Exhibit 2.1
STOCK AND ASSET PURCHASE AGREEMENT
This Stock and Asset Purchase Agreement (this "Agreement") is entered
into as of the 3rd day of October, 2005, by and among Nelnet, Inc., a Nebraska
corporation (the "Parent"), NNI Acquisition Servicing Limited Partnership, a
Nebraska limited partnership and indirect wholly owned subsidiary of the Parent
(the "Buyer"), Greater Texas Foundation, a Texas non-profit corporation (the
"Foundation"), and LoanSTAR Systems, Inc., a Texas non-profit corporation (the
"Servicer").
RECITALS
A. The Foundation is the record holder of 100,000 shares of senior
stock, $0.01 par value per share (the "Stock"), of LoanSTAR Funding Group, Inc.,
a Texas corporation (the "Company"), representing all of the issued and
outstanding capital stock of the Company.
B. The parties desire that the Foundation sell to the Buyer and the
Buyer purchase from the Foundation, upon the terms and conditions set forth
herein, the Stock.
C. The Servicer is engaged in Servicing Operations, provides
administrative services to the Foundation, the Company and the Subsidiaries and
currently owns the Purchased Assets.
D. The parties desire that the Servicer sell to the Buyer and the Buyer
purchase from the Servicer, upon the terms and conditions set forth herein, the
Purchased Assets.
NOW, THEREFORE, in consideration of the foregoing premises and in
consideration of and in reliance upon the representations, warranties and
obligations in this Agreement, the parties agree as follows:
AGREEMENT
ARTICLE I
PURCHASE OF STOCK AND ASSETS
1.1 RULES OF CONSTRUCTION. (a) Unless the context otherwise requires, as
used in this Agreement (i) a term has the meaning assigned to it in this
Agreement and (ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP. Certain capitalized terms are defined in
Section 9.1 hereof.
(b) The inclusion of any information in the Schedules to this Agreement
(the "Disclosure Schedule") shall not be deemed an admission or acknowledgment,
in and of itself and solely by virtue of the inclusion of such information in
the Disclosure Schedule, that such information is required to be listed in the
Disclosure Schedule or that such items are material to the Company, the
Subsidiaries or the Servicer.
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(c) All references in this Agreement to Schedules, Articles, Sections,
paragraphs and other subdivisions refer to the corresponding Schedules,
Articles, Sections, paragraphs and other subdivisions of this Agreement unless
expressly provided otherwise. Titles appearing at the beginning of any Articles,
Sections, subsections or other subdivisions of this Agreement are for
convenience only, do not constitute any part of such Articles, Sections,
subsections or other subdivisions, and shall be disregarded in construing the
language contained therein. The words "this Agreement," "herein," "hereby,"
"hereunder" and "hereof" and words of similar import refer to this Agreement as
a whole and not to any particular subdivision unless expressly so limited. The
words "this Section," "this subsection" and words of similar import, refer only
to the Sections or subsections hereof in which such words occur. The word
"including" (in its various forms) means "including, without limitation."
Pronouns in masculine, feminine or neuter genders shall be construed to state
and include any other gender and words, terms and titles (including terms
defined herein) in the singular form shall be construed to include the plural
and vice versa, unless the context otherwise expressly requires. Unless the
context otherwise requires, all defined terms contained herein shall include the
singular and plural and the conjunctive and disjunctive forms of such defined
terms.
1.2 PURCHASE OF STOCK. On the terms and subject to the conditions of
this Agreement, at the Closing, the Foundation agrees to sell, transfer and
assign to the Buyer, free of all Liens (including any Lien that would otherwise
constitute a Permitted Encumbrance), and the Buyer agrees to purchase, the Stock
representing 100% of the equity of the Company.
1.3 SALE AND TRANSFER OF ASSETS. On the terms and subject to the
conditions of this Agreement, at the Closing, the Servicer agrees to convey,
sell, assign, transfer and deliver to Buyer, and Buyer shall purchase and
acquire from the Servicer, all of the assets, properties, rights, privileges,
claims, contracts and interests of every kind and description, real or personal,
tangible or intangible, absolute or contingent, wherever situated, whether or
not carried or reflected on the books and records of the Servicer, that are
owned by the Servicer and used in the conduct of the Servicing Operations, free
and clear of any and all Liens, except for the Retained Assets (such assets,
properties, rights, privileges, claims, contracts and interests being
hereinafter collectively referred to as the "Purchased Assets"). Without
limiting the generality of the foregoing, the Purchased Assets shall include the
following:
(a) TANGIBLE PERSONAL PROPERTY. All of the equipment, office
furniture, furnishings, office equipment, computer hardware and
software, leasehold and other improvements and all other tangible
personal property owned by the Servicer in connection with the Servicing
Operations;
(b) BOOKS, RECORDS AND WRITTEN MATERIALS. All of the business
records of the Servicer used in connection with the Servicing
Operations, including all financial books and records, studies,
analyses, plans, forms, specifications, technical data, and any similar
information which has been reduced to writing and stored in any physical
location or on any type of media, electronic or otherwise, provided that
the Servicer shall be permitted to retain copies of such items for its
records and such items that relate solely to the Retained Assets;
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(c) CATALOGS AND ADVERTISING MATERIAL. All of the promotional and
advertising materials, including all catalogs, brochures, videos, plans,
manuals, handbooks, and equipment owned by or used or held for use by
the Servicer in connection with the Servicing Operations;
(d) INTELLECTUAL PROPERTY. Any and all intellectual property
owned by the Servicer, together with all claims for damages against
Persons by reason of past infringement thereon and the right to xxx for
and collect such damages, confidential or proprietary business
information and trade secrets and all other intellectual and intangible
property rights owned by the Servicer, or in which the Servicer has any
right or interest whatsoever, and which are used or held for use by the
Servicer in connection with the Servicing Operations (where there are
multiple copies of such material in possession or control of the
Servicer, all copies of such material);
(e) CONTRACTS. All rights and benefits of the Servicer in, to and
under the contracts, leases, instruments, agreements and loans, written
or oral (collectively, the "Servicing Operation Contracts") to which the
Servicer is a party and which relate to the Servicing Operations or by
which the Servicing Operations are conducted or by which any of the
other Purchased Assets are bound; Schedule 1.3(e) lists each Servicing
Operation Contract that involves purchases, sales, transfers, services
or obligations of the Servicer in excess of $250,000 over the life of
such Servicing Operation Contract;
(f) LICENSES. To the extent assignable under applicable Law, any
license, franchise, concession, certificate or registration from or with
a Governmental Authority, and held by or used or held for use in
connection with the Servicing Operations;
(g) PERMITS. To the extent assignable under applicable Law, any
permit, consent, authorization or approval from or with a Governmental
Authority, and held by or used or held for use in connection with the
Servicing Operations;
(h) NAMES. All rights in and to the trade names owned or held by
the Servicer; and
(i) ACCOUNT. The Lender Payable Account (reflecting an amount of
approximately $3.2 million as of August 31, 2005), and all funds held
therein, described in Schedule 1.4(b).
1.4 RETAINED ASSETS. Notwithstanding Section 1.3 or any other provision
of this Agreement, , the Purchased Assets shall not include, and the Servicer
shall retain all of its right, title and interest in and to and all Liabilities
arising under, the following assets and properties (collectively, the "Retained
Assets"):
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(a) all cash, cash equivalents and other types of investments of
the Servicer, including (i) certificates of deposit and marketable
securities and (ii) cash and securities related to the Flexible Option
Plan of the Servicer;
(b) all bank accounts and similar accounts, other than the
accounts listed on Schedule 1.4(b);
(c) all accounts receivable of the Servicer accrued as of and
through the Closing Date;
(d) all insurance policies, programs, reserves and related bonds
of any nature maintained by the Servicer (as identified in Schedule
1.4(d) attached hereto);
(e) the organizational documents and corporate minute books of
the Servicer;
(f) such records as relate primarily to (i) the items set forth
in the foregoing subsections (a), (b), (c) and (d), (ii) the Liabilities
not assumed by the Buyer or (iii) the negotiation and consummation of
the transactions contemplated by this Agreement;
(g) all of Servicer's rights, demands and causes of action that
arise under or are related to any Excluded Contract;
(h) any and all claims, causes of action, avoidance actions,
counterclaims, demands, controversies, costs, debts, sums of money,
accounts, reckonings, bonds, bills, damages, obligations, liabilities,
objections, legal proceedings, equitable proceedings, executions of any
nature, type, or description, choses in action, rights of recovery, and
rights of recoupment or set-off against any Person, in each case, that
do not arise under the Purchased Assets;
(i) all of Servicer's rights, demands and causes of action that
arise under or are related to this Agreement;
(j) any agreement, contract, arrangement, unexpired lease of real
or personal property, license and purchase order that is not a Servicing
Operations Contract; Schedule 1.4(j) lists each agreement, contract,
arrangement, unexpired lease of real or personal property, license and
purchase order of Servicer that is not a Servicing Operation Contract
and that involves purchases, sales, transfers or services or obligations
of the Servicer in excess of $250,000 over the life thereof; and
(k) the assets related to or used in providing the administrative
services currently provided by the Servicer to the Foundation, the
Company and the Subsidiaries, which are identified in Schedule 1.4(k)
attached hereto.
1.5 ASSUMPTION OF LIABILITIES. (a) The transfer of the Purchased Assets
pursuant to this Agreement shall not include the assumption of any liability or
obligation unless the Buyer expressly assumes such liability or obligation
pursuant to this Section 1.5. Subject to the terms and conditions of this
Agreement, at the Closing Buyer will assume, pay, satisfy, discharge, perform
and fulfill, as and when due, only the following liabilities, obligations and
commitments of the Servicer (collectively, the "Assumed Liabilities"):
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(i) all obligations of the Servicer under or with respect to the
Servicing Operation Contracts, subject to adjustments set forth in
Section 1.6 hereof;
(ii) all Liabilities of the Servicer under the severance policy
set forth in Schedule 1.5 hereof;
(iii) the Liabilities of the Servicer as of the Closing Date that
would be properly accrued on the balance sheet of the Servicer
(determined in a manner consistent with the preparation of the Balance
Sheet) under the line items "Lenders Payable," "Accrued Vacation
Payable" and "Capital Lease Liability"; and
(iv) all other liabilities and obligations of the Servicer that
relate to the Purchased Assets that arise from events occurring after
the Closing Date.
(b) All Assumed Liabilities shall be paid or discharged by Buyer in the
ordinary course of business when such liabilities become due and payable. The
assumption by Buyer of the Assumed Liabilities shall not enlarge any rights or
remedies of any third party thereunder, and Buyer shall not be prevented from
contesting in good faith any of the Assumed Liabilities. The covenants and
agreements of this Section 1.5 are for the sole benefit of the Servicer and are
not for the benefit of, and shall not be enforced or enforceable by, any
creditor of Buyer, the Servicer or any third party.
1.6 ADJUSTMENTS AND PRORATIONS.
(a) Subject to Section 7.11, all revenues and expenses of the Servicer
arising under the Servicing Operations Contracts, wages, salaries, vacation, and
sick leave, personal days, and other employee compensation pay and prepaid and
deferred items (other than the expenses of Servicer under the severance policy
set forth in Schedule 1.5 hereof), shall be prorated between Buyer and Servicer,
and an appropriate adjustment to the Purchase Price shall be made, in accordance
with the principle that, except as otherwise expressly set forth in this
Agreement, (i) Servicer shall receive all revenues, and shall be responsible for
all expenses, relating to the Purchased Assets and Assumed Liabilities for the
period ending at 11:59 p.m. on the day prior to the Closing Date, and (ii) Buyer
shall receive all revenues, and shall be responsible for all expenses, relating
to the Purchased Assets and Assumed Liabilities thereafter. Subject to Section
7.11, Servicer shall be liable for all the costs of employee compensation or
other benefits relating to the business or operations of the Purchased Assets
attributable to service with the Servicer through 11:59 p.m. on the date prior
to the Closing Date (other than the expenses of Servicer under the severance
policy set forth in Schedule 1.5 hereof), including (i) all taxes and related
contributions, vacations and sick pay and (ii) all group medical, dental or
death benefits for expenses incurred, related to or arising from events
occurring on or prior to 11:59 p.m. on the date prior to the Closing Date, or
death or disability occurring on or prior to 11:59 p.m. on the date prior to the
Closing Date, whether reported by the Closing Date or thereafter. Subject to
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Section 7.11, Buyer shall be liable for all of the costs of employee
compensation and other benefits (including the types of costs referred to in
clauses (i) and (ii) above) relating to the employees of the Servicer who
continue employment or service with Buyer, Parent or an Affiliate thereof,
attributable to service with Buyer, Parent or an Affiliate thereof on and after
the Closing Date, including any severance liabilities as provided in Section
1.5(ii).
(b) Prorations pursuant to this Section 1.6 and the related adjustments
to the Purchase Price will be determined in a manner consistent with the
preparation of the Balance Sheet and paid by the appropriate party no later than
90 days after the Closing Date, unless there is a dispute with respect thereto
(in which event the payment shall be made as set forth below). Within 60 days
after the Closing Date, Buyer shall submit to Servicer its good faith
determination of the adjustments or prorations required by this Section 1.6.
Buyer's determination of the amount of adjustment under this Section 1.6 shall
be made in a manner consistent with the preparation of the Balance Sheet. If
Servicer disagrees with the determination made by Buyer of the adjustment,
Servicer shall give prompt written notice thereof, but in no event later than 20
days after notice of Buyer's determination, specifying in reasonable detail the
nature and extent of the disagreement, and Buyer and Servicer shall have a
period of 30 days in which to resolve the disagreement. If the parties are
unable to resolve the disagreement within such 30 day period, the matter shall
be submitted to a mutually agreed independent certified public accounting firm,
which accounting firm shall be directed to submit a final resolution within 30
days. The accounting firm's determination shall be binding on Buyer and
Servicer. Each party shall bear the fees and expenses of its own
representatives, including its independent accountants, if any, and shall share
equally the fees and expenses of such public accounting firm, if engaged, to
resolve any disagreement between the parties. Within five business days
following a final determination hereunder, the party obligated to make payment
will make the payments determined to be due and owing in accordance with this
Section 1.6.
1.7 PARENT ASSURANCES. In the event the Buyer breaches any covenant,
promise, agreement or obligation contained herein or in any other document,
certificate or agreement delivered by the Buyer pursuant hereto or contemplated
hereby, the Parent shall assume the performance of such covenant, promise,
agreement or obligation of the Buyer and the full and timely payment of all
amounts payable by the Buyer to the Foundation or the Servicer pursuant to the
terms of, or arising as a result of a default or breach under, this Agreement
and the other documents, certificates or agreements delivered by the Buyer
pursuant hereto or contemplated hereby. Without limitation, the Parent shall be
jointly and severally liable with the Buyer and Buyer's permitted assigns for
all liabilities and obligations of any such entity under the terms of this
Agreement and the other documents, certificates and agreements delivered by the
Buyer pursuant hereto or contemplated hereby.
ARTICLE II
CONSIDERATION
2.1 PURCHASE PRICE. In consideration of the Stock and the Purchased
Assets, the Buyer will pay to the Foundation and the Servicer the aggregate
purchase price of ONE HUNDRED SEVENTY THREE MILLION, FIVE HUNDRED EIGHTY FIVE
THOUSAND, THREE HUNDRED THIRTY ONE DOLLARS ($173,585,331) (the "Purchase
Price"), payable as set forth below and as adjusted in accordance with the other
provisions of this Agreement. The parties hereto agree that the Purchase Price
shall be increased at Closing by an amount equal to 37% of any amounts paid by
the Company pursuant to Section 7.18 hereof.
