to qualify for and
obtain all Governmental Licenses from the SBA which are a condition to the
Closing. Each of IFC and Telecapital and the Purchaser will use their respective
best efforts to obtain consents of all Governmental Authorities and third
parties necessary to the consummation of the transactions contemplated by this
Agreement. In the event that at any time after Closing any further action is
necessary to carry out the purposes of this Agreement, the Purchaser Parties and
the Sellers shall take all such action without any further consideration
therefor.
Section 6.7. Employment Matters. (a) The Purchaser Parties
shall offer to hire in comparable positions and at comparable salary all or
substantially all of those employees who are employed on the date hereof in
connection with the IFC Business and the Telecapital Business and are actively
at work on the Closing Date (such employees who are to receive such employment
offers are referred to as the "Employees"), and to maintain benefit plans,
programs and policies and fringe benefits that, in the aggregate, will provide
benefits to the Employees that are no less favorable than those provided by the
Purchaser Parties to their own employees. Within 10 days after the date of this
Agreement, the Purchaser Parties shall provide IFC and Telecapital with a list
of the Employees, and such list shall be attached hereto as Schedule 6.7.
Employees shall be given credit for all service with the Sellers under all
employee benefit plans, programs and policies, and fringe benefits of the
Purchaser Parties in which they become
-29-
37
participants for purposes of eligibility and vesting. Notwithstanding the
foregoing, the Purchaser Parties shall have no obligation to retain the
employment of any of the Employees for any specified period following the
Closing Date and the Purchaser Parties shall have no obligation to the Employees
(except for contractual obligations owed to those employees which are included
in the IFC Assumed Liabilities or Telecapital Assumed Liabilities) upon
termination, except to the extent required by law.
(b) Effective as of the Closing Date, the Employees shall
cease to actively participate in the pension, profit-sharing and retirement
plan(s) of the Sellers. The benefits of such Employees under the such plans, of
any, shall be paid to the Employees in accordance with the terms thereof.
(c) Effective as of the Closing Date, all Employees shall
cease to be covered by the Sellers' employee welfare benefit plans, including
plans, programs, policies and arrangements which provide medical and dental
coverage, life and accident insurance, disability coverage, and vacation and
severance pay. Each of IFC and Telecapital shall retain responsibility for
providing its respective employees who were employed in connection with the IFC
Business or the Telecapital Business, as the case may be, who terminated
employment prior to the Closing Date, and who elected group health coverage
required by Section 4980B of the Code ("Continuation Coverage") under the terms
of the health plan maintained by such Seller with such Continuation Coverage.
Effective as of the Closing Date, the Purchaser Parties shall, or shall cause
the IFC Business and the Telecapital Business to, perform the duties required of
a successor employer with respect to Continuation Coverage, including making
such coverage available to the employees of the IFC Business and the Telecapital
Business on and after the Closing upon their termination of employment
subsequent to the Closing to the extent required by law.
(d) After the Closing, IFC shall perform its post-Closing
obligations and enforce its post-Closing rights under the respective severance
agreements between IFC and Xxxxxxx X. Xxxx, Xx., Xxxxxx Xxxxxxx, W. Xxxxx
Xxxxxxx, and Xxxxxx Xxxxxxxx referred to in Schedule 3.18. After the Closing,
Telecapital shall perform its post-Closing obligations and enforce its
post-Closing rights under the severance agreement between Telecapital and Xxxxx
Xxxxxx referred to in Schedule 4.18.
Section 6.8. Registration Agreement. The Parent shall, no
later than 20 days after the execution of this Agreement, file a registration
statement and related prospectus (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act") for the sale by IFC
and Telecapital of the Common Stock to be issued pursuant to Section 2.2, at the
Parent's sole cost and expense. The Registration Statement shall comply as to
form in all material respects with applicable rules of the SEC providing for
offers and sales by Sellers of the Common Stock. The Parent shall use its
commercially reasonable efforts to cause the Registration Statement to be
effective on the Closing Date, and to remain effective thereafter until the
earlier of (i) the sale by the recipients thereof of all such shares of Common
Stock or (ii) the time when all such shares of Common Stock are eligible to be
sold (x) pursuant to subparagraph (k) of Rule 144 promulgated under the
Securities Act or (y) in a single transaction
-30-
38
pursuant to Rule 144, or any successor thereto. The parties stipulate and agree
that the registration of the Common Stock to be issued pursuant to Section 2.2
is intended to provide Sellers with flexibility in liquidating their investment
in the Common Stock and does not evidence any present intention to dispose of
such investment. Parent shall provide the Sellers a reasonable number of copies
of the final prospectus and any amendments or supplements thereto. The Parent
shall register or qualify the Common Stock for sale under all applicable state
securities laws. The Registration Statement and the rights of each Seller under
this Section 6.8 shall also apply to Common Stock to be sold by the direct or
indirect partners or members of either Seller who receive Common Stock in
connection with a distribution by a Seller to its partners or members or a
distribution by such partner or member to its partners or members provided that
such distributee is an "Accredited Investor" within the meaning of Regulation D
promulgated under the Securities Act. Within 10 days after the date of the
execution of this Agreement, the parties shall execute and deliver a
Registration Rights Agreement incorporating the provisions of this Section 6.8,
containing customary indemnification and contribution provisions and other
customary terms consistent with the provisions of this Section 6.8.
