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AGREEMENT
FOR
PURCHASE AND SALE OF STOCK
dated October 27, 1997
by and among
AMERICAN BUSINESS FINANCIAL SERVICES, INC.,
XXXXXXX X. XXXXX
and
XXXX X. XXXXX
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AGREEMENT
FOR
PURCHASE AND SALE OF STOCK
THIS AGREEMENT is made and entered into this 27th day of October, 1997,
by and among American Business Financial Services, Inc., a Delaware corporation
("ABFS" or "Buyer") and Xxxxxxx X. Xxxxx and Xxxx X. Xxxxx (each a "Shareholder"
and collectively "Shareholders").
WHEREAS, each Shareholder is the record and beneficial owner of 475
shares of Common Stock, no par value per share, of New Jersey Mortgage and
Investments, Corp., a New Jersey corporation ("NJMIC" or the "Company"), which
950 shares of Common Stock (the "Stock"), constitute all of the issued and
outstanding capital stock of NJMIC;
WHEREAS, the Company is engaged in the businesses of (a) being a lender
which offers a broad range of products, including FNMA/FHLMC first mortgages,
FHA/VA loans, mixed-use/multi-family loans as well as first and second lien
non-conforming sub-prime home-equity loans; and (b) through its wholly-owned
subsidiary, Federal Leasing Corp, a New Jersey corporation ("FLC"), leases
capital equipment for medical, industrial and commercial use (collectively the
"Business");
WHEREAS, Buyer desires to purchase and Shareholders desire to sell to
Buyer all, but not less than all, of the Stock, upon the terms and conditions
set forth herein;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements herein contained, intending to be legally bound hereby,
the parties agree as follows:
ARTICLE
THE TRANSACTION
On and subject to the terms and conditions of this Agreement,
Shareholders agree to sell, transfer, assign and deliver to Buyer, and Buyer
agrees to purchase, accept, assume and receive, all right, title and interest in
and to the Stock at the Closing, free and clear of any and all liens,
encumbrances, pledges, security interests, mortgages, restrictive agreements or
claims of any nature whatsoever.
ARTICLE I
CONSIDERATION FOR TRANSFER
1.1. Consideration. The aggregate consideration to be paid by Buyer to
Shareholders for the Stock shall consist of the following:
(a) Closing Payment. At Closing, Buyer shall pay Shareholders
the following: $11,000,000 in aggregate by wire transfer of immediately
available funds to one or more accounts specified by Shareholders and a number
of whole shares of ABFS, par value $.001 per share, common stock ("ABFS Common
Stock") obtained by dividing $500,000 by the "Fair Market Value" of ABFS Common
Stock (collectively the "Closing Payment"). For purposes of the foregoing, the
"Fair Market Value"of ABFS Common Stock will be determined by averaging the
closing prices for ABFS Common Stock on the stock market where such stock is
then traded for the ten (10) trading days (i.e., days in which trades occurred)
ending on the second trading day before Closing. Fractional shares of ABFS
Common Stock will not be issued but any fractional shares obtained by the above
formula shall be rounded-up to the nearest whole share. The shares of ABFS
Common Stock will not be registered under the Securities Act of 1933 (as
amended) and applicable state securities laws, and will not be transferable by
either Shareholder for a period of three (3) years following the Closing Date
without the prior written consent of the Company which consent shall not be
unreasonably withheld. At the end of such three-year period, to the extent that
either Rule 144 or another exemption is not then available to allow the
Shareholders to freely transfer said stock, the Buyer shall take all such steps
as may be reasonably necessary (including without limitation registering such
stock, if necessary) to make such stock freely transferable.
(b) Collection Payment and Collection Payment Interest.
(i) Buyer shall pay Shareholders by wire transfer of
immediately available funds up to an aggregate amount not to exceed $5,000,000
(the "Collection Payment") as follows:
Beginning six (6) months from the Closing
Date and for each of the next five (5) six-month periods thereafter (the
"Collection Payment Periods") (i.e. a total of six (6) Collection Payment
Periods), Buyer shall pay to Shareholders by wire transfer of immediately
available funds to one or more accounts specified by Shareholders within ten
(10) business days (subject to Section 2.1(e) hereof) of the end of each
Collection Payment Period an amount calculated as follows:
The amount of $833,333.33 (the "Base Amount") (i) reduced by
the amount of any excess of the sum of any Amount in Default
for the current Collection Payment Period and any Accrued
Amount in Default for the immediately prior Collection Payment
Period (which number shall be zero for the first Collection
Payment Period) over $166,666.66 and (ii) increased by the sum
of any Recoveries and any Carryover Loan Loss Reserve
(collectively the net of (i) over (ii) above "Adjustments to
the Base Amount"); provided, however, such Collection Payment
during any Collection Payment Period may not exceed the sum of
the Base Amount and the Recoveries.
For purposes of this Section, "Collection
Payment Assets" is defined as: (i) all leases owned by NJMIC and/or its
Subsidiaries and any assets on the books and records of NJMIC as a result of
lease securitizations, on September 30, 1997, (ii) all loans owned by NJMIC
and/or its Subsidiaries and any assets on the books and records of NJMIC as a
result of loan securitizations, each on September 30, 1997, and (iii) as
otherwise set forth, in each case, on Exhibit "A".
For purposes of this Section, "Amount in
Default" is defined as the book value of the Collection Payment Assets which
are, at the end of each Collection Payment Period, contractually past due for
ninety (90) days or more or, in the case of Collection Payment Assets that are
not loans or leases, the amount of any negative adjustment in book value due to
the performance or evaluation of the underlying assets; such book value to be
determined as of the date a Collection Payment Asset becomes ninety (90) days or
more past due. With respect to Amounts in Default, Shareholders shall have the
right but not the obligation to service such Collection Payment Assets included
in Amounts in Default; provided that if and to the extent that the Shareholders
do not elect to service such assets, the Company will service such assets at its
location and using its personnel in the ordinary course of business consistent
with similar assets of the Company.
For purposes of this Section, "Recoveries"
is defined as the cash received from the Collection Payment Assets reduced by
out-of-pocket collections costs, which Collection Payment Assets have been
previously included in Amounts in Default but which have subsequently been
collected in any given Collection Payment Period plus, in the case of Collection
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Payment Assets that are not loans or leases, the amount of any positive
adjustment in book value due to the performance or evaluation of the underlying
assets.
For purposes of this Section, "Accrued
Amount in Default" is defined as the excess, if any, of the Adjustments to the
Base Amount over the Base Amount for any given Collection Payment Period.
For purposes of this Section, "Carryover
Loan Loss Reserve" for any given Collection Payment Period is defined as any
amount in excess of $166,666.66 over the sum of any Amount in Default for such
Collection Payment Period and any Accrued Amount in Default for the previous
Collection Payment Period.
(ii) Buyer shall pay Shareholders by wire transfer
of immediately available funds, interest at eight percent (8%) per annum simple
interest ("Collection Payment Interest") in arrears, on a month-to-month basis,
on the amount equal to $5,000,000 reduced on each Collection Payment Date by
$833,333.33.
(c) Earnout Payment. Buyer shall pay Shareholders up to an
aggregate amount not to exceed $4,000,000 (the "Earnout Payment") as follows:
$4,000,000 earned based on NJMIC non-conforming mortgage
originations (i.e. mortgages originated by NJMIC employees on the Closing Date
and/or their replacements or successors) for each year of the three-year period
("Earnout Payment Periods") following Closing to Shareholders by wire transfer
of immediately available funds to one or more accounts specified by Shareholders
payable up to one-third of such amount within (10) business days (subject to
Section 2.1(f) hereof) of the end of each Earnout Payment Period. The amount of
the Earnout Payment which shall be payable for each of the three years following
Closing is as follows:
Amount of Non-Conforming Mortgages Originated
(i.e. Non-Conforming Mortgages Closed and Funded)
During the First Year Following Closing Additional
(i.e. October 1, 1997 to September 30, 1998) Consideration Payable
-------------------------------------------------------- ---------------------------------------------------
$138,000,000 or more $1,333,334
Less than $138,000,000 $ 0
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Amount of Non-Conforming Mortgages Originated
(i.e. Non-Conforming Mortgages Closed and Funded)
During the Second Year Following Closing Additional
(i.e. October 1, 1998 to September 30, 1999) Consideration Payable
-------------------------------------------------------- ---------------------------------------------------
$156,000,000 or more $1,333,334
Less than $156,000,000 A pro rata portion of $1,333,334 which
but equal to or more than $138,000,000 is based on the amount that
the non-conforming mortgages actually
originated during such period is in excess of
$138,000,000 bears to $18,000,0000.
Less than $138,000,000 $ 0
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Amount of Non-Conforming Mortgages Originated
(i.e. Non-Conforming Mortgages Closed and Funded)
During the Third Year Following Closing Additional
(i.e. October 1, 1999 to September 30, 2000) Consideration Payable
-------------------------------------------------------- ---------------------------------------------------
$169,000,000 or more $1,333,334
Less than $169,000,000 A pro rata portion of $1,333,334 which is based on
but equal to or more than $148,200,000 the amount that the non-conforming mortgages
actually originated during such period is in
excess of $148,200,000 bears to $20,800,000.
Less than $148,200,000 $ 0
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If the Non-Conforming Mortgage Originations during either Year
1 or Year 2 following the Closing are less than the amount necessary to earn the
maximum Earnout Payment but in the case of Year 1 more than $100,000,000 and in
the case of Year 2 more than $138,000,000, any such shortfall (the "Shortfall")
shall be carried over to in the case of Year 1 to Year 2, and if necessary, Year
3, and in the case of Year 2 to Year 3 so that if in Year 2 Non-Conforming
Mortgage Originations exceed $156,000,000 and in Year 3 exceed $169,000,000, any
Non-Conforming Mortgage Originations in excess of such $156,000,000 or
$169,000,000, as the case may be, (the "Excess") shall be applied against any
Shortfall in Year 1 and/or Year 2, as the case may be, and the Shareholders
shall be entitled to be paid a pro rata portion of any Earnout Payment for Year
1 and/or Year 2, as the case may be, that was not paid (the "Unpaid Earnout
Payment") to the Shareholders because of the Shortfall in an amount which equals
the Unpaid Earnout Payment multiplied by a fraction (not greater than one) which
is the Excess over the Shortfall.
NJMIC will establish underwriting standards, loan procedures
and processes to be employed originating loans. The underwriting standards and
loan procedures and processes to be employed by NJMIC during the Earnout Payment
Period shall not be required to be more stringent than that used by ABFS for
similar type mortgages underwritten by ABFS which are to be securitized and no
more stringent for mortgages that are not to be securitized than those for
similar loans with similar borrowers in the lending area subject to mutually
agreed upon changes; provided, however, if such changes cannot be mutually
agreed upon, such underwriting standards and loan procedures and processes shall
be no more stringent than those for similar loans with similar borrowers in the
lending area.
In the event Xxxx Xxxxx is terminated "without cause" under
his Employment Agreement with Buyer then, and only then, will the
"Non-Conforming Mortgage Origination" contingency set forth above not be
applicable in which event the maximum Earnout Payment shall be paid in full on
the applicable Earnout Payment Date; provided, however that the Earnout Payments
shall still remain subject to Buyer's rights of set-off as set forth in Article
X hereof.