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2.1.1 CLOSING PAYMENT. At the Closing, the Buyer will pay the
Foundation and the Servicer in immediately available funds the amount of the
Purchase Price, to be allocated in accordance with Section 7.9 hereof, and to be
paid by wire transfers pursuant to instructions which shall be furnished by the
Foundation and the Servicer to the Buyer at least two (2) days prior to the
Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE FOUNDATION
The Foundation represents and warrants to the Buyer, as to the
Foundation and also with respect to the Company and each of the Subsidiaries, as
of the date of this Agreement as follows:
3.1 [RESERVED.]
3.2 AUTHORIZATION; ORGANIZATION AND STANDING; NON-CONTRAVENTION. (a) The
Foundation is a non-profit corporation duly organized, validly existing and in
good standing under the laws of the State of Texas. The Foundation has the
necessary corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. Assuming the due authorization,
execution and delivery of this Agreement by the Buyer and the Parent, this
Agreement constitutes the valid and binding obligation of the Foundation
enforceable against the Foundation in accordance with its terms, subject, as to
enforceability, to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and to general principals of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(b) The execution and delivery of this Agreement by the Foundation do
not, and the consummation of the transactions contemplated hereby and the
performance by the Foundation of its obligations under this Agreement will not
(i) violate any Law applicable to the Foundation, (ii) conflict with, result in
a breach of, constitute a default under, result in the acceleration of, create
in any Person the right to accelerate, modify or cancel, or require any notice
under any material contract to which the Company is a party or by which the
Company is bound or which any of its assets are subject, (iii) violate
provisions of the Company's articles of incorporation or bylaws, or (iv) violate
any order, judgment or decree to which the Company or the Foundation is bound,
except, with respect to the matters referred in clauses (i), (ii) and (iv), for
such conflicts, breaches, defaults, accelerations, rights, modifications,
cancellations, notices or violations that would not reasonably be expected to
have a Material Adverse Effect. No approval, authorization, license, permit or
other action by, or filing with, any Governmental Authority or non-governmental
third party is required that has not been obtained in connection with the
execution and delivery of this Agreement by the Foundation or the consummation
by the Foundation of the transactions contemplated hereby, except such as may be
required under the Xxxx-Xxxxx-Xxxxxx Act.
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3.3 INTELLECTUAL PROPERTY. Schedule 3.3 attached hereto sets forth a
materially complete list of all patents, pending patent applications and
registration certificates, all trade names, trade marks and service marks and
applications therefor, all copyright registrations, all copyrights not
registered, all internet domain name registrations of the Company, and all
source codes used in the business and operations of the Company and the
Subsidiaries as presently conducted (collectively, the "Company Intellectual
Property"). The Company is the sole and exclusive owner of the entire right,
title and interest in and to the Company Intellectual Property, free of any and
all Liens and there are no pending, or to the Foundation's knowledge, threatened
proceedings or litigation or other adverse claims affecting or with respect to
the Company Intellectual Property. To the Foundation's knowledge, (a) no Person
is infringing the Company Intellectual Property and (b) none of the Company
Intellectual Property is infringing upon the intellectual property rights of any
other Persons.
3.4 ORGANIZATION AND STANDING OF THE COMPANY.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Texas and is duly
qualified to transact business and is in good standing in every
jurisdiction in which the nature of the business conducted by it or the
character or location of properties owned or leased by it makes such
qualification necessary, except in such jurisdictions where failure to
be so duly qualified would not reasonably be expected to have a Material
Adverse Effect. A list of the jurisdictions in which the Company is
qualified to transact business is set forth in Schedule 3.4 attached
hereto.
(b) Each Subsidiary has been duly organized and is in good
standing under the laws of the jurisdiction of its organization, and is
duly qualified to transact business and is in good standing in every
jurisdiction in which the nature of the business conducted by it or the
character or location of properties owned or leased by it makes such
qualification necessary, except in such jurisdictions where failure to
be so duly qualified would not reasonably be expected to have a Material
Adverse Effect. A list of the jurisdictions in which each Subsidiary is
qualified to transact business is set forth in Schedule 3.4 attached
hereto. All of the issued and outstanding equity interests of each
Subsidiary have been duly authorized and validly issued and all of the
equity interests of each Subsidiary are owned by the Company, directly
or through Subsidiaries, free of any Liens. There are no outstanding
subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities, rights of first refusal or other
agreements or arrangements of any nature whatsoever under which any
Subsidiary is or may become obligated to issue, assign or transfer any
equity interest in such Subsidiary. Set forth in Schedule 3.4(b) is a
list of the indentures of trust to which each of the Subsidiaries is a
party. Each of the Subsidiaries has all requisite limited liability
company or partnership power and authority to own its properties and
carry on its business as presently conducted.
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(c) The Foundation has delivered to the Buyer a true and complete
copy of the Company's articles of incorporation and bylaws, and any
amendments thereto, as currently in effect. The Foundation has provided
to the Buyer a materially complete and accurate copy of the minute books
of the Company, with all necessary signatures, setting forth meetings
and certain actions taken by the shareholders and directors of the
Company. The stock transfer books and stock ledgers of the Company are
in all material respects in good order, true, correct and up to date,
with all necessary signatures, and set forth all stock certificates
issued, transferred and surrendered. The Company is not in default, in
any material respect, under or in violation, in any material respect, of
any provision of its articles of incorporation or bylaws,
(d) The Company's authorized capital stock consists of 100,000
shares of senior stock, $0.01 par value per share, and 100,000 shares of
common stock, $0.01 par value per share, of which 100,000 shares of
senior stock are issued and outstanding and owned by the Foundation,
free of any Liens (including any Lien that would otherwise constitute a
Permitted Encumbrance), and no shares of common stock are issued or
outstanding. The Stock is duly authorized, validly issued, fully paid,
non-assessable and free of preemptive rights, and is subject to no
restrictions with respect to transferability (other than restrictions,
if any, imposed by Law). There are no outstanding or authorized stock
appreciation, phantom stock, profit participation or similar rights with
respect to the Company, other than phantom stock rights described on
Schedule 3.4(d). There are no voting trusts, proxies or other agreements
or understandings with respect to the voting of the Stock. There are no
outstanding subscriptions, options, warrants, calls, contracts, demands,
commitments, convertible securities rights of first refusal or other
agreements or arrangements of any nature whatsoever under which the
Foundation or the Company are or may become obligated to issue, assign
or transfer any shares of the capital stock of the Company.
(e) Each of the Company and the Subsidiaries has all licenses,
permits and authorizations necessary to carry on the businesses in which
it is engaged and to own and use the properties owned and used by it,
except for such licenses, permits and authorizations, the absence of
which would not reasonably be expected to have a Material Adverse
Effect. None of the licenses, permits and authorizations of the Company
or the Subsidiaries will be terminated or are terminable due to
consummation of the transaction provided for herein.
3.5 GOOD TITLE TO ASSETS. The Company and the Subsidiaries are the sole
owners of, and have good title to or a valid leasehold in, free and clear of any
Liens, the properties and assets used by them in the conduct of their business
or shown on the Balance Sheet. Without limiting the foregoing, the Company and
the Subsidiaries are the sole owners of and have good and marketable title to,
free and clear of any Liens, through their eligible lender trustee, portfolios
of FFELP Loans having an aggregate outstanding principal balance of not less
than $839,000,000 as of August 31, 2005.
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3.6 MATERIAL CONTRACTS. Schedule 3.6 attached hereto lists each
agreement that is binding upon the Company or a Subsidiary, and which
individually involve purchases, sales, transfers or services or obligations of
the Company or a Subsidiary aggregating in excess of $250,000 over the life of
such agreement. True, correct and complete copies of all documents referred to
in Schedule 3.6 have been made available to the Buyer for its review. To the
knowledge of the Foundation, no Person has claimed that any of such agreements
listed in Schedule 3.6 are invalid or unenforceable in any material respect or
in default in any material respect. Except as disclosed in Schedule 3.6, none of
such agreements contain any provision which will or could result in termination
or modification of such agreement upon consummation of the transactions
contemplated by this Agreement. With respect to each of the agreements listed in
Schedule 3.6, such agreement is legal, valid, binding, enforceable and in full
force and effect, subject, as to enforceability, to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and to general principals of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity) and, to the Foundation's knowledge, no party is in breach or default
thereunder in any material respect and no event has occurred which with notice
or lapse of time, would constitute a material breach or default of, or permit
termination, modification or acceleration under, such agreement.
3.7 SUBSIDIARIES. The Company has no subsidiary other than the
Subsidiaries.
3.8 LITIGATION. There are no actions, claims, proceedings, litigation,
state or federal equal employment opportunity commission proceedings pending or,
to the Foundation's knowledge, threatened against the Company or any Subsidiary
with respect to their business, that would reasonably be expected to have,
directly or indirectly, individually or in aggregate, a Material Adverse Effect.
All pending litigation to which the Company is a party is identified in Schedule
3.8 attached hereto.
3.9 COMPLIANCE WITH LAWS. The Company and the Subsidiaries have complied
in all material respects and are complying in all material respects with all
Laws, and the Company has not received notice of violation of any applicable
Law.
3.10 COMPENSATION OF EMPLOYEES. Schedule 3.10(a) is a materially true,
correct and complete list of the names and job titles of all persons who are
employees, independent contractors or agents of the Company, together with
current annual base salaries and 2004 bonuses and commissions of such employees,
independent contractors or agents. Other than the employment agreements and
consulting agreements listed in Schedule 3.10(b), the Company has no employment
agreements, compensation or deferred compensation arrangements or consulting
agreements with any employee or other person or entity which are in writing or
which are not terminable at will. The Subsidiaries have no employees.
3.11 TAXES. All material Tax returns required to be filed prior to the
date of this Agreement have been filed in a timely manner and are true, complete
and correct in all material respects. All material Taxes relating to the Company
due on or before the date of this Agreement have been timely and fully paid. The
charges, accruals and reserves for Taxes due, or accrued but not yet due,
relating to the Company for any Tax period prior to the Closing Date as
reflected on the books of the Company are adequate to cover such Taxes. No
penalties or other charges of any nature are or will become due with respect to
the late filing of, or late payment of Taxes on, any Tax returns with respect to
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periods ending prior to the Closing Date. All material Taxes that the Company is
required by Law to withhold or collect have, in all respects, been duly withheld
or collected and have been timely paid over to the extent due and payable. There
are no Tax sharing agreements to which the Company is now or ever has been a
party. The Company is not a party to any agreement that would result, separately
or in the aggregate, in the payment of any "excess parachute payments" within
the meaning of ss. 280G of the Code. The Company is not a party to any joint
venture, partnership or other arrangement or contract that could be treated as a
partnership for federal income tax purposes, other than through the ownership of
the Subsidiaries.
3.12 EMPLOYEE BENEFIT PLANS. Except as identified in Schedule 3.12
attached hereto, the Company does not have "employee benefit plans" as that term
is defined in Section 3(3) of ERISA, that currently are maintained by, sponsored
in whole or in part by or contributed to, by or on behalf of the Company as
applicable, for the benefit of the respective employees, retirees, dependents,
spouses, directors, independent contractors or other beneficiaries. The Company
has made available to the Buyer true and correct copies of all material pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus or other material incentive plans, all
other material written employee programs, arrangements or agreements, whether
arrived at through collective bargaining or otherwise, all material medical,
vision, dental or other health plans, all life insurance plans and all other
material employee benefit plans or fringe benefit plans, including, without
limitation, all "employee benefit plans" as that term is defined in Section 3(3)
of ERISA, currently adopted, maintained by, sponsored in whole or in part by, or
contributed to by, or on behalf of, the Company for the benefit of its
employees, retirees, dependents, spouses, directors, independent contractors or
other beneficiaries who are eligible to participate therein (the "Benefit
Plans"). Neither the Foundation, the Company nor any ERISA affiliate of the
Foundation (which for purposes of this Agreement shall mean any entity required
to be aggregated with the Foundation or the Company under Code Sections 414(b),
(c), (m) or (o)) maintains or has maintained any multi employer plan within the
meaning of Section 3(37) of ERISA. All Benefit Plans are in compliance in all
material respects with the applicable terms of ERISA, the Code and any other
applicable laws, rules and regulations. No Benefit Plan that is a "defined
benefit plan" (within the meaning of Section 3(35) of ERISA) has any "unfunded
current liability," as that term is defined in Section 302(d)(8)(A) of ERISA,
and the present fair market value of the assets of any such plan exceeds the
plan's "benefit liabilities," as that term is defined in Section 4001(a)(16) of
ERISA, when determined under actuarial factors that would apply if the plan
terminated in accordance with all applicable legal requirements. No Benefit Plan
has an "accumulated funding deficiency" as defined in Code Section 412. No event
has occurred with respect to a Benefit Plan that could subject the Company to
liability under Title IV of ERISA. No Benefit Plan has been funded or
administered in a manner that would result in any material Liability for any Tax
or penalty for overfunding or prohibited transactions under applicable law.
11
3.13 ABSENCE OF CERTAIN EVENTS. Except as identified and described in
Schedule 3.13 attached hereto or as effected or contemplated by this Agreement,
since July 31, 2005 (with respect to items (b), (c), (f), (g), (h), (j) and (m)
below) and since December 31, 2004 (with respect to items (a), (d), (e), (i),
(k) and (l) below), there has not been:
(a) an amendment to the Company's articles of incorporation or
bylaws, or merger by the Company with or into or consolidation with any
Person, an amendment of or modification to, or an agreement to amend or
modify, any material agreement identified in Schedule 3.6 hereof to
which the Company is a party, other than those made in the ordinary
course of business, or a change or agreement to change the character or
business of the Company in any material respect;
(b) any dividends declared (other than the dividend described
under Section 7.21) or paid, or other distributions of any kind made, to
the Company's shareholder, or any direct or indirect redemption,
purchase, retirement or other acquisition of any of the Stock;
(c) any loan or advance made by the Company to any of the
Company's officers, directors, employees, consultants or shareholders
other than in the ordinary course of business;
(d) any strike or other labor dispute that has resulted in or
would reasonably be expected to have a Material Adverse Effect;
(e) any loss of any material permit, license, qualification or
certificate of authority held by the Company or a Subsidiary;
(f) an incurrence by the Company or a Subsidiary of indebtedness,
or entry by the Company or a Subsidiary into a transaction or series of
transactions creating an obligation or Liability of the Company or a
Subsidiary, in an amount exceeding $250,000, or any guarantee by the
Company or a Subsidiary of any indebtedness, Liability or obligation of
any other Person involving any amount exceeding $250,000, in each case,
other than in the ordinary course of business and other than in
connection with an amendment or restatement of the Company's existing
bank loan agreements;
(g) any obligation, Liability or Lien, paid, discharged or
satisfied by or on behalf of the Company or a Subsidiary other than in
the ordinary course of the Company's business and other than the current
Liabilities reflected in the Balance Sheet;
(h) any sale, transfer or other disposition of any asset or group
of related assets of the Company or a Subsidiary having a book value in
excess of $250,000 in the aggregate, or cancellation of debts or claims
of the Company having a book value in excess of $250,000 in the
aggregate, except in the ordinary course of business and except for the
Student Loans identified on Schedule 3.13(h), which may be transferred
or sold to the Foundation prior to Closing;
12
(i) any material change in, or any contract to materially change,
the compensation or other direct or indirect remuneration payable to any
officer, employee or consultant of the Company or any bonus, incentive
or deferred compensation, profit sharing, retirement, pension, group
insurance, death benefit or other fringe benefit plan, or any employment
or consulting agreement, granted, entered into or materially amended or
altered, other than (i) in the ordinary course of business, (ii) as
required pursuant to an existing employment agreement, (iii) the
severance policy adopted by the Company on September 7, 2005 as amended
on September 30, 2005 and (iv) the employment agreements between the
Company and each of Xxxxxxx Xxxxxx and Xxxxxx Xxxxxxxx, as identified in
Schedule 3.10(b) hereof;
(j) any capital expenditure, addition or improvement made or
committed to be made by or on behalf of the Company in excess of
$250,000 with respect to any single expenditure, addition or improvement
of the Company;
(k) any termination or failure to renew, or receipt of a threat
(that was not subsequently withdrawn) by a third party to terminate or
fail to renew, any agreement listed on Schedule 3.6;
(l) any material failure to maintain the Books and Records of the
Company in the usual, regular and ordinary manner, consistent with past
practice, or any material change in the accounting principle or practice
of the Company; or
(m) any Material Adverse Effect.