Section 6.9. Xxxx-Xxxxx-Xxxxxx Filings. Each of the Sellers
and the Purchaser Parties will use their respective best efforts to file with
the Antitrust Division of the Department of Justice (the "Antitrust Division")
and the Federal Trade Commission (the "FTC") promptly following the date hereof
the notification and report form (the "Report") required under the Xxxx-Xxxxx
Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR Act"), with
respect to the transactions contemplated hereby. Each of the Sellers and the
Purchaser Parties shall cooperate with the other party to the extent necessary
to assist the other party in the preparation of its Report, shall request early
termination of the waiting period required by the HSR Act and, if requested,
will promptly amend or furnish additional information thereunder if requested by
the Antitrust Division and/or the FTC. Purchaser shall pay all filing fees
incurred in connection with the filing of any Report.
Section 6.10. Unassignable Contracts or Licenses.
Notwithstanding any provision hereof to the contrary, to the extent that any
Material Contract or license to be assigned or transferred to a Purchaser
hereunder requires the consent of any other party, no Seller shall be deemed to
have assigned or transferred any such contract or license, and such Purchaser
shall not be deemed to have assumed or received any such contract or license,
unless and until such consent shall have been obtained. The Purchaser Parties,
in their sole discretion, may waive the obtaining of any such consent as a
condition to Closing. Notwithstanding any such waiver by the Purchaser Parties,
each Seller agrees to use its reasonable commercial efforts to obtain the
necessary consents to the assignment or transfer of any such contract or license
by it; provided, however, that no Seller shall be required to make any payment
in order to obtain any such consent (unless such payment is due and owing under
the respective contract or license on or prior to the Closing Date). If the
Purchaser Parties elect to proceed with Closing, until any necessary consent to
the assignment or transfer of any Material Contract or license is obtained, such
Seller and the Purchaser shall each cooperate with the other in any reasonable
arrangement which provides the Purchaser with the benefits under such contract
or license, including enforcement by such Seller of any and all rights arising
out of any breach or cancellation by the other party thereto all at the expense
and risk of the Purchaser. Any payments made and
-31-
39
expenses arising in respect of performance on and after the Closing Date under
any such contract or license as to which the necessary consent has not been
obtained and whose benefits are being enjoyed by Purchaser shall be for the
account of the Purchaser, but the Purchaser shall not be responsible for any
penalties, premiums or other increased charges resulting from the failure to
obtain the necessary consent. Sellers shall be promptly reimbursed by the
Purchaser Parties for any such payments and expenses. Notwithstanding anything
to the contrary contained herein, the Purchaser Parties shall not be obligated
to reimburse any Seller for any amounts the Seller determines to expend to
obtain any consent to the assignment and transfer of any contract or license.
All obligations of Sellers under this Section 6.10 shall terminate on December
15, 1998.
Section 6.11. Covenant Against Competition.
(a) In order to induce the Purchaser Parties to enter into
this Agreement and consummate the transactions contemplated hereby, each Seller
agrees that, for a period of three (3) years beginning on the Closing Date, each
of them will not, without the prior written consent of the Purchaser Parties,
for their own account or jointly with another, directly or indirectly, for or on
behalf of any individual, partnership, corporation or other legal entity, as
principal, agent or otherwise:
(i) engage in, consult with, or own, control, manage
or otherwise participate in the ownership, control or
management of a business engaged in any of the activities of
the IFC Business or the Telecapital Business (as conducted or
proposed to be conducted by IFC and Telecapital immediately
prior to the Closing Date) within any part of the Territory
(as defined in subsection (c) below), except for the benefit
of the Purchaser Parties; or
(ii) solicit or in any manner attempt to solicit the
patronage of any individual, partnership, corporation or other
entity to whom IFC or Telecapital provided financing during
the twenty-four (24) month period immediately preceding the
Closing Date for the provision of financing or other services
included in the IFC Business or the Telecapital Business; or
(iii) solicit or induce, or in any manner attempt to
solicit or induce, any person who is employed by a Purchaser
Party to leave such employment, whether or not such employment
is pursuant to a written contract with Purchaser or otherwise.