(d) Payment of Consideration. Subject to Article X hereof, at
the various payment dates set forth herein, Buyer shall pay and/or deliver to
each Shareholder one-half of all monies or capital stock which Shareholders are
then entitled to receive pursuant to this Agreement, all subject to the
provisions, restrictions, and conditions of this Agreement.
(e) Collection Payment. Buyer shall deliver to Shareholders at
least thirty (30) days prior to each Collection Payment Date, calculations
setting forth in reasonable detail the calculation of the Collection Payment for
the applicable six (6) calendar month period and the Collection Payment
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then due. If Shareholders have any objections to the calculations of any of the
foregoing, Shareholders will deliver a reasonably detailed statement describing
their objections to Buyer within ten (10) days after receiving the foregoing
documents. Buyer and Shareholders will use reasonable efforts to resolve any
objections themselves. Amounts not in dispute shall be timely paid. If the
parties do not obtain final resolution, the Accountant shall resolve any
disputes. The Accountant shall deliver to each of Buyer and Shareholders its
determinations within thirty days after receiving the joint instructions of
Buyer and Shareholders to resolve the objections, and the determinations of the
Accountant will be set forth in writing and will be conclusive and binding upon
the parties. The expenses of the Accountant shall be borne fifty percent (50%)
by Buyer and fifty percent (50%) by Shareholders. To the extent that the
Accountant determines that the Collection Payment was calculated incorrectly,
Buyer shall pay Shareholders the amount of the deficiency (without interest)
within five (5) business days after the final determination by the Accountant.
(f) Earnout Payment. Buyer shall deliver to Shareholders at
least 30 days prior to each Earnout Payment Date, calculations setting forth in
reasonable detail the non-conforming mortgage originations of NJMIC for the
applicable twelve calendar month period and the Earnout Payment then due. If
Shareholders have any objections to the calculations of any of the foregoing,
Shareholders will deliver a reasonably detailed statement describing their
objections to Buyer within ten days after receiving the foregoing documents.
Buyer and Shareholders will use reasonable efforts to resolve any objections
themselves. Amounts not in dispute shall be timely paid. If the parties do not
obtain final resolution, the Accountant shall resolve any disputes. The
Accountant shall deliver to each of Buyer and Shareholders its determinations
within thirty (30) days after receiving the joint instructions of Buyer and
Shareholders to resolve the objections, and the determinations of the Accountant
will be set forth in writing and will be conclusive and binding upon the
parties. The expenses of the Accountant shall be borne fifty percent (50%) by
Buyer and fifty percent (50%) by Shareholders. To the extent that the Accountant
determines that the Earnout Payment was calculated incorrectly, Buyer shall pay
Shareholders the amount of the deficiency (without interest) within five
business days after the final determination by the Accountant.
(g) Access. Buyer will make its employees and accountants and
its books and records, work papers and back-up materials used in preparing any
of the calculations set forth in Sections 2.1(e) and (f) hereof available to
Shareholders and their accountants and representatives at reasonable times and
upon reasonable notice at any time during (i) the preparation by Buyer of such
calculations, (ii) the review by Shareholders of such calculations, and (iii)
the resolution by Buyer and Shareholders of any objections to any of the
foregoing.
ARTICLE II
THE CLOSING AND TRANSFER OF STOCK
2.1. Closing. The transfer of the Stock contemplated by this Agreement
(the "Closing") shall occur at the offices of Blank Rome Comisky & XxXxxxxx, Xxx
Xxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000 at 10:00 A.M. on the earlier of
October 27, 1997 or the second business day following the satisfaction or waiver
of all conditions to the obligations of the parties to consummate the
transactions contemplated hereby (other than conditions with respect to actions
the respective parties will take at the Closing itself) or at such other time or
at such other place as may be mutually agreed upon by the parties (the "Closing
Date"). The Closing shall be deemed to take place as of the opening of business
on October 1, 1997.
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2.2. Deliveries by Buyer. At the Closing Date, Buyer shall deliver to
Shareholders the following:
(a) the Closing Payment;
(b) a non-recourse Officer's Certificate as to the accuracy in
all material respects at Closing of all of Buyer's representations and
warranties as if made at and as of Closing, the fulfillment of all of Buyer's
agreements and covenants and the satisfaction of all Closing conditions to be
satisfied by Buyer;
(c) certificate of good standing for Buyer certified as of a
recent date by the Secretary of the State of Delaware;
(d) a non-recourse certificate of the Secretary of Buyer
certifying that attached thereto is a true and correct copy of the Articles of
Incorporation and By-laws of Buyer and resolutions of the Board of Directors of
Buyer approving the transactions contemplated hereby; and
(e) such other endorsements, instruments or documents as may
be necessary or appropriate to carry out the transactions contemplated hereby.
2.3. Deliveries by Shareholders. At the Closing Date, Shareholders
shall deliver, or cause to be delivered, the following:
(a) certificates with fully executed stock powers evidencing
the Stock and any other documentation necessary or appropriate to effect the
transfer of ownership thereof to Buyer;
(b) the consents from third parties listed on Schedules 4.6
and 4.17;
(c) Articles of Incorporation of NJMIC, FLC and each and every
other Significant Subsidiary of either NJMIC or FLC certified as of a recent
date by the Secretary of the applicable jurisdiction of incorporation. For
purposes hereof "Significant Subsidiary" shall mean any subsidiary of either
NJMIC or FLC which has assets of any nature whatsoever in excess of $5,000.
(d) certificate of good standing of NJMIC, FLC and each and
every other Significant Subsidiary of either NJMIC or FLC certified as of a
recent date by the Secretary of the applicable jurisdiction of incorporation;
(e) resignations from certain of the NJMIC and FLC directors
and officers designated by Buyer;
(f) a non-recourse certificate of the Secretary of the Company
delivering the minute books, stock records and By-laws of the Company, FLC and
each and every other Significant Subsidiary of either NJMIC or FLC and
certifying that attached thereto are true and correct copies of the By-laws of
the Company, FLC and each and every other Significant Subsidiary of either NJMIC
or FLC;
(g) non-recourse certificates from each of the Shareholders as
to the accuracy in all material respects at Closing of all of Shareholders'
representations and warranties as if made at and as of Closing, the fulfillment
of all of Shareholders' agreements and covenants required to be performed prior
to Closing and the satisfaction of all Closing conditions to be satisfied by
Shareholders; and
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(h) such other endorsements, instruments or documents as may
be necessary or appropriate to carry out the transactions contemplated hereby.
2.4. Closing Agreements. At the Closing, the parties shall execute,
acknowledge and deliver the following (collectively, the "Closing Agreements"):
(a) Employment Agreement between Buyer and Xxxxxxx X. Xxxxx
in substantially the form attached hereto as Exhibit "B";
(b) Employment Agreement between Buyer and Xxxx X. Xxxxx in
substantially the form attached hereto as Exhibit "C";
(c) Employment Agreements among Buyer and each of the persons
listed on "D" attached hereto in a form reasonably acceptable to the Buyer; and
(d) Such other instruments or documents as may be necessary or
appropriate to carry out the transactions contemplated by this Agreement and to
comply with the terms hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Shareholders hereby, jointly and severally, represent and warrant to
Buyer as of the date hereof, as follows:
3.1. Authority. Shareholders, individually and collectively, have all
requisite right, power and authority, without the consent of any other person,
to execute and deliver this Agreement and the agreements to which they are a
party to be delivered at Closing and to carry out the transactions contemplated
hereby and thereby, including the transfer of the Stock. All actions and
proceedings required to be taken by Shareholders to authorize the execution,
delivery and performance of this Agreement and all agreements to which they are
a party and transactions contemplated hereby have been duly and properly taken.
3.2. Validity. This Agreement has been, and the agreements to which
they are a party and other documents to be delivered at Closing by Shareholders
including without limitation the Employment Agreements attached hereto as
Exhibits will be, duly executed and delivered by Shareholders and constitute
lawful, valid and legally binding obligations of Shareholders, enforceable in
accordance with their respective terms except as such enforceability may be
limited by (i) bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally and (ii) general principles of equity
relating to the availability of equitable remedies. Except as set forth in the
Schedules to this Agreement, the execution and delivery of this Agreement, the
Employment Agreements and the other agreements to which they are a party
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby will not (immediately, upon notice, with the passage of time, or
both) result in the creation of any lien, charge or encumbrance of any kind or
the termination or acceleration of any indebtedness or other obligation of the
Company or the Subsidiaries, and are not prohibited by, do not and will not
violate or conflict with any provision of, and do not and will not constitute a
default under or a breach of (i) the Articles of Incorporation or By-laws of the
Company or any Subsidiary, (ii) any note, bond, indenture, contract, agreement,
permit, license or other instrument to which the Company, the Subsidiaries or
any Shareholder is a party or by which the Company, the Subsidiaries or any
Shareholder or any of their respective assets, is bound, (iii) any order, writ,
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injunction, decree or judgment of any court or governmental agency, or (iv) any
permit, law, rule or regulation applicable to the Company, any Subsidiary or any
Shareholder.
3.3. Due Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of New Jersey
and has full power and authority and all requisite rights, licenses, permits and
franchises to own, lease and operate its assets and to carry on the Business as
it is presently conducted by the Company except where the failure to be so
licensed, permitted or franchised would not have a material adverse affect on
the Company and the Subsidiaries. The Company is duly licensed, registered and
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions in which the ownership, leasing or operation of its assets or the
conduct of its business requires such qualification, except where the failure to
be so licensed, registered or qualified would not have a material adverse effect
upon the Company, the Subsidiaries or their assets. Schedule 4.3 sets forth each
state or other jurisdiction in which the Company is licensed or qualified to do
business. The Company has delivered to Buyer an accurate, correct and complete
copy of its Articles of Incorporation and By-laws and each agreement, trust,
proxy or other arrangement among its shareholders. The minute books of the
Company accurately reflect in all material respects all actions taken at
meetings, or by written consent in lieu of meetings, of the shareholders and
board of directors of the Company. All actions taken by the Company have been
duly authorized, and no such actions have been taken in breach or violation of
the Articles of Incorporation or By-laws of the Company.
3.4. Capital Stock. The Company's capital stock consists of 1,000
authorized shares of common stock, no par value per share, of which an aggregate
of 950 shares are issued and outstanding. Each Shareholder owns beneficially and
of record 475 shares of such common stock. All outstanding shares of Stock are
duly authorized, validly issued, fully paid and nonassessable, were not issued
in violation of any preemptive, subscription or other right of any person to
acquire securities and constitute in the aggregate all the issued and
outstanding capital stock of all classes of the Company. There is no outstanding
subscription, option, convertible or exchangeable security, preemptive right,
warrant, call or agreement (other than this Agreement) relating to the Stock or
other obligation or commitment to issue any shares of capital stock of the
Company. There are no voting trusts or other agreements, arrangements or
understandings applicable to the exercise of voting or any other rights with
respect to any capital stock. Shareholders each have good title to all of the
Stock owned by such Shareholder and the absolute right to sell, assign, transfer
and deliver the same to Buyer, free and clear of all claims, security interests,
liens, pledges, charges, escrows, options, proxies, rights of first refusal,
preemptive rights, mortgages, hypothecations, prior assignments, title retention
agreements, indentures, security agreements or any other limitation, encumbrance
or restriction of any kind.
