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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF
1934
Date of Report (date of earliest event reported) August 17, 1999
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ALTIVA FINANCIAL CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware
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(State or other jurisdiction of incorporation)
0-21689 88-0286042
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(Commission File Number) (I.R.S. Employer
Identification No.)
1000 Parkwood Circle, Suite 500, Atlanta, GA 30339
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(Address of principal executive offices) (Zip Code)
(707) 952-6700
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(Registrant's telephone number, including area code)
Mego Mortgage Corporation
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(Former name or former address, if changed since last report)
This Form 8-K/A amends Registrant's previously filed Form 8-K dated
July 30, 1999.
This document includes the financial statements and pro forma financial
information which had been omitted from the previously filed document as
permitted by Item 7(a)(4) of Form 8-K.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 15, 1999, the Company consummated the previously announced purchase of
all of the outstanding stock of The Money Centre, Inc. The principal components
of the purchase price for the acquisition by the Company were $7,000,000 of
cash, $3 million of the Company's common stock (600,000 shares valued at $5 per
share), and 20% of the pre-tax net cash flow, as defined in the purchase
agreement for a period not to exceed 48 months. A portion of the cash purchase
price was financed through a loan agreement between Value Partners, LTD., T.
Rowe Price Recovery Fund, II, L.P. and the Company.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of business Acquired. The following financial
statements for The Money Centre, Inc. are attached hereto as Exhibit 99.1:
Audited Financial Statements for the Years ended December 31, 1997 and 1998
- Report of the Auditors
- Consolidated Balance Sheets as of December 31, 1997 and 1998
- Consolidated Statements of Operations and Retained Earnings for the Years
ended December 31, 1997 and 1998
- Consolidated Statements of Shareholders' Equity for the Years ended
December 31, 1997 and 1998
- Consolidated Statements of Cash Flows for the Years ended
December 31, 1997 and 1998
- Notes to Consolidated Financial Statements for the Years ended
December 31, 1997 and 1998
Unaudited Interim Financial Statements for the Five-Month ended May 31, 1999
- Condensed Consolidated Balance Sheet as of May 31, 1999
- Condensed Consolidated Statement of Operations and Retained Earnings
for the Five-Months ended May 31, 1999
- Condensed Consolidated Statement of Cash Flow for the Five Months ended
May 31, 1999
- Notes to Condensed Consolidated Financial Statements for the Five-Months
ended May 31, 1999
(b) Pro Forma Financial Information. Attached hereto as Exhibit 99.2 are the
unaudited pro forma consolidated condensed statement of operations for the nine
month period ended May 31, 1999 and for the twelve months ended August 31, 1998
as if the acquisition of The Money Centre, Inc. (MC, Inc.) occurred as of
September 1, 1998 and 1997, respectively. The pro forma condensed consolidated
balance sheet as of May 31, 1999 gives effect to the acquisition as if such
transaction occurred on May 31, 1999.
The pro forma condensed consolidated financial statements have been prepared by
the management of the Company based on the historical financial statements of
the Company and of MC, Inc. using the purchase method of accounting. Assumptions
and adjustments are discussed in the accompanying notes to the pro forma
condensed consolidated financial statements. In the opinion of the management of
the Company, all pro forma adjustments necessary to state fairly such pro forma
financial information have been made. The shares outstanding have been adjusted
to reflect the issuance of shares for the acquisition. The unaudited pro forma
condensed consolidated financial statements are not necessarily indicative of
what actual results of operations would have been for the period had the
transaction occurred on the dates indicated. In addition, such financial
statements do not purport to indicate the results of future operations of
financial position of the Company from the acquisition date forward.
The accompanying pro forma financial statements reflect the allocation of
purchase price based on a preliminary analysis of the values of equity
instruments issued and the assets acquired and liabilities assumed. Final
analysis may result in a change to the purchase price allocation.
(c) Exhibits.
2.1 Stock Purchase Agreement by and between the Company, MC, Inc., Rodney
D. Atkinson, Charles R. Cunningham, Stuart A. Lewis, John Richard Love and
Stephen L. Walker dated as of July 7, 1999.
10.1 Loan Agreement by and between the Company, Value Partners, Ltd. and T.
Rowe Price Recovery Fund II, L.P. dated as of July 14, 1999.
10.2 Pledge Agreement by and between the Company and Value Partners dated
as of July 14, 1999.
99.1 Audited Consolidated Financial Statements of MC, Inc. as of and for
the years ended December 31, 1997 and 1998 and unaudited condensed consolidated
financial statements as of and for the five months ended May 31, 1999.
99.2 Unaudited pro forma condensed consolidating financial statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ALTIVA FINANCIAL CORPORATION
Dated: August 17, 1999 By: /s/ J. Richard Walker
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J. Richard Walker
Executive Vice President
Chief Financial Officer
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STOCK PURCHASE AGREEMENT
among
RODNEY D. ATKINSON,
CHARLES R. CUNNINGHAM,
STUART A. LEWIS,
JOHN RICHARD LOVE,
STEPHEN L. WALKER,
THE MONEY CENTRE, INC.
and
ALTIVA FINANCIAL CORPORATION
July 7, 1999
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TABLE OF CONTENTS
<TABLE>
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page
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ARTICLE I SALE OF SHARES .............................................................................1
1.01. Purchase and Sale of Shares of the Company .................................................1
1.02. Binding Effect .............................................................................2
ARTICLE II PURCHASE PRICE .............................................................................2
2.01. Purchase Price .............................................................................2
2.02. Company Balance Sheet ......................................................................5
2.03. Method of Payment ..........................................................................6
ARTICLE III SELLERS' REPRESENTATIONS AND WARRANTIES OF TITLE AND
AUTHORITY ..................................................................................7
3.01. Power and Authority of Sellers .............................................................7
3.02. Ownership of the Shares ....................................................................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF COMPANY AND SELLERS .....................................................................7
4.01. Organization and Authorization .............................................................7
4.02. Authorized and Outstanding Stock ...........................................................9
4.03. Transfer Claims ...........................................................................10
4.04. Financial Statements ......................................................................10
4.05. No Undisclosed Liabilities ................................................................10
4.06. No Violation of Law .......................................................................11
4.07. Property ..................................................................................11
4.08. Leases ....................................................................................12
4.09. Indebtedness for Borrowed Money ...........................................................12
4.10. Trademarks, Etc. ..........................................................................13
4.11. Litigation and Claims .....................................................................13
4.12. Salaried Employees ........................................................................14
4.13. Employee Contracts, Union Agreements and Benefit Plans ....................................14
4.14. Pension Matters ...........................................................................15
4.15. Labor Relations ...........................................................................15
4.16. Bank Accounts .............................................................................16
4.17. License Agreements ........................................................................16
4.18. Insurance Policies ........................................................................16
4.19. Contracts and Commitments .................................................................17
4.20. No Conflict ...............................................................................18
4.21. Agreements in Full Force and Effect .......................................................19
4.22. Required Consents and Approvals ...........................................................19
4.23. Absence of Certain Changes and Events .....................................................19
</TABLE>
(i)
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<TABLE>
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4.24. Copies of Documents .......................................................................21
4.25. Required Licenses and Permits .............................................................21
4.26. Tax Matters ...............................................................................21
4.27. Miscellaneous Receivables .................................................................24
4.28. Environmental Matters .....................................................................25
4.29. Transactions with Related Parties .........................................................26
4.30. Brokers' and Finders' Fees ................................................................26
4.31. Compliance with Securities Act ............................................................26
4.32. Disclosure ............................................................................26
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER ...................................................27
5.01. Organization ..............................................................................27
5.02. Authorization .............................................................................27
5.03. No Conflict ...............................................................................27
5.04. Brokers' and Finders' Fees ................................................................27
ARTICLE VI COVENANTS OF THE COMPANY AND SELLERS ......................................................29
6.01. Pre-Closing Operations ....................................................................29
6.02. Access ....................................................................................31
6.03. Interim Financials ........................................................................32
6.04. Transfer Taxes ............................................................................32
6.05. Broker's or Finder's Fees .................................................................32
6.06. Further Information .......................................................................32
6.07. Consultation ..............................................................................32
6.08. Filing of Returns; Payment of Taxes .......................................................32
6.09. Cooperation on Tax Matters ................................................................32
ARTICLE VII COVENANTS OF THE PARTIES ..................................................................33
7.01. Approvals of Third Parties; Satisfaction of Conditions to Closing .........................33
7.02. Confidentiality ...........................................................................33
7.03. Buyer's Financing .........................................................................34
ARTICLE VIII CONDITIONS TO SELLERS' OBLIGATIONS ........................................................34
8.01. Representations and Warranties True at Closing Date .......................................34
8.02. Purchase Price ............................................................................34
8.03. Documents Satisfactory in Form and Substance ..............................................34
8.04. Required Consents and Approvals ...........................................................34
8.05. Atkinson Agreement ........................................................................35
8.06. Employment Agreements .....................................................................35
8.07. Lease Agreement ...........................................................................35
8.08. Registration Rights Agreement .............................................................35
8.09. R. Wendell Atkinson Agreement .............................................................35
8.10. Escrow Agreement ..........................................................................35
</TABLE>
(ii)
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<TABLE>
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8.11. Opinion of Counsel to Buyer ...........................................................35
8.12. Litigation ..........................................................................35
ARTICLE IX CONDITIONS TO BUYER'S OBLIGATIONS .. ..................................................37
9.01. Representations and Warranties True at Closing Date ...................................37
9.02. No Material Change ....................................................................38
9.03. Litigation ............................................................................38
9.04. Record Searches .......................................................................38
9.05. Opinion of Counsel to the Company and Sellers .........................................38
9.06. Documents Satisfactory in Form and Substance ..........................................38
9.07. Resignations of Officers and Directors ................................................38
9.08. Required Consents and Approvals .......................................................39
9.09. Financing .............................................................................39
9.10. Purchaser Questionnaire ...............................................................39
9.11. Atkinson Agreement ....................................................................39
9.12. Employment Agreements .................................................................39
9.13. Lease Agreement .......................................................................39
9.14. Escrow ................................................................................39
ARTICLE X CLOSING ...............................................................................39
10.01. Closing Date ..........................................................................40
10.02. Closing Requirements ..................................................................40
ARTICL XI INDEMNIFICATION BY SELLERS.............................................................40
11.01. Indemnification by Sellers ............................................................40
11.02. Indemnification by Buyer ..............................................................40
11.03. Time to Assert Claim ..................................................................40
11.04. Claims ................................................................................40
11.05. Loss Threshold ........................................................................41
11.06. Defense ...............................................................................41
11.07. Maximum Liability .....................................................................41
11.08. Escrow ................................................................................43
11.09. Nonrecourse Liability .................................................................45
ARTICLE XII TERMINATION PRIOR TO CLOSING ..........................................................45
12.01. Termination of Agreement ..............................................................45
12.02. Termination of Obligations ............................................................46
ARTICLE XIII MISCELLANEOUS .........................................................................47
13.01. Entire Agreement ......................................................................47
13.02. Parties Bound by Agreement; Successors and Assigns ....................................47
13.03. Counterparts ..........................................................................47
13.04. Headings ..............................................................................48
13.05. Modification and Waiver ...............................................................48
13.06. Expenses ..............................................................................48
</TABLE>
(iii)
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<TABLE>
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13.07. Notices .................................................................................48
13.08. Further Cooperation .....................................................................49
13.09. Governing Law; Construction .............................................................50
13.10. Public Announcements ....................................................................50
13.11. Acquisition Proposals ...................................................................50
13.12. Sellers' and Company's Knowledge ........................................................50
13.13. No Third-Party Beneficiaries ............................................................50
13.14. "Including" .............................................................................51
13.15. References ..............................................................................51
13.16. Effective Date ..........................................................................51
13.17. Consent to Jurisdiction; Designation of Agent ...........................................51
13.18. Post-Closing Operations of the Money Centre Division ....................................51
</TABLE>
(iv)
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of July _,
1999, is by and among Rodney D. Atkinson ("Atkinson"), Charles R. Cunningham
("Cunningham"), Stuart A. Lewis ("Lewis"), John Richard Love ("Love") and
Stephen L. Walker ("Walker"), each an individual resident of the State of North
Carolina (collectively, the "Sellers"), The Money Centre, Inc., a North Carolina
Corporation (the "Company") and Altiva Financial Corporation, a Delaware
corporation ("Buyer");
WITNESSETH:
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to buy from
Sellers, the issued and outstanding shares of capital stock of the Company owned
by Sellers; and
WHEREAS, the Board of Directors of the Company has authorized the
Company to execute, deliver and perform this Agreement and authorized the
Company in connection with the sale and purchase of such shares to make certain
representations, warranties and agreements for the benefit of Buyer; and
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms and subject to the
conditions hereinafter set forth, the parties do hereby agree as follows:
ARTICLE I
SALE OF SHARES
1.01. PURCHASE AND SALE OF SHARES OF THE COMPANY. Upon the terms and
subject to the conditions of this Agreement, Buyer agrees to purchase from each
Seller, and each such Seller agrees to sell, transfer, assign and deliver to
Buyer, at the Closing (as hereinafter defined), all of the issued and
outstanding shares of capital stock of the Company owned by such Seller (the
outstanding shares of such stock of the Company being referred to herein as the
"Shares"), free and clear of all liens, claims and encumbrances. The number of
Shares owned by each Seller is set forth beside the execution of this Agreement
by such Seller. The number of Shares owned by all the Sellers is set forth on
the list of shareholders of the Company attached as Schedule 1.01. If any Seller
at any time prior to the Closing acquires any further right or interest in
shares of capital stock of the Company, such right or interest shall become
subject to and sold under this Agreement. At Closing, the Shares shall
constitute all of the outstanding shares of capital stock of the Company.
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1.02. BINDING EFFECT. This Agreement shall become effective and binding
upon the Company, Buyer and Sellers when it has been duly executed and delivered
by each of the parties hereto.
ARTICLE II
PURCHASE PRICE
2.01. PURCHASE PRICE. (a) The purchase price (the "Purchase Price") for
the Shares shall include: (i) $7,000,000 in cash; (ii) 600,000 shares of the
common stock, par value $.01 of Buyer ("Common Stock"); and (iii) the earn-out
set forth in Sections 2.01(b) and (c). The $7,000,000 in cash and the 600,000
shares shall be payable at Closing and distributed to the Sellers as follows:
<TABLE>
<CAPTION>
NAME CASH # OF SHARES
- ---- ---- -----------
<S> <C> <C>
Rodney D. Atkinson $3,000,000 200,000
Stephen L. Walker $1,000,000 100,000
Charles R. Cunningham $1,000,000 100,000
Stuart A. Lewis $1,000,000 100,000
John Richard Love $1,000,000 100,000
</TABLE>
Notwithstanding the above, at Closing $105,000 of the cash portion of the
Purchase Price payable to Atkinson and $11,250 of the cash portion of the
Purchase Price (the "Purchase Price Escrow Amount") payable to each of
Cunningham, Lewis, Love and Walker (each a "Minority Seller" and collectively
the "Minority Sellers") shall be paid into the Escrow Account pursuant to the
Escrow Agreement (each as defined in Section 11.08 of this Agreement). At such
time as the Final Balance Sheet (as defined in Section 2.02(c)) is prepared, for
each two dollars by which Stockholders' Equity on the Final Balance Sheet
exceeds $3,400,000, each Seller shall be distributed, from the Escrow Account,
one dollar of the Purchase Price Escrow Amount multiplied by the percentage of
the Purchase Price Escrow Amount contributed by such Seller up to a maximum
aggregate amount of $150,000, and at such time, for each two dollars by which
the Stockholders' Equity on the Final Balance Sheet is less than $3,700,000,
Buyer shall receive a one-dollar distribution of the Purchase Price Escrow
Amount from the Escrow Account up to a maximum amount of $150,000.
(b) For the sixteen (16) consecutive calendar quarters beginning
with the calendar quarter beginning July 1, 1999, or until $2,551,000 (the
"Atkinson Maximum") is paid pursuant to this Section 2.01(b), whichever comes
first, Atkinson shall be entitled to a quarterly
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payment in an amount equal to 10% of the quarterly pre-tax Net Cash Flow (as
defined below) of the Money Centre, Inc. division of Buyer (the "Money Centre
Division").
(c) For the sixteen (16) consecutive calendar quarters beginning
with the calendar quarter beginning July 1, 1999, or until $500,000 is paid to
Atkinson pursuant to Section 2.01(c), whichever comes first, Atkinson shall be
entitled to a quarterly payment in an amount equal to 10% of the quarterly
pre-tax Net Cash Flow (as defined below) of the Money Centre Division of Buyer,
and after payment of such $500,000 to Atkinson, for the remainder of such
sixteen (16) consecutive calendar quarters beginning July 1, 1999, or until
another $3,500,000 (the "Minority Maximum") is paid pursuant to Section
2.01(c), whichever comes first, each Minority Seller shall be entitled to a
quarterly payment in the amount of 2.5% of the quarterly pre-tax Net Cash Flow
of the Money Centre Division of Buyer.
(d) The pre-tax Net Cash Flow in respect of each calendar quarter
with respect to which a payment is made pursuant to Section 2.01(b) or (c)
shall be equal to the sum of (A) all revenue received during such quarter from
the operation of, including all fees, discounts and other revenues of, the Money
Centre Division and (B) the amount received during such quarter from the sale of
loans originated by the Money Centre Division, minus, without duplication: (i)
all third party costs incurred during such quarter in connection with the
acquisition of loans or the origination of loans by the Money Centre Division;
(ii) all operating expenses incurred during such quarter in connection with the
acquisition of loans or the origination of loans by the Money Centre Division of
the kind that are customarily incurred by a company in the Company's industry;
(iii) all third party costs incurred during such quarter in connection with in
the disposition of loans acquired or originated by the Money Centre Division;
and (iv) all amounts incurred during such quarter by Buyer under the Atkinson
Contract, the Employment Contracts and the Lease Agreement (each as hereinafter
defined). To the extent that Buyer is indemnified for any costs or expenses
related to Putback Losses (hereinafter defined) pursuant to Section 4.01 hereof,
such costs or expenses shall not be taken into account in calculating the
pre-tax Net Cash Flow of the Money Centre Division for purposes of this Section
2.01.
(e) Upon a termination of employment by Buyer of a Minority
Seller without Good Cause (as defined in the Employment Contracts of each such
Minority Seller) and without the consent of all remaining Minority Sellers
employed by Buyer, such terminated Minority Seller shall be entitled to a
prepayment of a portion of the earnout payments due pursuant to Section 2.01(c)
(the "Termination Payment"). The Termination Payment is intended to accelerate a
portion of payments (70%) that would otherwise be due to such terminated
Minority Seller pursuant to Section 2.01(c) hereof, and the amount of the
Termination Payment shall be equal to 70% of the product of (a) the average
amount received by such terminated Minority Seller for the four preceding
calendar quarters in respect of which a payment was made to such Minority Seller
pursuant to Section 2.01(c) hereof and (b) sixteen (16) less the number of
quarters in respect of which such Minority Seller was eligible to receive a
payment, even if none was earned, pursuant to Section 2.01(c) hereof. In the
case of a termination prior to the end of the fourth calendar quarter following
the calendar quarter in which the Closing occurs, the
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Termination Payment shall be equal to 70% of the product of (a) the average
amount received by such terminated Minority Seller for the completed calendar
quarters in respect of which a payment was made to such Minority Seller pursuant
to Section 2.01(c) hereof and (b) sixteen less the number of quarters in
respect of which a payment was made to such Minority Seller pursuant to Section
2.01(c) hereof. The Termination Payment shall be made by Buyer on or before the
thirtieth (30th) day following termination of the Minority Seller's employment.
The Termination Payment shall not be refundable by such terminated Minority
Seller in the event that the final calculation of such terminated Minority
Seller's aggregate earnout pursuant to Section 2.01(c) is less than the
Termination Payment and such shortfall shall not affect the earnout payments due
to the other Minority Sellers pursuant to Section 2.01(c). The remaining earnout
payment due to such terminated Minority Seller pursuant to Section 2.01(c), if
any, shall be made on the date on which a payment is made to any Minority Seller
pursuant to Section 2.01(c) in respect of the sixteenth (16th) calendar
quarter following July 1, 1999; provided, however, that the remaining earnout
payment pursuant to Section 2.01(c) for any individual Minority Seller shall
not exceed $1,000,000 minus the sum of all previous amounts received by such
Minority Seller pursuant to Section 2.01(c) hereof, including the Termination
Payment. Any amount paid as a Termination Payment to any Minority Seller shall
be deducted from any payments to which such Minority Seller would otherwise be
entitled pursuant to Section 2.01(c) hereof after the date of termination, and
to the extent that $500,000 has not been paid to Atkinson by Buyer under Section
2.01(c) hereof, then the amount of any Termination Payment paid by Buyer to
such Minority Seller shall be reduced by $125,000 minus 25% of the amounts
previously paid to Atkinson pursuant to Section 2.01(c) and the amount thus
deducted from the Termination Payment shall be paid to Atkinson pursuant to
Section 2.01(c).
(f) Within thirty (30) days after the end of any calendar quarter
in respect of which a payment is due to a Seller under Sections 2.01(b) or
2.01(c), Buyer shall prepare and deliver to each Seller a statement setting
forth in reasonable detail the calculation of Net Cash Flow for the Money Centre
Division for the previous calendar quarter (the "Net Cash Flow Statement"). The
Sellers shall have the right to review fully each Net Cash Flow Statement, all
work papers relating thereto and the financial books and records kept with
respect to the Money Centre Division. Sellers shall complete their review of
each Net Cash Flow Statement within ten (10) days after such Net Cash Flow
Statement has been made available for their review. If Sellers believe that any
adjustment should be made to such Net Cash Flow Statement, Sellers shall give
Buyer written notice of such adjustments. If Buyer agrees with the adjustments
proposed by Sellers, the adjustment shall be made to such Net Cash Flow
Statement. If there are any proposed adjustments which are disputed by Buyer,
then Sellers and Buyer shall negotiate in good faith to resolve all disputed
adjustments. If after a period of five (5) days following the date on which
Sellers give Buyer written notice of their proposed adjustments any such
adjustments remain disputed, then Deloitte & Touche (or the independent auditors
engaged by the Company at such time) ("DT") shall be engaged to resolve any
remaining disputed adjustments and the decision of DT shall be final and binding
on the parties hereto. The parties shall use their best efforts to cause DT to
resolve such remaining disputed adjustments as promptly as possible. Buyer shall
pay the cost of preparing the Net Cash Flow Statement. If
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Sellers propose any adjustments to the Net Cash Flow Statement, (i) Sellers
shall pay the cost and expenses of DT if the disputed adjustments are resolved
in favor of Buyer and (ii) Buyer shall pay such costs and expenses if the
disputed adjustments are resolved in favor of Sellers. If the disputed
adjustments are resolved in part in favor of Buyer and in favor of Sellers,
Buyer and Seller shall share such costs and expenses in proportion to the
aggregate of the proposed dollar adjustments resolved in favor of Buyer compared
to the aggregate of the proposed dollar adjustments resolved in favor of
Sellers. Sellers shall be severally liable for their share of any such costs and
expenses in proportion to their respective Percentage Interests. Except in the
case of a disputed portion of any payment, payments of amounts due to a Seller
pursuant to Sections 2.01(b) or 2.01(c) shall be made on or before the
thirtieth (30th) day following any quarter in respect of which a payment is due,
subject to the provisions of Section 2.01(e). In the case of a disputed portion
of any such payments, Buyer shall make such payment within ten (10) days of the
final determination by DT.
2.02. COMPANY BALANCE SHEET. (a) As promptly as practicable after the
Closing Date, Sellers shall prepare a balance sheet of the Company and its
Subsidiaries as of June 30, 1999, if the Closing takes place on or before July
15, 1999 or as of July 31, 1999, if the Closing takes place after July 15, 1999
(the "Proposed Balance Sheet") in accordance with generally accepted accounting
principles ("GAAP") as applied by the Company in the past. Sellers shall
complete their preparation of the Proposed Balance Sheet within forty-five (45)
days after the Closing Date. It is specifically agreed by the parties that in
preparing the Proposed Balance Sheet, Sellers shall not apply any accounting
principles applied by the Company in preparing its historical financial
statements to the extent that such accounting principles are inconsistent with
GAAP.
(b) Buyer shall have the right to review fully the Proposed
Balance Sheet and all work papers relating thereto. Buyer shall complete its
review of the Proposed Balance Sheet within fifteen (15) days after the Proposed
Balance Sheet has been made available for its review. If Buyer believes that any
adjustments should be made to the Proposed Balance Sheet in order for the
Proposed Balance Sheet to be prepared in accordance with GAAP, Buyer shall give
Sellers written notice of such adjustments. If Sellers agree with the
adjustments proposed by Buyer, the adjustments shall be made to the Proposed
Balance Sheet. If there are any proposed adjustments which are disputed by
Sellers, then Sellers and Buyer shall negotiate in good faith to resolve all the
disputed adjustments. If, after a period of fifteen (15) days following the date
on which Buyer gives Sellers written notice of any proposed adjustments, any
such adjustments still remain disputed, then DT shall be engaged to resolve any
remaining disputed adjustments and the decision of DT shall be final and binding
on the parties hereto. The parties hereto shall use their best efforts to cause
DT to resolve any such remaining disputed adjustments as promptly as possible.
(c) After the Proposed Balance Sheet has been prepared and any
related adjustments thereto have been agreed to pursuant to Sections 2.02(a) and
(b) hereof, all adjustments, if any, so agreed to with respect to the Proposed
Balance Sheet shall be made. The
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Proposed Balance Sheet, as so revised by all such adjustments, if any, is
referred to herein as the "Final Balance Sheet."
(d) The parties hereto acknowledge that the Purchase Price is
based on the assumption that the stockholders' equity of the Company and its
Subsidiaries on the Closing Date will be at least $4,000,000. Accordingly, if
the stockholders' equity of the Company and its Subsidiaries on the Closing Date
as reflected in the Final Balance Sheet (the "Final Stockholders' Equity") is
less than $4,000,000, Sellers and Buyer agree that the Purchase Price shall be
reduced on a dollar-for-dollar basis by the amount by which $4,000,000 exceeds
the Final Stockholders' Equity, if the Final Stockholders' Equity is $3,700,000
or greater (the "Purchase Price Reduction"). Any Purchase Price Reduction
pursuant to this Section 2.02, of $300,000 or less, shall be made
proportionately among the Sellers in accordance with their respective Percentage
Interests shown on Schedule 2.02 (the "Reduction Interests") and shall be
effected by a dollar-for-dollar reduction of the Atkinson Maximum and the
Minority Maximum; provided that to the extent that any Purchase Price Reduction
exceeds $300,000, Sellers shall be severally responsible for any such excess
amount in accordance with the provisions of Section 2.01(a), with the maximum
additional liability of each such Seller being equal to the cash portion of the
Purchase Price Escrow Amount contributed by each such Seller pursuant to Section
2.01(a). The offset rights of Buyer under this Section 2.02 shall not be
subject to any threshold or cap applicable to indemnification payments by
Sellers pursuant to Article XI, and neither the earnout payments in respect of
which offsets are made pursuant to this Section 2.02 nor offsets against any
such earnout payments shall reduce the maximum indemnification obligations of
Sellers under Article XI hereof.
(e) Buyer shall pay the costs and expenses of preparing the
Proposed Balance Sheet and Final Balance Sheet and their own costs and expenses
incurred in reviewing the Proposed Balance Sheet and Final Balance Sheet. If DT
is engaged to resolve a dispute, (i) Buyer shall pay the fees, costs and
expenses of DT if the disputed adjustments are resolved in favor of Sellers, and
(ii) Sellers shall pay such fees, costs and expenses if the disputed adjustments
are resolved in favor of Buyer. If any such disputed adjustments are resolved in
part in favor of Buyer and in part in favor of Sellers, Buyer and Sellers shall
share such fees, costs and expenses of DT in proportion to the aggregate of the
proposed dollar adjustments resolved in favor of Buyer compared to the aggregate
of the proposed dollar adjustments resolved in favor of Sellers. Sellers shall
be severally liable for their share of any such costs and expenses in proportion
to their respective Percentage Interests.
2.03. METHOD OF PAYMENT. All cash payments from one party to another
pursuant to Section 2.01 shall be made by wire transfer of immediately available
federal funds to an account designated in writing by the person or entity to
receive such payment or by such other method as may be agreed to by the parties.
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ARTICLE III
SELLERS' REPRESENTATIONS AND
WARRANTIES OF TITLE AND AUTHORITY
Each of the Sellers, severally and not jointly, represents, warrants,
covenants and agrees, only on such Seller's behalf and with respect to the
Shares set forth beside the execution of this Agreement by such Seller, as of
the date hereof and as of the Closing Date, as follows:
3.01. POWER AND AUTHORITY OF SELLERS. Such Seller has the right, power
and capacity to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by such Seller and constitutes such Seller's legal, valid
and binding obligation, enforceable in accordance with its terms. The execution,
delivery and performance by such Seller of this Agreement and the consummation
of the transactions contemplated hereby will not, with or without the giving of
notice or the lapse of time, or both, (i) violate any provision of law, statute,
rule or regulation to which such Seller is subject, (ii) violate any order,
judgment or decree applicable to such Seller, or (iii) violate, conflict with,
or result in a breach or default under, or cause the termination of, any term or
condition of any court order, trust document, will, agreement, document or other
instrument to which such Seller is a party or by which such Seller or such
Seller's properties may be bound.
3.02. OWNERSHIP OF THE SHARES. Except as set forth in Schedule 3.02,
such Seller owns good and marketable record and beneficial title to the number
of Shares set forth beside such Seller's signature on this Agreement, and such
Shares (i) are validly issued, fully paid and nonassessable, and (ii) are free
and clear of any liens, restrictions, claims, equities, charges, options, rights
of first refusal, or encumbrances, with no defects of title whatsoever. Other
than the Shares set forth beside the execution hereof by such Seller, such
Seller owns no shares of capital stock of the Company or of any Subsidiary or
any other equity security of the Company or of any Subsidiary or right of any
kind to have any such equity security issued. Upon consummation of the Closing
in accordance with the terms of this Agreement, Buyer shall have obtained good
and marketable record and beneficial title to all Shares owned by such Seller,
free and clear of any liens, restrictions, claims, equities, options, charges,
rights of first refusal, or encumbrances or other restrictions, and with no
defects of title whatsoever, other than any such liens caused by Buyer. Except
as set forth in Schedule 3.02, such Seller has the exclusive right, power and
authority to vote the Shares owned by such Seller. Except as set forth in
Schedule 3.02, such Seller covenants that it is not party to or bound by any
agreement affecting or relating to such Seller's right to transfer or vote the
Shares owned by such Seller.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMPANY AND SELLERS
The Company and each of the Sellers, severally and not jointly,
represents, warrants, covenants and agrees, as of the date hereof and as of the
Closing Date, as follows:
4.01. ORGANIZATION AND AUTHORIZATION.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of North Carolina and has all
requisite power and authority, corporate or otherwise, to carry on and conduct
its business as it is now being conducted and to own or lease its properties and
assets, and is duly qualified and in good standing in every state of the United
States in which the conduct of the business of the Company or the ownership of
such properties and assets requires it to be so qualified, except where the
failure to be so qualified and in good standing would not have a material
adverse effect on the business, prospects, financial condition, assets,
liabilities (absolute, accrued, contingent or otherwise), reserves or
operations, taken as a whole, of the Company and its Subsidiaries, on a
consolidated basis, or materially impair the ability of the Company to
consummate the transactions contemplated by this Agreement (a "Company Material
Adverse Effect")
(b) Schedule 4.01 sets forth (i) every entity in which the
Company owns 50 percent or more of the outstanding equity, directly or
indirectly (the "Subsidiaries" and each a "Subsidiary") and the jurisdiction of
its incorporation, and (ii) every other ownership interest of the Company and
the Subsidiaries in any other corporation, partnership, joint venture or other
entity. Each of the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation and has all requisite power and authority, corporate or otherwise,
to carry on and conduct its business as it is now being conducted, and to own or
lease its properties and assets, and is duly qualified and in good standing in
every state of the United States in which the conduct of the business of such
Subsidiary or the ownership of such properties and assets requires it to be so
qualified, except where the failure to be so qualified and in good standing
would not have a Company Material Adverse Effect. Except as noted on Schedule
4.01, (v) all outstanding shares of capital stock of the Subsidiaries are owned
by the Company, directly or indirectly, free and clear of all liens,
restrictions, claims, equities, charges, options, rights of first refusal or
encumbrances, with no defects of title whatsoever, (w) there are no outstanding
options, warrants, subscriptions, rights or other arrangements or commitments
obligating any Subsidiary to issue or dispose of any shares of capital stock or
other ownership interest therein, (x) the Company, directly or indirectly
through the ownership of stock, has the sole interest in the properties and
business of each Subsidiary, (y) the Company has full power, right and authority
to vote all of the outstanding shares of capital stock of each Subsidiary, and
(z) the Company is not party to or bound by any
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agreement affecting or relating to its right to transfer or vote the outstanding
shares of capital stock of any Subsidiary.
(c) The copies of the charter documents and bylaws of the
Company and each Subsidiary that have been previously delivered to Buyer are the
complete, true, and correct charter documents and bylaws of the Company and the
Subsidiaries in effect as of the date hereof. The minutes of directors' and
shareholders' meetings and the stock books of the Company and each Subsidiary
that have previously been delivered to Buyer are the complete, true, and correct
records of directors' and shareholders' meetings and stock issuances through and
including the date hereof and reflect all transactions required to be contained
in such records.
(d) The current officers and directors of the Company and each
of the Subsidiaries are listed on Schedule 4.01.
(e) The Company has all requisite corporate power and
authority to enter into this Agreement. The execution and delivery of this
Agreement by the Company and the performance by the Company of its covenants and
agreements hereunder have been duly authorized by all necessary corporate action
on the part of the Company, and this Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company enforceable in accordance with its terms.
4.02. AUTHORIZED AND OUTSTANDING STOCK. The authorized capital stock of
the Company and each of the Subsidiaries and the number of issued and
outstanding shares thereof is set forth in Schedule 4.02. All of such issued and
outstanding shares of capital stock are validly issued, fully paid and
nonassessable. Neither the Company nor any Subsidiary has outstanding, and none
are bound by, any subscriptions, options, warrants, calls, commitments or
agreements requiring the Company to issue or entitling any person or entity to
acquire any additional shares of capital stock or any other equity security,
including any right of conversion or exchange under any outstanding security or
other instrument, and neither the Company nor any Subsidiary is obligated to
issue any shares of its capital stock for any purpose. All issuances, transfers
or purchases of the capital stock of the Company and each Subsidiary have been
in compliance with all applicable agreements and all applicable laws, including
federal and state securities laws, and all taxes owed by the Company or any
Subsidiary thereon have been paid. Except as set forth in Schedule 4.02, no
former or present holder of any of the Shares or any other capital stock of the
Company, any Subsidiary, or any corporation or other entity which has been
merged into the Company or any Subsidiary has any legally cognizable claim
against the Company, any Subsidiary or any Seller, based on any issuance, sale,
purchase, redemption or involvement in any transfer of any Shares or any such
other capital stock by the Company or any Subsidiary, or any corporation or
other entity which has been merged into the Company or any Subsidiary. There are
no outstanding obligations of the Company to repurchase, redeem or otherwise
acquire any outstanding shares of stock of the Company or any Subsidiary.
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4.03. TRANSFER CLAIMS. Except as set forth in Schedule 4.03, no prior
offer, issue, redemption, call, purchase, sale, transfer, negotiation or other
transaction of any nature or kind with respect to any capital stock (including
shares, offers, options, warrants, or debt convertible into shares, options or
warrants) of the Company or any Subsidiary, or any corporation or other entity
which has been merged into the Company or any Subsidiary, has given or may give
rise to any valid claim or action by any person which is enforceable against the
Company, any Subsidiary, any Seller or Buyer, and, to the knowledge of the
Company and Sellers, no fact or circumstance exists which could give rise to any
such right, claim or action on behalf of any person.
4.04. FINANCIAL STATEMENTS. Schedule 4.04 contains true, correct and
complete copies of (i) the audited consolidated balance sheets of the Company
and the Subsidiaries as of December 31, 1998, 1997 and 1996 (1997 and 1998 as
restated to account for FASB 91) and the related audited consolidated statements
of income, stockholders' equity and cash flow for the years then ended, and the
related notes thereto (the "1998 Financial Statements," "1997 Financial
Statements" and "1996 Financial Statements, respectively) and (ii) the
unaudited consolidated balance sheet of the Company and each of the Subsidiaries
as of April 30, 1999, and the related unaudited consolidated statement of income
for the period then ended (the "1999 Interim Financial Statements" and,
collectively with the 1996, 1997 and 1998 Financial Statements, the "Financial
Statements"). The 1998 Financial Statements present fairly in all material
respects the consolidated financial position of the Company and the Subsidiaries
as of December 31, 1998, and the related consolidated results of their
operations and changes in their financial position for the year then ended. The
1999 Interim Financial Statements present fairly in all material respects the
financial position of the Company and the Subsidiaries as of April 30, 1999, and
the related results of their respective operations for the four-month period
then ended, except for normal and customary year-end adjustments. The Financial
Statements are based on the books and records of the Company and the
Subsidiaries which have been kept, and such Financial Statements have been
prepared in all material respects, in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis, except that REO
(as hereinafter defined) is not written down to net realizable value until sold
and the unaudited financial statements are subject to year-end adjustments and
have no footnotes. The audited consolidated balance sheet as of December 31,
1998 included in the 1998 Financial Statements is referred to herein as the
"1998 Balance Sheet" and the unaudited consolidated balance sheet as of
April 30, 1999 included in the 1999 Interim Financial Statements is referred
to herein as the "1999 Balance Sheet."
