EXHIBIT 10.147.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CAPITAL ONE AUTO FINANCE, INC.,
FOOTHILL SERVICES CORPORATION
AND
ONYX ACCEPTANCE CORPORATION
DATED AS OF SEPTEMBER 21, 2004
TABLE OF CONTENTS
PAGE
ARTICLE 1 THE MERGER................................................................................ 1
Section 1.1 The Merger....................................................................... 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................................................................ 5
Section 1.11 Further Assurances............................................................... 5
Section 1.12 Dissenting Shares................................................................ 5
Section 1.13 Closing.......................................................................... 6
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............................................. 6
Section 2.4 Brokers.......................................................................... 7
Section 2.5 Operations of Sub................................................................ 7
Section 2.6 Funds............................................................................ 7
Section 2.7 Information Supplied............................................................. 8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................. 8
Section 3.1 Organization, Standing and Power................................................. 8
Section 3.2 Capital Structure................................................................ 9
Section 3.3 Authority........................................................................ 10
Section 3.4 Consents and Approvals; No Violation............................................. 10
Section 3.5 SEC Documents; Financial Statements; Other Documents............................. 11
Section 3.6 Information Supplied............................................................. 12
Section 3.7 Absence of Certain Changes or Events............................................. 12
Section 3.8 Permits and Compliance........................................................... 13
Section 3.9 Tax Matters...................................................................... 13
Section 3.10 Actions and Proceedings.......................................................... 14
Section 3.11 Employees; Employee Benefits..................................................... 15
Section 3.12 Labor Matters.................................................................... 18
Section 3.13 Receivables...................................................................... 18
Section 3.14 Title of Property and Assets..................................................... 22
Section 3.15 Real Property.................................................................... 22
Section 3.16 Insurance........................................................................ 23
Section 3.17 Business Relations............................................................... 23
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TABLE OF CONTENTS
(continued)
PAGE
Section 3.18 Intellectual Property............................................................ 23
Section 3.19 Agreements with Governmental Entities............................................ 25
Section 3.20 Investment Securities............................................................ 26
Section 3.21 Interest Rate Risk Management Instruments........................................ 26
Section 3.22 Undisclosed Liabilities.......................................................... 26
Section 3.23 Environmental Liability.......................................................... 26
Section 3.24 Off-Balance Sheet Financials and Related Documents............................... 27
Section 3.25 State Takeover Statutes.......................................................... 27
Section 3.26 Rights Agreement................................................................. 27
Section 3.27 Opinion of Financial Advisor..................................................... 27
Section 3.28 Required Vote of Company Stockholders............................................ 27
Section 3.29 Brokers.......................................................................... 27
Section 3.30 Accounting and Disclosure Controls; SOXA Compliance.............................. 28
Section 3.31 Material Contracts; Dealer Agreements; Securitization Agreements................. 28
ARTICLE 4 COVENANTS RELATING TO COMPANY CONDUCT OF BUSINESS......................................... 30
Section 4.1 Company Conduct of Business Pending the Merger................................... 30
Section 4.2 No Solicitation by the Company................................................... 31
ARTICLE 5 ADDITIONAL AGREEMENTS..................................................................... 32
Section 5.1 Company Stockholder Meeting...................................................... 32
Section 5.2 Preparation of the Proxy Statement; Fairness Opinion............................. 32
Section 5.3 Access to Information; Meetings with Company Officers............................ 33
Section 5.4 Certain Payments, Fees and Expenses.............................................. 33
Section 5.5 Reasonable Best Efforts.......................................................... 34
Section 5.6 Public Announcements............................................................. 35
Section 5.7 State Takeover Laws.............................................................. 35
Section 5.8 Indemnification; Directors and Officers Insurance................................ 35
Section 5.9 Notification of Certain Matters.................................................. 35
Section 5.10 12-1/2% Subordinated Notes....................................................... 36
ARTICLE 6 CONDITIONS PRECEDENT TO THE MERGER........................................................ 36
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger....................... 36
Section 6.2 Conditions to Obligation of the Company to Effect the Merger..................... 36
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the Merger................. 37
ARTICLE 7 TERMINATION, AMENDMENT AND WAIVER......................................................... 39
Section 7.1 Termination...................................................................... 39
Section 7.2 Effect of Termination............................................................ 40
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TABLE OF CONTENTS
(continued)
PAGE
Section 7.3 Amendment........................................................................ 40
Section 7.4 Waiver........................................................................... 41
ARTICLE 8 GENERAL PROVISIONS........................................................................ 41
Section 8.1 Nonsurvival of Representations and Warranties.................................... 41
Section 8.2 Notices.......................................................................... 41
Section 8.3 Interpretation................................................................... 42
Section 8.4 Counterparts..................................................................... 42
Section 8.5 Entire Agreement; No Third Party Beneficiaries................................... 42
Section 8.6 Governing Law.................................................................... 43
Section 8.7 Assignment....................................................................... 43
Section 8.8 Severability..................................................................... 43
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TABLE OF DEFINED TERMS
Defined Term Section
------------ -------
1996 Plan...................................................................................... 1.5(d)
Affiliate...................................................................................... 7.1(h)
Agreement...................................................................................... Preamble
Benefit Plans.................................................................................. 3.11(c)
Blue Sky Laws.................................................................................. 2.3
Certificate of Merger.......................................................................... 1.2
Certificates................................................................................... 1.6(b)
Claim.......................................................................................... 3.10
Closing........................................................................................ 1.13
Code........................................................................................... 1.6(d)
Company........................................................................................ Preamble
Company Annual Report.......................................................................... 3.2(c)
Company Bylaws................................................................................. 3.2(a)
Company Charter................................................................................ 1.4(a)
Company Common Stock........................................................................... 1.5(b)
Company Disclosure Letter...................................................................... 3.2(a)
Company Permits................................................................................ 3.8
Company Preferred Stock........................................................................ 3.2(a)
Company Quarterly Reports...................................................................... 3.7
Company Regulatory Agreement................................................................... 3.19
Company SEC Documents.......................................................................... 3.5(a)
Company Series A Preferred Stock............................................................... 3.2(a)
Company Stock Option Plans..................................................................... 3.2(a)
Company Stock Options.......................................................................... 3.2(a)
Company Stockholder Meeting.................................................................... 5.1
Confidentiality Agreement...................................................................... 5.3
Constituent Corporations....................................................................... Preamble
Contract....................................................................................... 3.13(a)
Dealer......................................................................................... 3.13(a)(iv)
Dealer Agreement............................................................................... 3.31(b)
D&O Insurance Tail............................................................................. 5.8(b)
DGCL........................................................................................... 1.1
Dissenting Shares.............................................................................. 1.12
Effective Time................................................................................. 1.2
Employees...................................................................................... 3.11(a)
Environmental Laws............................................................................. 3.23
ERISA.......................................................................................... 3.11(c)
ERISA Affiliate................................................................................ 3.11(d)
Exchange Act................................................................................... 2.3
Fairness Opinion............................................................................... 3.27
Financed Vehicle............................................................................... 3.13(a)
Former Employees............................................................................... 3.11(a)
GAAP........................................................................................... 3.5(b)
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Governmental Approvals......................................................................... 6.1(c)
Governmental Entity............................................................................ 2.3
HSR Act........................................................................................ 2.3
Indenture...................................................................................... 5.10
Intellectual Property.......................................................................... 3.18(a)
Intellectual Property Agreements............................................................... 3.18(a)
IRCA........................................................................................... 3.11(b)
IRS............................................................................................ 3.11(d)
Knowledge of the Company....................................................................... 3.10
Leased Real Property........................................................................... 3.15(a)
Liens.......................................................................................... 3.2(b)
Made Available................................................................................. 3.5(a)
Material Adverse Effect........................................................................ 3.1
Material Contracts............................................................................. 3.31(a)
Merger......................................................................................... Recitals
Merger Consideration........................................................................... 1.5(c)
Non-Employees.................................................................................. 3.11(a)
Notes.......................................................................................... 5.10
Obligor........................................................................................ 3.13(a)
Other Intellectual Property.................................................................... 3.18(a)
Owned Intellectual Property.................................................................... 3.18(a)
Parent......................................................................................... Preamble
Parent Bylaws.................................................................................. 2.3
Parent Charter................................................................................. 2.3
Paying Agent................................................................................... 1.6(a)
Payment Fund................................................................................... 1.6(a)
Person......................................................................................... 4.1(d)
Personnel...................................................................................... 3.18(f)
Protection Program............................................................................. 3.18(f)
Proxy Statement................................................................................ 3.6
Real Property Leases........................................................................... 3.15(a)
Receivables Schedule........................................................................... 3.13(b)
Residual Lines................................................................................. 3.31(d)
Rights Agreement............................................................................... 3.26
SEC............................................................................................ 3.5
Securities Act................................................................................. 3.5
Securitization Agreements...................................................................... 3.31(c)
SOXA........................................................................................... 3.30(c)
Sub............................................................................................ Preamble
Sub Bylaws..................................................................................... 1.4(a)
Sub Charter.................................................................................... 1.4(a)
Subsidiary..................................................................................... 3.1
Superior Proposal.............................................................................. 7.1(g)
Surviving Corporation.......................................................................... 1.1
Takeover Proposal involving the Company........................................................ 4.2(a)
Tax Return..................................................................................... 3.9(a)
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Taxing Authority............................................................................... 3.9(a)
Taxes.......................................................................................... 3.9(a)
Title Document................................................................................. 3.13(a)(i)(A)
Warehouse Agreements........................................................................... 3.31(d)
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of September 21, 2004 (this
"Agreement"), is by and among Capital One Auto Finance, Inc., a Texas
corporation ("Parent"), Foothill Services Corporation, a Delaware corporation
and a direct wholly owned subsidiary of Parent ("Sub"), and Onyx Acceptance
Corporation, a Delaware corporation (the "Company", and 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 Sub and the Company have
each approved and adopted, at meetings of each such Board of Directors, this
Agreement and have authorized the execution hereof and the Board of Directors of
Parent has authorized the execution hereof;
WHEREAS, simultaneously with the execution and delivery of this
Agreement, Parent and each of the stockholders of the Company identified in
Exhibit A hereto are entering into voting agreements pursuant to which each such
stockholder of the Company agrees to take specified actions in furtherance of
the transactions contemplated hereby; 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 Section 251 of 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 at the time of the Closing. When used in this Agreement, the
term "Effective Time" shall mean the date and time at which
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the Certificate of Merger is accepted for recording. The filing of the
Certificate of Merger shall be made on the date of the Closing (as defined in
Section 1.13).