3.14 FINANCIAL STATEMENTS. Set forth in Schedule 3.14 are (a) the
audited consolidated balance sheets of the Foundation, the Company, the
Subsidiaries and the Servicer as of December 31, 2004 and related statements of
income and cash flow for such entities for the fiscal year then ended, and (b)
the unaudited consolidated balance sheet of the Servicer, the Company and the
Subsidiaries at August 31, 2005 (the "Balance Sheet") and the related statements
of income and cash flow for such entities for the eight month period then ended
(collectively, the "Financial Statements"). The Financial Statements fairly
present, in all material respects, the Company's financial condition and
operating results as of the dates of and for the periods of such statements,
have been prepared in conformity of GAAP, where applicable (except that the
unaudited financial statements do not contain all footnotes required by GAAP and
are subject to all normal year-end audit adjustments), and have been prepared on
a consistent basis in all material respects throughout the periods covered
thereby.
3.15 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor any
Subsidiary has any Liability that will have, or would reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect, except for
the Liabilities which are accrued or reserved against and reflected upon the
Financial Statements.
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3.16 BROKERS AND FINDERS. The Foundation has not employed any broker or
finder or incurred any Liability for any financial advisory fees, or brokerage
fees, commissions or finder's fees in connection with this Agreement, other than
those set forth in Schedule 3.16 attached hereto.
3.17 CUSTOMERS. No customer which engages the services of the Company
and no lender or school which supplies or assists in supplying student loans has
terminated or, to the knowledge of the Foundation or the Company, threatened to
terminate or decrease its relationship with the Company in any material respect
within the previous twelve month period. The Company is not required to provide
any bonding or other financial security arrangements in connection with any
transactions with any customers or suppliers.
3.18 REAL ESTATE. Schedule 3.18 attached hereto is a true and complete
schedule of all leases of real estate to which the Company is a party and all
parcels of real estate in which the Company holds a leasehold interest. All such
leases are in full force and effect, the Company shall have the quiet and
peaceful possession of the properties covered thereby, and none of the lessors
thereunder are in material default under any of the terms thereof.
3.19 FAIRNESS OPINION. The Foundation has received an opinion from
Xxxxxxxx Xxxxx Xxxxxx & Xxxxx to the effect that the Purchase Price to be paid
by the Buyer pursuant to this Agreement is fair from a financial point of view
to the Foundation.
3.20 CONVERSION AND CHARITABLE ORGANIZATION STATUS. The Stock qualifies
as "senior stock" under Section 150(d) of the Code. The Foundation's election to
convert under Section 150(d) of the Code and the conversion itself were both
accomplished in accordance with all requirements under Section 150(d)(3) of the
Code and applicable Law, resulting in the Foundation maintaining its Charitable
Organization Status. Interest payable on the Tax-Exempt Bonds is excludable from
the gross income of the holders thereof under the Code, and, to the Foundation's
knowledge, all special allowance payments and interest subsidies billed
historically by the Company or any of the Subsidiaries to the U.S. Secretary of
Education have been properly billed and the Company has been and is entitled to
such special allowance payment and interest subsidies as billed. None of the
Foundation, the Company, the Subsidiaries or any Person acting on their behalf
has ever redeemed or otherwise purchased any securities issued pursuant to any
of the Tax-Exempt Bonds.
3.21 [RESERVED]
3.22 FORWARD FFELP LOAN SALE COMMITMENTS. Schedule 3.22 attached hereto
sets forth a list of all written commitments made by Persons to sell FFELP Loans
to the Company or the Subsidiaries in the future. All of the agreements set
forth in Schedule 3.22 are valid and binding and in full force and effect and
there are no breaches or defaults thereunder, or events which with notice or the
passage of time could constitute a breach or default by the Company or by any
other party thereto, except for such breaches, defaults or events that would not
reasonably be expected to have a Material Adverse Effect. The information in
Schedule 3.22 setting forth the purchase prices and outstanding balances of
FFELP Loans committed for sale to the Company in each such respective agreement
is true and accurate in all material respects.
14
3.23 FFELP LOANS. The amount of unpaid principal balance and accrued and
unpaid interest of each FFELP Loan held by or on behalf of the Company or the
Subsidiaries is set forth in Schedule 3.23, attached hereto, is due and owing,
and no counterclaim, offset, defense or right of rescission exists with respect
to any such FFELP Loan or which, with notice or lapse of time could be asserted
by the borrower(s) thereon against the Company or any of the Subsidiaries. Each
FFELP Loan held by or on behalf of the Company or any of the Subsidiaries has
been duly executed and delivered and constitutes the legal, valid and binding
obligation of the maker (and endorser, if any) thereof, enforceable in
accordance with its terms, subject, as to enforceability, to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and to general
principals of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). No FFELP Loan held by or on behalf of the
Company or any of the Subsidiaries bears interest at a rate lower than the
highest rate provided in the Higher Education Act for such type of FFELP Loan,
provided, however, that certain of such FFELP loans are subject to borrower
incentive programs as described in Schedule 3.23. Each FFELP Loan held by or on
behalf of the Company or any of the Subsidiaries is covered by a guarantee
agreement with a guarantee agency in accordance with the Higher Education Act
and is guaranteed as to full outstanding principal and accrued and unpaid
interest in accordance with the Higher Education Act. Each of the FFELP Loans
held by or on behalf of the Company or any of the Subsidiaries complies in all
material respects with applicable Law. Each of the FFELP loans held by or on
behalf of the Company or any of its Subsidiaries have been originated, serviced
and collected in material compliance with the Higher Education Act and rules of
the applicable guarantee agencies. None of any such FFELP Loans are subject to
any error or deficiency in origination, servicing or collection or other
circumstance which may result in either a loss of eligibility to receive any
portion of the principal, interest, interest subsidy payments, special allowance
payments (or guarantee or insurance payments with respect thereto), or may give
rise to any Liability on the part of the Company or any of the Subsidiaries.
Title to any FFELP Loans in which the Company or any of the Subsidiaries holds
an interest is held by an "eligible lender" as defined in the Higher Education
Act, and such eligible lender holds the lender identification numbers set forth
in Schedule 3.23 on behalf of the Company or the Subsidiaries. Neither the
Company nor any of the Subsidiaries own any interest in any Private Loans.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SERVICER
The Servicer represents to the Buyer as of the date of this Agreement as
follows:
4.1 AUTHORIZATION; ORGANIZATION AND STANDING; NON-CONTRAVENTION. (a) The
Servicer has the necessary corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. Assuming the due
authorization, execution and delivery of this Agreement by the Buyer and the
Parent, this Agreement constitutes the valid and binding obligation of the
15
Servicer, enforceable against the Servicer in accordance with its terms subject,
as to enforceability, to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and to general principals of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
(b) The execution and delivery of this Agreement by the Servicer do not,
and the consummation of the transactions contemplated hereby and the performance
by the Servicer of its obligations under this Agreement will not (i) violate any
Law applicable to the Servicer or by which the Purchased Assets are bound, (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any Person the right to accelerate, modify or cancel,
or require any notice under any material contract to which the Servicer is a
party or by which the Servicer is bound or which any of its assets are subject,
(iii) violate provisions of the Servicer's articles of incorporation or bylaws,
or (iv) violate any order, judgment or decree to which the Servicer is bound,
except, with respect to the matters referred in clauses (i), (ii) and (iv), for
such conflicts, breaches, defaults, accelerations, rights, modifications,
cancellations, notices or violations that would not reasonably be expected to
have a Material Adverse Effect. No approval, authorization, license, permit or
other action by, or filing with, any Governmental Authority or non-governmental
third party is required that has not been obtained in connection with the
execution and delivery of this Agreement by the Servicer or the consummation by
the Servicer of the transactions contemplated hereby, except such as may be
required under the Xxxx-Xxxxx-Xxxxxx Act.
4.2 INTELLECTUAL PROPERTY. Schedule 4.2 attached hereto sets forth a
materially complete list of all patents, pending patent applications and
registration certificates, all trade names, trade marks and service marks and
applications therefor, all copyright registrations, all copyrights not
registered, all internet domain name registrations of the Servicer, and all
source codes used in the business and operations of the Servicer as presently
conducted (collectively, the "Servicer Intellectual Property"). The Servicer is
the sole and exclusive owner of the entire right, title and interest in and to
the Servicer Intellectual Property, free of any and all Liens and there are no
pending, or to the Servicer's knowledge, threatened proceedings or litigation or
other adverse claims affecting or with respect to the Servicer Intellectual
Property. To the Servicer's knowledge, (a) no Person is infringing the Servicer
Intellectual Property, and (b) none of the Servicer Intellectual Property is
infringing upon the intellectual property rights of any other Persons.
4.3 ORGANIZATION AND STANDING OF THE SERVICER. The Servicer is a
non-profit corporation duly organized, validly existing and in good standing
under the laws of the State of Texas and is duly qualified to transact business
and is in good standing in every jurisdiction in which the nature of the
business conducted by it or the character or location of properties owned or
leased by it makes such qualification necessary, except in such jurisdictions
where failure to be so duly qualified would not reasonably be expected to have a
Material Adverse Effect. A list of the jurisdictions in which the Servicer is
qualified to transact business is set forth in Schedule 4.3 attached hereto.
16
4.4 GOOD TITLE TO ASSETS. The Servicer is the sole owner of, and has
good title to or a valid leasehold in, the properties and assets used by it in
the conduct of its business or shown on the Balance Sheet, free and clear of any
Liens, except any claims or rights in favor of Charter Accounting Systems, Inc.
4.5 MATERIAL CONTRACTS. Schedule 4.5 attached hereto lists each
agreement that is binding upon the Servicer, and which individually involve
purchases, sales, transfers or services or obligations of the Servicer
aggregating in excess of $250,000 over the life of such agreement. True, correct
and complete copies of all documents referred to in Schedule 4.5 have been made
available to the Buyer for its review. To the knowledge of the Servicer, no
Person has claimed that any of such agreements listed in Schedule 4.5 are
invalid or unenforceable in any material respect or in default in any material
respect. Except as disclosed in Schedule 4.5, none of such agreements contain
any provision which will or could result in termination or modification of such
agreement upon consummation of the transactions contemplated by this Agreement.
With respect to each of the agreements listed in Schedule 4.5, such agreement is
legal, valid, binding, enforceable and in full force and effect, subject, as to
enforceability, to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and to general principals of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity) and, to the
Servicer's knowledge, no party is in breach or default thereunder in any
material respect and no event has occurred which with notice or lapse of time,
would constitute a material breach or default of, or permit termination,
modification or acceleration under, such agreement.
4.6 LITIGATION. There are no actions, claims, proceedings, litigation,
state or federal equal employment opportunity commission proceedings pending or,
to the Servicer's knowledge, threatened against the Servicer with respect to its
business, that would reasonably be expected to have, directly or indirectly,
individually or in aggregate, a Material Adverse Effect. All pending litigation
to which the Servicer is a party is identified in Schedule 4.6 attached hereto.
4.7 COMPLIANCE WITH LAWS. The Servicer has complied in all material
respects and is complying in all material respects with all Laws, and the
Servicer has not received notice of violation of any applicable Law.
4.8 COMPENSATION OF EMPLOYEES. Schedule 4.8(a) is a materially true,
correct and complete list of the names and job titles of all persons who are
employees of the Servicer, together with current annual base salaries and 2004
bonuses and commissions of such employees, independent contractors or agents.
Other than the employment agreements listed in Schedule 4.8(b) attached hereto,
the Servicer has no employment agreements, compensation or deferred compensation
arrangements or consulting agreements with any employee or other person or
entity which are in writing or which are not terminable at will.
4.9 EMPLOYEE BENEFIT PLANS. All employee benefit plans of the Servicer
and similar employee arrangements or agreements are in compliance in all
material respects with the applicable terms of ERISA, the Code and any other
applicable laws, rules and regulations. No such benefit plan that is a "defined
benefit plan" (within the meaning of Section 3(35) of ERISA) has any "unfunded
current liability," as that term is defined in Section 302(d)(8)(A) of ERISA,
and the present fair market value of the assets of any such plan exceeds the
17
plan's "benefit liabilities," as that term is defined in Section 4001(a)(16) of
ERISA, when determined under actuarial factors that would apply if the plan
terminated in accordance with all applicable legal requirements. No such benefit
plan has an "accumulated funding deficiency" as defined in Code Section 412. No
event has occurred with respect to such a benefit plan that could subject the
Servicer to liability under Title IV of ERISA. No such benefit plan has been
funded or administered in a manner that would result in any material Liability
for any Tax or penalty for overfunding or prohibited transactions under
applicable law.
4.10 ABSENCE OF CERTAIN EVENTS. Except as identified in Schedule 4.10
attached hereto or as effected or contemplated by this Agreement, since July 31,
2005 (with respect to items (c), (d), (f) and (i) below) and since December 31,
2004 (with respect to items (a), (b), (e), (g) and (h) below), there has not
been:
(a) any strike or other labor dispute that has resulted in or
would reasonably be expected to have a Material Adverse Effect;
(b) any loss of any material permit, license, qualification or
certificate of authority held by the Servicer;
(c) any obligation, Liability or Lien, paid, discharged or
satisfied by or on behalf of the Servicer other than in the ordinary
course of the Servicer's business and other than the current Liabilities
reflected in the Balance Sheet;
(d) any sale, transfer or other disposition of any asset or group
of related assets of the Servicer having a book value in excess of
$250,000 in the aggregate, or cancellation of debts or claims of the
Servicer having a book value in excess of $250,000 in the aggregate,
except in the ordinary course of business;
(e) any material change in, or any contract to materially change,
the compensation or other direct or indirect remuneration payable to any
officer, employee or consultant of the Servicer or any bonus, incentive
or deferred compensation, profit sharing, retirement, pension, group
insurance, death benefit or other fringe benefit plan, or any employment
or consulting agreement, granted, entered into or materially amended or
altered, other than (i) in the ordinary course of business, (ii) as
required pursuant to an existing employment agreement, and (iii) the
amendment to the Servicer's severance policy adopted on September 15,
2005, as amended on September 30, 2005;
(f) any capital expenditure, addition or improvement made or
committed to be made by or on behalf of the Servicer in excess of
$250,000 with respect to any single expenditure, addition or improvement
of the Servicer;
(g) any termination or failure to renew, or receipt of a threat
(that was not subsequently withdrawn) by a third party to terminate or
fail to renew, any agreement listed on Schedule 4.5;
18
(h) any material failure to maintain the books and records of the
Servicer in the usual, regular and ordinary manner, consistent with past
practice, or any material change in the accounting principle or practice
of the Servicer; or
(i) any Material Adverse Effect.