(b) Each Seller agrees that it will not, without the prior
written consent of the Purchaser Parties, for its own account or jointly with
another, directly or indirectly, for or on behalf of any individual,
partnership, corporation or other entity, as principal, agent or otherwise, use
or authorize any other person to use any of the Sellers' trade or legal names,
or any part thereof, or any name similar thereto, in connection with the
providing of services similar to those offered by the IFC Business or the
Telecapital Business.
-32-
40
(c) For the purposes of this Section 6.11, the term
"Territory" means with respect to the Sellers, the continental United States.
(d) Notwithstanding anything herein to the contrary (i) it
shall not be a breach of the covenants contained in subsection (a) above for any
of the Sellers to own Common Stock or to own together less than five percent
(5%) of the capital stock of any corporation whose shares are publicly traded or
of limited partnership interests or similar equity interests of any entity in
which Seller is a passive investor and (ii) the covenants described in this
Section 6.11 shall apply only if the transactions contemplated hereby are
consummated at the Closing.
Section 6.12. Publicity. All press releases and other public
announcements respecting the subject matter hereof shall be made only with the
mutual agreement of the parties hereto; provided, however, that because the
Parent is a publicly held company, it may make such announcements as it deems
necessary to comply with the rules and regulations of the National Association
of Securities Dealers, Inc. (or such other comparable entity), and any and all
applicable federal and state securities laws, after prior notice to Sellers of
such announcement and a fair opportunity to comment thereon and to control the
description of the Sellers. In addition, the Purchaser Parties and Sellers agree
that the Purchaser Parties and Sellers will not disclose to any person the
specific monetary terms of the transaction except as may be necessary to obtain
the consent of the person. Any disclosure of the monetary terms shall be limited
to the Seller who has the contractual relationship with the person. The above
two sentences shall not limit any disclosure required by law.
Section 6.13. Legending of Common Stock.
(a) There shall be placed on all certificates representing
shares of Common Stock issued to the Sellers pursuant hereto appropriate
restrictive legends referencing the restrictions imposed by applicable
securities laws. Each Seller hereby acknowledges and agrees that the shares of
Common Stock to be issued pursuant hereto shall be subject to volume limitations
or other restrictions provided in Rule 144 (or any successor provision thereto)
promulgated under the Securities Act. Each Seller agrees to comply with any
applicable restrictions of Rule 144, and further agrees that it will not offer
to sell, sell or otherwise dispose of any of the shares of Common Stock issued
to such Seller except pursuant to an effective registration statement or another
exemption from registration requirements of the Securities Act, and in
compliance with all applicable requirements of Rule 144. With respect to any
such sale or disposition, each Seller agrees to furnish to the Purchaser Parties
upon request such information as its counsel may deem necessary to assure that
such sale or disposition is made in full compliance herewith, such rule, and
applicable federal and state securities laws.
(b) Reports Under the Exchange Act. With a view to making
available to the holders of shares of Common Stock issued to Sellers pursuant
hereto the benefits of Rule 144 promulgated under the Securities Act (or any
similar successor statute), and the rules and regulations thereunder and any
other rule or regulation of the SEC that may at any time permit a holder of
shares of Common Stock to sell securities of the Parent to the public without
registration, the Parent agrees to:
-33-
41
(i) file with the SEC in a timely manner all reports
and other documents required of the Parent under the
Securities Act and the Exchange Act and the rules and
regulations thereunder; and
(ii) furnish to any holder of shares of Common Stock
issued to Sellers pursuant hereto, forthwith upon request (A)
a written statement by the Parent that it has complied with
its reporting requirements in order that Rule 144 is available
for any holder of shares of Common Stock issued to Sellers,
(B) a copy of the most recent annual or quarterly report of
the Parent and such other reports or documents so filed with
the SEC by the Parent and (C) such other information as SEC
requires to permit the selling of any such securities without
registration pursuant to Rule 144 or any successor rule to
Rule 144.
Section 6.14. Rothschild. The Purchaser Parties agree to pay
to Rothschild a one-time fee of $250,000 at the time of the first securitization
after the Closing Date ("Securitization") which includes some or all of the
loans included in the Telecapital Purchased Assets. The Purchaser Parties shall
receive a credit for any underwriting or placement fees earned by Rothschild in
the Securitization, provided that Rothschild shall participate in the
Securitization if invited to by the Purchaser Parties upon terms reasonably
satisfactory to Rothschild. In the event the Purchaser Parties have not effected
the Securitization on or before December 31, 1998, the fee described above shall
be paid to Rothschild in full satisfaction of the obligation described in this
Section 6.14.