4.05. NO UNDISCLOSED LIABILITIES. Except as and to the extent reflected
in the 1999 Balance Sheet or as shown on Schedule 4.05, as of April 30, 1999,
neither the Company nor any Subsidiary had any liability or obligation
whatsoever, whether accrued, absolute, contingent or otherwise, which would be
required to be reflected or reserved against on a balance sheet prepared in
accordance with GAAP, except for liabilities and obligations incurred in the
ordinary course of business consistent with past practice which in the case of
any individual liability or obligation in excess of $25,000 is listed on
Schedule 4.05. Since April 30, 1999, neither the
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Company nor any Subsidiary has incurred any liability or obligation whatsoever,
except for liabilities and obligations incurred by the Company and the
Subsidiary in the ordinary course of their respective business consistent with
past practice or as reflected on Schedule 4.05.
4.06. NO VIOLATION OF LAW. Except as listed on Schedule 4.06, neither
the Company nor any Subsidiary is or has been (by virtue of any action, omission
to act, contract to which it is a party or any occurrence or state of facts
whatsoever) in violation in any material respect of any applicable local, state
or federal law, ordinance, regulation, order or decree (including, without
limitation, any licensing and antitrust laws and regulations), or any other
requirement of any governmental body, agency, authority or court binding upon
it, or relating to its properties or business, or its advertising, sales or
pricing practices. Without limiting the above, except as set forth in Schedule
4.06, the Company has complied in all material respects with any and all
applicable laws, rules and regulations governing usury, truth-in-lending, real
estate settlement procedures ("RESPA"), consumer credit protection, equal credit
opportunity, fair credit reporting, debt collection practices and disclosure.
4.07. PROPERTY.
(a) Schedule 4.07(a) sets forth a complete and accurate list and
description of all the real and personal property that the Company and the
Subsidiaries as of May 31, 1999 own or lease, have agreed (or have an option) to
purchase, sell or lease, or may be obligated to purchase, sell or lease, the
value of which (on an individual item-by-item basis, using for such purpose the
value of the fee simple, unencumbered title to such property) exceeds $10,000.
(b) Each of the Company and its Subsidiaries (i) has good, valid
and marketable title to all the personal and mixed, tangible and intangible
properties and assets which it purports to own, including all the personal
properties and assets reflected, but not shown as leased or encumbered, in the
1998 Balance Sheet and the 1999 Balance Sheet (except for inventory and assets
sold in the ordinary course of business consistent with past practice and
supplies consumed in the ordinary course of business), and (ii) except for
Permitted Liens (as defined herein), owns such personal property free and clear
of all title defects or objections, liens, restrictions, claims, charges,
security interests, easements or other encumbrances of any nature whatsoever,
including any mortgages, leases, chattel mortgages, conditional sales contracts,
collateral security arrangements and other title or interest retention
arrangements. "Permitted Liens" shall mean (i) the security interests, easements
or other encumbrances described in Schedule 4.07(b)(i); (ii) liens for taxes not
yet due and payable or which are being contested in good faith by appropriate
proceedings; and (iii) statutory liens of landlords and liens of carriers,
warehousemen, mechanics, materialmen and repairmen incurred in the ordinary
course of business for sums not overdue for a period of sixty (60) days or more.
All properties and assets of the Company and each Subsidiary are in the
possession or control of the Company or such Subsidiary, and no other person is
entitled to possession of any such properties and assets. Schedule 4.07(b)(ii)
sets forth a description and the location of any personal property (including
all improvements on any real property owned or leased by the Company or any
Subsidiary) and
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leasehold improvements which are not located on the premises of the principal
business operations of the Company or any Subsidiary.
(c) The rights, properties and other assets presently owned,
leased or licensed by the Company or each Subsidiary and described in Schedule
4.07(a) include all rights, properties and other assets necessary to permit the
Company or such Subsidiary to conduct its business as currently conducted or as
currently proposed to be conducted, except for such rights, properties and
assets that individually or in the aggregate do not have a book value in excess
of $10,000.
(d) Except for real-estate-owned properties acquired through
foreclosures, deeds in lieu of foreclosure or collection ("REO"), which are
valued as set forth in Section 4.07(f), the values at which assets of the
Company and the Subsidiaries are carried on the 1999 Balance Sheet have been
determined in accordance with the normal valuation policies of the Company and
have been determined in conformity with GAAP consistently applied, and the
values at which assets are carried on the 1998 Balance Sheet were determined in
accordance with the normal valuation policies of the Company and have been
determined in conformity with GAAP consistently applied.
(e) Except for REO, the Company does not own any real
property.
(f) The value of REO held by the Company which is reflected on
the 1999 Balance Sheet was, in the aggregate, the net realizable value of all
REO held by the Company as of April 30, 1999.
4.08. LEASES. Schedule 4.08 contains a complete and accurate list of
all leases (including any capital leases) and lease-purchase arrangements
pursuant to which the Company or any Subsidiary leases real or personal property
from others and which (i) require the Company or any Subsidiary to pay, for rent
and any obligatory improvements, more than $10,000 in any single year or $25,000
during the entire term of such lease (including any renewal term that the
Company or such Subsidiary may not avoid by refusing to renew in its sole
discretion), or (ii) provide for a purchase option for a price of more than
$25,000. Schedule 4.08 specifies which of such leases, if any, are capital
leases.
4.09. INDEBTEDNESS FOR BORROWED MONEY. Schedule 4.09 sets forth a
complete and accurate list and description of all instruments or other documents
relating to any direct or indirect indebtedness for borrowed money of the
Company and the Subsidiaries, as well as indebtedness by way of lease-purchase
arrangements, guarantees, undertakings on which others rely in extending credit
and all conditional sales contracts, chattel mortgages and other security
arrangements with respect to personal property used or owned by the Company or
any Subsidiary. No loan payable by the Company or any Subsidiary provides for
any prepayment penalty or premium.
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4.10. TRADEMARKS, ETC. Schedule 4.10 sets forth a complete and accurate
list and description of (i) all United States and foreign patents, registered
trademarks/service marks and pending applications for registration of
trademarks/service marks, and registered copyrights and pending applications for
registration of copyrights owned by the Company or any Subsidiary (hereinafter
the "Patent and Trademark Rights") and (ii) all United States and foreign
patents, registered trademarks/service marks and registered copyrights licensed
to the Company or any Subsidiary (hereinafter the "Licensed Rights"). Except as
specifically set forth in Schedule 4.10, (i) the Patent and Trademark Rights are
free of any liens, claims or encumbrances; are not subject to any license
(royalty bearing or royalty free) and are not subject to any obligation to grant
rights to any person or any arrangement requiring any payment to any person,
with the exception of payments required to be made to the United States Patent
and Trademark Office and other intellectual property authorities in order to
maintain the patents and trademark registrations in full force and effect, (ii)
to the knowledge of the Company and Sellers, the Licensed Rights are free and
clear of all liens, claims, encumbrances, royalties or other obligations, and
(iii) the Patent and Trademark Rights and the Licensed Rights represent all
registered intellectual property (or intellectual property that is subject of
pending applications for registration) necessary to the conduct of the business
of the Company and the Subsidiaries as currently being conducted or currently
expressly proposed to be conducted. Except as specifically set forth in Schedule
4.10, the validity of the Patent and Trademark Rights and title thereto, and the
validity of the Licensed Rights, (i) have not been questioned in any prior
litigation; (ii) are not being questioned in any pending litigation; and (iii)
are not the subject(s) of any threatened or proposed litigation. Except as
specifically set forth in Schedule 4.10, to the knowledge of the Company and
Sellers, the business of the Company and the Subsidiaries, as now conducted or
currently expressly proposed to be conducted, does not conflict with and has not
been alleged to conflict with any patents, trademarks, trade names, service
marks, or copyrights of others. The consummation of the transactions
contemplated hereby will not result in the loss or impairment of any of the
Patent and Trademark Rights or any of the Licensed Rights. Except as
specifically set forth in Schedule 4.10, the Company does not know of any use by
others of the Patent and Trademark Rights or the Licensed Rights.
4.11. LITIGATION AND CLAIMS. Schedule 4.11(a) sets forth all
litigation, claims, suits, actions, investigations, indictments or informations,
or administrative, arbitration or other proceedings pending, or, to the
knowledge of the Company and Sellers, threatened (including grand jury
investigations, actions or proceedings and product liability and workers'
compensation suits, actions or proceedings) against the Company or any
Subsidiary or involving any of their assets or properties and (ii) indicates
which of such matters are being defended by an insurance carrier, and which of
the matters being so defended are being defended under a reservation of rights.
None of the matters listed on Schedule 4.11 (a) (singly or in the aggregate)
could reasonably be expected to result in the issuance of an order or injunction
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated hereby or to have a material adverse effect on the
business or financial condition of the Company or any Subsidiary, and the
Company is not aware of any grounds for the assertion of any such claim. Except
as set forth in Schedule 4.11(b), there are no judgments, orders, injunctions,
decrees,
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stipulations or awards (whether rendered by a court, administrative agency, or
by arbitration, pursuant to a grievance or other procedure) against or relating
to the Company or any Subsidiary. No present or former officer or director of
the Company or any Subsidiary has or will have any claim for indemnification
from the Company or any Subsidiary related to any act or omission prior to the
Closing by such present or former officer or director.
4.12. SALARIED EMPLOYEES. The Company has delivered to Buyer in writing
prior to the date hereof the names and current annual salary and compensation of
all salaried employees of the Company or any Subsidiary who are paid more than
$20,000 per year together with the date and amount of the last salary increase
for each such person, if such increase occurred within the prior twelve months.
4.13. EMPLOYEE CONTRACTS, UNION AGREEMENTS AND BENEFIT PLANS.
(a) Schedule 4.13 sets forth a complete and accurate list of all
material agreements, arrangements, commitments, policies or understandings of
any kind (whether written or oral) which relate to compensation, remuneration or
benefits in any way and/or which constitute employment, consulting or collective
bargaining contracts, or deferred compensation, pension (as defined in Section
3(2) of ERISA), multiemployer (as defined in Section 3(37)(A) of ERISA), profit
sharing, thrift, stock ownership, stock appreciation rights, bonus, stock
option, stock purchase or other nonqualified or compensation commitments,
benefit plans, arrangements or plans, including all welfare plans, as defined in
Section 3(l) of ERISA, of or pertaining to the present or former employees
(including retirees) of the Company or any Subsidiary or any predecessors in
interest thereto, that are currently in effect or as to which the Company or any
Subsidiary has any ongoing liability or obligation whatsoever (all such
agreements, arrangements, commitments, policies and understandings shall be
referred to collectively as the "Employee Benefit Plans"). Except as set forth
on Schedule 4.13, all of the Employee Benefit Plans are currently in effect. All
welfare plans providing or offering benefits to retirees, all retirement plans
intended to be qualified under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code") and all multiemployer plans are identified as such
on Schedule 4.13.
(b) Except as set forth on Schedule 4.13, (a) the Company and
each Subsidiary and their predecessors in interest, have complied in all
material respects with all of their respective obligations with respect to all
Employee Benefit Plans, including the payment of all contributions required or
due to be paid, the satisfaction of all reporting requirements to federal, state
and local governments and governmental agencies and to all Employee Benefit Plan
participants and beneficiaries, and the payment or accrual of all expenses for
all periods, including the period between the end of the previous plan year and
the Closing Date, and (b) the Employee Benefit Plans have been maintained in
compliance in all material respects with all applicable laws and regulations.
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(c) All Employee Benefit Plan and trust instruments, and the most
recently available annual reports, actuarial reports and determination letters,
relating to the Employee Benefit Plans have been made available to Buyer. Since
the date such documents were made available to Buyer, no plan amendments have
been adopted nor will any such amendments be adopted prior to the Closing Date,
except as Buyer reasonably may request to assist in the transition of the
Employee Benefit Plans to Buyer's control upon the consummation of the Closing.
All Plan and trust instruments, and all amendments thereto, are identified on
Schedule 4.13.
(d) Except as described in Schedule 4.13, neither the Company nor
any Subsidiary, nor any predecessor in interest thereto, has any agreement,
arrangement, commitment or understanding, whether legally binding or not, to
create any additional Employee Benefit Plan or to increase the rate of benefit
accrual or contribution requirement under any of the Employee Benefit Plans; to
modify, change or terminate, in any material respect, any existing Employee
Benefit Plan; or, except as specifically provided in any existing law,
regulations, revenue rulings or revenue procedures, to continue any Employee
Benefit Plan or any provision thereunder for any period of time.
(e) None of the Employee Benefit Plans is currently under
investigation, audit or review by the Department of Labor, the Internal Revenue
Service or any other federal or state agency.
(f) No Employee Benefit Plan is liable for any federal, state,
local or foreign taxes.
4.14. PENSION MATTERS. The Company has no retirement plan, and has had
no retirement plan, other than the non-funded plans identified on Schedule 4.13.
4.15. LABOR RELATIONS. Except to the extent set forth in Schedule 4.15:
(a) The Company and each Subsidiary is in compliance in all
material respects with all applicable laws and collective bargaining agreements
respecting employment and employment practices, terms and conditions of
employment and wages and hours and occupational safety and health;
(b) There is no unfair labor practice, charge or complaint or any
other matter against or involving the Company or any Subsidiary pending or, to
the knowledge of the Company and Sellers, threatened before the National Labor
Relations Board or any court of law;
(c) There is no labor strike, dispute, slowdown or stoppage
actually pending or, to the knowledge of the Company and Sellers, threatened
against the Company or any Subsidiary;
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(d) No certification or decertification question or
organizational drive exists or has existed within the past twenty-four months
respecting the employees of the Company or any Subsidiary;
(e) No grievance proceeding or arbitration proceeding arising out
of or under any collective bargaining agreement is pending against the Company
or any Subsidiary, or, to the knowledge of the Company and Sellers, threatened;
and, to the knowledge of the Company and Sellers, no basis for any claim
therefor exists;
(f) No agreement (including any collective bargaining agreement),
arbitration or court decision or governmental order which is binding on the
Company or any Subsidiary in any way limits or restricts the Company or any
Subsidiary from relocating or closing any of its operations;
(g) Neither the Company nor any Subsidiary has experienced any
organized work stoppage or other labor difficulty since January 1, 1994;
(h) There are no charges, investigations, administrative
proceedings or formal complaints of discrimination (including discrimination
based upon sex, age, marital status, race, national origin, sexual preference,
handicap or veteran status) pending or, to the knowledge of the Company and
Sellers, threatened before the Equal Employment Opportunity Commission or any
federal, state or local agency or court against the Company or any Subsidiary.
There have been no governmental audits of the equal employment opportunity
practices of the Company or any Subsidiary and, to the knowledge of the Company
and Sellers, no basis for any such claim exists. There are no facts that now, or
with the passage of time would give rise to any claim by any employee for back
pay or unpaid salary.
4.16. BANK ACCOUNTS. Schedule 4.16 sets forth a complete and accurate
list of each bank or financial institution in which the Company or any
Subsidiary has an account or safe deposit box (giving the address and account
numbers) and the names of the persons authorized to draw thereon or to have
access thereto.
4.17. LICENSE AGREEMENTS. Schedule 4.17 sets forth a complete and
accurate list and description of all license agreements under which the Company
and the Subsidiaries conduct their businesses.
4.18. INSURANCE POLICIES. Schedule 4.18 sets forth a complete and
accurate list and description of all insurance policies in force naming the
Company, any Subsidiary or employees thereof as an insured or beneficiary or as
a loss payable payee or for which the Company or any Subsidiary has paid or is
obligated to pay or at any time may become obligated to pay all or part of the
premiums. Neither the Company nor any Subsidiary has received notice of any
pending or threatened cancellation or premium increase (retroactive or
otherwise) with respect thereto, and the Company and each Subsidiary is in
compliance with all conditions contained therein. There
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are no pending claims against such insurance by the Company or any of the
Subsidiaries as to which insurers are defending under reservation of rights or
have denied liability, and there exists no claim under such insurance that has
not been properly filed by the Company or the Subsidiaries.
4.19. CONTRACTS AND COMMITMENTS.
(a) For purposes of this Agreement, "Contract" means any
contract, agreement, promissory note, debt instrument, commitment, arrangement,
undertaking or understanding to which the Company or any Subsidiary is a party
or by which the Company or any Subsidiary is bound, whether written or oral and
including without limitation each and every amendment, modification or
supplement to any of them. Schedule 4.19 contains a true, correct and complete
copy of each Contract to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary is bound, except for contracts, agreements,
commitments, arrangements, undertakings or understandings:
(i) for the purchase or rental of materials, inventory and
supplies by the Company or any Subsidiary entered into in the ordinary
and usual course of business which do not individually (x) exceed
$25,000 (treating each purchase order as a separate agreement) or (y)
exceed $100,000 and which are reasonably expected to be fully
performed within six months of their respective dates;
(ii) for the purchase of services by the Company or any
Subsidiary entered into in the ordinary and usual course of business
which do not individually (x) involve an amount in excess of $25,000 or
(y) involve an amount in excess of $100,000 and which are reasonably
expected to be fully performed within six months of their respective
dates; or
(iii) for the extension of credit in the ordinary course of
business in connection with mortgage loans.
(b) Except as set forth in Schedule 4.19 and Schedule 4.13:
(i) Neither the Company nor any Subsidiary has any outstanding
contract, written or oral, with any officer, employee, agent,
consultant, advisor, salesman, manufacturer's representative,
distributor, dealer, subcontractor, or broker that is not cancelable by
the Company or such Subsidiary, on notice of not longer than thirty
(30) days and without liability, penalty or premium of any kind, or any
agreement or arrangement providing for the payment of any bonus or
commission based on sales or earnings;
(ii) Neither the Company nor any Subsidiary has (i) any
outstanding loan or loan commitment (excluding credit extended in the
ordinary course of business in
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connection with mortgage loans) to any person or (ii) any factoring,
credit line or subordination agreement;
(iii) Except for negotiable instruments in the process of
collection, neither the Company nor any Subsidiary has any power of
attorney outstanding or any contract, commitment or liability (whether
absolute, accrued, contingent or otherwise), as guarantor, surety,
co-signer, endorser, co-maker, indemnitor in respect of the contract or
commitment of any other person, corporation, partnership, joint
venture, association, organization or other entity;
(iv) There are no contracts or agreements of the Company or any
Subsidiary with any director, officer or shareholder of the Company or
any Subsidiary, or with any person related to any such person or to the
knowledge of the Company and Sellers with any company or other
organization in which any director, officer, or shareholder of the
Company or any Subsidiary, or to the knowledge of the Company and
Sellers anyone related to any such person, has a direct or indirect
financial interest (excluding for such purposes the ownership of less
than 1% of the outstanding equity of any publicly traded corporation of
which such person is neither an officer or a director);
(v) Neither the Company nor any Subsidiary is subject to any
contract or agreement (other than the license agreements listed in
Schedule 4.17) containing covenants limiting the freedom of the Company
or any Subsidiary to compete in any line of business in any geographic
area or requiring the Company to share any profits; and
(vi) Neither the Company nor any Subsidiary is a party to or
bound by any presently existing contract, agreement or other
arrangement that has had or is reasonably likely to have a Company
Material Adverse Effect.
4.20. NO CONFLICT. The execution and delivery of this Agreement by
Sellers and the Company, the consummation of the transactions contemplated
herein by Sellers and the Company, and the performance of the covenants and
agreements of Sellers and the Company contained herein will not, with or without
the giving of notice or the lapse of time, or both, (i) violate or conflict with
any of the provisions of any charter instrument or bylaw of the Company or any
Subsidiary, (ii) except as set forth in Schedule 4.20, violate, conflict with or
result in a breach or default under or cause the termination or acceleration of
any term or condition of any material mortgage, indenture, contract, license,
permit, instrument, trust document, or other agreement, document or instrument
to which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or their respective properties may be bound, (iii) violate any
provision of law, statute, rule or regulation by which the Company or any
Subsidiary is a party or by which any of them or their respective properties may
be bound, (iv) violate or conflict with any order, judgment, decree or ruling of
any governmental authority applicable to the Company, any Subsidiary or their
respective assets, (v) result in the creation or imposition of any lien, claim,
charge, restriction, security interest or encumbrance of any kind
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whatsoever upon any asset of the Company or any Subsidiary, or (vi) result in an
acceleration of any indebtedness or other obligations of the Company or any of
the Subsidiaries or result in a right of the holder of any such indebtedness or
obligations to require a redemption, purchase or redemption of such indebtedness
or obligations.
4.21. AGREEMENTS IN FULL FORCE AND EFFECT. All contracts, agreements,
plans, leases, policies, licenses and permits referred to, or required to be
referred to, in any Schedule delivered hereunder are valid and binding
obligations of the Company and are in full force and effect and are enforceable
against the Company in accordance with their terms and, to the knowledge of the
Company and Sellers, are valid and binding obligations of each other party
thereto and are in full and effect and are enforceable against each such party
in accordance with their terms. Neither the Company nor any Seller has any
knowledge of any pending or threatened bankruptcy, insolvency or similar
proceeding with respect to any party to such agreements, and to the knowledge of
the Company and Sellers, no event has occurred which (whether with or without
notice, lapse of time or the happening or occurrence of any other event) would
constitute a default thereunder by the Company or any Subsidiary or any other
party thereto. The Company and each Subsidiary have duly complied in all
material respects with all provisions of every contract or other agreement
(whether written or oral) to which the Company or such Subsidiary is a party and
is not in default as to any such contract or agreement. No condition or state of
facts exists that, with notice or the passage of time, or both, would constitute
a default by the Company or any Subsidiary or, to the knowledge of the Company
and Sellers, any other person, under any such contract or agreement to which the
Company or any Subsidiary is a party, or that would result in any loss or
impairment under any such contract or agreement or give any person the right to
terminate or accelerate the payment or performance of any obligation under any
such contract or agreement.
4.22. REQUIRED CONSENTS AND APPROVALS. Except as set forth in Schedule
4.22, no consent or approval of, or action or filing with or notice to, any
person is required by virtue of the execution and delivery of this Agreement by
Sellers and the Company or the consummation of any of the transactions
contemplated herein to avoid the violation or breach of, or the default under,
or the creation of a lien on assets of the Company or any Subsidiary pursuant to
the terms of, any material regulation, order, decree or award of any court or
governmental agency or any lease, contract, mortgage, note, license, or any
other instrument to which the Company or any Subsidiary is a party or to which
any of them or any of their property or any of the Shares is subject.
4.23. ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 4.23 and as otherwise contemplated by this Agreement, since December
31, 1998, each of the Company and its Subsidiaries has conducted its businesses
only in the ordinary and usual course of business consistent with past practice,
and has not:
(a) suffered any damage or destruction adversely affecting the
properties, business or prospects of the Company or such Subsidiary;
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(b) except for customary dividends consistent with past practice
(the amount and distribution dates of which are set forth in Schedule 4.23),
made any declaration, setting aside or payment of any dividend or other
distribution of assets (whether in cash, stock or property) with respect to the
capital stock of the Company or such Subsidiary or any direct or indirect
redemption, purchase or other acquisition of such stock;
(c) suffered any material adverse change in its working capital,
assets, liabilities, financial condition, business prospects, or relationships
with any suppliers or customers listed on Schedule 4.21;
(d) except for customary increases based on term of service or
regular promotion of non-officer employees, increased the compensation payable
or to become payable to any employee or increased any bonus, insurance, pension
or other employee benefit plan, payment or arrangement for such employees or
entered into or amended any employment, consulting, severance or similar
agreement;
(e) incurred any liability or obligation (absolute, accrued,
contingent or otherwise) not incurred in the ordinary and usual course of
business consistent with past practice;
(f) paid, discharged or satisfied any claim, liability or
obligation other than payment in the ordinary course of business and consistent
with past practice;
(g) permitted any of its assets to be subjected to any mortgage,
lien, security interest, restriction or charge of any kind;
(h) waived any material claims or rights;
(i) sold, transferred or otherwise disposed of any of its assets
or canceled any debts or claims, except in the ordinary and usual course of
business consistent with past practice;
(j) made any single capital expenditure or investment in excess
of $5,000, or aggregate capital expenditures in excess of $20,000, or additions
to property, plant and equipment other than ordinary repairs and maintenance;
(k) made any change in any method of accounting, or any material
practice or principle of accounting;
(1) paid, loaned or advanced any amount or asset to or sold,
transferred or leased any asset to any employee except for normal compensation
involving salary and benefits and ordinary course employee loans that do not
exceed in any individual case a principal amount in excess of $10,000;
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(m) entered into any material commitment or transaction, other
than in the ordinary and usual course of business, affecting the operations of
the Company or any Subsidiary; or
(n) agreed in writing, or otherwise, to take any action described
in this Section.
Since December 31, 1998, no event, condition, proceeding or development
has occurred or is pending or threatened which individually or in the aggregate
is reasonably likely to have in a Company Material Adverse Effect. For purposes
of this paragraph, no change in general economic conditions shall be taken into
account in determining whether or not a Company Material Adverse Effect shall
have occurred.
4.24. COPIES OF DOCUMENTS. The Company has made available to Buyer, to
the extent such documents exist:
(a) The charters and articles of incorporation, bylaws, minute
books and stock books referred to in Section 4.01 (c);
(b) Each of the contracts, lease agreements, plans, instruments,
reports or documents that are in writing and are listed in the Schedules;
(c) Each trademark and service mark registration or application
therefor, patent or patent application or other item listed in Schedule 4.10
and each assignment or license with respect to any thereof;
(d) The pleadings and briefs filed in each pending suit or
proceeding listed in Schedule 4.11 (a), with the exception of foreclosure
proceedings initiated by the Company, and the judgments, orders, injunctions,
decrees, stipulations and awards listed in said Schedule; and
(e) All written licenses and permits listed in Schedule 4.25.
4.25. REQUIRED LICENSES AND PERMITS.
(a) The Company and the Subsidiaries have all material licenses,
permits or other authorizations of governmental authorities necessary for the
conduct of their businesses as currently conducted or as currently proposed to
be conducted. A correct and complete list of such licenses, permits and
authorizations is set forth on Schedule 4.25.
4.26. TAX MATTERS.
(a) Taxes. For purposes of this Agreement, "Taxes" shall mean all
taxes, assessments, charges, duties, fees, levies or other governmental charges
(including interest,
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penalties or additions associated therewith) including federal, state, city,
county, foreign or other income, franchise, capital stock, real property,
personal property, tangible, withholding, FICA, unemployment compensation,
disability, transfer, sales, use, excise, gross receipts, registration, license,
stamp, occupation, premium, windfall profits, environmental, value-added,
alternative or add-on minimum, estimated and all other taxes of any kind for
which the Company or any Subsidiary may have any liability imposed by the United
States or any state, county, city, country or foreign government or subdivision
or agency thereof, whether disputed or not.
(b) Tax Returns and Liabilities. Except as otherwise disclosed in
Schedule 4.26(b): (i) all returns, including estimated returns and reports of
every kind with respect to Taxes, which are due to have been filed by the
Company and each Subsidiary in accordance with any applicable law, have been
duly filed and are true, correct and complete in all material respects; (ii) all
Taxes, deposits or other payments for which the Company or any Subsidiary has
any liability, including, without limitation any Taxes due under Section 1374 of
the Code, through the date hereof (whether or not shown on a return), have been
paid in full or are accrued as liabilities for Taxes on the books and records of
the Company in all material respects; (iii) the amounts so paid on or before the
date hereof, together with any amounts accrued as liabilities for Taxes (whether
accrued as currently payable or deferred Taxes) on the books of the Company and
reflected in the 1997 Balance Sheet will be adequate to satisfy all liabilities
for Taxes of the Company and the Subsidiaries in any jurisdiction through the
Closing Date, including Taxes accruable upon income earned through the Closing
Date; (iv) with respect to the Company and each Subsidiary, there are not now
any extensions of time in effect with respect to the dates on which any returns
or reports of Taxes were or are due to be filed; (v) all deficiencies asserted
as a result of any examination of any return or report of Taxes of the Company
or any Subsidiary have been paid in full, accrued on the books of the Company,
or finally settled, and no issue has been raised in any such examination which,
by application of the same or similar principles, reasonably could be expected
to result in a proposed deficiency for any other period not so examined; (vi) no
claims have been asserted and, to the knowledge of the Company and Sellers, no
proposals or deficiencies for any Taxes are being asserted against the Company
or any Subsidiary, proposed or threatened, and no audit or investigation of any
return or report of Taxes is currently underway, pending or, to the knowledge of
the Company and Sellers, threatened; (vii) there are no outstanding waivers or
agreements by Sellers, the Company or any Subsidiary for the extension of time
for the assessment of any Taxes or deficiency thereof, nor are there any
requests for rulings, outstanding subpoenas or requests for information, notice
of proposed reassessment of any property owned or leased by the Company or any
Subsidiary or any other matter pending between the Company or any Subsidiary and
any taxing authority; (viii) there are no liens for Taxes upon any property or
assets of the Company or any Subsidiary except liens for current Taxes not yet
due, nor are there any liens which, to the Company's knowledge, are pending or
threatened; (ix) to the knowledge of the Company and Sellers, there are no facts
which exist or have existed which would constitute meritorious grounds for the
assessment of any Taxes against the Company or any Subsidiary with respect to
the periods which have not been audited by the Internal Revenue Service or other
taxing authorities, (x) none of the Company and its Subsidiaries is a party to
any Tax allocation or sharing agreement; and
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(xi) none of the Company and its Subsidiaries (A) has been a member of an
affiliated group (within the meaning of Section 1504(a) of the Code) filing a
consolidated federal income tax return (other than a group the common parent of
which was the Company) or (B) has any liability (whether known or unknown,
asserted or unasserted, liquidated or unliquidated, and whether due or to become
due) for the Taxes of any person (other than the Company and the Subsidiaries)
under Treas. Reg. ss. 1.1502-6 (or any similar provision of state, local or
foreign law), as transferee or successor, by contract or otherwise.
(c) Reserves. In each case, adequate provision, including
provision in the deferred tax account, has been made in the Financial Statements
for all deferred and accrued tax liabilities as of their respective dates with
respect to operations for periods ending on such dates.
(d) Submission of Tax Returns. The Company has delivered to Buyer
true and complete copies of all federal and state income tax returns (together
with any examination reports and statements of deficiency) relating to the
operations of the Company and the Subsidiaries for the taxable years ended 1996
and 1997.
(e) Elections. Neither Sellers nor the Company nor any Subsidiary
has filed a consent pursuant to Section 341 (f) of the Code. Neither the Company
nor any Subsidiary, nor any predecessor in interest of any of them, has filed,
or may be deemed to have filed, any election under Section 338 of the Code.
(f) Industrial Development Bonds. No assets of the Company or any
Subsidiary or of any "Related Person," as that term is defined in Section
144(a)(3) of the Code (or Section 103 (b)(6)(C) of the Internal Revenue Code of
1954, as amended (the "1954 Code")) whether owned or leased pursuant to a
capital lease, have been financed by private activity bonds within the meaning
of Section 141 of the Code (or industrial development bonds within the meaning
of Section 103(b) of the 1954 Code), and neither the Company nor any Subsidiary
nor any Related Person is a "principal user," as that term is used in the
context of Section 144(a) of the Code (or Section 103(b) of the 1954 Code) of
any building which has been so financed.
(g) Excess Parachute Payments. Except as set forth in Schedule
4.29g, neither the Company nor any Subsidiary has made any payment which
constitutes an "excess parachute payment" within the meaning of Section 280G of
the Code, and no payment by the Company or any Subsidiary required to be made
under any contract (including the obligation of the Company described in Section
7.05 hereof) will, if made, constitute an "excess parachute payment" within the
meaning of Section 280G of the Code.
(h) FIRPTA. None of the Company and the Subsidiaries has been a
United States real property corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
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(i) Asset Basis. As of the year end of the taxable year preceding
the Closing Date, and as of the Closing Date, the adjusted basis of the
depreciable or amortizable assets of the Company and the Subsidiaries for
federal income tax purposes ("Tax Basis") is as set forth on the tax basis fixed
asset list (the "List") showing the original tax cost of the assets and the tax
depreciation or amortization thereon as of the year end of the taxable year
preceding the Closing Date, and the Closing Date. The List shall be prepared at
the Company's expense and submitted to the Buyer with the federal and state tax
returns of the Company which are prepared in accordance with Section 6.09.
(j) Subchapter S Status. The Company (and any predecessor of the
Company) has been a validly electing S corporation within the meaning of
Sections 1361 and 1362 of the Code during the following periods, and the Company
will be an S corporation up to and including the day before the Closing Date:
(i) from its inception through December 31, 1994, and (ii) from January 1, 1997
including at all times during 1999 up to and including the day before the
Closing Date. Each Subsidiary of the Company identified on Schedule 4.01 that is
a corporation for federal income tax purposes is a "qualified subchapter S
subsidiary" within the meaning of Section 1361(b)(3)(B) of the Code, has been a
"qualified subchapter S subsidiary" at all times since the date shown on such
schedule, and will continue to be a "qualified subchapter S subsidiary" up to
and including the day before the Closing Date.
4.27. MISCELLANEOUS RECEIVABLES.
(a) Except as set forth on Schedule 4.27, all miscellaneous
receivables of the Company or any Subsidiary owing by any director, officer,
shareholder or employee of the Company or any Subsidiary or any relative of any
such person (including those accounts receivable reflected on the 1999 Balance
Sheet and incurred since the date of the 1999 Balance Sheet) have been paid in
full prior to the date hereof or will be paid in full on the Closing Date.
(b) Except as listed in Schedule 4.27, to the knowledge of the
Company and Sellers, all miscellaneous receivables, employee advances and
commercial advances of the Company or any Subsidiary which are reflected on the
1999 Balance Sheet (i) are valid, existing and fully collectible within 90 days
following the Closing Date without resort to legal proceedings or collection
agencies and (ii) are not subject to any refunds or adjustments or any defenses,
rights of set-off, assignment, restrictions, security interests or other
encumbrances. Except as shown on Schedule 4.27, all such miscellaneous
receivables, employee advances and commercial advances are current, and the
Company is not aware of any dispute regarding the collectibility of any such
miscellaneous receivables, employee advances and commercial advances. Neither
the Company nor any Subsidiary has ever factored any of its miscellaneous
receivables, employee advances and commercial advances.
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4.28. ENVIRONMENTAL MATTERS.
(a) Except as set forth in Schedule 4.28, (i) neither the Company
nor any of its Subsidiaries has used, stored, treated, transported,
manufactured, refined, handled, produced or disposed of any Hazardous Materials
or Petroleum Products on, under, at, from or in any way affecting any of their
properties or assets (including, without limitation, any properties or assets
now or previously owned or operated by the Company or any of its Subsidiaries),
or otherwise, in any matter which at the time of the action in question violated
any Environmental Law governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous Materials
or Petroleum Products, and (ii) to the knowledge of Sellers and the Company, no
prior owner of such property or asset or any tenant, subtenant, prior tenant or
prior subtenant thereof has used Hazardous Materials or Petroleum Products on,
from or in any way affecting any such property or asset, or otherwise, in any
manner which at the time of the action in question violated any Environmental
Law governing the use, storage, treatment, transportation, manufacture,
refinement, handling, production or disposal of Hazardous Materials or Petroleum
Products.
(b) Except as set forth in Schedule 4.28, neither the Company nor
any of its Subsidiaries has any obligations or liabilities, whether absolute or
contingent, accrued or unaccrued, asserted or unasserted, known or unknown, or
otherwise, that have been or are imposed by reason of or based upon any
provision of any Environmental Laws relating to or arising out of or
attributable, in whole or in part, to the manufacture, processing, distribution,
use, treatment, storage, release, disposal, arranging for disposal, transport or
handling of any Hazardous Materials or Petroleum Products by the Company or any
of its Subsidiaries or, to the knowledge of the Sellers and the Company, by any
predecessor in interest in connection with or in any way arising from or
relating to the Company, any of its Subsidiaries or any of their respective
properties or assets, or relating to or arising from or attributable, in whole
or in part, to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of any such substance by the Company or
any of its Subsidiaries or, to the knowledge of the Company and Sellers, by any
predecessor in interest at or on or under any of the real properties owned or
used by Company or any of its Subsidiaries.
