Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
CONSUMER PORTFOLIO SERVICES, INC.
CPS MERGERSUB, INC.
AND
TFC ENTERPRISES, INC.
DATED AS OF MARCH 31, 2003
TABLE OF CONTENTS
ARTICLE 1 THE MERGER .................................................................. 1
Section 1.1 The Merger .................................................... 1
Section 1.2 Effective Time ................................................ 1
Section 1.3 Effects of the Merger ......................................... 2
Section 1.4 Charter and Bylaws; Directors and Officers .................... 2
Section 1.5 Conversion of Securities ...................................... 2
Section 1.6 Exchange of Certificates ...................................... 3
Section 1.7 Return of Payment Fund ........................................ 4
Section 1.8 No Further Ownership Rights in Company Common Stock ........... 4
Section 1.9 Closing of Company Transfer Books ............................. 4
Section 1.10 Lost Certificates ............................................. 4
Section 1.11 Further Assurances ............................................ 4
Section 1.12 Dissenting Shares ............................................. 5
Section 1.13 Closing ....................................................... 5
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB ............................ 6
Section 2.1 Organization, Standing and Power .............................. 6
Section 2.2 Authority ..................................................... 6
Section 2.3 Consents and Approvals; No Violation .......................... 7
Section 2.4 SEC Documents and Other Reports ............................... 7
Section 2.5 Absence of Certain Changes or Events .......................... 8
Section 2.6 Brokers ....................................................... 8
Section 2.7 Operations of Sub ............................................. 8
Section 2.8 No Need for Financing ......................................... 9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............................... 9
Section 3.1 Organization, Standing and Power .............................. 9
Section 3.2 Capital Structure ............................................. 9
Section 3.3 Authority ..................................................... 10
Section 3.4 Consents and Approvals; No Violation .......................... 11
Section 3.5 SEC Documents and Other Reports ............................... 11
Section 3.6 Proxy Statement ............................................... 12
Section 3.7 Absence of Certain Changes or Events .......................... 12
Section 3.8 Permits and Compliance ........................................ 12
Section 3.9 Tax Matters ................................................... 13
Section 3.10 Actions and Proceedings ....................................... 15
Section 3.11 Employees; Employee Benefits .................................. 16
Section 3.12 Labor Matters ................................................. 18
Section 3.13 Contract Receivables .......................................... 19
Section 3.14 Title of Property and Assets .................................. 19
Section 3.15 Real Property ................................................. 19
Section 3.16 Insurance ..................................................... 20
Section 3.17 Business Relations. ........................................... 20
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Section 3.18 Retail Installment Contracts ............................. 20
Section 3.19 Opinion of Financial Advisor ............................. 20
Section 3.20 Required Vote of Company Stockholders .................... 21
Section 3.21 Brokers .................................................. 21
ARTICLE 4 COVENANTS RELATING TO CONDUCT OF BUSINESS ................................. 21
Section 4.1 Conduct of Business Pending the Merger ................... 21
Section 4.2 No Solicitation by the Company ........................... 22
ARTICLE 5 ADDITIONAL AGREEMENTS ..................................................... 23
Section 5.1 Company Stockholder Meeting .............................. 23
Section 5.2 Preparation of the Proxy Statement ....................... 24
Section 5.3 Access to Information .................................... 24
Section 5.4 Certain Payments, Fees and Expenses ...................... 24
Section 5.5 Reasonable Best Efforts .................................. 25
Section 5.6 Public Announcements ..................................... 26
Section 5.7 State Takeover Laws ...................................... 26
Section 5.8 Indemnification; Directors and Officers Insurance ........ 26
Section 5.9 Notification of Certain Matters .......................... 26
Section 5.10 Employee Benefit Plans and Agreements .................... 26
Section 5.11 Estoppel Certificates .................................... 27
ARTICLE 6 CONDITIONS PRECEDENT TO THE MERGER ........................................ 28
Section 6.1 Conditions to Each Party's Obligation to Effect
the Merger ............................................... 28
Section 6.2 Conditions to Obligation of the Company to Effect
the Merger ............................................... 28
Section 6.3 Conditions to Obligations of Parent and Sub to
Effect the Merger ........................................ 29
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER ......................................... 29
Section 7.1 Termination .............................................. 29
Section 7.2 Effect of Termination .................................... 31
Section 7.3 Amendment ................................................ 31
Section 7.4 Waiver ................................................... 31
ARTICLE 8 GENERAL PROVISIONS ........................................................ 32
Section 8.1 Nonsurvival of Representations and Warranties ............ 32
Section 8.2 Notices .................................................. 32
Section 8.3 Interpretation ........................................... 33
Section 8.4 Counterparts ............................................. 33
Section 8.5 Entire Agreement; No Third Party Beneficiaries ........... 33
Section 8.6 Governing Law ............................................ 33
Section 8.7 Assignment ............................................... 34
Section 8.8 Severability ............................................. 34
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TABLE OF DEFINED TERMS
Agreement ........................................................... 1
Blue Sky Laws ....................................................... 7
Certificate of Merger ............................................... 1
Certificates ........................................................ 3
Closing ............................................................. 5
Code ................................................................ 4
Company ............................................................. 1
Company Annual Report ............................................... 10
Company Bylaws ...................................................... 10
Company Charter ..................................................... 10
Company Common Stock ................................................ 2
Company Letter ...................................................... 10
Company Permits ..................................................... 13
Company SEC Documents ............................................... 11
Company Stockholder Meeting ......................................... 23
Confidentiality Agreement ........................................... 24
Constituent Corporations ............................................ 1
D&O Insurance Tail .................................................. 26
DGCL ................................................................ 1
Dissenting Shares ................................................... 5
Effective Time ...................................................... 1
Employees ........................................................... 16
ERISA ............................................................... 17
Former Employees .................................................... 16
Governmental Entity ................................................. 7
Income Taxes ........................................................ 14
IRCA ................................................................ 17
IRS ................................................................. 17
Knowledge of the Company ............................................ 16
Leased Real Property ................................................ 19
Liens ............................................................... 10
Material Adverse Effect ............................................. 6
Merger .............................................................. 1
Merger Consideration ................................................ 2
Non-Employees ....................................................... 16
Option .............................................................. 2
Parent .............................................................. 1
Parent Bylaws ....................................................... 7
Parent Charter ...................................................... 7
Parent Letter ....................................................... 7
Parent SEC Documents ................................................ 8
Paying Agent ........................................................ 3
Payment Fund ........................................................ 3
Proxy Statement ..................................................... 12
Real Property Leases ................................................ 19
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Retained Employees ...................................................... 27
Xxxxxxxx-Xxxxx Act of 2002 .............................................. 8
SEC ..................................................................... 7
SOX ..................................................................... 7
State Takeover Approvals ................................................ 7
Sub ..................................................................... 1
Sub Charter ............................................................. 2
Subsidiary .............................................................. 6
Superior Proposal ....................................................... 30
Surviving Corporation ................................................... 1
Takeover Proposal involving the Company ................................. 23
Tax Return .............................................................. 14
Taxes ................................................................... 14
Taxing Authority ........................................................ 14
United States Real Property Holding Corporation ......................... 15
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 31, 2003 (this
"Agreement"), is among Consumer Portfolio Services, Inc., a California
corporation ("Parent"), CPS Mergersub Inc., a Delaware corporation and a direct
wholly owned subsidiary of Parent ("Sub"), and TFC Enterprises, Inc., a Delaware
corporation (the "Company", together with Sub, the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company have determined that the merger of Sub with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth herein, is
advisable and fair to and in the best interests of their respective
stockholders;
WHEREAS, the respective Boards of Directors of the Company, Parent and
Sub have each approved and adopted, at meetings of each such Boards of
Directors, this Agreement and have authorized the execution hereof; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the Delaware General Corporation Law (the
"DGCL"), Sub shall be merged with and into the Company at the Effective Time (as
hereinafter defined). Following the Merger, the separate corporate existence of
Sub shall cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the DGCL.
Section 1.2 Effective Time. The Merger shall become effective when a
Certificate of Merger (the "Certificate of Merger"), executed in accordance with
the relevant provisions of the DGCL, is filed with the Secretary of State of the
State of Delaware; provided, however, that, upon mutual consent of the
Constituent Corporations, the Certificate of Merger may provide for a later date
of effectiveness of the Merger not more than 30 days after the date the
Certificate of Merger is filed. When used in this Agreement, the term "Effective
Time" shall mean the date and time at which the Certificate of Merger is
accepted for recording or such later time established by the Certificate of
Merger. The filing of the Certificate of Merger shall be made on the date of the
Closing (as hereinafter defined).
Section 1.3 Effects of the Merger. The Merger shall have the effects
set forth in this Agreement and in Section 259 of the DGCL.
Section 1.4 Charter and Bylaws; Directors and Officers.
(a) At the Effective Time, the Certificate of Incorporation of Sub (the
"Sub Charter"), as in effect at the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until amended as provided by
applicable law except that the name of the Surviving Corporation shall initially
be "The Finance Company" At the Effective Time, the Bylaws of Sub as in effect
at the Effective Time shall be the Bylaws of the Surviving Corporation until
thereafter changed or amended in accordance with applicable law.
(b) The directors of Sub at the Effective Time of the Merger shall be
the directors of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be. The officers of the Sub at the Effective Time of
the Merger shall be the officers of the Surviving Corporation, until the earlier
of their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
Section 1.5 Conversion of Securities. As of the Effective Time, by
virtue of the Merger and without any action on the part of Sub, the Company or
the holders of any securities of the Constituent Corporations:
(a) Each issued and outstanding share of common stock, par value $.01
per share, of Sub shall be converted into one (1) validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
(b) Each issued and outstanding share of common stock, par value $0.01
per share, of the Company (the "Company Common Stock") that is held in the
treasury of the Company or by any wholly owned Subsidiary of the Company, and
any shares of Company Common Stock owned by Parent, shall be cancelled and no
capital stock of Parent or other consideration shall be delivered in exchange
therefor.
(c) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be cancelled in
accordance with Section 1.5(b) and any Dissenting Shares (as hereinafter
defined)) shall be converted into the right to receive $1.87 in cash payable to
the holder thereof, without interest thereon (the "Merger Consideration"). All
such shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired and each holder of
a certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration pursuant
to this Section 1.5(c). The Merger Consideration shall be appropriately adjusted
for any stock dividend, stock split or like transaction affecting Company Common
Stock prior to the Effective Time.