4.11 FINANCIAL STATEMENTS. The Financial Statements fairly present, in
all material respects, the Servicer's financial condition and operating results
as of the dates of and for the periods of such statements, have been prepared in
conformity of GAAP, where applicable (except that the unaudited financial
statements do not contain all footnotes required by GAAP and are subject to all
normal year-end audit adjustments), and have been prepared on a consistent basis
in all material respects throughout the periods covered thereby.
4.12 ABSENCE OF UNDISCLOSED LIABILITIES. The Servicer does not have any
Liability that will have, or would reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect, except for the Liabilities which
are accrued or reserved against and reflected in the Financial Statements.
4.13 BROKERS AND FINDERS. The Servicer has not employed any broker or
finder or incurred any Liability for any financial advisory fees, or brokerage
fees, commissions or finder's fees in connection with this Agreement.
4.14 CUSTOMERS. No customer which engages the services of the Servicer
and no servicing customer has terminated or, to the knowledge of the Servicer,
threatened to terminate or decrease its relationship with the Servicer in any
material respect within the previous twelve month period. As of the Closing
Date, the Servicer is not required to provide any bonding or other financial
security arrangements in connection with any transactions with any customers or
suppliers.
4.15 REAL ESTATE. Schedule 4.15 attached hereto is a true and complete
schedule of all leases of real estate to which the Servicer is a party and all
parcels of real estate in which the Servicer holds a title or leasehold
interest. All such leases are in full force and effect, the Servicer shall have
the quiet and peaceful possession of the properties covered thereby, and none of
the lessors thereunder are in material default under any of the terms thereof.
4.16 SERVICING OPERATION CONTRACTS. Schedule 4.16, attached hereto, sets
forth a list of all Servicing Operation Contracts under which the Servicer acts
as servicing agent and services Student Loans. All of the Servicing Operation
Contracts set forth in Schedule 4.16 are valid and binding and in full force and
effect and there are no breaches or defaults thereunder or events which with
notice or passage of time would constitute a material breach or default by the
Servicer or any other party thereto. If any such Servicing Operation Contracts
contain restrictions on assignment, the Servicer shall use its commercially
reasonable efforts to obtain written consents to assignment to the Buyer signed
by the other parties thereto.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND PARENT
The Buyer and Parent each, jointly and severally, represent and warrant
to the Foundation and the Servicer as of the date of this Agreement as follows:
5.1 ORGANIZATION AND POWER. Each of the Buyer and the Parent is a
corporation duly organized, validly existing and in good standing under the laws
of its state of organization. Each of the Buyer and the Parent has full
corporate power to execute, deliver and perform this Agreement and all other
agreements and documents to be executed and delivered by it in connection
herewith.
5.2 AUTHORITY; NONCONTRAVENTION. Each of the Buyer and the Parent has
the necessary corporate powers and authority to execute and deliver this
Agreement and to perform the obligations to be performed by it hereunder, and
this Agreement is valid and binding upon the Parent and the Buyer and
enforceable in accordance with its terms. The execution and delivery of this
Agreement will not (a) violate any Law, (b) conflict with, result in a breach
of, constitute a default under, result in acceleration of, create in any Person
the right to accelerate, modify or cancel, or require any notice under any
contract to which the Parent or the Buyer is a party or by which the Parent or
the Buyer is bound or which any of either entity's assets are subject, (c)
violate the articles of incorporation or bylaws of the Buyer, or (d) result in
acceleration of any obligation under, or constitute an event of default under,
any order, judgment or decree to which the Parent or the Buyer is bound. Except
as specifically set forth in this Agreement, no approval, authorization,
license, permit or other action by, or filing with, any Governmental Authority
or non-governmental third party, or of the shareholders or directors of the
Parent or the Buyer is required that has not been obtained in connection with
the execution and delivery of this Agreement by the Parent or the Buyer or the
consummation by the Parent or the Buyer of the transactions contemplated hereby.
5.3 BROKERS AND FINDERS. Neither the Parent nor the Buyer has employed
any broker or finder or incurred any Liability for any brokerage fees,
commissions or finder's fees in connection with this Agreement.
5.4 FINANCING. Buyer, as of Closing, shall have sufficient funds
(through existing credit arrangements or a signed commitment letter) to pay the
Purchase Price and all fees and expenses payable by Buyer related to this
Agreement and the transactions contemplated hereby, each on the terms
contemplated by this Agreement.
5.5 CERTAIN INVESTMENT REPRESENTATIONS. Buyer is purchasing the Stock
for its own account with the present intention of holding such securities for
investment purposes and not with a view to or for sale in connection with any
public distribution of such securities in violation of any federal or state
securities laws. Buyer is an "accredited investor" as defined in Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act.
Buyer acknowledges that it is informed as to the risks of the transactions
contemplated hereby and of ownership of the Stock. Parent and Buyer each
acknowledges that the Stock has not been registered under the Securities Act or
any state or foreign securities laws and that the Stock may not be sold,
transferred, offered for sale, pledged, hypothecated or otherwise disposed of
unless such transfer, sale, assignment, pledge, hypothecation or other
disposition is pursuant to the terms of an effective registration statement
under the Securities Act and is registered under any applicable state or foreign
securities laws or pursuant to an exemption from registration under the
Securities Act and any applicable state or foreign securities laws.
20
5.6 LITIGATION. There is no suit, action or proceeding by any Person
pending or, to the knowledge of Buyer or Parent, threatened against Buyer,
Parent or any Affiliate thereof, nor is there any judgment, decree, unfunded
settlement, conciliation agreement, letter of deficiency, award, temporary
restraining order, injunction, rule or order of any Governmental Authority
outstanding against Buyer or Parent, that may (i) affect, challenge or impair
the ability of Parent or Buyer to perform its obligations under this Agreement
or the consummation of the transactions contemplated hereunder or (ii) delay or
prevent the consummation of any of the transactions contemplated by this
Agreement, nor is there any judgment, decree, injunction, rule or order of any
Governmental Agency, arbitrator or mediator outstanding against Buyer, Parent or
any Affiliate thereof having, or which could be expected to have, any effect
referred to in clause (i) or (ii) above.
ARTICLE VI
CLOSING
6.1 CLOSING. If the conditions to the parties' obligations enumerated
below in Sections 6.2 and 6.3 are satisfied, consummation of the transactions
contemplated hereby (the "Closing") shall take place on the twentieth day
following the Parent's filing of the Form 8-K referenced in Section 7.1 (or on
the next business day if the such day is a Saturday, Sunday or bank holiday in
the State of Texas) (the "Closing Date") at the offices of Xxxxxx & Xxxxxx
L.L.P. in Dallas, Texas, or as soon thereafter as all conditions to Closing have
been satisfied or waived in accordance with Sections 6.2 and 6.3 or on such
other date or at such other location as the parties may agree.
6.2 CONDITIONS TO THE PARENT'S AND THE BUYER'S OBLIGATIONS. The
obligations of the Parent and the Buyer to effect the transactions contemplated
by this Agreement are subject to satisfaction (or written waiver by the Parent
in the Parent's sole discretion) of the following conditions at or before the
Closing:
6.2.1 AGREEMENTS PERFORMED. Each of the Foundation and the
Servicer shall have performed in all material respects all of the obligations
under this Agreement to be performed by it at or before the Closing and the
Parent and the Buyer shall have received a certificate to such effect, executed
by each of the Foundation and the Servicer and dated as of the Closing Date.
6.2.2 REPRESENTATIONS ACCURATE. The representations and
warranties of each of the Foundation and the Servicer contained herein shall be
accurate in all material respects as of the Closing as though made on and as of
the Closing (except to the extent such representations and warranties expressly
speak as of an earlier date), without giving effect to any supplemental
disclosure, update or modification of any Schedule hereto, and the Buyer shall
have received a certificate to such effect, executed by the Foundation and the
Servicer and dated as of the Closing Date; PROVIDED, HOWEVER, that this
condition shall be deemed to have been satisfied unless the individual or
aggregate impact of all inaccuracies of such representations and warranties
would result in a Material Adverse Effect. The certificate of the Foundation and
the Servicer required by this Section 6.2.2 shall be deemed to be a
representation and warranty of the Foundation and the Servicer under this
Agreement as of the Closing Date.
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6.2.3 LEGAL ACTION. There will be no pending or threatened legal
action or inquiry which challenges the validity or legality of or seeks or could
reasonably be expected to prevent, delay or impose conditions on the
consummation of the transactions contemplated by this Agreement;
6.2.4 DELIVERIES. The Buyer will have received the documents
to be delivered pursuant to Sections 6.5.1 and 6.5.3 hereof; and
6.2.5 XXXX-XXXXX-XXXXXX ACT COMPLIANCE. All applicable waiting
periods (and any extensions thereof) under the Xxxx-Xxxxx-Xxxxxx Act shall have
expired or shall have been otherwise terminated.
6.3 CONDITIONS TO THE FOUNDATION'S AND THE SERVICER'S
OBLIGATIONS. The obligation of the Foundation and of the Servicer, respectively,
to perform this Agreement is subject to satisfaction (or written waiver of the
Foundation and of the Servicer in the Foundation's and the Servicer's sole
discretion) of the following conditions at or before the Closing:
6.3.1 AGREEMENTS PERFORMED. The Parent and the Buyer shall have
performed in all material respects all of their obligations under this Agreement
to be performed by them at or before the Closing and the Foundation and the
Servicer shall have received a certificate to such effect, executed by the
Parent and the Buyer and dated as of the Closing Date;
6.3.2 REPRESENTATIONS ACCURATE. The representations and
warranties of the Parent and the Buyer contained herein shall be accurate in all
material respects as of the Closing as though made on and as of the Closing
(except to the extent such representations and warranties expressly speak as of
an earlier date) and the Foundation and the Servicer shall have received a
certificate to such effect, executed by the Parent and the Buyer and dated as of
the Closing Date. The certificate of the Parent and the Buyer required by this
Section 6.3.2 shall be deemed to be a representation and warranty of the Parent
and the Buyer under this Agreement as of the Closing Date.
6.3.3 LEGAL ACTION. There will be no pending or threatened legal
action or inquiry which challenges the validity or legality of or seeks or could
reasonably be expected to prevent, delay or impose conditions on the
consummation of the transactions contemplated by this Agreement;
6.3.4 XXXX-XXXXX-XXXXXX ACT COMPLIANCE. All applicable waiting
periods (and any extensions thereof) under the Xxxx-Xxxxx-Xxxxxx Act shall have
expired or shall have been otherwise terminated; and
22
6.3.5 CLOSING PAYMENT. The Foundation and the Servicer will have
received immediately available funds by wire transfer in the amount of the
Purchase Price and each of the other documents required to be delivered pursuant
to Section 6.5.2 hereof.
6.4 CLOSING COVENANTS; TERMINATION.
6.4.1 [Reserved]
6.4.2 SATISFACTION OF CONDITIONS. Each of the Foundation and the
Servicer agrees to use its commercially reasonable efforts to cause each of the
conditions set forth in Section 6.2 to be satisfied at or before the Closing.
Each of the Parent and the Buyer agrees to use its commercially reasonable
efforts to cause each of the conditions set forth in Section 6.3 to be satisfied
at or before the Closing.
6.4.3 TERMINATION. This Agreement may be terminated at any time:
(a) by written agreement of the Parent, the Servicer and
the Foundation;
(b) by the Parent, upon the Parent giving written notice
to the Foundation and the Servicer, if either (i) there has been
a material breach by the Foundation or the Servicer of any of the
Foundation's or the Servicer's representations, warranties,
covenants or agreements set forth in this Agreement (other than,
with respect to a breach of a representation or warranty, a
breach that would not reasonably be expected to result in a
Material Adverse Effect) which breach cannot be cured prior to
the Closing Date, or (ii) the Closing shall not have occurred on
or before the 90th day following the date hereof by reason of
failure of any condition precedent under Section 6.2 hereof
(other than the failure of the Parent or the Buyer to comply with
its obligations under this Agreement);
(c) by the Foundation and the Servicer, upon the
Foundation giving written notice to the Buyer, if either (i)
there has been a material breach by the Parent or the Buyer of
any of either entity's representations, warranties, covenants or
agreements set forth in this Agreement which breach cannot be
cured prior to the Closing Date, or (ii) the Closing shall not
have occurred on or before the 90th day following the date hereof
by reason of failure of any condition precedent under Section 6.3
hereof (other than the failure of either the Foundation or the
Servicer to comply with its obligations under this Agreement);
(d) by the Servicer and the Foundation, upon giving
written notice to the Parent that any of the Servicer, the
Foundation or the Company intends to accept a Superior Third
Party Offer pursuant to Section 7.14 hereof, subject to the
obligation of the Servicer and the Foundation to pay the
Termination Fee to the Buyer.
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6.4.4 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to paragraph (a) of Section 6.4.3, all provisions of this
Agreement will become void without any Liability on the part of any
party. If this Agreement is terminated pursuant to paragraph (b), (c) or
(d) of Section 6.4.3, then the undertakings of the parties set forth
herein shall forthwith be of no further force and effect without any
Liability on the part of any party; PROVIDED, HOWEVER, that, subject in
all respects to Section 7.14(d), this Section 6.4.4, Section 7.14 and
Article IX, and the obligations thereunder and the rights and remedies
for any breaches of this Agreement occurring prior to such termination,
in each case, shall survive any such termination.
6.5 CLOSING DELIVERIES. At the Closing, the parties hereto will make the
transfers and deliveries hereinafter set forth. The transfers and deliveries
herein contemplated will be mutually interdependent and regarded as occurring
simultaneously; and no such transfer or delivery will become effective until all
of the transfers and deliveries provided for hereunder have been consummated.
The transfers and deliveries herein contemplated will be deemed to have occurred
and the Closing will be effective as of the close of business on the Closing
Date.