(c) For purposes of this Agreement, (i) "Environmental Laws"
shall mean any and all national, federal, state, provincial, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes, decrees or
requirements of any governmental or regulatory authority regulating, relating to
or imposing liability or standards of conduct concerning any Hazardous Materials
or Petroleum Products or environmental protection as now or at any time
hereafter in effect, together with any amendment or re-authorization thereto or
thereof; (ii) "Hazardous Materials" shall mean any hazardous material,
hazardous waste, infectious medical waste, hazardous or toxic substance defined
or regulated as such under any Environmental Law, including without limitation,
materials exhibiting the characteristics of ignitability, corrosivity,
reactivity or extraction procedure toxicity, as such terms are now or hereafter
defined in connection with hazardous materials or hazardous waste or hazardous
or toxic substances in any
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Environmental Law; and (iii) "Petroleum Products" shall mean gasoline, diesel
fuel, motor oil, waste or used or oil, heating oil, kerosene and other petroleum
products.
4.29. TRANSACTIONS WITH RELATED PARTIES. Except as set forth in
Schedule 4.29, since December 31, 1998, neither the Company nor any of its
Subsidiaries has, in the ordinary course of business or otherwise, purchased,
leased or otherwise acquired any material property or assets or obtained any
material services from, or sold, leased or otherwise disposed of any material
property or assets or provided any material services to (except with respect to
services rendered as a director, officer or employee of one or more of the
Company and its Subsidiaries and remuneration for such services) (i) any holder
of 5% or more of the voting securities of the Company, (ii) any director,
officer or employee of the Company or any of its Subsidiaries, (iii) except for
any transactions among the Company and its Subsidiaries, any person, firm or
corporation that directly or indirectly controls, is controlled by or is under
common control with the Company or any of its Subsidiaries, or (iv) any member
of the immediate families of any such persons (collectively, a "Related Party").
Except as set forth in Schedule 4.29, the Contracts do not include any
obligation or commitment between the Company or any of its Subsidiaries and any
Related Party, and the properties and assets of the Company and its Subsidiaries
do not include any receivable or other obligation or commitment from a Related
Party to the Company or any such Subsidiary.
4.30. BROKERS' AND FINDERS' FEES. Neither the Company, any Subsidiary,
nor any Seller, nor anyone acting on behalf of any of them, has done anything to
cause or incur any liability to any party other than Centura Investment Bankers
for any brokers' or finders' fees or the like in connection with this Agreement
or any transaction contemplated hereby.
4.31. COMPLIANCE WITH SECURITIES ACT. Sellers are acquiring the Common
Stock for their own accounts and not with a view to the resale or
"distribution," as such term is defined in Section 2(l1) of the Securities Act
of 1933, as amended (the "Securities Act"), of any shares of the Common Stock in
violation of the Securities Act. Each Seller is an "accredited investor," as
that term is defined in Rule 501(a) of Regulation D promulgated under the
Securities Act.
4.32. DISCLOSURE. No representations, warranties, assurances or
statements by Sellers in this Agreement (including Schedules) contain or will
contain any untrue statement of material fact or omit or will omit to state any
material fact, or omit or will omit to state any fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
5.01. ORGANIZATION. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority, corporate or otherwise, to carry on and
conduct its business as it is now being conducted and to own or lease its
properties and assets.
5.02. AUTHORIZATION. Buyer has all requisite corporate power and
authority to enter into this Agreement. The execution and delivery of this
Agreement by Buyer and the performance by Buyer of its covenants and agreements
hereunder have been duly authorized by all necessary corporate action on the
part of Buyer, and this Agreement has been duly executed and delivered by Buyer
and constitutes a valid and binding obligation of Buyer enforceable in
accordance with its terms.
5.03. No Conflict. Assuming receipt by Buyer prior to the Closing Date
of the consents and approvals listed on Schedule 8.04, neither the execution and
delivery of this Agreement nor the performance of the transactions contemplated
herein by Buyer will violate or conflict with any of the provisions of any
charter instrument or bylaws of Buyer or violate or conflict with or constitute
a default under any mortgage, indenture, contract, agreement, license, permit,
instrument or trust or any order or ruling of any governmental authority to
which Buyer is a party or by which Buyer is bound, or violate any provision of
law, statute, rule or regulation to which Buyer is subject. Without limiting the
generality of the foregoing, the transactions contemplated by this Agreement do
not create an obligation in the Company, Sellers or Buyer to make a Pre-Merger
Notification filing under the Hart-Scott-Rodino Antitrust Improvement Act of
1976. In making the representations in this Section 5.03, Buyer is relying on
the representations of Sellers in Section 4.31.
5.04. BROKERS' AND FINDERS' FEES. Neither Buyer nor anyone acting on
behalf of Buyer has done anything to cause or incur any liability to any party
for any brokers' or finders' fees or the like in connection with this Agreement
or any transaction contemplated hereby.
5.05. PUBLIC DOCUMENTS, FINANCIAL STATEMENTS. (a) Buyer's annual report
on Form I0-K/A for the year ended August 31, 1998 (the "1998 10-K"), its
quarterly report on Form 10-Q/A for the quarter ended February 28, 1999 (the
"February 1999 10-Q") its proxy statement for its 1999 annual meeting, as filed
with the SEC (the "1999 Proxy Statement"), and its Registration Statement on
Form S-1 (Registration No. 333-68995) filed with the SEC on December 16, 1998,
as amended (the "Buyer S-1" and, together with the 1998 10-K, the February 1999
10-Q and the 1999 Proxy Statement, the "Buyer Filings"), do not contain any
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untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements contained therein, in
light of the circumstances under which they were made, not misleading. As of the
date hereof the Buyer has filed with the SEC all filings required to be made by
it under the 1934 Securities Exchange Act, as amended.
(b) The historical financial statements contained (or
incorporated by reference) in the 1998 10-K and the February 1999 10-Q have been
prepared in accordance with GAAP and fairly present in all material respects the
consolidated financial position of the Buyer and its subsidiaries at the
respective dates thereof and the results of their consolidated operations for
the periods indicated therein.
5.06. AUTHORIZED AND OUTSTANDING STOCK. The current authorized capital
stock of the Buyer and each of its subsidiaries and the current number of issued
and outstanding shares thereof is the same as that set forth in the Buyer
Filings. All of such issued and outstanding shares of capital stock are validly
issued, fully paid and nonassessable. Except as disclosed in the Buyer Filings,
neither the Buyer nor any subsidiary of the Buyer has outstanding, and none are
bound by, any subscriptions, options, warrants, calls, commitments or agreements
requiring the Buyer to issue or entitling any person or entity to acquire any
additional shares of capital stock or any other equity security, including any
right of conversion or exchange under any outstanding security or other
instrument, and neither the Buyer nor any subsidiary of the Buyer is obligated
to issue any shares of its capital stock for any purpose. All issuances of the
capital stock of the Buyer and each subsidiary of the Buyer have been in
compliance in all material respects with all applicable agreements and all
applicable laws, including federal and state securities laws. No former or
present holder of any other capital stock of the Buyer, any subsidiary of the
Buyer, or any corporation or other entity which has been merged into the Buyer
or any subsidiary of the Buyer has any legally cognizable claim against the
buyer or any subsidiary of the Buyer, based on any issuance, sale, purchase,
redemption or involvement in any transfer of any shares or any such other
capital stock by the Buyer or any subsidiary of the Buyer. Except as disclosed
in the Buyer Filings, there are no outstanding obligations of the Buyer or any
subsidiary of the Buyer to repurchase, redeem or otherwise acquire any
outstanding shares of stock of the Buyer or any subsidiary of the Buyer.
5.07. NO UNDISCLOSED LIABILITIES. Except as disclosed in the Buyer
Filings, the Buyer is not subject to any liability or obligation of any kind of
nature whatsoever, whether known, unknown, asserted, unasserted, absolute,
accrued, contingent or otherwise, required by GAAP to be reflected or reserved
against in a consolidated balance sheet of the Buyer, except liabilities
incurred since February 28, 1999 in the ordinary course of business.
5.08. ABSENCE OF CHANGES. Except as disclosed in the Buyer Filings,
since February 28, 1999, the Buyer has not: (i) suffered any damages or
destruction adversely affecting the properties, business or prospects of the
Buyer or its subsidiaries; (ii) suffered any material adverse damage in its
working capital, assets, liabilities, financial condition or business
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prospects; or (iii) entered into any material commitment or transaction, other
than in the ordinary and usual course of business, affecting the operations of
the Buyer or any of its subsidiaries.
5.09. POTENTIAL ACQUISITIONS. Except as disclosed in the Buyer Filings,
the Buyer has no ongoing discussions or contacts with any persons or entities
regarding the purchase or acquisition of the stock or assets of any entity
which, in the judgment of the Buyer, are likely to result in the consummation of
any such transaction.
5.10. DISCLOSURE. No representations, warranties, assurances or
statements by Buyer in this Agreement (including Schedules) contain or will
contain any untrue statement of material fact or omits or will omit to state any
material fact, or omits or will omit to state any fact necessary, in light of
the circumstances under which it was made, in order to make the statements
herein or therein not misleading.
ARTICLE VI
COVENANTS OF THE COMPANY AND SELLERS
6.01. PRE-CLOSING OPERATIONS. The Company hereby covenants and agrees,
except as contemplated hereunder, as disclosed in the Schedules, or as consented
to in writing by Buyer, pending the Closing, that it and each Subsidiary shall
operate and conduct its business only in the ordinary and usual course in
accordance with prior practices, and carry on its business substantially in the
manner as heretofore conducted and not make or institute any new methods of
accounting or operation except in the ordinary and usual course of business
consistent with past practice. By way of illustration and not in limitation of
the foregoing:
(a) The Company shall manage its working capital, including cash,
receivables, other current assets, trade payables and other current liabilities,
in a fashion consistent with past practice and shall carry on the business of
the Company in the same manner as heretofore conducted and not engage in any new
line of business or purchase or sell any new products or provide any new service
or enter into any agreement, transaction or activity or make any commitment
except those in the ordinary and usual course of business consistent with past
practice.
(b) Except as previously disclosed and consented to by Buyer,
which consent shall not be unreasonably withheld, no material contract or
commitment of any kind relating to any material capital expenditure by the
Company or any Subsidiary shall be entered into.
(c) The Company and each Subsidiary shall use commercially
reasonable efforts consistent with past practices to maintain their assets in
their present state of repair, keep available the services of its employees, and
preserve the good will of their businesses and
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relationships with all parties having business relations with them and shall
continue and maintain all underwriting guidelines consistent with prior
practice.
(d) Neither the Company nor any Seller shall take, and shall not
permit any Subsidiary to take, any of the following actions after the date of
this Agreement:
(i) Dispose of any property or asset other than in the ordinary
and usual course of business consistent with past practice;
(ii) Mortgage, pledge or subject to liens or other encumbrances
any property or asset, except by incurring Permitted Liens;
(iii) Purchase or commit to purchase any property or asset for a
price exceeding $25,000;
(iv) Except for planned or normal increases in the ordinary and
usual course of business consistent with past practice with respect to
non-officer employees, increase (or announce any increase of) any
salaries, wages or employee benefits or hire, commit to hire any
employee, or except for terminations in the ordinary and usual course
of business consistent with past practice with respect to non-officer
employees, terminate any employee;
(v) Amend its charter instrument or bylaws;
(vi) Issue, sell or repurchase any of its capital stock or make
any change in its issued and outstanding capital stock or issue any
warrant, option or other right to purchase shares of its capital stock
or any security convertible into its capital stock, or redeem, purchase
or otherwise acquire any shares of its capital stock, or declare any
dividends or make any other distribution with respect to its stock,
except for the dividends set forth in this Section 6.01;
(vii) Incur, assume or guarantee any obligation or liability for
borrowed money, or exchange, refund or renew any outstanding
indebtedness in such a manner as to reduce the principal amount of such
indebtedness and increase the interest rate or balance outstanding;
(viii) Cancel any debts;
(ix) Amend or terminate any material agreement, including any
employee benefit plan (except as otherwise contemplated by this
Agreement) or any insurance policy, in force on the date hereof,
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(x) Solicit or entertain any offer for, or sell or agree to sell,
or participate in any business combination with respect to, any of the
Shares or any of the capital stock of any of the Subsidiaries;
(xi) Make any changes in its accounting methods, principles or
practices;
(xii) Do any act, omit to do any commercially reasonable act or
permit any act within Sellers' or the Company's or any Subsidiary's
control which will cause a breach of any representation, warranty or
obligation contained in this Agreement;
(xiii) Issue substitute stock certificates to replace
certificates which have been lost, misplaced, destroyed, stolen or are
otherwise irretrievable, unless an adequate indemnity agreement
approved by Buyer has been duly executed and delivered to the Company;
or
(xiv) Organize any subsidiary, acquire any capital stock or other
equity securities of any corporation, or acquire any equity or other
ownership interest in any business.
Buyer hereby consents to the distributions and stock redemptions listed
on Schedule 4.23.
6.02. ACCESS. From the date of this Agreement to the Closing Date, the
Company shall (i) provide Buyer and its officers, counsel, accountants and other
authorized representatives with such information reasonably available to Sellers
or the Company as Buyer may from time to time reasonably request with respect to
the Company, the Subsidiaries and the transactions contemplated by this
Agreement, (ii) provide Buyer and its officers, counsel, accountants and other
authorized representatives access during regular business hours and upon
reasonable notice to the books, records, offices, personnel, counsel,
accountants and actuaries of the Company and the Subsidiaries, as Buyer or its
designees may from time to time reasonably request, and (iii) permit Buyer and
its officers, counsel, accountants and other authorized representatives to make
such inspections thereof as Buyer may reasonably request. Any investigation
shall be conducted in such a manner so as not to interfere unreasonably with the
operation of the business of the Company and the Subsidiaries. No such
investigation shall limit or modify in any way Sellers' obligations with respect
to any breach of their representations, warranties, covenants or agreements
contained herein.
6.03. INTERIM FINANCIALS. As promptly as practicable after each regular
accounting period subsequent to the 1999 Balance Sheet and prior to the Closing
Date, the Company will deliver to Buyer periodic financial reports in the form
which it customarily prepares for its internal purposes concerning the Company
and the Subsidiaries, and, if available, unaudited consolidated statements of
the financial position of the Company and the Subsidiaries as of the last day of
each accounting period and consolidated statements of income and changes in
financial position of such entities for the period then ended. The Company and
Sellers covenant
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that such interim statements (i) will present fairly consistent with past
practices, the financial condition of the Company and each Subsidiary as of
their respective dates and the related results of their respective operations
for the respective periods then ended, subject to normal and customary year-end
adjustments, and (ii) will be prepared on a basis consistent with prior interim
periods.
6.04. TRANSFER TAXES. All transfer taxes, including, but not limited
to, stock transfer taxes, document recording fees, real property transfer taxes,
sales and use taxes, stamp taxes, and excise taxes and any similar tax or fee,
arising out of or in connection with the consummation of the transactions
contemplated hereby shall be paid by Sellers when due, and Sellers will, at
their own expense, file all necessary tax returns and other documentation with
respect to all such transfer, documentary, sales, use, stamp and other similar
taxes and fees.
6.05. BROKER'S OR FINDER'S FEES. The Company shall pay any fee owing by
virtue of the authorization or engagement by Sellers or the Company of any
person to act as a broker, finder or in any other similar capacity in connection
with the transactions contemplated by this Agreement, including any fees and
expenses payable to Centura Investment Bankers; provided that such fees and
expenses shall not in the aggregate exceed $300,000.
6.06. FURTHER INFORMATION. In addition to such actions as the Company
may otherwise be required to take under this Agreement or applicable law in
order to consummate this Agreement and the transactions contemplated hereby, the
Company shall take such action, shall furnish such information, and shall
prepare, or cooperate in preparing, and execute and deliver such certificates,
agreements and other instruments as Buyer may reasonably request from time to
time, before or at the Closing, with respect to compliance with obligations of
Buyer, the Sellers or the Company in connection with Buyer's purchase of the
Shares from the Sellers. Such matters for which Buyer shall be entitled to seek
assistance and cooperation may involve the preparation of disclosure statements
and informational materials pertaining to the transactions contemplated by this
Agreement.
6.07. CONSULTATION. Until the Closing Date, Sellers shall consult Buyer
concerning all significant business and operating decisions affecting the
Company or any Subsidiary.
6.08. FILING OF RETURNS; PAYMENT OF TAXES. Sellers shall, at Buyer's
expense, prepare or cause to be prepared all Tax returns for the Company and its
Subsidiaries for all periods ending on or prior to the Closing Date. At least
ninety (90) days prior to the filing deadline for each such Tax return (taking
into account all filing extensions permitted under applicable law), Sellers
shall deliver each such Tax return to Buyer for its review and comment. In the
event that Buyer believes that changes should be made to such Tax return in
order for such return to comply with applicable law, Buyer shall propose such
changes to Sellers, and Buyer and Sellers shall negotiate in good faith to reach
agreement on any such changes to such Tax return as promptly as practicable. In
the event that Buyer and Sellers fail to reach agreement on any such proposed
changes within ten (10) business days, DT (or Buyer's independent public
accountants
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at such time) shall determine whether any of Buyer's proposed changes to such
Tax return should be made in order for such return to comply with applicable
law. The decision of DT (or such other accounting firm) with respect to such
proposed changes shall be conclusive and binding on the parties. To the extent
permitted by applicable law, Sellers shall include any income, gain, loss,
deduction or other tax items for such periods on their Tax return in a manner
consistent with the Schedule K-1's furnished by the Company to the Sellers for
such periods. Sellers shall reimburse Buyer for Taxes of the Company and its
Subsidiaries with respect to periods within fifteen (15) days after payment by
Buyer or the Company and its Subsidiaries of such Taxes to the extent such Taxes
are not reflected in the reserve for Tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) shown on the face of the 1999 Balance Sheet. Except as required by law,
Buyer shall not amend any previously filed Tax return of the Company.
6.09. COOPERATION ON TAX MATTERS.
(a) Buyer, the Company (and its Subsidiaries) and Sellers shall
provide each other with such assistance as may reasonably be requested by any of
them in connection with the preparation of any return of Taxes, any audit or
other examination by any taxing authority, or any judicial or administrative
proceedings relating to liability for Taxes of the Company or the Subsidiaries.
The party requesting assistance hereunder shall reimburse the other for
reasonable out-of-pocket expenses incurred in providing such assistance. Buyer
and Seller further agree, upon request, to use their best efforts to obtain any
certificate or other document from any governmental authority or any other
person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed (including, but not limited to, with respect to the transactions
contemplated hereby).
(b) Prior to the Closing, the Company and Sellers will not revoke
the Company's election to be taxed as an S corporation within the meaning of
Sections 1361 and 1362 of the Code. Prior to the Closing, the Company and
Sellers will not take or allow any action (other than the sale of the Company's
stock pursuant to this agreement) that would result in the termination of the
Company's status as a validly electing S corporation within the meaning of
Sections 1361 and 1362 of the Code.
ARTICLE VII
COVENANTS OF THE PARTIES
The Company, Sellers and Buyer, respectively, hereby covenant to and
agree with one another as follows:
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7.01. APPROVALS OF THIRD PARTIES; SATISFACTION OF CONDITIONS TO
CLOSING. The Company and Buyer will use their reasonable, good faith efforts,
and will cooperate with one another, to secure all necessary consents,
approvals, authorizations and exemptions from governmental agencies and other
third parties, including all consents required by Section 9.10, necessary to
consummate the transactions contemplated hereby. The Company and Buyer will use
their reasonable, good faith efforts, and the Sellers shall cooperate in good
faith, to obtain the satisfaction of the conditions specified in Articles VIII
and IX, as shall be required in order to enable Sellers and Buyer to cause the
Closing to occur as soon as practicable but in any event by July 31, 1999.
7.02. CONFIDENTIALITY. Each party shall, and shall use its best efforts
to cause its authorized representatives to, hold in strict confidence, and not
disclose to any person without the prior written consent of the other party, or
use in any manner except in connection with the transactions contemplated
hereby, all information obtained from such other party in connection with the
transactions contemplated hereby, except that such information may be disclosed
(i) where necessary to any regulatory authorities or governmental agencies or
stock market or exchange, (ii) if required by court order or decree or
applicable law, (iii) if it is generally known to the public or the mortgage
industry or is ascertainable or obtained from public or published information,
(iv) if it is received from a third party not known to the recipient to be under
an obligation to keep such information confidential, (v) if it is or becomes
known to the public other than through disclosure by such party, (vi) if the
recipient can demonstrate it was in its possession prior to disclosure thereof
in connection with the Agreement, or (vii) if the recipient can demonstrate it
was independently developed by it, but in the case of (i) and (ii) above, only
after giving notice to the other party as far in advance of the disclosure as
practicable.
7.03. BUYER'S FINANCING. Prior to the Closing Date, Buyer shall enter
into certain financing documents (the "Financing-Documents") pursuant to which
Buyer shall obtain financing to pay the cash portion of the Purchase Price
payable pursuant to Section 2.01(a) (the "Financing"). Buyer covenants and
agrees to use its reasonable commercial efforts to satisfy all conditions
precedent in the Financing Documents to the consummation of the financing
transactions contemplated by the Financing Documents on or before the Closing
Date and to close the financing on or before the Closing Date. If the Closing
does not occur on or prior to July 31, 1999 due to a failure by Buyer to obtain
the Financing, and Buyer or Sellers elect to terminate the Agreement pursuant to
Section 12.01(e), Buyer shall pay to Sellers the amount of $500,000 on or before
the third business day following such termination.
7.04. PALMER CONTRACT. Buyer covenants and agrees to cause the Company
to fulfill its obligations under the Consultation Agreement dated September 17,
1996 between Ray Palmer ("Palmer") and the Company, as amended (the "Palmer
Contract") and the Agreement Not to Compete dated September 17, 1996 between the
Company and Palmer, as amended. It is the intent of the parties that Palmer be a
third-party beneficiary to, and only to, this Section 7.04 of the Agreement.
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7.05. ATKINSON AGREEMENT. Subject to the fulfillment of their
respective closing conditions set forth in Articles VIII and IX, at Closing,
Buyer and Atkinson shall enter into an agreement in the form of Exhibit 8.05
hereto.
7.06. EMPLOYMENT AGREEMENTS. Subject to the fulfillment of their
respective closing conditions set forth in Articles VIII and IX, at Closing,
Buyer and each of Walker, Cunningham, Lewis and Love shall enter into an
employment agreement in the form of Exhibit 8.06 hereto.
7.07. LEASE AGREEMENT. Subject to the fulfillment of their respective
closing conditions set forth in Articles VIII and IX, at Closing, Buyer shall
and Atkinson shall cause Royal County Down, LLC to enter into a lease agreement
in the form of Exhibit 8.07 hereto.
7.08. REGISTRATION RIGHTS AGREEMENT. Subject to the fulfillment of
their respective closing conditions set forth in Articles VIII and IX, at
Closing, Buyer and Sellers shall enter into a registration rights agreement in
the form of Exhibit 8.08 hereto.
7.09. ESCROW AGREEMENT. Subject to the fulfillment of their respective
closing conditions set forth in Articles VIII and IX, at Closing, Buyer and
Sellers shall enter into an escrow agreement in the form of Exhibit 8.10 hereto.
7.10. SELLERS' WAIVERS. Subject to the fulfillment of Seller's closing
conditions set forth in Article VII, at Closing, Buyer shall receive from each
Seller a waiver of any right to assert any claim against the Company or any
Subsidiary, and a release of the Company and each of its Subsidiaries from any
liability for any claim, in each case arising out of or related to any act or
omission or event or condition arising prior to the Closing Date.
7.11. COMPANY WAIVER. Subject to the fulfillment of Buyer's closing
conditions set forth in Article IX, at Closing, Buyer shall cause the Company to
execute a waiver of any right to assert any claim against any current or former
officer, director or employee of the Company, and a release of such persons from
liability for any claim, in each case arising out of or related to any event or
condition arising out of any act or omission of such persons taken in his or her
capacity as an officer, director or employee of the Company prior to the Closing
Date.
7.12. RESTRUCTURING AGREEMENT. Prior to Closing, Sellers shall exercise
their best efforts in good faith to execute an Agreement Regarding Restructuring
of Debt and Termination of Shareholder Agreements and to consummate the
transactions contemplated thereby at or before the Closing Date.
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ARTICLE VIII
CONDITIONS TO SELLERS' OBLIGATIONS
Each of the obligations of Sellers to be performed hereunder shall be
subject to the satisfaction (or waiver by Sellers) at or prior to the Closing
Date of each of the following conditions:
8.01. REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING DATE. Buyer's
representations and warranties contained in this Agreement shall be true and
correct in all material respects on and as of the Closing Date with the same
force and effect as though made on and as of such date (other than such
representations or warranties made as of a specific date which shall be true and
correct in all material respects as of such date); Buyer shall have complied in
all material respects with the covenants and agreements set forth herein to be
performed by it on or before the Closing Date; and Buyer shall have delivered to
Sellers a certificate dated the Closing Date and signed on behalf of Buyer by
its duly authorized officer attesting to all such effects described in this
paragraph.
8.02. PURCHASE PRICE. Buyer shall have tendered payment of the Purchase
Price in accordance with Section 2.02 for the Shares delivered to Buyer for
purchase at the Closing.
8.03. DOCUMENTS SATISFACTORY IN FORM AND SUBSTANCE. All agreements,
certificates, opinions and other documents delivered by Buyer to Sellers
hereunder (other than any such agreement, certificate, opinion or other document
the form of which is attached hereto as an exhibit, which shall be in the form
of the exhibit) shall be in form and substance satisfactory to Sellers.
8.04. REQUIRED CONSENTS AND APPROVALS. All governmental approvals and
consents of third parties listed in Schedule 8.04 shall have been obtained and
shall be in full force and effect.
8.05. ATKINSON AGREEMENT. Buyer and Atkinson shall have entered into an
agreement in the form of Exhibit 8.05 hereto.
8.06. EMPLOYMENT AGREEMENTS. Buyer and each of Walker, Cunningham,
Lewis and Love shall have entered into an employment agreement in the form of
Exhibit 8.06 hereto.
8.07. LEASE AGREEMENT. Buyer and Royal County Down, LLC shall have
entered into a lease agreement in the form of Exhibit 8.07 hereto.
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8.08. REGISTRATION RIGHTS AGREEMENT. Buyer and Sellers shall have
entered into a registration rights agreement in the form of Exhibit 8.08 hereto.
8.09. R. WENDELL ATKINSON AGREEMENT. Buyer and R. Wendell Atkinson
shall have entered into an agreement in the form of Exhibit 8.09 hereto.
8.10. ESCROW AGREEMENT. Buyer and Sellers shall have entered into an
escrow agreement in the form of Exhibit 8.10 hereto.
8.11. OPINION OF COUNSEL TO BUYER. Sellers shall have received from
King & Spalding, counsel to Buyer, an opinion, dated the Closing Date,
substantially in the form of Exhibit 8.11.
8.12. LITIGATION. No suit, investigation, action or other proceeding
shall be overtly threatened or pending against Buyer, any of the Sellers, the
Company or any Subsidiary before any court or governmental agency which, in the
reasonable opinion of counsel for Sellers, (i) could result in the restraint or
prohibition of any such party, or the obtaining of damages or other relief from
any such party, in connection with this Agreement or the consummation of the
transactions contemplated hereby or (ii) an order restricting the Company or any
Subsidiary in conducting its business as now being conducted or currently
proposed to be conducted.
8.13. WAIVER. The Company shall have executed a waiver of any right to
assert any claim against any current or former officer, director or employee of
the Company, and a release of such persons from liability for any claim, in each
case arising out of or related to any event or condition arising out of any act
or omission of such persons taken in his or her capacity as an officer, director
or employee of the Company prior to the Closing Date.
8.14. RESTRUCTURING AGREEMENT. The Company, Atkinson, the Minority
Sellers, Amy S. Beverly-Walker and Jeanne A. Lewis shall have executed an
Agreement Regarding Restructuring of Debt and Termination of Shareholder
Agreements.
ARTICLE IX
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to be performed hereunder shall be subject to
the satisfaction (or waiver by Buyer) on or before the Closing Date of each of
the following conditions:
9.01. REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING DATE. The
representations and warranties of Sellers contained in Articles III and IV shall
be true and correct in all material respects on and as of the Closing Date with
the same force and effect as though made on and as of such date (other than such
representations or warranties made as of a specific date, which shall
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be true and correct in all material respects as of such date); Sellers and the
Company shall have complied in all material respects with the respective
covenants and agreements set forth herein to be performed by them on or before
the Closing Date; and the Company and Sellers shall have delivered to Buyer a
certificate signed on behalf of the Company by its President and by each Seller
attesting to all of such effects described in this paragraph.
9.02. NO MATERIAL CHANGE. The Company and the Subsidiaries shall not
have suffered a Company Material Adverse Effect. For purposes of this Section
9.02, a change in the general economic conditions shall not be taken into
account in determining whether or not a Company Material Adverse Effect shall
have occurred.
9.03. LITIGATION. No suit, investigation, action or other proceeding
shall be overtly threatened or pending against Buyer, any of the Sellers, the
Company or any Subsidiary before any court or governmental agency which, in the
reasonable opinion of counsel for Buyer, (i) could result in the restraint or
prohibition of any such party, or the obtaining of damages or other relief from
any such party, in connection with this Agreement or the consummation of the
transactions contemplated hereby or (ii) an order restricting the Company or any
Subsidiary in conducting its business as now being conducted or currently
proposed to be conducted.
9.04. RECORD SEARCHES. The record searches made by or on behalf of
Buyer on or before the Closing Date shall not have indicated the existence of
any material litigation, claim, lien, mortgage, encumbrance or judgment against
the Company or any of the Subsidiaries or any of its or their assets, except as
described in Schedule 4.07(a), 4.07(b)(i) or 4.07(b)(ii); or, if any such
litigation, claim, lien, mortgage, encumbrance or judgment has been indicated,
the Company shall have provided evidence satisfactory to Buyer of the removal,
prior to the Closing, of any such litigation, claim, lien, mortgage, encumbrance
or judgment.
9.05. OPINION OF COUNSEL TO THE COMPANY AND SELLERS. Buyer shall have
received from Gorman & Associates, counsel to the Company and Atkinson, an
opinion, dated the Closing Date, substantially in the form of Exhibit 9.05(a),
and from Robinson Bradshaw & Hinson, counsel to the Minority Sellers, an opinion
dated the Closing Date, substantially in the form of Exhibit 9.05(h).
9.06. DOCUMENTS SATISFACTORY IN FORM AND SUBSTANCE. All agreements,
certificates, opinions and other documents delivered by Sellers to Buyer
hereunder shall be in form and substance satisfactory to counsel for Buyer, in
the exercise of such counsel's reasonable judgment.
9.07. RESIGNATIONS OF OFFICERS AND DIRECTORS. All officers and
directors of the Company and the Subsidiaries shall have delivered to Buyer
their resignations as officers and directors, effective as of the Closing Date.
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9.08. REQUIRED CONSENTS AND APPROVALS. All governmental approvals and
consents of third parties listed in Schedule 9.08 hereto shall have been
obtained and shall be in full force and effect.
9.09. FINANCING. Subject to the provisions of Section 7.03, the
transactions contemplated in the Financing Documents shall have been
consummated.
9.10. PURCHASER QUESTIONNAIRE. Buyer shall have received a purchaser
questionnaire from each Seller indicating that each Seller is an "accredited
investor" as such term is defined in Rule 501 of the Securities Act.
9.11. ATKINSON AGREEMENT. Buyer and Atkinson shall have entered into an
agreement in the form of Exhibit 8.05 hereto.
9.12. EMPLOYMENT AGREEMENTS. Buyer and each of Walker, Cunningham,
Lewis and Love shall have entered into an employment agreement in the form of
Exhibit 8.06 hereto.
9.13. LEASE AGREEMENT. Buyer and Royal County Down, LLC shall have
entered into a lease agreement in the form of Exhibit 8.07 hereto.
9.14. ESCROW AGREEMENT. Buyer and Sellers shall have entered into an
escrow agreement in the form of Exhibit 8.10 hereto.
9.15. WAIVERS. Buyer shall have received from each Seller a waiver of
any right to assert any claim against the Company or any Subsidiary, and a
release of the Company and each of its Subsidiaries from any liability for any
claim, in each case arising out of or related to any act or omission or event or
condition arising prior to the Closing Date.
9.16. RAY PALMER WAIVER. Palmer shall have agreed in writing to waive
the acceleration of payments due from the Company under the Palmer Contract
which may result from the consummation of the transactions contemplated herein,
which waiver shall be satisfactory in form and substance to Buyer.
ARTICLE X
CLOSING
10.01. CLOSING DATE. Subject to the satisfaction or waiver of the
conditions set forth herein, the closing of the purchase and sale of the Shares
(the "Closing") shall take place at 9:00 a.m. on July 15, 1999 in the offices of
King & Spalding, 191 Peachtree Street, Atlanta, Georgia, or at such other date,
time and place as the parties shall agree. The date of the Closing is referred
to herein as the "Closing Date."
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<PAGE> 45
10.02. CLOSING REQUIREMENTS. At the Closing, the following shall occur:
(a) The parties hereto shall exchange and deliver the
certificates and other evidence as to the accuracy of the representations and
warranties contained herein, and the compliance with the covenants and
agreements contained herein, which are required to be delivered by such party as
herein provided.
(b) Sellers shall deliver and Buyer shall receive at the
Closing certificates evidencing the Shares owned by Sellers, duly endorsed in
blank for transfer or accompanied by duly executed blank stock powers attached
and otherwise in good form for transfer; and Buyer shall deliver to the Sellers
at Closing the funds and shares provided for in Section 2.02.
(c) Counsel for the Company and the Sellers shall deliver
to Buyer the opinion specified in Section 9.06 and counsel to Buyer shall
deliver to Sellers the opinion specified in Section 8.11.
(d) All other documents, instruments and writings required
to be delivered by a party at or prior to the Closing Date pursuant to this
Agreement will be delivered to the party entitled thereto.
ARTICLE XI
INDEMNIFICATION BY SELLERS
11.01. INDEMNIFICATION BY SELLERS.
(a) Except as otherwise specified in this Section 11, each
Seller agrees, severally but not jointly, to indemnify Buyer and its officers,
directors, employees, agents and affiliates (collectively, a "Buyer Indemnified
Party") in respect of, and hold each of them harmless from and against any and
all damages, fines, penalties, deficiencies, losses and expenses (including
without limitation interest, court costs, reasonable fees of attorneys,
accountants and other experts or other reasonable expenses of litigation or
other proceedings or of any claim, default or assessment) and any amounts
incurred in mitigation or settlement of the foregoing (hereinafter "Losses")
arising out of or relating to any misrepresentation, breach of warranty or
breach of any covenant or agreement on the part of such Seller contained in
Article III hereof.
(b) Except as otherwise specified in this Section 11,
Sellers agree, severally but not jointly, to indemnify the Buyer Indemnified
Parties in respect of, and hold each of them harmless from and against, (i) any
and all Losses arising out of or relating to any misrepresentation, breach of
warranty or breach of any covenant or agreement (other than representations,
warranties, covenants and agreements contained in Article III) on the part of
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<PAGE> 46
Sellers or the Company contained in this Agreement, and (ii) any and all net
losses of principal, if any, incurred after the Closing Date on loans sold by
the Company prior to the Closing Date and on loans held in the Company's
inventory on the Closing Date that Buyer or the Company is required to
repurchase as a result of a failure of any such loan to comply with applicable
law ("Putback Losses"). To the extent that any costs or expenses that would
constitute Putback Losses under this Section 11.01(b) are taken into account in
calculating the pre-tax Net Cash Flow of the Money Centre Division pursuant to
Section 2.01 hereof, such costs or expenses shall not constitute Putback Losses
for which Buyer is entitled to indemnification under this Section 11.01(b).
11.02. INDEMNIFICATION BY BUYER. Except as otherwise specified in this
Section 11, Buyer agrees to indemnify Sellers and the Company (collectively, a
"Company Indemnified Party" in respect of, and hold each of them harmless from
and against, any and all Losses suffered, incurred or sustained by any of them
or to which any of them becomes subject, resulting from, arising out of or
relating to any misrepresentation, breach of warranty or breach of any covenant
or agreement on the part of Buyer contained in this Agreement.
11.03. TIME TO ASSERT CLAIM. Any claim for indemnification made by a
Buyer Indemnified Party under Section 11.01 or any claim for indemnification
made by a Company Indemnified Party under Section 11.02 shall be asserted by
written notice to the party from whom indemnification is sought (the
"Indemnifying Party") on or before the date which is thirty (30) days after July
1, 2003 or, if earlier, thirty (30) days after the end of the calendar quarter
in which the aggregate amount payable to Atkinson pursuant to Section 2.01 (b)
(without regard to indemnification claims, payments into escrow because of
indemnification claims or any reduction in purchase price pursuant to Section
2.02(d)) equals $2,551,000 (the "Termination Date"). Any matter as to which a
claim has been timely asserted under Section 11.01 or Section 11.02 and which is
pending or unresolved as of the Termination Date shall continue to be covered by
Section 11.01 or Section 11.02 until finally terminated or resolved. Any claim
that is not made on or before the Termination Date shall not be entitled to
indemnification by an Indemnifying Party under this Article XI.