3.5. Subsidiaries.
(a) Except as set forth in Schedule 4.5, the Company does not
own stock or have any equity investment or other interest in, does not have the
right to acquire any such interest, and does not control, directly or
indirectly, any corporation, association, partnership, joint venture or other
entity and has not had such an ownership or control relationship with any such
entity. No subsidiary of either the Company or FLC other than a Significant
Subsidiary has any assets, either individually or all other subsidiaries in the
aggregate, of more than $5,000. For purposes of this Article IV, any reference
to NJMIC or the Company shall be deemed to include FLC and each and every other
Significant Subsidiary (as such term is defined in Section 3.3(c) hereof) of
NJMIC or FLC (collectively "Subsidiaries") whether or not specifically so
referenced. Schedule 4.5 sets forth the state or other jurisdiction of
incorporation or organization of each Subsidiary, and each state or other
jurisdiction in which such Subsidiary is licensed or qualified to do business.
Each Subsidiary is a corporation, limited liability company or partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its
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organization. Each Subsidiary has full power and authority and all requisite
licenses and permits to own, lease and operate its assets and to carry on the
business in which it is engaged, except where the failure to be so licensed or
permitted would not have a material adverse affect upon such Subsidiary. Except
as set forth on Schedule 4.5, each Subsidiary is duly licensed, registered and
qualified to do business as a foreign corporation, and is in good standing in
all jurisdictions in which the ownership, leasing or operation of its assets or
the conduct of its business requires such qualification, except where the
failure to be so licensed, registered or qualified would not have a material
adverse effect upon such Subsidiary. The Company has delivered to Buyer
accurate, correct and complete copies of each Subsidiary's Articles of
Incorporation, By-laws and each agreement, trust, proxy or other arrangement
among each Subsidiary and its shareholders, as the case may be. The minute books
of each Subsidiary accurately reflect in all material respects all actions taken
at meetings, or by written consent in lieu of meetings, of the shareholders and
board of directors of each Subsidiary. All actions taken by each Subsidiary have
been duly authorized, and no such actions have been taken in breach or violation
of the Articles of Incorporation, By-laws or charter or organization documents
of each Subsidiary.
(b) The capitalization, including debt for borrowed money and
equity, of each Subsidiary and the Company's ownership interest in each
Subsidiary is accurately set forth in Schedule 4.5. Except as set forth on
Schedule 4.5, there are no outstanding subscription, option, convertible or
exchangeable security, preemptive right, warrant, call or agreement (other than
this Agreement) relating to the Company's ownership interests in the
Subsidiaries or other obligations or commitments of any Subsidiary to issue any
additional shares of capital stock or partnership interests. There are no voting
trusts or other agreements, arrangements or understandings applicable to the
exercise of voting or any other rights with respect to any of the Company's
ownership interests in a Subsidiary. The Company has good and marketable title
to its ownership interests in each Subsidiary and, except as set forth in
Schedule 4.5, the absolute right to sell, assign, transfer and deliver the same
to Buyer, free and clear of all claims, security interests, liens, pledges,
charges, escrows, options, proxies, rights of first refusal, preemptive rights,
mortgages, hypothecations, prior assignments, title retention agreements,
indentures, security agreements or any other limitation, encumbrance or
restriction of any kind.
3.6. Consents. Except for applicable securities laws and as described
on Schedule 4.6, no approval, authorization, registration, consent, order or
other action of or filing with any person, including any court, administrative
agency or other governmental authority, is required for the execution and
delivery by any Shareholder of this Agreement or the agreements contemplated
hereby or the consummation of the transactions contemplated hereby and thereby.
3.7. Transactions with Affiliates. Except as set forth on Schedule 4.7
or in any other Schedule to this Agreement, none of Shareholders, nor any
Affiliate (as hereinafter defined) of any Shareholder, directly or indirectly:
(a) owns any debt, equity or other interest in any corporation, association or
other entity which is a competitor, lessor, lessee, customer or supplier of the
Business; (b) has any cause of action or other claim against or owes any amount
to, or is owed any amount by the Company, or the Subsidiaries; (c) has any
interest in or owns any property or right used in the conduct of the Business;
(d) is a party to any contract, lease or agreement of which the Company or the
Subsidiaries, is a party or which is used in the conduct of the Business; or (e)
received from or furnished to the Business any goods or services. For purposes
of this Agreement, the term "Affiliate" means any member of the immediate family
of any Shareholder, or any corporation, partnership, trust or other entity in
which any of the foregoing individuals is a director, officer, partner or
trustee or has an equity interest in excess of twenty percent (20%).
3.8. Financial Statements. The consolidated financial statements of the
Company and the Subsidiaries as of and for the two fiscal years ended February
28, 1997 and for the seven-month period ended September 30, 1997 are attached
hereto as Schedule 4.8 (the "Financial Statements"), and (i) fairly
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present the consolidated financial condition and results of operations of the
Company, the Business and the Subsidiaries as of the dates and for the periods
indicated and (ii) are prepared in accordance with GAAP on a consistent basis
throughout the periods covered thereby.
3.9. Books and Records. The books and other records (other than
financial books and records) of the Company and the Subsidiaries, are complete
and correct in all material respects.
3.10. Interim Change. Except as specifically permitted by this
Agreement, or as reflected in the latest Financial Statements, since the date of
the latest Financial Statements to the date hereof, the Company has operated the
Business only in the ordinary course, consistent with past practices, and there
has not been:
(a) any material adverse change in the financial condition,
assets, liabilities, personnel, prospects or business affairs of the Company or
the Subsidiaries, nor has there been the occurrence of any event or condition
which could reasonably be expected to have such an effect;
(b) any declaration or payment of any dividend or other
distribution with respect to the equity interests of the Company or the
Subsidiaries;
(c) any forgiveness, cancellation, write-off or write-down of
debts or claims, or waiver of any rights other than in the ordinary course of
business;
(d) any increase in the compensation or benefits payable or to
become payable by the Company or the Subsidiaries to any employee or other
person who renders services or any payments of compensation other than salary to
any of such employees in the ordinary course of business consistent with the
past practices;
(e) any incurrence of debt other than trade payables incurred
in the ordinary course of business consistent with the past practices;
(f) any entry into any material agreement, commitment or
transaction by the Company or the Subsidiaries of any capital expenditure in
excess of $25,000;
(g) any incurrence of any security interest, lien, charge,
encumbrance or claim on, or any damage or loss to, any of the Company's and/or
the Subsidiaries' assets other than in the ordinary course consistent with past
practices;
(h) any change in the method of operation or practices of the
Company, the Business or the Subsidiaries, including any change in the
accounting, billing or invoicing procedures of the Business;
(i) any sale, transfer or disposal by or for the Company, the
Business or the Subsidiaries or purchase by or for the Company, the Business or
the Subsidiaries of any properties or assets, except in the ordinary course
consistent with past practices; or
(j) any agreement or commitment by the Company, the
Subsidiaries or any Shareholder to do any of the foregoing.
3.11. Insurance. Schedule 4.11 contains a list (including name of the
insurer, coverage, premium and expiration date) of all policies of insurance or
fidelity bonds maintained in connection with or covering the assets, personnel,
products or operations of the Company and the Subsidiaries. The
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Company has delivered to Buyer accurate and complete copies of all such
policies. Such policies are in full force and effect. Schedule 4.11 also
contains a list of all claims (other than health, life, disability and/or
xxxxxxx'x compensations claims) related to the Business made on such policies
during the last year.
3.12. Licenses and Permits. Schedule 4.12 contains an accurate, correct
and complete list of each material license, permit, certificate, approval,
exemption, registration, variance, or authorization used or required for the
operation of the Company and the Subsidiaries (collectively, the "Licenses and
Permits"). The Licenses and Permits are valid and in full force and effect and
there are not pending, or, to the Shareholders' knowledge, threatened, any
proceedings which could result in the termination, revocation, limitation or
impairment of any License or Permit. The Licenses and Permits are all of the
licenses, permits, certificates, approvals, registrations, and other
authorizations as are necessary in order to enable the Company and the
Subsidiaries to own and conduct their respective businesses and to occupy their
respective real property. Unless otherwise set forth in Schedule 4.12, no
consents or approvals of any parties with respect to the Licenses and Permits
are required in connection with the transactions contemplated hereby. No notice
of violations have been received by the Company in respect of any Licenses and
Permits, and Shareholders know of no meritorious basis therefor. Neither the
Company nor any Subsidiary is and has engaged in any business in any
jurisdiction in which it is not, and was then, duly authorized or qualified to
transact such business except where the failure to be so authorized or qualified
would not have a material adverse affect on the Company, FLC and/or the
Business. Except for compliance with periodic renewal procedures, no approvals
or authorizations are required to permit the Company or any Subsidiary to
continue conducting its business as presently conducted.
3.13. Title to Assets. Except as set forth on Schedule 4.13, the
Company is the sole and exclusive legal and equitable owner of all right, title
and interest in all of its material assets. The Company now has, and at Closing
will have, good and marketable title to all of its material assets and, except
as set forth in Schedule 4.13, such assets are not and will not be subject to
any material claim, pledge, option, escrow, mortgage, hypothecation, lien,
charge, security interest, financing statement, prior assignment, title
retention agreements, lease, license, covenant, encumbrance or other restriction
of any kind. All of the Company's material assets, whether owned or leased by
the Company, are in good operating condition and repair (reasonable wear and
tear excepted), are suitable for the purposes for which they are presently being
used and will furnish Buyer with all of the capacity and rights to operate the
Business in substantially the same manner as it is presently being operated by
the Company and the Subsidiaries, and to otherwise conduct the Business in
substantially the same manner as presently conducted.
3.14. Real Estate. Except as set forth in Schedule 4.14, neither the
Company nor the Subsidiaries owns any real property. Schedule 4.14 sets forth an
accurate, correct and complete list of all real property leased or subleased by
the Company and the Subsidiaries, including identification of the lease or
sublease, street address and list of contracts, agreements, leases and subleases
affecting such real estate or any interest therein to which the Company or the
Subsidiaries is a party or by which any of their interests in real property is
bound (the "Real Estate Leases"). All Real Estate Leases are in full force and
effect and are valid, binding and enforceable in accordance with their
respective terms. Neither the Company, the Subsidiaries nor any other party to
any Real Estate Lease is in breach of any provision of, in violation of, or in
default under the terms of any Real Estate Lease in any material respect. No
event has occurred which with notice or passage of time or both would result in
a material breach of any provision of, or default under, the terms of any Real
Estate Lease. The Company has delivered to Buyer accurate, correct and complete
copies of each Real Estate Lease. At the Closing, except as set forth on
Schedule 4.14, the Company shall deliver to Buyer any consents or approvals of
any parties to the Real Estate Leases required in connection with the
transactions contemplated hereby.