Section 6.15. Transitional Services. After the Closing,
individuals who were employees of the Sellers and their Affiliates prior to the
Closing who continue to be employed by any Purchaser Party or any Affiliate
thereof shall be made available to the Sellers and their Affiliates, at
reasonable times and in a manner which does not interfere with or impede in any
material respect the performance of their duties for the Purchaser Parties and
their Affiliates, for purposes of the winding up and liquidation of the Sellers,
provided that this obligation shall cease one year after the Closing Date and,
provided, further, that Sellers shall be responsible for all out-of-pocket costs
connected therewith.
-34-
42
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1. Mutual Conditions. The respective obligations of
each party to consummate the transactions contemplated by this Agreement shall
be subject to the fulfillment at or prior to Closing of the condition that no
Governmental Authority of competent jurisdiction shall have (i) enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, judgment,
decree, injunction or other order which is in effect or (ii) commenced or
threatened any action or proceeding, which in either case would prohibit
consummation of the transactions contemplated by this Agreement
Section 7.2. Conditions to the Purchaser Parties' Obligations.
The obligations of the Purchaser Parties to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment prior to or
at Closing of each of the following conditions:
(a) The representations and warranties made by IFC and
Telecapital in this Agreement and the Schedules hereto shall be true, correct
and complete in all material respects as of the Closing Date as though such
representations and warranties were made on the Closing Date (except as to any
representation or warranty made as of a specific date, in which case such
representation or warranty shall be deemed to have been made again on the
Closing Date but only as of such specific date), and IFC and Telecapital shall
have in all material respects duly performed or complied with all of the
covenants, obligations and conditions to be performed or complied with by them
under the terms of this Agreement prior to or at Closing.
(b) (i) All authorizations, consents, waivers, approvals or
other actions required in connection with the execution, delivery and
performance of this Agreement and the instruments of transfer by Sellers and the
consummation by Sellers of the transactions contemplated hereby and thereby
shall have been obtained and shall be in full force and effect; and (ii) all
authorizations, consents, waivers, approvals or other actions identified on
Schedule 5.4 necessary to permit Purchaser1 and Purchaser2 to operate the IFC
Business and the Telecapital Business, respectively, in material compliance with
all applicable laws immediately after the Closing shall have been obtained and
shall be in full force and effect, including without limitation the all
necessary approvals from the SBA to be a Section 7(a) lender, including the
obtaining of "preferred lender" status in those jurisdictions and districts and
for those SBA programs maintained by IFC on the date hereof.
(c) Prior to or at Closing, IFC and Telecapital shall have
delivered to the Purchaser Parties all instruments of assignment, transfer and
conveyance identified herein and such other closing documents as shall be
reasonably requested by the Purchaser Parties in form and substance reasonably
acceptable to the Purchaser Parties ' counsel, including the following:
(i) such instruments of sale, transfer, assignment,
conveyance and delivery (including all vehicle titles, the Xxxx of Sale
set forth as Exhibit B (the terms of which shall be reasonably agreed
upon and attached hereto within 20 days from the date hereof), blanket
mortgage assignment set forth as Exhibit C (the terms of which shall be
reasonably agreed upon and attached hereto within 20 days from the date
-35-
43
hereof), and the Assignment and Assumption Agreement set forth as
Exhibit D (the terms of which shall be reasonably agreed upon and
attached hereto within 20 days from the date hereof), as are required
in order to transfer title to the Purchased Assets as provided herein;
(ii) certificates of an appropriate authorized
Person of each of IFC and Telecapital, dated the Closing Date, to the
effect that (1) the Person signing such certificate is familiar with
this Agreement and (2) the conditions specified in Section 7.2(a) and
(b) applicable to that Seller have been satisfied;
(iii) certificates of an appropriate authorized
Person of each of IFC and Telecapital, dated the Closing Date, as to
the incumbency or authorization of any Person executing on behalf of
IFC or Telecapital, as the case may be, this Agreement, the instruments
of transfer or any document related thereto;
(iv) such other documents or instruments as the
Purchaser Parties reasonably request to effect the transactions
contemplated hereby;
(v) an opinion of counsel of Xxxxxxxxxx Xxxxxxx
PC, dated as of the Closing;
(vi) a noncompetition agreement substantially
identical to Section 6.11 shall have been executed and delivered by
each Seller Principal; and
(vii) Xxxx Xxxxx shall have entered into a
noncompetition and employment agreement with Purchaser.
(c) There shall have been no Material Adverse
Change in respect of the IFC Business or the Telecapital Business except for (i)
changes in general economic or financial conditions or in generally prevailing
commercial interest rates, (ii) changes resulting from the actions of any
Purchaser Party or any of its Affiliates or representatives, or (iii) changes
contemplated by this Agreement.