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 the
Company (the "Company 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; provided, however, that such Certificate of
Incorporation shall be amended to become, and as a result at the Effective Time
shall without further action be, identical to the Certificate of Incorporation
of Sub (the "Sub Charter") as in effect immediately prior to the Effective Time
except that Article I thereof shall be amended to change the name of the
Surviving Corporation to the name of the Company. At the Effective Time, the
Bylaws of Sub (the "Sub Bylaws") as in effect immediately prior to 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 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 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 $0.01
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 (as defined in Section
3.1) of the Company, and any shares of Company Common Stock owned by Parent,
shall be cancelled and no payment, 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 $28.00 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
2
adjusted for any stock dividend, stock split or like transaction affecting the
Company Common Stock prior to the Effective Time.
(d) (i) The Company shall cause each Company Stock Option (as defined
in Section 3.2(a)) issued and outstanding under the Company 1996 Stock
Option/Stock Issuance Plan (as amended and restated as of April 23, 1998 and
subsequently amended and restated as of March 31, 2000 and as of December 30,
2003) (the "1996 Plan"), to become fully vested and exercisable as of
immediately prior to the Effective Time and permit the holders of such issued
and outstanding Company Stock Options to exercise such Company Stock Options as
of immediately prior to the Effective Time. A notice and election form to be
mutually agreed upon by the Company and Parent shall be distributed by the
Company to the holders of such Company Stock Options to permit such holders to
elect to so exercise their Company Stock Options as of immediately prior to the
Effective Time and Parent shall cause the Company to make a cash payment to such
holders as promptly as practicable after the Closing (but in no event later than
two business days after the Closing) equal to the number of shares of Company
Common Stock for which each Company Stock Option is then exercisable multiplied
by the per share Merger Consideration, less the aggregate exercise price of each
such Company Stock Option and less any amounts required to be withheld pursuant
to any applicable tax withholding requirements. The Company shall cause each
Company Stock Option issued and outstanding under the Company Stock Option Plans
(as defined in Section 3.2(a)) at the Effective Time, and which has not been
exercised prior to the Effective Time, to be cancelled as of the Effective Time
without payment thereon. All Company Stock Options when cancelled in accordance
with this Section 1.5(d) shall cease to be outstanding, and each holder of such
a Company Stock Option and all other Persons (as defined in Section 4.1(d))
shall cease to have any rights with respect thereto.
(ii) Except as provided herein or as otherwise agreed to by the
parties, the Company shall cause the Company Stock Option Plans 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) (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 (including nominee holders for
distribution to beneficial holders) 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 and a Form W-9 to establish available exemptions from back-up
withholding). 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
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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. 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 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 paid upon the surrender of Certificates and the payments
made in respect of exercised Company Stock Options in accordance with the terms
hereof shall be deemed to have been paid and made in full satisfaction of all
rights pertaining to the shares of Company Common Stock represented by such
Certificates and such Company Stock Options.
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
4
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 (as defined in Section 3.10) 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 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 the 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 this 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 compromise or offer to settle or compromise, any such
demands. Parent shall be responsible for all payments with respect to the
Dissenting Shares, including all expenses associated with any negotiations and
proceedings with respect to demands for appraisal under the DGCL.
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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 Mayer, Brown, Xxxx & Maw
LLP, 0000 X Xxxxxx, X.X., Xxxxxxxxxx, X.X. at 10:00 a.m., local time, no later
than the second business day following the fulfillment or waiver (if permitted
by law) of the conditions set forth in Article 6 or at such other time and place
as Parent and the Company shall agree.
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 incorporated, 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 of Parent and Sub is duly qualified to do business, and is in good
standing, in each jurisdiction where the character of its properties owned or
held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not, individually
or in the aggregate, 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.
Section 2.2 Authority. On or prior to the date of this Agreement, (a)
the Boards of Directors of Parent and Sub have declared the Merger and this
Agreement advisable and fair to and in the best interest of Parent and Sub,
respectively, and their respective stockholders, (b) the Board of Directors of
Parent has approved the execution of this Agreement in accordance with
applicable law and (c) the Board of Directors of Sub has approved and adopted
this Agreement in accordance with 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 of this Agreement 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 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 clauses (i)
through (v) of this Section 2.3 have been obtained and all filings and
obligations described in clauses (i) through (v) of this Section 2.3 have been
made, the execution and delivery of this Agreement does not, and the
6
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 under or cause the
loss of a material benefit under, or result in the creation of any Lien (as
defined in Section 3.2(b)) upon or default on any of the properties or assets of
Parent or any of its Subsidiaries under, any provision of (a) the Articles of
Incorporation of Parent (the "Parent Charter") or the Bylaws of Parent (the
"Parent Bylaws") or the Sub Charter or Sub Bylaws, (b) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Parent or Sub
or (c) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Sub or any of their respective properties or assets,
other than, in the case of clauses (b) or (c), any such violation, default,
right, loss or Lien that would not, individually or in the aggregate, 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, state or local), foreign or supranational court,
commission, governmental body, regulatory agency, authority or tribunal (a
"Governmental Entity") is required by or with respect to Parent or Sub 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 provisions of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended (the "HSR Act") and the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated thereunder, the "Exchange
Act"), (ii) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware and appropriate related documents with the relevant
authorities of other states in which the Company or any of its Subsidiaries is
qualified to do business, (iii) applicable requirements, if any, of state
securities or "blue sky" laws ("Blue Sky Laws"), (iv) applicable bank holding
company regulatory approval and (v) 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, 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 Brokers. No broker, investment banker or other Person,
other than Deutsche Bank Securities Inc., 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 or Sub.
Section 2.5 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 transactions contemplated hereby.
Section 2.6 Funds. Parent has, or will have prior to the Effective
Time, sufficient funds available to satisfy the obligation to pay the Merger
Consideration.
7
Section 2.7 Information Supplied. None of the information supplied by
Parent or Sub for inclusion or incorporation by reference in the Proxy Statement
(as defined in Section 3.6) will, at the date the Proxy Statement is first
mailed to the Company's stockholders or at the time of the Company Stockholder
Meeting (as defined in Section 5.1), 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 except that no representation is made
by Parent or Sub with respect to statements made or incorporated by reference
therein based on information supplied by the Company for inclusion in such
document.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub that, except as
otherwise set forth in a specific section of the Company Disclosure Letter that
references a specific representation or warranty in this Article 3:
Section 3.1 Organization, Standing and Power. The Company is a
corporation duly incorporated, 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 respective properties owned or held
under lease or the nature of their respective 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.
For purposes of this Agreement (a) "Material Adverse Effect" means, when used
with respect to Parent, the Company or the Surviving Corporation, as the case
may be, any event, change or effect that individually or when taken together
with all other such events, changes or effects is or is reasonably expected to
be materially adverse to the business, assets, liabilities, financial condition,
or results of operations of Parent and its Subsidiaries, taken as a whole, the
Company and its Subsidiaries, taken as a whole, or the Surviving Corporation and
its Subsidiaries, taken as a whole, as the case may be; and (b) "Subsidiary"
means any corporation, partnership, limited liability company, joint venture or
other legal entity of which Parent, the Company or the Surviving Corporation, 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 or other legal entity.
8
Section 3.2 Capital Structure.
(a) As of the date hereof, the authorized capital stock of the Company
consists of 15,000,000 shares of Company Common Stock and 10,000,000 shares of
preferred stock, par value $.01 per share (the "Company Preferred Stock"), of
which 200,000 shares have been designated as Series A Participating Preferred
Stock, par value $.01 per share (the "Company Series A Preferred Stock"). At the
close of business on September 16, 2004, (i) 5,260,577 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) no shares of
Company Preferred Stock were issued and outstanding and 200,000 shares of
Company Series A Preferred Stock were reserved for issuance pursuant to the
Rights Agreement (as defined in Section 3.26), (iv) 1,905,987 shares of Company
Common Stock were reserved for issuance pursuant to options to purchase shares
of Company Common Stock ("Company Stock Options") issued and outstanding
pursuant to (x) the 1996 Plan, (y) the Company Second Amended and Restated 1994
Stock Option Plan and (z) the Company 1994 Special Performance Option Grant Plan
(collectively, the "Company Stock Option Plans") and (v) the weighted average
exercise price of all outstanding Company Stock Options with an exercise price
per share of Company Common Stock less than the Merger Consideration was $5.18.
The Company Stock Option Plans are the only benefit plans, programs, policies,
arrangements or agreements of the Company or its Subsidiaries under which any
securities of the Company are issuable. As of the date of this Agreement, except
as set forth above and except for the issuance of shares of Company Common Stock
upon the exercise of Company Stock Options, 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 disclosure 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 Disclosure Letter (the "Company
Disclosure 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, purchase or redeem, or cause to be issued, delivered,
sold, purchased 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 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 wholly
owned Subsidiary of the Company (other than shares of CU Acceptance Corporation,
which is majority owned by the Company), free and clear of all security
interests, liens, Claims, pledges, third party rights or restrictions, options,
mortgages, title imperfections, defects, objections, easements, encroachments,
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
9
vote (or convertible into or exercisable for securities having the right to
vote) with the stockholders of the Company on any matter.
(c) Exhibit 21.1 to the Company's Annual Report on Form 10-K for the
year ended December 31, 2003, as filed with the SEC (as defined in Section 3.5)
(the "Company Annual Report"), was, at the time so filed, 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.
Section 3.3 Authority. On or prior to the date of this Agreement, the
Board of Directors of the Company has unanimously (a) declared the Merger and
this Agreement advisable and fair to and in the best interests of the Company
and its stockholders, (b) approved and adopted this Agreement in accordance with
the DGCL, (c) resolved to recommend the approval and adoption of this Agreement
by the Company's stockholders and (d) 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 (i) approval of this Agreement by the
stockholders of the Company and (ii) 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 this
Agreement on Parent and Sub) this Agreement constitutes the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except as the 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 clauses (i)
through (v) of this Section 3.4 have been obtained and all filings and
obligations described in clauses (i) through (v) of this Section 3.4 have been
made, except as set forth in Section 3.4(a) of the Company Disclosure 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 under or cause the loss of a
material benefit under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries under, any
provision of (a) the Company Charter or the Company Bylaws, (b) any provision of
the comparable charter or organization documents of any of the Company's
Subsidiaries or any off-balance sheet trusts or other entities of the Company or
any of its Subsidiaries, (c) any loan or credit agreement, note, bond, mortgage,
indenture, securitization agreement, lease or other agreement, instrument,
permit, concession, franchise or license to which the Company or any of its
Subsidiaries is a party or is subject or (d) any judgment, order or decree or,
to the Knowledge of the Company, any statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or any of
10
their respective properties or assets, other than, in the case of clauses (b),
(c) or (d), any such violation, default, right, loss or Lien 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 HSR Act and the
Exchange Act, (ii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate related documents with the
relevant authorities of other states in which the Company or any of its
Subsidiaries is qualified to do business, (iii) applicable requirements, if any,
of The NASDAQ Stock Market, (iv) items set forth in Section 3.4(b) of the
Company Disclosure Letter (other than pursuant to Real Property Leases (as
defined in Section 3.15(a)) which are addressed in Section 3.15) and (v) 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.