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3.15. Personal Property Leases. Schedule 4.15 contains an accurate,
correct and complete list of all material leases of personal property leased by
the Company or the Subsidiaries (the "Personal Property Leases"). The Company
has delivered to Buyer accurate and complete copies of each Personal Property
Lease. All Personal Property Leases are in full force and effect and are valid,
binding and enforceable in accordance with their respective terms. Neither the
Company, the Subsidiaries nor any other party to any Personal Property Lease is
in breach of any provision of, in violation of, or in default under the terms of
any Personal Property Lease in any material respect. No event has occurred which
with notice or passage of time or both would result in a breach of any material
provision of, or default under, the terms of any Personal Property Lease. At the
Closing, except as set forth on Schedule 4.15, the Company shall deliver to
Buyer any consents or approvals of any parties to the Personal Property Leases
required in connection with the transactions contemplated hereby.
3.16. Intellectual Property. There are no material patents, trademarks,
trade names, service marks, copyrights and applications for any of the foregoing
and trade secrets, know-how or proprietary information, including but not
limited to, software, copyrighted and copyrightable material, electronic data
processing systems, program specifications and technical information relating to
or used in the Business by the Company and Subsidiaries.
3.17. Material Contracts.
(a) Schedule 4.17 contains a list (which list may incorporate
by reference other Schedules to this Agreement) of all contracts, agreements,
commitments, instruments, leases and arrangements, including all amendments or
supplements thereto, to which the Company or the Subsidiaries are a party or
bound, or by which any of the Company's or Subsidiaries' assets or the Business
are subject or bound, which (a) are material to the Company, the Subsidiaries or
the Business or (b) meet any of the following descriptions (collectively, the
"Material Contracts"): (i) any contracts, agreements or arrangements with
lessees of Company or Subsidiaries assets and any servicing or subserving
agreements to which the Company or any Subsidiary is a party; (ii) any contract
or agreement not entered into in the normal course of business including without
limitation all securitizations of any of the Company's or Subsidiaries' assets;
(iii) any contract or agreement which involves future payments or receipts in
excess of $5,000; (iv) any contracts or agreements with purchasers of the
Company's mortgage products, leases or other assets on behalf of the Business;
(v) any joint venture, partnership or shareholder arrangements or agreements;
(vi) Real Estate Leases and Personal Property Leases; (vii) any instrument
evidencing indebtedness, any liability for borrowed money or any instrument
guaranteeing any indebtedness, obligation or liability including, without
limitation, any contract relating to (A) the maintenance of compensating
balances, (B) any lines of credit, (C) the advance of any funds to any other
person outside the ordinary course of business (D) the payment for property,
products or services which are not conveyed, delivered or rendered to any such
party, (E) any obligation to keep-well, make-whole or maintain or increase net
worth, working capital, solvency, earnings or other financial condition or
results of operations of any person or perform similar requirements, or (F) the
guaranty of any lease or other similar periodic payments to be made by any such
other person; (viii) any contracts containing covenants not to compete; (ix) all
contracts involving the purchase or sale of mortgage loans, home improvement
loans, home equity loans or consumer loans; (x) all brokerage, management or
consulting contracts which accounted for $5,000 or more in commissions, fees and
revenues earned in respect of the Company during fiscal 1996; (xi) contracts for
the purchase or sale of materials, supplies or equipment (including, without
limitation, computer hardware and software), or the provision of services
(including, without limitation, data processing services), involving annual
payments of more than $5,000 or containing any escalation, renegotiation or
redetermination provisions, which contracts are not terminable at will without
liability, premium or penalty; (xii) contracts relating to licenses of
trademarks, trade names, service marks or other similar property rights; (xiii)
collective bargaining agreements and
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other contracts with any labor union or association representing any employee;
(xiv) contracts under which the Company or any Subsidiary agrees to indemnify
any person; (xv) any powers of attorney granted by the Company or any Subsidiary
to any person; and (xvi) any employment or other agreement with any current or
former shareholder, officer, director, employee, consultant, agent or other
representative. The Company has delivered to Buyer accurate and complete copies
of each Material Contract.
(b) All Material Contracts are valid, binding and enforceable
in accordance with their terms and are in full force and effect. Neither the
Company, nor any other party to any Material Contract is in breach of any
provision of, in violation of, or in default under t material respect. Except as
set forth in Schedule 4.17, no event has occurred which with notice or passage
of time or both would result in a breach of any provision of, or default under,
the terms of any Material Contract. Except as set forth in Schedule 4.17, at the
Closing the Company shall deliver to Buyer any consents or approvals of any
parties to the Material Contracts required in connection with the transactions
contemplated hereby.
(c) No Material Contract which provides for the sale by the
Company or any Subsidiary of mortgage loans or leases originated by the Company
or such Subsidiary requires the Company or such Subsidiary to sell any future
loans or leases pursuant to such contract or provides for any penalty based on
the Company or such Subsidiary's failure to do so other than as set forth on
Schedule 4.17. Except as set forth on Schedule 4.17, the Company and its
Subsidiaries may prepay their obligations under each of the credit facilities
listed on Schedule 4.17 and terminate such facilities without penalty or
premium.
3.18. Employees. Schedule 4.18 lists the name, position and
compensation of each employee of the Company. Except as set forth in Schedule
4.18, (a) the Company has complied in all material respects with all local,
state and federal laws, rules and regulations respecting the employment of such
employees; and (b) the Company has paid all accrued wages and compensation due
to employees, including all earned and accrued vacations or vacation pay,
holidays or holiday pay, sick days or sick pay, and bonuses, other than with
respect to the current payment period. Since September 30, 1997, the Company has
not (x) paid or made any accrual or arrangement for the payment of, bonuses or
special compensation of any kind, including severance or termination pay, to any
present or former officer or employee, (y) made any general wage or salary
increases or (z) increased or altered any other benefits or insurance provided
to any employee. To the best of the Shareholders' knowledge, the services of all
present employees will continue to be available on substantially the same terms
and conditions to Buyer following the Closing.
3.19. Employee Benefit Plans.
(a) Schedule 4.19 sets forth an accurate, correct and complete
list of all employee benefit plans, as defined in Section 3(3) of ERISA, and all
other plans, trust agreements or arrangements for bonus, severance,
hospitalization, vacation, incentive or deferred compensation, pension or
profit-sharing, retirement, payroll savings, stock option, equity compensation,
group insurance, death benefit, fringe benefit, welfare or any other employee
benefit plan or fringe benefit arrangement of any nature whatsoever, including
those benefitting retirees or former employees sponsored or contributed to by
the Company and/or the Subsidiaries (all of the foregoing, whether in existence
by virtue of agreement, policy or applicable law, being herein called "Benefit
Plans")
(b) (i) The Company and the Subsidiaries have complied with
their obligations (including funding obligations) with respect to all Benefit
Plans, including the payment of all social security and other contributions
required by law, which if not complied with (individually or in the aggregate)
would be reasonably likely to have a material adverse effect on the Company or
the
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Subsidiaries, and (ii) such Benefit Plans have been maintained in material
compliance with all applicable laws and regulations.
(c) All documents relating to the Benefit Plans and requested
in writing by Buyer and all amendments thereto have been made available to Buyer
including a true and correct copy of the most current Form 5500 and any other
form or filing required to be submitted to any governmental agency with regard
to any of the Benefit Plans and the most current actuarial report with regard to
any of the Benefit Plans.
(d) Neither the Company nor the Subsidiaries has an agreement,
commitment or announced intention to create any additional Benefit Plan or to
increase the rate of benefit accrual or contribution requirement under any
Benefit Plan or to modify, change or terminate any of them.
(e) To the knowledge of the Company or the Shareholders, no
Benefit Plan is currently under investigation, audit or review by any
governmental authority.
(f) All Taxes with respect to any Benefit Plan through the
date hereof have (i) if due, been paid in full or (ii) been reserved for on the
Financial Statements of the Company and the Subsidiaries.
(g) The Benefit Plans, and their operations (including
satisfaction of all reporting and disclosure requirements) are in material
compliance with their provisions and with all applicable laws, and there are no
claims pending or, to the knowledge of the Company, threatened, by any
participant in any of such Benefit Plans, excluding claims for benefits in the
ordinary course, in each case which, if determined adversely (individually or in
the aggregate) would be reasonably likely to have a material adverse effect on
the Company or the Subsidiaries.
(h) The Company and the Subsidiaries do not, and for the past
five years have not, sponsored or contributed to a "single-employer plan" as
defined in Section 4001(a)(15) of the Employee Retirement Income Security Act of
1974 ("ERISA") or to a "multiemployer plan" as defined in Section 4001(a)(3) of
ERISA which is subject to the provisions of Title IV of ERISA and/or Section 412
of the Code (as hereinafter defined). The Company has not incurred, and will not
incur, any withdrawal liability, nor does the Company have any contingent
withdrawal liability, under ERISA to any Multiemployer Plan (as defined in ERISA
or the Code).
(i) No event has occurred in connection with which the
Company, the Subsidiaries or any Benefit Plan, directly or indirectly, could be
subject to any material liability under ERISA, the Internal Revenue Code of 1986
as amended (the "Code"), or any other law, regulation or governmental order
applicable to any such Benefit Plan, including, without limitation, Section 406,
409, 502(i) or 502(l) of ERISA, or Section 4971, 4975 or 4976 of the Code, or
under any agreement, instrument, statute, rule of law or regulation pursuant to
or under which the Company or the Subsidiaries has agreed to indemnify or is
required to indemnify any person against liability incurred under, or for a
violation or failure to satisfy the requirements of, any such statute,
regulation or order.
(j) With respect to each Benefit Plan, (i) all material
payments due from the Company or the Subsidiaries to date have been made when
due and all amounts properly accrued to date as liabilities of the Company or
the Subsidiaries which have not been paid have been properly recorded on the
books of the Company and the Subsidiaries; (ii) each Benefit Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) and
intended to qualify under Section 401 of the Code has received a favorable
determination letter with respect to the Benefit Plans and all amendments to the
Benefit Plans from the Internal Revenue Service with respect to such
qualification, its related trust
-14-
has been determined to be exempt from taxation under Section 501(a) of the Code,
and each such Benefit Plan and trust is so qualified; and (iii) no plan is a
discriminatory self-insured medical expense reimbursement plan within the
meaning of Section 105(h) of the Code.
(k) The consummation of the transactions contemplated by this
Agreement will not (i) entitle any employee of the Company or the Subsidiaries
to severance pay, unemployment compensation or any other payment or (ii)
accelerate the time of the payment or vesting, or increase the amount of
compensation due to any such employee or former employee.
(l) With respect to each Benefit Plan that is funded wholly or
partially through an insurance policy, all premiums required to have been paid
to date under the insurance policy have been paid and, as of the date hereof,
neither the Company nor the Subsidiaries will have any liability under any such
insurance policy or ancillary agreement with respect to such insurance policy in
the nature of a retroactive rate adjustment, loss sharing arrangement or other
actual or contingent liability arising wholly or partially out of events
occurring prior to the date hereof.
(m) Except as disclosed in Schedule 4.19, no event has
occurred or will occur which will result in any liability to the Company in
connection with any Benefit Plan established, maintained or contributed to
(currently or previously) by the Company or by any other entity which, together
with the Company, constitute elements of either (i) a controlled group of
corporations (within the meaning of Section 414(b) of the Code), (ii) a group of
trades or businesses under common control (within the meaning of Sections 414(c)
of the Code or 4001 of ERISA), (iii) an affiliated service group (within the
meaning of Section 414(m) of the Code), or (iv) another arrangement covered by
Section 414(o) of the Code.