(d) Each option to acquire shares of Company Common Stock (an "Option")
outstanding immediately prior to the Effective Time, that is vested and
exercisable at that time, shall be cancelled and converted into the fully vested
right to receive the excess of $1.87, if any, over the exercise price per share
for which shares of Company Common Stock may be acquired
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pursuant to the Option. Prior to the Effective Time, the Company shall take all
actions within its control which are necessary (and shall use its reasonable
best efforts to obtain such consents, if any, from Option holders as may be
required) to cancel and convert all outstanding Options in accordance with this
Section 1.5(d). All Options, when so converted, shall no longer be outstanding,
and each holder of such an Option shall cease to have any rights with respect
thereto, except the right to receive the consideration described in this Section
1.5(d). The consideration described in this Section 1.5(d) shall be
appropriately adjusted for any stock dividend, stock split or like transaction
affecting Company Common Stock prior to the Effective Time.
All applicable withholding taxes attributable to the payments made
hereunder or to distributions contemplated hereby shall be deducted from the
cash amount payable above. Except as provided herein or as otherwise agreed to
by the parties and to the extent permitted by the Company Stock Purchase Plan,
the Incentive Plan or the Director Plan (each as defined in Section 3.2(a)
hereof), the Company shall cause the Company Stock Purchase Plan, the Incentive
Plan and the Director Plan to terminate as of the Effective Time.
Section 1.6 Exchange of Certificates.
(a) Parent shall appoint a trust company or a commercial bank
reasonably acceptable to the Company to act as Paying Agent hereunder (the
"Paying Agent"). Prior to the Effective Time, Parent shall deposit with the
Paying Agent the aggregate Merger Consideration under Section 1.5(c) hereof (the
"Payment Fund"). The Paying Agent shall deliver the Merger Consideration
contemplated to be paid pursuant to Section 1.5(c) out of the Payment Fund.
(b) Parent shall cause the Paying Agent, as soon as practicable after
the Effective Time, to mail to each record holder of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock converted in the Merger (the
"Certificates") a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon actual delivery of the Certificates to the Paying Agent, and shall contain
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration). Upon surrender for cancellation to the Paying
Agent of one or more Certificates held by any record holder of a Certificate,
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration pursuant to this Article 1, and any Certificate so surrendered
shall forthwith be cancelled. No interest will be paid or accrued on the Merger
Consideration payable to the holder of the Certificates.
(c) The Paying Agent shall invest the Payment Fund, as directed by
Parent, in (i) direct obligations of the United States of America, (ii)
obligations for which the full faith and credit of the United States of America
is pledged to provide for the payment of principal and interest, or (iii)
certificates of deposit, bank repurchase agreements or bankers acceptances, of
commercial banks with assets exceeding $1,000,000,000, and any net earnings with
respect thereto shall be paid to Parent as and when requested by Parent;
provided that any such investment or any such payment of earnings shall not
delay the receipt by holders of Certificates of their Merger Consideration or
otherwise impair such holders' respective rights hereunder.
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Parent must promptly replace any portion of the Payment Fund which the Paying
Agent loses through investments.
(d) If any Merger Consideration is to be paid to a name other than that
in which the Certificate surrendered is registered, it shall be a condition of
such payment that the Certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
payment shall pay to the Paying Agent any taxes required by reason of payment or
shall establish to the satisfaction of the Paying Agent that such tax has been
paid or is not applicable. Parent or the Paying Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of shares of Company Common Stock such amounts as Parent
or the Paying Agent is required to deduct and withhold with respect to the
making of such payment under the Internal Revenue Code of 1986, as amended (the
"Code"), or under any provision of state, local or foreign tax law. To the
extent that amounts are so withheld by Parent or the Paying Agent, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the shares of Company Common Stock in respect of which such
deduction and withholding was made by Parent or the Paying Agent.
Section 1.7 Return of Payment Fund. Any portion of the Payment Fund
which remains undistributed to the former stockholders of the Company for six
months after the Effective Time shall be delivered to Parent, upon demand of
Parent, and any such former stockholders who have not theretofore complied with
this Article 1 shall thereafter look only to Parent for payment of their claim
for their Merger Consideration. Neither Parent nor the Surviving Corporation
shall be liable to any former holder of Company Common Stock for any such Merger
Consolidation that is delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
Section 1.8 No Further Ownership Rights in Company Common Stock. The
Merger Consideration issued upon the surrender of Certificates in accordance
with the terms hereof shall be deemed to have been issued in full satisfaction
of all rights pertaining to the shares of Company Common Stock represented by
such Certificates.
Section 1.9 Closing of Company Transfer Books. At the Effective Time,
the stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock shall thereafter be made on the records of the
Company. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, the Paying Agent or the Parent, such Certificates shall
be cancelled as provided in this Article 1.
Section 1.10 Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by Parent or the Paying Agent, the posting by such person of a bond, in
such reasonable amount as Parent or the Paying Agent may direct as indemnity
against any claim that may be made against them with respect to such
Certificate, the Paying Agent will pay the Merger Consideration for such lost,
stolen or destroyed Certificate.
Section 1.11 Further Assurances. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or
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assurances or any other acts or things are necessary, desirable or proper (a) to
vest, perfect or confirm, of record or otherwise, in the Surviving Corporation
its right, title or interest in, to or under any of the rights, privileges,
powers, franchises, properties or assets of either of the Constituent
Corporations or (b) otherwise to carry out the purposes of this Agreement, the
Surviving Corporation and its proper officers and directors or their designees
shall be authorized to execute and deliver, in the name and on behalf of either
of the Constituent Corporations, all such deeds, bills of sale, assignments and
assurances and to do, in the name and on behalf of either Constituent
Corporation, all such other acts and things as may be necessary, desirable or
proper to vest, perfect or confirm the Surviving Corporation's right, title or
interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of such Constituent Corporation and otherwise to carry out
the purposes of this Agreement.
Section 1.12 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time held by a holder (if any), who has the
right to demand, and who properly demands, an appraisal of such shares of
Company Common Stock in accordance with Section 262 of the DGCL (or any
successor provision) ("Dissenting Shares") shall not be converted into a right
to receive their Merger Consideration unless such holder fails to perfect or
otherwise loses such holder's right to such appraisal, if any. If, after the
Effective Time, such holder fails to perfect or loses any such right to
appraisal, each such share of Company Common Stock of such holder shall be
treated as a share of Company Common Stock that had been converted as of the
Effective Time into the right to receive the Merger Consideration in accordance
with Article 1. At the Effective Time, any holder of Dissenting Shares shall
cease to have any rights with respect thereto, except the rights provided in
Section 262 of the DGCL (or any successor provision) and as provided in the
immediately preceding sentence. The Company shall give prompt notice to Parent
of any demands received by the Company for appraisal of shares of Company Common
Stock, and Parent shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any such demands. Parent shall be
responsible for all payments with respect to the Dissenting Shares, including
without limitation, all expenses associated with any negotiations and
proceedings with respect to demands for appraisal under the DGCL.
Section 1.13 Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") and all actions specified in this Agreement to
occur at the Closing shall take place at the offices of Xxxxxxx XxXxxxxxx LLP,
000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx at 10:00 a.m., local time, no later than the
second business day following the day on which the last of the conditions set
forth in Article 6 shall have been fulfilled or waived (if permissible) or at
such other time and place as Parent and the Company shall agree.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
Section 2.1 Organization, Standing and Power. Each of Parent and Sub is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized and has the requisite
corporate power and authority to carry on its business as now being conducted.
Each Subsidiary of Parent is duly qualified to do business, and is in good
standing, in each jurisdiction where the character of their properties owned or
held under lease or the nature of their activities makes such qualification
necessary, except where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect (as hereinafter defined) on
Parent. For purposes of this Agreement (a) "Material Adverse Effect" means, when
used with respect to Parent, Sub or the Company, as the case may be, any event,
change or effect, including, without limitation, any event, change or effect
arising from acts of terrorism or war, that individually or when taken together
with all other such events, changes or effects is materially adverse to the
business, financial condition or results of operations of Parent and its
Subsidiaries, taken as a whole, or the Company and its Subsidiaries, taken as a
whole, as the case may be, except to the extent resulting from or relating to
(i) any event, change or effect affecting the economy of the United States or
the consumer finance industry generally other than any event, change or effect
arising from acts of terrorism or war, or (ii) the execution or announcement of,
or compliance with the terms of, this Agreement; and (b) "Subsidiary" means any
corporation, partnership, limited liability company, joint venture or other
legal entity of which Parent or the Company, as the case may be (either alone or
through or together with any other Subsidiary), owns, directly or indirectly,
50% or more of the stock or other equity interests, the holders of which are
generally entitled to vote for the election of the Board of Directors or other
governing body of such corporation, partnership, limited liability company,
joint venture, other legal entity, or a statutory or business trust (i) that
holds receivables, and (ii) of which the Company or a Subsidiary thereof is a
beneficiary or the holder of a beneficial interest.
Section 2.2 Authority. On or prior to the date of this Agreement, the
Boards of Directors of Parent and Sub have (i) declared the Merger advisable and
fair to and in the best interest of Parent and Sub, respectively, and their
respective stockholders and (ii) approved and adopted this Agreement in
accordance with the General Corporation Law of California and the DGCL. Each of
Parent and Sub has all requisite corporate power to enter into this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Parent and Sub and the consummation by Parent and
Sub of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Parent and Sub, subject to filing of
appropriate Merger documents as required by the DGCL. This Agreement and the
consummation of the transactions contemplated hereby have been approved by
Parent as the sole stockholder of Sub. This Agreement has been duly executed and
delivered by Parent and Sub, and (assuming the valid authorization, execution
and delivery of this Agreement by the Company and the validity and binding
effect hereof on the Company) this Agreement constitutes the valid and binding
obligation of Parent and Sub enforceable against each of them in accordance with
its terms except as the same may be limited by applicable
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bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or
other laws or equitable principles in effect relating to creditors' rights and
remedies and general principles of equity.