Section 3.5 SEC Documents; Financial Statements; Other Documents.
(a) The Company has timely filed all required documents with the U.S.
Securities and Exchange Commission (the "SEC") since December 31, 2001,
including all certifications and statements required by (i) the SEC's order
dated June 27, 2002 pursuant to Section 21(a)(1) of the Exchange Act (File No.
4-460), (ii) Rule 13a-14 or 15d-14 under the Exchange Act or (iii) 18 U.S.C.
Section 1350 (Section 906 of SOXA (as defined in Section 3.30(c)) with respect
to such documents (collectively, the "Company SEC Documents"). As of their
respective dates, the Company SEC Documents complied in all material respects
with the requirements of the Securities Act of 1933, as amended (together with
the rules and regulations promulgated thereunder, the "Securities Act"), SOXA or
the Exchange Act, as the case may be, and, at the respective times they were
filed, none of the Company SEC Documents contained any untrue statement of a
material fact or omitted 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 Company has Made Available to Parent
copies of all (x) Company SEC Documents and (y) comment letters received by the
Company from the SEC since December 31, 2001 and all responses to such comment
letters by or on behalf of the Company. "Made Available" means, with respect to
any document or information, that such document or information was present and
available for inspection by Parent and its representatives in the due diligence
document review room to which Parent and its representatives had access on
September 12, 13 and 14, 2004 at the Company's headquarters or was actually
delivered to Parent by or on behalf of the Company prior to the date of this
Agreement.
(b) The consolidated financial statements (including, in each case, any
notes thereto) of the Company included in the Company SEC Documents complied 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
in accordance with generally accepted U.S. accounting
11
principles and SEC Regulation S-X ("GAAP") (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 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
filed with the SEC prior to the date of this Agreement or as required by GAAP,
the Company has not, since December 31, 2001, made any material change in the
accounting practices or policies applied in the preparation of financial
statements.
(c) Section 3.5(c) of the Company Disclosure Letter lists, and the
Company has Made Available to Parent copies of the documentation creating or
governing, all securitization transactions and "off-balance sheet arrangements"
(as defined in Item 303(c) of Regulation S-K of the SEC) effected by the Company
or its Subsidiaries since December 31, 2001. Each of (i) PricewaterhouseCoopers
LLP, which has expressed its opinion with respect to the consolidated financial
statements (including, in each case, any notes thereto) of the Company as of and
for the periods ended December 31, 2002 and for all periods prior thereto
included in the Company SEC Documents and (ii) Xxxxx Xxxxxxx LLP, which has
expressed its opinion with respect to the consolidated financial statements
(including, in each case, any notes thereto) of the Company as of December 31,
2003 and for the year then ended included in the Company SEC Documents, is and
has been, as required, throughout the periods covered by such respective
financial statements (x) a registered public accounting firm (as defined in
Section 2(a)(12) of SOXA), (y) "independent" with respect to the Company within
the meaning of Regulation S-X of the SEC and (z) with respect to the Company, in
compliance with subsections (g) through (l) of Section 10A of the Exchange Act
and the related rules of the SEC and the Public Company Accounting Oversight
Board. Section 3.5(c) of the Company Disclosure Letter lists all non-audit
services performed by each of PricewaterhouseCoopers LLP and Xxxxx Xxxxxxx LLP
for the Company and its Subsidiaries since December 31, 2001.
Section 3.6 Information Supplied. None of the information supplied by
the Company for inclusion or incorporation by reference in the Proxy Statement
relating to the Company Stockholder Meeting (the "Proxy Statement") will, at the
date the Proxy Statement is first mailed to the Company's stockholders or 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 except that no
representation is made by the Company with respect to statements made or
incorporated by reference therein based on information supplied by Parent or Sub
for inclusion in such document. The Proxy Statement will comply as to form with
the requirements of the Exchange Act and the rules and regulations of the SEC
thereunder. The Company shall promptly inform Parent of the discovery of any
information which should be set forth in a supplement to the Proxy Statement.
Section 3.7 Absence of Certain Changes or Events. Except as disclosed
in Section 3.7 of the Company Disclosure Letter and the Company's Quarterly
Reports on Form 10-Q for the quarters ended March 31, 2004 and June 30, 2004
filed with the SEC (the "Company Quarterly Reports"), since December 31, 2003:
(a) the Company and its Subsidiaries have not incurred any
12
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 the cash dividends to
stockholders of the Company paid during 2004 and disclosed in the Company
Quarterly Reports or any Reports on Form 8-K filed with the SEC by the Company
since December 31, 2003 and prior to the date of this Agreement; and (d) there
has been no Material Adverse Effect with respect to the Company.
Section 3.8 Permits and Compliance. Each of the Company and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
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.
Section 3.9 Tax Matters.
(a) 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) "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 (iii) "Tax
Return" means any return, report or similar statement (including the attached
schedules) required to be filed with respect to any Tax, including any
information return, claim for refund, amended return or declaration of estimated
Tax.
(b) All material federal, state, local, foreign and other Tax Returns
of the Company and its Subsidiaries (including any consolidated Tax Returns that
include the income or loss of the Company or any of its Subsidiaries) required
by law to be filed or sent as of the Effective Time have been or will be duly
filed or sent, and such returns are or will be true, complete and correct in all
material respects. All material Taxes imposed upon the Company or any of its
Subsidiaries or any of the properties, assets or income of the Company or any of
its Subsidiaries which are due and payable through the Effective Time or claimed
by any Taxing Authority to be due and payable through the Effective Time have
been or will be paid or reserved for, or adequate provision will be made
therefor in accordance with GAAP, as of the Effective Time, other than Taxes
being contested in good faith by the Company or any of its Subsidiaries
13
concerning an aggregate amount which is not material to the business of the
Company or any of its Subsidiaries.
(c) Except as set forth in Section 3.9 of the Company Disclosure
Letter, there are: (i) no material Tax Claims pending against the Company or any
of its Subsidiaries and neither the Company nor any of its Subsidiaries knows of
any threatened Claim for Tax deficiencies or any basis for such Claims; (ii) no
Tax Returns for the Company or any of its Subsidiaries that have been or are
currently being examined by any Taxing Authority; and (iii) not now in force any
waivers or agreements by the Company or any of its Subsidiaries for the
extension of time for the assessment of any material Tax, nor has any such
waiver or agreement been requested by any Taxing Authority.
(d) The Company and each of its Subsidiaries have paid or are
withholding and will pay when due to the proper Taxing Authorities all material
withholding amounts required to be withheld with respect to all Taxes, including
sales and use Taxes and Taxes on income or benefits and taxes for unemployment,
social security or other similar programs with respect to salary and other
compensation of directors, officers and employees of the Company and its
Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries has any liability
for any material federal, state, local, foreign or other Taxes of any
corporation or entity other than the Company and its Subsidiaries, including any
liability arising from the application of U.S. Treasury Regulation Section
1.1502-6 or any analogous provision of state, local or foreign law.
(f) Neither the Company nor any of its Subsidiaries is or has been a
party to any material Tax sharing agreement with any corporation other than the
Company and its Subsidiaries.
(g) Neither the Company nor any of its Subsidiaries 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 neither Parent nor Sub is required to withhold
Tax on the purchase of Company Common Stock pursuant to the Merger by reason of
Section 1445 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 Disclosure Letter, there are no
outstanding and unsatisfied 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 or 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 defined
in Section 3.11(c)) that, individually or in the aggregate, (i) would have a
Material Adverse Effect on the Company or involve the potential for loss in the
aggregate in excess of $250,000 or (ii) 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 Disclosure Letter, there are no actions, suits, claims, litigation
or legal, administrative or arbitration proceedings or investigations pending
or, to the Knowledge of the Company, threatened against or involving the
14
Company or any of its Subsidiaries or any of its or their present or former
directors, officers or employees, as such, or any of its or their properties,
assets or business or any Benefit Plan 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 or consummate the
transactions contemplated hereby. As of the date hereof, there are no actions,
suits, claims, litigation or legal, administrative, governmental or arbitration
proceedings or investigations ("Claims") 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 or employees or any of its or
their properties, assets or business or any Benefit Plan, in each case relating
to the transactions contemplated by this Agreement. Section 3.10 of the Company
Disclosure Letter sets forth a list of all outstanding actions, suits,
litigation or legal, administrative, governmental or arbitration proceedings or
formal investigations to which the Company or any of its Subsidiaries is a
party, excluding bankruptcies and deficiency collection matters other than
deficiency collection matters where the Company is a defendant. For purposes of
this Agreement, "Knowledge of the Company" means the knowledge of the
individuals identified on Section 3.10 of the Company Disclosure Letter after
reasonable inquiry.
Section 3.11 Employees; Employee Benefits.
(a) Copies of all material written agreements with, concerning or
relating to all current employees of the Company and its Subsidiaries (the
"Employees") and former employees of the Company and its Subsidiaries ("Former
Employees"), including union and collective bargaining agreements, and all
material employment policies, and all amendments and supplements thereto, have
been Made Available to Parent, and a list of all such agreements and policies is
set forth on Section 3.11(a) of the Company Disclosure Letter. The Company does
not currently offer or provide retiree health and other insurance benefits to
Former Employees or their dependents, survivors or beneficiaries, and neither
the Company nor any of its Subsidiaries has any liabilities (contingent or
otherwise) with respect thereto except as otherwise required by Section 4980B of
the Code, the comparable provisions of ERISA (as defined in Section 3.11(c)) or
similar provisions of applicable state law. Except for individual automobile
loans for not more than $50,000 and except as set forth in Section 3.11(a) of
the Company Disclosure Letter, there are no outstanding loans from the Company
or any of its Subsidiaries to any Employees or Former Employees. There are no
outstanding loans to Xxxx X. Xxxx and any prior loans to Xx. Xxxx, and the
retirement thereof, complied with all applicable laws, including SOXA. Except as
set forth on Section 3.11(a) of the Company Disclosure Letter, since December
31, 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 or Former
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 Employee'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. To the
Knowledge of the Company, 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. Neither the Company nor any of its
Subsidiaries has any material liability to or with respect to such Non-Employees
for the withholding or payment of any income or social
15
security taxes, the provision of benefits under any Benefit Plans or for any
other charges, taxes or benefits with respect thereto. Copies of each agreement
with any Non-Employee pursuant to which the Company or any of its Subsidiaries
may have any material liability or which are not terminable upon less than 30
days notice have been Made Available to Parent and a list of all such agreements
is set forth on Section 3.11(a) of the Company Disclosure Letter.