3.20. Taxes.
(a) Filings. The Company and the Subsidiaries have each filed
or will file all returns, declarations and reports and all information returns
and statements required to be filed or sent with respect to all foreign,
federal, state, county, local and other taxes of every kind and however
measured, including income, gross receipts, excise, franchise, property, value
added, import duties, employment, payroll, withholding, sales and use taxes and
any additions to taxes and any interest or penalties thereon (collectively,
"Taxes") for any period ending on or before the Closing Date (collectively,
"Returns") (except where the failure to file would not have a material adverse
effect on the financial condition of the Company or the Subsidiaries).
Shareholders shall have authority to cause the Company and its Subsidiaries to
prepare and file Returns for periods prior to Closing. The Company and the
Subsidiaries have timely paid or made adequate provision for all Taxes shown as
due and payable on their Returns required to be filed or sent prior to the date
hereof and will make adequate provision for all Taxes that will be shown as due
and payable on their Returns required to be filed or sent after the date hereof.
All required Tax estimates, deposits, prepayments and similar reports or
payments for Pre- Closing Periods (as hereinafter defined) have been or will be
properly made (except where the failure to file or pay would not have a material
adverse effect on the financial condition of the Company or the Subsidiaries).
Neither the Company nor the Subsidiaries is delinquent in the filing of any
Return or the payment of any Tax and has not requested any extension of time
within which to file any Return. The Company has filed, as a common parent of an
"affiliated group" (within the meaning of Section 1504(a) of the Code), a
consolidated return for federal income tax purposes on behalf of itself and all
of its Subsidiaries which are "includible corporations" within the meaning of
Section 1504(b) of the Code. Neither the Company nor any of its Subsidiaries has
previously been members of any other consolidated federal income tax group with
respect to which the Company or any Subsidiary may have several liability for
Taxes pursuant to Treasury Regulation Section 1.1502-6. All transactions which
could give rise to a substantial understatement of federal income tax (within
the meaning of Section 6662 of the
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Code) were adequately disclosed (or with respect to returns to be filed before
Closing will be adequately disclosed) on Returns as required in accordance with
Section 6662(d)(2) of the Code.
(b) Compliance. The Company and the Subsidiaries have withheld
amounts from employees and others working in the Company and the Subsidiaries,
as required under applicable law, and have filed all Returns with respect to
employee income Tax withholding and social security and unemployment Taxes in
compliance with the tax withholding provisions of the Code and other applicable
foreign, Federal, state or local laws.
(c) Disputes. There are no due and unpaid Tax liens on any
assets of the Company or the Subsidiaries other than liens for Taxes not yet due
and payable. No adjustment of or deficiency for any Tax or claim for additional
Taxes has been proposed, asserted or assessed against or, to the knowledge of
Shareholders, threatened against, the Company or any of the Subsidiaries.
Neither the Company nor the Subsidiaries has any dispute with any taxing
authority as to Taxes of any nature. There are no audit examinations being
conducted or, to the knowledge of Shareholders, threatened, and there is no
deficiency or refund litigation or controversy in progress or threatened, with
respect to any Taxes previously paid by the Company or the Subsidiaries or with
respect to any Returns previously filed by or on behalf of the Company or the
Subsidiaries. Neither the Company nor the Subsidiaries has any extensions or
waivers of any statute of limitations relating to the assessment or collection
of Taxes.
(d) Tax Liability. Following the Closing, the Company and its
Subsidiaries shall have no liability for Taxes of any kind for periods on or
prior to September 30, 1999 in excess of the provisions or reserves for such
Taxes shown on the books and records of the Company as of the Closing Date.
(e) Code Section 280G. The Company and its Subsidiaries have
not made any payments, are not obligated to make any payments, and are not
parties to any agreement that under certain circumstances could obligate any of
them to make any payments that will not be deductible under Section 280G or
subject to withholding under Code Section 4999.
3.21. Litigation. Except as set forth in Schedule 4.21, neither the
Company nor any Shareholder or the Subsidiaries is engaged in, or a party to,
or, to the knowledge of Shareholders, threatened with, any suit, action,
proceeding, investigation, arbitration or other method of settling disputes and
no Shareholder knows, anticipates or has notice of any basis for any such
action. Neither the Company, any Shareholder, nor the Subsidiaries has received
notice of any investigation threatened or contemplated by any foreign, federal,
state or local government or regulatory authority, including those involving
their respective employment practices or policies or compliance with
environmental regulations. The Company and the Subsidiaries are not subject to
any order, decree or judgment of any court or governmental agency or
instrumentality.
3.22. Compliance. Except as set forth in Schedule 4.22, each of the
Company's and the Subsidiaries' operations (including, without limitation, the
documenting, making and servicing of all loans and/or leases by the Company or
any Subsidiary) each conform and have conformed in all material respects to all
applicable statutes, codes, ordinances, licensing requirements, laws, rules and
regulations, including without limitation, those of HUD and the FHA and state
banking departments or similar state regulatory agencies, the Equal Credit
Opportunity Act, Real Estate Settlement Procedures Act, Truth-in- Lending Act,
Fair Housing Act, Pennsylvania Mortgage Bankers and Brokers Act, Pennsylvania
Secondary Mortgage Loan Act, New Jersey Mortgage Bankers and Brokers Act and New
Jersey Secondary Mortgage Loan Act and any and all other similar laws in any
jurisdiction where the Business is or was conducted. Set forth on Schedule 4.22
is a true, complete and accurate description of all inspections, inquiries
and/or audits in process, made or conducted by any governmental body and/or
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other person for the past three years regarding any material laws, rules and
regulations applicable to the Business, together with a description of all
findings or recommendations or, actions taken by, submission of information to,
and charges, fines and/or penalties imposed by, all such governmental bodies and
authorities. Except as set forth in Schedule 4.22, the Company and each of the
Subsidiaries have complied in all material respects with all statutes, codes,
ordinances, licensing requirements, laws, rules, regulations, decrees, awards or
orders applicable to its business or its operations, including those relating to
employment, employee benefits, consumer credit, usury, leasing, lending and
environmental matters and any and all other federal or state provisions relating
to any aspect of the current or former Business; and there is not and will not
be any liability arising from or related to any violations thereof and
Shareholders have no knowledge of any violations of such laws. Neither the
Company, the Subsidiaries nor any Shareholder has received any written notice
from any governmental body or other person alleging that Company, the
Subsidiaries or any Shareholder has failed to comply with any such law, rule or
regulation.
3.23. Brokers. Except with respect to Xxxxxx Brothers and Xxxxx
Kropshot ("Kropshot"), neither the Company, the Subsidiaries nor any Shareholder
has retained any broker or finder or incurred any liability or obligation for
any brokerage fees, commissions or finder's fees with respect to this Agreement
or the transactions contemplated hereby. The Shareholders shall be solely
responsible for any payments due Xxxxxx Brothers and Kropshot, and to the extent
the Buyer shall have any liability with respect thereto, such liability shall be
subject to Article X hereof without the benefit of the $100,000 basket.
3.24. Banking Relationships and Investments. Schedule 4.24 sets forth
an accurate, correct and complete list of all banks and financial institutions
in which the Company or the Subsidiaries has an account, deposit, safe-deposit
box, lock box or line of credit or other loan facility, including the names of
all persons authorized to draw on those accounts or deposits, or to borrow under
such lines of credit or other loan facilities, or to obtain access to such
boxes. Schedule 4.24 sets forth an accurate, correct and complete list of all
certificates of deposit, debt or equity securities and other investments owned,
beneficially or of record, by the Company or the Subsidiaries (the
"Investments"). The Company has good and marketable title to all of the
Investments.
3.25. Environmental Matters. Each of the Company and the Subsidiaries
is in compliance in all respects with all federal, state and local environmental
laws, rules, regulations, standards and requirements, including those respecting
hazardous or biomedical materials and/or wastes. Neither the Company nor the
Subsidiaries has engaged in any storage, holding, release, emission, discharge,
generation, processing, disposition, handling or transportation of any
biomedical wastes or hazardous substances or materials, as defined in any
applicable federal or state law or regulation from, into or on any portion of
the premises of the Company or the Subsidiaries except in the ordinary course of
business consistent with past practice and in compliance with all laws.
3.26. Absence of Undisclosed Liabilities. Except as set forth in
Schedule 4.26, neither the Company, the Business nor the Subsidiaries is subject
to any liability or obligation (whether absolute, accrued, contingent or
otherwise and whether matured or unmatured) which is not shown on the Company's
balance sheet dated as of September 30, 1997, other than liabilities incurred in
the ordinary course of its business since September 30, 1997 on terms and
conditions and in amounts consistent with past practices (none of which results
from, arises out of, relates to, is in the nature of, or was caused by any
breach of contract, breach of warranty, tort, infringement or violation of law).
4.27. Investment Representations and Warranties. Since a portion of the
Closing Payment is to be paid by issuing shares of ABFS Common Stock to the
Shareholders, the Shareholders further represent, warrant and covenant as
follows:
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(a) Each Shareholder is an "accredited investor" within the
meaning of Rule 502(a) promulgated under the Securities Act of 1933, as amended
(the "Securities Act"). Each Shareholder understands the risks of, and other
considerations relating to, the receipt of ABFS Common Stock as part of the
Closing Payment. Each Shareholder, by reason of his business and financial
experience, together with the business and financial experience of those
persons, if any, retained by him to represent or advise him with respect to his
investment in the shares of ABFS Common Stock, (i) has such knowledge,
sophistication and experience in financial and business matters and in making
investment decisions of this type, that he is capable of evaluating the merits
and risks of an investment in the Buyer and of making an informed investment
decision, (ii) is capable of protecting his own interests or has engaged
representatives or advisors to assist him in protecting his interests and (iii)
is capable of bearing the economic risk of such an investment.
(b) The shares of ABFS Common Stock to be issued to each
Shareholder will be acquired by each Shareholder for his own account for
investment only and not with a view to a distribution thereof, in whole or in
part. Each Shareholder confirms that all documents, records and books pertaining
to an investment in the Buyer and requested by any Shareholder have been made
available or delivered to such Shareholder. Each Shareholder has had an
opportunity to ask questions of and receive answers from the Buyer or from a
person or persons acting on the Buyer's behalf, concerning the terms and
conditions of the transaction contemplated by this Agreement and his acquisition
of shares of ABFS Common Stock. Each Shareholder has relied upon, and is making
his investment decisions solely upon such information as has been provided to
such Shareholder by the Buyer.