(d) Each Seller shall have obtained the third
party consents to the assignment and transfer to the applicable Purchaser of the
Material Contracts the failure of which to obtain would have a material adverse
effect on such Purchaser's conduct of the IFC Business or Telecapital Business
after the Closing as determined in the reasonable judgment of Purchaser. Without
limiting any other provision of this Agreement, the Purchaser Parties
acknowledge that no consent shall be needed from unaffiliated lenders to either
Seller, and the Purchaser Parties shall be responsible for paying off at the
Closing all such indebtedness which is an IFC or Telecapital Assumed Liability.
-36-
44
Section 7.3. Conditions to the Sellers' Obligations. The
obligations of each of IFC and Telecapital to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing of each of the following conditions:
(a) The representations and warranties made by the Purchaser
Parties in this Agreement shall be true, correct and complete in all material
respects as of the Closing Date as though such representations and warranties
were made as of the Closing Date (except as to any
-37-
45
representation or warranty made as of a specific date, in which case such
representation or warranty shall be deemed to have been made again on the
Closing Date but only as of such specific date), and the Purchaser Parties shall
have in all material respects duly performed or complied with all of the
covenants, obligations and conditions to be performed or complied with by it
under the terms of this Agreement prior to or at Closing.
(b) (i) All authorizations, consents, waivers, approvals or
other action required in connection with the execution, delivery and performance
of this Agreement and the instruments of transfer by the Purchaser Parties and
the consummation by the Purchaser Parties of the transactions contemplated
hereby and thereby shall have been obtained and shall be in full force and
effect; and (ii) all authorization, consents, waivers, approvals or other
actions identified on Schedule 5.4 necessary to permit the Purchaser1 and
Purchaser2 to operate the IFC Business and the Telecapital Business,
respectively, in material compliance with all applicable laws immediately after
the Closing shall have been obtained and shall be in full force and effect.
(c) Prior to or at Closing, the Purchaser Parties shall have
delivered to each of IFC and Telecapital such closing documents as shall be
reasonably requested, in form and substance reasonably acceptable to the
Sellers' counsel, including the following:
(i) the Assignment and Assumption Agreements
executed by each Purchaser and dated the Closing Date;
(ii) a certificate of an appropriate authorized
Person of the Purchaser Parties, dated the Closing Date, to the effect
that (1) the Person signing such certificate is familiar with this
Agreement and (2) the conditions specified in Section 7.3(a) and (b)
have been satisfied;
(iii) a certificate of an appropriate authorized
Person, dated the Closing Date, as to the incumbency of any officer of
the Purchaser Parties executing this Agreement, the instruments of
transfer or any document related thereto;
(iv) the IFC Purchase Price to IFC and the
Telecapital Purchase Price to Telecapital payable as provided in
Section 2.2, with the cash portion payable by wire transfer in
immediately available funds to accounts designated by IFC and
Telecapital, respectively, by written notice to the Purchaser Parties
at least two (2) Business Days before the Closing Date;
(v) such other documents or instruments as either
Seller reasonably requests to effect the transactions contemplated
hereby; and
(vi) an opinion of counsel of the General Counsel
of Parent, dated as of the Closing.
(d) There shall have been no Material Adverse Change with
respect to Parent and its consolidated subsidiaries, taken as a whole, except
for (i) changes in general economic or
-38-
46
financial conditions or in generally prevailing commercial interest rates, (ii)
changes resulting from the actions of any Purchaser Party or any of its
Affiliates or representatives, or (iii) changes contemplated by this Agreement.
ARTICLE VIII
TERMINATION
Section 8.1. Termination. This Agreement may be terminated at
any time prior to Closing as follows:
(a) by mutual consent of Sellers and the Purchaser Parties;
(b) by Sellers or the Purchaser Parties if the other party
hereto (treating the Sellers as one party for this purpose) shall breach in any
material respect any of its representations, warranties or obligations contained
in this Agreement and such breach is not cured in all material respects within
the ten-day period commencing on the date written notice of such breach is
received by the breaching party;
(c) by the Purchaser Parties, in the event that the conditions
to its obligations set forth in Article VII hereof have not been satisfied or
waived at the Closing;
(d) by IFC or Telecapital, in the event that the conditions to
their obligations set forth in Article VII hereof have not been satisfied or
waived at the Closing; and
(e) by any party if the transactions contemplated by this
Agreement shall not have been consummated on or before August 14, 1998 (or such
later date as may be agreed upon in writing by the parties hereto), provided
that this date shall automatically be extended until September 19, 1998 if the
transactions have not been consummated by August 14, 1998 because the Purchaser
Parties have not obtained the Governmental Licenses from the SBA which are a
condition to the Closing (subject to Sellers' or the Purchaser Parties' right to
terminate if the SBA has unconditionally rejected the Purchaser Parties'
application therefor).