(b) The Company and each of its Subsidiaries has complied in all
material respects with all laws, statutes, rules and regulations applicable with
respect to any employees, terms and conditions of employment and wages and hours
in each of the jurisdictions in which it operates or does business, and no
Claims have been made nor are pending or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries arising out of or
relating to or alleging any violation of any of the foregoing. The Company and
each of its Subsidiaries has complied in all material respects with the
employment eligibility verification form requirements under the Immigration
Reform Control Act, as amended ("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. The Company is not currently employing any
Employees who are not authorized to work in the United States.
(c) Section 3.11(c) of the Company Disclosure Letter sets forth a list
of each material defined benefit and defined contribution plan, retirement 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,
unemployment compensation plan or program, sickness, disability or death benefit
plan (whether provided through insurance, on a funded or unfunded basis or
otherwise), medical or life insurance plan, cafeteria or flexible benefits plan,
fringe benefit plan, employee stock option or stock purchase plan, severance
pay, termination or salary continuation plan, change in control plan, program or
arrangement, retention plan or program and each other employee benefit plan,
program, policy, agreement or arrangement, including 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 sponsored or maintained by
the Company or any of its ERISA Affiliates (as defined in Section 3.11(d)), to
which the Company or any of its ERISA Affiliates is a party, in which the
Company or any of its ERISA Affiliates participates, which the Company or any of
its ERISA Affiliates has a commitment to create or under or with respect to
which the Company or any of its ERISA Affiliates may have any material liability
or material contingent liability, all of which are hereinafter referred to as
the "Benefit Plans." Except as set forth in Section 3.11(c) of the Company
Disclosure Letter, neither Parent nor the Company will incur any liability
(including any increased 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 Disclosure
Letter or as would not 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) and which is intended to meet the requirements for qualification
under Section 401(a) of the Code and exemption from federal Income Taxes under
Section 501(a) of the Code 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
16
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 for which the
remedial amendment period (as defined under applicable Treasury Regulations) has
expired; and since the date of such determination letter, if any, 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. With respect to each
Benefit Plan, the Company has heretofore Made Available to Parent complete and
correct copies of the following documents, where applicable: (i) the three most
recent annual reports (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 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. The term "ERISA
Affiliate" means, with respect to any Person, any corporation or other trade or
business under common control with such Person within the meaning of Section
414(b) or (c) of the Code. All of the Subsidiaries of the Company are ERISA
Affiliates of the Company.
(e) Except as described in Section 3.11(e) of the Company Disclosure
Letter, none of the assets of any Benefit Plan is invested in employer
securities or employer real property. There have been no acts or omissions by
the Company or any of its ERISA Affiliates which have given rise to or may
reasonably be expected to give rise to fines, penalties, taxes or related
charges under section 502 of ERISA or Chapters 43, 47, 68 or 100 of the Code for
which the Company or any of its ERISA Affiliates may be liable.
(f) With respect to the six consecutive year period ending as of the
Effective Time, none of the Benefit Plans was or is a "multiemployer plan"
within the meaning of Section 3(37) or 4001(a)(3) of ERISA and no Benefit Plan
was or is subject to (i) Title IV of ERISA or (ii) Section 412 of the Code or
parallel provision of ERISA. All contributions required to be made to or with
respect to each Benefit Plan prior to the date hereof have been made or have
been accrued for in the books and records of the Company or its ERISA Affiliates
for all periods through the date hereof.
(g) Except as set forth on Section 3.11(g) of the Company Disclosure
Letter or as would not have a Material Adverse Effect on the Company, 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;
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
17
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 or the IRS with respect to any Benefit Plan have been timely
filed or delivered; there is no Claim 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 Entity 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.
(h) Except as set forth in Section 3.11(h) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries has received any written
notice from any Employee indicating that such Employee intends to terminate its
employment with the Company or any of its Subsidiaries and, to the Knowledge of
the Company, no Employee intends to terminate its employment with the Company or
any of its Subsidiaries.
Section 3.12 Labor Matters. 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 in connection with their employment with
the Company or any of its Subsidiaries. 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 or any of its Subsidiaries, 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 Receivables. Except as set forth in Section 3.13(a) of the
Company Disclosure Letter:
(a) As to each retail installment sales contract and security agreement
or installment loan agreement and security agreement pursuant to which the
obligor(s) thereunder (the "Obligor") has financed the purchase of an
automobile, light-duty truck or van (a "Financed Vehicle") and granted a
security interest therein to the Company or any of its Subsidiaries, including
those that have been sold or assigned to a securitization trust of the Company
or any of its Subsidiaries, (each, a "Contract") and that is reflected on the
books and records of the Company or one of its Subsidiaries:
(i) Each Contract is secured by a valid and enforceable first
priority security interest in favor of the Company or one of its Subsidiaries in
the related Financed Vehicle, and such security interest has been duly perfected
and is prior to all other Liens upon such Financed Vehicle which now exist or
may hereafter arise or be created (except, as to priority, for any Lien
18
for unpaid taxes or unpaid storage or repair charges or any Lien created
pursuant to a Securitization Agreement or a Warehouse Agreement) (as defined in
Section 3.31(d)).
(A) If the related Contract was originated in a state
in which notation of a security interest on the certificate of title for, or
other evidence of ownership of, such Financed Vehicle (the "Title Document") (or
in the electronic title records) is required or permitted to perfect the
security interest in the related Financed Vehicle, and (x) was originated 180
days or more prior to the date of this Agreement, the Title Document or the
electronic title records for such Financed Vehicle shows the Company or one of
its Subsidiaries named as the original secured party under the related Contract
as the holder of a first priority security interest in such Financed Vehicle; or
(y) was originated less than 180 days prior to the date of this Agreement, the
Title Document or the electronic title records for such Financed Vehicle within
180 days from the date of origination will show the Company named as the
original secured party under the related Contract as the holder of a first
priority security interest in such Financed Vehicle; and
(B) if the related Contract was originated in a state
in which the filing of a financing statement under that state's Uniform
Commercial Code is required to perfect a security interest in motor vehicles,
and (x) was originated 180 days or more prior to the date of this Agreement,
such filings or recordings have been duly made and show the Company named as the
original secured party under the related Contract or (y) was originated less
than 180 days prior to the date of this Agreement, such filings or recordings
within 180 days from the date of origination will be duly made and will show the
Company named as the original secured party under the related Contract. With
respect to each Contract for which the Title Document has not yet been returned
from the registrar of titles in the applicable jurisdiction (or evidenced in the
electronic title records), the Company has written evidence that such Title
Document showing the Company as first lienholder has been applied for.
(ii) The Company or one of its Subsidiaries has good and
marketable title to and is the sole owner of each Contract free of all Liens
other than those created pursuant to a Securitization Agreement or a Warehouse
Agreement and any Lien for unpaid taxes or unpaid storage or repair charges.
(iii) There is no right of rescission, offset, defense or
counterclaim to the obligation of the related Obligor(s) to pay the unpaid
principal and interest due under such Contract; the operation of the terms of
such Contract or the exercise of any right thereunder will not render such
Contract unenforceable in whole or in part or subject such Contract to any right
of rescission, offset, defense or counterclaim, and neither the Company nor any
of its Subsidiaries has Knowledge that such right of rescission, offset, defense
or counterclaim has been asserted or threatened.
(iv) Each Contract, and the sale of the Financed Vehicle sold
thereunder, complied, at the time it was made, in all material respects with all
applicable federal, state and local laws (and regulations thereunder), including
usury, equal credit opportunity, fair credit reporting, truth-in-lending and
other similar laws, the Federal Trade Commission Act, the Fair Debt Collection
Practices Act, the Fair Credit Billing Act, the Xxxxxxxx-Xxxx Warranty Act, the
Federal Reserve Board's Regulations B and Z, the Servicemembers Civil Relief
Act, state
19
adoptions of the National Consumer Act and the Uniform Consumer Credit Code, and
other applicable state laws regulating retail installment sales contracts and
loans in general and motor vehicle retail installment contracts and loans in
particular. Each Contract was acquired from the seller of the Financed Vehicle
(a "Dealer"), which Dealer originated and assigned such Contract without any
fraud or misrepresentation on the part of the Company or any of its
Subsidiaries.
(v) Each Contract is the legal, valid and binding obligation
of the related Obligor(s) thereunder and is enforceable in accordance with its
terms, except only as such enforcement may be limited by bankruptcy, insolvency
or similar laws affecting the enforcement of creditors' rights generally; each
party to such Contract had full legal capacity to execute and deliver such
Contract and all other documents related thereto and to grant the security
interest purported to be granted thereby; the terms of such Contract have not
been waived, amended or modified in any respect, except by instruments that are
part of the related Contract documents, and no such waiver, amendment or
modification has caused such Contract to fail to meet all of the
representations, warranties and conditions, set forth herein with respect
thereto. No Obligor on such Contract is a federal, state or local government
entity.
(vi) Each Contract contains customary and enforceable
provisions such as to render the rights and remedies of the holder or assignee
thereof adequate for the practical realization against the collateral of the
benefits of the security, subject, as to enforceability, to bankruptcy,
insolvency, reorganization or similar laws affecting the enforcement of
creditors' rights generally.
(vii) Except for payment or insurance delinquencies, to the
Knowledge of the Company, (a) there is no default, breach, violation or event
permitting acceleration existing under any Contract, (b) there does not exist
any continuing condition that with notice or lapse of time or both would
constitute a default, breach, violation or event permitting acceleration under
such Contract, and (c) neither the Company nor any of its Subsidiaries has
waived any such default, breach, violation or event permitting acceleration.
(viii) Each Financed Vehicle is covered by Creditors
Comprehensive Single Interest Insurance Policy covering losses with respect to
the Contracts, which policy has been issued by Great American Insurance Company;
each of the Company and its Subsidiaries has at all times complied with all of
the provisions of such insurance policy applicable to it so long as such
insurance policy is in effect.
(ix) Each Contract requires that the related Obligor(s) obtain
and maintain in effect for the related Financed Vehicle a comprehensive and
collision insurance policy (i) in an amount at least equal to the lesser of (x)
its maximum insurable value or (y) the principal amount due from the related
Obligor(s) under such Contract, (ii) naming the Company as a loss payee and
(iii) insuring against loss and damage due to fire, theft, transportation,
collision and other risks generally covered by comprehensive and collision
coverage and the Company has in place a vendor's single interest insurance
policy providing coverage upon repossession of the related Financed Vehicle in
an amount equal to the lesser of the actual cash value of such Financed Vehicle,
the cost of repair or replacement for such Financed Vehicle and the unpaid
balance of the related Contract. Each of the Company and its Subsidiaries has at
all times complied with all of the provisions of such insurance policies
applicable to it.