Section 2.3 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in this Section
2.3 have been obtained and all filings and obligations described in this Section
2.3 have been made, and, except as set forth in Section 2.3 of the letter dated
the date hereof and delivered on the date hereof by Parent to the Company, which
letter relates to this Agreement and is designated the Parent Letter (the
"Parent Letter"), the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of Parent
or any of its Subsidiaries under, any provision of (i) the Articles of
Incorporation of Parent (the "Parent Charter") or the Bylaws of Parent (the
"Parent Bylaws") or the Sub Charter or Bylaws of Sub, (ii) any provision of the
comparable charter or organization documents of any of Parent's Subsidiaries,
(iii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, instrument, permit, concession, franchise or license applicable
to Parent or any of its Subsidiaries or (iv) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clauses (ii), (iii) or (iv) , any such violations, defaults, rights,
liens, security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent, materially impair
the ability of Parent or Sub to perform their respective obligations hereunder
or prevent the consummation of any of the transactions contemplated hereby. No
filing or registration with, or authorization, consent or approval of, any
domestic (federal and state), foreign or supranational court, commission,
governmental body, regulatory agency, authority or tribunal (a "Governmental
Entity") is required by or with respect to Parent or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by Parent or Sub or
is necessary for the consummation of the Merger and the other transactions
contemplated by this Agreement, except for (i) in connection or in compliance
with the Securities Exchange Act of 1934, as amended (together with the
applicable rules and regulations thereunder including without limitation, those
regulations adopted in accordance with the Xxxxxxxx-Xxxxx Act of 2002 ("SOX"),
the "Exchange Act"), (ii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with the
relevant authorities of other states in which the Company or any of its
Subsidiaries is qualified to do business, (iii) such filings, authorizations,
orders and approvals as may be required by state takeover laws (the "State
Takeover Approvals"), (iv) applicable requirements, if any, of state securities
or "blue sky" laws ("Blue Sky Laws") and NASDAQ, (v) as may be required under
foreign laws and (vi) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not, individually or in the aggregate, have a Material Adverse Effect
on Parent, materially impair the ability of Parent or Sub to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
Section 2.4 SEC Documents and Other Reports. Parent has filed all
required documents with the U.S. Securities and Exchange Commission (the "SEC")
since December 31,
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2002 (as they have been amended or supplemented since the time of their filing
to the date hereof and including all such forms, reports, schedules, statements
and documents filed with the SEC after the date of this Agreement, collectively
"Parent SEC Documents") in a timely manner. As of their respective dates, Parent
SEC Documents complied or will comply in all material respects with the
requirements of the Securities Act of 1933, as amended (together with the
applicable rules and regulations thereunder, including without limitation, those
regulations adopted in accordance with SOX, the "Securities Act"), or the
Exchange Act, as the case may be, to the extent applicable thereto, and, at the
respective times filed, none of Parent SEC Documents contained or will contain
any untrue statement of a material fact or omitted or will 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 consolidated financial statements (including, in each case, any
notes thereto) of Parent included in Parent SEC Documents complied or will
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared or will be prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto) and fairly
presented or will present in all material respects the consolidated financial
position of Parent and its consolidated Subsidiaries as at the respective dates
thereof and the consolidated results of their operations and their consolidated
cash flows for the periods then. Except as disclosed in Parent SEC Documents or
as required by generally accepted accounting principles, Parent has not, between
December 31, 2002 and the date hereof, made any material change in the
accounting practices or policies applied in the preparation of such financial
statements.
Section 2.5 Absence of Certain Changes or Events. Except as disclosed
in Parent SEC Documents filed with the SEC prior to the date of this Agreement
or as disclosed in Section 2.5 of Parent Letter, since December 31, 2002, (a)
Parent and its Subsidiaries have not incurred any liability or obligation
(indirect, direct or contingent) that, individually or in the aggregate, would
result in a Material Adverse Effect on Parent, (b) Parent and its Subsidiaries
have not sustained any loss or interference with their business or properties
from fire, flood, windstorm, accident or other calamity (whether or not covered
by insurance) that has had a Material Adverse Effect on Parent, (c) there has
been no dividend or distribution of any kind declared, paid or made by Parent on
any class of its stock and (d) there has been no Material Adverse Effect with
respect to Parent.
Section 2.6 Brokers. No broker, investment banker or other person,
other than Westdeutsche Landesbank Girozentrale, New York Branch, the fees and
expenses of which will be paid by Parent, is entitled to any broker's, finder's
or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent.
Section 2.7 Operations of Sub. Sub is a direct, wholly owned subsidiary
of Parent, was formed solely for the purpose of engaging in the transactions
contemplated hereby, and has engaged in no other business activities other than
those necessary to consummate the transaction described herein.
8
Section 2.8 No Need for Financing. Parent is in possession of sufficient
cash reserves to fund the Payment Fund in full and to redeem up to $620,000 of
the Private Placement Notes (as such term is defined in Section 3.4 of the
Company Letter) held by the individuals identified in Section 2.8 of the Company
Letter (the "Redeemable Placement Debt") without the need for additional
financing.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization, Standing and Power. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
carry on its business as now being conducted. Each Subsidiary of the Company is
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate power and
authority to carry on its business as now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power
or authority would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. The Company and each of its Subsidiaries are duly
qualified to do business, and are in good standing, in each jurisdiction where
the character of their properties owned or held under lease or the nature of
their activities makes such qualification necessary, except where the failure to
be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on the Company.
Section 3.2 Capital Structure.
(a) As of the date hereof, the authorized capital stock of the Company
consists of 41,000,000 shares of capital stock of which 40,000,000 are shares of
Company Common Stock, par value $.01 per share, and 1,000,000 are shares of
preferred stock, par value $.01 per share, of the Company. At the close of
business on March 17, 2003, (i) 11,551,033 shares of Company Common Stock were
issued and outstanding, all of which were validly issued, fully paid and
nonassessable and free of preemptive rights, (ii) no shares of Company Common
Stock were held in the treasury of the Company, (iii) 856,679 shares of Company
Common Stock were reserved for issuance pursuant to Options issued and
outstanding pursuant to the 1995 Long Term Incentive Plan (the "Incentive Plan")
and the Non-Employee Director Stock Option Plan (the "Director Plan") and (iv)
307,500 shares of Common Stock were reserved for issuance pursuant to the change
of control agreements (the "Change of Control Agreements") disclosed in Section
3.2 of the Company Letter, which do not vest unless a change of control, as
defined in the Change of Control Agreements, occurs. No shares of Company Common
Stock are reserved for issuance under issued and outstanding Options under the
Employee Stock Purchase Plan (the "Company Stock Purchase Plan"). The Company
Stock Purchase Plan, the Incentive Plan and the Director Plan are the only
benefit plans of the Company or its Subsidiaries under which any securities of
the Company are issuable. All Options will be fully vested and exercisable at or
prior to the Effective Time. As of the date of this Agreement, except (i) as set
forth above and (ii) for the issuance of shares of Company Common Stock upon the
exercise of (x) Options, and (y) the General Electric Capital Corporation
warrants to purchase an aggregate of 1,135,280
9
shares of Company Common Stock, no shares of capital stock or other voting
securities of the Company were issued, reserved for issuance or outstanding. As
of the date of this Agreement, except (i) as set forth above, and (ii) as set
forth in Section 3.2 of the letter dated the date hereof and delivered on the
date hereof by the Company to Parent, which letter relates to this Agreement and
is designated the "Company Letter," there are no options, warrants, calls,
rights, puts or agreements to which the Company or any of its Subsidiaries is a
party or by which any of them is bound obligating the Company or any of its
Subsidiaries to issue, deliver, sell or redeem, or cause to be issued,
delivered, sold or redeemed, any additional shares of capital stock (or other
voting securities or equity equivalents) of the Company or any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to grant,
extend or enter into any such option, warrant, call, right, put or agreement.
True, complete and correct copies of the Restated Certificate of Incorporation
of the Company (the "Company Charter") and the Bylaws of the Company, as amended
(the "Company Bylaws"), have been delivered to Parent.
(b) Each outstanding share of capital stock (or other voting security or
equity equivalent) of each Subsidiary of the Company is duly authorized, validly
issued, fully paid and nonassessable, and each such share (or other voting
security or equity equivalent) is owned by the Company or another Subsidiary of
the Company, free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, limitations on voting rights,
charges and other encumbrances of any nature whatsoever (collectively, "Liens")
other than such Liens which (individually or in the aggregate) would not have a
Material Adverse Effect on the Company. The Company does not have any
outstanding bonds, debentures, notes or other obligations the holders of which
have the right to vote (or convertible into or exercisable for securities having
the right to vote) with the stockholders of the Company on any matter. Exhibit
21 to the Company's Annual Report on Form 10-K for the year ended December 31,
2002 (the "Company Annual Report"), a true and complete copy of which has been
delivered to the Parent prior to the date hereof, is and will be when filed with
the SEC, a true, accurate and correct statement in all material respects of all
of the information required to be set forth therein by the regulations of the
SEC. The Company's current Subsidiaries are identified in Section 3.2(b) of the
Company Letter.
Section 3.3 Authority. On or prior to the date of this Agreement, the
Board of Directors of the Company has unanimously (i) declared the Merger
advisable and fair to and in the best interest of the Company and its
stockholders, (ii) approved and adopted this Agreement in accordance with the
DGCL, (iii) resolved to recommend the approval and adoption of this Agreement by
the Company's stockholders and (iv) directed that this Agreement be submitted to
the Company's stockholders for approval and adoption. The Company has all
requisite corporate power to enter into this Agreement and, subject to approval
by the stockholders of the Company of this Agreement, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company, subject to (x) approval of this Agreement by the
stockholders of the Company and (y) the filing of appropriate Merger documents
as required by the DGCL. This Agreement has been duly executed and delivered by
the Company and (assuming the valid authorization, execution and delivery of
this Agreement by Parent and Sub and the validity and binding effect of the
Agreement on Parent and Sub) constitutes the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
the
10
same may be limited by applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium, or other laws or equitable principles in effect
relating to creditors' rights and remedies and general principles of equity. The
filing of the Proxy Statement with the SEC has been duly authorized by the
Company's Board of Directors.
Section 3.4 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in this Section
3.4 have been obtained and all filings and obligations described in this Section
3.4 have been made, except as set forth in Section 3.4 of the Company Letter,
the execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated hereby and compliance with the provisions hereof
will not, result in any violation of, or default (with or without notice or
lapse of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or the loss of a material benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any of its
Subsidiaries under, any provision of (i) the Company Charter or the Company
Bylaws, (ii) any provision of the comparable charter or organization documents
of any of the Company's Subsidiaries, (iii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to the Company or any of its
Subsidiaries or (iv) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to the Company or any of its Subsidiaries or any of
their respective properties or assets, other than, in the case of clauses (ii) ,
(iii) or (iv) , any such violations, defaults, rights, liens, security
interests, charges or encumbrances that, individually or in the aggregate, would
not have a Material Adverse Effect on the Company, materially impair the ability
of the Company to perform its obligations hereunder or prevent the consummation
of any of the transactions contemplated hereby. No filing or registration with,
or authorization, consent or approval of, any Governmental Entity is required by
or with respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by the Company or is necessary for the
consummation of the Merger and the other transactions contemplated by this
Agreement except for (i) in connection or in compliance with the provisions of
the Exchange Act, (ii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with the
relevant authorities of other states in which the Company or any of its
Subsidiaries is qualified to do business, (iii) such filings, authorizations,
orders and approvals as may be required to obtain the State Takeover Approvals,
(iv) applicable requirements, if any, of Blue Sky Laws, (v) as may be required
under foreign laws and (vi) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not, individually or in the aggregate, have a Material Adverse Effect
on the Company, materially impair the ability of the Company to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby. Except as set forth in Section 3.4 of the Company Letter,
the Company and its Subsidiaries do not have outstanding, and have not arranged
any outstanding, "extensions of credit" to directors or executive officers
within the meaning of Section 402 of SOX.