6.5.1 DELIVERIES FROM THE FOUNDATION TO THE BUYER. At the
Closing, the Foundation shall deliver or cause to be delivered the following to
the Buyer:
(a) certificates representing all of the Stock duly
endorsed by the Foundation, fully registered in the name of the
Buyer and duly recorded on the stockholder and transfer records
of the Company, free of all Liens (including any Lien that would
otherwise constitute a Permitted Encumbrance);
(b) the Books and Records of the Company including,
without limitation, the stock books, stock ledgers, minute books,
corporate seal and contracts;
(c) an Administrative Services Agreement incorporating the
terms set forth in Schedule 6.5.1(A) and a Loan Servicing
Agreement incorporating the terms set forth in Schedule 6.5.1(B),
each duly executed by the Foundation;
(d) a certificate of the Foundation in accordance with
Section 6.2 hereof;
(e) a certificate of good standing with respect to each of
the Company and the Subsidiaries, issued by the Secretary of
State for the state of incorporation or organization thereof
within ten (10) days prior to the Closing Date;
24
(f) an opinion from the Foundation's counsel, dated as of
the Closing Date, addressed to the Buyer, opining that (i) the
execution and delivery by the Foundation of the Agreement have
been duly authorized by all corporate action on the part of the
Foundation, (ii) the Agreement constitutes the valid and binding
obligation of the Foundation, enforceable against the Foundation
in accordance with its terms, subject to customary qualifications
(including that such counsel is not opining as to the
enforceability of Section 7.12 hereof), and (iii) the
transactions contemplated in this Agreement do not result in an
adverse effect on the prior legal opinions with respect to the
treatment of interest on the Tax-Exempt Bonds as excludable from
the gross income of the holders thereof under existing law, all
in form and substance reasonably satisfactory to the Buyer and
its counsel;
(g) certificates executed by the Secretary of each of the
Foundation, the Company and the Subsidiaries, certifying copies
of the articles of incorporation (or article of organization or
partnership agreement, as the case may be), bylaws (or operating
agreements, as the case may be) and all amendments thereto of
each certifying entity as in effect as of the Closing Date and,
in the case of the Foundation, certifying duly enacted
resolutions of the board of directors of the Foundation approving
this Agreement and the other documents and transactions
contemplated hereby and authorizing the execution and delivery
thereof; and
(h) each other document reasonably requested to be
delivered to the Buyer hereunder.
6.5.2 DELIVERIES FROM THE PARENT OR THE BUYER TO THE FOUNDATION
OR TO THE SERVICER. At the Closing, the Buyer or the Parent shall deliver or
cause to be delivered the following to the Foundation or to the Servicer, as
appropriate:
(a) wire transfer of the Purchase Price to the Foundation
and the Servicer, allocated in accordance with the terms of this
Agreement;
(b) an Administrative Services Agreement incorporating the
terms set forth in Schedule 6.5.1(A) and a Loan Servicing
Agreement incorporating the terms set forth in Schedule 6.5.1(B),
each duly executed by the Parent;
(c) a Xxxx of Sale and Assignment and Assumption
Agreement, in the form of Schedule 6.5.2, attached hereto, duly
executed by the Buyer;
(d) an opinion from the Parent's and Buyer's counsel,
dated as of the Closing Date, addressed to the Foundation and the
Servicer, opining that (i) the execution and delivery by the
Parent and the Buyer of the Agreement have been duly authorized
by all corporate action on the part of the Parent and the Buyer,
and (ii) the Agreement constitutes the valid and binding
25
obligation on the part of the Buyer, enforceable against the
Parent and the Buyer in accordance with its terms, subject to
customary qualifications (including that such counsel is not
opining as to the enforceability of Section 7.12 hereof), all in
form and substance reasonably satisfactory to the Foundation, the
Servicer and their respective counsel;
(e) a certificate of the Parent and the Buyer in
accordance with Section 6.3 hereof; and
(f) each other document reasonably requested to be
delivered to the Foundation hereunder.
6.5.3 DELIVERIES FROM THE SERVICER TO THE BUYER. At the Closing,
the Servicer shall deliver or cause to be delivered the following to the Buyer:
(a) a duly executed Xxxx of Sale and Assignment and
Assumption Agreement, in the form of Schedule 6.5.2, attached
hereto;
(b) such releases and termination statements as may be
necessary to terminate and release any and all Liens on the
Purchased Assets;
(c) an opinion from the Servicer's counsel, dated as of
the Closing Date, in form and substance satisfactory to the Buyer
and its counsel, addressed to the Buyer, opining that (i) the
execution and delivery by the Servicer of the Agreement have been
duly authorized by all corporate action on the part of the
Servicer, and (ii) the Agreement constitutes the valid and
binding obligation of the Servicer in accordance with its terms,
subject to customary qualifications (including that such counsel
is not opining as to the enforceability of Section 7.12 hereof);
(d) a certificate of the Secretary of the Servicer
certifying duly enacted resolutions of the board of directors of
the Servicer approving this Agreement and the other documents and
transactions contemplated hereby and authorizing execution and
delivery thereof;
(e) a certificate of the Servicer in accordance with
Section 6.2 hereof; and
(f) each other document reasonably requested to be
delivered by the Buyer hereunder.
26
ARTICLE VII
COVENANTS
7.1 PUBLICITY. All public announcements relating to this Agreement or
the transactions contemplated hereby will be made only as may be authorized
mutually by the Parent and the Foundation or as required by Law. On the first
business day following the execution of this Agreement, (i) the Parent, the
Foundation and the Servicer shall issue a joint press release substantially in
the form set forth in Schedule 7.1 and containing a statement to the effect that
closing of the transactions contemplated hereby shall be subject to standard
conditions of closing such as lapse of regulatory waiting periods and any other
legal obligations, and (ii) the Buyer shall file a current report under Item
1.01 of Form 8-K under the Securities Exchange Act of 1934 with respect to the
execution of this Agreement and shall file this Agreement as an exhibit thereto.
7.2 CONFIDENTIALITY.
7.2.1 CONFIDENTIALITY OBLIGATION. Except for a Required
Disclosure (as defined below) and except for the public disclosure contemplated
by Section 7.1, each party hereto agrees not to disclose or use, directly or
indirectly, any Confidential Information of the other parties, at any time after
execution of this Agreement and prior to the Closing. In the event of a
contemplated Required Disclosure of Confidential Information by a party, such
party agrees to use its best efforts to provide the other party and the Company
an opportunity to object to the disclosure and as much prior written notice as
is possible under the circumstances. For purposes of this Section 7.2.1,
"Confidential Information" means (i) all information belonging to, used by, or
which is in the possession of any party hereto relating to the Servicer's, the
Company's or the Subsidiaries' or another party hereto's business to the extent
such information has not been or is not intended to be disseminated to the
public or is otherwise not generally known to competitors of the Servicer, the
Company or the Subsidiaries, including, but not limited to, information relating
to the Company's or its Subsidiaries' products, services, strategies, pricing,
customers, representatives, suppliers, distributors, technology, finances,
employee compensation, computer software and hardware, inventions, developments,
or trade secrets and (ii) to the extent such information has not been or is not
intended to be disseminated to the public, all information relating to the
acquisition of the Stock and the Purchased Assets by the Buyer hereunder,
including, without limitation, all strategies, negotiations, discussions, terms,
conditions and other information relating to this Agreement and each other
document and agreement delivered in connection herewith; PROVIDED, that nothing
in this section shall prohibit the Foundation, the Servicer or the Company from
engaging in discussions or negotiations contemplated by Section 7.14 of this
Agreement. Each party hereto acknowledges that following the Closing all of the
Confidential Information will be the exclusive proprietary property of the
Company or of the appropriate other parties hereto, as the case may be, whether
or not prepared in whole or in part by any party hereto and whether or not
disclosed to or entrusted to the custody of any party hereto. Nothing herein
shall require any party to withhold from disclosure of any Confidential
Information hereunder where disclosure is required by Law, required to be
included in either party's financial statements or required for the preparation
and submission of any report for any agency, commission or board requiring such
information in connection with such party's business (a "Required Disclosure").
Notwithstanding any other provision contained in this Agreement to the contrary,
the Buyer may furnish information (including Confidential Information) to third
Persons who are agents or employees of the Buyer.
27
7.3 ACCESS TO INFORMATION. Upon reasonable notice and subject to
applicable Laws relating to the exchange of information, each of the Foundation
and the Servicer shall afford to the officers, employees, accountants, counsel
and other representatives of the Buyer reasonable access, during normal business
hours during the period prior to the Closing Date, to all of the properties of
the Company and of the Servicer and, during such period, each of the Company and
the Servicer shall make available to the Buyer all information and Books and
Records concerning the Company and the Servicer and their respective properties,
business and employees as the Buyer may reasonably request. Following the end of
each calendar month prior to Closing, the Foundation and the Servicer shall
provide to the Buyer unaudited interim financial statements of the Servicer, the
Company and the Subsidiaries for such calendar month promptly after the same
become available for internal purposes.
7.4 CONDUCT OF BUSINESS. The Foundation agrees that, from the date
hereof through the Closing, except to the extent otherwise permitted or required
by this Agreement or consented to in writing by the Buyer, the Foundation shall
cause the Company to:
(a) operate its business only in the ordinary course of business;
(b) not enter into or assume any material agreement, contract or
instrument relating to the Company or enter into or permit any material
amendment, supplement, waiver or other modification in respect thereof,
except in the ordinary course of business;
(c) pay accounts payable and other obligations of the Company
when they become due and payable in the ordinary course of business;
(d) use its reasonable efforts to preserve its business
organization intact, to retain the services of its employees and to
preserve its goodwill and relationships with customers, suppliers,
creditors and others having business relationships with it;
(e) use commercially reasonable efforts to preserve its
properties and assets and to maintain its permits and licenses;
(f) use commercially reasonable efforts to maintain its existing
insurance policies in full force and effect;
(g) comply in all material respects with any applicable Law;
(h) promptly advise the Buyer in writing of any Material Adverse
Effect;
(i) review with the Buyer all decisions regarding new contracts
or extensions or amendments of existing contracts, equipment purchases
and sales and other operational decisions involving individually or in
the aggregate more than $250,000 over the life of such matter;
28
(j) except as required by applicable Law or contract, not make or
commit to make any salary or wage increase with respect to any officer,
employee or agent or enter into, amend or alter any Benefit Plan, trust
agreement or arrangement or any employment or consulting contract;
PROVIDED, that that Company may amend or modify its Phantom Stock Plan
to provide for payments required to be made thereunder to be calculated
in the manner required under such plan as of September 30, 2005;
(k) not pay, discharge or satisfy any Liability or Lien other
than current Liabilities reflected in the Balance Sheet, and current
Liabilities incurred since the date of the Balance Sheet in the ordinary
course of business;
(l) not sell, transfer or otherwise dispose of or encumber any of
its assets or properties other than in the ordinary course of business,
or engage in any activity in connection with any securitization of
assets owned by the Company or the Subsidiaries;
(m) not declare or pay any dividend or make any distribution with
respect to the Stock, or redeem, purchase or otherwise acquire any of
its capital stock;
(n) not modify or amend any of the terms of any of the contracts
set forth on Schedule 3.6 to which the Company is a party, other than in
the ordinary course of business;
(o) not make any contract or understanding to take any action
proscribed by this Section 7.4; and
(p) not take any affirmative action, or fail to take any
reasonable action within its control, which would result in any of the
changes or events listed in Section 3.13.
7.5 CONDUCT OF BUSINESS. The Servicer agrees that, from the date hereof
through the Closing, except to the extent otherwise permitted by this Agreement
or consented to in writing by the Buyer, the Servicer shall:
(a) operate its business only in the ordinary course of business;
(b) not enter into or assume any material agreement, contract or
instrument relating to the Servicer or enter into or permit any material
amendment, supplement, waiver or other modification in respect thereof,
except in the ordinary course of business;
29
(c) pay accounts payable and other obligations of the Servicer
when they become due and payable in the ordinary course of business;
(d) use its reasonable efforts to preserve its business
organization intact, to retain the services of its employees and to
preserve its goodwill and relationships with customers, suppliers,
creditors and others having business relationships with it;
(e) use commercially reasonable efforts to preserve its
properties and assets and to maintain its permits and licenses;
(f) use commercially reasonable efforts to maintain its existing
insurance policies in full force and effect;
(g) comply in all material respects with any applicable Law;
(h) promptly advise the Buyer in writing of any Material Adverse
Effect;
(i) review with the Buyer all decisions regarding new contracts
or extensions or amendments of existing contracts, equipment purchases
and sales and other operational decisions involving individually or in
the aggregate more than $250,000 over the life of each such matter;
(j) except as required by applicable Law or contract, not make or
commit to make any salary or wage increase with respect to any officer,
employee or agent or enter into, amend or alter any Benefit Plan, trust
agreement or arrangement or any employment or consulting contract;
(k) not sell, transfer or otherwise dispose of or encumber any of
its assets or properties other than in the ordinary course of business;
(l) not modify or amend any of the terms of any of the contracts
set forth on Schedule 4.5 to which the Servicer is a party other than in
the ordinary course of business;
(m) not make any contract or understanding to take any action
proscribed by this Sections 7.5;
(n) not take any affirmative action, or fail to take any
reasonable action within its control, which would result in any of the
changes or events listed in Sections 4.10.
30
7.6 FINANCIAL INFORMATION. From and after the date hereof, the
Foundation shall provide the Buyer with copies of monthly financial statements
of the Company, and the Servicer shall provide the Buyer with copies of monthly
financial statements of the Servicer. Such financial statements shall be
delivered to the Buyer within five (5) days after such statements become
generally available to management of the Company or the Servicer, as the case
may be.
7.7 OFFICERS AND EMPLOYEES. Without incurring any Liability with respect
to the Company, the Foundation shall use commercially reasonable efforts to
cause the officers and employees of the Company listed on Schedule 7.7 to remain
as officers, employees or independent contractors (as applicable) with the
Company or to accept employment with, or enter into an independent contractor
agreement with, the Parent's designee after the Closing Date, pursuant to the
agreements set forth in Schedule 7.7 hereto. Prior to the Closing Date, the
Company or the Parent's designee shall negotiate to enter into employment or
independent contractor agreements with the key employees of the Company or of
the Servicer listed in Schedule 7.7 under the terms described therein.
7.8 FINAL TAX RETURN. The Buyer shall cause the Company to engage the
accounting firm of its choice to prepare the final Tax return for the Company
following Closing, the cost of which shall be paid by the Foundation. In the
event the Company ultimately incurs any Liabilities for Taxes with respect to
any matters with respect to which the Company received notice or waived such
notice from the Internal Revenue Service between August 31, 2005 and the Closing
Date, the Foundation shall promptly pay to the Buyer the amount of all such
Liabilities upon request therefor from the Buyer. Not later than 10 days prior
to the due date of each such Tax return, the Buyer shall deliver a copy of such
Tax Return to the Foundation. The Buyer shall permit the Foundation to review
and comment on such Tax return prior to filing and shall make such revisions to
such Tax return as are reasonably requested by the Foundation.
7.9 ALLOCATION OF PURCHASE PRICE.
(a) Allocation between the Foundation and the Servicer. The
Purchase Price, as adjusted in accordance with the other provisions of
this Agreement, shall be allocated in such manner that the Buyer will
pay (i) to the Foundation the sum of $163,585,331, and (ii) to the
Servicer the sum of $10,000,000. Any adjustment of the Purchase Price in
accordance with the other provisions of this Agreement shall be made to
the portion of the Purchase Price allocated to the Foundation.
(b) Allocation Among Stock, Purchased Assets and Noncompete
Covenants.
(i) The Purchase Price, as adjusted in accordance with the
other provisions of this Agreement, shall be allocated among the
Stock, the Purchased Assets and the noncompetition covenants in
Section 7.12 in accordance with the procedure set forth in this
Section 7.9(b).
(ii) The parties hereto covenant and agree that they will
attempt, in good faith, to reach mutual agreement on the
allocation of the Purchase Price, as adjusted in accordance with
the other provisions of this Agreement, by November 15, 2005, or
such other date as mutually agreed to in writing by the parties.