(c) Each Shareholder acknowledges the Securities Act or state
securities laws by reason of a specific exemption or exemptions from
registration under the Securities Act and applicable state securities laws, (ii)
the Buyer's reliance on such exemptions is predicated in part on the accuracy
and completeness of the representations and warranties of each Shareholder
contained herein, (iii) such shares of ABFS Common Stock, therefore, cannot be
resold unless registered under the Securities Act and applicable state
securities laws, or unless an exemption form registration is available and (iv)
the Buyer has no obligation or intention to register such shares of ABFS Common
Stock for resale under the Securities Act or any state securities laws or to
take any action that would make available any exemption from the registration
requirements of such laws. Each Shareholder hereby acknowledges that because of
the restrictions on transfer or assignment of such shares of ABFS Common Stock
to be issued hereunder which are set forth in this Agreement, such Shareholder
may have to bear the economic risk of the investment commitment evidenced by
this Agreement and any shares of ABFS Common Stock received hereby for an
indefinite period of time.
(d) The address set forth for each Shareholder in Section 12.8
hereof is the address of the Shareholder's principal residence and no
Shareholder has any present intention of becoming a resident of any country,
state or jurisdiction other than the country and state in which his principal
residence is now sited.
4.28. No Criminal Proceedings. To the knowledge of Shareholders, there
are no pending actions, charges, indictments, information, or investigations of
any current or former employees of the Company or any Subsidiary or any
Affiliate thereof, or their agents, officers or directors, whether pending or
threatened, which involve allegations of criminal violations by any of them, or
their agents, officers or directors acting in connection with the Business, of
any federal, state or local statute, law, rule or regulation.
4.29. Absence of Regulatory Actions. Neither NJMIC nor any of its
Subsidiaries is a party to any cease and desist order, written agreement or
memorandum of understanding with, or a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or is a recipient of
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any supervisory letter from, or has adopted any board resolutions at the request
of, federal or state governmental authorities charged with the supervision or
regulation of any aspect of the Business ("Regulators"), nor has it been advised
by any Regulator that such Regulator is contemplating issuing or requesting (or
is considering the appropriateness of issuing or requesting) any such order,
directive, written agreement, memorandum of understanding, extraordinary
supervisory letter, commitment letter, board resolutions or similar undertaking.
4.30. Reports, etc. Neither the Company nor any entity as to which the
Company is a successor has filed any registration statement under the Securities
Act of 1933, as amended (the "Securities Act") or any comparable rules or
regulations of any Regulator, or at any time had any class of securities
registered under (or required to be registered under ) the Securities Exchange
Act of 1934, as amended (the "Exchange Act") or otherwise been subject to the
information and reporting requirements of the Exchange Act.
4.31. Subordinated Debt. The Company's currently outstanding
Subordinated Debt has been (and all previously issued subordinated debt was)
issued (and continues to be) in full compliance with all applicable federal and
state laws, rules and regulations, including without limitation applicable
federal and state securities laws, rules and regulations. Schedule 4.31 sets
forth a list of all currently outstanding Subordinated Debt together with the
names and addresses of the holders thereof, principal balances due, applicable
interest rates and ability to prepay.
4.32. Xxxx-Xxxxx-Xxxxxx. Under and pursuant to Rule 802.4 promulgated
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act, the aggregate fair
market value of the Company's non-exempt assets does not exceed $15 million.
4.33. Investment Company or Advisor. Neither the Company nor any
Subsidiary is (i) an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, (ii) a "broker" or "dealer" within the meaning
of the Securities Exchange Act of 1934, as amended, or (iii) is required to be
registered as an investment adviser under the Investment Advisers Act of 1940,
as amended.
4.34. Mortgage Banking Qualification. The Company and each Subsidiary
(i) to the extent required for the conduct of its business, is approved (A) by
FHA as an endorsed mortgagee and servicer for FHA Loans, (B) by VA as an
endorsed lender and servicer for VA Loans and (C) by FNMA as an approved
seller/servicer of first lien residential mortgages. Such approvals are current.
Each of the Company and its Subsidiaries is also in compliance with all
conditions and requirements necessary to maintain the Licenses and Permits in
full force and effect, including the giving of necessary notices and the
maintenance of a minimum net worth. Each of the Company and its Subsidiaries has
timely filed all reports required to be filed with the FHA. The Company and its
Subsidiaries have not received notice that the most recent audits conducted by
FNMA of any of the Company's and its Subsidiaries' financial position were not
satisfactory to such entities and such audits were satisfactory to such
entities.
4.35. Repurchase Obligations. Set forth on Schedule 4.35 attached
hereto is a true and complete list of all repurchase obligations known to be in
existence as of the date hereof or which would arise after the passage of time
based on facts known to the Shareholders on the date hereof with respect to the
loans sold or serviced by the Company or any Subsidiary and with respect to any
loan the ownership of which was transferred by the Company or any Subsidiary to
any third
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby, represents and warrants to Shareholders as of the date
hereof, as follows:
4.1. Authority. Buyer has all requisite right, power and authority,
without the consent of any other person, to execute and deliver this Agreement
and the agreements to be delivered at Closing and to carry out the transactions
contemplated hereby and thereby. All actions required to be taken by Buyer to
authorize the execution, delivery and performance of this Agreement and all
agreements and transactions contemplated hereby have been duly and properly
taken.
4.2. Validity. This Agreement has been, and the agreements and other
documents to be delivered at Closing by Buyer will be, duly executed and
delivered by Buyer, and constitute valid and binding obligations of Buyer
enforceable in accordance with their respective terms. The execution and
delivery of this Agreement and the other agreements contemplated hereby and the
consummation of the transactions contemplated hereby and thereby are not
prohibited by, do not and will not violate or conflict with any provision of,
and do not and will not (immediately upon notice, with the passage of time or
both) constitute a default under or a breach of (i) the Articles of
Incorporation or By-laws of Buyer, (ii) any material contract, agreement or
other instrument to which Buyer is a party, (iii) any material order, writ,
injunction, decree or judgment of any court or governmental agency, or (iv) any
material law, rule or regulation applicable to Buyer.
4.3. Due Organization. Buyer is a corporation organized and validly
existing under the laws of its State of Delaware and has full power and
authority to carry on the business in which it is engaged. Buyer has delivered
to Shareholders accurate, correct and complete copies of its Articles of
Incorporation and By-laws.
4.4. Capital Stock. Buyer's equity capital consists of 9,000,000
authorized shares of Common Stock, par value $.001 per share and 1,000,000
shares of Preferred Stock, no par value per share, of which as of June 30, 1997,
2,353,166 shares of Common Stock are issued and outstanding and no shares of
Preferred Stock are issued and outstanding as of the date hereof. All
outstanding shares of Common Stock are duly authorized, validly issued, fully
paid and nonassessable, were not issued in violation of any preemptive,
subscription or other right of any person to acquire securities and constitute
in the aggregate all the issued and outstanding capital stock of all classes of
Buyer. The shares of Common Stock to be issued pursuant to this Agreement will,
upon issuance, be validly issued, fully paid and non-assessable and will vest in
Shareholders good and marketable title thereto and will be delivered free and
clear of all claims, security interests, liens, pledges, charges, escrows,
options, proxies, rights of first refusal, preemptive rights, mortgages,
hypothecations, prior assignments, title retention agreements, security
agreements or any other limitation, encumbrance or restriction of any kind.
4.5. Consents. No approval, authorization, registration, consent, order
or other action of or filing with any person, including any court,
administrative agency or other governmental authority, is required for the
execution and delivery by Buyer of this Agreement or the agreements contemplated
hereby or the consummation of the transactions contemplated hereby and thereby.
4.6. SEC Filings; Financial Statements. Buyer has delivered to
Shareholders, in the form filed with the Securities Exchange Commission (the
"SEC"), (i) its Annual Reports to Shareholders and Forms 10-KSB for the fiscal
years ended June 30, 1997 and June 30, 1996, (ii) all Quarterly Reports on Form
10-QSB filed by it since June 30, 1996, (iii) its Proxy Statement for the most
recent Annual
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Meeting of Shareholders, (iv) any reports on Form 8-K filed by it since June 30,
1996, (v) any other reports and documents required to be filed by it under
Sections 13(a), 14(a), 14(c) and 15(d) of the Securities Exchange Act of 1934
since June 30, 1996; and (vi) any amendments and supplements to all such reports
filed by Buyer with the SEC (collectively, the "SEC Reports"). The SEC Reports
did not at the time they were filed (or if amended or superseded by a filing
prior to the date hereof, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. Since the date of the latest Quarterly Report on
Form 10-QSB, there has not been any material adverse change in the business,
prospects, properties, financial position, results of operations or net worth of
Buyer.
4.7. Brokers. Except for Prudential Securities Incorporated, Buyer has
not retained any broker or finder or incurred any liability or obligation for
any brokerage fees, commissions or finder's fees with respect to this Agreement
or the transactions contemplated hereby.
5.8. Compliance. The Buyer and its subsidiaries each have the corporate
power and authority to own, lease and operate their properties and to conduct
their businesses as now conducted. The Buyer and its subsidiaries each have
complied and are in compliance in all material respects with (i) all federal,
state and local laws, regulations, ordinances, rules or orders affecting or
regulating the conduct and operations of their respective businesses, and (ii)
all of their respective material contracts and agreements.
ARTICLE V
COVENANTS
Each Shareholder, jointly and severally, and Buyer, as applicable,
hereby agree to keep, perform and fully discharge the following covenants and
agreements.
5.1. Access. From the date hereof through the Closing Date,
Shareholders shall, and shall cause the Company to, give Buyer and its
representatives full and free access during normal business hours to all
properties, facilities, personnel, books, contracts, leases, commitments and
records, including any financial and operating data and information and during
this period Shareholders shall, and shall cause the Company to, furnish Buyer
with all other information regarding the Company, the Subsidiaries, the Business
and its assets, properties, rights and claims, as Buyer may from time to time
request. Except as set forth herein, neither the furnishing of information to
Buyer or its representatives nor any investigation made heretofore or hereafter
by Buyer shall affect Buyer's right to rely on any representation or warranty
made by Shareholders in this Agreement, each of which shall survive any
furnishing of information or any investigation as set forth herein.
5.2. Continued Assistance. Following the Closing, Shareholders and
Buyer shall cooperate in an orderly transfer of the Business and the
continuation thereof by Buyer. From time to time, at Buyer's request and cost
and without further consideration, Shareholders shall execute, acknowledge and
deliver such documents, instruments or assurances and take such other action as
Buyer may reasonably request to more effectively assign, convey and transfer any
of its assets and will assist Buyer in the vesting, collection or reduction to
possession of such assets, properties, rights and claims. Shareholders shall
give Buyer and its Affiliates access to such books and records as Buyer may
reasonably request in order to allow Buyer or its Affiliates to audit the
financial statements of the Company for prior years. Buyer shall cooperate with
Shareholders and provide such assistance as Shareholders may reasonably request,
at Shareholders' expense, in connection with the defense or prosecution of any
claims, actions or investigations and any other matters arising out of or
related to the conduct of the Business prior to the Closing.
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5.3. Records and Documents. For five (5) years following the Closing
Date, each party hereto shall retain and grant to the other party and its
representatives, at such other party's request, access to and the right to make
copies of those records and documents which are retained by such party, as may
be necessary in connection with the business and affairs of such other party
after the Closing. If during such time any party elects to dispose of such
records, such party shall first give each other party hereto sixty (60) days'
written notice, during which period such other party shall have the right to
obtain the records without further consideration.