Section 3.5 SEC Documents and Other Reports. On or prior to the date of
this Agreement, the Company has filed all required documents with the SEC since
December 31, 2002 (as they have been amended or supplemented since the time of
their filing to the date hereof and including all such forms, reports,
schedules, statements and documents filed with the SEC after the date of this
Agreement, collectively, the "Company SEC Documents") in a timely
11
manner. As of their respective dates, the Company SEC Documents complied or will
comply in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, to the extent applicable thereto, and, at
the respective times filed, none of the Company SEC Documents contained or will
contain any untrue statement of a material fact or omitted or will 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 consolidated financial statements (including, in each case,
any notes thereto) of the Company included in the Company SEC Documents complied
or will comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared or will be prepared in accordance with generally accepted
accounting principles (except, in the case of the unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented or will present in all material respects the consolidated
financial position of the Company and its consolidated Subsidiaries as at the
respective dates thereof and the consolidated results of their operations and
their consolidated cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year end audit adjustments and to any other
adjustments described therein). Except as disclosed in the Company SEC Documents
or as required by generally accepted accounting principles, the Company has not,
between December 31, 2002 and the date hereof, made any material change in the
accounting practices or policies applied in the preparation of financial
statements.
Section 3.6 Proxy Statement. None of the information to be included in
the Proxy Statement relating to the Company Stockholders Meeting (as defined in
Section 5.1) (the "Proxy Statement") will at the time of the mailing of the
Proxy Statement and at the time of the Company Stockholder Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act.
Section 3.7 Absence of Certain Changes or Events. Except as disclosed
in the Company SEC Documents filed with the SEC prior to the date of this
Agreement or as disclosed in Section 3.7 of the Company Letter, since December
31, 2002: (a) the Company and its Subsidiaries have not incurred any material
liability or obligation (indirect, direct or contingent) that would result in a
Material Adverse Effect on the Company; (b) the Company and its Subsidiaries
have not sustained any loss or interference with their business or properties
from fire, flood, windstorm, accident or other calamity (whether or not covered
by insurance) that has had a Material Adverse Effect on the Company; (c) there
has been no dividend or distribution of any kind declared, paid or made by the
Company on any class of its stock except for regular quarterly cash dividends to
shareholders of the Company; and (d) there has been no Material Adverse Effect
with respect to the Company.
Section 3.8 Permits and Compliance.
(a) Each of the Company and its Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates,
12
approvals and orders of any Governmental Entity necessary for the Company or any
of its Subsidiaries to own, lease and operate its properties or to carry on its
business as it is now being conducted (the "Company Permits"), except where the
failure to have any of the Company Permits would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. Neither the Company
nor any of its Subsidiaries is in violation of (i) its charter, bylaws or other
organizational documents, (ii) any applicable law, ordinance, administrative or
governmental rule or regulation or (iii) any order, decree or judgment of any
Governmental Entity having jurisdiction over the Company or any of its
Subsidiaries, except, in the case of clauses (i), (ii) and (iii), for any
violations that, individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
(b) Except as disclosed in the Company SEC Documents filed on or prior
to the date of this Agreement or as disclosed in Section 3.8 of the Company
Letter, as of the date hereof, there is no contract or agreement that is or was
required to be filed by the Company as a material contract pursuant to Item 601
of Regulation S-K under the Securities Act. Except as set forth in Section 3.8
of the Company Letter or disclosed in the Company SEC Documents, as of the date
hereof, neither the Company nor any of its Subsidiaries is a party to or bound
by any agreement evidencing, or guarantee relating to, indebtedness for borrowed
money, or which obligates the Company or any of its Subsidiaries to pay for
goods or services, to the extent the aggregate principal amount outstanding
thereunder with respect to indebtedness, or to the extent the total amount to be
paid with respect to goods or services, exceeds one percent of the aggregate
Merger Consideration to be paid pursuant to ss.1.5(c) hereof. Except as set
forth in Section 3.8 of the Company Letter, no event of default or event that,
but for the giving of notice or the lapse of time or both, would constitute an
event of default exists or, upon the consummation by the Company of the
transactions contemplated by this Agreement will exist under any indenture,
mortgage, loan agreement, note or other agreement or instrument for borrowed
money, any guarantee of any agreement or instrument for borrowed money or any
lease, contractual license or other agreement or instrument to which the Company
or any of its Subsidiaries is a party or by which the Company or any such
Subsidiary is bound or to which any of the properties, assets or operations of
the Company or any such Subsidiary is subject, other than any defaults that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
Section 3.9 Tax Matters.
(a) Except as set forth in Section 3.9 of the Company Letter, or in
the Company Annual Report, or as would not have a Material Adverse Effect on the
Company, the Company and its Subsidiaries (i) have timely filed all Tax Returns
that are required to have been filed by each of them with all appropriate
governmental agencies (and all such returns are true and correct and fairly
reflect in all material respects its operations for tax purposes); and (ii) have
timely paid all Taxes due and payable (other than Taxes the validity of which
are being contested in good faith by appropriate proceedings). The assessment of
any additional Taxes for periods for which returns have been filed is not
expected to exceed an amount that would have a Material Adverse Effect on the
Company and, to the Knowledge of the Company, there are no material unresolved
claims concerning the Company's or any Subsidiary's Tax liability. The Company's
and the Subsidiaries' Tax Returns have not been reviewed or audited by any
Taxing Authority. There is no action, suit, proceeding, investigation, audit,
claim or assessment pending or
13
threatened in writing with respect to the Company or any Subsidiary with respect
to a liability for Taxes or with respect to any Tax Return, except for those
which would not have a Material Adverse Effect on the Company. No liens exist
for Taxes (other than liens for Taxes not yet due and payable) with respect to
any of the assets or properties of the Company, except for those which would not
have a Material Adverse Effect on the Company. For purposes of this Agreement,
(i) "Taxes" shall mean all federal, state, local and foreign income, profits,
franchise, gross receipts, payroll, sales, employment, use, property, excise,
withholding and other taxes, duties or assessments, together with all interest,
penalties and additions imposed with respect to such amounts; (ii) "Income
Taxes" shall mean all franchise Taxes and all Taxes imposed on or measured by
net income or gross profits or gross receipts or capital (but excluding sales,
use, value added and property Taxes), together with all interest, penalties and
additions imposed with respect to such amounts; (iii) "Taxing Authority" shall
mean any domestic, foreign, federal, national, state, county or municipal or
other local government, any subdivision, agency, commission or authority
thereof, or any quasi-governmental body exercising tax regulatory authority and
(iv) "Tax Return" shall mean any return, report or similar statement (including
the attached schedules) required to be filed with respect to any Tax, including,
without limitation, any information return, claim for refund, amended return or
declaration of estimated Tax.
(b) Neither the Company nor any Subsidiary has outstanding agreements
or waivers extending, or having the effect of extending, the statute of
limitations with respect to the assessment or collection of any Tax. The Tax
Returns of the Company and the Subsidiaries with respect to federal income taxes
have been examined by the IRS, or the statute of limitations with respect to the
assessment or collection of the relevant Tax liability has expired, for all
taxable periods through and including the year ended December 31, 1995.
(c) Neither the Company nor any Subsidiary is a party to or bound by
any tax-sharing agreement, tax indemnity obligation or similar agreement,
arrangement or practice with respect to Taxes (including any advance pricing
agreement, closing agreement or other agreement relating to Taxes with any
Taxing Authority).
(d) Except as set forth in Section 3.9 of the Company Letter or as
would not have a Material Adverse Effect on the Company, the Company and its
Subsidiaries shall not be required to include in a taxable period ending after
the Closing Date any taxable income attributable to income that accrued in a
prior taxable period but was not recognized in any prior taxable period as a
result of the installment method of accounting, the cash method of accounting or
Section 481 of the Code or any comparable provision of state, local or foreign
Tax law, or for any other reason.
(e) Except as set forth in Section 3.9 of the Company Letter or as
would not have a Material Adverse Effect on the Company, neither the Company,
nor any of its Subsidiaries, has made with respect to the Company any consent
under Section 341 of the Code, no property of the Company is "tax exempt use
property" within the meaning of Section 168(h) of the Code, the Company is not a
party to any lease made pursuant to Section 168(f)(8) of the Internal Revenue
Code of 1954, and none of the assets of the Company is subject to a lease under
Section 7701(h) of the Code or under any predecessor Section thereof.
14
(f) Except as set forth in Section 3.9 of the Company Letter, no
currently effective power of attorney with respect to any Taxes has been
executed or filed with any Taxing Authority by or on behalf of the Company or
any Subsidiary of the Company.
(g) The Company and its Subsidiaries have complied in all material
respects with all applicable laws relating to the payment and withholding of
Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 3121 and
3402 of the Code or any comparable provision of any state, local or foreign
laws) and have, within the time and in the manner prescribed by applicable law,
withheld from and paid over to the proper Taxing Authorities all amounts
required to be so withheld and paid over under applicable laws.
(h) Any deficiency resulting from any audit or examination relating to
Taxes of the Company or any Subsidiary by any Taxing Authority has been timely
paid.
(i) Section 3.9 of the Company Letter lists all jurisdictions in which
the Company and any Subsidiary currently files Tax Returns. No jurisdiction
where the Company or any Subsidiary does not file a Tax Return has made a claim
that the Company or any Subsidiary is required to file a Tax Return for such
jurisdiction.
(j) Except as set forth in Section 3.9 of the Company Letter, neither
the Company nor any Subsidiary has requested an extension of time within which
to file any Tax Return with respect to any taxable period or year for which such
Tax Return has not since been filed.
(k) Neither the Company nor any Subsidiary is or has been a "United
States Real Property Holding Corporation" within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code and Parent or Merger Subsidiary is not required to
withhold Tax on the purchase of Company Common Shares pursuant to the Merger by
reason of Section 1445 of the Code.
(l) Except as set forth in Section 3.9 of the Company Letter or as
would not have a Material Adverse Effect on the Company, neither the Company nor
any Subsidiary has made any payment, is obligated to make any payment, or is a
party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Section 162(m) or Section
280G of the Code.