20
(x) Payments under each Contract have been applied as provided
in the applicable Contract, and are due monthly in substantially equal amounts
through its maturity date sufficient to fully amortize the principal balance of
such Contract by its maturity date.
(xi) There is only one original of each Contract and such
original, together with (a) the original credit application of the Obligor
thereunder; (b) either (i) the original Title Document for the related Financed
Vehicle or a duplicate copy thereof issued or certified by the registrar of
titles which issued the original thereof (or, with respect to certain of the
Financed Vehicles, evidence of the electronic Title Document), together with
evidence of perfection of the security interest in the related Financed Vehicle
granted by such Contract, as determined by the Company to be permitted or
required to perfect such security interest under the laws of the applicable
jurisdiction, or (ii) written evidence that the Title Document for such Financed
Vehicle showing the Company as first lienholder has been applied for; (c) any
agreement(s) modifying the Contract (including any extension agreement(s)); (d)
any documents evidencing or related to any insurance policy with respect to the
Financed Vehicle and (e) any documents specifically relating to the Obligor or
the Financed Vehicle, is being held by the Company or one of its Subsidiaries or
Xxxxxx Records Management.
(xii) At the date of origination of each Contract, the
original principal balance of such Contract was not greater than the purchase
price to the related Obligor(s) (including taxes, warranties, licenses and
related charges) of the related Financed Vehicle.
(xiii) No Obligor under such Contract was in bankruptcy
proceedings at the time of origination of the Contract.
(xiv) Each Contract had an original maturity of not more than
72 months.
(xv) The related Obligor(s) were located in the United States
at the time of origination.
(xvi) The Obligor on each Contract is either (A) a natural
person residing in any state or (B) another entity, provided that a natural
person is a joint and several Obligor with respect to such Contract.
(b) Section 3.13(b) of the Company Disclosure Letter sets forth
schedules (the "Receivables Schedules") of delinquencies, charge-offs and
repossessions, (i) in absolute dollars and (ii) as a percentage of "managed
receivables" as set forth in the financial statements of the Company or its
Subsidiaries, or securitization trusts of the Company or any of its
Subsidiaries, with respect to the Contracts, during the prior (w) 29 days, (x)
30 to 59 days, (y) 60 to 89 days and (z) 90 or more days, in each case as of (A)
June 30, 2004, (B) July 31, 2004 and (C) August 31, 2004.
(c) Section 3.13(c) of the Company Disclosure Letter sets forth (i) the
aggregate number and aggregate amount (in U.S. dollars) of Contracts purchased
by the Company or its Subsidiaries during each month ended (A) July 31, 2004 and
(B) August 31, 2004 and (ii) with respect to each such aggregate amount (in U.S.
dollars), the amount thereof classified under the Company's "Gold" program.
21
(d) Each securitization entity (other than securitization trusts) of
the Company or any Subsidiary of the Company meets the qualifications set forth
in the definition of the term, and accordingly is a, Subsidiary of the Company
as defined in this Agreement.
Section 3.14 Title of Property and Assets. Except as set forth in
Section 3.14 of the Company Disclosure Letter or as would not 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 the Company Annual
Report or acquired since the date thereof, free and clear of all Liens, except
such Liens which do not materially impair the Company's or any such Subsidiary's
ownership or use of such property or assets. With respect to the property and
assets it leases, except as would not have a Material Adverse Effect on the
Company, each of the Company and its Subsidiaries are in compliance with such
leases and all leases to which the Company or any of its Subsidiaries are a
party are in full force and effect and constitute valid and binding obligations
of the Company or the Subsidiary, as the case may be. Except as would otherwise
not have a Material Adverse Effect on the Company, the Company's and each of 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 the Company and its Subsidiaries.
Section 3.15 Real Property.
(a) Set forth in Section 3.15 of the Company Disclosure Letter is a
list of all material leases, subleases, licenses and other agreements
(collectively, the "Real Property Leases") under which the Company or any of its
Subsidiaries 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 Disclosure
Letter, neither the Company nor any of its Subsidiaries 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.
(c) Except as provided in Section 3.15 of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries owns any real property.
(d) Except as set forth in Section 3.15 of the Company Disclosure
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
of its Subsidiaries 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 payable
thereunder has been paid in full, (v) except as set forth in the Real Property
Leases Made Available to Parent, no waiver, indulgence or postponement of any of
the obligations of the Company or any of its Subsidiaries 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
22
Leases under the current material terms thereof will in no way be affected by
the Merger and (viii) there are no material disputes or forbearance programs in
effect, as to any of the Real Property Leases.
Section 3.16 Insurance. Section 3.16 of the Company Disclosure Letter
contains a list of all policies of casualty, liability, theft, fidelity, life
and other forms of insurance held by the Company or any of its Subsidiaries. All
such insurance policies are in the name of the Company or its Subsidiaries, and
all premiums with respect to such policies have been paid when due. All such
policies are in full force and effect, and neither the Company nor any of its
Subsidiaries has received notice of cancellation or termination of any such
policy. To the Knowledge of the Company, since December 31, 2001, neither the
Company nor any of its Subsidiaries has been denied or had revoked or rescinded
any policy of insurance, nor borrowed against any such policies, other than the
receipt of insurance industry standard "non-renewal" letters (none of which have
given rise to the revocation, rescission or termination of any such policy prior
to the end of the policy term) or letters from insurance providers notifying the
Company that such providers are exiting certain risk markets. Except as set
forth in Section 3.16 of the Company Disclosure Letter, no material claim under
any such policy is pending as of the date hereof.
Section 3.17 Business Relations. Except as set forth in Section 3.17 of
the Company Disclosure Letter, neither the Company nor any of its Subsidiaries
has received any written notice from any lender, customer, Dealer, counterparty
to any securitization transaction, consultant, contractor, supplier or vendor
indicating that it intends to terminate or modify its business relationship with
the Company or any of its Subsidiaries, which termination or modification would
have a Material Adverse Effect on the Company.
Section 3.18 Intellectual Property.
(a) Section 3.18(a)(i) of the Company Disclosure Letter contains a list
of all material Intellectual Property (as defined in this Section 3.18(a)) owned
by the Company or any of its Subsidiaries (the "Owned Intellectual Property"),
indicating the owner of each item thereof and those items that have been
registered or are the subject of a pending application. Section 3.18(a)(ii) of
the Company Disclosure Letter contains a list of all material Intellectual
Property used by the Company or any of its Subsidiaries other than the Owned
Intellectual Property (the "Other Intellectual Property"), indicating the
licensee of each item thereof and those items that have been registered or are
the subject of a pending application. All material contracts, sublicenses,
assignments and indemnities which govern rights or obligations of the Company or
any of its Subsidiaries with respect to any Intellectual Property (the
"Intellectual Property Agreements") have been Made Available to Parent. Correct
and complete copies of all written items identified in Sections 3.18(a)(i) and
(ii) of the Company Disclosure Letter have been Made Available to Parent.
"Intellectual Property" means any and all: United States and foreign patents and
patent applications (including continuations, continuations-in-part,
divisionals, provisionals, reissues and re-examinations thereof); registered and
unregistered trade names, trademarks, service names and service marks (and
applications for registration of the same) and all goodwill associated
therewith; copyrights and copyright registrations (and applications for the
same); trade secrets (including know how); computer data; computer programs and
software (in source code and object code form) and firmware and all related
programming, user and systems
23
documentation; proprietary inventions, processes, designs (whether or not
patentable or reduced to practice) and formulae; and all other intellectual
property rights and assets.
(b) The Company and its Subsidiaries own and have, and immediately
after the Effective Time the Surviving Corporation will own and have, the entire
right, title and interest in and to the Owned Intellectual Property and the
unrestricted right, subject to the express provisions of the applicable
Intellectual Property Agreement, to use the Other Intellectual Property, in each
case free and clear of any Liens. The Owned Intellectual Property and Other
Intellectual Property comprise all of the Intellectual Property necessary for,
and the computer software and firmware included therein have all of the
performance capabilities, characteristics and functions described in their
documentation and specifications and as are necessary for, the conduct and
operation of the business of the Company and its Subsidiaries as presently
conducted and as contemplated by the Company to be conducted. The Company
possesses technical documentation relating to computer software that is Owned
Intellectual Property or Other Intellectual Property and such technical
documentation relating to computer software that is Owned Intellectual Property
includes all the source code, system documentation, statements of principles of
operation, schematics, tools and explanation necessary to render such materials
understandable and usable by a computer programmer of reasonable skill. To the
Knowledge of the Company, none of the Owned Intellectual Property or Other
Intellectual Property contains any virus, computer instructions, circuitry or
other technological means intended to disrupt, damage or interfere with
operation of applicable software.
(c) Neither the Company nor any of its Subsidiaries has infringed,
misappropriated or otherwise conflicted with any rights of any Person in respect
of any Intellectual Property. To the Knowledge of the Company, none of the Owned
Intellectual Property or Other Intellectual Property is being infringed or
otherwise used or is available for use by any other Person, except for software
licensed by the Company or any of its Subsidiaries from third parties that was
not developed for the exclusive use of the Company and its Subsidiaries. Neither
the Company nor any of its Subsidiaries has used or incorporated within any of
the Owned Intellectual Property any software that contains or is derived in any
manner from, in whole or in part, any software distributed as free software,
shareware, open source software (e.g., Linux), or under similar licensing or
distribution models, including software licensed or distributed under any of the
following licenses or distribution models: (i) GNU's General Public License
(GPL) or Lesser/Library GPL (LGPL); (ii) the Artistic License (e.g., PERL);
(iii) the Mozilla Public License(s); (iv) the Netscape Public License; (v) the
Berkeley software design (BSD) license including Free BSD or BSD-style license;
(vi) the Sun Public License (SPL); (vii) an Open Source Foundation License
(e.g., CDE and Motif Unix user interfaces); and (viii) the Apache Server
License.
(d) The Intellectual Property Agreements (i) are valid, legal, binding,
enforceable and in full force and effect in accordance with their terms, and no
material default, violation or breach exists thereunder by the Company or any of
its Subsidiaries or, to the Knowledge of the Company, by any other party
thereto, and no event has occurred and is continuing that, with notice or the
passage of time or both, would constitute a default, violation or breach
thereunder by the Company or any of its Subsidiaries or, to the Knowledge of the
Company, any other party, and (ii) are free and clear of all Liens. All
royalties, license fees, charges or other amounts payable by, on behalf of, to
or for the account of the Company or any of its Subsidiaries in
24
respect of any Intellectual Property are disclosed in the consolidated financial
statements of the Company contained in the Company SEC Documents. All such
amounts payable by, on behalf of, or for the account of the Company or any of
its Subsidiaries will be fully paid up as of the Effective Time.