Section 8.2. Effect of Termination. If this Agreement is
terminated pursuant to Section 8.1 hereof, all rights and obligations of the
Sellers and the Purchaser Parties hereunder shall terminate and no party shall
have any liability to the other party, except for obligations of the parties
hereto in Sections 6.1 and 10.2, which shall survive the termination of this
Agreement, and except nothing herein will relieve any party from liability for
any breach of any representation, warranty, agreement or covenant contained
herein prior to such termination.
-39-
47
ARTICLE IX
DURATION OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
Section 9.1. Duration of Representations and Warranties. The
representations, warranties, covenants, agreements and indemnifications of the
parties contained herein or in any writing delivered pursuant to the provisions
hereof shall survive any investigation heretofore or hereafter made by the
Purchaser Parties or Sellers, and the consummation of the transactions
contemplated herein, and shall continue in full force and effect for the period
(the "Survival Period") beginning on the Closing Date and continuing until the
first anniversary thereof; provided, however, that the Survival Period shall be
extended automatically to include any time period necessary to resolve a
specific claim for indemnification which was made before expiration of the
Survival Period but not resolved prior to its expiration; and provided, further,
that any such extension shall apply only as to claims asserted and not so
resolved within the Survival Period.
Section 9.2. Indemnification. (a) For the Survival Period, IFC
and Telecapital, severally and not jointly, subject to the limitations set forth
below in this Section 9.2(a) and in Sections 9.2(d) and (e), shall indemnify and
hold harmless the Purchaser Parties, their Affiliates, officers, directors,
employees, agents and representatives, and any Person claiming by or through any
of them, against and in respect of any and all claims, costs, expenses, damages,
liabilities, losses or deficiencies (including counsel's fees and other costs
and expenses incident to any suit, action or proceeding) (the "Damages") arising
out of, resulting from or incurred in connection with (i) any IFC Retained
Liability or Telecapital Retained Liability, as the case may be, (ii) the breach
by IFC or Telecapital, as the case may be, of any covenant or agreement to be
performed by it hereunder or under any other agreement delivered pursuant
hereto, and (iii) any inaccuracy in or breach of any representation or warranty
of IFC or Telecapital, as the case may be. Notwithstanding anything to the
contrary in this Agreement, neither IFC or Telecapital shall be liable under
this Section 9.2(a) unless the aggregate of all Damages for which they would
otherwise be liable under this Section 9.2(a) shall exceed $250,000 and
$125,000, respectively, but in the event that such Damages exceed such
respective threshold, IFC or Telecapital, as the case may be, shall then be
liable for all such Damages subject only to the other limitations contained in
this Section 9.2(a) and in Sections 9.2(d) and (e).
(b) The Purchaser Parties, jointly and severally, shall
indemnify and hold harmless each of IFC and Telecapital, and their respective
Affiliates, members, partners, officers, employees, agents and representatives,
and any Person claiming by or through any of them, against and in respect of any
and all Damages arising out of, resulting from or incurred in connection with
(i) the breach by the Purchaser Parties of any covenant or agreement to be
performed by it hereunder or under any other agreement delivered pursuant
hereto, (ii) any IFC Assumed Liability or Telecapital Assumed Liability, as the
case may be, (iii) the operation of the IFC Business or the Telecapital
Business, as the case may be, following the Closing, and (iv) any inaccuracy in
or breach of any representation or warranty of any Purchaser Party.
-40-
48
(c) Any Person providing indemnification pursuant to the
provisions of this Section 9.2 is hereinafter referred to as an "Indemnifying
Party" and any Person entitled to be indemnified pursuant to the provisions of
this Section 9.2 is hereinafter referred to as an "Indemnified Party."
(d) The recourse of the Purchaser Parties and all other
Indemnified Parties for Damages and for all claims arising under this Article IX
against IFC or Telecapital shall be limited to the funds or Acceptable Letter of
Credit deposited under the IFC Escrow Agreement or Telecapital Escrow Agreement,
respectively. The aggregate maximum indemnification to be provided by IFC and
Telecapital to the Purchaser Parties and all other Indemnified Parties pursuant
to this Article IX shall be $5,000,000 and $2,500,000, respectively.
(e) All claims for Damages by the Purchaser Parties or any
other Indemnified Party under Section 9.2(a) or (b) shall be computed net of
insurance proceeds received by the Purchaser Parties, any such other Indemnified
Party or any Affiliate thereof as a result of any Damages subject to
indemnification hereunder. In addition, all claims for Damages under Section
9.2(a) or (b) shall be computed net of related, determinable tax benefits, if
any, which are actually used to reduce taxes otherwise due by the Purchaser
Parties, any other Indemnified Party or any Affiliate thereof resulting from any
of the Damages to which the Purchaser Parties or any other Indemnified Party is
entitled to indemnification hereunder.