11.04. CLAIMS. In the event that either a Buyer Indemnified Party or a
Company Indemnified Party receives notice (the "Claims Notice") whether or not
in writing of any pending, threatened or reasonably likely claim or proceeding
against such party that, if successful, might result in a claim under Section
11.0 1 or Section 11.02, the Indemnifying Party shall be given prompt written
notice of such claim or proceeding and shall be permitted to participate in the
defense of such claim or proceeding by counsel of the Indemnifying Party's own
choosing and at the expense of the Indemnifying Party. The Claims Notice will
set out in a reasonably detailed manner the facts known to the Buyer Indemnified
Party or Company Indemnified Party, as the case may be, that form the basis for
the claim and will also set out a non-binding, good faith estimate, or range, of
the potential Losses that may be incurred.
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<PAGE> 47
11.05. LOSS THRESHOLD. Notwithstanding anything to the contrary
contained in this Agreement, the Indemnifying Party shall not be responsible to
the Buyer Indemnified Party or the Company Indemnified Party, as the case may
be, with respect to any Losses as to which such party is otherwise entitled to
indemnification pursuant to Section 11.01(b) or 11.02 of this Agreement, unless
and until the aggregate amount of such Losses exceeds $200,000 (the "Threshold
Amount"). An Indemnified Party may recover from an Indemnifying Party only such
amounts by which the aggregate Losses suffered by the Indemnified Party exceed
the Threshold Amount. The provisions of this Section 11.05 shall apply only to a
claim for indemnification brought pursuant to Section 11.01(b) or 11.02 arising
out of any misrepresentation, breach of warranty or breach of any covenant or
agreement prior to the Closing.
11.06. DEFENSE. If the facts pertaining to a Loss by a Buyer
Indemnified Party or a Company Indemnified Party, as the case may be, arise out
of the claim of any third party, or if there is any claim against a third party
available by virtue of the circumstances of the Loss, the applicable
Indemnifying Party may assume the defense or the prosecution thereof by written
notice to such Buyer Indemnified Party or Seller Indemnified Party, including
the employment of counsel or accountants reasonably satisfactory to such Buyer
Indemnified Party or Seller Indemnified Party, at the Indemnifying Party's cost
and expense. Such Buyer Indemnified Party or Seller Indemnified Party shall have
the right to employ counsel separate from counsel employed by such Indemnifying
Party in any such action and to participate therein, but the fees and expenses
of such counsel employed by such Buyer Indemnified Party or Seller Indemnified
Party shall be at its expense. The Indemnifying Party shall not be liable for
any settlement of any such claim effected without its prior written consent,
which shall not be unreasonably withheld. The Indemnifying Party shall not agree
to a settlement of any claim without the prior written consent of the Buyer
Indemnified Party or Seller Indemnified Party, as the case may be, which consent
will not be unreasonably withheld. Whether or not the Indemnifying Party chooses
to so defend or prosecute such claim, all the parties hereto shall cooperate in
the defense or prosecution thereof and shall furnish such records, information
and testimony, and attend such conferences, discovery proceedings, hearings,
trials and appeals, as may be reasonably requested in connection therewith. The
Indemnifying Party shall be subrogated to all rights and remedies of the Buyer
Indemnified Party or Seller Indemnified Party, as the case may be.
11.07. SEVERAL LIABILITY; MAXIMUM LIABILITY. Each Seller's several
liability for an indemnification claim made by Buyer pursuant to Section 11.01
shall be equal to such Seller's proportionate share based on his percentage
interest of such liability set forth below (the "Percentage Interest"):
<TABLE>
<CAPTION>
NAME PERCENTAGE INTEREST
- ---- -------------------
<S> <C>
Rodney D. Atkinson 60%
Charles R. Cunningham 10%
</TABLE>
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<PAGE> 48
<TABLE>
<S> <C>
Stuart A. Lewis 10%
John Richard Love 10%
Stephen L. Walker 10%
</TABLE>
The maximum aggregate liability of each Seller for all indemnification
claims made by Buyer pursuant to Section 11.01 shall not exceed such Seller's
proportionate share based on his Percentage Interest of $2,500,000 (for each
Seller, such Seller's "Seller Indemnity Cap"). The Seller Indemnity Cap of each
Seller for all claims shall be reduced quarterly commencing with the calendar
quarter beginning October 1, 1999 by an amount equal to the aggregate amount of
the amount payments payable to Sellers pursuant to Sections 2.01 (b) and (c)
with respect to the immediately preceding calendar quarter, without regard to
any indemnification claims, payments into escrow because of indemnification
claims, the Seller entitled to such payments or any reduction in the Purchase
Price pursuant to Section 2.02(d), multiplied by such Seller's Percentage
Interest. Such quarterly reduction shall take place on (a) in the case of a
quarter where no claims are sent to arbitration pursuant to Section 11.08(c),
the date by which payments under Sections 2.01 (a) and 2.01 (b) in respect of
the previous quarter are required to be made to Sellers pursuant to Section
2.01 (f), or, (b) in the case of a quarter where a claim or claims is sent to
arbitration pursuant to Section 11.08(c), the second business day after the date
on which the Final Arbitrator (as defined herein) issues a decision with respect
to the amount of the Withheld Amount, if any, (as defined herein) with respect
to the immediately preceding quarter. Buyer shall be entitled to amend an
existing indemnification claim before it is resolved solely to increase the
amount of such claim (but not to change the basis for or character of any such
claim of expand the claim in any other manner). No Seller's Seller Indemnity Cap
shall be reduced as a result of any Losses included in the Threshold Amount.
11.08. ESCROW. (a) Buyer shall not make indemnification claims against
a Seller pursuant to Section 11.01(a) or 11.01(b) that in the aggregate
exceed such Seller's Seller Indemnity Cap as adjusted in accordance with Section
11.07. Buyer shall have the right to withhold from the amount earned by a Seller
for each calendar quarter pursuant to Sections 2.01(b) and (c) an amount
determined in accordance with the provisions of this Section 11.08, that,
together with the amount payments withheld from such Seller with respect to
prior calendar quarters which are on deposit for the account of such Seller in
the Escrow Account, will not exceed such Seller's proportionate share based on
his Percentage Interest of the aggregate amount of indemnification claims made
by Buyer against Seller that are outstanding and unresolved at such time. Buyer
shall not have the right to make any withholding for any Losses included in the
Threshold Amount.
(b) During the first thirty (30) days after each calendar
quarter beginning after the Closing Date in which a claim by a Buyer Indemnified
Party is made pursuant to Section 11.04, Edward B. Meyercord, J. Richard Walker,
Rodney D. Atkinson and Stephen L. Walker, or their
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<PAGE> 49
successors, assigns or designees (the "Committee"), shall meet, in person or
telephonically, to discuss the amount, if any, of the amounts payable to each
Seller pursuant to Section 2.01(b) and 2.01(c) to deposit in the Escrow
Account the ("Withheld Amount"). Buyer shall be entitled to subtract the
Withheld Amount for each Seller from any amounts payable to such Seller pursuant
to Section 2.01(b) and Section 2.01(c) in respect of such calendar quarter. To
the extent that the Withheld Amount exceeds the amounts payable to any Seller
pursuant to Section 2.01(b) and Section 2.01(c) in respect of such calendar
quarter, Buyer shall be entitled to withhold the excess amount from subsequent
payments to such Seller pursuant to Section 2.01(b) and Section 2.01(c). The
Committee is also empowered to determine any adjustments to a Seller's Withheld
Amount with respect to any particular claim and to meet from time to time for
this purpose, if necessary.
(c) To the extent that the Committee is unable to agree on the
Withheld Amount, to the extent allowed by the then-applicable AAA rules, the
parties shall request that their arbitration proceedings be arbitrated for the
purpose of determining (i) the validity of the Buyer Indemnified Party's claim
and (ii) the Withheld Amount. During the duration of the arbitration
proceedings, no payments will be made pursuant to Section 2.01(b) or 2.01(c),
and Buyer shall have no liability for the non-payment of such amounts. The
arbitration proceedings will be conducted in Charlotte, North Carolina, under
the then-effective Commercial Arbitration Rules of the American Arbitration
Association ("AAA"). The decision made and award rendered by the Final
Arbitrator (as defined below) will be final and binding on the parties and not
subject to further appeal. Such arbitration can be initiated by written notice
by either party (the "Claimant") to the other party, which notice will identify
the Claimant's selected arbitrator. The party receiving such notice (the
"Respondent") will identify its arbitrator within ten (10) business days
following its receipt of such notice. The arbitrator selected by the Claimant
and the arbitrator selected by the Respondent will, within five (5) business
days of their appointment, select a third neutral arbitrator who shall be the
sole arbitrator for the proceedings (the "Final Arbitrator"). If they are unable
to do so, either party may request the American Arbitration Association to
appoint the Final Arbitrator. The Final Arbitrator will have the authority to
award any remedy or relief that a court in the State of Georgia could order or
grant, including specific performance of any obligation created under this
Agreement, the issuance of injunctive or other provisional relief, or the
imposition of sanctions for abuse or frustration of the arbitration process. The
arbitration award will be in writing. It is the intent of the parties that any
arbitration will be concluded as quickly as reasonably practicable. Each party
will bear its own costs and pay one-half of the fees and expenses of the
arbitrators. Any legal proceeding instituted to enforce an arbitration award
hereunder will be brought in the U.S. federal or state courts situated in North
Carolina, and each party will submit to personal jurisdiction therein and
irrevocably waives any objection as to venue therein, and will not plead or
claim in any such court that any such proceeding has been brought in an
inconvenient forum.
(d) All amounts withheld by Buyer from earnout payments pursuant
to this Section 11.08 shall promptly be deposited by Buyer, with notice to the
Sellers, in an escrow account (the "Escrow Account") maintained by Centura Bank,
as escrow agent (the "Escrow
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<PAGE> 50
Agent") pursuant to the terms of an escrow agreement substantially in the form
attached hereto as Exhibit 11.09 (the "Escrow Agreement"). Buyer and the Sellers
agree to comply with their respective obligations under the Escrow Agreement.
(e) All payments to Buyer in satisfaction of indemnification
claims made by Buyer pursuant to Section 11.01 shall be made solely from the
Escrow Account in accordance with this Section 11.08 and the Escrow Agreement.
Amounts shall be disbursed from the Escrow Account only upon resolution of
indemnification claims. Funds will be distributed from the Escrow Account only
pursuant to a notice signed by both the Buyer Indemnified Party and the
Representative (as defined in the Escrow Agreement), such signatures not to be
unreasonably withheld. As each indemnification claim against a Seller is
resolved, there shall be disbursed from the Escrow Account from each Seller's
Withheld Amount with respect to such claim (i) to Buyer the amount of Losses (if
any) for which Buyer is entitled to indemnification from such Seller under
Section 11.01, after accounting for the Threshold Amount and (ii) to such Seller
any amount on deposit in the Escrow Account with respect to indemnification
claims against such Seller that exceeds the aggregate amount of all remaining
outstanding and unresolved indemnification claims against such Seller, after
accounting for the Threshold Amount. There shall also be disbursed to Buyer and
such Seller at such time a proportionate share of all Interest Earnings (as
defined in the Escrow Agreement) on deposit in the Escrow Account attributable
to such disbursements.
11.09. NONRECOURSE LIABILITY. Each Sellers' liability for
indemnification claims made by a Buyer Indemnified Party pursuant to Section
11.01 shall be limited solely to amounts on deposit in the Escrow Account with
respect to such Seller and any remaining earnout payments required to be made to
such Seller pursuant to Sections 2.01(b) and (c) hereof (including Interest
Earnings in the Escrow Account).
11.10. EXCLUSIVE REMEDIES. All claims made with respect to the
representations, warranties, covenants and agreements contained in this
Agreement (other than claims based on intentional fraud or willful misconduct)
shall be made exclusively under, and subject to the limitations set forth in,
this Article XI. Such limitation shall apply notwithstanding that such claims
are asserted by a cause of action or legal theory other than breach of contract.
ARTICLE XII
TERMINATION PRIOR TO CLOSING
12.01. TERMINATION OF AGREEMENT. This Agreement may be terminated at
any time prior to the Closing:
(a) By the mutual written consent of Buyer and Sellers;
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<PAGE> 51
(b) By Sellers in writing, without liability, if Buyer
shall (i) fail to perform in any material respect its agreements contained
herein required to be performed by it on or prior to the Closing Date, or (ii)
materially breach any of its representations, warranties or covenants contained
herein, which failure or breach is not cured within ten (10) days after Sellers
have notified Buyer of their intent to terminate this Agreement pursuant to this
subparagraph (b);
(c) By Buyer in writing, without liability, if the Company
or any of Sellers shall (i) fail to perform in any material respect its
agreements contained herein required to be performed by it on or prior to the
Closing Date, or (ii) materially breach any of its representations, warranties
or covenants contained herein, which failure or breach is not cured within ten
(10) days after Buyer has notified the Company and Sellers of its intent to
terminate this Agreement pursuant to this subparagraph (c);
(d) By either Sellers or Buyer in writing, without
liability, if there shall be any order, writ, injunction or decree of any court
or governmental or regulatory agency binding on Buyer and/or Sellers, which
prohibits or restrains Buyer and/or Sellers from consummating the transactions
contemplated hereby, provided that Buyer and Sellers shall have used their best
efforts to have any such order, writ, injunction or decree lifted and the same
shall not have been lifted within 30 days after entry, by any such court or
governmental or regulatory agency; or
(e) By either Sellers or Buyer, in writing, without
liability, if for any reason the Closing has not occurred by July 31, 1999.
12.02. TERMINATION OF OBLIGATIONS. Termination of this Agreement
pursuant to this Article XII shall terminate all obligations of the parties
hereunder, except for the obligations under Sections 7.02, 12.02, 13.06 and
13.10, unless such termination was the result of a breach by a party of any
representation, warranty, covenant or other provision of this Agreement, or an
act or omission by a party that resulted in the breach of any representation,
warranty, covenant or other provision of this Agreement, in which case the other
parties hereto shall be entitled to seek any remedy to which such other parties
may be entitled at law or in equity for such violation or breach of this
Agreement. Notwithstanding the above, neither the Company nor Sellers shall be
liable to Buyer in the event that this Agreement is terminated by Buyer due to
any breach of representations or warranties of the Company or Sellers resulting
from an unintentional failure, in good faith, to include information on the
Schedules forming part of this Agreement that result in aggregate Losses to
Buyer of less than $50,000.
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<PAGE> 52
ARTICLE XIII
MISCELLANEOUS
13.01. ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits) constitutes the sole understanding of the parties with respect to the
subject matter hereof and terminates the Letter of Intent, dated May 13, 1999;
provided, however, that this provision is not intended to abrogate any other
written agreement between the parties executed contemporaneously with or after
this Agreement. No amendment, modification or alteration of the terms or
provisions of this Agreement shall be binding unless the same shall be in
writing and duly executed by the parties hereto.
13.02. PARTIES BOUND BY AGREEMENT; SUCCESSORS AND ASSIGNS. The terms,
conditions and obligations of this Agreement shall inure to the benefit of and
be binding upon the parties hereto and the respective successors and assigns
thereof. In the case of any Seller who is acting as a trustee or in any other
fiduciary capacity, the terms, conditions and obligations of this Agreement
shall inure to the benefit of and be binding upon both the Seller and the trust
estate represented by such Seller. The term "successors and assigns," as used
herein, shall include any beneficiary or distributee of any trust estate which a
Seller represents who receives any distribution of property from such trust
estate after the Closing with respect to such Seller, to the extent of such
distribution. Without the prior written consent of Buyer, Sellers may not assign
their rights, duties or obligations hereunder or any part thereof to any other
person or entity. Buyer may assign its rights and duties hereunder in whole or
in part (before or after the Closing) to one or more affiliates of Buyer.
Notwithstanding any assignment by Buyer of its rights hereunder, in the event
Buyer or any affiliate thereof is required to make any indemnification payment
or otherwise make whole any assignee of Buyer (or subsequent assignee) as a
result of any act or omission of the Company or Sellers for which Buyer would be
entitled to indemnification from Sellers but for the assignment of its rights
hereunder, Buyer shall be fully subrogated to such assignee and shall be
restored to all rights under this Agreement to obtain indemnification from
Sellers.
13.03. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
13.04. HEADINGS. The headings of the Sections and paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
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13.05. MODIFICATION AND WAIVER. Any of the terms or conditions of this
Agreement may be waived in writing at any time by the party which is entitled to
the benefits thereof. No waiver of any of the provisions of this Agreement shall
be deemed to or shall constitute a waiver of any other provision hereof (whether
or not similar).
13.06. EXPENSES. Except as otherwise provided herein, the Company and
Buyer shall each pay all costs and expenses incurred by them or it or on their
or its behalf in connection with this Agreement and the transactions
contemplated hereby, including fees and expenses of their or its own financial
consultants, accountants and counsel. All such expenses incurred by Sellers in
connection with this Agreement and the transactions contemplated hereby shall be
borne by the Company.
13.07. NOTICES. Any notice, request, instruction or other document to
be given hereunder by any party hereto to any other party hereto shall be in
writing and delivered personally or by telecopy transmission or sent by
registered or certified mail or by any express mail service, postage or fees
prepaid,
IF TO THE COMPANY, TO ATKINSON
AND WALKER AT: P.O. Box 47375
Charlotte, North Carolina 29247-0375
with copies to: Gorman & Associates
7422 Carmel Executive Park
Charlotte, North Carolina 28226
Attn: Tom Gonnan
Telephone: (704) 544-2500
Facsimile: (704) 544-2596
Robinson Bradshaw & Hinson
101 N. Tryon Street, Suite 1900
Charlotte, North Carolina 28246
Attn: John B. Garver
Telephone: (704) 378-4000
Facsimile: (704) 373-3912
IF TO SELLERS BY NOTICE TO THE
SELLERS AT THE ADDRESSES
SPECIFIED IN SCHEDULE 1.01
HERETO:
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with copies to: Gorman & Associates
7422 Carmel Executive Park
Charlotte, North Carolina 28226
Attn: Tom Gorman
Telephone: (704) 544-2500
Facsimile: (704) 544-2596
Robinson Bradshaw & Hinson
101 N. Tryon Street, Suite 1900
Charlotte, North Carolina 28246
Attn: John B. Garver
Telephone: (704) 378-4000
Facsimile: (704) 373-3912
IF TO BUYER, TO: Altiva Financial Corporation
1000 Parkwood Circle, 6th Floor
Atlanta, Georgia 30339
Attention: J. Richard Walker
Telephone: (770) 952-6700
Facsimile: (770) 937 9576
with a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attention: John D. Capers, Jr.
Telephone: (404) 572-4658
Facsimile: (404) 572-5135
or at such other address or number for a party as shall be specified by like
notice. Any notice which is delivered personally or by telecopy transmission in
the manner provided herein shall be deemed to have been duly given to the party
to whom it is directed upon actual receipt by such party or its agent. Any
notice which is addressed and mailed in the manner herein provided shall be
conclusively presumed to have been duly given to the party to which it is
addressed at the close of business, local time of the recipient, on the fourth
business day after the day it is so placed in the mail or, if earlier, the time
of actual receipt.
13.08. FURTHER COOPERATION. From and after the Closing Date, the
parties will each take all such action and deliver all such documents as shall
be reasonably necessary or appropriate to confirm and vest title to the Shares
in Buyer.
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13.09. GOVERNING LAW; CONSTRUCTION. This Agreement is executed by Buyer
in, and shall be construed in accordance with and governed by the laws of, the
State of Georgia without giving effect to the principles of conflicts of law
thereof, except the right, power and capacity of each Seller who is a fiduciary
to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby shall be determined in accordance with and
governed by the laws of the State where the will, trust agreement or other
document that established or created the authority of such fiduciary to act was
executed. No provision of this Agreement or any related document shall be
construed against or interpreted to the disadvantage of any party hereto by any
court or other governmental or judicial authority by reason of such party's
having or being deemed to have structured or drafted such provision.
13.10. PUBLIC ANNOUNCEMENTS. No public announcement shall be made with
regard to the transactions contemplated by this Agreement without the prior
consent of the Company and Buyer; provide that either party may make such
disclosure if advised in writing by counsel that it is legally required to do
so. The Company and Buyer will discuss any public announcements or disclosures
concerning the transactions contemplated by this Agreement with the other party
prior to making such announcements or disclosures.
13.11. ACQUISITION PROPOSALS. Prior to Closing or termination of this
Agreement, no Seller shall, nor shall the Company permit, any representative, or
any officer, director, employee or agent of the Company or any Subsidiary (a) to
solicit, initiate or encourage submission of proposals or offers, or accept any
offers, from any person relating to any acquisition or purchase of all or a
material amount of the assets of, or any equity interest in, or any merger,
consolidation or business combination with, the Company or any Subsidiary (an
"Acquisition Proposal"), or (b) to participate in any discussions or
negotiations regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with or assist, facilitate or
encourage any Acquisition Proposal by any other person. The Company shall
promptly notify Buyer of any Acquisition Proposal of which the Company becomes
aware and shall disclose to Buyer all material information regarding such
Acquisition Proposal.
13.12. KNOWLEDGE. As used herein, the terms "Sellers' knowledge" and
"to the knowledge of Sellers" with respect to any Seller shall mean the
knowledge of that particular Seller, and the term "Company's knowledge" or "to
the knowledge of the Company and Sellers" shall mean the knowledge of any Seller
or R. Wendell Atkinson. As used herein the terms "Buyer's knowledge" and "to the
knowledge of Buyer" shall mean the knowledge of Edward B. "Champ" Meyercord or
J. Richard Walker. Knowledge shall include actual knowledge as well as the
knowledge a reasonable business person would have obtained after making
reasonable inquiry and after exercising reasonable diligence with respect
thereto.
13.13. NO THIRD-PARTY BENEFICIARIES. With the exception of the parties
to this Agreement and the exception set forth in Section 7.04, there shall exist
no right of any person to claim a beneficial interest in this Agreement or any
rights occurring by virtue of this Agreement.
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13.14. "INCLUDING." Words of inclusion shall not be construed as terms
of limitation herein, so that references to "included" matters shall be regarded
as non-exclusive, noncharacterizing illustrations.
13.15. REFERENCES. Whenever reference is made in this Agreement to any
Article, Section, Schedule or Exhibit, such reference shall be deemed to apply
to the specified Article or Section of this Agreement or the specified Schedule
or Exhibit to this Agreement.
13.16. EFFECTIVE DATE. Whenever reference is made in this Agreement to
the "effective date" of the Agreement or "the date hereof," as to the Sellers
such date shall be the date as of which this Agreement has been executed by
Buyer, the Company and the Sellers.
13.17. CONSENT TO JURISDICTION; DESIGNATION OF AGENT. Each Seller
irrevocably submits to the jurisdiction of the United States District Court for
the Western District of North Carolina, and/or any State court of the State of
North Carolina located in Mecklenburg County (the "Jurisdictional Courts") in
any action, suit or proceeding brought against such Seller by any Protected
Party and related to, or in connection with, this Agreement or the transactions
contemplated hereby, and, to the extent permitted by applicable law, each Seller
waives and agrees not to assert as a defense in any such suit, action or
proceeding any claim that such Seller is not personally subject to the
jurisdiction of the Jurisdictional Courts, that the venue of the suit, action or
proceeding is improper or inconvenient, that the suit, action or proceeding is
brought in an inconvenient forum, or that this Agreement or the subject matter
hereof may not be enforced in or by such Jurisdictional Courts. Each Seller
hereby designates and appoints the agent listed on Schedule 13.17, as such
Seller's lawful agent for service of process (the "Agent for Service"), upon
whom all process against any Seller in such any action, suit or proceeding may
be served in respect of any matter as to which Seller has submitted to
jurisdiction under this Section 13.17, with the same effect as if such Seller
were a resident of the State of North Carolina and had personally and lawfully
been served with such process in such State. Each Seller hereby covenants that
should such Seller elect to change his or its Agent for Service, such change
shall be communicated to Buyer in writing within five (5) days of the date the
change is made.
13.18. SEVERABILITY. If any portion of this Agreement is held invalid
or inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative.
13.19. POST-CLOSING OPERATIONS OF THE MONEY CENTRE DIVISION. (a) In
order to support and preserve the integrity of the amount payable by Buyer in
accordance with Sections 2.01(b) and 2.01(c) of this Agreement, Buyer and the
Minority Sellers the employed by Buyer (the "Employed Sellers") covenant and
agree that until July 1, 2003, the Minority Sellers shall control and manage the
Money Centre Division in accordance with the operating plans for the Money
Centre Division developed by the Board of Directors of Buyer, management of
Buyer and the Employed Sellers. Until July 1, 2003 or until such time as the
final payment is made to
51
<PAGE> 57
any Seller pursuant to Section 2.01(b) or 2.01(c), (A) the Minority Sellers
shall operate the Money Centre Division after the Closing in an independent
manner consistent with both the manner in which the Minority Sellers operated
the Company prior to the Closing and in their reasonable business judgment, with
such changes as are agreed upon by the Board of Directors of Buyer, the
management of Buyer and the Employed Sellers, (B) Buyer shall not, and shall
cause its affiliates not to, divert business or customers of the Money Centre
Division, away from the Money Centre Division to any affiliate of Buyer, (C)
Buyer shall not require the Money Centre Division to discontinue any material
business activity that was conducted prior to the Closing or commence any
material business activity that was not conducted prior to the Closing without
the consent of the majority of the Minority Sellers employed by Buyer and (D)
Buyer shall not require the Money Centre Division to incur any material
additional expense without the consent of the majority of the Minority Sellers
employed by Buyer, including, without limitation, the hiring of additional
employees, the purchase of additional equipment or the relocation to other
premises. Notwithstanding the foregoing, if the Net Cash Flow of the Money
Centre Division following September 1, 1999 (the "Start Date") is less than the
Target Amount (as defined below) for any two consecutive quarters or for any
year following the date of this agreement (such time as these Target Amounts are
missed being referred to herein as the "Target Shortfall"), then Buyer shall
have the right in good faith and in its sole and absolute judgment to take any
and all actions and adopt any and all policies with respect to the Money Centre
Division as the Board of Directors and/or management of Buyer deem necessary, in
conformity with their respective fiduciary duties to Buyer and its stockholders,
to optimize the future financial performance of the business of the Money Centre
Division, and no Seller shall have the right to assert any claim that his right
to receive any payments due under Sections 2.01(b) or 2.01(c) of this
Agreement has been adversely affected as a result of such actions of Buyer,
taken in good faith.
(b) If the Money Centre Division ceases to be operated as a
separate division of Buyer, in order to calculate the Net Cash Flow with respect
to payments, if any, due to any Seller pursuant to Sections 2.01(b) or 2.01(c):
(i) Buyer shall use all commercially reasonable means to determine the
amount of cash generated by the business of the Money Centre Division as then
operated by Buyer; and (ii) the expenses included in the calculation of Net Cash
Flow shall be equal to (a) the average expenses included in the calculation of
Net Cash Flow for the last four (4) quarters of operations of the Money Centre
Division prior to the Target Shortfall or (b) if the Money Center Division was
not in operation for four quarters prior to the Target Shortfall, the average
expenses included in the calculation of Net Cash Flow for all quarters of
operations of the Money Centre Division prior to the Target Shortfall. If the
Money Centre Division ceases to be operated as a separate division of Buyer,
Buyer covenants that it will, until July 1, 2003 or until such time as the final
payment is made to any Seller pursuant to Section 2.01(b) or 2.01(c), keep a
separate set of books and records which shall reflect the calculation of Net
Cash Flow as calculated pursuant to this Section 13.19(b)
(b) The Target Amounts shall be as follows:
52
<PAGE> 58
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
PERIOD AMOUNT
- ------ ------
- ---------------------------------------------------------------------------------------
<S> <C>
First Four Quarters after Start Date (per quarter) $ 2,000,000
- ---------------------------------------------------------------------------------------
First Year after Start Date (entire year) $ 8,500,000
- ---------------------------------------------------------------------------------------
Fifth through Eighth Quarters after Start Date $ 2,500,000
(per quarter)
- ---------------------------------------------------------------------------------------
Second Year after Start Date (entire year) $11,250,000
- ---------------------------------------------------------------------------------------
Ninth through Twelfth Quarters after Start Date $ 2,900,000
(per quarter)
- ---------------------------------------------------------------------------------------
Third Year after Start Date (entire year) $13,050,000
- ---------------------------------------------------------------------------------------
Thirteenth through Sixteenth Quarters after Start $ 3,340,000
Date (per quarter)
- ---------------------------------------------------------------------------------------
Fourth Year after Start Date (entire year) $15,030,000
- ---------------------------------------------------------------------------------------
</TABLE>
53
<PAGE> 59
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf on the date indicated.
BUYER: COMPANY:
Altiva Financial Corporation The Money Centre, Inc.
By: /s/ Champ Meyercord By: /s/ Rodney D. Atkinson
------------------------------- -------------------------------
Name: Champ Meyercord Name: Rodney D. Atkinson
----------------------------- -----------------------------
Date: July 7, 1999 Date: July 7, 1999
----------------------------- -----------------------------
<TABLE>
<CAPTION>
SELLERS: SHARES OWNED
- -------- ------------
<S> <C>
/s/ Rodney D. Atkinson 35,000
- ---------------------------------- ------
Name: Rodney D. Atkinson
/s/ Charles R. Cunningham 3,750
- ---------------------------------- ------
Name: Charles R. Cunningham
/s/ Stuart A. Lewis 3,750
- ---------------------------------- ------
Name: Stuart A. Lewis
/s/ John Richard Love 3,750
- ---------------------------------- ------
Name: John Richard Love
/s/ Stephen L. Walker 3,750
- ---------------------------------- ------
Name: Stephen L. Walker
</TABLE>
54
<PAGE> 60
EXHIBIT 8.05
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated the __ day of July,
1999 (the "Effective Date") is by and between the Money Centre, Inc., a North
Carolina corporation (the "Company"), a wholly-owned subsidiary of Altiva
Financial Corporation, a Delaware corporation ("Altiva"), and Rodney D.
Atkinson, a resident of the State of North Carolina ("Employee").
RECITALS
WHEREAS, the Company is a commercial finance company principally
engaged in originating, purchasing, brokering and selling consumer loans secured
by one-to-four-family residences throughout the United States (the "Business of
the Company"). The Company desires to employ Employee and to have the benefit
of his skills and services, and Employee desires to accept employment with the
Company, on the terms and conditions set forth herein; and
WHEREAS, Altiva has agreed to guaranty the obligations of the Company
under this Agreement, attached hereto as Exhibit A.
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein, and the performance of each, the
parties hereto, intending legally to be bound, hereby agree as follows:
AGREEMENTS
SECTION 1. EMPLOYMENT, TERM, AUTOMATIC EXTENSION. The initial term
of this Agreement shall begin on the Effective Date and continue until the fifth
anniversary of the Effective Date unless sooner terminated as provided in
Section 6 (such term of employment, as extended, is referred to herein as the
"Term").
SECTION 2. POSITION AND DUTIES. The Company hereby employs
Employee as Director of Public Relations of the Company. Employee shall have
such responsibilities, duties and authorities as are assigned to him by the
Chief Executive Officer of the Company. Employee shall fulfill his duties and
responsibilities as described in this Section 2 in a reasonable and appropriate
manner in light of the Company's policies and practices as established by the
Board of Directors (the "Board") and the laws and regulations that apply to the
Company's operation and administration.
SECTION 3. COMPENSATION. For all services rendered by Employee,
the Company shall compensate Employee as follows:
<PAGE> 61
(a) Base Salary and Benefits. Beginning on the Effective
Date, the total amount of base salary and benefits
payable ("Total Compensation") to Employee shall be
Two Hundred Thousand Dollars ($200,000) per year,
payable on a regular basis in accordance with the
Company's standard payroll procedures, but not less
than monthly.
(b) Benefits. The specific benefits to be received by
Employee shall be determined by mutual agreement
between the Company and employee. Employee's Total
Compensation shall include only those benefits which
are deductible in their full amount by the Company on
a dollar-for-dollar basis as a business expense. To
the extent that Employee receives benefits which are
not fully deductible by the Company on a
dollar-for-dollar basis, the amount of such benefits
shall be deducted from Employee's Total Compensation.
(c) Modifications or Amendments. The compensation provided
for in this Section 3 shall not be modified or
amended in any manner without the prior written
consent of Employee and the Board of Directors of
Altiva.
SECTION 4. EXPENSE REIMBURSEMENT. The Company shall reimburse
Employee in accordance with the Company's expense reimbursement policy for (or,
at the Company's option, pay) all business travel which is pre-approved by the
Company and other reasonable and customary out-of-pocket expenses reasonably
incurred by Employee in the performance of his services hereunder during the
Term and deductible by the Company as a business expense. All reimbursable
expenses shall be appropriately documented in reasonable detail by Employee upon
submission of any request for reimbursement, and in a format and manner
consistent with the Company's expense reporting policy applicable to employees
of the Company at the level of Employee's position, as well as applicable
federal and state tax record keeping requirements. Reimbursement shall be
limited to expenses incurred by Employee which are deductible by the Company as
a business expense.
SECTION 5. PLACE OF PERFORMANCE. Employee shall carry out his
duties and responsibilities hereunder principally in and from the Charlotte,
North Carolina metropolitan area.
SECTION 6. TERMINATION; LUMP SUM BUYOUT.
(a) Subject to the Company's right to terminate this
Agreement as provided in Section 6(b) below and to
place Employee on administrative leave as provided in
Section 6(c) below, Employee's employment may not be
terminated prior to the expiration of the Term for
any reason. In the event of the death or disability of
Employee, the base salary described in Section
-2-
<PAGE> 62
3 herein shall continue as periodic payments to
Employee or his estate, as the case may be. In the
event of the disability of Employee, the benefits
described in Section 3 herein shall also continue.
(b) Notwithstanding anything to the contrary set forth in
this Agreement, the Company may terminate this
Agreement and Employee's employment with the Company
hereunder by providing not less than ten day's notice
of such termination to Employee and by paying to
Employee on the effective date of such termination an
amount equal to the sum of (i) the unpaid amount of
the Total Compensation payable in the year during
which such termination occurs and (ii) an amount
equal to $200,000 multiplied by the number of full
years remaining in the term of this Agreement
following such termination. All payments made to
Employee pursuant to this Section 6(b) shall be made
net of any applicable withholding.
(c) Nothing in this Agreement shall prevent Employer from
putting Employee on paid administrative leave for all
or any portion of the Term. During any period of the
Term that Employee is on paid administrative leave,
Employee shall not perform any services on behalf of
Employer unless expressly requested by Employer, and
Employee shall not have the right to be present on
any premises of Employer unless expressly approved by
Employer. During any period that Employee is on paid
administrative leave, Employee shall receive the full
amount of compensation described in Section 3 herein.
SECTION 7. RESTRICTIONS ON COMPETITION.
(a) During the Term, and for a period of two (2) years
thereafter, Employee shall not, directly or indirectly,
for himself or on behalf of or in conjunction with any
other person, company, partnership, corporation,
business, group or other entity (each, a "Person"):
(i) engage, as an officer, director, shareholder,
owner, partner, member, joint venturer, or in a managerial
capacity, whether as an employee, independent contractor,
consultant, advisor or representative, in any business whose
principal products or services compete directly with the Business
of the Company in such areas where (i) the Company conducts
business as of the date of this Agreement, (ii) the Company then
conducts business and (iii) the Company did conduct business at
the end of the Term, if applicable (the "Territory"); or
(ii) contact any Person who is, at the time of the
contact, or was, within twelve (12) months prior to the date of
contact, an employee of the
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<PAGE> 63
Company in any capacity for the purpose or intent of enticing
such employee away from or out of the employ of the Company, or
hire any such Person; or
(iii) contact any Person within the Territory who
is, at the time of the contact, or has been, within twelve (12)
months prior to the date of contact, a mortgage banker or
mortgage broker or other referral source to the Company, for the
purpose of originating, purchasing, brokering or selling consumer
loans, in competition with the Business of the Company.
(b) Notwithstanding any other provision of this Section 7,
nothing in this Agreement shall be deemed to prohibit
Employee or any other person from acquiring as an
investment not more than two percent (2%) of the
capital stock of any business, whose stock is traded
on a national securities exchange or through the
automated quotation system of a registered securities
association.
(c) For the purposes of this Section 7, references to
"the Company" shall mean the Company and its
subsidiaries.
(d) The parties understand and agree that the term
"Business of the Company" is limited to the activity
of originating, purchasing, brokering and selling
consumer loans secured by one-to-four-family
residences.
(e) If fulfillment of any provision of this Section 7, at
the time such fulfillment shall be due, shall
transcend the limit of validity prescribed by law,
then the obligation to be fulfilled shall be reduced
to the limit of such validity; and if any clause or
provision contained in this Section 7 operates or
would operate to invalidate this Section 7, in whole
or in part, then such clause or provision only shall
be held ineffective as though not herein contained,
and the remainder of this Section 7 shall remain
operative and in full force and effect.
(f) All of the covenants in this Section 7 shall be
construed as an agreement independent of any other
provisions in this Agreement, and the existence of
any claim or cause of action Employee may have against
the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the
enforcement by the Company of such covenants.
(g) Employee has carefully read and considered the
provisions of this Section 7 and, having done so,
agrees that the restrictive covenants in this Section 7
impose a fair and reasonable restraint on Employee and
are reasonably required to protect the interests of
the Company and its officers, directors, employees, and
stockholders.