(e) No Claim or demand of any Person has been made, nor is there any
Claim pending or, to the Knowledge of the Company, threatened, which (i)
challenges the rights of the Company or any of its Subsidiaries in respect of
any Intellectual Property, (ii) asserts that the Company or any of its
Subsidiaries is infringing, has misappropriated or is otherwise in conflict
with, or is, except as disclosed in the consolidated financial statements of the
Company contained in the Company SEC Documents, required to pay any royalty,
license fee, charge or other amount with regard to, any Intellectual Property,
or otherwise asserts that a license or other Intellectual Property right is
necessary or desirable for the Company or any of its Subsidiaries to conduct its
business, or (iii) claims that any default exists under any Intellectual
Property Agreement. Since January 1, 2001, none of the Owned Intellectual
Property or, to the Knowledge of the Company, the Other Intellectual Property
has been subject to any outstanding orders, judgments, injunctions, awards or
decrees of any Governmental Entity or has been the subject of any claim, demand,
action, suit, litigation or legal, administrative or arbitration proceeding or
investigation.
(f) Except as set forth in Section 3.18(f) of the Company Disclosure
Letter, each of the Employees, agents, consultants, contractors and others who
has contributed to or participated in the discovery, creation or development of
any Intellectual Property on behalf of the Company or any of its Subsidiaries
("Personnel"): (i) has assigned to the Company or one of its Subsidiaries, or is
under a valid obligation to assign to the Company or one of its Subsidiaries (or
to a Person who is obligated by contract to assign the same to the Company or
one of its Subsidiaries), all right, title and interest in such Intellectual
Property; (ii) is a party to a valid "work-made-for-hire" agreement under which
the Company or one of its Subsidiaries is deemed to be the original owner/author
of all subject matter included in such Intellectual Property; or (iii) to the
extent that Personnel do not have the ability to take any of the actions
described in the foregoing clauses (i) or (ii), has granted to the Company or
one of its Subsidiaries a license or other legally enforceable right granting
the Company or one of its Subsidiaries perpetual, unrestricted and royalty-free
rights to use such Intellectual Property. Immediately after the Effective Time,
the Surviving Corporation and its Subsidiaries shall own all right, title and
interest of the Company and its Subsidiaries under all of the assignments,
agreements, licenses and other arrangements described in the foregoing clauses
(i), (ii) and (iii). Each of the Company and its Subsidiaries has taken all
reasonable, customary and usual precautions, including electronic and physical
security precautions, to protect the secrecy, confidentiality and value of its
trade secrets and confidential information and all third party confidential
information in its possession (the "Protection Program") and, to the Knowledge
of the Company, there has been no material violation of the Protection Program
by any Person.
Section 3.19 Agreements with Governmental Entities. Except as set forth
in Section 3.19 of the Company Disclosure Letter, neither the Company nor any of
its Subsidiaries is subject to any cease-and-desist or other order issued by, or
is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive issued by, or is a
recipient of any
25
supervisory letter from or has adopted any board resolutions at the request of,
any Governmental Entity that restricts the conduct of its business or that in
any manner related to its capital adequacy, its credit policies, its management
or its business (each, a "Company Regulatory Agreement"), nor has the Company or
any of its Subsidiaries been advised since January 1, 1999 by any Governmental
Entity that it is considering issuing or requesting any such Company Regulatory
Agreement.
Section 3.20 Investment Securities. Except for its interests in any of
the Company's Subsidiaries, neither the Company nor any of its Subsidiaries (a)
owns, has any right to acquire or is involved in negotiations to acquire,
directly or indirectly, any capital stock, membership interest, partnership
interest, joint venture interest or other equity interest in any Person or (b)
has the ability to control (whether through the ownership of voting securities
or otherwise) any other Person.
Section 3.21 Interest Rate Risk Management Instruments. Section 3.21 of
the Company Disclosure Letter sets forth the notional amount and fair value of
each interest rate swap, cap, floor and option agreement and other interest rate
risk management arrangement, and such instruments, whether entered into for the
account of the Company or one of its Subsidiaries, were entered into in the
ordinary course of business and with counterparties reasonably believed by the
Company to be financially responsible at the time and are legal, valid and
binding obligations of the Company or one of its Subsidiaries and, to the
Knowledge of the Company, the counterparties, enforceable in accordance with
their terms (except as may be limited by 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), and are in full force and effect. The Company and each of its
Subsidiaries have duly performed in all material respects all of their material
obligations thereunder to the extent that such obligations to perform have
accrued, and, to the Knowledge of the Company, there are no material breaches,
violations or defaults or allegations or assertions of such by any party
thereunder.
Section 3.22 Undisclosed Liabilities. Except for (a) those liabilities
that are fully reflected or reserved for in the consolidated balance sheet of
the Company included in its Quarterly Report on Form 10-Q for the quarter ended
June 30, 2004, as filed with the SEC, (b) liabilities disclosed in Section 3.22
of the Company Disclosure Letter and (c) liabilities incurred since June 30,
2004 (i) in the ordinary course of business consistent with past practice, or
(ii) outside the ordinary course not in excess, in the aggregate (exclusive of
any matter set forth in Section 3.10 of the Company Disclosure Letter), of
$250,000, at June 30, 2004, neither the Company nor any of its Subsidiaries had,
and since such date none of them has incurred, any liabilities or obligations of
any nature whatsoever (whether accrued, absolute, contingent or otherwise and
whether or not required to be reflected in Company's financial statements in
accordance with GAAP).
Section 3.23 Environmental Liability. There are no Claims or
remediation activities of any nature seeking to impose, or that could reasonably
result in the imposition, on the Company or any of its Subsidiaries of any
material liability or obligation arising under common law or under any local,
state or federal environmental statute, regulation or ordinance relating to the
protection of the environment or human health including the Comprehensive
Environmental
26
Response, Compensation and Liability Act of 1980, as amended ("Environmental
Laws"), pending or, to the Knowledge of the Company, threatened against Company
or any of its Subsidiaries. To the Knowledge of Company, there is no reasonable
basis for any such Claim or remediation activity that would impose any material
liability or obligation on the Company or any of its Subsidiaries. The Company
and each of its Subsidiaries is, and has been, in compliance with all applicable
Environmental Laws in all material respects and has no material liability under
any Environmental Law.
Section 3.24 Off-Balance Sheet Financials and Related Documents. Each
of (a) the off-balance sheet financial information with respect to special
purpose entities and related matters as set forth in Section 3.24(a) of the
Company Disclosure Letter and (b) the records and reports with respect to
delinquencies and static pool losses that have been delivered to Parent or its
financial advisors prior to the date of this Agreement are accurate and correct
in all material respects.
Section 3.25 State Takeover Statutes. No state "fair price," "control
share acquisition," "business combination moratorium" or other state takeover
statute is applicable to the Merger or the other transactions contemplated by
this Agreement.
Section 3.26 Rights Agreement. The Company has taken all action
necessary to render the Series A Participating Preferred Stock purchase rights
issued pursuant to the Rights Agreement, dated as of July 8, 1997, between the
Company and American Stock Transfer and Trust Company, as Rights Agent (the
"Rights Agreement") inapplicable to the Merger. Without limiting the generality
of the foregoing, the Rights Agreement has been amended by all necessary action
to (a) render the Rights Agreement inapplicable to this Agreement and the Merger
and (b) ensure that (i) none of Parent or Sub or their respective Affiliates (as
defined in Section 7.1(h)) is or will be an "Acquiring Person" (as defined in
the Rights Agreement) by virtue of the execution, delivery, announcement or
performance of this Agreement or the Merger and (ii) none of a "Distribution
Date", a "Shares Acquisition Date", or a "Triggering Event" (as such terms are
defined in the Rights Agreement) occurs by reason of the execution, delivery,
announcement, consummation or performance of this Agreement or the Merger.
Section 3.27 Opinion of Financial Advisor. The Company has received the
written opinion of Relational Advisors LLC, dated as of September 20, 2004, to
the effect that, as of September 20, 2004, the Merger Consideration is fair to
the Company's stockholders from a financial point of view (the "Fairness
Opinion").
Section 3.28 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 3.29 Brokers. No broker, investment banker or other Person 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.
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Section 3.30 Accounting and Disclosure Controls; SOXA Compliance.
(a) Each of the Company and its Subsidiaries maintains a system of
accounting controls sufficient to provide reasonable assurances that: (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of the consolidated financial statements of the Company in conformity with GAAP
and to maintain accountability for assets; (iii) access to assets is permitted
only in accordance with management's general or specific authorization; (iv) the
reporting of assets is compared with existing assets at regular intervals and
appropriate action is taken with respect to any differences; (v) material
information relating to the Company and its Subsidiaries is promptly made known
to the officers responsible for establishing and maintaining the system of
internal control over financial reporting; and (vi) any significant deficiencies
or material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to materially and adversely
affect the ability to record, process, summarize and report financial
information, and any fraud whether or not material that involves management or
other employees who have a significant role in respect of internal control over
financial reporting, are adequately and promptly disclosed to the independent
auditors and the audit committee of the Board of Directors of the Company.
(b) The Company maintains disclosure controls and procedures required
by Rule 13a-15 or 15d-15 under the Exchange Act; such controls and procedures
are effective to ensure that all material information concerning the Company and
its Subsidiaries is made known on a timely basis to the individuals responsible
for the preparation of the Company's filings with the SEC and other public
disclosure documents. Section 3.30(b) of the Company Disclosure Letter lists,
and the Company has Made Available to Parent copies of, all written descriptions
of, and all policies, manuals and other documents promulgating, such disclosure
controls and procedures. To the Knowledge of the Company, each director and
executive officer of the Company has filed with the SEC on a timely basis all
statements required by Section 16(a) of the Exchange Act since December 31,
2001.
(c) The Company is in compliance in all material respects with all
provisions of SOXA applicable to the Company. "SOXA" means the Xxxxxxxx-Xxxxx
Act of 2002, including all rules and regulations relating thereto.
Section 3.31 Material Contracts; Dealer Agreements; Securitization
Agreements.
(a) The agreements filed as exhibits to the Company Annual Report and
the Company Quarterly Reports (or incorporated as exhibits thereto by reference)
together with the agreements entered into by the Company or any of its
Subsidiaries since June 30, 2004 listed in Section 3.31(a) of the Company
Disclosure Letter constitute all the agreements and contracts required to be
filed by the Company with the SEC as material contracts pursuant to Item 601 of
Regulation S-K under the Securities Act (collectively, the "Material
Contracts"). Except as set forth in Section 3.31(a) of the Company Disclosure
Letter or disclosed in the Company SEC Documents filed with the SEC prior to the
date of this Agreement, none of the Company or any of its Subsidiaries is a
party to or bound by any agreement evidencing, or guarantee relating to,
indebtedness for borrowed money in an aggregate outstanding principal amount
exceeding $250,000.