(f) The rights and remedies of the Purchaser Parties and all
other Indemnified Parties under this Section 9.2 shall constitute the sole and
exclusive remedy of the Purchaser Parties and any such other Indemnified Parties
arising out of, resulting from or incurred in connection with the breach by IFC
or Telecapital of any covenant or agreement to be performed by it under this
Agreement or any instrument of transfer or other agreement delivered pursuant
hereto and for any inaccuracy in or breach of any representation or warranty;
provided that the limitations set forth in this Section 9.2 shall not apply with
respect to Damages resulting from the fraud of IFC or Telecapital with respect
to any Purchaser Party in connection with this Agreement or the transactions
contemplated hereunder.
Section 9.3. Procedures for Third Party Claims. In the case of
any claim for indemnification arising from a claim of a third party (a "Third
Party Claim"), an Indemnified Party shall give prompt written notice to the
Indemnifying Party of any claim or demand which such Indemnified Party has
knowledge and as to which it may request indemnification hereunder. The
Indemnifying Party shall have the right to defend and to direct the defense
against any such Third Party Claim, in its name or in the name of the
Indemnified Party, as the case may be, at the expense of the Indemnifying Party,
and with counsel selected by the Indemnifying Party unless (i) such Third Party
Claim seeks an order, injunction or other equitable relief against the
Indemnified Party, or (ii) the Indemnified Party shall have reasonably concluded
that (x) there is a conflict of interest between the Indemnified Party and the
Indemnifying Party in the conduct of the defense of such Third Party Claim or
(y) the Indemnified Party has one or more defenses not available to the
Indemnifying Party. Notwithstanding anything in this Agreement to the contrary,
the Indemnified Party shall, at the expense of the Indemnifying Party, cooperate
with the Indemnifying Party, and keep the Indemnifying Party fully informed, in
the defense of such Third
-41-
49
Party Claim. The Indemnified Party shall have the right to participate in the
defense of any Third Party Claim with counsel employed at its own expense;
provided, however, that, in the case of any Third Party Claim or demand
described in clause (i) or (ii) of the second preceding sentence or as to which
the Indemnifying Party shall not in fact have employed counsel to assume the
defense of such Third Party Claim, the reasonable fees and disbursements of such
counsel shall be at the expense of the Indemnifying Party. The Indemnifying
Party shall have no indemnification obligations with respect to any such Third
Party Claim or demand which shall be settled by the Indemnified Party without
the prior written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. Any settlement of any such Third Party Claim
or demand made by the Indemnifying Party shall include a complete release and
discharge of each Indemnified Party or if not so included, shall require the
prior written consent of the Indemnified Party.
Section 9.4. Procedures for Inter-Party Claims. In the event
that an Indemnified Party determines that it has a claim for Damages against an
Indemnifying Party hereunder (other than as a result of a Third Party Claim),
the Indemnified Party shall give prompt written notice thereof to the
Indemnifying Party, specifying the amount of such claim and any relevant facts
and circumstances relating thereto. The Indemnified Party shall provide the
Indemnifying Party with reasonable access to its books and records for the
purpose of allowing the Indemnifying Party a reasonable opportunity to verify
any such claim for Damages. The Indemnified Party and the Indemnifying Party
shall negotiate in good faith regarding the resolution of any disputed claims
for Damages. In the event that the Indemnified Party and the Indemnifying Party
did not resolve the dispute by negotiation and legal proceedings are instituted
seeking to recover Damages hereunder, the prevailing party in such litigation
shall be entitled to recover its cost and expenses in connection with such
proceedings (including costs of investigation and reasonable attorneys' fees and
disbursements).
ARTICLE X
MISCELLANEOUS
Section 10.1. Notices. All notices or other communications
required or permitted hereunder shall be in writing and shall be delivered
personally, or sent by facsimile, sent by certified, registered or express air
mail, postage prepaid, or sent by a reputable overnight courier service, and
shall be deemed given when so delivered personally or by facsimile, if sent by
certified or registered mail, three (3) Business Days after the date of mailing,
or if sent by overnight courier or express air mail, one (1) Business Day after
being sent, as follows:
-42-
50
If to the Purchaser Parties: AMRESCO, INC.
000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000 - XX 342
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxxx X. Xxxxx
With a copy to: AMRESCO, INC. 000 Xxxxx Xxxxx Xxxxxx
Xxxxx 0000 - XX 342
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: General Counsel
If to Sellers: Independence Funding Company, LLC
Telecapital, L.P.