-4-
<PAGE> 64
SECTION 8. TRADE SECRETS AND CONFIDENTIAL INFORMATION.
(a) For purposes of this Section 8, "Confidential
Information" means any data or information, other
than Trade Secrets, that is valuable to the Company
and not generally known to the public or to
competitors of the Company. "Trade Secret" means
information including, but not limited to, any
technical or nontechnical data, formula, pattern,
compilation, program, device, method, technique,
drawing, process, financial data, financial plan,
product plan, list of actual or potential sources,
underwriters, brokers and purchasers of consumer loans
or other information similar to any of the foregoing,
which (i) derives economic value, actual or potential,
from not being generally known to, and not being
readily ascertainable by proper means by, other persons
who can derive economic value from its disclosure or
use and (ii) is the subject of efforts that are
reasonable under the circumstances to maintain its
secrecy.
(b) Employee acknowledges he is employed hereunder by the
Company in a confidential relationship wherein
Employee, in the course of his employment with the
Company, has received or will receive and has had or
will have access to Confidential Information and
Trade Secrets of the Company, including but not
limited to confidential and secret business and
marketing plans, strategies, and studies, lists of
actual or potential sources, underwriters, brokers or
purchasers of consumer loans and information relating
to the operations and business of the Company and,
accordingly, he is willing to enter into the covenants
contained in Sections 7 and 8 of this Agreement in
order to provide the Company with what he considers to
be reasonable protection for its interests.
(c) Subject to Section 8(e), Employee hereby agrees that,
during the Term and for a period of two (2) years
thereafter, he will hold in confidence all Confidential
Information of the Company that came into his knowledge
during his employment by the Company and will not
disclose, publish or make use of such Confidential
Information without the prior written consent of the
Company.
(d) Employee shall hold in confidence all Trade Secrets of
the Company that came into his knowledge during his
employment by the Company or during his employment with
any subsidiary of the Company or any predecessors
entity and shall not disclose, publish or make use of
at any time after the date hereof such Trade Secrets
without the prior written consent of the Company for as
long as the information remains a Trade Secret.
-5-
<PAGE> 65
(e) Notwithstanding the foregoing, the provisions of this
Section will not apply to (i) information required to
be disclosed by Employee in the ordinary course of his
duties hereunder or (ii) Confidential Information that
otherwise becomes generally known in the industry or to
the public through no act of Employee or any person or
entity acting by or on Employee's behalf, or which is
required to be disclosed by court order or applicable
law.
(f) The parties agree that the restrictions stated in this
Section 8 are in addition to and not in lieu of
protections afforded to trade secrets and confidential
information under applicable state law. Nothing in this
Agreement is intended to or shall be interpreted as
diminishing or otherwise limiting the Company's right
under applicable state law to protect its Trade Secrets
and Confidential Information.
SECTION 9. INVENTIONS. Employee shall disclose promptly to the
Company any and all significant conceptions and ideas for business products,
services and processes, inventions, improvements and valuable discoveries,
whether patentable or not, which are conceived or made by Employee, solely or
jointly with another, during the period of employment, and which are directly
related to the Business of the Company and which Employee conceives as a result
of his employment by the Company or any subsidiary of the Company or any
predecessors entity (the "Work Product"). Employee hereby agrees that all Work
Product shall be considered work made for hire by Employee and shall be owned by
the Company. If any Work Product may not, by operation of law, be considered
work made for hire by Employee for the Company, Employee hereby assigns and
agrees to assign all his interests therein to the Company or its nominee.
Whenever requested to do so by the Company, during or after the Term, Employee
shall at the expense of the Company execute any and all applications,
assignments or other instruments that the Company shall deem necessary to apply
for and obtain any permits, approvals and consents required with respect to any
Work Product or to otherwise protect the Company's interest in the Work Product.
SECTION 10. RETURN OF COMPANY PROPERTY. All records, designs,
patents, business plans, financial statements, manuals, memoranda, lists,
databases and other property delivered to or compiled by Employee by or on
behalf of the Company (including any subsidiary of the Company and predecessors
entity) or its representatives, vendors or customers which pertain to the
Business of the Company (including any subsidiary of the Company and
predecessors entity) shall be and remain the property of the Company, and be
subject at all times to its discretion and control. Upon the request of the
Company and, in any event, at the end of the Term or upon the termination of
Employee's employment with the Company, Employee shall deliver all such
materials to the Company before any final compensation is paid to Employee.
Likewise, all correspondence, reports, records, charts, advertising materials
and other similar data pertaining to the business, activities or future plans of
the Company which are collected by Employee shall be
-6-
<PAGE> 66
delivered promptly to the Company without request by it at the end of the Term
or upon termination of Employee's employment. Nothing contained herein shall
require Employee to deliver to the Company any property or materials owned or
prepared by Employee prior to the commencement of Employee's employment by the
Company; provided however, that such property or materials have not been
modified so as to contain any Confidential Information or Trade Secrets.
SECTION 11. INDEMNIFICATION. In the event Employee is made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by the
Company against Employee), by reason of the fact that he is or was performing
services under this Agreement, then the Company shall indemnify Employee against
all expenses (including reasonable attorneys' fees), judgment, fines and amounts
paid in settlement, as actually and reasonably incurred by Employee in
connection therewith to the fullest extent provided by law and to the same
extent, if any, as the Company covers its other officers and directors,
including coverage with respect to matters involving predecessor entities. The
obligations of the Company under this Section shall survive any termination of
employment or this Agreement with regard to Employee's acts or omissions (other
than willful misconduct or fraud) taken while employed by the Company or any
subsidiary of the Company or predecessor entity.
SECTION 12. NO PRIOR AGREEMENTS. Employee hereby represents and
warrants to the Company that the execution of this Agreement by Employee and his
employment by the Company and the performance of his duties hereunder will not
violate or be a breach of any agreement with a former employer, client or any
other Person. Further, Employee agrees to indemnify the Company for any claim,
including, but not limited to, reasonable attorneys' fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against the Company based upon or arising out of any
non-competition agreement, invention or secrecy agreement between Employee and
such third party which was in existence as of the date of this Agreement.
SECTION 13. ASSIGNMENT, BINDING EFFECT. Employee understands that
he has been selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. The Company
may assign this Agreement only to the purchaser of all or substantially all of
the assets of the Company (whether by merger, consolidation, sale of assets or
other business combination), provided that any such assignee shall assume this
Agreement in a writing delivered to Employee. Subject to the preceding two
sentences, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective heirs, legal representatives,
successors and assigns.
SECTION 14. COMPLETE AGREEMENT; WAIVER; AMENDMENT. This Agreement
is not a promise of future employment. Employee has no oral representations,
understandings, or agreements with the Company or any of its officers,
directors, or representatives covering the
-7-
<PAGE> 67
same subject matter as this Agreement. This Agreement is the final, complete,
and exclusive statement of expression of the agreement between the Company and
Employee with respect to the subject matter hereof, and cannot be varied,
contradicted, or supplemented by evidence of any prior or contemporaneous oral
or written agreements. This Agreement may not be later modified except by a
further writing approved by the Board of Directors and signed by a duly
authorized officer of the Company and Employee, and no term of this Agreement
may be waived except by a writing signed by the party waiving the benefit of
such term.
SECTION 15. NOTICE. Whenever any notice is required hereunder, it
shall be given in writing addressed as follows:
To the Company: Altiva Financial Corporation
Attention: J. Richard Walker
1000 Parkwood Circle
Suite 500
Atlanta, Georgia 30339
To the Employee: Rodney D. Atkinson
2929 Twelve Mile Creek Road
Matthews, North Carolina 28104
With a copy to: Attorney Thomas J. Gorman
Gorman & Associates
7422 Carmel Executive Park, Suite 200
Charlotte, North Carolina 28226
or to such other representative or at such other address of a party as such
party hereto may furnish to the other parties in writing. Such notice shall be
effective upon the date of delivery or refusal of delivery, if sent by personal
delivery, registered, certified or express mail or courier delivery, or upon
transmission by telecopy transmission, if immediately confirmed by telephone or
electronic means.
SECTION 16. SEVERABILITY; HEADINGS. If any portion of this
Agreement is held invalid or inoperative, the other portions of this Agreement
shall be deemed valid and operative and, so far as is reasonable and possible,
effect shall be given to the intent manifested by the portion held invalid or
inoperative. This severability provisions shall be in addition to, and not in
place of, the provisions of Section 7(e) above. The section headings are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent of the Agreement or of any part hereof.
SECTION 17. EQUITABLE REMEDY. Because of the difficulty of
measuring economic losses to the Company as a result of a breach of the
restrictive covenants set forth in Sections 7, 8, 9 and 10, and because of the
immediate and irreparable damage that would be caused to the
-8-
<PAGE> 68
Company for which monetary damages would not be a sufficient remedy, it is
hereby agreed that in addition to all other remedies that may be available to
the Company at law or in equity, the Company shall be entitled to specific
performance and any injunctive or other equitable as a remedy for any breach or
threatened breach of the aforementioned restrictive covenant.
SECTION 18. ARBITRATION. Any unresolved dispute or controversy
arising under or in connection with this Agreement, or with Employee's
employment with the Company, including but not limited to any alleged claims of
employment discrimination, shall be settled exclusively by arbitration,
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. The arbitrators shall have the authority to order back-pay,
severance compensation, reimbursement of costs, including those incurred to
enforce this Agreement, and interest thereon in the event the arbitrators
determine that Employee was terminated without disability or that the Company
has otherwise materially breached this Agreement. A decision by a majority of
the arbitration panel shall be final and binding. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. The direct expense of any
arbitration proceeding shall be borne by the Company. The arbitration proceeding
shall be held in the city where the Company's corporate headquarters is located.
Notwithstanding the foregoing, the Company and Employee shall be entitled to
seek injunctive or other equitable relief, as contemplated by Section 17 above,
from any court of competent jurisdiction, without the need to resort to
arbitration.
SECTION 19. CONSTRUCTION. No provision of this Agreement shall be
construed against or interpreted to the disadvantage of Employee or the Company
by any court or the government or judicial authority by reason of Employee or
the Company having or being deemed to have structured or drafted such provision
of this Agreement.
SECTION 20. GOVERNING LAW. It is the intention of the parties
hereto that this Agreement and the performance hereunder be interpreted,
construed and governed in accordance with, under and pursuant to the laws of the
State of North Carolina without reference to its choice of law rules. In
addition, the parties hereto consent to the jurisdiction of the courts of the
State of North Carolina for the adjudication of claims related to this Agreement
and the matters described herein.
IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be duly executed as of the date first written above.
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<PAGE> 69
THE MONEY CENTRE, INC.
By:
---------------------------------
[name]
EMPLOYEE
------------------------------------
Rodney D. Atkinson
-10-
<PAGE> 70
EXHIBIT 8.06
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated the __ day of July,
1999 (the "Effective Date") is by and between The Money Centre, Inc., a North
Carolina corporation (the "Company"), a wholly-owned subsidiary of Altiva
Financial Corporation, a Delaware corporation and a resident of the State of
North Carolina ("Employee").
RECITALS
WHEREAS, the Company is a commercial finance company principally
engaged in originating, purchasing, brokering and selling consumer loans secured
by one-to-four-family residences throughout the United States (the "Business of
the Company"). The Company desires to employ Employee and to have the benefit of
his skills and services, and Employee desires to accept employment with the
Company, on the terms and conditions set forth herein; and
WHEREAS, Altiva has agreed to guaranty the obligations of the Company
under this Agreement, which shall be in the form of the Guaranty Agreement
attached hereto as Exhibit A.
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein, and the performance of each, the
parties hereto, intending legally to be bound, hereby agree as follows:
AGREEMENTS
SECTION 1. EMPLOYMENT; TERM; AUTOMATIC EXTENSION. The initial term
of this Agreement shall begin on the Effective Date and continue until the
fourth anniversary of the Effective Date unless sooner terminated as provided in
Section 6. Unless either the Company, Altiva or Employee delivers a notice of
intent not to extend the term of this Agreement six months prior to the fourth
anniversary, or any subsequent anniversary, of the Effective Date of this
Agreement and Employee remains employed by the Company on each such anniversary
date, the term of this Agreement automatically shall be extended for one year or
until Employee reaches age 65, whichever comes first, unless sooner terminated
as provided in Section 6 (such term of employment, as extended, is referred to
herein as the "Term").
SECTION 2. POSITION AND DUTIES. The Company hereby employs
Employee as [_______] of the Company. Employee shall have such responsibilities,
duties and authorities as are assigned to him by the Chief Executive Officer or
Chief Operating Officer of Altiva. Employee shall fulfill his duties and
responsibilities as described in this Section 2 in a reasonable and appropriate
manner in light of the Company's policies and practices as established by the
<PAGE> 71
Company's Board of Directors (the "Board") and the laws and regulations that
apply to the Company's operation and administration.
SECTION 3. COMPENSATION. For all services rendered by Employee,
the Company shall compensate Employee as follows:
(a) Base Salary. Beginning as of the Effective Date, the
base salary payable to Employee shall be Three
Hundred Thousand Dollars ($300,000) per year, payable
on a regular basis in accordance with the Company's
standard payroll procedures, but not less than monthly.
(b) Bonus Plan. For Year 1 and Year 2, Employee shall be
eligible to participate in the Incentive Bonus Plan
attached hereto as Exhibit B as such plan is in effect
from time to time during the Term (the "Bonus Plan").
In Year 3, and for the remainder of the Term, Employee
shall be eligible to participate in the Bonus Plan for
each calendar year during the Term based upon the
achievement of the criteria established by the Board
or a compensation committee thereof in their sole
discretion.
(c) Earnout and Signing Bonus. In addition to any other
bonus payable pursuant to this Agreement, Employee
shall receive the following bonuses, each of which
shall be increased by 38% at the time of payment to
reflect the grossed-up difference between capital
gains tax treatment and ordinary income tax
treatment:
(i) an amount equal to any reduction to Employee's
amount as a result of the Sellers failure to deliver $4,000,000
in Final Stockholders Equity (as defined in the Stock Purchase
Agreement) pursuant to Section 2.02(d) of that certain Stock
Purchase Agreement by and between Employee, Rodney D. Atkinson,
Charles R. Cunningham, Stuart A. Lewis, John Richard Love, The
Money Centre, Inc. and Employer, dated July 7, 1999 (the "Stock
Purchase Agreement"); such amount, if any, shall be paid to
Employee in a lump sum on the last day of the amount period as
provided for in Section 2.01(c) of the Stock Purchase
Agreement; and
(ii) an amount equal to the portion of the Purchase
Price (as defined in the Stock Purchase Agreement) received by
Employee in cash pursuant to Section 2.01 of the Stock Purchase
Agreement which is repaid by Employee to Employer pursuant to
Section 2.02 of the Stock Purchase Agreement as a result of the
Sellers failure to deliver $4,000,000 in Final Stockholders
Equity (as defined in the Stock Purchase Agreement). Such
amount, if any, shall be paid to Employee in the last pay
period of 1999.
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(d) Additional Compensation. Employee shall receive
additional compensation in a base amount equal to the
amount of Shareholder Advances made to Employee as
reported on Schedule 4.27 to the Stock Purchase
Agreement. Employee shall be paid such additional
compensation in quarterly installments simultaneously
with each amount payment due to Employee pursuant to
Section 2.01(c) of the Stock Purchase Agreement. The
amount of each installment of additional compensation
shall represent the product of (a) a percentage of the
Base Amount equal to the same percentage that the
amount of the amount payment received by Employee on
such date represents of the total amount of amount
payments that could be earned by Employee pursuant to
Section 2.01(c) of the Stock Purchase Agreement and (b)
1.89. No amount of such additional compensation shall
be paid to Employee in any quarter that Employee does
not receive an amount payment. Notwithstanding the
foregoing, any amount of such additional compensation
(i.e. - the base amount multiplied by 1.89) not paid to
Employee in such installments shall be paid to Employee
in a lump sum on the last day of the amount period
provided for in Section 2.01(c) of the Stock Purchase
Agreement.
(e) Benefits. Employee shall be entitled to such benefits
as are currently made available to Employee by the
Company, which shall include an automobile allowance
not to exceed $950 per month.
(f) Stock Options. Employee shall be issued, within thirty
(30) days after the date hereof, an option to acquire
25,000 shares of common stock at an exercise price of
$15.00 per share pursuant to Altiva's Incentive Stock
Option Plan as in effect from time to time during the
Term (the "Stock Option Plan"), such stock options to
vest in installments of 8,334 shares, 8,333 shares and
8,333 shares on the first, second and third
anniversaries of the date of this Agreement. Such stock
options shall be subject to the terms and conditions of
the Stock Option Plan.
(g) Modifications or Amendments. The compensation provided
for in this Section 3 shall not be modified or amended
in any manner without the prior written consent of the
Board of Directors of Altiva.
SECTION 4. EXPENSE REIMBURSEMENT. The Company shall reimburse
Employee for (or, at the Company's option, pay) all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the performance of his
services hereunder during the Term. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission of any
request for reimbursement, and in a format and manner consistent with the
Company's expense reporting policy applicable to employees of the Company at the
level of Employee's position, as well as applicable federal and state tax record
keeping requirements.
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SECTION 5. PLACE OF PERFORMANCE. Employee shall carry out his
duties and responsibilities hereunder principally in and from the Charlotte,
North Carolina metropolitan area.
SECTION 6. TERMINATION, RIGHTS ON TERMINATION. Employee's
employment may be terminated in any one of the following ways, prior to the
expiration of the Tenn:
(a) Death. The death of Employee shall immediately
terminate the Term and his employment. In the event of
termination of Employee's employment because of
Employee's death, Employee's estate shall receive from
the Company the base salary at the rate, plus group
health insurance, then in effect, for a period of six
(6) months from the date of termination as well as any
compensation due under Section 6(d) hereto. Such amount
shall be paid in a lump sum within ten (10) days after
termination of Employee's employment. In such event, no
other severance compensation shall be owed to
Employee's estate, except for Employee's estate's right
to receive any payments provided for in Section 6(d)
hereof.
(b) Disability. If, as a result of incapacity due to
physical or mental illness or injury, Employee shall
have been unable to perform the material duties of his
position on a full-time basis for a period of four (4)
consecutive months, then thirty (30) days after written
notice to Employee (which notice may be given before or
after the end of the four (4) consecutive month period,
but which shall not be effective earlier than the last
day of the four (4) consecutive month period), the
Company may terminate Employee's employment hereunder
if Employee is unable to resume his full-time duties at
the conclusion of the four (4) consecutive month
period. In the event of termination of Employee's
employment in accordance with this Section 6(b) as a
result of incapacity due to physical or mental illness
or injury, Employee shall receive from the Company the
base salary at the rate, plus paid group health
insurance, then in effect, for a period of six (6)
months from the date of termination as well as any
compensation due under Section 6(d) hereto. Such amount
shall be paid in a lump sum within ten (10) days after
termination of Employee's employment. In such event, no
other severance compensation shall be payable to
Employee, except for Employee's right to receive any
payments provided for in Section 6(d) hereof.
(c) Termination by the Company for Good Cause. The Company
may terminate the Term and Employee's employment ten
(10) days after written notice to Employee for "Good
Cause." "Good Cause" shall mean:
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(i) any act or omission that constitutes a willful and
material breach of this Agreement which is not cured
within thirty (30) days after written notice of same;
(ii) fraud, embezzlement, misappropriation of funds or
breach of trust in connection with his services
hereunder; (iii) the conviction of any crime that
involves dishonesty or a breach of trust; (iv) gross
negligence in connection with the Employee's duties
hereunder, which is not cured within thirty (30) days
after receipt by Employee of written notice of same; or
(v) the material refusal (other than as a result of
disability) by Employee to perform his duties
hereunder. Any termination for Good Cause shall be made
in writing to Employee, which notice shall set forth in
detail all acts or omissions upon which the Company is
relying for such termination. In the event of
termination of Employee's employment for Good Cause, no
severance compensation shall be payable to Employee,
except for Employee's right to receive any payments
provided for in Section 6(d).
(d) Payment Through Termination. Upon termination of
Employee's employment for any reason provided for in
Section 6(a), 6(b), or 6(c), Employee shall be entitled
to receive all compensation earned including a pro rata
share of any incentive compensation including, but not
limited to, the Bonus Plan, and all benefits and
reimbursements (including payments for accrued vacation
and sick leave, in each case in accordance with
applicable policies of the Company) due through the
effective date of termination. Additional compensation
subsequent to termination, if any, will be due and
payable to Employee only to the extent and in the
manner expressly provided above in this Section 6.
Except as specified in this Section 6, all rights and
obligations of the Company and Employee under this
Agreement shall cease as of the effective date of
termination, except that (i) the Company's obligations
under Section II shall survive such termination in
accordance with its terms and (ii) Employee's
obligations under Sections 7, 8, 9 and 10 shall survive
such termination in accordance with their terms.
(e) Termination Without Good Cause. At any time, the
Company shall have the right to terminate Employee's
employment hereunder by written notice to Employee.
Upon any termination pursuant to this Section 6(e)
(that is not a termination under any of Sections 6(a),
(b) or (c)), the Company shall (i) pay to Employee any
unpaid base salary through the effective date of
termination specified in such notice; (ii) pay to
Employee the accrued but unpaid incentive compensation,
if any, for the bonus period ending on or before the
date of the termination of Employee's employment with
the Company; (iii) continue to pay Employee's base
salary through the expiration of the Term (which shall
be the Term in effect on the date of
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termination of Employee's employment with the Company,
without regard to any potential future extensions of
such Term pursuant to Section 1), or, if the date of
termination is prior to any extension of the Term
pursuant to Section 1, through the end of the amount
period under Section 2.01(c) of the Stock Purchase
Agreement, in each case in the manner and at such times
as the base salary would have been payable to Employee;
and (iv) continue to provide Employee with health
insurance and life insurance (the "Benefits") through
the expiration of the Term (which shall be the Term in
effect on the date of termination of Employee's
employment with the Company, without regard to any
potential future extensions of such Term pursuant to
Section 1), or, if the date of termination is prior to
any extension of the Term pursuant to Section 1,
through the end of the amount period under Section 2.01
(c) of the Stock Purchase Agreement, in the manner and
at such times as the Benefits would have been payable
to Employee. In the event that the Company is unable to
provide Employee with the Benefits required hereunder
by reason of the termination of Employee's employment
pursuant to this Section 6(e), then the Company shall
pay Employee cash equal to the value of the Benefits
(based upon the cost to Employee to obtain comparable
benefits at standard rates) that otherwise would have
accrued for Employee's benefit under the plan for the
period during which such Benefits could not be provided
under the plans, such cash payments to be made over the
Tenn (which shall be the Term in effect on the date of
termination of Employee's employment with the Company,
without regard to any potential future extensions of
such Term pursuant to Section 1). The Company's good
faith determination of the value of any Benefits that
would have accrued under any plan shall be binding and
conclusive on Employee. Vesting of any unvested stock
option granted to Employee shall be accelerated and
become immediately vested, subject to exercise prior to
the termination of the stock option in accordance with
the Stock Option Plan. The Company shall have no
further liability hereunder (other than for
reimbursement for reasonable business expenses incurred
prior to the date of termination, subject, however, to
the provisions of Section 4) to Employee.
(f) Employee's employment hereunder may be terminated only
upon written consent of the Board of Directors of
Altiva. Altiva shall have the right to terminate
Employee upon the same terms and conditions as the
Company.
SECTION 7. RESTRICTIONS ON COMPETITION.
(a) During the period that the Employee is receiving
payments pursuant to this Agreement, and for a period
of two (2) years thereafter, Employee shall not,
directly or indirectly, for himself or on behalf of or
in conjunction
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<PAGE> 76
with any other person, company, partnership,
corporation, business, group or other entity (each, a
"Person"):
(i) engage, as an officer, director, shareholder,
owner, partner, member, joint venturer, or in a managerial
capacity, whether as an employee, independent contractor,
consultant, advisor or representative, in any business whose
principal products or services compete directly with the
Business of the Company in such areas where (i) the Company
conducts business as of the date of this Agreement, (ii) the
Company then conducts business and (ii) the Company did conduct
business at the end of the period that the Employee is employed
by the Company, if applicable (the "Territory"); or
(ii) contact any Person who is, at the time of the
contact, or was, within twelve (12) months prior to the date of
contact, an employee of the Company in any capacity for the
purpose or intent of enticing such employee away from or out of
the employ of the Company, or hire any such Person; or
(iii) contact any Person within the Territory who
is, at the time of the contact, or has been, within twelve (12)
months prior to the date of contact, a mortgage banker or
mortgage broker or other referral source to the Company, for the
purpose of originating, purchasing or, brokering selling
consumer loans, in competition with the Business of the Company.
(b) Notwithstanding any other provision of this Section 7,
nothing in this Agreement shall be deemed to prohibit
Employee or any other person from acquiring as an
investment not more than two percent (2%) of the
capital stock of any business, whose stock is traded on
a national securities exchange or through the automated
quotation system of a registered securities
association.
(c) For the purposes of this Section 7, references to "the
Company" shall mean the Company and its subsidiaries.
(d) The parties understand and agree that the term
"Business of the Company" is limited to the activity of
originating, purchasing, brokering and selling consumer
loans secured by one-to-four-family residences.
(e) If fulfillment of any provision of this Section 7, at
the time such fulfillment shall be due, shall transcend
the limit of validity prescribed by law, then the
obligation to be fulfilled shall be reduced to the
limit of such validity; and if any clause or provision
contained in this Section 7 operates or would operate
to invalidate this Section 7, in whole or in part, then
such clause or provision only shall be held ineffective
as though not herein
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<PAGE> 77
contained, and the remainder of this Section 7 shall
remain operative and in full force and effect.
(f) All of the covenants in this Section 7 shall be
construed as an agreement independent of any other
provisions in this Agreement, and the existence of any
claim or cause of action Employee may have against the
Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the
enforcement by the Company of such covenants.
(g) Employee has carefully read and considered the
provisions of this Section 7 and, having done so,
agrees that the restrictive covenants in this Section 7
impose a fair and reasonable restraint on Employee and
are reasonably required to protect the interests of the
Company and its officers, directors, employees, and
stockholders.
SECTION 8. TRADE SECRETS AND CONFIDENTIAL INFORMATION.
(a) For purposes of this Section 8, "Confidential
Information" means any data or information, other than
Trade Secrets, that is valuable to the Company and not
generally known to the public or to competitors of the
Company. "Trade Secret" means information including,
but not limited to, any technical or nontechnical data,
formula, pattern, compilation, program, device, method,
technique, drawing, process, financial data, financial
plan, product plan, list of actual or potential
sources, underwriters, brokers and purchasers of
consumer loans or other information similar to any of
the foregoing, which (i) derives economic value, actual
or potential, from not being generally known to, and
not being readily ascertainable by proper means by,
other persons who can derive economic value from its
disclosure or use and (ii) is the subject of efforts
that are reasonable under the circumstances to maintain
its secrecy.
(b) Employee acknowledges he is employed hereunder by the
Company in a confidential relationship wherein
Employee, in the course of his employment with the
Company, has received or will receive and has had or
will have access to Confidential Information and Trade
Secrets of the Company, including but not limited to
confidential and secret business and marketing plans,
strategies, and studies, lists of actual or potential
sources, underwriters, brokers or purchasers of
consumer loans and information relating to the
operations and business of the Company and,
accordingly, he is willing to enter into the covenants
contained in Sections 7 and 8 of this Agreement in
order to provide the Company with what he considers to
be reasonable protection for its interests.
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(c) Subject to Section 8(e), Employee hereby agrees that,
during the period that the Employee is receiving
payments pursuant to this Agreement and for a period of
two (2) years thereafter, he will hold in confidence
all Confidential Information of the Company that came
into his knowledge during his employment by the Company
and will not disclose, publish or make use of such
Confidential Information without the prior written
consent of the Company.
(d) Employee shall hold in confidence all Trade Secrets of
the Company that came into his knowledge during his
employment by the Company or during his employment with
any subsidiary of the Company or any predecessors
entity and shall not disclose, publish or make use of
at any time after the date hereof such Trade Secrets
without the prior written consent of the Company for as
long as the information remains a Trade Secret.
(e) Notwithstanding the foregoing, the provisions of this
Section will not apply to (i) information required to
be disclosed by Employee in the ordinary course of his
duties hereunder or (ii) Confidential Information that
otherwise becomes generally known in the industry or to
the public through no act of Employee or any person or
entity acting by or on Employee's behalf, or which is
required to be disclosed by court order or applicable
law.
(f) The parties agree that the restrictions stated in this
Section 8 are in addition to and not in lieu of
protections afforded to trade secrets and confidential
information under applicable state law. Nothing in this
Agreement is intended to or shall be interpreted as
diminishing or otherwise limiting the Company's right
under applicable state law to protect its Trade Secrets
and Confidential Information.
SECTION 9. INVENTIONS. Employee shall disclose promptly to the
Company any and all significant conceptions and ideas for business products,
services and processes, inventions, improvements and valuable discoveries,
whether patentable or not, which are conceived or made by Employee, solely or
jointly with another, during the period of employment, and which are directly
related to the Business of the Company and which Employee conceives as a result
of his employment by the Company or any subsidiary of the Company or any
predecessors entity (the "Work Product"). Employee hereby agrees that all Work
Product shall be considered work made for hire by Employee and shall be owned by
the Company. If any Work Product may not, by operation of law, be considered
work made for hire by Employee for the Company, Employee hereby assigns and
agrees to assign all his interests therein to the Company or its nominee.
Whenever requested to do so by the Company, during or after the Term, Employee
shall at the expense of the Company execute any and all applications,
assignments or other instruments that
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the Company shall deem necessary to apply for and obtain any permits, approvals
and consents required with respect to any Work Product or to otherwise protect
the Company's interest in the Work Product.
SECTION 10. RETURN OF COMPANY PROPERTY. All records, designs,
patents, business plans, financial statements, manuals, memoranda, lists,
databases and other property delivered to or compiled by Employee by or on
behalf of the Company (including any subsidiary of the Company and predecessors
entity) or its representatives, vendors or customers which pertain to the
Business of the Company (including any subsidiary of the Company and
predecessors entity) shall be and remain the property of the Company, and be
subject at all times to its discretion and control. Upon the request of the
Company and, in any event, at the end of the Term or upon the termination of
Employee's employment with the Company, Employee shall deliver all such
materials to the Company before any final compensation is paid to Employee.
Likewise, all correspondence, reports, records, charts, advertising materials
and other similar data pertaining to the business, activities or future plans of
the Company which are collected by Employee shall be delivered promptly to the
Company without request by it at the end of the Term or upon termination of
Employee's employment. Nothing contained herein shall require Employee to
deliver to the Company any property or materials owned or prepared by Employee
prior to the commencement of Employee's employment by the Company; provided
however, that such property or materials have not been modified so as to contain
any Confidential Information or Trade Secrets.
SECTION 11. INDEMNIFICATION. In the event Employee is made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by the
Company against Employee), by reason of the fact that he is or was performing
services under this Agreement, then the Company shall indemnify Employee against
all expenses (including reasonable attorneys' fees), judgment, fines and amounts
paid in settlement, as actually and reasonably incurred by Employee in
connection therewith to the fullest extent provided by law and to the same
extent, if any, as the Company covers its other officers and directors,
including coverage with respect to matters involving predecessor entities. In
the event that Employee incurs travel expenses for any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by the Company against Employee) to which
Employee is not a party, by reason of the fact that he is or was performing
services under this Agreement, the Company shall indemnify Employee for such
travel expenses as actually and reasonably incurred by Employee in connection
therewith. The obligations of the Company under this Section shall survive any
termination of employment or this Agreement with regard to Employee's acts or
omissions (other than willful misconduct or fraud) taken while employed by the
Company or any subsidiary of the Company or predecessor entity.
SECTION 12. NO PRIOR AGREEMENTS. Employee hereby represents and
warrants to the Company that the execution of this Agreement by Employee and his
employment by the Company and the performance of his duties hereunder will not
violate or be a breach of any
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<PAGE> 80
agreement with a former employer, client or any other Person. Further, Employee
agrees to indemnify the Company for any claim, including, but not limited to,
reasonable attorneys' fees and expenses of investigation, by any such third
party that such third party may now have or may hereafter come to have against
the Company based upon or arising out of any non-competition agreement,
invention or secrecy agreement between Employee and such third party which was
in existence as of the date of this Agreement.
SECTION 13. ASSIGNMENT; BINDING EFFECT. Employee understands that
he has been selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. The Company
may assign this Agreement only to the purchaser of all or substantially all of
the assets of the Company (whether by merger, consolidation, sale of assets or
other business combination), provided that any such assignee shall assume this
Agreement in a writing delivered to Employee. Subject to the preceding two
sentences, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective heirs, legal representatives,
successors and assigns.
SECTION 14. COMPLETE AGREEMENT: WAIVER; AMENDMENT. This Agreement
is not a promise of future employment beyond the Term. Employee has no oral
representations, understandings, or agreements with the Company or any of its
officers, directors, or representatives covering the same subject matter as this
Agreement. This Agreement is the final, complete, and exclusive statement of
expression of the agreement between the Company and Employee with respect to the
subject matter hereof, and cannot be varied, contradicted, or supplemented by
evidence of any prior or contemporaneous oral or written agreements. This
Agreement may not be later modified except by a further writing approved by the
Board of Directors and signed by a duly authorized officer of the Company and
Employee, and no term of this Agreement may be waived except by a writing signed
by the party waiving the benefit of such term.
SECTION 15. NOTICE. Whenever any notice is required hereunder, it
shall be given in writing addressed as follows:
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To the Company: Altiva Financial Corporation
Attention: J. Richard Walker
1000 Parkwood Circle
Suite 500
Atlanta, Georgia 30339
To the Employee: [name]
-----------------------------
-----------------------------
or to such other representative or at such other address of a party as such
party hereto may furnish to the other parties in writing. Such notice shall be
effective upon the date of delivery or refusal of delivery, if sent by personal
delivery, registered, certified or express mail or courier delivery, or upon
transmission by telecopy transmission, if immediately confirmed by telephone or
electronic means.
SECTION 16. SEVERABILITY; HEADINGS. If any portion of this
Agreement is held invalid or inoperative, the other portions of this Agreement
shall be deemed valid and operative and, so far as is reasonable and possible,
effect shall be given to the intent manifested by the portion held invalid or
inoperative. This severability provisions shall be in addition to, and not in
place of, the provisions of Section 7(e) above. The section headings are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent of the Agreement or of any part hereof.
SECTION 17. EQUITABLE REMEDY. Because of the difficulty of
measuring economic losses to the Company as a result of a breach of the
restrictive covenants set forth in Sections 7, 8, 9 and 10, and because of the
immediate and irreparable damage that would be caused to the Company for which
monetary damages would not be a sufficient remedy, it is hereby agreed that in
addition to all other remedies that may be available to the Company at law or in
equity, the Company shall be entitled to specific performance and any injunctive
or other equitable as a remedy for any breach or threatened breach of the
aforementioned restrictive covenant.
SECTION 18. ARBITRATION. Any unresolved dispute or controversy
arising under or in connection with this Agreement, or with Employee's
employment with the Company, including but not limited to any alleged claims of
employment discrimination, shall be settled exclusively by arbitration,
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. The arbitrators shall have the authority to order back-pay,
severance compensation, reimbursement of costs, including those incurred to
enforce this Agreement, and interest thereon in the event the arbitrators
determine that Employee was terminated without disability or without Good Cause
or that the Company has otherwise materially breached this Agreement. A decision
by a majority of the arbitration panel shall be final and binding. Judgment may
be entered on the arbitrators' award in
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any court having jurisdiction. The direct expense of any arbitration proceeding
shall be borne by the Company. The arbitration proceeding shall be held in
Charlotte, North Carolina. Notwithstanding the foregoing, the Company and
Employee shall be entitled to seek injunctive or other equitable relief, as
contemplated by Section 17 above, from any court of competent jurisdiction,
without the need to resort to arbitration.
SECTION 19. CONSTRUCTION. No provision of this Agreement shall be
construed against or interpreted to the disadvantage of Employee or the Company
by any court or the government or judicial authority by reason of Employee or
the Company having or being deemed to have structured or drafted such provision
of this Agreement.
SECTION 20. GOVERNING LAW. It is the intention of the parties
hereto that this Agreement and the performance hereunder be interpreted,
construed and governed in accordance with, under and pursuant to the laws of the
State of North Carolina without reference to its choice of law rules. In
addition, the parties hereto consent to the jurisdiction of the courts of the
State of North Carolina for the adjudication of claims related to this Agreement
and the matters described herein.
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IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be duly executed as of the date first written above.
THE MONEY CENTRE, INC.
By:
---------------------------------
[name]
EMPLOYEE
------------------------------------
[Name]
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<PAGE> 84
EXHIBIT 8.07
<PAGE> 85
COMMERCIAL OFFICE LEASE AGREEMENT
LANDLORD: ROYAL COUNTY DOWN, LLC,
A North Carolina Limited Liability Company
2929 Twelve Mile Creek Road
Matthews, North Carolina 28104
TENANT: THE MONEY CENTRE, INC.