5.4. Release. Shareholders hereby, irrevocably and unconditionally,
fully and forever acquit, release and discharge and agree to hold harmless Buyer
and all affiliated corporations, and their respective officers, directors,
employees, agents, representatives, successors and assigns (hereinafter
collectively referred to as the "Releasees") from all actions, claims, causes of
action, suits, charges, complaints, debts, sums of money, accounts, covenants,
contracts, controversies, agreements, promises, damages, judgments, liabilities
or obligations of any kind whatsoever in law or in equity ("Claims") which the
undersigned and their respective Affiliates, heirs, executors, administrators,
successors and assigns can, shall or may have against the Releasees, upon or by
reason of any matter, act or failure to act whatsoever related to or arising
from the Business or operations of the Company and the Subsidiaries from the
beginning of time to the Closing Date; provided, however, that this release does
not release Buyer from any obligation expressly undertaken by the Company, the
Subsidiaries or Buyer, pursuant to this Agreement, the Employment Agreements or
any agreement referenced in this Agreement.
5.5. Employee Benefits. For purposes of all benefits, Buyer shall, to
the extent applicable, recognize the years of service and level of seniority for
each employee of the Company. Buyer agrees to continue the health and welfare
benefit plans currently maintained by the Company until December 31, 1997.
Commencing January 1, 1998, the Board of Directors of Buyer will determine the
health and welfare benefit plans available to the Company and its employees;
provided, however, that the current employees of the Company will receive, to
the extent applicable, full credit for all years of service with the Company,
including pre-Closing periods, for all purposes of vesting, benefit entitlement
and determining years of service with Buyer and its Affiliates (including the
Company).
6.6. NJMIC Headquarters Lease. Following the Closing, the Buyer shall
cause NJMIC to exercise its option under its real estate lease for its
headquarters facility to be extended for an additional five-year period.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
Each and all of the obligations of Buyer to consummate the transactions
contemplated by this Agreement are subject to fulfillment prior to or at the
Closing of the following conditions:
6.1. Accuracy of Warranties and Performance of Covenants. The
representations and warranties of Shareholders contained herein shall be
accurate in all material respects as if made on and as of the Closing Date.
Shareholders shall have performed in all material respects all of the
obligations and complied with each and all of the covenants, agreements and
conditions required to be performed or complied with on or prior to the Closing.
6.2. No Pending Action. No action, suit, proceeding or investigation
before any court, administrative agency or other governmental authority shall be
pending or threatened wherein an
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unfavorable judgment, decree or order would prevent the carrying out of this
Agreement or any of the transactions contemplated hereby, declare unlawful the
transactions contemplated hereby, cause such transactions to be rescinded, or
which might affect the right of Buyer to own, operate or control the Business or
the Company or Subsidiaries.
6.3. Consents. All consents by third parties that are required for the
transfer of the Business or the Stock or are required for the consummation of
the transactions contemplated hereby, or that are required in order to prevent a
breach of or a default under or a termination of any agreement to which the
Company or Subsidiaries is a party or to which any portion of the property of
the Company is subject, shall have been obtained or provided for and shall
remain in effect. All consents required with respect to each Material Contract
shall have been obtained.
6.4. Satisfaction of Counsel. All corporate and other actions and
proceedings in connection with the transactions contemplated hereby and all
documents incidental thereto, and all other related legal matters, shall be
reasonably satisfactory in form and substance to counsel for Buyer, and Buyer
shall have received all such resolutions, documents and instruments, or copies
thereof, certified if requested, as its counsel shall have reasonably requested.
6.5. Regulatory Approvals. All permits, approvals and authorizations
from any governmental or regulatory body required for the lawful consummation of
the transactions contemplated hereby or for the operation of the Business by
Buyer shall have been obtained and all such actions shall remain in full force
and effect and shall be satisfactory in form and substance to Buyer and its
counsel.
7.6. Fiscal Year. NJMIC shall have changed its fiscal year from
February 28 to September 30 and as of September 30, 1997, NJMIC shall have
consolidated assets of not more than $20,000,000.
7.7. Other Subsidiaries. Prior to the Closing Date, NJMIC shall have
transferred to the Shareholders all subsidiaries of NJMIC or FLC other than
Significant Subsidiaries.
7.8. Shareholder Loans. Prior to the Closing Date, the Shareholders
shall have satisfied up to $335,000 of loans from NJMIC to the Shareholders and
IMDC.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SHAREHOLDERS
Each and all of the obligations of Shareholders to consummate the
transactions contemplated by this Agreement are subject to fulfillment prior to
or at the Closing of the following conditions:
7.1. Accuracy of Warranties and Performance of Covenants. The
representations and warranties of Buyer contained herein shall be accurate in
all material respects as if made on and as of the Closing Date. Buyer shall have
performed in all material respects all of the obligations and complied with each
and all of the covenants, agreements and conditions required to be performed or
complied with on or prior to the Closing.
7.2. No Pending Action. No action, suit, proceeding or investigation
before any court, administrative agency or other governmental authority shall be
pending or threatened wherein an unfavorable judgment, decree or order would
prevent the carrying out of this Agreement or any of the transactions
contemplated hereby, declare unlawful the transactions contemplated hereby or
cause such transactions to be rescinded.
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7.3. Consents. All consents by third parties that are required for the
consummation by Buyer of the transactions contemplated hereby, or that are
required in order to prevent a breach of or a default under or a termination of
any agreement to which Buyer is a party or to which any portion of the property
of Buyer is subject, shall have been obtained or provided for and shall remain
in effect.
7.4. Satisfaction of Counsel. All corporate and other actions and
proceedings in connection with the transactions contemplated hereby and all
documents incidental thereto, and all other related legal matters, shall be
reasonably satisfactory in form and substance to counsel for Shareholders, and
Shareholders shall have received all such resolutions, documents and
instruments, or copies thereof, certified if requested, as its counsel shall
have reasonably requested.
ARTICLE VIII
TERMINATION
8.1. Termination of Agreement. Buyer and Shareholders may earlier
terminate this Agreement as provided below:
(a) Buyer and Shareholders may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(b) Buyer may terminate this Agreement by giving written
notice to Shareholders at any time prior to the Closing in the event any
Shareholder has breached any representation, warranty, or covenant contained in
this Agreement in any material respect, and such breach is not cured within five
business days after written notice of such breach has been given by Buyer to
Shareholders;
(c) Shareholders may terminate this Agreement by giving
written notice to Buyer at any time prior to the Closing in the event Buyer has
breached any representation, warranty, or covenant contained in this Agreement
in any material respect, and such breach is not cured within five business days
after notice of such breach has been given by Shareholders to Buyer; and
(d) Buyer or Shareholders may terminate this Agreement if the
Closing has not occurred by December 31, 1997.
8.2. Effect of Termination. If Buyer or Shareholders terminate this
Agreement pursuant to Section 9.1 above, all rights and obligations of the
parties hereunder shall terminate without any liability of any party, except as
provided below. Notwithstanding the foregoing, Sections 6.5 and 11.4, and the
Confidentiality Agreement shall survive any termination of this Agreement. If
this Agreement is terminated because of the negligent, wilful or intentional
breach of any term or provision hereof, the non-breaching party shall be
entitled to be reimbursed from the breaching party for all of its out-of-pocket
expenses incurred in connection with this Agreement to the date of termination,
including without limitation, legal, accounting and financial advisor costs and
expenses. If the transactions contemplated hereby are not consummated for any
reason whatsoever, nothing contained in this Article IX shall be deemed to
preclude either party from seeking to recover damages which it incurs as a
result of such non-consummation or to obtain other legal or equitable relief
(including specific performance), if such non-consummation results from a
negligent, wilful or intentional breach of any term or provision of this
Agreement by the party from whom damages are or against whom such other legal or
equitable relief is sought.
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ARTICLE IX
SURVIVAL AND INDEMNIFICATION
9.1. Survival. All representations and warranties contained in this
Agreement (including all Exhibits and Schedules hereto) shall be deemed to be
material and to have been relied upon by the parties hereto, and shall survive
the Closing and shall continue to be fully effective and enforceable for a
period of three years following the Closing Date (unless a different period is
specifically provided below), but shall thereafter be of no further force or
effect, except as they relate to claims for indemnification timely made pursuant
to this Article or claims alleging fraud on the part of a party hereto. Any
claim for indemnification asserted in writing (which claim shall provide
reasonable detail of the indemnity claim) before the third anniversary of the
Closing Date or other applicable survival period shall survive until resolved or
judicially determined. The representations and warranties set forth in Sections
4.1, 4.2, 4.3, 4.4 and 4.5 hereof and any representations regarding tax returns
and reports filed by any Taxpayer and Shareholders' indemnification obligation
with respect thereto shall survive for the applicable statute of limitations
period. All covenants and agreements contained herein shall survive indefinitely
unless a shorter time period is provided for in this Agreement. Except as set
forth herein, the representations and warranties contained in this Agreement
shall not be affected by any investigation, verification or examination by any
party hereto or by anyone on behalf of any such party.
9.2. Indemnification.
(a) Shareholders shall, jointly and severally, indemnify, hold
harmless and defend Buyer from and against any and all loss, damage, cost,
expense (including court costs and reasonable attorneys' fees at all levels of
trial and appeal and expenses and costs of investigation), suit, action, claim,
deficiency, liability or obligation ("Adverse Consequences") related to, caused
by or arising from any misrepresentation or breach of any representation,
warranty or covenant of any Shareholder under this Agreement. Shareholders shall
not be liable for indemnification under this Agreement until the aggregate
amount of all such claims exceeds $100,000 and then Buyer shall be entitled to
recover only the amount in excess of such claims. The maximum aggregate
liability of Shareholders for indemnification under Article X of this Agreement
is $16,000,000.
(b) Buyer shall, jointly and severally, indemnify, hold
harmless and defend Shareholders from and against any and all Adverse
Consequences related to, caused by or arising from any misrepresentation or
breach of any representation, warranty or covenant of Buyer under this
Agreement. Buyer shall not be liable for indemnification under this Agreement
until the aggregate amount of such claims exceeds $100,000 and then Shareholders
shall be entitled to recover only the amount in excess of such claims. The
maximum aggregate liability of Buyer for indemnification under Article X of this
Agreement is $16,000,000.