0000 XXX Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-0000-0000
Attention: B. Xxxx Xxxxx
and Harbourton Holdings, L.P.
c/x Xxxxx & Xxxx Enterprises
0000 Xxxxxxx Xxxxxx
Xxxxx 000, 0xx Xxxxx
Xxxxx Xxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxx X. Xxxxx
With a copy to: XXXXXXXXXX XXXXXXX PC
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
or to such other address as any party hereto shall notify the other parties
hereto (as provided above) from time to time.
-43-
51
Section 10.2. Expenses. Regardless of whether the transactions
provided for in this Agreement are consummated, except as otherwise provided
herein, each party hereto shall pay its own expenses incident to this Agreement
and the transactions contemplated herein.
Section 10.3. Governing Law; Consent to Jurisdiction. This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of Texas, without reference to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the non-exclusive
jurisdiction of the courts of the State of Texas and the United States District
Court for the Northern District of Texas for the purpose of any suit, action,
proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby. Service of process in connection with any such
suit, action or proceeding may be served on each party hereto anywhere in the
world by the same methods as are specified for the giving of notices under this
Agreement. Each of the parties hereto irrevocably consents to the jurisdiction
of any such court in any such suit, action or proceeding and to the laying of
venue in such court. Each party hereto irrevocably waives any objection to the
laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
Section 10.4. Assignment; Successors and Assigns; No Third
Party Rights. Except as otherwise provided herein, this Agreement may not be
assigned by operation of law or otherwise without the written consent of the
parties hereto, and any attempted assignment shall be null and void. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors, permitted assigns and legal representatives.
This Agreement shall be for the sole benefit of the parties to this Agreement
and their respective successors, permitted assigns and legal representatives and
is not intended, nor shall be construed, to give any Person, other than the
parties hereto and their respective successors, assigns and legal
representatives, any legal or equitable right, remedy or claim hereunder.
Section 10.5. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original agreement, but all of
which together shall constitute one and the same instrument.
Section 10.6. Titles and Headings. The headings and table of
contents in this Agreement are for reference purposes only, and shall not in any
way affect the meaning or interpretation of this Agreement.
Section 10.7. Entire Agreement. This Agreement, including the
Schedules and Exhibits attached hereto, constitutes the entire agreement among
the parties with respect to the matters covered hereby and supersedes all
previous written, oral or implied understandings among them with respect to such
matters.
Section 10.8. Amendment and Modification. This Agreement may
only be amended or modified in writing signed by the party against whom
enforcement of such amendment or modification is sought.
-44-
52
Section 10.9. Waiver. Any of the terms or conditions of this
Agreement may be waived at any time by the party or parties entitled to the
benefit thereof, but only by a writing signed by the party or parties waiving
such terms or conditions.
Section 10.10. Severability. The invalidity of any portion
hereof shall not affect the validity, force or effect of the remaining portions
hereof. If it is ever held that any restriction hereunder is too broad to permit
enforcement of such restriction to its fullest extent, such restriction shall be
enforced to the maximum extent permitted by law.
Section 10.11. Obligations Several. Representations,
warranties, covenants, agreements, liabilities and obligations of IFC to the
Purchaser Parties are several and shall not bind nor be the responsibility or
obligation of Telecapital in any manner or respect; representations, warranties,
covenants, agreements, liabilities and obligations of Telecapital to the
Purchaser Parties are several and shall not bind nor be the responsibility or
obligation of IFC in any manner or respect.
Section 10.12. No Strict Construction. Each of the Purchaser
and the Sellers acknowledge that this Agreement has been prepared collectively
by the parties hereto, and shall not be strictly construed against any party.
-45-
53
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
INDEPENDENCE FUNDING COMPANY, LLC
By: /s/ XXXXX X. XXXXX
-----------------------------------
Name: Xxxxx X. Xxxxx
Title: Chairman
TELECAPITAL, L.P.
By: /s/ XXXXX X. XXXXX
-----------------------------------
Name: Xxxxx X. Xxxxx
Title: Chairman
AMRESCO INDEPENDENCE
FUNDING CO., INC.
By: /s/ XXXXXXXX XXXXX
-----------------------------------
Name: Xxxxxxxx Xxxxx
Title: President
AMRESCO COMMERCIAL
LENDING CORP.
By: /s/ XXXXXXXX XXXXX
-----------------------------------
Name: Xxxxxxxx Xxxxx
Title: Vice President
AMRESCO, INC.
By: /s/ XXXXXXXX XXXXX
-----------------------------------
Name: Xxxxxxxx Xxxxx
Title: President - Commercial Finance
-46-