Section 3.10 Actions and Proceedings. Except as set forth in the
Company SEC Documents filed prior to the date of this Agreement and except as
set forth in Section 3.10 of the Company Letter, there are no outstanding
orders, judgments, injunctions, awards or decrees of any Governmental Entity
against or involving the Company or any of its Subsidiaries, or against or
involving any of the present or former directors, officers, employees of the
Company or any of its Subsidiaries, as such, or any of its or their properties,
assets or business or any Benefit Plan (as hereinafter defined) that,
individually or in the aggregate, would have a Material Adverse Effect on the
Company or materially impair the ability of the Company to perform its
obligations hereunder. Except as set forth in the Company SEC Documents filed
prior to the date of this Agreement or in Section 3.10 of the Company Letter,
there are no actions, suits or claims or legal, administrative or arbitration
proceedings or investigations pending or, to the Knowledge of the Company,
threatened against or involving the Company or any of its Subsidiaries or any of
15
its or their present or former directors, officers, employees, as such, or any
of its or their properties, assets or business that, individually or in the
aggregate, would have a Material Adverse Effect on the Company or materially
impair the ability of the Company to perform its obligations hereunder. As of
the date hereof, there are no actions, suits, or other litigation, legal or
administrative proceedings or governmental investigations pending or, to the
Knowledge of the Company, threatened against the Company or any of its
Subsidiaries or any of its or their present or former officers, directors,
employees or any of its or their properties, assets or business, in each case
relating to the transactions contemplated by this Agreement. Section 3.10 of the
Company Letter sets forth a list of all outstanding litigation to which the
Company or any of its Subsidiaries is a party as of the date hereof. For
purposes of this Agreement, "Knowledge of the Company" means the actual
knowledge of the individuals identified on Section 3.10 of the Company Letter.
Section 3.11 Employees; Employee Benefits.
(a) Complete and correct copies of all material written agreements
with or concerning all current employees of the Company and its Subsidiaries
(the "Employees"), including, without limitation, union and collective
bargaining agreements, and all material employment policies, and all amendments
and supplements thereto, have been delivered to Parent, and a list of all such
agreements and policies is set forth on Section 3.11(a) of the Company Letter.
The Company does not currently offer or provide retiree health and other
insurance benefits to former Employees of the Company and its Subsidiaries
("Former Employees"), or their dependents, survivors or beneficiaries, and the
Company has no liabilities (contingent or otherwise) with respect thereto. There
are no outstanding loans from the Company to any Employees or Former Employees.
Except as set forth on Section 3.11(a) of the Company Letter, since January 1,
2003, the Company and its Subsidiaries have not, in any material respect taken
as a whole, (i) except in the ordinary course of business and consistent with
past practice, increased the salary or other compensation payable or to become
payable to or for the benefit of any of the Employees, (ii) provided any of the
Employees with any increased security or tenure of employment, (iii) increased
the amounts payable to any of the Employees upon the termination of any such
person's employment or (iv) adopted, increased, augmented or improved benefits
granted to or for the benefit of any of the Employees or Former Employees under
any Benefit Plan (as hereinafter defined). All individuals who, in the last 24
months, have performed services for the Company or its Subsidiaries as a
consultant or independent contractor ("Non-Employees") are independent
contractors and are not employees of the Company or its Subsidiaries and the
Company has no material liability to or with respect to such Non-Employees for
the withholding or payment of any income or social security taxes, the provision
of benefits under any Benefit Plans (as hereinafter defined) or for any other
charges, taxes or benefits with respect thereto.
(b) The Company has complied in all material respects with all laws,
statutes, rules and regulations applicable with respect to employees, terms and
conditions of employment and wages and hours in each of the jurisdictions in
which it operates and/or does business, and there have been no claims made or,
to the Knowledge of the Company, threatened thereunder against the Company
arising out to of relating to or alleging any violation of any of the foregoing.
The Company has complied in all material respects with the employment
eligibility verification form requirements under the Immigration Reform Control
Act, as amended
16
("IRCA"), with respect to Employees and with the paperwork provisions and
anti-discrimination provisions of IRCA and has obtained and maintained the
employee records and I-9 forms with respect to the Employees in proper order as
required by law. To the Knowledge of Company, the Company is not currently
employing any Employees who are not citizens of the United States and who are
not authorized to work in the United States.
(c) Section 3.11(c) of the Company Letter sets forth a list of each
defined benefit and defined contribution plan, stock ownership plan, executive
compensation program or arrangement, bonus plan, incentive compensation plan or
arrangement, deferred compensation agreement or arrangement, supplemental
retirement plan or arrangement, vacation pay, sickness, disability or death
benefit plan (whether provided through insurance, on a funded or unfunded basis
or otherwise), medical or life insurance plan, providing benefits to any
Employee, retiree or Former Employee or any of their dependents, survivors or
beneficiaries, employee stock option or stock purchase plan, severance pay,
termination or salary continuation plan, and each other employee benefit plan,
program or arrangement, including, without limitation, each "employee benefit
plan" within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), which is maintained by the Company
for the benefit of or relating to any of the Employees or to any Former
Employees or their dependents, survivors or beneficiaries, whether or not
legally binding, and for which the Company could reasonably have any material
liabilities, all of which are hereinafter referred to as the "Benefit Plans."
Except as set forth in Section 3.11(c) of the Company Letter, neither Parent nor
the Company will incur any material liability under any severance agreement,
deferred compensation agreement, employment agreement, similar agreement or
Benefit Plan solely as a result of the consummation of the transactions
contemplated by this Agreement.
(d) Except as set forth on Section 3.11(d) of the Company Letter or as
would not otherwise have a Material Adverse Effect on the Company, each Benefit
Plan which is an "employee pension benefit plan" (as defined in Section 3(2) of
ERISA) meets the requirements of Section 401(a) of the Code; the trust, if any,
forming part of such plan is exempt from U.S. Federal Income Tax under Section
501(a) of the Code; a favorable determination letter has been issued by the
Internal Revenue Service (the "IRS") with respect to each plan and trust and
each amendment thereto, including all amendments required under the Uruguay
Round Agreement Act of 1994, the Uniformed Services Employment and Reemployment
Rights Act of 1994, the Small Business Job Protection Act of 1996 and the
Taxpayer Relief Act of 1997; and since the date of such determination letter
there have been no circumstances which are likely to adversely affect the
qualification of such plan. No Benefit Plan is a "voluntary employees
beneficiary association" (within the meaning of Section 501(c)(9) of the Code)
or a "multiple employer welfare arrangement" (within the meaning of Section
3(40) of ERISA) and there have been no other "welfare benefit funds" (within the
meaning of Section 419 of the Code) relating to Employees or Former Employees.
No event or condition exists with respect to any Benefit Plan that could subject
the Company to any material Tax under Section 4980B of the Code. With respect to
each Benefit Plan, the Company has heretofore delivered to Parent complete and
correct copies of the following documents, where applicable: (i) the three most
recent annual report (Form 5500 series), together with schedules, as required,
filed with the IRS, and any financial statements and opinions required by
Section 103(a)(3) of ERISA, (ii) the most recent determination letter issued by
the IRS, (iii) the most recent summary plan description and all modifications
thereof, (iv) the text of the Benefit Plan and of any trust, insurance or
annuity
17
contracts maintained in connection therewith, (v) the most recent actuarial
report, if any, relating to the Benefit Plan and (vi) the most recent actuarial
valuation, study or estimate of any retiree medical and life insurance benefits
plan or supplemental retirement benefit plan.
(e) The Company does not, and any corporation or other trade or
business under common control with the Company (as determined pursuant to
Section 414(b) or (c) of the Code) (an "ERISA Affiliate") does not, maintain or
contribute to or, to the Knowledge of the Company, in any way directly or
indirectly have any liability (whether contingent or otherwise) with respect to,
any "multiemployer plan," within the meaning of Section 3(37) or 4001(a)(3) of
ERISA. Except as otherwise set forth on Section 3.11(e) of the Company Letter,
no Benefit Plan or plan of any ERISA Affiliate is subject to Title IV of ERISA.
All contributions required to be made to or with respect to each Benefit Plan
with respect to the service of Employees or Former Employees prior to the date
hereof have been made or have been accrued for in the books and records of the
Company for all periods through the date hereof.
(f) Except as set forth on Section 3.11(f) of the Company Letter or as
would not otherwise have a Material Adverse Effect on the Company, none of the
Benefit Plans has been subject to a "reportable event," within the meaning of
Section 4043 of ERISA (whether or not the reporting for which has been waived),
within the 24-month period ended on the date hereof; there have been no
"prohibited transactions" within the meaning of Section 4975 of the Code or Part
4 of Subtitle B of Title I of ERISA in connection with any of the Benefit Plans
that, assuming the taxable period of such transaction expired as of the date
hereof, could subject the Company or any ERISA Affiliate to a Tax or penalty
imposed by either Section 4975 of the Code or Section 502(i) of ERISA; none of
the Benefit Plans which is subject to Section 412 of the Code has incurred any
"accumulated funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code and the Company is not subject to a lien under Section
412(n) of the Code; each Benefit Plan has, in all material respects, been
administered to date in accordance with the applicable provisions of ERISA, the
Code and other applicable law and with the terms and provisions of all
documents, contracts or agreements pursuant to which such Benefit Plan is
maintained; there has been no correction of any defects with respect to a
Benefit Plan subject to Section 401(a) of the Code or its operation pursuant to
any procedures established, or program permitted, by the IRS or otherwise within
the 36-month period prior hereto; all reports and information required to be
filed with the Department of Labor, the IRS or the PBGC with respect to any
Benefit Plan have been timely filed or delivered; there is no arbitration, claim
or suit pending or, to the Knowledge of the Company, threatened involving a
Benefit Plan (other than routine claims for benefits), and, to the Knowledge of
the Company, there is no basis for such a claim; none of the Benefit Plans nor
any fiduciary thereof has been, to the Knowledge of the Company, the direct or
indirect subject of an order or investigation or examination by a governmental
or quasi-governmental agency and there are no matters pending before the IRS,
the Department of Labor or any other governmental agency with respect to a
Benefit Plan; and there has not been and will be no "parachute payment" (as
defined in Section 280G(b)(2) of the Code) to any of the Employees prior to the
Closing or as a result of the transactions contemplated by this Agreement.
Section 3.12 Labor Matters. As of the date hereof, neither the Company
nor any of its Subsidiaries is a party to any collective bargaining agreement or
labor contract. No labor union or other collective bargaining unit represents or
has ever represented any of the Employees
18
in connection with their employment with the Company. There is no labor strike,
dispute, slowdown, work stoppage, picketing, filed grievance, unfair labor
practice charge, investigation, complaint or other proceeding pending or, to the
Knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries which may interfere with the respective business activities of
the Company, except where such dispute, strike, slowdown, work stoppage,
picketing, filed grievance, unfair labor practice charge, investigation,
complaint or other proceeding would not have a Material Adverse Effect on the
Company. No consent of any labor union or other collective bargaining unit
representing Employees is required to consummate the transactions contemplated
by this Agreement.
Section 3.13 Contract Receivables. The contract receivables shown on
the Company's balance sheet as of December 31, 2002 included in the Company
Annual Report, except for write-offs in amounts reserved against in such
financial statements, or thereafter acquired, subject to reserves created in the
ordinary course of business on a basis consistent with the periods covered in
such financial statements, (a) are collectible in all material respects and (b)
in all material respects and taken as a whole, (i) are valid and enforceable,
(ii) arose from bona-fide sales to third parties in ordinary course of business,
and (iii) are not subject to any counterclaims or setoffs and have not been
encumbered or sold, except as set forth in Section 3.14 of the Company Letter
and except for contract receivables sold in the Company's securitization program
(including warehouse financing arrangements.)