28
(b) Section 3.31(b)(i) of the Company Disclosure Letter lists each
agreement between the Company or any of its Subsidiaries, on the one hand, and
any Dealer, on the other hand (each such agreement, a "Dealer Agreement").
Except as set forth in Section 3.31(b)(ii) of the Company Disclosure Letter,
each Dealer Agreement conforms in all material respects to the form dealer
agreements delivered to Parent prior to the date of this Agreement.
(c) Section 3.31(c) of the Company Disclosure Letter lists each
securitization agreement to which the Company or any of its Subsidiaries, or any
securitization trust of the Company or any of its Subsidiaries, is a party (the
"Securitization Agreements").
(d) Section 3.31(d) of the Company Disclosure Letter lists each
warehouse agreement and residual line to which the Company or any of its
Subsidiaries is a party (respectively, the "Warehouse Agreements" and "Residual
Lines").
(e) Neither the Company or any of its Subsidiaries, nor, to the
Knowledge of the Company, any other Person, is in default, violation or breach
in any respect under any Material Contract, Securitization Agreement, Warehouse
Agreement or Residual Line, and no event has occurred and is continuing that
constitutes a violation of, or default (with or without notice or lapse of time,
or both) under, or gives any Person a right of termination, cancellation or
acceleration of any obligation under or shall cause the loss of a material
benefit under any Material Contract, Securitization Agreement, Warehouse
Agreement or Residual Line. Neither the execution, delivery and performance of
this Agreement nor the consummation of the transactions contemplated hereby
shall result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give to any Person a right of termination, cancellation
or acceleration of any obligation under or cause the loss of a material benefit
under any Material Contract, Securitization Agreement, Warehouse Agreement or
Residual Line and each Material Contract, Securitization Agreement, Warehouse
Agreement and Residual Line shall continue in full force and effect in
accordance with its terms following the consummation of the transactions
contemplated hereby.
(f) Neither the Company or any of its Subsidiaries, nor, to the
Knowledge of the Company, any other Person, is in default, violation or breach
in any respect under any Dealer Agreement, and no event has occurred and is
continuing that constitutes a violation of, or default (with or without notice
or lapse of time, or both) under, or gives any Person a right of termination,
cancellation or acceleration of any obligation under or shall cause the loss of
a material benefit under any Dealer Agreement, other than any such violation,
default, right or loss that, individually or in the aggregate, would not have a
Material Adverse Effect on the Company. Neither the execution, delivery and
performance of this Agreement nor the consummation of the transactions
contemplated hereby shall result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to any Person a right
of termination, cancellation or acceleration of any obligation under or cause
the loss of a material benefit under any Dealer Agreement and each Dealer
Agreement shall continue in full force and effect in accordance with its terms
following the consummation of the transactions contemplated hereby, except as
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
29
ARTICLE 4
COVENANTS RELATING TO COMPANY CONDUCT OF BUSINESS
Section 4.1 Company Conduct of Business Pending the Merger. Except as
expressly permitted by this Agreement, 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 Disclosure 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:
(a) (i) 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, (ii) 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 (iii) 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; provided, however, that the Company may declare and pay during its
fiscal quarter ending December 31, 2004, a dividend of no more than $0.25 per
share of Company Common Stock if, and only if, the Company's net income
(determined in accordance with GAAP applied in a manner consistent with the
audited financial statements included in the Company Annual Report) for its
fiscal quarter ending September 30, 2004 is greater than or equal to $4.13
million.
(b) 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 the issuance of shares of Company Common Stock upon the
exercise of Company Stock Options;
(c) amend its charter or bylaws or other comparable charter or
organizational documents;
(d) merge or consolidate with or effect any business combination with
any person, business, corporation, limited liability company, partnership,
association or other business organization or entity (a "Person") or division
thereof;
(e) acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets of or equity in, or by any
other manner, any Person or division thereof or (ii) 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;
30
(f) 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 or in connection with the Company's securitization
program;
(g) sell any securitization residuals (including any B piece) at a
price, prior to any selling expenses, which is less than the par value for such
residuals;
(h) 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 (i) indebtedness or guarantees in
the ordinary course of business and (ii) loans, advances, capital contributions
and other investments between the Company and any of its Subsidiaries or between
Subsidiaries of the Company;
(i) 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;
(j) increase the compensation (including bonuses, profit sharing and
pension benefits) payable or to become payable to any of its Employees other
than cash bonus payments for fiscal year 2004 consistent with the Company's past
practice and consistent with the information provided to Parent by the Company
prior to the date of this Agreement;
(k) other than in the ordinary course of business consistent with past
practices of the Company, terminate or amend any Dealer Agreement or otherwise
materially modify the terms of its relationship with any Dealer;
(l) change the Company's independent public accountants or make any
change in accounting methods or policies of the Company except as required by
the Financial Accounting Standards Board (FASB);
(m) make any tax election not in the ordinary course of business;
(n) change, in any material respect, any of the Company's credit
policies or hedging strategies; or
(o) 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 Subsidiaries or any of its
or their officers, directors or employees or any investment banker, financial
advisor, attorney, accountant, agent or other representative retained by it or
by any of its 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
31
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 in
connection with an unsolicited bona fide Takeover Proposal involving the Company
by such Person, 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 (as confirmed in writing) of outside legal counsel of the Company,
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, such Board of Directors receives from such Person an executed
confidentiality agreement similar in form and substance to the Confidentiality
Agreement (as defined in Section 5.3). 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 15% or greater equity interest in, 15% or more of the voting
securities of, or 15% 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 securitization related transaction entered into by the Company or
any of its Subsidiaries in the ordinary course of business.
(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 and any material changes thereto.
ARTICLE 5
ADDITIONAL AGREEMENTS
Section 5.1 Company Stockholder Meeting. The Company shall, 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
shall, through its Board of Directors, recommend to its stockholders approval of
this Agreement, shall use its reasonable best 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 written advice of outside legal 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
applicable law.
Section 5.2 Preparation of the Proxy Statement; Fairness Opinion.
32
(a) The Company shall promptly (i) prepare, and provide Parent
reasonable opportunity to review and provide comments to, the Proxy Statement
and (ii) file the Proxy Statement with the SEC. The Company shall use its
reasonable best efforts to mail the Proxy Statement to its stockholders as soon
as practicable thereafter.
(b) The Company shall provide to Parent a copy of the Fairness Opinion
prior to mailing the Proxy Statement to the Company's stockholders.
Section 5.3 Access to Information; Meetings with Company Officers.
(a) 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, 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 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, (ii) a copy of the unaudited financial statements of
the Company for each month ended during such period, in each case within 15 days
after the last day of each such month ended and (iii) all other information
concerning its business, properties and personnel as Parent may reasonably
request. All information obtained pursuant to this Section 5.3 shall be kept
confidential in accordance with the Confidentiality Agreement, dated July 26,
2004 between Capital One Financial Corporation and the Company (the
"Confidentiality Agreement").
(b) During the period from the date of this Agreement through the
Effective Time, the Company shall permit Parent's officers and executives to
meet with officers and executives of the Company responsible for the
consolidated financial statements (including, in each case, any notes thereto)
of the Company included in the Company SEC Documents, the internal controls of
the Company and the disclosure controls and procedures of the Company to discuss
such matters as Parent may deem reasonably necessary or appropriate for Capital
One Financial Corporation, Parent or the Company to satisfy obligations under
Sections 302 and 906 of SOXA.
(c) Notwithstanding anything to the contrary in this Section 5.3, the
Company shall only, in response to a request by Parent pursuant to this Section
5.3, be required to prepare analyses or conduct investigations to develop
information or material that is not available at the time of such request, and
will not become available in the ordinary course of the Company's business, if
such preparation or investigation would not be materially and unreasonably
burdensome to the Company.
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
33
transactions contemplated hereby including the fees and disbursements of counsel
and accountants and all financing commitment fees, shall be paid by the party
incurring such costs and expenses, provided that all printing and mailing
expenses and all filing fees (including filing fees under the Exchange Act and
the HSR Act) and all fees and expenses incurred with respect to communication
with the Company's stockholders and option holders in connection with this
Agreement and the transactions contemplated hereby shall be paid 50% by Parent
and 50% by the Company promptly when due.
(b) Notwithstanding any provision in this Agreement to the contrary, if
this Agreement is terminated by (i) the Company pursuant to Section 7.1(g), (ii)
Parent pursuant to Section 7.1(h), (iii) either the Company or Parent pursuant
to Section 7.1(f) and a Takeover Proposal involving the Company was made prior
to the time of the Company Stockholder Meeting or any adjournment or
postponement thereof, as applicable, or is announced within 180 days thereafter,
(iv) either the Company or Parent pursuant to Section 7.1(d) and a Takeover
Proposal involving the Company was made prior to such termination and was a
contributing cause of such failure to effect the Merger by the date specified in
Section 7.1(d) or (v) Parent pursuant to Section 7.1(b) or 7.1(c), then, in each
case, the Company shall pay to Parent a fee of $9,000,000 in cash. In the case
of such a termination of this Agreement by the Company, such payment shall be
made no later than, and shall be a condition to the validity of, such
termination. In the case of such a termination of this Agreement by Parent, such
payment shall be made promptly, but in no event later than, the third day
following such termination.
(c) Further, notwithstanding any provision in this Agreement to the
contrary, if this Agreement is terminated by the Company pursuant to Section
7.1(b) or 7.1(c), then Parent shall pay to the Company a fee of $9,000,000 in
cash.
Section 5.5 Reasonable Best Efforts.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties hereto agrees to use its 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: (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 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 the HSR Act); (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) executing and delivering 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.
34
(b) Each party hereto shall use its reasonable best efforts not to 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.
Section 5.6 Public Announcements. Parent and the Company shall 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 may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
minimize the effects of any such statute or regulation on the transactions
contemplated hereby.
Section 5.8 Indemnification; Directors and Officers Insurance.
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to indemnify and hold harmless all past and present officers and
directors 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 and the Company Bylaws,
as in effect immediately prior to the Effective Time, and under applicable laws.