If the parties do not reach such agreement by such date, any
dispute over such allocation shall be resolved by an accounting
firm chosen by the Buyer and reasonably acceptable to the
Foundation prior to the Closing. The fees and expenses of such
31
accounting firm shall be borne equally by the Parent and the
Servicer. The parties (and their Affiliates) shall: (A) timely
file all forms and Tax returns (including IRS Form 8594 (Asset
Allocation Statement)) required to be filed in connection with
this Section 7.9(b), (B) be bound by such allocation for all Tax
purposes, (C) prepare and file all Tax returns in a manner
consistent with such allocation, and (D) take no position
inconsistent with such allocation in any audit or other
proceeding relating to Taxes without the written consent of the
other parties to this Agreement, which consent shall not be
unreasonably withheld.
(iii) The parties hereto covenant and agree with each
other that none of them will take a position on any income tax
return (including IRS Form 8594 (Asset Allocation Statement), if
required), before any Governmental Authority charged with the
collection of any income Tax or in any judicial proceeding that
is in any manner inconsistent with the terms of this Section
7.9(b) without the written consent of the other parties to this
Agreement, which consent shall not be unreasonably withheld.
7.10 PAYMENT OF INDEBTEDNESS. On or before the Closing Date, any
intercompany Liabilities between the Foundation, on the one hand, and the
Company or any Subsidiary, on the other, shall be eliminated.
7.11 EMPLOYEES. The Buyer or the Parent shall offer employment or
consulting arrangements with the Buyer or its designated Affiliates to the
persons identified in Schedule 7.11 attached hereto who satisfy the Parent's
standard employment qualifications, under such terms as are mutually agreeable
between the Buyer or its designated Affiliates and such employees; provided that
the Buyer's or its designated Affiliates' terms shall include (i) salaries
substantially equivalent to, or better than, the salaries currently paid to such
employees, (ii) participation in the Parent's benefit plans in accordance with
the Parent's customary and usual employment practices; and (iii) the severance
policy set forth on Schedule 1.5; provided that (a) such employee benefit plans
and severance policy will recognize periods of employment with the Company and
the Servicer for purposes of determining eligibility for participation in such
employee benefit plans and severance policy (including vacation benefits), and
shall not be subject to waiting periods, exclusions for pre-existing conditions
or evidence of insurability, and (b) any claims arising prior to the Closing
Date shall be included for purposes of satisfying deductibles, out of pocket
maximums and similar limitations. The Servicer, the Foundation, and the Company
shall cooperate reasonably with the Buyer's or its designated Affiliates'
efforts to enter into employment arrangements with the employees identified in
Schedule 7.11. The Servicer and the Foundation agree, for the period of two (2)
years following Closing, not to solicit for employment any of the employees
identified in Schedule 7.11 that enter into individual employment or consulting
agreements pursuant to this Section 7.11, other than such employees whose
employment is terminated by the Buyer or its Affiliates; provided that nothing
32
herein shall prohibit the Servicer or the Foundation from making general media
solicitations (or hires resulting therefrom) not specifically targeted at such
employees so long as such media solicitations do not violate Section 7.11
hereof. Prior to Closing, the Company shall amend its employment agreements with
Xxxxx X. Xxxx, Xxxxxxx Xxxxxx and Xxxxx Xxxxxxx and the employment policy with
respect to Xxxxxx Xxxxxxxx in the form previously provided to the Buyer.
7.12 NONCOMPETITION. Each of the Servicer and the Foundation agrees
that, for a period of five (5) years following the Closing Date, neither the
Servicer nor the Foundation may engage, either directly or indirectly, in
owning, managing, operating, joining, controlling, being retained as a
contractor or consultant by or on behalf of, or participating in any manner in
the ownership, management, operation or control of any Person which in any way,
directly or indirectly, is engaged in any activity which is directly or
indirectly competitive with the business of the Buyer or any of its Affiliates
as currently conducted, with the exceptions of (i) participating in any program
(including the origination and acquisition of loans or otherwise supporting the
extension of credit) undertaken pursuant to legislation promulgated by the
Legislature of the State of Texas providing for the extension of credit for the
purposes of obtaining a higher education provided such program does not offer
FFELP Loans made under the terms of the Higher Education Act, (ii) participating
in any manner to support the extension of credit to persons seeking a higher
education, provided that such participation does not require the Foundation to
raise funds in the capital markets, or result in the acquisition, holding,
financing or servicing of FFELP Loans by the Foundation or any entity acting on
its behalf (except as permitted by clause (iii)), and (iii) acquiring, holding
and financing FFELP Loans (or interests therein) by the Foundation to the
limited extent required under the Code in order for the Foundation to maintain
its Charitable Organization Status. For a period of five (5) years following the
Closing Date, the Buyer agrees to sell, or cause to be sold, to the Foundation
FFELP Loans and Private Loans in an aggregate amount sufficient to permit the
Foundation to maintain a portfolio of FFELP Loans and Private Loans equal to no
less than $200,000,000.00. The purchase price for such FFELP Loans and Private
Loans shall be the fair market value mutually agreed upon by the Buyer and the
Foundation. The Buyer also agrees to buy, or cause one or more of its Affiliates
to buy, all of the FFELP Loans held by the Foundation (or any portion thereof if
such portion exhibits representative characteristics of the Foundation's entire
FFELP Loan portfolio) at a price not less than the unpaid principal balance
thereof plus accrued borrower interest thereon. The Buyer shall be required to
purchase a Loan only if such Loan is subject to an existing servicing agreement
and guarantee agreement to which the Buyer is a party. Such purchase shall occur
within fifteen business (15) days after written notice to Buyer of Foundation's
intent to sell such FFELP loans. All purchases and sales of FFELP Loans and
Private Loans hereunder shall be subject to terms and conditions (including
representations and warranties) standard in the student loan industry.
The commitment to sell such FFELP Loans and Private Loans to the
Foundation as provided by this Section 7.12 may be satisfied by the sale of
participation interests or subparticipation interests in FFELP Loans or Private
Loans to the Foundation at the fair market value of such interests as mutually
agreed upon by the parties. In connection with such sale, the Parent shall have
the right to provide input to the Foundation with respect to any financing of
33
the purchase of such interests. The participation interests or subparticipation
interests sold to the Foundation pursuant to this paragraph must (i) be
sufficient to produce gross revenues payable to the Foundation equal to that
which would have been earned by a portfolio of FFELP Loans or Private Loans
representing the difference between $200,000,000.00 and the amount of FFELP
Loans and Private Loans then owned by the Foundation, taking into consideration
servicing costs and premiums paid in connection with such FFELP Loans and
Private Loans and (ii) have terms that, when calculated with the return provided
by the Foundation's portfolio of FFELP Loans and Private Loans, are sufficient
to produce a reasonable positive return to the Foundation, taking into account
servicing costs and reasonable costs of funding. The Parent or its Affiliates
shall have the option at any time to repurchase all or any portion of the FFELP
Loans, Private Loans and participation or subparticipation interests sold to the
Foundation under this Section 7.12 at fair market value as mutually agreed upon
by the parties; provided that the remaining portfolio of such Loans and
interests are sufficient to produce a reasonable positive return to the
Foundation, taking into account servicing costs and reasonable costs of funding.
At all times after the Closing Date, the Foundation shall have the right to
acquire additional student loans from any source only to the extent necessary
for the Foundation to qualify as an organization described in Section 509(a)(2)
of the Code. The Parent shall have access to the financial and other records of
the Foundation from time to time in order to verify the needs of the Foundation
in maintaining its qualification as an organization under Section 509(a)(2) of
the Code and to verify the Foundation's rate of return on any FFELP Loans,
Private Loans, participation interests or subparticipation interests sold to the
Foundation pursuant to this Section 7.12. Notwithstanding the foregoing, in the
event that income from Private Loans is not permitted to be counted toward
satisfying the Foundation's requirements to qualify as an organization described
in Section 509(a)(2) of the Code, then the Buyer shall only sell FFELP Loans or
participation interests therein to fulfill its commitments under this Section
7.12.
Without limiting the generality of the foregoing, neither the Servicer
nor the Foundation shall, and each of the Servicer and Foundation shall cause
their then current officers, directors, employees, and agents not to, contact
any borrower, school or lender in order to originate, acquire, hold, service or
finance any FFELP Loan, except to the extent required under the Code for the
Foundation to maintain its Charitable Organization Status. Prior to the sale or
transfer of any FFELP Loans or Private Loans (or participation interests or
subparticipation interests in such Loans) owned by or on behalf of the
Foundation, the Foundation shall give written notice to the Buyer of the
proposed details of such sale including but not limited to purchase price,
identity of purchaser, characteristics of the FFELP Loan and Private Loan
portfolios proposed to be sold and other relevant terms. The Buyer shall have
fifteen (15) days after receipt of such notice in which to notify the Foundation
that the Buyer wishes to exercise its right of first refusal hereby granted by
the Foundation to the Buyer or its designee, in which case the Foundation shall
promptly sell such FFELP Loans or Private Loans (or participation interests or
subparticipation interests in such Loans) to the Buyer under the terms set forth
in the Foundation's notice given pursuant to this Section 7.12. The parties
acknowledge that a breach hereof will cause irreparable injury to the Buyer and
that monetary damage would not provide an adequate remedy for such breach, and
therefore the Buyer may elect to have this Section 7.12 specifically enforced by
any court having equity jurisdiction. In the event either the Servicer or the
Foundation fails in any manner to observe the requirements of this Section 7.12,
the Buyer shall be entitled to enforce such provisions through any remedy
provided by Law, including but not limited to injunctive relief, and pursue such
other remedies for relief which may be available pursuant to Law or this
Agreement. Within thirty (30) days following the Closing Date, the Servicer
shall change its name so as to not include the word "LoanSTAR" (or any
derivative thereof).
34
7.13 CONTINUATION OF CHARITABLE ORGANIZATION STATUS. The Foundation and
Servicer shall each maintain and continue its Charitable Organization Status
through the Closing Date and for at least one year thereafter.
7.14 NO SHOP.
(a) From the date of this Agreement until the earlier of (i) the
Closing Date or (ii) the termination of this Agreement in accordance
with Section 6.4.3 hereof, each of the Foundation and the Servicer shall
not, and shall cause their respective officers, directors, employees and
other agents not to, directly or indirectly, solicit, initiate or
encourage any Acquisition Proposal, other than in connection with the
transactions contemplated by this Agreement. Nothing in this Agreement
shall prevent the Foundation, the Company, the Servicer, their
respective officers, directors, employees and other agents or the board
of directors of the Foundation, the Company or the Servicer from
engaging in discussions or negotiations with, or furnishing or
disclosing any information relating to the Foundation, the Company, any
Subsidiary or the Servicer, to any Person who has made a bona fide
unsolicited Acquisition Proposal after the date hereof, if (x) in the
good faith judgment of the Foundation's, the Servicer's or the Company's
board of directors, taking into account the likelihood of consummation
and after consultation with its financial advisors, such Acquisition
Proposal is reasonably likely to result in a Superior Third Party Offer
and (y) the board of directors of the Foundation, the Servicer or the
Company, after consultation with its outside legal counsel, determines
in good faith that the failure to do so would be inconsistent with its
fiduciary obligations under applicable law.
(b) In the event that the Servicer, the Foundation or the Company
(or their respective representatives) receive any Acquisition Proposal
in accordance with the foregoing, the Servicer and the Foundation shall
(x) notify the Buyer as soon as practicable and (y) keep the Buyer
informed generally of the status of such discussions or negotiations.
(c) The Servicer, the Company and/or the Foundation may accept a
Superior Third Party Offer; provided, that:
(i) neither the Servicer nor the Foundation has breached in
any material respect its obligations under this Section
7.14; and
(ii) the Servicer and the Foundation contemporaneously
terminate this Agreement pursuant to Section 6.4.3(d).
(d) The Foundation and/or the Servicer shall pay the Termination
Fee to the Buyer within five (5) business days following the closing of
a Superior Third Party Offer transaction or termination of this
Agreement pursuant to Section 6.4.3(d). The parties intend that the
Termination Fee shall be liquidated damages and not (and not deemed to
be) a penalty and payment thereof shall be the sole and exclusive remedy
35
available to the Parent, the Buyer and their Affiliates for such
termination or any breach of this Agreement in the event the Termination
Fee is paid by the Foundation or the Servicer under and pursuant to this
Section 7.14 and neither the Parent, the Buyer nor any of their
Affiliates shall assert or pursue in any manner, directly or indirectly,
any claim against the Foundation, the Company, any Subsidiary or the
Servicer or its or their officers, directors, employees, agents or
representatives based upon such termination or any breach of this
Agreement.
7.15 NOTICE OF DEVELOPMENTS. Prior to the Closing, each party shall
promptly notify the other parties if such party or any of its representatives
obtains actual knowledge that any representation or warranty of such party in
this Agreement is not true and correct in all material respects, or if such
party or any of its representatives obtains actual knowledge of any material
errors in, or omissions from, the schedules hereto.
7.16 JPM CHASE LINE. Prior to Closing, the Foundation shall cause the
Company to use its good faith efforts to obtain the written consent of JPMorgan
Chase Bank, N.A., under the JPM Chase Line, to the transactions contemplated by
this Agreement, without resulting in any effect upon the JPM Chase Line. If the
Company is not successful in obtaining such consent on terms reasonably
satisfactory to the Buyer, then the Foundation shall cause the Company to pay
off the principal balance and accrued interest under the JPM Chase Line in full
on or before the Closing Date, and obtain a release of any Liens created under
the JPM Chase Line.
7.17 PRESERVATION OF BOOKS AND RECORDS. Buyer shall preserve the books
and records constituting a part of the Purchased Assets for a period of six
years from the Closing Date, or for such longer period as is required by any
applicable Law, and will permit the Foundation and the Servicer and their
authorized representatives reasonable access thereto, including making any
copies, in connection with the affairs of the Foundation or the Servicer at the
cost of the Foundation and the Servicer. Such records may be sought under this
Section 7.17 for any reasonable purpose, including, without limitation, to the
extent reasonably required in connection with the audit, accounting, tax,
litigation, or other similar needs of the party seeking such records.
7.18 SATISFACTION OF PHANTOM EQUITY. On or prior to the Closing Date,
the Foundation shall cause the Company to pay, satisfy and extinguish the
Liabilities of the Company, and redeem the interests issued, under the Company's
Phantom Stock Plan, as amended through the Closing Date, and provide to the
Buyer evidence of such satisfaction. The portion of the Purchase Price allocated
to the Foundation under Section 7.9(a) shall be reduced by any payment made by
the Company to satisfy and extinguish such Liabilities.
7.19 SATISFACTION OF CITIBANK COMMITMENT AGREEMENT. The parties
acknowledge that the Foundation is obligated to sell, or cause an affiliate to
sell to Citibank FFELP loans with an aggregate principal balance equal to
$100,000,000.00. prior to June 30, 2006. Of this amount, approximately
$23,000,000.00 of FFELP Loans have been sold, leaving a balance of approximately
$77,000,000.00 remaining under the loan sale commitment. The agreement creating
this obligation states that it may be assigned by the Foundation with the
written consent of Citibank, which consent will not be unreasonably withheld.