Section 3.14 Title of Property and Assets. Except as set forth in
Section 3.14 of the Company Letter or as would not otherwise have a Material
Adverse Effect on the Company, the Company or its Subsidiaries have good title
to, or a valid leasehold interest in or license to use, the property and assets
(real, personal, mixed, tangible and intangible) reflected in Company's Annual
Report or acquired since the date thereof, free and clear of all Liens, except
such Liens which do not materially impair Company's or any of its Subsidiary's
ownership or use of such property or assets. With respect to the property and
assets it leases, except as would otherwise not have a Material Adverse Effect
on Company, Company and its Subsidiaries are in compliance with such leases, all
leases to which Company or any of its Subsidiaries are a party are in full force
and effect and constitute valid and binding obligations of Company or the
Subsidiary, as the case may be. Except as would otherwise not have a Material
Adverse Effect on Company, Company's and its Subsidiaries' assets constitute all
of the properties, interests, assets and rights (real, personal, mixed, tangible
and intangible) held for use or used in connection with the business and
operations of Company.
Section 3.15 Real Property.
(a) Set forth in Section 3.15 of the Company Letter, is a list of all
material leases, subleases, licenses and other agreements (collectively, the
"Real Property Leases") under which the Company or any Subsidiary uses or
occupies or has the right to use or occupy, now or in the future, any real
property (the "Leased Real Property").
(b) Except as provided in Section 3.15 of the Company Letter, neither
the Company nor any Subsidiary owns or holds, or is obligated under or a party
to, any option, right of first refusal or other contractual right to purchase
any Leased Real Property or any portion thereof or interest therein.
19
(c) Except as provided in Section 3.15 of the Company Letter, neither
the Company nor any Subsidiary owns any real property.
(d) Except as set forth in Section 3.15 of the Company Letter, as to
all of the Real Property Leases, except as would otherwise not have a Material
Adverse Effect on the Company, (i) they are enforceable in accordance with their
respective terms and constitute valid and binding obligations of the respective
parties thereto, (ii) there have not been and there currently are not any
material defaults thereunder by the Company or any Subsidiary or, to the
Knowledge of the Company, any other party thereto, (iii) no event has occurred
which (whether with or without notice, lapse of time or the happening or
occurrence of any other event) would constitute a default thereunder entitling
the landlord thereunder to terminate any of the Real Property Leases, (iv) all
rent and additional rent due and payable thereunder has been paid in full
through the date hereof, (v) no waiver, indulgence or postponement of the
Company's or any Subsidiary's obligations thereunder has been granted, (vi)
there are no oral agreements with respect to any of the Real Property Leases,
(vii) the continuation, validity and effectiveness of all of the Real Property
Leases under the current material terms thereof will in no way be affected by
the Merger, (viii) they may be assigned by the Company or any Subsidiary without
the consent or approval of any other person or entity, and (ix) there are no
material disputes, oral agreements or forbearance programs in effect as to any
of the Real Property Leases.
Section 3.16 Insurance. Section 3.16 of the Company Letter contains a
list, which is true and complete in all material respects, of all policies of
casualty, liability, theft, fidelity, life and other forms of insurance held by
Company or any of its Subsidiaries. All such insurance policies are in the name
of Company or its Subsidiaries, and all premiums with respect to such policies
which are due prior to the date hereof have been paid. All such policies are in
full force and effect, and neither Company nor any of its Subsidiaries has
received notice of cancellation or termination of any policy. To the Knowledge
of the Company, since December 31, 2000, neither Company nor any of its
Subsidiaries has been denied or had revoked or rescinded any policy of
insurance, nor borrowed against any such policies. Except as set forth in
Section 3.16 of the Company Letter, no material claim under any such policy is
pending as of the date hereof.
Section 3.17 Business Relations. Neither the Company nor any of its
Subsidiaries has received any written notice from any customer, consultant,
contractor, supplier or vendor indicating that it intends to terminate or modify
its business relationship with Company or any of its Subsidiaries, which
termination or modification would have a Material Adverse Effect on the Company.
Section 3.18 Retail Installment Contracts. The retail installment
contracts held by Company or any of its Subsidiaries are valid and enforceable
in accordance with their terms except where the failure of such retail
installment contracts to be valid and enforceable would not have a Material
Adverse Effect on the Company.
Section 3.19 Opinion of Financial Advisor. The Company has received
the written opinion of Xxxxxxxx Xxxxx Xxxxxx & Xxxxx, dated the date hereof, to
the effect that, as of the date hereof, the Merger Consideration is fair to the
Company's stockholders from a financial point of view.
20
Section 3.20 Required Vote of Company Stockholders. The affirmative
vote of the holders of a majority of the outstanding shares of Company Common
Stock is required to approve the Merger and adopt this Agreement. No other vote
of the securityholders of the Company is required by law, the Company Charter or
the Company Bylaws or otherwise in order for the Company to consummate the
Merger and the transactions contemplated hereby.
Section 3.21 Brokers. No broker, investment banker or other person,
other than Xxxxxxxx Xxxxx Xxxxxx & Xxxxx, the fees and expenses of which will be
paid as provided herein, is entitled to any broker's, finder's or other similar
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company. Section
3.21 of the Company Letter contains disclosure relating to the Company's now
terminated relationship with the Company's former investment banker.
ARTICLE 4
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger. Except as
expressly permitted by clauses (i) through (xiii) of this Section 4.1(a), during
the period from the date of this Agreement through the Effective Time, the
Company shall, and shall cause each of its Subsidiaries to, in all material
respects carry on its business in the ordinary course of its business as
currently conducted and, to the extent consistent therewith, use reasonable best
efforts to preserve intact its current business organizations, keep available
the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it. Without limiting the generality of the foregoing, and, except as otherwise
contemplated by this Agreement, or as set forth in Section 4.1 of the Company
Letter, the Company shall not, and shall not permit any of its Subsidiaries to,
without the prior written consent of Parent, which consent shall not be
unreasonably withheld or delayed:
(i) (A ) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, or otherwise
make any payments to its stockholders in their capacity as such other than
dividends and distributions by any Subsidiary to its parent, (B) split, combine
or reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (C) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any Subsidiary or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities, equity equivalents or
convertible securities, other than (a) the issuance of shares of Company Common
Stock upon the exercise of Company Stock Options and (b) the issuance of Options
exercisable for Company Common Stock under the Company Stock Purchase Plan, the
Incentive Plan, the Director Plan (whether or not subject to subsequent approval
of Parent's stockholders);
21
(iii) amend its charter or bylaws or other comparable charter or
organizational documents;
(iv) acquire or agree to acquire (a) by merging or
consolidating with, or by purchasing a substantial portion of the assets of or
equity in, or by any other manner, any business or any corporation, limited
liability company, partnership, association or other business organization or
division thereof or (b) any assets that are material, individually or in the
aggregate, to the Company and its Subsidiaries taken as a whole other than
retail installment contracts purchased in the ordinary course of business;
(v) sell, lease, license, mortgage, encumber or otherwise
dispose of material properties or assets other than in connection with sales in
the ordinary course of business to Westdeutsche Landesbank Girozentrale, New
York Branch, pursuant to the Company's warehouse facility or in connection with
the Company's securitization program;
(vi) [intentionally deleted];
(vii) incur any indebtedness for borrowed money, guarantee any
such indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other person, other than (a) indebtedness or
guarantees in the ordinary course of business, (b) loans, advances, capital
contributions and other investments between the Company and any Subsidiary or
between Subsidiaries and (c) advances to employees in the ordinary course of
business;
(viii) enter into, adopt or amend in any material respect any
severance plan, agreement or arrangement, Benefit Plan or employment or
consulting agreement, except as required by applicable law or except in the
ordinary course of business;
(ix) increase the compensation (including bonuses, profit
sharing and pension benefits) payable or to become payable to its Employees, or
pay any bonuses to its Employees other than as set forth in Section 4.1 of the
Company Letter;
(x) change the Company's independent public accountants or
make any change in accounting methods or policies of the Company except as
required by FASB;
(xi) make any tax election not in the ordinary course of
business;
(xii) change, in any material respect, any of the Company's
credit policies or hedging strategies; or
(xiii) agree or commit to do any of the foregoing.
Section 4.2 No Solicitation by the Company.
(a) From the date hereof until the earlier of the Effective Time or the
date on which this Agreement is terminated in accordance with the terms hereof,
the Company shall not, nor shall it permit any of its officers, directors or
employees or any investment banker, financial advisor, attorney, accountant,
agent or other representative retained by it or by any of its
22
Subsidiaries to, directly or indirectly through any representative or otherwise
(i) solicit or initiate the submission of, any Takeover Proposal involving the
Company (as hereafter defined), (ii) enter into any agreement with respect to
any Takeover Proposal involving the Company (other than a confidentiality
agreement to the extent information is permitted to be furnished to any person
pursuant to this Section 4.2(a)), or (iii) participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, or take any other action to facilitate knowingly any inquiries or the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
Takeover Proposal involving the Company; provided, however, that, nothing
contained in this Agreement shall prevent the Company or its Board of Directors
from (i) complying with Rules 14-d(9) and 14-e(2) under the Exchange Act or
publicly disclosing the existence of a Takeover Proposal involving the Company
to the extent required by applicable law or (ii) furnishing nonpublic
information to, or entering into discussions or negotiations with, any person or
entity in connection with an unsolicited bona fide Takeover Proposal involving
the Company by such person or entity, if, (x) the failure to take such action
would, in the good faith judgment of the Board of Directors of the Company,
taking into consideration the advice of corporate counsel of the Company, likely
violate the fiduciary duties of the Board of Directors of the Company to the
Company's stockholders under applicable law, and (y) prior to furnishing such
nonpublic information to, or entering into discussions or negotiations with,
such person or entity, such Board of Directors receives from such person or
entity an executed confidentiality agreement with provisions not less favorable
to the Company than those contained in the Confidentiality Agreement (as defined
below). For purposes of this Agreement, "Takeover Proposal involving the
Company" means any proposal by any third party for a merger, consolidation or
other business combination involving the Company or any of its Subsidiaries or
any proposal or offer to acquire in any manner, directly or indirectly, a 25% or
greater equity interest in, 25% or more of the voting securities of, or 25% or
more of the assets of, the Company or any of its Subsidiaries, other than the
transactions contemplated by this Agreement and other than any warehouse
facility or securitization related transaction.
(b) The Company shall advise Parent as promptly as practicable of (i) any
Takeover Proposal involving the Company, and (ii) the material terms of such
Takeover Proposal involving the Company. The Company will keep Parent informed
of any material changes in such terms.