(c) The party seeking indemnification under this Article shall
give written notice to the indemnifying party of the facts and circumstances
giving rise to any claim for indemnification. All rights contained in this
Article are cumulative. All indemnification rights shall be deemed to apply in
favor of the indemnified party's officers, directors, representatives,
subsidiaries, Affiliates, successors and assigns. If an indemnifiable matter
involves a third party action, suit, claim or demand, then, upon receipt of
notice, the indemnitor shall, at its expense and through counsel of its choice,
promptly assume and have sole control of the litigation, defense or settlement
of the indemnification matter (referred to as the "Defense"), except that: (a)
the indemnitee may, at its option and expense and through counsel of its choice,
participate in (but not control) the Defense; (b) if the indemnitee reasonably
believes that the handling of the Defense by the indemnitor may have a material
adverse affect on the indemnitee's business or its relationship with any client,
employee, contractor, salesman, agent or representative, then the indemnitee
may, at its option and expense and through counsel of its choice, assume control
of the Defense; provided that the indemnitor shall continue to be obligated to
indemnify the indemnitee with
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respect thereto and shall be entitled to participate in the Defense at its
expense and through counsel of its choice; (c) the indemnitor shall not consent
to any judgment or agree to any settlement without the indemnitee's prior
written consent; provided that, if the indemnitee withholds its consent to any
monetary judgment or settlement that is acceptable to the indemnitor, then (1)
the indemnitor's liability with respect to such indemnification shall be limited
to such monetary amount, and (2) the indemnitee shall be responsible for any
additional costs reasonably incurred by the indemnitor in connection therewith;
(d) if the indemnitor does not promptly assume control over the Defense or,
after doing so, does not continue to prosecute the Defense in good faith, the
indemnitee may, at its option and through counsel of its choice, but at the
indemnitor's expense, assume control over the Defense; provided that the
indemnitor shall continue to be obligated to indemnify the indemnitee with
respect thereto; and (e) in any event, the indemnitor and the indemnitee shall
fully cooperate with each other in connection with the Defense, including, but
not limited to, furnishing all available documentary or other evidence as is
reasonably requested by the other.
(d) Buyer shall be entitled to recover any indemnification
payments due hereunder by setting off against any amounts due from Buyer to
Shareholders under this Agreement, including the Collection Payment, the
Collection Interest Payment, the Earnout Payment, or any other agreement,
whether or not such amounts are due from Buyer by the express terms of any such
agreement or as a result of settlement or judgment with respect to any such
agreement but not the Employment Agreements with Shareholders; provided,
however, that to the extent then available, the Buyer's indemnification claims
hereunder shall first be set-off against the Collection Payment, the Collection
Interest Payment and/or the Earnout Payment. Buyer's continuing right of set-off
shall not be deemed Buyer's exclusive remedy for Shareholders' breach of any of
the representations, warranties or agreements set forth herein.
(e) If Shareholders indemnify Buyer with respect to a breach
of the representations and warranties in Section 4.26 relating to the collection
of accounts receivable, Buyer shall, concurrently with its receipt of such
indemnification payment, assign to Shareholders all of its title to, and the
right to collect on, the accounts receivable in question.
(f) The remedy provided by this Article X, subject to the
limitations set forth herein, shall be the parties' sole and exclusive remedy
for the recovery of any damages resulting from, relating to or arising out of
this Agreement, and no party shall be entitled to an award of punitive or
exemplary damages against any other party.
(g) In the event that any party is required to make any
payment under this Article X, such party shall promptly pay the indemnified
party the amount so determined. If there should be a dispute as to the amount or
manner of determination of any indemnity obligation owed under this Article X,
the indemnifying party shall, nevertheless, pay when due such portion, if any,
of the obligation as shall not be subject to dispute. The portion in dispute
shall be paid upon a final and non-appealable resolution of such dispute. Upon
the payment in full of any claim, the indemnifying party shall be subrogated to
the rights of the indemnified party against any person with respect to the
subject matter of such claim.
(h) To the extent any Adverse Consequence causes a reduction
in either the Earnout Payment and/or the Collection Payment, such Adverse
Consequence shall not also be subject to indemnification under this Article X to
the extent of such reduction.
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ARTICLE X
GENERAL PROVISIONS
10.1. Definitions.
"Accountant" shall mean B.D.O. Xxxxxxx or the Buyer's then current
independent public accountant, a "big six" accounting firm (or their successor)
or a mutually acceptable accounting firm.
"Acquisition Proposals" has the meaning set forth in Section 6.8.
"Affiliate" has the meaning set forth in Section 4.7.
"Benefit Plans" has the meaning set forth in Section 4.19.
"Business" has the meaning set forth in the preamble.
"Buyer" has the meaning set forth in the preamble.
"Claims" has the meaning set forth in Section 6.10.
"Closing" has the meaning set forth in Section 3.1.
"Closing Agreements" has the meaning set forth in Section 3.4.
"Closing Date" has the meaning set forth in Section 3.1.
"Closing Payment" has the meaning set forth in Section 2.1(a).
"Code" has the meaning set forth in Section 4.19(i).
"Collection Payment" has the meaning set forth in Section 2.1(b).
"Collection Payment Date" shall mean 90 days following the applicable
Closing Payment Period.
"Collection Period" has the meaning set forth in Section 2.1(b).
"Company" has the meaning set forth in the preamble.
"Earnout Payment" has the meaning set forth in Section 2.1(c).
"Earnout Payment Date" shall mean 90 days following the applicable
Earnout Payment Period.
"Earnout Period" has the meaning set forth in Section 2.1(c).
"ERISA" has the meaning set forth in Section 4.19(h).
"Financial Statements" has the meaning set forth in Section 4.8.
"Intellectual Property" has the meaning set forth in Section 4.16.
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"Investments" has the meaning set forth in Section 4.27.
"Licenses and Permits" has the meaning set forth in Section 4.12.
"Material Contracts" has the meaning set forth in Section 4.17.
"Personal Property Leases" has the meaning set forth in Section 4.15.
"Pre-Closing Periods" has the meaning set forth in Section 4.20(d).
"Real Estate Leases" has the meaning set forth in Section 4.14.
"Releasees" has the meaning set forth in Section 6.10.
"Returns" has the meaning set forth in Section 4.20(a).
"S corporation" has the meaning set forth in Section 4.20(f).
"SEC Reports" has the meaning set forth in Section 5.6.
"Shareholders" has the meaning set forth in the preamble.
"Significant Subsidiaries" has the meaning set forth in Section 3.3(c).
"Stock" has the meaning set forth in the preamble.
"Subsidiaries" has the meaning set forth in Section 4.5.
"Taxes" has the meaning set forth in Section 4.20.
"Third Party" has the meaning set forth in Section 6.8.
10.2. Notices. All notices, requests, consents, demands and other
communications hereunder must be in writing and shall be personally delivered,
sent by overnight carrier (such as Express Mail, Federal Express, etc.) with a
delivery receipt obtained or sent by facsimile transmission with confirming copy
sent by overnight carrier and a delivery receipt obtained and addressed to the
intended recipient as follows:
(a) If to Shareholders:
Xxxxxxx X. Xxxxx, President
New Jersey Mortgage and Investment Corp.
0 Xxxxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 201-535-4870
and
Xxxx X. Xxxxx, Senior Vice President
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New Jersey Mortgage and Investment Corp.
0 Xxxxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 201-535-4870
with a copy to:
Xxxxxx XxXxxxx, Esquire
Xxxx Xxxxxxx & Xxxxxx LLP
000 0xx Xxxxxx
Xxx Xxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
(b) If to Buyer:
Xxxxxxx X. Xxxxxxxx, Xx.
Chief Executive Officer
American Business Financial Services, Inc.
BalaPointe Office Centre
000 Xxxxxxxxxxxx Xxxx., Xxxxx 000
Xxxx Xxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
with copies to:
Xxxxxxx X. Xxxxx
Senior Vice President and General Counsel
American Business Financial Services, Inc.
BalaPointe Office Centre
000 Xxxxxxxxxxxx Xxxx., Xxxxx 000
Xxxx Xxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
and
Blank Rome Comisky & XxXxxxxx
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxxx X. Xxxxx, XX
Telephone: 000-000-0000
Facsimile: 000-000-0000
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Any party may change its address for receiving notice by written notice given to
the others named above.
10.3. Amendments and Waiver. No amendment, waiver or consent with
respect to any provision of this Agreement shall in any event be effective,
unless the same shall be in writing and signed by the parties hereto, and then
such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
10.4. Expenses and Taxes. Except as otherwise expressly provided
herein, each party to this Agreement shall pay its own costs and expenses in
connection with the transactions contemplated hereby. Any sales, transfer or
other taxes or fees applicable to the conveyance and transfer from Shareholders
to Buyer of the Stock shall be borne by Shareholders. The provisions of this
Section 11.4 shall survive any termination of this Agreement.
10.5. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
10.6. Benefit. This Agreement shall bind and inure to the benefit of
the parties named herein and their respective successors and assigns. Neither
party hereto may assign any rights, benefits, duties or obligations under this
Agreement without the prior written consent of the other party.
10.7. Entire Transaction. This Agreement and the documents referred to
herein, and the Confidentiality Agreement, dated June 17, 1997, among the
Company and Buyer (the "Confidentiality Agreement") contain the entire
understanding among the parties with respect to the transactions contemplated
hereby and supersede all other agreements, understandings and undertakings among
the parties with respect to the subject matter hereof.
10.8. Applicable Law. This Agreement shall be governed by and construed
in accordance with the internal substantive laws of the Commonwealth of
Pennsylvania, without regard to conflicts of laws principles.
10.9. Waiver. Any party's lack of enforcement of any provision of this
Agreement shall not be construed as a waiver of any such provision and the
non-breaching party may elect to enforce any such provision in the event of
past, repeated or continuing breach. No waiver of any of the provisions of this
Agreement or of any of the rights or remedies of the parties hereto shall be
valid unless such waiver is in writing signed by the parties so waiving. No
waiver in one or more instances of any of the provisions of this Agreement shall
be deemed a continuing waiver or a waiver of any other provision.
10.10. Other Rules of Construction. References in this Agreement to
sections, schedules and exhibits are to sections of, and schedules and exhibits
to, this Agreement unless otherwise indicated. Words in the singular include the
plural and in the plural include the singular. The word "or" is not exclusive.
The word "including" shall mean including, without limitation. The section and
other headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
10.11. Announcements. No announcement of this Agreement or any
transaction contemplated hereby shall be made by any party without the written
approval of the other parties hereto (which approval shall not be unreasonably
withheld), except as required by law or the regulations of any securities
exchange.
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10.12. Partial Invalidity. In the event that any provision of this
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed all as of the date first written above.
AMERICAN BUSINESS FINANCIAL SERVICES,
INC.
By: /s/ Xxxxxxx X. Xxxxxxxx, Xx.
------------------------------------
Title: President
----------------------------------------
/s/ Xxxxxxx X. Xxxxx
__________________________________________
XXXXXXX X. XXXXX
/s/ Xxxx X. Xxxxx
__________________________________________
XXXX X. XXXXX
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EXHIBITS AND SCHEDULES
Exhibits
A List of Collection Payment Assets
B Form of Xxxxxxx X. Xxxxx Employment Agreement
C Form of Xxxx X. Xxxxx Employment Agreement
D List of Other Persons to Enter into Employment Agreements.
Schedules
Shareholders' Schedules
4.3. Qualified to do Business
4.5. Subsidiaries
4.6. Consents
4.7. Transactions with Affiliates
4.8. Financial Statements
4.11. Insurance
4.12. Licenses and Permits
4.13. Title to Assets
4.14. Real Estate
4.15. Personal Property Leases
4.17. Material Contracts
4.18. Employees
4.19. Employee Benefit Plans
4.21. Litigation
4.22. Compliance
4.24. Banking Relationships and Investments
4.26. Undisclosed Liabilities
4.31. Subordinated Debt
4.35. Repurchase Obligations
THE REGISTRANT AGREES TO FURNISH SUPPLEMENTALLY A COPY OF ANY OMITTED
EXHIBIT OR SCHEDULE TO THE COMMISSION UPON REQUEST.
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