Foundation agrees to seek the consent of Citibank to the assignment of this
36
agreement, and if obtained Buyer agrees to accept assignment of the agreement
and perform all obligations of the Foundation thereunder. If Citibank fails to
consent to such assignment, Buyer agrees to sell to Foundation before June 30,
2006 FFELP loans which qualify for sale under such agreement in an amount
sufficient to satisfy all of the Foundation's obligations thereunder and at a
premium equal to the previously agreed upon premium to be received by the
Foundation from Citibank upon a subsequent sale of such loans. The Foundation
agrees not to sell any FFELP loans to Citibank prior to Closing. However, the
parties acknowledge that the Company as an affiliate of the Foundation may sell
to Citibank, at any time prior to Closing, FFELP loans in an amount not in
excess of that shown in Schedule 3.13(h) hereto.
7.20 CONTINUATION OF SERVICER. For a period of at least one (1) year
following the Closing Date, the Servicer shall maintain its corporate existence
and not liquidate or dissolve. After the Closing Date, the Foundation and the
Servicer and their respective Affiliates shall not use the word "LoanSTAR" or
any derivative thereof in any marketing materials.
7.21 RESCISSION OF DIVIDEND. Prior to the Closing, the Foundation shall
cause the Company to rescind in full the dividend previously authorized and yet
unpaid by the Company in the amount of $4,985,331.
7.22 UNASSIGNABLE CONTRACTS. Prior to the Closing Date, the Servicer
shall use commercially reasonable efforts to obtain any required consents to or
approvals to effect the assignment of the Servicing Operations Contracts to the
Buyer pursuant to this Agreement. To the extent the Servicer is unable to obtain
such consents or approvals, the Servicer shall use commercially reasonable
efforts to ensure that the Buyer shall receive all of the benefits of such
Servicing Operations Contracts that would otherwise have been assigned to the
Buyer but for the inability to obtain required consents to or approvals of
assignment thereof, including paying to the Buyer all fees, compensation and
consideration due under such unassignable contracts.
ARTICLE VIII
INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Foundation in Section 3.2, the third and fourth sentences of
Section 3.4(b), and Sections 3.4(d), 3.5, 3.6, 3.11 and 3.23, and of the
Servicer in Sections 4.1, 4.4, 4.5, and 4.16 (collectively, the "Surviving
Representations and Warranties"), will survive the Closing until, and shall
terminate on, the expiration of the applicable statute of limitations; PROVIDED,
that the representations and warranties of the Foundation set forth in Sections
3.6 and 3.23 and of the Servicer in Sections 4.5 and 4.16 shall terminate on the
date that is 547 days following the Closing Date. No other representation or
warranty of the Foundation or the Servicer shall survive the Closing. The
representations and warranties of the Parent and the Buyer shall survive the
Closing until, and shall terminate on, the expiration of the applicable statute
of limitations. Neither the Foundation nor the Servicer shall be liable for any
Indemnifiable Costs (as defined below) resulting from a breach of a Surviving
Representation and Warranty unless a written claim for indemnification is made
by the Parent or the Buyer on or before the applicable date of termination of
such Surviving Representation and Warranty. Neither the Parent nor the Buyer
shall be liable for any Indemnifiable Costs resulting from a breach of any
37
representation or warranty unless a written claim for indemnification is made by
the Foundation or the Servicer on or before the applicable date of termination
of such representation or warranty.
8.2 INDEMNIFICATION BY THE FOUNDATION AND THE SERVICER. From and after
the Closing, and subject to the provisions of this Article VIII and Section 9.4
hereof, the Foundation and the Servicer will jointly and severally indemnify the
Parent, the Buyer and their respective Affiliates, shareholders, directors,
employees and agents (collectively, the "Buyer Indemnified Parties") against and
hold them harmless from:
(a) all Liability, loss, damage or cost (including without
limitation reasonable attorneys fees) (collectively, "Indemnifiable
Costs") resulting from or arising out of or in connection with any
inaccuracy in or breach of any Surviving Representation and Warranty;
(b) all Indemnifiable Costs resulting from or arising out of or
in connection with any breach or nonperformance of any covenant or
obligation herein made or incurred by the Foundation and/or the
Servicer; and
(c) all Indemnifiable Costs from or arising out of claims made
against the Buyer for any Liability of the Servicer that is not an
Assumed Liability.
8.3 INDEMNIFICATION BY THE PARENT AND THE BUYER. From and after the
Closing, and subject to the provisions of this Article VIII and Section 9.4
hereof, the Parent and the Buyer will jointly and severally indemnify the
Foundation, the Servicer and their respective Affiliates, shareholders, members,
directors, employees and agents (collectively, the "Foundation/Servicer
Indemnified Parties") against and hold them harmless from:
(a) all Indemnifiable Costs resulting from or arising out of or
in connection with any inaccuracy in or breach of any representation or
warranty by the Parent and the Buyer herein;
(b) all Indemnifiable Costs resulting from or arising out of any
breach or nonperformance of any covenant or obligation herein made or
incurred by the Parent or the Buyer; and
(c) all Indemnifiable Costs from or arising out of claims made
against the Servicer for any Assumed Liability.
8.4 LIMITATIONS. Notwithstanding the foregoing provisions of this
Article VIII, but subject in all respects to Section 9.4, the Parent and the
Buyer, on behalf of themselves and anyone who could make a claim by or on
either's behalf, agree as follows:
(a) There shall be no liability of the Foundation or the Servicer
for indemnification under Section 8.2 (i) for inaccuracies in or
breaches of Sections 3.6 or 4.5 hereof unless and until the aggregate
amount of Indemnifiable Costs for inaccuracies in or breaches of such
38
sections exceeds $500,000, (ii) for inaccuracies in or breaches of
Section 3.23 hereof unless and until the aggregate amount of
Indemnifiable Costs for such inaccuracies or breaches exceeds $500,000,
and (iii) for inaccuracies in or breaches of Section 4.16 hereof unless
and until the aggregate amount of Indemnifiable Costs for such
inaccuracies or breaches exceeds $500,000. If the aggregate amount of
Indemnifiable Costs described in clause (i), (ii) or (iii) above exceed
$500,000, the Servicer and the Foundation will only be obligated
(subject to the other limitations in this Article VIII) to indemnify the
Buyer Indemnified Parties for Indemnifiable Costs in excess of $500,000
for Indemnifiable Costs described in clause (i), Indemnifiable Costs in
excess of $500,000 for Indemnifiable Costs described in clause (ii), and
Indemnifiable Costs in excess of $500,000 for Indemnifiable Costs
described in clause (iii). As an example of the foregoing, if the
aggregate Indemnifiable Costs under Sections 3.6 and 4.5 equal $600,000,
the Indemnifiable Costs under Section 3.23 equal $600,000 and the
Indemnifiable Costs under Section 4.16 equal $300,000, the joint and
several liability of the Foundation and the Servicer shall be $200,000.
(b) In no event shall the Foundation or the Servicer have
liability for indemnification with respect to inaccuracies in or
breaches of Sections 3.23 or 4.16 resulting from, arising out of or in
connection with (i) FFELP Loan or Private Loan servicing errors
committed or caused by the Parent, the Buyer or their Affiliates (other
than the Servicer) prior to the Closing or (ii) FFELP Loan or Private
Loan servicing errors that are not the result of a systemic defect or
series of defects in the Foundation's, the Servicer's, the Company's or
the Subsidiaries' servicing operations that, singly or in the aggregate,
impact a material portion of the FFELP Loans or Private Loans serviced
by the Foundation, the Servicer, the Company or the Subsidiaries.
(c) In no event shall the Servicer's and the Foundation's
liability for Indemnifiable Costs pursuant to Section 8.2 exceed (i)
$5,000,000 in the aggregate for breaches of Sections 3.6 and 4.5 hereof,
(ii) $5,000,000 in the aggregate for breaches of Section 3.23, (iii)
$5,000,000 in the aggregate for breaches of Section 4.16 or (iv)
$500,000 for breaches of Section 3.11.
8.5 DEFENSE OF THIRD PARTY ACTIONS. An Indemnified Party shall give
prompt written notice to any entity that is obligated to provide indemnification
hereunder (an "Indemnifying Party") of the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a "third
party action") in respect of which such Indemnified Party shall seek
indemnification hereunder. Any failure so to notify an Indemnifying Party shall
not relieve such Indemnifying Party from any liability that it may have to such
Indemnified Party under this Article VIII unless the failure to give such notice
materially and adversely prejudices such Indemnifying Party. The Indemnifying
Party shall have the right to assume control of the defense of, settle, or
otherwise dispose of such third party action on such terms as it deems
appropriate; provided, however, that:
39
(a) the Indemnified Party shall be entitled, at its own expense,
to participate in the defense of such third party action; PROVIDED,
however, that the Indemnifying Party shall pay the attorneys' fees of
the Indemnified Party if (i) the employment of separate counsel shall
have been authorized in writing by such Indemnifying Party in connection
with the defense of such third party action, or (ii) the Indemnified
Party's counsel shall have advised the Indemnified Party in writing,
with a copy delivered to the Indemnifying Party, that there is a
conflict of interest that could make it inappropriate under applicable
standards of professional conduct to have common counsel;
(b) no Indemnifying Party shall consent to the entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to
each Indemnified Party of a release from all liability in respect of
such third party action; and
(c) the Indemnified Party shall be entitled to have sole control
over the defense or settlement, compromise, admission, or acknowledgment
of any third party action for which the Indemnifying Party notifies the
Indemnifying Party in writing that it will not assume control of the
defense; PROVIDED, that (i) the Indemnifying Party shall be entitled to
participate at its own expense in the defense of such third party action
and (ii) the Indemnified Party shall make no settlement, compromise,
admission, or acknowledgment that would give rise to liability on the
part of any Indemnifying Party without the prior written consent of such
Indemnifying Party.
The parties hereto shall extend reasonable cooperation in connection with the
defense of any third party action pursuant to this Section 8.5 and, in
connection therewith, shall furnish such records, information, and testimony and
attend such conferences, discovery proceedings, hearings, trials, and appeals as
may be reasonably requested.
8.6 DETERMINATION OF BREACH. For purposes of determining (i) whether an
Indemnifying Party shall be required to indemnify an Indemnified Party under
this Article VIII, or (ii) the aggregate amount of Indemnifiable Costs suffered
by an Indemnified Party, each representation and warranty contained in this
Agreement for which indemnification can be or is sought hereunder shall be read
(including for purposes of determining whether a breach of such representation
or warranty has occurred) without regard to whether a particular breach would
result or be reasonably expected to result in a Material Adverse Effect.
8.7 MITIGATION; OFFSET. (a) Each Indemnified Party shall use
commercially reasonable efforts to mitigate all Indemnifiable Costs, including
availing itself of any commercially reasonable defenses, limitations, rights of
contribution, claims against third Persons and other rights at law or equity.
The Indemnified Parties' commercially reasonable efforts shall include the
reasonable expenditure of money to mitigate or otherwise reduce or eliminate any
Indemnifiable Costs for which indemnification would otherwise be due.
40
(b) All Indemnifiable Costs shall be net of (i) the dollar amount of any
insurance or other proceeds actually received by any Indemnified Party or any of
its Affiliates with respect to such Indemnifiable Costs, (ii) the amount of
recoveries from any third party actually received by any Indemnified Party, and
(iii) the amount of any Tax benefit available to reduce Taxes by any Indemnified
Party arising from the incurrence or payment of any such Indemnifiable Costs.
Any party seeking indemnity hereunder shall use commercially reasonable efforts
to seek coverage (including both costs of defense and indemnity) under
applicable insurance policies with respect to any such Indemnifiable Costs;
provided that no party is required hereby to maintain any insurance therefor.
ARTICLE IX
CONSTRUCTION
9.1 DEFINITIONS. When used in this Agreement, the following terms in all
of their tenses and cases will have the meanings assigned to them below or
elsewhere in this Agreement as indicated below:
"Acquisition Proposal" means any proposal or offer, including, without
limitation, any proposal or offer to the Foundation, the Company, the
Subsidiaries or the Servicer (or any of their respective representatives or
advisers), which relates to the purchase or acquisition of all or a majority or
more of the business, assets or capital stock of the Foundation, the Company,
the Subsidiaries or the Servicer, whether by way of merger, consolidation, asset
purchase, stock purchase or similar transaction.
"Affiliate" of any Person means any person directly or indirectly
controlling, controlled by, or under common control with, any such Person. As
used in this definition, the term "control" means possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" shall mean this Stock and Asset Purchase Agreement and all
schedules attached hereto and amendments hereof, and is defined in the Recitals.
"Balance Sheet" is defined in Section 3.14 hereof.
"Books and Records" means all books and records of the Company relating
to the Company's business and properties, including, but not limited to, (i) all
books and records relating to the purchase of materials and supplies, dealings
with customers, invoices and personnel records, (ii) all contracts, reports,
opinions, maps and other documents affecting the title to or the value of the
properties of the Company, (iii) tax returns, and (iv) all financial and
operating data, files and other information with respect to the Company's
business and properties.
"Buyer" means NNI Acquisition Servicing Limited Partnership, a Nebraska
limited partnership.
41
"Charitable Organization Status" means the current status of the
Foundation with respect to taxation under the Code, including the status as an
entity exempt from taxation under Section 501(a) of the Code by virtue of being
an organization described in Section 501(c)(3) of the Code.
"Closing" and "Closing Date" are defined in Section 6.1 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means LoanSTAR Funding Group, Inc., a Texas corporation.
"Company Intellectual Property" is defined in Section 3.3 hereof.
"Confidential Information" is defined in Section 7.2.1 hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Contracts" means the change in control agreements between the
Servicer and each of X. X. Xxxxxxx, Xxxx X. Xxxx, Xxxxx Xxxxxxx and Xxxxxx
Xxxxxxx.
"FFELP Loan" means a student loan made and guaranteed pursuant to the
Higher Education Act.
"Financial Statements" is defined in Section 3.14 hereof.
"Foundation" means Greater Texas Foundation, a Texas non-profit
corporation.
"GAAP" means generally accepted accounting principles in the United
States.
"Governmental Authority" means any federal, provincial, municipal,
state, regional or local authority, agency, body, court or instrumentality,
regulatory or otherwise, domestic or foreign, which, in whole or in part, was
formed by or operates under the auspices of any federal, provincial, municipal,
state, regional or local government, domestic or foreign.
"Xxxx-Xxxxx-Xxxxxx Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
"Higher Education Act" means Title IV, Parts B, F and G, of the Higher
Education Act of 1965, as amended or supplemented and in effect from time to
time, or any successor enactment thereto, and all regulations promulgated
thereunder and any related directives issued by the United States Secretary of
Education.
"Indemnified Parties" means the Buyer Indemnified Parties or the
Foundation/Servicer Indemnified Parties, as the case may be.
42
"JPM Chase Line" means the line of credit established pursuant to the
Forward Financing Agreement dated as of January 13, 2005, between the Company
and JPMorgan Chase Bank, N.A.
"knowledge": The Foundation, the Company or the Servicer will be deemed
to have "knowledge" of a particular fact or matter only if any of Xxxxx X.
Xxxxxxx, Xxxx Xxxx, Xxxxx X. Xxxx, R. Xxxxxxx Xxxxxxx, Xx. or Xxxxxx Xxxxxxx has
actual knowledge of such fact or matter.
"Law" means any common law and any federal, provincial, municipal,
state, regional, local or foreign law, bylaw, rule, statute, ordinance, rule,
order or regulation.