ARTICLE 5
ADDITIONAL AGREEMENTS
Section 5.1 Company Stockholder Meeting. The Company will, as soon as
practicable following the date of this Agreement, duly call, give notice of,
convene and, hold a meeting of stockholders (the "Company Stockholder Meeting")
for the purpose of considering the approval of this Agreement. The Company will,
through its Board of Directors, recommend to its stockholders approval of this
Agreement, shall use all reasonable efforts to solicit such approval by its
stockholders and shall not withdraw or modify, or propose to withdraw or modify
in a manner adverse to Parent, such recommendation, except if in the good faith
judgment of the Company's Board of Directors, taking into consideration the
advice of corporate counsel of the Company, the making of, or the failure to
withdraw or modify, such recommendation would violate the fiduciary duties of
such Board of Directors to the Company's stockholders under
23
applicable law. The Company agrees to submit the Merger Agreement to its
stockholders for approval whether or not the Board of Directors of the Company
determines at any time subsequent to the date hereof that the Merger Agreement
is no longer advisable and recommends that the stockholders of the Company
reject it.
Section 5.2 Preparation of the Proxy Statement. The Company shall
promptly prepare and file the Proxy Statement with the SEC. The Company shall
use its reasonable best efforts to mail the Proxy Statement to its stockholders
promptly as practicable thereafter.
Section 5.3 Access to Information. Subject to currently existing
contractual and legal restrictions applicable to the Company or any of its
Subsidiaries, the Company shall, and shall cause each of its Subsidiaries to,
afford to the accountants, counsel, financial advisors and other representatives
of Parent reasonable access to, and permit them to make such inspections as they
may reasonably require of, during normal business hours during the period from
the date of this Agreement through the Effective Time, all of its properties,
books, contracts, commitments and records (including, without limitation, the
work papers of independent accountants, if available and subject to the consent
of such independent accountants) and, during such period, the Company shall, and
shall cause each of its Subsidiaries to, furnish promptly to Parent (i) a copy
of each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of federal or state securities
laws and (ii) all other information concerning its business, properties and
personnel as the other may reasonably request. Without limiting the generality
of the foregoing, the Company shall afford Parent's representatives reasonable
access, upon reasonable prior notice during normal business hours, the
opportunity to investigate without limitation, at Parent's sole expense, all the
books and records relating to the Company's retail installment loan contracts
and other loan agreements held by the Company and its Subsidiaries, to the
extent Parent shall deem necessary or desirable. All information obtained
pursuant to this Section 5.3 shall be kept confidential in accordance with the
Confidentiality Agreement, dated February 21, 2003 between Parent and the
Company (the "Confidentiality Agreement").
Section 5.4 Certain Payments, Fees and Expenses.
(a) Except as provided in this Section 5.4 and Section 5.8, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby including, without
limitation, the fees and disbursements of counsel and accountants and all
financing commitment fees, shall be paid by the party incurring such costs and
expenses.
(b) (i) Notwithstanding any provision in this Agreement to the contrary,
if this Agreement is terminated (A) by the Company or Parent pursuant to Section
7.1(e), (B) by the Company pursuant to Section 7.1(g), or (C) by Parent pursuant
to Section 7.1(h), 7.1(i) or Section 7.1(j) then, in each case the Company shall
reimburse Parent upon demand for all reasonable documented out-of-pocket fees
and expenses incurred or paid by or on behalf of Parent or any Affiliate (as
hereinafter defined) of Parent in connection with this Agreement and the
transactions contemplated herein, including all fees and expenses of counsel,
investment banking firms, lenders, accountants and consultants; provided,
however, that the Company shall not be obligated to make payments pursuant to
this Section 5.4(b)(i) in excess of $500,000 in the
24
aggregate. As used herein, "Affiliate" shall have the meaning set forth in Rule
405 under the Securities Act.
(ii) Notwithstanding any provision in this Agreement to the
contrary, if this Agreement is terminated by the Company or Parent pursuant to
Section 7.1(f), Parent shall reimburse the Company upon demand for all
reasonable out-of-pocket fees and expenses incurred or paid by or on behalf of
the Company or any Affiliate of the Company in connection with this Agreement
and the transactions contemplated herein, including all fees and expenses of
counsel, investment banking firms, lenders, accountants and consultants;
provided, that Parent shall not be obligated to make payments pursuant to this
Section 5.4(b)(ii) in excess of $500,000 in the aggregate.
(c) Notwithstanding any provision in this Agreement to the contrary, if
this Agreement is terminated by (i) by the Company pursuant to Section 7.1(g) or
(ii) by Parent pursuant to Section 7.1(h), then, in each case, the Company shall
in addition to any obligation under Section 5.4(b)(i) pay to Parent a fee of
$650,000 less the amount paid pursuant to Section 5.4(b)(i) in cash, such
payment to be made promptly, but in no event later than, the third day following
such termination.
Section 5.5 Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including, but not limited to: (i) obtaining all necessary actions or
nonactions, waivers, consents and approvals from all Governmental Entities and
the making of all necessary registrations and filings (including filings with
Governmental Entities) and taking all reasonable steps (including, without
limitation, divesting or holding separate any assets or agreeing to any
governmental conditions), as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any Governmental Entity (including
those in connection with State Takeover Approvals); (ii) obtaining all necessary
consents, approvals or waivers from third parties; (iii) defending any lawsuits
or other legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated hereby, including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed; and (iv) the execution and
delivery of any additional instruments necessary to consummate the transactions
contemplated by this Agreement. No party to this Agreement shall consent to any
voluntary delay of the consummation of the Merger at the behest of any
Governmental Entity without the consent of the other parties to this Agreement,
which consent shall not be unreasonably withheld.
(b) Each party shall use all reasonable best efforts to not take any
action, or enter into any transaction, which would cause any of its
representations or warranties contained in this Agreement to be untrue in any
material respect or result in a material breach of any covenant made by it in
this Agreement or which could reasonably be expected to impede, interfere with,
prevent or delay in any material respect the Merger.
25
Section 5.6 Public Announcements. Parent and the Company will not issue
any press release with respect to the transactions contemplated by this
Agreement or otherwise issue any written public statements with respect to such
transactions without prior consultation with the other party, except as may be
required by applicable law or by obligations pursuant to any listing agreement
with any national securities exchange or the rules of NASDAQ.
Section 5.7 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby,
Parent and the Company and their respective Boards of Directors shall use their
reasonable best efforts to grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby and thereby may be
consummated as promptly as practicable on the terms contemplated hereby and
thereby and otherwise act to minimize the effects of any such statute or
regulation on the transactions contemplated hereby and thereby.
Section 5.8 Indemnification; Directors and Officers Insurance.
(a) From and after the Effective Time, Parent shall, and shall cause the
Surviving Corporation to, indemnify and hold harmless all past and present
officers, directors, employees and agents of the Company and of its Subsidiaries
to the full extent such persons may be indemnified by the Company, for acts or
omissions occurring at or prior to the Effective Time, pursuant to the Company
Charter, the Company Bylaws, applicable laws (common law and statutory law) and
any existing agreements.
(b) On or prior to the Effective Time, the Company or Parent shall
purchase, or shall cause the Surviving Corporation to purchase, a 6-year "tail"
on the Company's current directors and officers insurance and indemnification
policy (the "D&O Insurance Tail"); provided, however, that the Company, Parent
and the Surviving Corporation shall not be required to pay more than $300,000
for the D&O Insurance Tail.
(c) The provisions of this Section 5.8 are intended for the benefit of, and
shall be enforceable by, each person entitled to indemnification under this
Section 5.8, his or her heirs and his or her personal representatives.
Section 5.9 Notification of Certain Matters. Parent shall use its
reasonable best efforts to give prompt notice to the Company, and the Company
shall use its reasonable best efforts to give prompt notice to Parent, of: (i)
the occurrence, or nonoccurrence, of any event of which it is aware and which
would be reasonably likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect, or (ii) any
failure of Parent or the Company, as the case may be, to comply in a timely
manner with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.9 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
Section 5.10 Employee Benefit Plans and Agreements.
(a) For a period of six months following the Effective Time, Parent shall
cause the Surviving Corporation to provide employees of the Company or any of
its Subsidiaries who
26
continue employment after the Effective Time with the Surviving Corporation
(including those on vacation, authorized leave of absence or short-term
disability who return to active employment within six months after the Effective
Time) (the "Retained Employees") with employee benefit plans that are no less
favorable, in the aggregate, than the employee benefit plans provided to the
Retained Employees immediately prior to the Effective Time.
(b) Except as otherwise provided in this Section, nothing in this
Agreement shall be interpreted as limiting the power of the Surviving
Corporation to amend or terminate any particular Benefit Plan or any other
particular employee benefit plan, program, agreement or policy or as requiring
the Surviving Corporation to offer to continue the employment of any employee
(other than as required by the terms of any written employment contract),
provided, however, that no such termination or amendment may impair the rights
of any person with respect to benefits or any other payments already accrued as
of the time of such termination or amendment without the consent of such person.
(c) Parent shall honor or cause to be honored by the Company, the
Surviving Corporation and their Subsidiaries, the Change of Control Agreements,
the consulting agreement with Xxxxxx X. Xxxxx Xx. (the "Xxxxx Consulting
Agreement"), all bonus agreements, severance agreements and any other agreements
with the persons who are directors, officers and employees of the Company and
its Subsidiaries. The terms of these arrangements are to be honored as to these
individuals in addition to the other provisions of this Section 5.10
(d) Subject to the approval of an insurer of any applicable welfare
benefit plan, Parent shall, or shall cause the Company and the Surviving
Corporation to, (i) waive all limitations as to preexisting conditions,
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Retained Employees and former employees of the
Company and its Subsidiaries under any welfare or fringe benefit plan in which
such employees and former employees may be eligible to participate after the
Effective Time, other than limitations or waiting periods that are in effect
with respect to such employees and that have not been satisfied under the
corresponding welfare or fringe benefit plan maintained by the Company for the
Retained Employees and former employees prior to the Effective Time, and (ii)
provide each Retained Employee and former employee with credit under any welfare
plans in which such employee or former employee becomes eligible to participate
after the Effective Time for any co-payments and deductibles paid by such
Retained Employee or former employee for the then current plan year under the
corresponding welfare plans maintained by the Company prior to the Effective
Time.
Section 5.11 Estoppel Certificates. The Company shall use commercially
reasonable efforts to obtain estoppel certificates reasonably satisfactory to
Parent from the landlords of the Company and its Subsidiaries as they exist as
of the Effective Time.
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ARTICLE 6
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been duly approved
by the requisite vote of stockholders of the Company in accordance with
applicable law and the Company Charter and Company Bylaws.