A North Carolina Corporation
10504 Park Road
Charlotte, North Carolina 28210
LEASE TERM: Commencement Date - July 1, 1999
Termination Date - June 30, 2009
Five Year Renewal Option
BASE RENT: Initial Annual Base Rent - $270,000.00
Initial Monthly Base Rent - $22,500.00
LEASED PREMISES: Lot 5B, Park Fifty One Professional Center
10504 Park Road, Charlotte, North Carolina 28210
RENTABLE AREA: Approximately 15,000 Square Feet
<PAGE> 86
STATE OF NORTH CAROLINA )
)
COUNTY OF MECKLENBURG )
COMMERCIAL OFFICE LEASE AGREEMENT
This Commercial Office Lease Agreement ("this Lease") is made as of this ____
day of July, 1999 by and between Royal County Down, LLC, a North Carolina
Limited Liability Company (hereinafter referred to as "Landlord"), and The
Money Centre, Inc., a North Carolina corporation (hereinafter referred to as
"Tenant").
WHEREAS, Landlord owns the real property known as Lot 5B of Park Fifty
One Professional Center - Map 1, as shown on the map thereof recorded in Map
Book 26, Page 331 of the Mecklenburg County Public Registry, and having a
street address of at 10504 Park Road, Charlotte, North Carolina 28210,
consisting of a one story brick veneer building containing approximately 15,000
square feet, and attendant easements as shown on the recorded plat, as well as
the parking and sidewalk areas (the "Leased Premises"); and
WHEREAS, Landlord wishes to rent the Leased Premises to Tenant, and
Tenant wishes to rent the Leased Premises from Landlord.
NOW, THEREFORE, based upon the following mutual promises and
conditions, and upon the payment of the rent stated herein, Landlord leases to
Tenant, and Tenant leases from Landlord, the Leased Premises, upon the
following terms and conditions:
1. RENT. The initial base rent beginning on July 1, 1999, shall be
in the annual amount of $270,000.00, which equates to a monthly amount of
$22,500.00, or approximately $18.00 per square foot. The base rent will be
increased each year by the percentage increase in the Consumer Price Index
("CPI") in Charlotte, North Carolina, subject to a minimum increase of four per
cent (4%) for the previous twelve month period. All rental payments are due by
the first day of the month, and there is a late payment charge of five percent
if the rent is not timely paid. Timely paid shall be defined as being paid by
the 10th day of the month.
2. EXAMINATION. Tenant agrees that the premises are currently in
satisfactory condition, and at the time of Tenant's original possession, the
Leased Premises were in good order and satisfactory condition, except as to
such matters as may be agreed upon by both parties prior to such entry.
3. TERM OF LEASE. The term of this Lease shall be for a period of
ten (10) years. This lease may be renewed, at the option of Tenant, for an
additional five (5) year term.
4. LEASE YEAR. The term "lease year" as used herein shall mean each
calendar year during the term hereof, with any period of occupancy by Tenant
prior to the first and subsequent to the last such calendar year being deemed a
calendar year for the purpose hereof with pro rata adjustment with respect to
rental or other matters provided for in this Lease in which the "lease year"
shall be a factor.
5. SECURITY DEPOSIT. There is no security deposit required with this
Lease.
6. USE OF LEASED PREMISES. Tenant agrees that the Leased Premises
will be used for the purpose of conducting a mortgage business, and for use as
a general office. Tenant will not use the Leased Premises for any other purpose
without Landlord's consent in writing.
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7. REPAIRS AND ALTERATIONS. Tenant, at its sole cost and expense
after the expiration of any warranty period by contractors and/or suppliers,
whether the same shall be the property of Tenant or Landlord, shall keep both
the interior and exterior of the Leased Premises in good repair. This
obligation shall include (but is not limited to) all painting, floor
maintenance, replacement of damaged ceiling tile (except for damage caused by
roof leaks), screen repair, and repair of all hardware, interior and exterior
doors, trade fixtures and heating, air conditioning, water, electrical,
plumbing and other equipment, whether or not they were originally installed by
Landlord or by Tenant. Tenant shall replace and install all interior or
exterior damaged glass except such glass as may be damaged as a result of
settling of the building or improper initial installation. Alterations to the
Leased Premises by Tenant shall be made only with the consent of Landlord and
under its control and supervision. Any structural alterations by Tenant, (i.e.,
roof cuts, etc.) must have written approval by Landlord. However, consent shall
not be unreasonably withheld in case of minor alterations to conform the Leased
Premises to the use of Tenant's business. Any unauthorized structural
alteration by Tenant, which jeopardizes or voids an existing building or roof
warranty, shall result in the tenant being financially liable for all costs the
Landlord incurs which would normally have been covered through the warranty
period. Tenant shall bear the cost of any alterations or installations which
are made by it or for its convenience.
Tenant shall promptly pay all contractors and materialmen, so
as to minimize the possibility of a lien attaching to the Leased Premises, and
should any such lien be made or filed, tenant shall bond against or discharge
the same within thirty (30) days after written request by Landlord,
notwithstanding the provisions regarding liens in Paragraph 15.
Regardless of any obligation otherwise imposed upon Landlord,
Tenant shall pay for the cost of any repairs or damage resulting from the
negligence or the unlawful or willful acts of its employees, representatives or
visitors.
Landlord shall not be liable to Tenant for failure to make
any repairs required of Landlord, or damages as a consequence thereof, unless
written notice of necessity thereof has been given by Tenant to Landlord,
specifying in reasonable detail the repairs required, and Landlord shall not
have made such repairs within a reasonable period of time sufficient to
accomplish such repairs after receipt of such notice, due allowances being made
for delays beyond the control of Landlord.
8. CARE OF LEASED PREMISES. Tenant shall at all times keep the
Leased Premises in a clean and neat condition. Tenant shall (A) contract with a
licensed heating and air conditioning firm for regular inspections and
maintenance of mechanical equipment, including, but not limited to, regular
replacement of filters and furnish Landlord a copy of said contract or
agreement; (B) on the Expiration Date, Tenant shall quit and surrender the
demised premises broom clean and in good condition and repair together with all
alterations, fixtures, installations, additions and improvements which may have
been made in or attached on the demised premises except for reasonable wear and
tear. Upon surrender, Tenant shall remove its trade fixtures, and Tenant shall
repair any damage to the demised premises caused thereby. Landlord may require
Tenant to restore the demised premises so that the demised premises shall be as
they were on the commencement date except for reasonable wear and tear; (C)
prohibit anything which shall endanger or cause injury to any person or
property; (D) prohibit disturbing or offensive odors, fumes, gases, smoke,
dust, steam vapors, noise or vibrations; (E) keep the entryways, sidewalks and
delivery and service areas clean and free from rubbish, dirt, snow, and ice;
(F) keep the interior free of vermin; (G) prohibit the use of sinks, toilets or
urinals for any purpose except that for which they were designated and
installed; (H) maintain all the display windows and glass in a clean and neat
condition; (I) store all trash and garbage within the Leased Premises and
provide for its prompt and regular removal for disposal; (J) Use electric
current in such manner as not to overload the buildings wiring installation.
9. SIGNS AND ADVERTISING. Without the prior approval of Landlord,
Tenant shall not
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permit the painting or display of any sign, placard, lettering or advertising
material of any kind on or near the exterior of the leased premises. tenant
shall not permit the use of any advertising media or device (such as sound
production devices) which shall be audible from the exterior of the Leased
Premises.
Tenant shall be responsible for damage to and repairing
building to as near original condition, subject to Landlord's acceptance, due
to the installation, maintenance and/or removal of sign. Signs which remain in
place on the Premises ten (10) days after the end of the Term or after Tenant
abandons Premises shall automatically become the property of Landlord and may
be removed by Landlord at Tenant's expense (including cost of repairs to
Premises).
10. COST OF UTILITIES. Tenant shall procure for its own account,
shall be solely responsible for and shall promptly pay all charges for water,
sewerage service, gas, electric power, hot and cold water furnished for heat
and air conditioning consumed or used in or at said premises, together with any
and all other utilities used or consumed in the Leased Premises. The Landlord
shall not be responsible or liable to the Tenant in damages or otherwise for
the quality or quantity or for any interruptions, curtailment, or suspension of
utilities service due to repairs, action of public enemy, or any other cause
beyond the Landlord's reasonable control.
11. TAXES. Tenant shall make timely payment of all ad valorem taxes
and assessments against the Leased Premises, as well as Tenant's stock of
merchandise, furniture, equipment, supplies and other property located on or
used in connection with the Leased Premises and of all privilege and business
licenses, taxes and similar charges for which Tenant is primarily responsible.
12. PROPERTY INSURANCE. Tenant shall keep all furniture, fixtures,
equipment and plate or other glass insured to the extent of its full insurable
value against loss or damage by fire, with extended coverage, and shall furnish
Landlord with satisfactory evidence of such coverage within thirty (30) days
after the commencement date of this lease agreement.
Tenant will not do or suffer to be done, or keep or suffer to
be kept, anything in, upon or about the Demised Premises which will contravene
Landlord's policies insuring against loss or damage by fire or other casualty
(including but not limited to public liability) or which will prevent Landlord
from procuring such policies in companies acceptable to Landlord. If anything
done, omitted to be done or suffered to be done by Tenant, or kept or suffered
by Tenant to be kept, in, upon or about the Demised Premises shall cause the
rate of fire or other insurance on the Demised Premises or other property of
Landlord in companies acceptable to Landlord to be increased beyond the minimum
rate from time to time applicable to the premises for use for the purposes
permitted under this Lease or such other property for the uses made thereof,
Tenant will pay the amount of such increase promptly upon Landlord's demand.
13. LIABILITY INSURANCE. Tenant shall provide and keep in force, for
the protection of the general public and Landlord, liability insurance against
claims for bodily injuries or death upon or near the Leased Premises, and the
sidewalks, streets and service and parking areas adjacent thereto to the extent
of not less than $1,000,000.00 in respect to bodily injuries or death to any
one person and to the extent of not less than $ 1,000,000,00 for bodily
injuries or death to any number of persons arising out of one accident or
disaster and property damage with limits of not less than $1,000,000.00. Tenant
shall furnish Landlord with satisfactory evidence of such coverage within
thirty (30) days after the commencement date of this lease agreement. Such
policy of insurance shall show as named assured the Tenant and the Landlord, as
their interest may appear and shall contain clause that the insurer will not
cancel or change the insurance without first giving Landlord ten (10) days
prior written notice.
14. PROTECTION OF LANDLORD. (A) Tenant shall indemnify and save
harmless Landlord from and against any and all liability, damage, penalties or
judgments arising from injury to person or persons or property sustained by
anyone in and about the Leased Premises resulting
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from any act or acts or omissions of Tenant or Tenant's officers, agents,
servants, employees, contractors or sublessees. The tenant shall at its own
cost and expense, defend any and all suits or actions which may by impleaded
with other upon any such aforementioned matter or claim except as may result
from the acts set forth in Subparagraph (B) of this Paragraph.
(B) Except for its affirmative acts or negligence or the
affirmative acts or negligence of its officers, agents, servants, employees or
contractors, Landlord shall not be responsible or liable for any damage or
injury to any property, fixtures, buildings, or other improvements or to any
person or persons, at any time on the Leased Premises, including any damage or
injury to Tenant or to any of Tenant's officers, agents, servants, employees,
contractors, customers, or sublessees.
(C) Landlord shall not be under any responsibility or
liability in any way whatsoever for any latent defect in the Leased Premises or
in the building of which they form a part.
(D) Tenant shall give immediate notice to Landlord in case of
fire or accidents in the Leased Premises or the building of which the premises
are a part or of defects therein or in any fixtures or equipment. Tenant shall
not sell or distribute alcoholic beverages for on or off premises consumption
without prior approval by Landlord. If approved, Tenant shall carry liquor
liability insurance naming the Landlord and its agents as additional insured.
Tenant shall furnish Landlord a copy of said liquor liability insurance and
shall keep said policy in full force and effect and shall notify Landlord
immediately upon termination of said insurance.
15. LIENS. Tenant agrees not to suffer or permit any lien of any
nature or description to be placed against the Property, or any portion
thereof, and, within sixty (60) days of any such lien attaching by reason of
the conduct of Tenant, to pay and remove the same, or to post a bond for same,
pending resolution of any claim. This provision shall not be interpreted as
meaning that the Tenant has any authority or power to permit any lien of any
nature or description to attach to or be placed upon the Landlords title or
interest in the Property or any portion thereof; Tenant does not have such
power or authority.
16. FIRE OR CASUALTY. If the Leased Premises shall be made
untenantable by fire or other casualty, Landlord, if it so elects, may (A)
Terminate the term of this Lease, effective as of the date of such fire or
casualty, by written notice given to Tenant within thirty (30) days after such
date, or (B) repair, restore, or rehabilitate said Leased Premises at
Landlord's expense within six (6) months after the date of such fire or
casualty, in which event the term hereof shall not terminate but any fixed rent
herein reserved shall be abated on a per diem basis while the Leased Premises
shall remain untenantable. If Landlord elects to so repair, restore or
rehabilitate said Leased Premises and shall fail to substantially complete the
same within said six (6) month period, due allowance being made for delay due
to practical impossibility, either Landlord or Tenant, by written notice to the
other, given within fifteen (15) days next following the last day of said six
(6) month period, may terminate the term hereof pursuant to this Paragraph,
guaranteed rent, if any, reserved hereunder shall be apportioned on a per diem
basis and paid to the date of such fire or casualty and percentage rent, if
any, shall be paid to the date of termination. The right of termination herein
provided is separate and independent of any other provisions of this Lease
relative to termination. The foregoing notwithstanding, if during the last two
(2) years of the existing term, the Leased Premises shall be damaged to the
extent of more than 25% of the reasonable value of the improvements above
foundation and floor, Landlord shall not be obligated to repair and replace
said premises unless Tenant, within thirty (30) days after demand by Landlord,
extends said Lease for the period of any renewal term then authorized, and if
there be no such term authorized, Landlord shall not be obligated to make such
repairs, but may, at is election to be exercised within sixty (60) days after
date of such damages, cancel and terminate this Lease effective as of the date
of such damages. If the Lease is terminated by the Tenant pursuant to the
provisions of this Paragraph, Landlord shall have no further obligations to
<PAGE> 90
TENANT.
17. EMINENT DOMAIN. In the event the whole of the Leased Premises (or
such substantial part thereof that they are rendered unsuitable for Tenant's
business) shall be taken by any public authority under the power of eminent
domain or like power, this Lease shall terminate as of the date possession
thereof shall be required to be delivered to the appropriate authority. In the
event of only a partial taking under such power, which does not materially
render the Leased premises unsuitable for Tenant's business, this Lease shall
not terminate, but there shall be an equitable abatement of the guaranteed rent
proportionate to the part of the Leased Premises taken under such power. In the
event of any total or partial taking under such power, Landlord shall be
entitled to all such awards of damages as may be allowed.
18. ASSIGNMENT AND SUBLETTING. Without Landlord's prior written
consent, which consent shall not be unreasonably withheld, Tenant shall not
assign this Lease, sublet any part of the Leased Premises, or otherwise
transfer any right or interest hereunder. If Landlord gives its consent, such
approval shall be limited only to the particular instance described in the
consent. In the event the Landlord's written consent is given to an assignment,
or subletting, the Tenant shall nevertheless remain liable to perform all
covenants and conditions thereto and to guarantee such performance by his
assignee or subtenant unless relieved thereof by the terms of such consent. In
the event that any transfer, assignment or subletting results in rent in excess
of that due by Tenant hereunder, Landlord shall be entitled to the whole amount
of such access.
19. LANDLORD MORTGAGES. At the option of Landlord, this lease shall
be subordinated to the lien of any mortgage or deed of trust (hereinafter
called 'mortgagee') which Landlord may place on the Leased Premises. Upon
Landlord's request, Tenant shall execute any instrument which may be required
to effectuate such a subordination, provided Landlord shall first have
delivered to Tenant recordable agreement signed by the mortgagee(s) providing
in substance that, as long as Tenant shall discharge its obligations under this
Lease: (A) its tenancy shall not be disturbed; (B) This Lease shall not be
affected by any default under the mortgage; (C) in the event of foreclosure of
the mortgage, the right of Tenant shall survive, provided Tenant fully performs
all of its obligations hereunder, and provided further that Tenant shall not
have prepaid any rent, except as the same becomes due under the terms of this
Lease; and (D) This Lease shall continue in full force and effect. If Tenant is
notified of Landlord's assignment of this Lease as security for a mortgage
loan, and of the name and address of the mortgagee or trustee, Tenant shall not
terminate or cancel this Lease for any default on the part of Landlord without
first: (A) Giving notice of its intention to do so to such mortgagee or
trustee, the notice to describe in reasonable detail the nature and extent of
the default; and (B) Affording such mortgagee or trustee a reasonable
opportunity to perform on behalf of Landlord its obligations under this Lease.
20. SALE OR ASSIGNMENT. Tenant shall, in the event of sale or
assignment of Landlord's interest in the building of which the Leased Premises
form a part, or in the event of any proceedings brought for the foreclosure of,
or in the event of the exercise of the power of sale under any mortgage made by
Landlord covering the Leased Premises, attorn to the purchaser and recognize
such purchaser as Landlord under this Lease.
21. ESTOPPEL CERTIFICATES. At any time and from time to time upon
request in writing from Landlord, Tenant agrees to execute, acknowledge and
deliver to Landlord a statement in writing certifying that the Lease if
unmodified and in full force and effect (or if there have been modifications,
that the same is in full force and effect as modified and stating the
modifications), the dates to which the Fixed Minimum Rent, Percentage Rent, and
other charges have been paid, and any other factual date relating to this Lease
or the Leased Premises which Landlord may request.
22. ENTRY OF LANDLORD. Landlord may, at all reasonable times, enter
the Leased Premises: (A) To inspect or protect the Leased Premises or any of
its equipment thereon; (B)
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To effect compliance with any law, order or regulation of any lawful authority;
(c) To make or supervise repairs, alterations or additions; (D) To exhibit the
Leased Premises to prospective tenants, purchasers or other persons; and (E) To
alter or otherwise prepare the Leased Premises for re-occupancy at any time
after Tenant has vacated the Leased Premises. No authorized entry by Landlord
shall constitute an eviction of Tenant or a deprivation of Tenant's rights,
after the obligation of Tenant, or create any right in Tenant adverse to
Landlord's interests hereunder and the rent reserved shall in no way abate, by
reason of loss or interruption of business of Tenant, or otherwise, while any
repairs, alterations, improvements or additions are being made. During the last
six (6) months prior to the expiration of the term of this Lease or any renewal
terms, Landlord may place upon the Leased Premises the usual notices 'for rent'
or 'for sale,' which notices Tenant shall permit to remain thereon without
molestation.
23. REMOVAL OF EQUIPMENT AND FIXTURES. All trade furnishings,
fixtures and equipment in the Leased Premises, which are supplied and installed
at the sole expense of Tenant, shall remain Tenant's property. Tenant may
remove these items prior to termination of this Lease, provided: (A) Tenant is
not in default hereunder at the time of termination; and (B) Tenant immediately
repairs or reimburses Landlord for the cost of repairing all resulting damage
or defacement. Otherwise, such items shall become Landlord's property.
24. HOLDING OVER BY TENANT. In the event Tenant remains in possession
of the Demised Premises after the expiration date and without the execution of
a new lease, it shall be deemed to be occupying said premises as a tenant from
month to month at a rental equal to the rental (including any Percentage
Rental) herein provided plus twenty percent (20%) of such amount and for each
additional month, the rental shall be an additional twenty percent (20%) over
and above the rental paid for the preceding month. For example, if rent is
$20,000.00, Tenant shall pay $24,000.00 in the first month tenant holds over
and $28,800.00 for the second month, and so forth. Otherwise, all conditions,
provisions and obligations of this Lease insofar as the same are applicable to
a month to month tenancy. Either party may terminate such month to month
tenancy upon 30 days written notice thereof to the other party. Tenant shall
not acquire any right or interest in the Leased Premises by remaining in
possession after the termination of this Lease.
25. DEFAULT. As used in this Lease, the term 'event of default' shall
mean any of the following: (A) Tenant's failure to make payment of any rental
installment or any other amounts payable by Tenant to Landlord hereunder within
ten (10) days after receipt of notice that same is due and payable; (B)
Tenant's failure, within ten (10) days after receipt of demand by Landlord, to
fulfill any obligation imposed on Tenant by this Lease; (C) Tenant or its
guarantor shall file in any court a petition in bankruptcy or insolvency or for
reorganization within the meaning of the Bankruptcy Code, or for the
appointment of a receiver or trustee of all or a portion of Tenant's property;
(D) an involuntary petition of the kind referred to in Subparagraph (C) of this
Paragraph shall be filed against Tenant or its guarantor, if any, and such
petition shall not be vacated within thirty (30) days after the date of filing
thereof; (E) Tenant or guarantor, if any, shall make an arrangement for the
benefit of creditors, or shall be adjudicated a bankrupt; (F) any property used
in connection with Tenant's leasehold interest shall be taken on execution; (G)
Tenant shall for reasons other than those specifically permitted in this Lease
cease to conduct its normal business operations in the Leased Premises and
leave the same vacated or abandoned for a period of ten (10) days. Upon the
happening of an 'event of default', Landlord at its option, may: (A) terminate
this lease; (B) if default consists in whole or in part of Tenant's failure to
expend funds, make the necessary expenditures for the account of Tenant who
shall reimburse Landlord therefore with interest at the maximum legal rate of
interest from date of expenditure; or (C) terminate Tenant's rights to
possession of the Leased Premises without terminating the term of this Lease.
Upon termination of this Lease for any reason, or upon termination of the
Tenant's right of possession as provided above, Tenant shall promptly surrender
possession to Landlord and vacate the Leased Premises, and Landlord may reenter
the Leased Premises and expel the Tenant or anyone claiming under the Tenant
and remove the property of any of them without notice, formal claim or process,
Landlord being absolved of any
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liability or claim for damages in doing anything reasonably necessary or
appropriate in connection therewith. If Landlord elects to terminate Tenant's
right of possession without terminating the term of this Lease, Landlord may,
at its option, lease or sublet all or any part of the Leased Premises on such
terms and conditions as Landlord may elect and collect from Tenant any balance
remaining due on the rent or other obligations payable by Tenant under this
Lease. It is expressly understood and agreed that the provisions of this
Paragraph shall not be construed to limit or impair any other right, claim or
remedy to which Landlord may be entitled by law in case of Tenant's default.
26. ENVIRONMENTAL COMPLIANCE. Tenant will not use, nor permit in the
operation of its business for the Leased Premises, the property or any
improvements thereupon to be used for the generation, manufacture, use,
storage, or disposal of materials designated or regulated as hazardous,
radioactive, or toxic materials or wastes by any federal, state, or municipal
government authority, agency, or body having jurisdiction, except in strict
compliance with all applicable environmental laws. Tenant specifically agrees
to indemnify and hold Landlord, its partners, officers and employees, and the
mortgagee under any mortgage, beneficiary and trustee under any deed of trust
and ground lessor under any ground lease having an interest in the Property or
any part of it, and their officers and employees (collectively, the
"Environmental Indemnities") harmless, from any cost, loss, damage, fine,
penalty, judgment, award or fee, including attorney's fees, incurred by any
Environmental Indemnitee as a result of a spill, release or threatened spill or
release or the generation, manufacture, use, storage or disposal; of Toxins by
Tenant, its agents, servants, employees, invitees, licensees or others under
its control, or Tenant's failure to comply with its obligations set forth
herein, including without limitation, lost rents and profits by reason of the
unavailability of the Property or any portion of it, or the Premises for future
use, costs of current clean up and remedial measures and subsequent clean up
and remedial measures irrespective of whether such costs are incurred during
the term of or after the expiration of the terms of this Lease.
27. LANDLORD'S WARRANTIES. Landlord warrants to Tenant that it has
the right to lease the Leased Premises on the terms and conditions of this
Lease; that the Leased Premises are presently free of any zoning or other
restrictions prohibiting Tenant's authorized use and occupancy thereof, and
that Tenant may peaceably and quietly hold and enjoy the Leased Premises for
the term of this Lease as long as it shall faithfully perform its obligations
hereunder, except as otherwise provided for by the terms of this Lease.
28. NOTICES AND REPORTS. Any notice, report, statement, approval,
consent, designation, demand or request to be given, and any option or election
to be exercised, by a party under the provisions of this Lease shall be
effective only when made in writing and sent by United States Certified or
Registered Mail, postage prepaid, to the other party at the applicable address
set forth above. However, either party may designate a different address by
giving the other party notice of the change. Rentals payable to Landlord shall
be paid by Tenant at the same address prescribed for delivery of written
notice.
29. CONSTRUCTION OF LEASE. This Lease shall be construed according to
the laws of the State of North Carolina. References to Tenant, whenever
consistent with the context of this Lease, shall include the plural, neuter,
feminine and masculine. In the absence of specified provisions to the contrary,
the party upon whom any obligation is imposed by this Lease shall perform the
obligation at its own expense. Paragraph headings relating to the contents of
particular paragraphs are inserted only for the purpose of convenience and are
not to be construed as parts of the particular paragraphs to which they refer.
Any separate or attached sketch, drawing, plan, specification, rider, exhibit
or schedule shall be deemed an original part of this Lease only if initialed by
the parties. The failure of the Landlord to insist upon strict performance of
any of the covenants or condition of this Lease or to exercise any option
herein conferred in any one or more instances shall not be construed as a
waiver or relinquishment of any such covenants, conditions or options, but the
same shall be and remain in full force and effect.
<PAGE> 93
If any term, covenant or conditions of this Lease or the
application thereof to any person or circumstances shall, to any extent be
invalid or unenforceable, the remainder of this Lease, of the application of
such term, covenant or condition to persons or circumstances other than those
as to which it is held invalid or unenforceable, shall not be affected thereby
and each term, covenant or condition of this Lease shall be valid and be
enforced to the fullest extent permitted by law.
30. RECORDATION OF MEMORANDUM OF LEASE. Upon the request of either
party, the other party will in good faith cooperate in the preparation and
execution of a recordable instrument describing the parties, the Leased
Premises, the basic terms of this lease and such other portions hereof as
either party may desire to be included in such instrument.
31. DEFAULT BY LANDLORD. Landlord shall in no event be charged with
default in the performance of any of its obligation hereunder unless and until
Landlord shall have failed to perform such obligations within thirty (30) days
after written notice by Tenant to Landlord properly specifying wherein Landlord
has failed to perform any such obligation, or if circumstances are such that
the default cannot be reasonably cured within said thirty (30) day period,
unless Landlord has not commenced to perform such obligations within said
thirty (30) days after written notice, and has not completed performance within
a reasonable time thereafter.
32. IDENTITY OF INTEREST. The execution of this Lease or the
performance of any act pursuant to the provisions thereof shall not be deemed
or construed to have the effect of creating between Landlord and Tenant the
relationship of principal or agent or of partnership or of joint venture and
the relationship between them shall be that only of Landlord and Tenant.
33. BINDING EFFECT OF LEASE. All rights and liabilities given to or
imposed upon either of the parties by this Lease shall benefit and bind their
respective successors, heirs and assigns to the extent this Lease may be
assignable as provided above.
34. MISCELLANEOUS. This Lease contains all of the agreements and
conditions made between the parties hereto and may not be modified orally, or
in any other manner than by an agreement, in writing, signed by the parties
hereto or their respective successors in interest.
Each of the persons whose signature appears hereon does warrant to all
others signatory hereto that such person is duly authorized and empowered to
execute this Lease Agreement and thereby bind the Landlord and Tenant first
named above.
If Tenant shall default in the performance of any covenant
required to be performed by virtue of any provisions of this Lease, Landlord
may, after any notice and the expiration of any period with respect thereto as
required pursuant to the applicable provisions of this lease, perform the same
for the account of Tenant. If Landlord, at any time, is compelled to pay or
elects to pay any sum of money or do any acts which would require the payment
of any sum of money by reason of the failure of Tenant, after any notice and
the expiration of any period with respect thereto as required pursuant to the
applicable provisions of this lease, to comply with any provision of this
Lease, or if Landlord is compelled to incur any expense including reasonable
attorney's fees, instituting, prosecuting or defending any action or proceeding
instituted by reason of any default of Tenant hereunder, the sum or sums so
paid by Landlord, with all interest, costs and damages, shall be deemed to be
additional rental hereunder and shall be due from tenant to Landlord on the
first day of the month following the incurring of such respective expenses
except as otherwise herein specifically provided. If Tenant is compelled to
incur any expense, including reasonable attorney's fees, in instituting,
prosecuting or defending any action or proceeding instituted by reason of any
default of Landlord hereunder, the sum or sums so paid by Tenant, with all
interest, costs and damages, shall be due and payable from Landlord to Tenant
on the first day of the month following the incurring of such expense.
<PAGE> 94
35. LIMITATION OF LIABILITY. Anything contained in this Lease to the
contrary notwithstanding, Tenant agrees that it shall look solely to the estate
and property of the Landlord in the land and buildings comprising the Demised
Premises from a part for the collection of any judgment requiring the payment
of money by Landlord for any default or breach by Landlord of any of its
obligations under this Lease, and no other asset of Landlord shall be subject
to levy, execution or other judicial process for the satisfaction of Tenant's
claim.
36. NON-WAIVER. In the event the Lessor shall fail to exercise any
right, power, privilege, or option immediately upon the same arising, such
failure shall not be construed as a waiver of the right to exercise that right,
power, privilege or option at a subsequent time, and the failure on the part of
the lessor to insist upon strict compliance with any of the terms of this
agreement by Lessee shall not be construed as a waiver of the right of the
Lessor to insist upon strict compliance in the future.
37. LATE CHARGES. In the event that Tenant is more than ten (10) days
late in the payment of its monthly charges under the provisions of this Lease,
then in addition to the amount owed, Tenant shall pay a late charge equal to
five percent (5%) of the amount due. Failure to pay any funds when due under
the terms of this Lease shall subject Tenant to all of the provisions
applicable upon default provided for in this Agreement; or provided for by law,
and such rights granted to the Landlord shall not be abridged by the provisions
herein for said late charges.
38. INSUFFICIENT FUNDS. Landlord will bill Tenant, and Tenant agrees
to pay, Twenty-five Dollars ($25.00) for each rental payment that has been
returned because of insufficient funds.
39. WAIVER OF JURY TRIAL; VENUE. Landlord and Tenant each hereby
waives all right to trial by Jury in any claim, action, proceeding or
counter-claim by either party against the other on any matters arising out of
or in any way connected with this Lease, the relationship of Landlord and
Tenant or Tenants' use or occupancy of the Premises, and agree that any such
litigation shall be brought only in the Federal or State courts in the City of
Charlotte, County of Mecklenburg, North Carolina having jurisdiction thereof.
40. ATTORNEY'S FEES. The prevailing Party shall recover all reasonable
Attorney's Fees, reasonable expert witnesses fees, court costs, and related
expenses incurred in connection with any litigation to enforce this Lease
IN WITNESS WHEREOF, the parties hereto have signed and sealed this
Lease as of the day and year first above written.
LANDLORD: ROYAL COUNTY DOWN, LLC, a North Carolina
Limited Liability Company
By: (SEAL)
Rodney D. Atkinson, Member/Manager
TENANT: THE MONEY CENTRE, INC.
(CORPORATE SEAL)
<PAGE> 95
By:
Stephen L. Walker - Chief Financial Officer
ATTESTED:
By:
Assistant Secretary
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
I, the undersigned Notary Public for said County and State, do hereby
certify that Rodney D. Atkinson, Member/Manager of Royal County Down, LLC, a
North Carolina Limited Liability Company, appeared before me this day and
acknowledged the due execution of the foregoing instrument.
Witness my hand and official seal, this the ____ day of July, 1999.
Notary Public
My Commission Expires:
-------------------------
STATE OF NORTH CAROLINA
COUNTY OF MECKLENBURG
I, the undersigned Notary Public for said County and State, certify
that Debbie Wilson personally appeared before me this day and acknowledged that
she is Assistant Secretary of The Money Centre, Inc., and that by authority
duly given and as the act of the corporation, the foregoing instrument was
signed in its name by its Chief Financial Officer, sealed with its corporate
seal, and attested by herself as its Assistant Secretary.
Witness by hand and official seal, this the ______ day of July, 1999.
-----------------------------
Notary Public
My Commission Expires:
--------------
<PAGE> 96
EXHIBIT 8.08
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated the ___
day of July, 1999 by and among Altiva Financial Corporation, a Delaware
corporation (the "Company"), and each of the shareholders listed on the
signature pages hereof (each, a "Shareholder" and collectively, the
"Shareholders"). Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Stock Purchase Agreement, dated the date hereof,
between the Company, The Money Centre, Inc. and the Shareholders (the "Purchase
Agreement").
1. Registration. The Company will use its reasonable best efforts to
prepare and file a registration statement, on or before August 16, 1999, under
the Securities Act of 1933 (the "1933 Act") for the purpose of registering the
offering and sale of all shares of Common Stock (the "Securities") and cause
the same to be declared effective by the Securities and Exchange Commission
(the "SEC") as promptly as practicable.
2. Obligations of the Company.
(a) If the Company is required by the provisions of this
Agreement to use its reasonable best efforts to effect the registration of any
of the Securities under the 1933 Act, the Company will, as expeditiously as
possible:
(i) prepare and file with the SEC a registration statement
with respect to the Securities and use its reasonable best efforts to
cause such registration statement to become and remain effective until
such time as the Securities, if not so registered, may be sold free
from restrictions imposed by Rules 144 and 145 of the Securities Act
(with the exception of requirements contained in Rule 144(c)) or until
all of the Securities have been sold by the Shareholders;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the 1933 Act
with respect to the sale or other disposition of all Securities
covered by such registration statement until the earlier of such time
as all of such Securities have been disposed of or until such time as
the Securities may be sold free from restrictions imposed by Rules 144
and 145 of the Securities Act (with the exception of requirements
contained in Rule 144(c));
(iii) file in a timely fashion all reports required to be
filed by Sections 13 and 15(d) of the Securities Exchange Act of 1934,
as amended.
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<PAGE> 97
(iii) furnish to the Shareholders such number of copies of a summary
prospectus or other prospectus in conformity with the requirements of the 1933
Act, and such other documents, as such Shareholders may reasonably request;
(iv) notify the Shareholders promptly and (if requested by any such
person) confirm such notice in writing, (a) when a prospectus or prospectus
supplement or post-effective amendment has been filed, and, with respect to a
registration statement or any post-effective amendment, when the same has
become effective, (b) of any request by the SEC for amendments or supplements
to a registration statement or related prospectus or for additional information
regarding any Shareholder, (c) of the issuance by the SEC of any stop order
suspending the effectiveness of a registration statement or the initiation of
any proceedings for that purpose, and (d) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose;
(v) use commercially reasonable efforts to prevent the issuance of any
order suspending the effectiveness of a registration statement, or the lifting
of any suspension of the qualification or exemption from qualification of any
of the securities for sale in any jurisdiction in the United States and, if any
such order is issued, to obtain the withdrawal of such order as soon as
practicable;
(vi) if requested by the Shareholders, furnish to the Shareholders and
counsel for the Shareholders, without charge, one conformed copy of each
registration statement as declared effective by the SEC and of each
post-effective amendment thereto, in each case including financial statements
and schedules and all exhibits and reports incorporated or deemed to be
incorporated therein by reference; and such number of copies of the preliminary
prospectus, each amended preliminary prospectus, each final prospectus and each
post-effective amendment or supplement thereto, as the Shareholders may
reasonably request in order to facilitate the disposition of the Securities
covered by each registration statement in conformity with the requirements of
the 1933 Act;
(vii) use its reasonable best efforts to register or qualify the
Securities covered by such registration statement under such other securities
or blue sky laws of such jurisdictions within the United States and Puerto Rico
as each Shareholder shall request (provided, however, that the Company shall
not be obligated to qualify as a foreign corporation to do business under the
laws of any jurisdiction in which it is not then qualified or to file any
general consent to service of process), and do such other reasonable acts and
things as may be required of it to enable each Shareholder to consummate the
disposition in such jurisdiction of the Securities covered by such registration
statement;
(viii) prepare a supplement or post-effective amendment to each
registration statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Securities
being sold thereunder, such prospectus will not contain any
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<PAGE> 98
untrue statement of a material fact or omit any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made,
not misleading;
(ix) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC; and
(x) cause all Securities covered by the registration
statement to be listed on each securities exchange, if any, on which
similar securities issued by the Company are then listed.