"Liabilities" means obligations, commitments and liabilities of any and
every kind, whether known or unknown, accrued, absolute, contingent or
otherwise.
"Lien" means any security interest, lien, easement, adverse claim,
demand, encumbrance, limitation, security interest, option, pledge, warrant or
any other title defect or restriction of any kind, other than Permitted
Encumbrances.
"Material Adverse Effect" means a material adverse effect on (a) the
business, financial condition or results of operations of the Company, the
Servicer or the Subsidiaries, taken as a whole (it being understood that the
occurrence of a Material Adverse Effect will not be precluded due to the fact
that such an effect relates solely to one such entity), or (b) the ability of
the Foundation or the Servicer to consummate the transactions contemplated by
this Agreement, except to the extent (in the case of either clause (a) or clause
(b) above) that such material adverse effect results from (i) general economic,
regulatory or political conditions or changes therein; (ii) the outbreak or
escalation of hostilities involving the United States, the declaration of the
United States of a national emergency or war or the occurrence of any other
calamity or crisis, including an act of violence or terrorism; (iii) financial
or securities market fluctuations or conditions; (iv) any change or effect
resulting from the announcement or pendency of this Agreement or the
transactions contemplated hereby; (v) any change or effect resulting from taking
any action required to be taken under the terms of this Agreement; (v) any
change or effect resulting from any change in accounting rules or principles
applicable to the Foundation, the Company, any Subsidiary or the Servicer; or
(vi) any change or effect resulting from a change in the laws applicable to the
Foundation, the Company, any Subsidiary or the Servicer.
"Permitted Encumbrances" means (i) Liens for Taxes, impositions,
assessments, fees, rents or other governmental charges levied or assessed or
imposed not yet delinquent or being contested in good faith by appropriate
proceedings, (ii) statutory Liens (including materialmen's, warehousemen's,
mechanic's, repairmen's, landlord's, and other similar Liens) arising in the
ordinary course of business securing payments not yet delinquent or being
contested in good faith by appropriate proceedings, (iii) solely with respect to
real estate, Liens of public record which would not reasonably be expected to
result in a Material Adverse Effect, (iv) the rights of lessors and lessees
under leases executed in the ordinary course of business, (v) the rights of
licensors and licensees under licenses executed in the ordinary course of
business, (vi) solely with respect to real estate, restrictive covenants,
easements and defects, imperfections or irregularities of title or Liens, if
any, as would not reasonably be expected to result in a Material Adverse Effect,
(vii) purchase money Liens on equipment and Liens securing rental payments under
43
capital lease arrangements executed in the ordinary course of business, (viii)
restrictions on transfer with respect to which consents or waivers are obtained
for the transactions contemplated by this Agreement, (ix) Liens referenced in
any real property files made available by the Foundation to the Buyer or in the
Schedules to this Agreement that would not reasonably be expected to result in a
Material Adverse Effect, (x) Liens listed on Schedule 9.1, comprised solely of
those Liens created by the Tax-Exempt Bonds described therein and by the Taxable
Bonds described therein, and (xi) Liens created by the Buyer or its successors
and assigns.
"Person" means any individual, corporation, partnership, limited
liability company, association, trust, joint venture or any other entity or
organization or any Governmental Authority.
"Private Loan" means a student loan which is not made or guaranteed
pursuant to the Higher Education Act.
"Purchase Price" is defined in Section 2.1 hereof.
"Purchased Assets" is defined in Section 1.3 hereof.
"Retained Assets" is defined in Section 1.4 hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Servicer" means LoanSTAR Systems, Inc., a Texas non-profit corporation.
"Servicer Intellectual Property" is defined in Section 4.2 hereof.
"Servicing Operations" means the operations of the Servicer with respect
to origination, servicing, administering and collection of Student Loans.
"Servicing Operation Contracts" is defined in Section 1.3(e) hereof.
"Stock" is defined in the Recitals.
"Student Loan" means a FFELP Loan or a Private Loan.
"Subsidiaries" means, collectively, LoanStar Assets GP, LLC, a Delaware
limited liability company, LoanStar Assets LP, LLC, a Delaware limited liability
company, LoanStar Assets Partners, L.P., a Delaware limited partnership,
LoanStar Assets XX XX, LLC, a Delaware limited liability company, LoanStar
Assets XX XX, LLC, a Delaware limited liability company, and LoanStar Assets
Partners II, L.P., a Delaware limited partnership.
"Superior Third Party Offer" means an unsolicited bona fide Acquisition
Proposal made by a third party to purchase or acquire all or a majority or more
of the business, assets or capital stock of the Foundation, the Company, the
Subsidiaries or the Servicer (whether by way of merger, consolidation, asset
44
purchase, stock purchase or similar transaction), which proposal contains terms
and conditions that are, in the reasonable judgement of the board of directors
of the Foundation, the Company or the Servicer (based on, among other things,
the advice of its or their independent financial advisors and outside counsel),
more favorable to the Foundation, the Company, the Subsidiaries or the Servicer
(as applicable) than the terms and conditions of this Agreement, taking into
account, without limitation, the respective missions of the Foundation and the
Servicer, terms with respect to payment of the total consideration upon
completion of the transaction and all legal, regulatory and other aspects of
such Acquisition Proposal.
"Tax" means any charge or assessment by or liability to any Governmental
Authority, including, but not limited to, any deficiency, interest or penalty.
"Tax-Exempt Bonds" means the bonds or notes issued by the Company or any
of the Subsidiaries set forth in Schedule 3.5A the gross income from which is
intended to be exempt from taxation.
"Taxable Bonds" means the bonds or notes issued by the Company or any of
the Subsidiaries as set forth in Schedule 3.5B, the gross income from which is
intended to be subject to taxation.
"Termination Fee" means a one-time fee that the Foundation or the
Servicer shall be required to pay to the Buyer upon the acceptance of a Superior
Third Party Offer pursuant to Section 6.4.3(d), which fee shall equal the sum of
(A) $8,000,000, plus (B) the legal, accounting and other costs and expenses of
the Buyer incurred in connection with the Buyer's due diligence, drafting and
negotiation, execution and preparation for closing of this Agreement, the
documents related thereto and the transactions contemplated hereby and thereby;
provided, that the amount of the liability for such costs and expenses hereunder
in this clause (B) shall not exceed $150,000.
9.2 NOTICES. All notices shall be in writing delivered as follows:
(a) If to the Buyer:
National Education Loan Network, Inc.
Attention: Xxxxx X. Xxxxxx, CFO
000 Xxxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Telephone: 402/ 000-0000
Facsimile: 402/ 458-2294
with a copy to:
Xxxxxx X. Xxxxxx
Perry, Guthery, Xxxxx
& Xxxxxxxx, P.C., L.L.O.
000 Xxxxx 00xx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Telephone: 402/ 000-0000
Facsimile: 402/ 476-0094
45
(b) If to the Foundation:
LoanSTAR Funding Group, Inc.
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxx, XX 00000
Attention: Xxxxx X. Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx & Xxxxxx L.L.P.
0000 Xxxxxxxx Xxxx Xxxxxx
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000-0000
Attention: Xxx X. Xxxxxx III
Xxxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
(c) If to the Servicer:
LoanSTAR Systems, Inc.
0000 Xxxx Xxxxxx
Xxxxx, XX 00000
Attention: Xxxx Xxxxxxx
Telephone: (000) 000-0000 x0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxx & Xxxxxx L.L.P.
0000 Xxxxxxxx Xxxx Xxxxxx
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000-0000
Attention: Xxx X. Xxxxxx III
Xxxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
46
or to such other address as may have been designated in a prior written notice.
Notices sent by registered or certified mail, postage prepaid, return receipt
requested, shall be deemed to have been given two business days after being
mailed, and otherwise notices shall be deemed to have been given when received.
9.3 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained herein, other than those set forth in Section 8.1
hereof, and in any certificate or other writing delivered pursuant hereto shall
not survive the Closing. This Section 9.3 shall not limit any covenant or
agreement of the parties to this Agreement which, by its terms, contemplates
performance after the Closing.
9.4 KNOWLEDGE. Notwithstanding anything contained herein to the
contrary, no party shall have (a) any liability to the other party for any
breach of or inaccuracy in any representation or warranty by such party, if the
other party or any of its officers, employees, counsel or representatives (i)
had knowledge at or before the Closing of the facts as a result of which such
representation or warranty was breached or inaccurate or (ii) received at or
before the Closing a document disclosing such facts or (b) any liability after
the Closing for any breach of or failure to perform any covenant or obligation
of such party if the other party or any of its officers, employees, counsel or
other representatives (i) had knowledge at or before the Closing of such breach
or failure or (ii) received at or before the Closing a document disclosing such
breach or failure.
9.5 BINDING EFFECT; ASSIGNMENT. Except as may be otherwise provided
herein, this Agreement will be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns. Except as
otherwise provided in this Agreement, nothing in this Agreement is intended or
will be construed to confer on any Person other than the parties any rights or
benefits hereunder. No party may assign this Agreement or any of its rights,
interests or obligations hereunder without the prior written consent of the
other parties; provided, however, that before the Closing is effected, the Buyer
may assign any or all of its rights, interests and obligations hereunder to one
or more of its Affiliates, in which case the Buyer shall not be relieved of its
obligations hereunder. Any purported assignment in violation of the foregoing
shall be null and void.
9.6 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same document. Such counterparts may be
effectively delivered in person, by facsimile or by other electronic means.
9.7 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal, or incapable of being enforced by any rule of Law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated herein are not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal, or incapable of being enforced, the court or other
Governmental Authority making such determination is authorized and instructed to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in order that the transactions contemplated herein are
consummated as originally contemplated to the fullest extent possible.
47
9.8 MODIFICATION. No supplement, modification or amendment of this
Agreement will be binding unless made in a written instrument which is signed by
all parties and which specifically refers to this Agreement.
9.9 ENTIRE AGREEMENT. This Agreement and the agreements and documents
referred to in this Agreement or delivered hereunder are the exclusive statement
of the agreement between the parties concerning the subject matter hereof. All
negotiations between the parties are merged into this Agreement, and there are
no representations, warranties, covenants, understandings or agreements, oral or
otherwise, in relation thereto between the parties other than those incorporated
herein and to be delivered hereunder. This Agreement shall specifically
supersede any prior negotiations, understandings or agreements among the
Foundation, the Servicer and the Buyer.
9.10 EXPENSES. Except as otherwise provided in this Agreement, all
legal, accounting and other costs and expenses incurred in connection with this
Agreement and the other documents and the transactions contemplated hereby and
thereby shall be paid by the parties incurring such expenses, including but not
limited to Liability incurred by the Foundation described in Schedule 3.16
hereof. Notwithstanding the foregoing, the Foundation and the Servicer, on the
one hand, and the Buyer, on the other hand, shall share evenly the filing fees
required in connection with filings made under the Xxxx-Xxxxx-Xxxxxx Act.
9.11 NO WAIVER RELATING TO CLAIMS FOR FRAUD. None of the provisions set
forth in this Agreement, including but not limited to the provisions set forth
in Section 8.1 (relating to the survival period of the representations and
warranties) shall be deemed a waiver by any party to this Agreement of any right
or remedy which such party may have at law or equity based on any other party's
fraudulent acts or omissions; provided, that with respect to such rights and
remedies at law or equity, the parties further acknowledge and agree that none
of the provisions of this Section 9.11 shall be deemed a waiver of any defenses
which may be available in respect of actions or claims for fraud, including but
not limited to, defenses of statutes of limitations or limitations of damages.
9.11 GOVERNING LAW; VENUE. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
ITS CONFLICTS-OF-LAW PRINCIPLES. EACH OF THE PARTIES HERETO SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF
TEXAS.
48
INTENDING TO BE LEGALLY BOUND, the parties have signed this Stock and
Asset Purchase Agreement as of the date first above written.
NNI Acquisition Servicing Limited
Partnership
By: InTuition, Inc., its general partner Greater Texas Foundation
By: /s/ XXXXX X. XXXXXX By: /s/ XXXX XXXX
--------------------------- --------------------------
Title: CFO Title: Chairman
--------------------------- --------------------------
Nelnet, Inc. LoanSTAR Systems, Inc.
By: /s/ XXXXX X. XXXXXX By: /s/ XXXXXX X. XXXXXXX
------------------------- --------------------------
Title: CFO Title: Chairman
--------------------------- --------------------------
49
LIST OF SCHEDULES TO STOCK AND ASSET PURCHASE AGREEMENT
The following is a list of schedules to the Stock and Asset Purchase
Agreement that were omitted from Exhibit 2.1 pursuant to the provisions of Item
601(b)(2) of Regulation S-K. Nelnet, Inc. agrees to furnish supplementally a
copy of any omitted schedule to the Securities and Exchange Commission upon
request.
Schedule Description
-------- -----------
Schedule 1.3(e) List of Servicing Operation Contracts
Schedule 1.4(b) List of Bank Accounts and Similar Accounts
Schedule 1.4(d) List of Insurance Policies, Programs, Reserves and Related
Bonds
Schedule 1.4(j) List of Agreements, Arrangements, Unexpired Leases and
Purchase Orders that are not Servicing Operation Contracts
Schedule 1.4(k) List of Assets for Administrative Services
Schedule 3.4(a) List of Jurisdictions where Company Qualified to Transact
Business
Schedule 3.4(b) List of Indentures of Trust
Schedule 3.4(d) Description of Phantom Stock Rights
Schedule 3.5a List of Liens created through Tax Exempt Bonds
Schedule 3.5b List of Liens created through Taxable Bonds
Schedule 3.6 List of Material Contracts of Company
Schedule 3.8 List of Pending Litigation of Company
Schedule 3.10(a) List of Employees, Independent Contractors and Agents
Schedule 3.10(b) List of Employment Agreements and Consulting Agreements
Schedule 3.13(h) List of Student Loans which may be transferred to
Foundation
Schedule 3.14(a) Audited Financial Statements
Schedule 3.14(b) Unaudited Financial Statements
Schedule 3.16 List of Brokers/Financial Advisors
Schedule 3.18 Schedule of Leases of Real Estate by Company
Schedule 3.22 List of Forward FFELP Loan Sale Commitments
Schedule 3.23 Schedule of FFELP Loans
Schedule 4.2 List of Intellectual Property
Schedule 4.3 List of Jurisdictions where Servicer Qualified to Transact
Business
Schedule 4.5 List of Material Contracts of Servicer
Schedule 4.6 List of Pending Litigation of Servicer
Schedule 4.8(a) List of Compensation of Employees of Servicer
Schedule 4.8(b) List of Employment Agreements of Servicer
Schedule 4.10 List of Certain Subsequent Events
Schedule 4.15 Schedule of Leases of Real Estate by Servicer
Schedule 4.17 List of Servicing Operation Contracts by Servicer
Schedule 6.5.1(A) Terms of Administrative Services Agreement
Schedule 6.5.1(B) Terms of Loan Servicing Agreement
Schedule 6.5.2 Form of Xxxx of Sale and Assignment and Assumption
Agreement
Schedule 7.1 Form of Press Release
Schedule 7.7 List of Officers and Employees of the Company and Related
Agreements
Schedule 7.9(b) Allocation of Purchase Price
Schedule 7.11 List of Employees and Related Agreements
Schedule 9.1 List of Liens which are Permitted Encumbrances