(b) Authorizations, Consents, Waivers and Extensions. The following
documents shall have been received: (i) Waivers and Consents to the Merger
executed by each of Westside Funding Corporation, NM Rothschild & Sons, Ltd.,
Royal Sun Alliance, and Radian Asset Assurance, Inc.; (ii) Extension and Warrant
Termination Agreement executed by General Electric Capital Corporation; (iii)
Consent to the Merger executed by Xxxxxx Xxxxxxxxx Capital Partners II, L.P.;
and (iv) stock option cancellation agreements with respect to substantially all
underwater options.
(c) Redeemable Placement Debt. The $620,000 of Redeemable Placement
Debt shall have been paid.
(d) No Order. No court or other Governmental Entity having jurisdiction
over the Company or Parent, or any of their respective Subsidiaries, shall have
enacted, issued, promulgated, enforced or entered any law, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is then in effect and has the effect of making
the Merger or any of the transactions contemplated hereby illegal.
(e) Litigation. There shall not be instituted or pending any suit,
action or proceeding by any Governmental Entity relating to this Agreement or
any of the transactions contemplated herein which would have a Material Adverse
Effect on the Company or Parent.
(f) Xxxxx Consulting Agreement. Xxxxxx X. Xxxxx Xx. shall have waived
all rights to his current and former employment agreements with the Company or
any of its Subsidiaries and entered into the Xxxxx Consulting Agreement.
Section 6.2 Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following additional
conditions:
Performance of Obligations; Representations and Warranties. Each of
Parent and Sub shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior to
the Effective Time, each of the representations and warranties of Parent and Sub
contained in this Agreement that is qualified by materiality shall be true and
correct on and as of the Effective Time as if made on and as of such date (other
than representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date) and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects on and as of
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the Effective Time as if made on and as of such date (other than representations
and warranties which address matters only as of a certain date which shall be
true and correct in all material respects as of such certain date), in each case
except as contemplated or permitted by this Agreement, and the Company shall
have received a certificate signed on behalf of Parent by its Chief Executive
Officer or its Chief Financial Officer to such effect.
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Performance of Obligations; Representations and Warranties. The
Company shall have performed in all material respects each of its agreements
contained in this Agreement required to be performed on or prior to the
Effective Time, each of the representations and warranties of the Company
contained in this Agreement that is qualified by materiality shall be true and
correct on and as of the Effective Time as if made on and as of such date (other
than representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date) and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects on and as of the Effective Time as if made on
and as of such date (other than representations and warranties which address
matters only as of a certain date which shall be true and correct in all
material respects as of such certain date), in each case except as contemplated
or permitted by this Agreement, and Parent shall have received a certificate
signed on behalf of the Company by its Chief Executive Officer or its Chief
Financial Officer to such effect.
(b) Dissenting Shares. The aggregate number of Dissenting Shares shall
not exceed 10% of the total number of Company Common Shares outstanding on the
Closing Date.
(c) Securitization. On or prior to the Effective Time, (i) the Company
shall have entered into a securitization arrangement, that, assuming an April
30, 2003 cut off date, would clear the Company's GECC warehouse line and its
warehouse line with Westside Funding Corporation of eligible receivables in the
normal course of business or (ii) the Company shall have adequate available
financing to terminate the GECC line.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after any approval of the matters
presented in connection with the Merger by the stockholders of the Company or
Parent:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the other party shall have
failed to comply in any material respect with any of its covenants or agreements
contained in this Agreement required to be complied with prior to the date of
such termination, which failure to comply has not been cured within thirty
business days following receipt by such other party of written notice from the
nonbreaching party of such failure to comply;
29
(c) by either Parent or the Company if there has been (i) a breach by
the other party (in the case of Parent, including any breach by Sub) of any
representation or warranty that is not qualified as to materiality which has the
effect of making such representation or warranty not true and correct in all
material respects or (ii) a breach by the other party (in the case of Parent,
including any breach by Sub) of any representation or warranty that is qualified
as to materiality, in each case which breach has not been cured within thirty
business days following receipt by the breaching party from the nonbreaching
party of written notice of the breach;
(d) by Parent or the Company if: (i) the Merger has not been effected
on or prior to the close of business on July 31, 2003; provided, however, that
the right to terminate this Agreement pursuant to this Section 7.1(d)(i) shall
not be available to any party whose failure to fulfill any of its obligations
contained in this Agreement has been the cause of, or resulted in, the failure
of the Merger to have occurred on or prior to the aforesaid date; or (ii) any
court or other Governmental Entity having jurisdiction over a party hereto shall
have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the consummation of the Merger
and such order, decree, ruling or other action shall have become final and
nonappealable;
(e) by Parent or the Company if the stockholders of the Company do not
approve this Agreement at the Company Stockholder Meeting or at any adjournment
or postponement thereof; provided, however, that the Company may not terminate
this Agreement pursuant to this Section 7.1(e) if the Company has not complied
with its obligations under Sections 5.1 and 5.2 or has otherwise breached in any
material respect its obligations under this Agreement in any manner that could
reasonably have caused the failure of the stockholder approval to be obtained at
the Company Stockholder Meeting;
(f) by the Company or Parent due to the failure of Parent to have the
financing needed to pay the Merger Consideration and the $620,000 of Redeemable
Placement Debt;
(g) by the Company if the Board of Directors of the Company determines
that a Takeover Proposal constitutes a Superior Proposal. For purposes of this
Agreement "Superior Proposal" means a Takeover Proposal that the Board of
Directors of the Company determines in its good faith judgment, after
consultation with its financial advisors, is more favorable to the Company's
stockholders from a financial point of view than the Merger;
(h) by Parent if (i) the Board of Directors of the Company shall not
have recommended, or shall have resolved not to recommend, or shall have
adversely qualified, adversely modified or withdrawn its recommendation of the
Merger or declaration that the Merger is advisable and fair to and in the best
interest of the Company and its stockholders, or shall have resolved to do so,
(ii) any person (other than Parent or its Affiliates) acquires or becomes the
beneficial owner of 25% or more of the outstanding shares of Company Common
Stock, (iii) the Board of Directors of the Company shall have recommended to the
stockholders of the Company any Takeover Proposal involving the Company or shall
have resolved to do so or (iv) a tender offer or exchange offer for 25% or more
of the outstanding shares of capital stock of the Company is commenced, and the
Board of Directors of the Company fails, within 10 business days of such
commencement, to recommend against acceptance of such tender offer or
30
exchange offer by its stockholders (including by taking no position with respect
to the acceptance of such tender offer or exchange offer by its stockholders);
(i) By Parent on or before April 30, 2003, if Parent in its good faith
judgment, after review pursuant to Section 5.3 of the receivables and other
assets held by Company and its Subsidiaries, determines that (i) any material
portion of such receivables are not valid or not enforceable, or did not arise
from bona fide transactions in the ordinary course of business, or are subject
to counterclaims or setoffs, or were purchased without compliance with the
Company's written standards, policies or procedures, or (ii) that the Company
has failed to comply with the servicing requirements of applicable Servicing or
Sale and Servicing Agreements, including without limitation (x) by modification
of terms of receivables, such as by extension of payment due dates, or (y) by
failure to charge off receivables defined therein as "Liquidated Contracts" or
"Liquidated Receivables," or (z) by keeping records of its servicing activities
that are inconsistent with the truth; or
(j) By Parent if as of the Closing, the "total shareholders' equity" of
the Company on a consolidated basis, determined in accordance with generally
accepted accounting principles applied on a consistent basis with the Company's
Annual Report (except as permitted for unaudited statements by Form 10-Q of the
SEC and except that there shall be no reduction in such amount for the monthly
fees of $133,000 payable to GECC since December 31, 2002) is less than the
"total shareholders' equity" of the Company on a consolidated basis shown on the
balance sheet as of December 31, 2002 included in the Company's Annual Report.
The right of any party hereto to terminate this Agreement pursuant to
this Section 7.1 shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent, Sub or their respective officers or
directors (except for the Confidentiality Agreement and the entirety of Section
5.4, which shall survive the termination); provided, however, that nothing
contained in this Section 7.2 shall relieve any party hereto from any liability
for any willful breach of a representation or warranty contained in this
Agreement or the breach of any covenant contained in this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger at the Company Stockholder Meeting, but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein
31
or in any document delivered pursuant hereto and (iii) waive compliance with any
of the agreements or conditions contained herein which may legally be waived.
Any agreement on the part of a party hereto to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on behalf of
such party.
ARTICLE 8
GENERAL PROVISIONS
Section 8.1 Nonsurvival of Representations and Warranties. The
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall terminate at the Effective Time.
Section 8.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given when delivered personally, one day
after being delivered to an overnight courier or when telecopied (with a
confirmatory copy sent by overnight courier) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to
Consumer Portfolio Services, Inc.
00000 Xxxxxx Xxxxxx Xxxx
Xxxxxx, XX 00000-0000
Attention: General Counsel
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxx XxXxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Xxx X. Xxxxxxxxxxx
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
TFC Enterprises, Inc.
0000 Xxxxx Xxxx Xxxx
Xxxxxxx, XX 00000
Facsimile: (757) - 858-4093
Telephone: (757) - 000-0000
Attention: President
with a copy to:
Xxxxxxxx Xxxxxx
32
000 Xxx Xxxxxxxx Xxxxxx
Xxxxxxxx Xxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxx Xx., Esq.
Section 8.3 Interpretation. When a reference is made in this Agreement
to a Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents, list of defined terms and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
Section 8.4 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 8.5 Entire Agreement; No Third Party Beneficiaries. This
Agreement and the Confidentiality Agreement constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof. This Agreement, except as
provided in the next sentence, is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder. The parties hereto
expressly intended the provisions of Sections 5.8 and 5.10 to confer a benefit
upon and be enforceable by, as third party beneficiaries of this Agreement, the
third persons referred to in, or intended to be benefited by such provision.
Section 8.6 Governing Law.
(a) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
(b) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the exclusive jurisdiction of any
Delaware State court or federal court of the United States of America sitting in
Delaware, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement, or for recognition or enforcement
of any judgment, and each of the parties hereto hereby irrevocably and
unconditionally agrees that all claims in respect of any action or proceeding
may be heard and determined in any such Delaware State court or, to the extent
permitted by law, in such federal court. Such party agrees that a final,
nonappealable judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
(c) Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any Delaware State or
federal court. Such party hereby irrevocably waives, to the
33
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(d) EACH OF THE PARTIES HEREBY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF THE
PARTIES IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.
Section 8.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties.
Section 8.8 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other terms, conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic and
legal substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated by this Agreement may be
consummated as originally contemplated to the fullest extent possible.
* * * * *
REMAINDER OF PAGE INTENTIONALLY BLANK
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized
all as of the date first written above.
CONSUMER PORTFOLIO SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Its: President
CPS MERGERSUB, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Its: President
TFC ENTERPRISES, INC.
By: /s/ Xxxxxx X. Tray
---------------------------------------
Name: Xxxxxx X. Tray
Its: President
35