3. Additional Terms and Obligations.
(a) The obligations of the Company under this Agreement are
subject to the following terms and limitations:
(i) the Company shall be entitled to postpone for up to
three months the filing of any registration statement otherwise
required to be prepared and filed by it hereunder if its Board of
Directors determines, in its reasonable good faith judgment (evidenced
by a two-thirds vote of the directors of the Company then in office),
that such registration and sale would materially interfere with any
financing, acquisition, corporate reorganization or other material
transaction involving the Company then under consideration, including
an underwritten public offering of the Company's securities;
(ii) the Company shall not be required to effect the
registration of any Securities received by the Shareholders other than
pursuant to the Purchase Agreement;
(iii) the Company shall pay all fees and expenses
associated with the registration and offering of shares pursuant to
this Agreement, including, without limitation, (i) all registration
and filing fees, (ii) fees and expenses of compliance with federal or
state securities or blue sky laws, (iii) printing expenses (including,
without limitation, expenses of printing of prospectuses if the
printing of prospectuses is requested by the holders of a majority of
the Securities included in any registration statement), (iv) fees and
disbursements of counsel for the Company and (v) fees and
disbursements of all independent certified public accountants of the
Company and all other persons retained by the Company in connection
with the registration statement; provided, however, that in the event
of a registration under Section 9 hereof, the Company shall not be
obligated to pay the costs related to the preparation of any audited
financial statements included in any registration statement required
to be prepared and filed by it pursuant to Section 9 hereof as of any
date other than December 31 (or the end of its fiscal year, if other
than December 31);
(iv) it shall be a condition precedent to the obligations
of the Company under this Agreement that the Shareholders shall
furnish to the Company such information regarding the Shareholders,
the Securities proposed to be sold and the intended method of
disposition of such Securities as the Company shall reasonably
request;
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<PAGE> 99
(v) the registration rights provided herein may not be
assigned, directly or indirectly, by operation of law or otherwise, to
any other person; and
(vi) if, pursuant to Section 3(a)(i), the Company has
failed to file a registration statement for a period of 90 consecutive
days or more, then, in each such instance, the Registration Period
shall be extended by an equal number of days.
4. Withdrawal. Any Shareholder participating in a registration
pursuant to this Agreement shall be permitted to withdraw all or part of his
Securities from such registration at any time prior to the effective date of
the registration statement covering such Securities; provided, that, in the
event of a withdrawal from a registration effected pursuant to Section 1, such
registration shall be deemed to have been effected for purposes of Section 1
unless (i) the participating Shareholders shall have paid or reimbursed the
Company for all out-of-pocket fees and expenses paid by the Company hereunder
or (ii) the Shareholders elect to terminate such registration due to the
occurrence of a Material Adverse Change (as hereinafter defined); provided,
however, that during the term of this Agreement only one such withdrawal under
clause (i) shall be permitted pursuant to the preceding proviso. "Material
Adverse Change" means (i) any general suspension of trading in, or limitation
on prices for, securities on any national securities exchange or in the
over-the-counter market in the United States of America, (ii) the declaration
of a banking moratorium or any suspension of payments in respect of banks in
the United States of America, (iii) the commencement of a war, armed
hostilities or other international or national calamity involving the United
States of America, (iv) any limitation (whether or not mandatory) by any
governmental authority on, or any other event which materially affects the
extension of credit by banks or other financial institutions, or (v) any
material adverse change in the Company's financial condition.
5. Delay of Registration. No Shareholder shall have any right to
take any action to restrain, enjoin or otherwise delay any registration as the
result of any controversy that might arise with respect to the interpretation
or implementation of these registration rights.
6. Indemnification. In the event any Securities are included in a
registration statement filed pursuant to Section 1 of this Agreement:
(a) to the extent permitted by law, the Company will indemnify
and hold harmless each Shareholder requesting or joining in a registration
against any losses, claims, damages or liabilities, joint or several, to which
they may become subject under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based on any untrue or alleged untrue statement of any material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein, or
necessary to make the statements therein not misleading or arise out of any
violation by the Company of any rule or regulation promulgated under the 1933
Act applicable to the Company and relating to action or inaction required of
the Company in connection with any such registration; and will reimburse each
such Shareholder for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that
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<PAGE> 100
the indemnity agreement contained in this Section 7(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
connection with such registration statement, preliminary prospectus, final
prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such holder;
(b) to the extent permitted by law, each Shareholder requesting or
joining in a registration will indemnify and hold harmless the Company, each of
its directors, each of its officers who have signed the registration statement,
each person, if any, who controls the Company within the meaning of the 1933
Act and each agent for the Company against any losses, claims, damages or
liabilities to which the Company or any such director, officer, controlling
person or agent may become subject, under the 1933 Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any amendments
or supplements thereto, or arise out of or are based upon the omission or
alleged omission to state therein a fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such registration
statement, preliminary or final prospectus, or amendments or supplements
thereto, in reliance upon and in conformity with information furnished by such
Shareholder expressly for use in connection with such registration; and each
such Shareholder will reimburse any legal or other expenses incurred by the
Company or any such director, officer, controlling person or agent in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 7(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of such Shareholder; and
(c) promptly after receipt by an indemnified party under this
paragraph of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party under this paragraph, notify the indemnifying party in writing of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties. The failure to
notify an indemnifying party promptly of the commencement of any such action,
if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this
paragraph, but the omission so to notify the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this paragraph.
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<PAGE> 101
7. Amendments and Waivers. This Agreement may be amended,
supplemented or modified at any time; provided, that, each of the Shareholders
and the Company has provided its written consent to such amendment, supplement
or modification. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party
of any term or condition of this Agreement, in any one or more instances, shall
be deemed to be or construed as a waiver of the same term or condition of this
Agreement on any future occasion.
8. Entire Agreement. This Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter hereof
and contains the sole and entire agreement between the parties hereto with
respect to the subject matter hereof.
9. Nominees for Beneficial Owners. In the event that any Securities
are held by a nominee for the beneficial owner thereof, the beneficial owner
thereof may, at its election, be treated as the holder of such Securities for
purposes of request or other action by any Shareholder pursuant to this
Agreement. If the beneficial owner of any Securities so elects, the Company may
require assurances reasonably satisfactory to it of such owner's beneficial
ownership of such Securities. For purposes of this Agreement, "beneficial
ownership" and "beneficial owner" refer to beneficial ownership as defined in
Rule 13d-3 without regard to the 60-day provision in paragraph (d)(1)(i)
thereof under the 1934 Act.
10. Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if (a)
delivered personally, (b) by facsimile transmission, (c) by electronic mail at
the electronic addresses, if any, provided below, (d) by Federal Express, UPS
Next Day Air or other internationally recognized courier service or (e) mailed
(first class postage prepaid) to the parties at the following addresses or
facsimile numbers:
If to the Company, to:
Altiva Financial Corporation
1000 Parkwood Circle
Atlanta, Georgia 30339
Attn: Mr. J. Richard Walker
Fax No.(770) 937-9576
e-mail:[email protected]
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<PAGE> 102
with a copy to:
King & Spalding
191 Peachtree Street
Suite 4900
Atlanta, Georgia 30303
Attn: John D. Capers, Jr., Esq.
Fax No. (404) 572-5135
e-mail:[email protected]
If to Shareholders, at their respective addresses set forth
on the signature pages hereof with a copy to:
Robinson Bradshaw & Hinson
191 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246
Attn: John B. Garver, Esq.
Fax No.(704) 278-4000
e-mail:[email protected]
11. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for convenience of
reference only and do not define or limit the provisions hereof or otherwise
affect the meaning hereof.
12. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA WITHOUT REFERENCE TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF.
[signatures appear on following pages]
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<PAGE> 103
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
ALTIVA FINANCIAL CORPORATION
By:
--------------------------------
Name:
Title:
SHAREHOLDERS:
By:
--------------------------------
Rodney D. Atkinson
By:
--------------------------------
Charles R. Cunningham
By:
--------------------------------
Stuart A. Lewis
By:
--------------------------------
John Richard Love
By:
--------------------------------
Stephen L. Walker
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<PAGE> 104
EXHIBIT 8.09
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated the _ day of July,
1999 (the "Effective Date") is by and between the Money Centre, Inc. , a North
Carolina corporation (the "Company "), a wholly-owned subsidiary of Altiva
Financial Corporation, a Delaware corporation and R. Wendell Atkinson, a
resident of the State of North Carolina ("Employee").
R E C I T A L S
WHEREAS, the Company is a commercial finance company principally
engaged in originating, purchasing, brokering and selling consumer loans
secured by one-to-four-family residences throughout the United States (the
"Business of the Company"). The Company desires to employ Employee and to have
the benefit of his skills and services, and Employee desires to accept
employment with the Company, on the terms and conditions set forth herein; and
WHEREAS, Altiva has agreed to guaranty the obligations of the Company
under this Agreement, attached hereto as Exhibit A.
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein, and the performance of each, the
parties hereto, intending legally to be bound, hereby agree as follows:
AGREEMENTS
SECTION 2. EMPLOYMENT; TERM; AUTOMATIC EXTENSION. The initial term
of this Agreement shall begin on the Effective Date and continue until the
second anniversary of the Effective Date unless sooner terminated as provided
in Section 6 (such term of employment, as extended, is referred to herein as
the "Term").
SECTION 3. POSITION AND DUTIES. The Company hereby employs Employee
as Assistant Vice President - Operations of the Company. Employee shall have
such responsibilities, duties and authorities as are assigned to him by Steve
Walker or such other employee as the Company may designate from time to time.
Employee shall fulfill his duties and responsibilities as described in this
Section 2 in a reasonable and appropriate manner in light of the Company's
policies and practices as established by the Board of Directors of the Company
(the "Board") and the laws and regulations that apply to the Company's
operation and administration.
SECTION 4. COMPENSATION. For all services rendered by Employee, the
Company shall compensate Employee as follows:
<PAGE> 105
(a) Base Salary. Beginning as of the Effective Date, the
base salary payable to Employee shall be One Hundred
Sixty-Four Thousand Dollars ($164,000) per year,
payable on a regular basis in accordance with the
Company's standard payroll procedures, but not less
than monthly.
(b) Benefits. Employee shall be entitled to participate in
all benefit programs made available to
similarly-situated employees of the Company which shall
include, at a minimum, the benefits currently provided
to Employee by the Company, including a company car.
(c) Modifications or Amendments. The compensation provided
for in this Section 3 shall not be modified or amended
in any manner without the prior written consent of
Employee and the Board of Directors of Altiva.
SECTION 5. EXPENSE REIMBURSEMENT. The Company shall reimburse
Employee for (or, at the Company's option, pay) all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the performance of
his services hereunder during the Term. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission of
any request for reimbursement, and in a format and manner consistent with the
Company's expense reporting policy applicable to employees of the Company at
the level of Employee's position, as well as applicable federal and state tax
record keeping requirements.
SECTION 6. PLACE OF PERFORMANCE. Employee shall carry out his
duties and responsibilities hereunder principally in and from the Charlotte,
North Carolina metropolitan area.
Section 7. TERMINATION.
(a) Subject to the Company's right to terminate this
Agreement as provided in Section 6(b) below and to
place Employee on administrative leave as provided in
Section 6(c) below, Employee's employment may not be
terminated prior to the expiration of the Term for any
reason. In the event of the death or disability of
Employee, the base salary described in Section 3 herein
shall continue as periodic payments to Employee or his
estate, as the case may be. In the event of the
disability of Employee, the benefits described in
Section 3 herein shall also continue.
(b) Notwithstanding anything to the contrary set forth in
this Agreement, the Company may terminate this
Agreement and Employee's employment with the Company
hereunder by providing not less than ten day's notice
of such termination to Employee and by paying to
Employee on the effective date of such termination an
amount equal to the sum of (i) the unpaid amount of the
Total Compensation payable in the year during which
such termination occurs and (ii) an amount equal to
$164,000 multiplied by the number of full years
remaining in the term of this Agreement following such
termination.
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<PAGE> 106
All payments made to Employee pursuant to this Section
6(b) shall be made net of any applicable withholding.
(c) Nothing in this Agreement shall prevent Employer from
putting Employee on paid administrative leave for all
or any portion of the Term. During any period of the
Term that Employee is on paid administrative leave,
Employee shall not perform any services on behalf of
Employer unless expressly requested by Employer, and
Employee shall not have the right to be present on any
premises of Employer unless expressly approved by
Employer. During any period that Employee is on paid
administrative leave, Employee shall receive the full
amount of compensation described in Section 3 herein.
SECTION 8. RESTRICTIONS ON COMPETITION.
(a) During the Term, Employee shall not, directly or
indirectly, for himself or on behalf of or in
conjunction with any other person, company,
partnership, corporation, business, group or other
entity (each, a "Person"):
(I) engage, as an officer, director, shareholder,
owner, partner, member, joint venturer, or in a managerial
capacity, whether as an employee, independent contractor,
consultant, advisor or representative, in any business whose
principal products or services compete directly with the
Business of the Company in such areas where (i) the Company
conducts Business as of the date of this Agreement, (ii) the
Company then conducts business and (ii) the Company did conduct
business at the end of the Term, if applicable (the
"Territory"); or
(II) contact any Person who is, at the time of the
contact, or was, within twelve (12) months prior to the date of
contact, an employee of the Company in any capacity for the
purpose or intent of enticing such employee away from or out of
the employ of the Company, or hire any such Person; or
(III) contact any Person within the Territory who is,
at the time of the contact, or has been, within twelve (12)
months prior to the date of contact, a mortgage banker or
mortgage broker or other referral source to the Company, for
the purpose of originating, purchasing, brokering or selling
consumer loans, in competition with the Business of the
Company.
(b) Notwithstanding any other provision of this Section 7,
nothing in this Agreement shall be deemed to prohibit
Employee or any other person from acquiring as an
investment not more than two percent (2%) of the
capital stock of any business, whose stock is traded on
a national securities exchange or through the automated
quotation system of a registered securities
association.
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<PAGE> 107
(c) For the purposes of this Section 7, references to "the
Company" shall mean the Company and its subsidiaries.
(d) The parties understand and agree that the term
"Business of the Company" is limited to the activity of
originating, purchasing, brokering and selling consumer
loans secured by one-to-four-family residences.
(e) If fulfillment of any provision of this Section 7, at
the time such fulfillment shall be due, shall transcend
the limit of validity prescribed by law, then the
obligation to be fulfilled shall be reduced to the
limit of such validity; and if any clause or provision
contained in this Section 7 operates or would operate
to invalidate this Section 7, in whole or in part, then
such clause or provision only shall be held ineffective
as though not herein contained, and the remainder of
this Section 7 shall remain operative and in full force
and effect.
(f) All of the covenants in this Section 7 shall be
construed as an agreement independent of any other
provisions in this Agreement, and the existence of any
claim or cause of action Employee may have against the
Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the
enforcement by the Company of such covenants.
(g) Employee has carefully read and considered the
provisions of this Section 7 and, having done so,
agrees that the restrictive covenants in this Section 7
impose a fair and reasonable restraint on Employee and
are reasonably required to protect the interests of the
Company and its officers, directors, employees, and
stockholders.
SECTION 9. TRADE SECRETS AND CONFIDENTIAL INFORMATION.
(a) For purposes of this Section 8, "Confidential
Information" means any data or information, other than
Trade Secrets, that is valuable to the Company and not
generally known to the public or to competitors of the
Company. "Trade Secret" means information including,
but not limited to, any technical or nontechnical data,
formula, pattern, compilation, program, device, method,
technique, drawing, process, financial data, financial
plan, product plan, list of actual or potential
sources, underwriters, brokers and purchasers of
consumer loans or other information similar to any of
the foregoing, which (i) derives economic value, actual
or potential, from not being generally known to, and
not being readily ascertainable by proper means by,
other persons who can derive economic value from its
disclosure or use and (ii) is the subject of efforts
that are reasonable under the circumstances to maintain
its secrecy.
(b) Employee acknowledges he is employed hereunder by the
Company in a confidential relationship wherein Employee,
in the course of his employment
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<PAGE> 108
with the Company, has received or will receive and has
had or will have access to Confidential Information and
Trade Secrets of the Company, including but not limited
to confidential and secret business and marketing
plans, strategies, and studies, lists of actual or
potential sources, underwriters, brokers or purchasers
of consumer loans and information relating to the
operations and business of the Company and,
accordingly, he is willing to enter into the covenants
contained in Sections 7 and 8 of this Agreement in
order to provide the Company with what he considers to
be reasonable protection for its interests.
(c) Subject to Section 8(e), Employee hereby agrees that,
during the Term and for a period of two (2) years
thereafter, he will hold in confidence all Confidential
Information of the Company that came into his knowledge
during his employment by the Company and will not
disclose, publish or make use of such Confidential
Information without the prior written consent of the
Company.
(d) Employee shall hold in confidence all Trade Secrets of
the Company that came into his knowledge during his
employment by the Company or during his employment with
any subsidiary of the Company or any predecessors
entity and shall not disclose, publish or make use of
at any time after the date hereof such Trade Secrets
without the prior written consent of the Company for as
long as the information remains a Trade Secret.
(e) Notwithstanding the foregoing, the provisions of this
Section will not apply to (i) information required to
be disclosed by Employee in the ordinary course of his
duties hereunder or (ii) Confidential Information that
otherwise becomes generally known in the industry or to
the public through no act of Employee or any person or
entity acting by or on Employee's behalf, or which is
required to be disclosed by court order or applicable
law.
(f) The parties agree that the restrictions stated in this
Section 8 are in addition to and not in lieu of
protections afforded to trade secrets and confidential
information under applicable state law. Nothing in this
Agreement is intended to or shall be interpreted as
diminishing or otherwise limiting the Company's right
under applicable state law to protect its Trade Secrets
and Confidential Information.
SECTION 10. INVENTIONS. Employee shall disclose promptly to the
Company any and all significant conceptions and ideas for business products,
services and processes, inventions, improvements and valuable discoveries,
whether patentable or not, which are conceived or made by Employee, solely or
jointly with another, during the period of employment, and which are directly
related to the Business of the Company and which Employee conceives as a result
of his employment by the Company or any subsidiary of the Company or any
predecessors entity (the "Work Product"). Employee hereby agrees that all Work
Product shall be considered work made
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<PAGE> 109
for hire by Employee and shall be owned by the Company. If any Work Product may
not, by operation of law, be considered work made for hire by Employee for the
Company, Employee hereby assigns and agrees to assign all his interests therein
to the Company or its nominee. Whenever requested to do so by the Company,
during or after the Term, Employee shall at the expense of the Company execute
any and all applications, assignments or other instruments that the Company
shall deem necessary to apply for and obtain any permits, approvals and
consents required with respect to any Work Product or to otherwise protect the
Company's interest in the Work Product.
SECTION 11. RETURN OF COMPANY PROPERTY. All records, designs,
patents, business plans, financial statements, manuals, memoranda, lists,
databases and other property delivered to or compiled by Employee by or on
behalf of the Company (including any subsidiary of the Company and predecessors
entity) or its representatives, vendors or customers which pertain to the
Business of the Company (including any subsidiary of the Company and
predecessors entity) shall be and remain the property of the Company, and be
subject at all times to its discretion and control. Upon the request of the
Company and, in any event, at the end of the Term or upon the termination of
Employee's employment with the Company, Employee shall deliver all such
materials to the Company before any final compensation is paid to Employee.
Likewise, all correspondence, reports, records, charts, advertising materials
and other similar data pertaining to the business, activities or future plans
of the Company which are collected by Employee shall be delivered promptly to
the Company without request by it at the end of the Term or upon termination of
Employee's employment. Nothing contained herein shall require Employee to
deliver to the Company any property or materials owned or prepared by Employee
prior to the commencement of Employee's employment by the Company; provided
however, that such property or materials have not been modified so as to
contain any Confidential Information or Trade Secrets.
SECTION 12. INDEMNIFICATION. In the event Employee is made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by the
Company against Employee), by reason of the fact that he is or was performing
services under this Agreement, then the Company shall indemnify Employee
against all expenses (including reasonable attorneys' fees), judgment, fines
and amounts paid in settlement, as actually and reasonably incurred by Employee
in connection therewith to the fullest extent provided by law and to the same
extent, if any, as the Company covers its other officers and directors,
including coverage with respect to matters involving predecessor entities. The
obligations of the Company under this Section shall survive any termination of
employment or this Agreement with regard to Employee's acts or omissions (other
than willful misconduct or fraud) taken while employed by the Company or any
subsidiary of the Company or predecessor entity.
SECTION 13. NO PRIOR AGREEMENTS. Employee hereby represents and
warrants to the Company that the execution of this, Agreement by Employee and
his employment by the Company and the performance of his duties hereunder will
not violate or be a breach of any agreement with a former employer, client or
any other Person. Further, Employee agrees to indemnify the Company for any
claim, including, but not limited to, reasonable attorneys' fees and expenses
of investigation, by any such third party that such third party may now have or
may hereafter come to have against the Company based upon or arising out of any
non-competition agreement, invention or secrecy
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<PAGE> 110
agreement between Employee and such third party which was in existence as of
the date of this Agreement.
SECTION 14. ASSIGNMENT; BINDING EFFECT. Employee understands that
he has been selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. The Company
may assign this Agreement only to the purchaser of all or substantially all of
the assets of the Company (whether by merger, consolidation, sale of assets or
other business combination), provided that any such assignee shall assume this
Agreement in a writing delivered to Employee. Subject to the preceding two
sentences, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties and their respective heirs, legal representatives,
successors and assigns.
SECTION 15. COMPLETE AGREEMENT, WAIVER; AMENDMENT. This Agreement is
not a promise of future employment. Employee has no oral representations,
understandings, or agreements with the Company or any of its officers,
directors, or representatives covering the same subject matter as this
Agreement. This Agreement is the final, complete, and exclusive statement of
expression of the agreement between the Company and Employee with respect to
the subject matter hereof, and cannot be varied, contradicted, or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
Agreement may not be later modified except by a further writing approved by the
Board of Directors and signed by a duly authorized officer of the Company and
Employee, and no term of this Agreement may be waived except by a writing
signed by the party waiving the benefit of such term.
SECTION 16. NOTICE. Whenever any notice is required hereunder, it
shall be given in writing addressed as follows:
To the Company: Altiva Financial Corporation
Attention: J. Richard Walker
1000 Parkwood Circle
Suite 500
Atlanta, Georgia 30339
To the Employee: R. Wendell Atkinson
8818 Kingston Forest Drive
Charlotte, North Carolina 28277
With a copy to: Attorney Thomas J. Gorman
Gorman & Associates
7422 Carmel Executive Park, Suite 200
Charlotte, North Carolina 28226
or to such other representative or at such other address of a party as such
party hereto may furnish to the other parties in writing. Such notice shall be
effective upon the date of delivery or refusal of
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<PAGE> 111
delivery, if sent by personal delivery, registered, certified or express mail
or courier delivery, or upon transmission by telecopy transmission, if
immediately confirmed by telephone or electronic means.
SECTION 17. SEVERABILITY; HEADINGS. If any portion of this
Agreement is held invalid or inoperative, the other portions of this Agreement
shall be deemed valid and operative and, so far as is reasonable and possible,
effect shall be given to the intent manifested by the portion held invalid or
inoperative. This severability provisions shall be in addition to, and not in
place of, the provisions of Section 7(e) above. The section headings are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent of the Agreement or of any part hereof.
SECTION 18. EQUITABLE REMEDY. Because of the difficulty of
measuring economic losses to the Company as a result of a breach of the
restrictive covenants set forth in Sections 7, 8, 9 and 10, and because of the
immediate and irreparable damage that would be caused to the Company for which
monetary damages would not be a sufficient remedy, it is hereby agreed that in
addition to all other remedies that may be available to the Company at law or
in equity, the Company shall be entitled to specific performance and any
injunctive or other equitable as a remedy for any breach or threatened breach
of the aforementioned restrictive covenant.
SECTION 19. ARBITRATION. Any unresolved dispute or controversy
arising under or in connection with this Agreement, or with Employee's
employment with the Company, including but not limited to any alleged claims of
employment discrimination, shall be settled exclusively by arbitration,
conducted in accordance with the rules of the American Arbitration Association
then in effect. The arbitrators shall not have the authority to add to, detract
from, or modify any provision hereof nor to award punitive damages to any
injured party. The arbitrators shall have the authority to order back-pay,
severance compensation, reimbursement of costs, including those incurred to
enforce this Agreement, and interest thereon in the event the arbitrators
determine that Employee was terminated without disability or that the Company
has otherwise materially breached this Agreement. A decision by a majority of
the arbitration panel shall be final and binding. Judgment maybe entered on the
arbitrators' award in any court having jurisdiction. The direct expense of any
arbitration proceeding shall be borne by the Company. The arbitration
proceeding shall be held in the city where the Company's corporate headquarters
is located. Notwithstanding the foregoing, the Company and Employee shall be
entitled to seek injunctive or other equitable relief, as contemplated by
Section 17 above, from any court of competent jurisdiction, without the need to
resort to arbitration.
SECTION 20. CONSTRUCTION. No provision of this Agreement shall be
construed against or interpreted to the disadvantage of Employee or the Company
by any court or the government or judicial authority by reason of Employee or
the Company having or being deemed to have structured or drafted such provision
of this Agreement.
SECTION 21. GOVERNING LAW. It is the intention of the parties
hereto that this Agreement and the performance hereunder be interpreted,
construed and governed in accordance with, under and pursuant to the laws of
the State of North Carolina without reference to its choice of law rules. In
addition, the parties hereto consent to the jurisdiction of the courts of the
State of North Carolina for the adjudication of claims related to this
Agreement and the matters described herein.
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<PAGE> 112
IN WITNESS THEREOF the parties hereto have caused this Employment
Agreement to be duly executed as of the date first written above.
THE MONEY CENTRE, INC.
By:
------------------------------------
[name]
EMPLOYEE
------------------------------------
R. Wendell Atkinson
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<PAGE> 113
EXHIBIT 8.10
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement"), dated as of the day of
July, 1999, by and among ALTIVA FINANCIAL CORPORATION, a Delaware corporation
("ALTIVA"); Rodney D. Atkinson ("Atkinson"), Charles R. Cunningham
("Cunningham"), Stuart A. Lewis ("Lewis"), John R. Love ("Love"), and Stephen
L. Walker ("Walker"), each an individual resident of the State of North
Carolina (collectively, the "Sellers"), The Money Centre, Inc., a North
Carolina Corporation (the "Company") and Altiva Financial Corporation, a
Delaware corporation ("Buyer").
RECITALS:
WHEREAS, Altiva, Shareholders and The Money Centre, Inc. (the
"Company") have entered into a Stock Purchase Agreement (the "Stock Purchase
Agreement"), dated July 7_, 1999, pursuant to which Altiva will acquire all of
the outstanding capital stock of the Company;
WHEREAS, pursuant to Section 2.02 of the Stock Purchase Agreement, the
Shareholders have agreed to repay a portion of the Purchase Price under certain
circumstances;
WHEREAS, pursuant to Article XI of the Stock Purchase Agreement, the
Shareholders have agreed to provide certain indemnification rights to Altiva;
WHEREAS, pursuant to Sections 2.02 and 11.08 of the Stock Purchase
Agreement, the parties have agreed to enter into this Agreement; and
WHEREAS, the Escrow Agent is willing to act as escrow agent under this
Agreement.
NOW, THEREFORE, in consideration of the foregoing, and the
representations, warranties, covenants and agreements set forth in the Stock
Purchase Agreement and this Agreement, the parties agree as follows:
1. Definitions. Altiva, the Representative (as defined herein), the
Shareholders and the Escrow Agent are each referred to herein as a "P" and
collectively as the "Parties." Capitalized terms used but not otherwise defined
in this Agreement shall have the meanings ascribed to such terms in the Stock
Purchase Agreement.
2. Establishment of Escrow Account. An escrow (the "Escrow Account") is
hereby established in accordance with the provisions of Sections 2.02 and 11.08
of the Stock Purchase Agreement.
<PAGE> 114
3. Release of Funds. Upon receipt of written notice signed by both
Parties in the form of Exhibit A, the Escrow Agent shall, in accordance with the
notice, within three (3) business days release such funds to the Buyer
Indemnified Party.
4. Termination of Escrow Account. The Escrow Account provided for
hereunder shall terminate completely upon the fourth anniversary of Closing, or
at such earlier time as the Parties may designate in writing to the Escrow Agent
(the "Escrow Termination Date"); provided that if on the Escrow Termination
Date, any Buyer Indemnified Party shall give the Escrow Agent written notice
that any indemnity claim under the Stock Purchase Agreement for which a Claims
Notice has been delivered has not been satisfied in full, the Escrow Account
shall remain in effect until such claim is resolved.
5. Payment Upon Termination. Upon termination of the Escrow Account,
the Escrow Agent shall pay over to the Representative the balance, if any, of
the Escrow Account then held by the Escrow Agent, for disbursement by the
Representative to each Shareholder in accordance with the amount paid into the
Escrow Account by such Shareholder (after taking into consideration any payments
which have been made pursuant to the terms of this Agreement out of the Escrow
Fund on behalf of the respective Shareholders).
6. Duties of Escrow Agent. Escrow Agent shall have no liability or
obligation with respect to the Escrow Account except for Escrow Agent's willful
misconduct or gross negligence. Escrow Agent's sole responsibility shall be for
the safekeeping, investment, and disbursement of the Escrow Account in
accordance with the terms of this Agreement. Escrow Agent shall have no implied
duties or obligations and shall not be charged with knowledge or notice of any
fact or circumstance not specifically set forth herein. Escrow Agent may rely
upon any instrument, not only as to its due execution, validity and
effectiveness, but also as to the truth and accuracy of any information
contained therein, which Escrow Agent shall in good faith believe to be genuine,
to have been signed or presented by the person or parties purporting to sign the
same and to conform to the provisions of this Agreement. In no event shall
Escrow Agent be liable for incidental, indirect, special, consequential or
punitive damages. Escrow Agent shall not be obligated to take any legal action
or commence any proceeding in connection with the Escrow Account, any account in
which the Escrow Account is deposited, or this Agreement, or to appear in,
prosecute or defend any such legal action or proceedings.
(a) Disputes. If, at any time, there shall exist any dispute between
Altiva, the Shareholders or the Representative with respect to the holding or
disposition of any portion of the Escrow Account or any other obligations of
Escrow Agent hereunder, or if at any time Escrow Agent is unable to determine,
to Escrow Agent's sole satisfaction, the proper disposition of any portion of
the Escrow Account or Escrow Agent's proper actions with respect to its
obligations hereunder, or if Altiva and the Representative have not, within 30
days of the furnishing by Escrow Agent of a notice of resignation pursuant to
Section 6(d), appointed a successor Escrow Agent to act hereunder, then Escrow
Agent may, in its sole discretion, take either or both or the following actions:
(i) suspend the performance of any of its obligations under
this Agreement until such dispute or uncertainty shall be resolved
to the sole satisfaction of Escrow Agent or until a successor
Escrow Agent shall have been appointed (as the
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<PAGE> 115
case may be); provided, however, that Escrow Agent shall
continue to invest the Escrow Account in accordance with
Section 2 hereof, and/or
(ii) petition (by means of an interpleader action or
any other appropriate method) any court of competent
jurisdiction in Charlotte, North Carolina, for instructions
with respect to such dispute or uncertainty, and pay into or
deposit with such court all funds held by it in the Escrow
Account for holding and disposition in accordance with the
instructions of such court.
Escrow Agent shall have no liability to Altiva, the
Shareholders or the Representative or any other person with respect to any such
suspension of performance or disbursement into court, specifically including any
liability that may arise, or be alleged to have arisen, out of or as a result of
any delay in the disbursement of funds held in the Escrow Account or any delay
in or with respect to any other action required or requested of Escrow Agent.
(b) Resignation of Escrow Agent. Escrow Agent may resign from
the performance of its duties hereunder at any time by giving ten (10) days'
prior written notice to Altiva and the Representative or may be removed, with or
without cause, by Altiva and the Representative, acting jointly, at anytime by
the giving often (10) days' prior written notice to Escrow Agent. Such
resignation or removal shall take effect upon the appointment of a successor
Escrow Agent as provided herein. Upon any such notice of resignation or removal,
Altiva and the Representative jointly shall appoint a successor Escrow Agent
hereunder, which shall be a commercial bank, trust company or other financial
institution with a combined capital and surplus in excess of $ 100,000,000. Upon
the acceptance in writing of any appointment as Escrow Agent hereunder by a
successor Escrow Agent, such successor Escrow Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Escrow Agent, and the retiring Escrow Agent shall be discharged from
its duties and obligations under this Agreement, but shall not be discharged
from any liability for actions taken as Escrow Agent hereunder prior to such
succession. After any retiring Escrow Agent's resignation or removal, the
provisions of this Escrow Agreement shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Escrow Agent under this
Agreement.
(c) Fees. Altiva shall compensate Escrow Agent for its
services hereunder in accordance with Schedule I attached hereto and, in
addition, shall reimburse Escrow Agent for all of its reasonable out-of-pocket
expenses, including travel expenses, telephone and facsimile transmission costs,
postage (including express mail and overnight delivery charges), copying charges
and the like. All of the compensation and reimbursement obligations set forth in
this paragraph (e) shall be payable upon demand by Escrow Agent. The obligations
of Altiva under this paragraph (e) shall survive any termination of this
Agreement and the resignation or removal of Escrow Agent.
7. Representative.
(a) Each of the Shareholders hereby constitutes and
appoints WALKER to act as the Representative under this Agreement. In the event
Walker shall for any reason be unable or unwilling to serve as the
Representative, Lewis shall serve as the Representative. In the event that
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<PAGE> 116
neither Walker nor Lewis shall for any reason be able or willing to serve as the
Representative, Atkinson shall serve as the Representative.
(b) Each of the Shareholders agrees to indemnify and
hold harmless the Representative by reason of his acting or failing to act in
connection with any of the transactions contemplated hereby or by the Stock
Purchase Agreement and against any loss, liability or expense the Representative
may sustain or incur as a result of serving as Representative hereunder, except
such losses, liabilities and expenses which are determined in a final judgment
of a court to have resulted primarily from the gross negligence or willful
misconduct of the Representative. Each of the Shareholders agrees that the
Representative shall have no liability whatsoever to any Shareholder, or such
Shareholder's beneficiaries, heirs or personal representatives for any matters
arising under this Agreement or the Stock Purchase Agreement except, in the case
of the Shareholders, for liability for such matters which are determined in a
final judgment of a court to have resulted primarily from the gross negligence
or willful misconduct of the Representative. Each of the Shareholders hereby
agrees to reimburse the Representative upon the request of the Representative
for all reasonable expenses, disbursements and advanced incurred or made by the
Representative in the performance of his duties under this Agreement. The
Representative shall have the authority to act on behalf of and to bind the
Shareholders for purposes of the provision of this Agreement to the extent set
forth in this Agreement. In no event shall the Representative be liable to any
Buyer Indemnified Party for any Shareholder's obligation under this Agreement or
the collection of any claim against any Shareholder.
8. Notices. Any notice or other document to be given hereunder
by any Party hereto to any other Party hereto shall be in writing and delivered
by courier or by telecopy transmission or sent by any express mail service,
postage or fees prepaid,
If to the Representative or the Shareholders at the address
specified on Schedule 1.01 to the Stock Purchase Agreement:
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<PAGE> 117
with a copy to:
Robinson Bradshaw & Hinson
101 N. Tryon Street, Suite 1900
Charlotte, North Carolina 28246
Attn: John B. Garver
Telephone: (704) 378-4000
Facsimile: (704) 373-3912
and:
Thomas J. Gonnan
Gonnan & Associates
7422 Carmel Executive Park, Suite 200
Charlotte, North Carolina 28226
If to Altiva to:
Altiva Financial Corporation
1000 Parkwood Circle
6th Floor
Atlanta, Georgia 30339
Attention: Mr. J. Richard Walker,
Executive Vice President and
Chief Financial Officer
Telecopy No.: 770
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Attn: John D. Capers, Jr.
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<PAGE> 118
If to Escrow Agent:
[ADDRESS]
Telecopy No.:
-------------
or at such other address or number for a Party as shall be specified by like
notice. Any notice which is delivered in the manner provided herein shall be
deemed to have been duly given to the Party to whom it is directed upon actual
receipt by such Party or its agent.
9. Parties Bound by Agreement. The terms, conditions and
obligations of this Agreement shall inure to the benefit of and be binding upon
the Parties hereto and their respective successors and assigns. Except as
hereinafter provided, without the prior written consent of the other Parties, no
Party hereto may assign such Party's rights, duties or obligations hereunder or
any part thereof to any other person or entity.
10. Number; Gender. Whenever the context so requires, the
singular number shall include the plural and the plural shall include the
singular, and the gender of any pronoun shall include the other genders.
11. Headings. The headings of the Articles and Sections of
this Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.
12. Modification and Waiver. Any of the terms or conditions
of this Agreement may be waived in writing at any time by the party which is
entitled to the benefits thereof. No waiver of any of the provisions of this
Agreement shall be deemed to or shall constitute a waiver of any other provision
hereof.
13. Construction. This Agreement shall be construed in
accordance with and governed by the laws of the State of Georgia. No provision
of this Agreement shall be construed against or interpreted to the disadvantage
of any Party hereto by any court or other governmental or judicial authority or
by any board of arbitrators by reason of such Party or its counsel having or
being deemed to have structured or drafted such provision. Unless otherwise
expressly provided herein, all references in this Agreement to Section(s) shall
refer to the Section(s) of this Agreement.
14. No Limitation. The Parties agree that the rights and
remedies of any Party under this Agreement shall not operate to limit any other
rights and remedies otherwise available to any Party under the Stock Purchase
Agreement or otherwise.
15. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction will, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction will not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted bylaw, the Parties waive any provision of law which renders any such
provision prohibited or unenforceable in any respect.