(b) 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 policy (the "D&O Insurance Tail"); provided, however, that
the Company, Parent and the Surviving Corporation shall not be required to pay
more than 250% of the Company's last annual premium for its directors and
officers insurance policy 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
35
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 12-1/2% Subordinated Notes. The Company shall cause all of
the 12-1/2% Subordinated Notes due June 15, 2006 (the "Notes") under that
certain Indenture dated as of April 17, 2000 among the Company, as issuer, and
Bankers Trust Company, as trustee (the "Indenture") to be redeemed as of the
Closing pursuant to the terms of the Indenture in such a manner that no Default
(as defined in the Indenture) or Event of Default (as defined in the Indenture)
shall occur as a result of the Merger or the other transactions contemplated
hereby, including the delisting of the Company Common Stock from the NASDAQ
Stock Market. Parent shall make available to the Company the funds necessary to
redeem the Notes when and as necessary, but in no event prior to the Effective
Time.
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) HSR. Any waiting period (and any extension thereof), or notice or
filing period applicable to the consummation of the Merger under the HSR Act
shall have expired or been terminated.
(c) Authorizations and Consents. All authorizations, consents, orders,
declarations or approvals of, or filings with, or terminations or expirations of
waiting periods imposed by, any Governmental Entity, including the Federal
Reserve Board, which the failure to obtain, make or occur would have the effect
of making the Merger or any of the transactions contemplated hereby illegal or
would have, individually or in the aggregate, a Material Adverse Effect on
Parent (assuming the Merger had taken place) ("Governmental Approvals"), shall
have been obtained, shall have been made or shall have occurred. All necessary
state securities or Blue Sky authorizations shall have been received.
(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 under 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.
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
condition:
36
(a) 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 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 an 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 and its Chief
Financial Officer to such effect.
(b) Consents. The Company shall have obtained (i) the consent or
approval of each Person that is not a Governmental Entity whose consent or
approval shall be required in connection with the transactions contemplated
hereby under any loan or credit agreement, note, mortgage, indenture, lease or
other agreement or instrument by which the Company or any of its Subsidiaries is
bound, except as to which the failure to obtain such consents and approvals
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company, the Surviving Corporation or Parent and (ii) each consent
identified in Section 6.3(b) of the Company Disclosure Letter.
(c) Estoppel Certificate. The Company shall have obtained an estoppel
certificate in form reasonably satisfactory to Parent from the landlord of the
Company's Foothill Ranch, California facility.
37
(d) Dissenting Shares. The aggregate number of Dissenting Shares shall
not exceed 5% of the total number of Company Common Shares outstanding
immediately prior to the Effective Time.
(e) Employment Agreements. Each of the employment agreements dated as
of the date hereof between Parent or the Surviving Corporation, as the case may
be, on the one hand, and the respective individuals identified in Section 6.3(e)
of the Company Disclosure Letter, on the other hand, shall be in full force and
effect immediately prior to the Effective Time and none of such individuals
shall have terminated his or her respective agreement or have breached the terms
thereof.
(f) Opinion of Counsel. Xxxxxxx Xxxxx LLP, legal counsel to the
Company, shall have provided an opinion to Parent, dated as of the date of
Closing, substantially in the form of Exhibit B hereto.
(g) Secretary's Certificate. Parent shall have received a certificate,
dated as of the date of Closing, of the secretary of the Company, in form and
substance reasonably satisfactory to Parent, certifying (i) the Company Charter
and the certificate of incorporation of each of the Company's Subsidiaries, (ii)
the Company Bylaws and the bylaws of each of the Company's Subsidiaries, (iii) a
certificate of good standing for each of the Company and its Subsidiaries duly
certified by the Secretary of State of the State of Delaware and (iv) the
incumbency of each individual authorized to execute this Agreement on behalf of
the Company.
(h) 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 hereby which is reasonably likely to result
in a Material Adverse Effect on the Company or Parent.
(i) Dissolution of CU Acceptance Corporation. Notwithstanding the
covenants set forth in Section 4.1, CU Acceptance Corporation, a Delaware
corporation and Subsidiary of the Company, shall have been dissolved prior to
the Effective Time, and such dissolution shall have been effected pursuant to
(i) the unanimous consent of CU Acceptance Corporation's Board of Directors and
(ii) the approval of CU Acceptance Corporation's stockholders.
(j) Certain Market Events. Since the date of this Agreement there shall
not have been (i) any banking moratorium declared or in effect in the United
States, (ii) any significant suspension or material limitation of trading in
securities generally on the New York Stock Exchange, or any setting of minimum
prices for trading thereon, or any suspension of trading of any securities of
the Company by the NASDAQ Stock Market or the SEC or (iii) any outbreak or
material escalation of major hostilities or any other substantial national or
international calamity or emergency if, in the reasonable judgment of Parent,
the effect of any such outbreak, escalation, calamity or emergency on the United
States financial markets makes it impracticable or inadvisable to proceed with
the transactions contemplated hereby.
(k) Material Adverse Effect. Since the date of this Agreement, there
shall have been no events, changes, circumstances or effects that, individually
or in the aggregate, have had or
38
could reasonably be expected to have a Material Adverse Effect on the Company or
the Surviving Corporation.
(l) Governmental Approvals. No Governmental Approvals impose
conditions, restrictions, requirements or limitations that would have,
individually or in the aggregate, a Material Adverse Effect on Parent.
ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. Subject to Sections 5.4(b) and 5.4(c), 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;
(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 the Merger has not been effected on or
prior to the close of business on the date that is 180 days after the date of
this Agreement; provided, however, that the right to terminate this Agreement
pursuant to this Section 7.1(d) 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;
(e) by Parent or the Company if 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;
(f) 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(f) 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
39
manner that could reasonably have caused the failure of the stockholder approval
to be obtained at the Company Stockholder Meeting;
(g) by the Company on or after the tenth calendar day after the Company
has notified Parent in writing that the Board of Directors of the Company has
determined that a Takeover Proposal involving the Company constitutes a Superior
Proposal; provided, that, as of such tenth calendar day after the Company has so
notified Parent, the Board of Directors of the Company continues to believe in
its good faith judgment, after taking into consideration any changes in the
terms of the transactions contemplated by this Agreement that have been proposed
by Parent on or prior to such date, that such Takeover Proposal involving the
Company continues to constitute a Superior Proposal. For purposes of this
Agreement "Superior Proposal" means a Takeover Proposal involving the Company
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 transactions
contemplated by this Agreement; or
(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 modified or withdrawn its recommendation, approval or adoption of the
Merger or this Agreement, or shall have resolved to do so, (ii) any Person
(other than Parent or its Affiliates) acquires or becomes the beneficial owner
of 20% 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 20% 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 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). As used herein,
"Affiliate" shall have the meaning set forth in Rule 405 under the Securities
Act.
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 Section 5.4 and Article
8, 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
40
Meeting, but, after any such approval, no amendment shall be made which by law
requires further approval by such stockholders. 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 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
Capital One Auto Finance, Inc.
0000 X. Xxxxxx Xxxxxxx
Xxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
and to:
Capital One Financial Corporation
0000 Xxxxxxx Xxx Xxxxx
XxXxxx, Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxxx, Xx.
Facsimile No.: (000) 000-0000
41
with a copy to:
Mayer, Brown, Xxxx & Maw LLP
000 X. XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
Onyx Acceptance Corporation
00000 Xxxxx Xxxxxx Xxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxx LLP
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
Section 8.3 Interpretation. When a reference is made in this Agreement
to an Article or a Section, such reference shall be to an Article or 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 two or more
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, the Company Disclosure Letter 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 Section 5.8 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.
42
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
Wilmington, 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 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 may 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
43
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.
CAPITAL ONE AUTO FINANCE, INC.
By: /s/ Xxxxx X. Xxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President and Chief Executive Officer
FOOTHILL SERVICES CORPORATION
By: /s/ Xxxxx X. Xxxxxx
------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman, President and Chief
Executive Officer
ONYX ACCEPTANCE CORPORATION
By: /s/ Xxxx X. Xxxx
------------------------------------------
Name: Xxxx X. Xxxx
Title: President and Chief Executive Officer
44
EXHIBIT A
Stockholders of the Company entering into voting agreements with
Parent:
1. Xxxx X. Xxxx
2. Xxxxxxx X. Xxxxxxxx
3. Xxx X. Xxxxx
4. Xxxx X. Xxxxxxx
5. Xxxxxxx X. Krahelski
6. Xxxxxx Xxxxxxx
7. Xxxx Xxxxx
8. Xxxxx X. Xxxxxxxxxx
9. Xxxxx X. XxxXxxxx
10. Xxxxx Xxxxxxx
11. Xxxxx Xxxxxxxx
EXHIBIT B
[XXXXXXX XXXXX LLP LETTERHEAD]
[To be rendered in substantially the following form, subject to typical
qualifications and final approval by AK Opinion Committee]
_________ __, 200__
[PARENT]
[____________]
[____________]
Ladies and Gentlemen:
We have acted as counsel to [FOOTHILL], a Delaware corporation (the
"Company") in connection with the negotiation, execution and delivery of the
Agreement and Plan of Merger dated as of September __, 2004 among [PARENT], a
________ corporation ("Parent"), [MERGER SUB], a Delaware corporation ("Sub")
and the Company (the "Merger Agreement"). Capitalized terms used but not defined
herein shall have the meaning assigned to them in the Merger Agreement.
We are of the opinion that:
1. The Company is a corporation, validly existing and in good standing
under the laws of the State of Delaware.
2. Each Subsidiary of the Company is, validly existing and in good
standing under the laws of the jurisdiction in which it is organized.
3. The Company has all requisite corporate power to enter into the
Merger Agreement and, subject to approval by the stockholders of the Company of
the Merger Agreement, to consummate the transactions contemplated thereby.
4. The execution and delivery of the Merger Agreement by the Company
and the consummation by the Company of the transactions contemplated thereby
have been duly authorized by all necessary corporate action on the part of the
Company.
5. The execution and delivery of the Merger Agreement by the Company
does not, and the consummation of the transactions contemplated thereby and
compliance with the provisions thereof by the Company will not, result in any
violation of (a) the Company Charter or the Company Bylaws or (b) any provision
of the comparable charter or organization documents of any of the Company's
Subsidiaries.
6. 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 the Merger Agreement by the Company or is necessary for the consummation of
the Merger and the other transactions contemplated by the Merger Agreement,
except for (i) in connection, or in compliance, with the provisions of the
HSR Act and the Exchange Act, (ii) applicable bank holding company regulatory
approval, (iii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate related documents with the
relevant authorities of other states in which the Company or any of its
Subsidiaries is qualified to do business, (iii) applicable requirements, if any,
of The Nasdaq Stock Market, and (iv) other filings and registrations the failure
of which to obtain would not have a Material Adverse Effect.
We have furnished this opinion pursuant to Section 6.3(f) of the Merger
Agreement.
Very truly yours,
Xxxxxxx Xxxxx LLP
2