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<PAGE> 119
16. Purchase of Securities. The Escrow Agent and any
stockholder, director, officer or employee of the Escrow Agent may buy, sell,
and deal in any of the securities of Altiva and become pecuniarily interested in
any transaction in which Altiva may be interested, and contract and lend money
to Altiva and otherwise act as fully and freely as though it were not Escrow
Agent under this Agreement. Nothing herein shall preclude the Escrow Agent from
acting in any other capacity for Altiva or for any other entity.
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<PAGE> 120
IN WITNESS WHEREOF, the Parties hereto have caused this
Agreement to be executed as of the date first above written.
ALTIVA FINANCIAL CORPORATION
By:
-------------------------------
Name:
Title:
----------------------------------,
as Escrow Agent
By:
-------------------------------
Name:
Title:
REPRESENTATIVE
----------------------------------
Stephen L. Walker
SHAREHOLDERS
----------------------------------
Rodney D. Atkinson
----------------------------------
Charles R. Cunningham
----------------------------------
Stuart A. Lewis
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<PAGE> 121
----------------------------------
John Richard Love
----------------------------------
Stephen L. Walker
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<PAGE> 122
EXHIBIT A
FORM OF NOTICE
[Date]
Centura Bank
Attn:
---------------
- ---------------------
- ---------------------
Dear Sir or Madam:
Reference is made to the Escrow Agreement dated as of July 7_, 1999,
between and among Altiva Financial Corporation, Rodney Atkinson, Charles
Cunningham, Stuart "Bo" Lewis, John R. Love, Stephen Walker and Centura
Investment Bank as Escrow Agent (the "Escrow Agent").
Pursuant to Section 3 of the Escrow Agreement, you are hereby
authorized and directed in your capacity as Escrow Agent to disburse from the
Escrow Account the sums set forth below in accordance with the payment
instructions set forth below:
<TABLE>
<CAPTION>
Payee Amount Payment Instruction
----- ------ -------------------
<S> <C> <C>
--------------- -------------- -----------------------
--------------- -------------- -----------------------
--------------- -------------- -----------------------
--------------- -------------- -----------------------
</TABLE>
All capitalized terms used herein and not otherwise defined herein
shall have the meanings given such terms in the Escrow Agreement.
ALTIVA FINANCIAL CORPORATION
By:
--------------------------------
Name:
Title:
Stephen L. Walker, as Representative
of the Shareholders
<PAGE> 123
EXHIBIT 8.11
July , 1999
--
Mr. Rodney D. Atkinson
Mr. Charles R. Cunningham
Mr. Stuart A. Lewis
Mr. John Richard Love
Mr. Stephen L. Walker
P.O. Box 47375
Charlotte, North Carolina 29247-0375
Gentlemen:
We have acted as counsel to Altiva Financial Corporation, a Delaware
corporation ("Altiva "), in connection with the transactions contemplated by the
Stock Purchase Agreement (the "Agreement") dated as of July 7, 1999 among
Altiva, The Money Centre, Inc., a North Carolina corporation ("Money Centre"),
Rodney D. Atkinson, Charles R. Cunningham, Stuart A. Lewis, John Richard Love
and Stephen L. Walker (collectively, the "Sellers"). This opinion is being
delivered to you pursuant to Section 8.11 of the Agreement. Capitalized terms
used but not otherwise defined herein have the same meanings ascribed to them in
the Agreement.
We have acted as counsel to Altiva in connection with the preparation,
execution and delivery of the Agreement. In connection with rendering this
opinion, we have reviewed and relied upon the following documents:
1. The Agreement, the Escrow Agreement, dated as of the date
hereof among Altiva, the Sellers and______, the Registration
Rights Agreement between Altiva and the Sellers and each of
the Employment Agreements between Altiva and each Seller, the
Guaranty of Altiva, and the Employment Agreement between
Altiva and R. Wendell Atkinson, each dated as of even date
herewith (collectively, the "Transaction Agreements").
2. The Certificate of Incorporation and the By-laws of Altiva.
3. Resolutions of the Board of Directors of Altiva authorizing
the execution, delivery and performance by Altiva of the
Transaction Agreements.
4. The consent and waiver dated June 30, 1999 from Sovereign
Bank, the consent and waiver dated June 30, 1999, from
Sovereign Bancorp, Inc., the consent and waiver dated June 30,
1999, from City National Bank of
<PAGE> 124
West Virginia and the consent and waiver dated July _, 1999
from Greenwich Financial Services (collectively, the
"Consents").
5. Such other documents, corporate records, certificates
(including, but not limited to, certificates of officers of
Altiva) and materials as we have deemed necessary for the
purposes of the opinions rendered herein.
In our examination of the above documents, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
such latter documents.
Insofar as this opinion relates to factual matters, we have assumed
without independent investigation that the representations and warranties of
Altiva contained in the Transaction Agreements are true and correct as to all
factual matters stated therein.
Any reference to "best of our knowledge," "our knowledge" or to any
matter "coming to our attention" or "of which we are aware" or any variation of
any of the foregoing means the actual knowledge of any of the attorneys in this
firm who have represented Altiva in connection with the preparation, execution
and delivery of the Transaction Agreements of the existence or absence of any
facts which would contradict the opinions set forth below. We have not
undertaken any independent investigation to determine the existence or absence
of such facts, and no inference as to our knowledge of the existence or absence
of such facts should be drawn from the fact of our representation of Altiva.
Without limiting the foregoing, we have not examined any records of any court,
administrative tribunal or other similar entity, or any electronic databases, in
connection with our opinions expressed herein. We are expressing no opinion
herein as to the application of or compliance with any federal or state law or
regulation to the power, authority or competence of any party to the Transaction
Agreements other than Altiva.
Any reference to "senior executive officers" of Altiva means Edward B.
Meyercord and J. Richard Walker.
For purposes of our opinions set forth below, we have assumed that each
party to the Transaction Agreements other than Altiva has all requisite power,
legal authority and capacity, and has taken all necessary action to execute and
deliver the Transaction Agreements and to effect the transactions contemplated
thereby, and have assumed that each of the Transaction Agreements is the valid,
binding and enforceable obligation of each party thereto other than Altiva. We
have assumed that all such necessary actions fully comply with any applicable
law.
Our opinions expressed are qualified to the extent that they may be
subject to or affected by (i) applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance or transfer, moratorium or similar laws affecting the
rights and remedies of creditors generally, (ii) statutory or decisional law
concerning recourse by creditors to security in the absence of notice or hearing
and (iii) duties and standards imposed on creditors and parties to contracts,
including, without limitation, requirements of good faith, reasonableness and
fair dealing. Further, we do not
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express any opinion as to (a) availability of the remedy of specific performance
or any other equitable remedy upon breach of any such provision, whether applied
by a court of law or equity or (b) the successful assertion of any equitable
defense. We express no opinion herein as to the consequences of the Acquisition
under applicable federal, state and local tax laws and regulations.
In rendering the opinions below, we are opining only as to the specific
legal issues expressly set forth herein, and no opinion shall be inferred as to
any other matters. We are opining on the date hereof as to the law governing the
performance by Altiva of its obligations under the Transaction Agreements only
as in effect on the date hereof, and we disclaim any obligation to advise you of
any change in any of these sources of law or subsequent legal or factual
developments which might affect any matters or opinions set forth herein.
In rendering the opinions in paragraph 8, we have assumed without
independent investigation that the representations and warranties of the
Sellers in Section 4.31 of the Agreement are true and correct.
We express no opinion as to the laws of any state or jurisdiction other
than the laws of the State of Georgia, the Delaware General Corporation Law
("DGCL") and the federal laws of the United States of America. To the extent
that the matters referred to below are governed by and construed in accordance
with the laws of jurisdictions other than the State of Georgia, the DGCL or the
federal laws of the United States, we have assumed that such laws are identical
to the laws of the State of Georgia, and we are expressing no opinion herein as
to whether such assumption is reasonable or correct.
Based on and subject to the foregoing, we are of the opinion that:
1. Altiva is a corporation duly incorporated and validly existing under the laws
of the State of Delaware and has all requisite corporate power and corporate
authority to own, lease and operate its properties and assets and to carry on
its business as it is now being conducted.
2. The authorized capital stock of Altiva consists of 400,000,000 shares of
common stock, $.0l per share par value ("Common Stock"), of which 3,056,666
shares are issued and outstanding, and 5,000,000 shares of preferred stock, of
which 62,513 shares are issued and outstanding.
3. Altiva has full corporate power and authority to perform its obligations
under the Transaction Agreements, and the execution, delivery and performance by
Altiva of the Transaction Agreements have been duly authorized by all necessary
corporate action on the part of Altiva.
4. Each of the Transaction Agreements has been duly executed and delivered by
Altiva and constitutes the valid and binding obligation of Altiva, enforceable
against Altiva in accordance with its terms, except that (i) enforceability may
be limited by bankruptcy, insolvency, moratorium and similar laws affecting
creditors' rights generally and (ii) the availability of equitable remedies may
be limited by equitable principles of general applicability.
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5. Neither the execution and delivery of the Transaction Agreements by Altiva,
nor consummation by Altiva of the transactions contemplated thereby to be
performed by Altiva on the date hereof, including the issuance of the Common
Stock, (i) conflict with or result in a breach of any provisions of the
Certificate of Incorporation or Bylaws of Altiva, (ii) violate, conflict with or
result in a breach of any term, condition or provision of, or constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of any
lien or encumbrance upon any property or asset of Altiva pursuant to, any
material note, bond, mortgage, indenture, deed of trust, license, lease,
Transaction Agreement or other instrument or obligation to which Altiva is a
party, or by which any of its properties or assets may be bound or affected, and
which is known to such counsel from an examination of Altiva's filings under
federal and state securities laws and after inquiry of the senior executive
officers of Altiva, other than such violations, conflicts, breaches and defaults
which have been waived pursuant to the Consents or (iii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Altiva.
6. To our knowledge, other than the Consents, no consent, approval, order or
other authorization of, nor any filing with, any governmental entity or other
third party is legally required by or on behalf of Altiva in connection with the
execution and delivery by Altiva of the Transaction Agreements or the
consummation by Altiva of the transactions contemplated by the Transaction
Agreements to be performed by Altiva on the date hereof.
7. To our knowledge, there is no action, suit or proceeding pending against
Altiva before any court or governmental entity which in any manner challenges
the legality, validity or enforceability of any of the Transaction Agreements.
8. The authorization, issuance and delivery of the shares of Common Stock have
been duly authorized by all requisite corporate action on the part of Altiva,
and when issued, sold and delivered in accordance with the Transaction
Agreements, such shares of Common Stock will be validly issued and outstanding,
fully paid and nonassessable and free of any encumbrances. The issuance of the
shares of Common Stock to the Sellers pursuant to the Transaction Agreements
complies with all applicable state and federal securities laws.
This opinion is furnished to you for your exclusive use in connection
with the transactions contemplated by the Transaction Agreements and may not be
quoted to or relied upon by any other person or entity or used for any other
purpose, without our prior written consent.
Very truly yours,
King & Spalding
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<PAGE> 127
Exhibit 9.05(a)
<PAGE> 128
GORMAN & ASSOCIATES
ATTORNEYS AT LAW
7422 CARMEL EXECUTIVE PARK, SUITE 200
CHARLOTTE, NORTH CAROLINA 28226
(704) 544-2500 (TELEPHONE)
(704) 544-2596 (FACSIMILE)
Thomas J. Gorman Of Counsel:
Shelley B. Ballard J. Eric Kindberg
Derek E. Dinner
June 30, 1999
Altiva Financial Corporation
1000 Parkwood Circle, 6th Floor
Atlanta, Georgia 30339
Attention: Mr. J. Richard Walker
Re: Stock Purchase Agreement
Gentlemen:
We have acted as special counsel to The Money Centre, Inc. (the
"Company"), and Rodney D. Atkinson ("Atkinson") in connection with the Stock
Purchase Agreement (the "Agreement") dated as of June 30, 1999, among the my
clients and the other shareholders of the Company ("the Minority Sellers") and
Altiva Financial Corporation ("Altiva"), pursuant to which Altiva has agreed to
acquire all the outstanding stock of the Company.
This opinion is furnished to you pursuant to Section 9.05 of the
Agreement. Capitalized terms not defined herein have the meanings given to them
in the Agreement.
We have reviewed (i) the Agreement, (ii) the Escrow Agreement, dated as
of the date hereof, among Altiva, Atkinson, the Minority Sellers and Centura
Bank, (iii) the Registration Rights Agreement among Altiva, Atkinson and the
Minority Sellers, and (iv) the Employment Agreement between Altiva and Atkinson
(collectively, the "Transaction Documents").
In addition, we have examined such corporate and other documents and
records and certificates of the Company and public officials as we have deemed
necessary or appropriate for the purposes of this opinion. We have relied as to
factual matters on certificates of the Company, Atkinson, and Minority Sellers,
on certificates of public officials, and on the representations and warranties
of Atkinson and the Company contained in the Transaction Documents. We have
assumed (i) the authority and genuineness of all signatures of persons signing
the Transaction Documents, the other documents referred to therein, and other
certificates and instruments, (ii) the authenticity of all documents submitted
to us as originals, (iii) the conformity to authentic original documents of all
documents submitted to us as certified, conformed or photostatic copies, (iv)
the legal capacity of all natural persons signing any of the Transaction
Documents and (v) all formalities and requirements
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<PAGE> 129
of the laws of any relevant jurisdiction (other than the laws of the United
States and the laws of the State of North Carolina) and of any regulatory
authority therein, applicable to the execution, delivery, performance and
enforceability of the Transaction Documents have been or will be duly complied
with.
Based on the foregoing, and subject to the assumptions and
qualifications hereinafter set forth, it is our opinion that:
1. The Transaction Documents have been duly executed and
delivered by the Company and Atkinson, and constitute the
valid and binding obligations of the Company and Atkinson,
enforceable against the Company and Atkinson in accordance
with their terms.
2. To our knowledge, except as disclosed in the Schedules to the
Agreement, no consent, approval, order or other authorization
of any governmental entity or other third party is legally
required by or on behalf of the Company or Atkinson in
connection with the execution, delivery and performance of the
Agreement.
3. To our knowledge, there is no action, suit or proceeding
pending against the Company or Atkinson before any court or
governmental entity which in any manner challenges the
legality, validity or enforceability of the Agreement.
4. The Company is a corporation duly incorporated and validly
existing under the laws of the State of North Carolina and has
all requisite corporate power and corporate authority to own,
lease and operate its properties and assets and to carry on
its business as it is now being conducted.
5. The authorized capital stock of the Company consists of
100,000 shares of common stock, $ 1.00 per share par value
(the "Common Stock"), of which 50,000 shares are issued and
outstanding and of record and owned of record by the Sellers.
All of the issued and outstanding shares of Common Stock are
duly authorized, validly existing, fully paid and
nonassessable, except as described in the Stock Purchase
Agreement.
6 The Company has full corporate power and authority to perform
its obligations under the Agreement, and the execution,
delivery and performance by the Company of the Agreement have
been duly authorized by all necessary corporate action on the
part of the Company.
7. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated thereby, nor
compliance by the Company or the Sellers with any of the
provisions thereof, (i) conflict with or result in a breach of
any provisions of the Certificate of Incorporation or Bylaws
of the Company, (ii) violate, conflict with or result in a
breach of any term, condition or provision of, or constitute a
default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, or give rise to any
right of termination, cancellation or acceleration with
respect to, or result in the creation of any hen or
encumbrance upon any property or asset of the Company pursuant
to, any material note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or
obligation to which the Company is a party, or by which any of
properties or assets may be bound or affected, and which is
known to such counsel after inquiry of the senior executive
officers of the Company, or (iii) violate any order, writ,
injunction, decree, statute, rule or
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regulation applicable to the Company, except as disclosed in the
Schedules to the Agreement.
This opinion is subject to the following additional assumptions and
qualifications:
(a) The opinions set forth herein are limited to matters governed by the
laws of the State of North Carolina and the federal laws of the United
States, and no opinion -is expressed herein as to the laws of any other
jurisdiction. We note that the Transaction Documents are governed by
the laws of the State of Georgia. We have assumed instead for the
purposes of this opinion that they are governed by the laws of the
State of North Carolina. No opinion is expressed as whether or not the
transaction as stated violates any state or federal antitrust laws or
regulations.
(b) The opinions expressed in paragraph I above are subject to the effect
of applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium and similar laws affecting the enforcement of
creditors' rights generally, and the effect of general principles of
equity (regardless of whether considered in a proceeding in equity or
at law), which may, among other things, deny rights of specific
performance, and to general standards of commercial reasonableness,
good faith and fair dealing.
(c) We express no opinion as to the enforceability of:
(i) any provisions contained in the Transaction Documents relating
to consent to jurisdiction, selection of venue, means of
service of process or choice of law;
(ii) any provisions contained in the Transaction Documents that
require waivers or amendments to be made only in writing;
(iii) any provisions in the Transaction Documents that purport to
authorize a party to act in its sole discretion;
(iv) any provisions in the Transaction Documents that purport to
effect waivers of constitutional, statutory or equitable
rights or the effect of applicable laws;
(v) any provisions in the Transaction Documents that impose
liquidated damages, penalties or forfeiture;
(vi) any provisions in the Transaction Documents purporting to
require a party thereto to pay or reimburse attorneys' fees
incurred by another party, or to indemnify another party
therefor, which provisions may be limited by applicable
statutes and decisions relating to the collection and award of
attorneys' fees; and
(vii) the noncompetition provisions in the Employment Agreements.
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<PAGE> 131
(d) We have assumed that the Transaction Documents constitute the
valid, binding and enforceable obligation of each of the
parties thereto other than Atkinson and the Company.
(e) Whenever any statement of any opinion set forth herein is
qualified by the phrase "to our knowledge" or "of which we are
aware," such phrase indicates that the attorneys in our firm
giving substantive attention to the matters referred to herein
have no actual knowledge that circumstances exist that would
make such opinion inaccurate, but we have undertaken no
independent investigation with respect thereto.
This opinion letter is delivered for your use only in connection with
the transactions contemplated by the Transaction Documents and may not be relied
upon by you for any other purpose or by any other person or entity for any
purpose whatsoever without our prior written consent.
Sincerely,
GORMAN & ASSOCIATES
Thomas J. Gorman
TJG:dh
Cc: Rodney D. Atkinson
Stephen L. Walker
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<PAGE> 132
EXHIBIT 9.05(B)
<PAGE> 133
JOHN B. GARVER
(704) 377-8377
INTERNET
[email protected]
[Date]
Altiva Financial Corporation
1000 Parkwood Circle
6th Floor
Atlanta, Georgia 30339
Attention: Mr. J. Richard Walker
Re: Stock Purchase Agreement
Gentlemen:
We have acted as special counsel to Charles R. Cunningham, Stuart
A. Lewis, John Richard Love, and Stephen L. Walker (the "Minority
Sellers") in connection with the Stock Purchase Agreement (the
"Agreement") dated as of July_, 1999, among the Minority Sellers, Rodney
D. Atkinson ("Atkinson"), The Money Centre, Inc. (the "Company") and
Altiva Financial Corporation ("Altiva"), pursuant to which Altiva has
agreed to acquire all the outstanding stock of the Company.
This opinion is furnished to you pursuant to Section 9.05 of the
Agreement. Capitalized terms not defined herein have the meanings given
to them in the Agreement.
We have reviewed (i) the Agreement, (ii) the Escrow Agreement,
dated as of the date hereof, among Altiva, Atkinson, the Minority Sellers
and, (iii) the Registration Rights Agreement among Altiva, Atkinson and
the Minority Sellers, and (iv) each of the Employment Agreements between
Altiva and a Minority Seller (collectively, the "Transaction Documents").
In addition, we have examined such corporate and other documents
and records and certificates of the Company and public officials as we
have deemed necessary or appropriate for the purposes of this opinion. We
have relied as to factual matters on certificates of the Minority
Sellers, on certificates of public officials, and on the representations
and warranties of the Minority Sellers contained in the Transaction
Documents. We have assumed (i) the authority and genuineness of all
signatures of persons signing the Transaction Documents, the other
documents referred to therein, and other certificates and instruments,
(ii) the authenticity of all documents submitted to us as originals,
(iii) the conformity to authentic original documents of all
<PAGE> 134
Altiva Financial Corporation
[Date]
Page 2
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documents submitted to us as certified, conformed or photostatic copies, (iv)
the legal capacity of all natural persons signing any of the Transaction
Documents and (v) all formalities and requirements of the laws of any relevant
jurisdiction (other than the laws of the United States and the laws of the State
of North Carolina) and of any regulatory authority therein, applicable to the
execution, delivery, performance and enforceability of the Transaction Documents
have been or will be duly complied with.
Based on the foregoing, and subject to the assumptions and
qualifications hereinafter set forth, it is our opinion that:
1. The Transaction Documents have been duly executed and
delivered by each Minority Seller and constitute the valid and
binding obligation of such Minority Seller, enforceable
against such Minority Seller in accordance with their terms.
2. To our knowledge, no consent, approval, order or other
authorization of any governmental entity or other third party
is legally required by or on behalf of any Minority Seller in
connection with the execution, delivery and performance of the
Transaction Documents.
3. To our knowledge, there is no action, suit or proceeding
pending against any Minority Seller before any court or
governmental entity which in any manner challenges the
legality, validity or enforceability of the Transaction
Documents.
This opinion is subject to the following additional assumptions and
qualifications:
(a) The opinions set forth herein are limited to matters governed
by the laws of the State of North Carolina and the federal
laws of the United States, and no opinion is expressed herein
as to the laws of any other jurisdiction. We note that the
Transaction Documents are governed by the laws of the State of
Georgia. We have assumed instead for the purposes of this
opinion that they are governed by the laws of the State of
North Carolina.
(b) The opinions expressed in paragraph 1 above are subject to the
effect of applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium and similar laws affecting
the enforcement of creditors' rights generally, and the effect
of general principles of equity (regardless of whether
considered in a proceeding in equity or at law), which may,
among other things, deny rights of specific performance, and
to general standards of commercial reasonableness, good faith
and fair dealing.
(c) We express no opinion as to the enforceability of:
<PAGE> 135
Altiva Financial Corporation
[Date]
Page 3
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(i) any provisions contained in the Transaction Documents
relating to consent to jurisdiction, selection of
venue, means of service of process or choice of law;
(ii) any provisions contained in the Transaction Documents
that require waivers or amendments to be made only in
writing;
(iii) any provisions in the Transaction Documents that
purport to authorize a party to act in its sole
discretion;
(iv) any provisions in the Transaction Documents that
purport to effect waivers of constitutional,
statutory or equitable rights or the effect of
applicable laws;
(v) any provisions in the Transaction Documents that
impose liquidated damages, penalties or forfeiture;
(vi) any provisions in the Transaction Documents
purporting to require a party thereto to pay or
reimburse attorneys' fees incurred by another party,
or to indemnify another party therefor, which
provisions may be limited by applicable statutes and
decisions relating to the collection and award of
attorneys' fees; and
(vii) the noncompetition provisions in the Employment
Agreements.
(d) We have assumed that the Transaction Documents constitute the
valid, binding and enforceable obligation of each of the
parties thereto other than the Minority Sellers.
(e) Whenever any statement of any opinion set forth herein is
qualified by the phrase "to our knowledge" or "of which we are
aware," such phrase indicates that the attorneys in our firm
giving substantive attention to the matters referred to herein
have no actual knowledge that circumstances exist that would
make such opinion inaccurate, but we have undertaken no
independent investigation with respect thereto.
<PAGE> 136
Altiva Financial Corporation
[Date]
Page 4
- --------------------------------
This opinion letter is delivered for your use only in connection with
the transactions contemplated by the Transaction Documents and may not be relied
upon by you for any other purpose or by any other person or entity for any
purpose whatsoever without our prior written consent.
Very truly yours,
ROBINSON, BRADSHAW & HINSON, P.A.
John B. Garver, III
<PAGE> 1
EXHIBIT 10.1
LOAN AGREEMENT
This LOAN AGREEMENT ("Agreement") is made and entered into as of this
14th day of July, 1999, by and between Value Partners, Ltd., a Texas Limited
Partnership ("Value Partners") and T. Rowe Price Recovery Fund II, L.P.
("Price") (collectively the "Lenders") (each of which is acting severally and as
to itself only and not jointly) and Altiva Financial Corporation, a Delaware
Corporation (the "Borrower").
R E C I T A L S
Borrower has requested that the Lenders loan to Borrower and Lenders
are willing to loan to Borrower the sum of $3,650,000.00 ("Loan Amount") upon
the terms and subject to the conditions hereinafter set forth. The respective
obligation of each Lender to make such loan is limited to $1,825,000.00 as to
Value Partners and $1,825,000.00 as to Price. To evidence this loan, the
Borrower shall execute a Promissory Note in those respective sums to each Lender
in the form attached hereto as Exhibit "A" (the "Notes"). This Agreement, the
Notes, the Pledge Agreement (as defined below) and the Notice, (as defined
below), and other documents required by the terms hereof shall be referred to
collectively as the "Loan Documents". All exhibits attached hereto are by this
reference incorporated herein. The term "Holder" or "holder", as used herein or
in any of the Loan Documents, refers to the Lenders and each successive owner
and holder of the respective Notes. Repayment of the Notes shall be secured
pursuant to the terms of that certain Pledge Agreement, as that term is defined
herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby
acknowledged, Lenders and Borrower agree:
1. References in Loan Documents. All references in the Loan Documents
to the Notes shall henceforth include references to the Notes, as such Notes
may, from time to time, be amended, modified, reinstated, extended, renewed,
decreased, and/or increased.
2. Execution of Documents. Subject to the terms and conditions set
forth herein, Borrower will execute in favor of each of the Lenders a Note in
the form attached hereto as Exhibit "A" as to the respective amount advanced by
the respective Lender and Borrower and Lenders shall execute that certain Notice
and Certification of No Oral Agreements in the form attached hereto as Exhibit
"B" (the "Notice") and that certain Pledge Agreement in the form attached hereto
as Exhibit "C" (the "Pledge Agreement"). Repayment of the Notes shall be secured
pursuant to the terms of that certain Pledge Agreement, as that term is defined
herein, together with such other documents as are necessary and related to this
transaction.
LOAN AGREEMENT, PAGE 1
<PAGE> 2
3. Agreement to Advance: Purpose. Upon Borrower's compliance with the
requirements of Lenders set forth in this Agreement and subject to the terms and
conditions hereof, Value Partners shall advance a total amount not to exceed
$1,825,000.00 and Price, a total amount not to exceed $1,825,000.00, as
evidenced by their respective Notes and Borrower shall repay such sums pursuant
to the terms of the Loan Documents. The proceeds of this loan are to be used by
Borrower solely (a) to fund the purchase of The Money Centre, Inc. ("MCI") on
July 15, 1999, a North Carolina corporation, together with its successors
pursuant to the terms of that certain Stock Purchase Agreement dated as of July
7, 1999, by and among the Borrower, MCI and each of the shareholders of MCI, and
(b) to pay legal fees and expenses of counsel to the Lenders in the sum of
$150,000.00 incurred by Lenders to date in negotiating this and other
transactions between Borrower and Lenders. The sum of $150,000.00 payable to
such counsel shall be paid directly by Lenders ($75,000.00 each) to such counsel
and shall be deemed an advance of that portion of the loan amount to Borrower.
4. Application of Proceeds. Any monies collected by or on behalf of a
Lender pursuant to the Loan Documents shall be applied in the following order:
First, to reimbursement of expenses and indemnities provided herein and
in the Loan Documents;
Second, in case the principal of the outstanding Notes shall not have
become due and be unpaid, to the payment of interest on the Notes in default in
the order of the maturity of the installments of such interest, with interest
upon the overdue installments of interest at the rate then borne by the Notes,
or in the event of prepayment of principal and/or interest, to the payment of
the whole amount then owing and unpaid upon the Notes for principal and
interest, with interest on the payments of interest at the rate then borne by
the Notes, and in the case such sums are insufficient to pay in full the whole
amounts so due and unpaid upon the Notes, then to the payment of such principal
and interest without preference or priority of principal over interest, such
payment to be made ratably to the Lenders entitled thereto;
Third, in case the principal of the outstanding Notes shall have become
due, by declaration or otherwise, and be unpaid, to the payment of the whole
amount then owing and unpaid upon the Notes for principal and interest, with
interest on the overdue principal, and upon overdue payments of interest at the
rate then borne by the Notes, and in case such monies shall be insufficient to
pay in full the whole amounts so due and unpaid upon the Notes, then to the
payment of such principal and interest without preference or priority of
principal over interest, such payment to be made ratably to the Lenders entitled
thereto; and
Fourth, to the payment of the remainder, if any, to the Borrower or any
other person lawfully entitled thereto.
5. Confirmation of Rights. The Lenders shall have the right to exercise
all rights and
LOAN AGREEMENT, PAGE 2
<PAGE> 3
remedies of Lenders under the Loan Documents and under applicable law upon the
occurrence of any default or event of default under any of the Loan Documents
and under any and all amendments or modifications to any of the Loan Documents
or to the terms thereof.
6. Representations and Warranties of Borrowers. Borrower represents and
warrants to the Lenders as follows:
(a) Organization, Standing, etc. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware and has all requisite corporate power and authority to own its assets
and carry on its business as presently conducted. Borrower has all requisite
corporate power and authority to (i) execute, deliver and perform its
obligations under the Loan Documents, and (ii) execute, deliver and perform its
obligations under all other agreements and instruments executed and delivered by
it pursuant to or in connection with the Loan Documents.
(b) Authorization and Execution. The execution, delivery and
performance by Borrower of the Loan Documents has been duly and validly
authorized and Borrower has the corporate power and authority to execute,
deliver and perform this Agreement and execute deliver and perform the Loan
Documents. The Loan Documents have been duly executed and delivered by Borrower
and constitutes a valid and binding agreement of Borrower.
(c) No Conflict. Neither the execution and delivery of this
Agreement and each of the other Loan Documents, nor consummation of the
transactions contemplated hereby and thereby, nor compliance by the Borrower
with any of the provisions hereof or thereof: (i) does or will conflict with or
result in a breach of any provisions of the Certificate of Incorporation or
Bylaws of the Borrower or the equivalent documents of any Borrower subsidiary;
(ii) violate, conflict with or result in a breach of any term, condition or
provision of, or constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, or give rise to any right
of termination, cancellation or acceleration with respect to, or result in the
creation of any lien upon any property or asset of the Borrower or a Borrower
subsidiary pursuant to, any material note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which the
Borrower or a Borrower subsidiary is a party, or by which any of their
respective properties or assets may be bound or affected, except for such
conflicts with the trust and related agreements described in Exhibit "B" to the
Pledge Agreement; or (iii) subject to the compliance referred to in clauses (i)
and (ii) of the preceding sentence and subject to obtaining any consents under
the trust and related agreements described in Exhibit "B" to the Pledge
Agreement, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Borrower or a Borrower subsidiary. No consent,
approval, order or other authorization of any governmental entity or of any
third party is required by or on behalf of the Borrower or a subsidiary of the
Borrower in connection with the execution, delivery and performance of this
Agreement and each of the other Loan Documents
(d) Documentation; No Material Misstatements. All of the necessary
documents
LOAN AGREEMENT, PAGE 3
<PAGE> 4
related to the consummation of this transaction requested by Lenders have been
provided by Borrower to the Lenders and are true, correct and complete in all
material respects, and no written representation, warranty or statement made by
the Borrower in or pursuant to this Agreement contains or will contain, when
made, any untrue statement of a material fact or omits or will omit to state any
material fact necessary to make such representation, warranty or statement not
misleading to a prospective purchaser of securities from Borrower, who is
seeking full information with respect to Borrower.
(e) Additional Representations, Covenants, and Agreements.
Borrower further covenants and agrees:
(i) To perform all obligations under the Loan Documents
and other documents related to the Loan Documents and
any instrument, document, or writing referenced
herein, and to promptly pay when due, all other
costs, charges, and expenses incurred in connection
with the operations of Borrower.
(ii) To indemnify and hold harmless the Lenders from any
and all actions, claims, demands, damages, costs,
expenses, and other liabilities, including without
limitation attorney's fees, that Lenders may incur
that in any way relate to or arise out of this
Agreement, the other Loan Documents, but not the
gross negligence, willful misconduct, fraud or
violation of law by Lenders.
(iii) That this Agreement or any right or obligation that
Borrower has under this Agreement shall not be
assigned or transferred by Borrower without the
express written consent of Lenders, and that Borrower
and Borrower's successors, and assigns shall be bound
by this Agreement.
7. Representations and Warranties of Lenders. The Lenders, severally
and not jointly, represent and warrant to Borrower as follows:
Such Lender has full legal right, power, and authority (including the
due authorization by all necessary partnership action) to enter into this
Agreement and to perform such Lender's obligations hereunder without the need
for the consent of any other person, and this Agreement has been duly
authorized, executed and delivered and constitutes the legal, valid and binding
obligation of the such Lender enforceable against the such Lender in accordance
with the terms hereof.
8. Covenants of Borrower. Borrower covenants and agrees that so long as
its obligation under the Loan Documents, including the Notes, shall be
outstanding:
LOAN AGREEMENT, PAGE 4
<PAGE> 5
a. Principal and Interest. Borrower will pay or cause to
be paid punctually the principal of and interest on
the Notes at the times and places and in the manner
specified in the Notes.
b. Maintenance and Existence. Borrower will at all times
do or cause to be done all things necessary to
maintain, preserve and renew its existence and its
rights, patents and franchises.
c. Compliance with Laws. Borrower will comply in all
material respects with all applicable laws, rules,
regulations, and orders of the United States of
America and of all foreign countries and of any state
or municipality, and of any instrumentality or agency
of any thereof (including applicable statutes,
regulations, orders and restrictions relating to
equal employment opportunities and environmental
standards or controls) in respect of the conduct of
business and the ownership of property by Borrower.
d. Insurance. Borrower will maintain adequate insurance
with financially sound and reputable insurance
companies in such amounts and covering such risks as
is customarily carried by companies engaged in
similar businesses and similarly situated as
Borrower. Borrower shall notify Lenders of any
cancellations or material changes within five (5)
Business Days of notice of such cancellation or
change to the Borrower.
e. Indebtedness. Borrower will pay punctually and
discharge when due and payable any indebtedness
heretofore or hereafter incurred or assumed by it and
discharge, perform and observe the covenants,
provisions and conditions to be discharged, performed
and observed in all material respects on the part of
Borrower in connection therewith, or in connection
with any agreement or other instrument relating
thereto.
f. Books. Borrower will keep at all times proper books
of record and account in which full, true and correct
entries will be made of its transactions in
accordance with applicable generally accepted
accounting principles.
(i) Certificate of Default. Deliver to the
Lenders, forthwith upon becoming aware of
any default or defaults in the performance
of any covenant, agreement or condition
contained in the Loan Documents (including
notice of any event which with the giving of
notice, lapse of time or both would become
an Event of Default as defined in the
Notes), an Officer's Certificate specifying
such default or Event of Default.
LOAN AGREEMENT, PAGE 5
<PAGE> 6
(ii) Additional Information. Such other data and
information as from time to time may be
reasonably and timely requested by any of
the Lenders.
g. Other Documents. Borrower will comply will all other
covenants, representations, warranties, terms and
obligations of the Loan Documents and all other
documents executed pursuant to the terms hereof or to
the other Loan Documents.
9. Events of Default. The Events of Default provision of the
Notes are incorporated herein by reference and made a part hereof for all
purposes.
10. Waiver of Claims. Borrower warrants and represents to Lenders
that as of the date hereof the Notes are subject to no credits, charges, claims,
or rights of offset or deduction of any kind or character whatsoever; and the
Borrower releases and discharges Lenders from any and all claims and causes of
action, whether known or unknown and whether now existing or hereafter arising,
including, without limitation, any usury claims, that have at any time been
owned, or that are hereafter owned by Borrower and that arise out of or are
related to the execution, delivery and performance of the Loan Documents.
11. Special Notices to Borrower and All Other Obligors. THIS LOAN
IS PAYABLE IN FULL NO LATER THAN AUGUST 1, 1999. AT MATURITY, YOU MUST PAY THE
ENTIRE UNPAID PRINCIPAL BALANCE OF THE LOAN AND ACCRUED UNPAID INTEREST THEN
DUE. THE LENDERS ARE UNDER NO OBLIGATION TO REFINANCE THE LOAN AT THAT TIME. YOU
WILL THEREFORE BE REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS YOU MAY OWN, OR
YOU WILL HAVE TO FIND A LENDER WILLING TO LEND THE MONEY AT PREVAILING MARKET
RATES, WHICH MAY BE CONSIDERABLY HIGHER THAN THE INTEREST RATE ON THIS LOAN. IF
YOU REFINANCE THIS LOAN AT MATURITY, YOU MAY HAVE TO PAY SOME OR ALL OF THE
CLOSING COSTS NORMALLY ASSOCIATED WITH A NEW LOAN EVEN IF YOU OBTAIN REFINANCING
FROM THE SAME LENDERS.
12. Costs and Expenses. Borrower agrees to pay, upon execution of
this Agreement, all costs and expenses incurred by Lenders to date in connection
with the execution and consummation of this Agreement and certain related
transactions in the sum of $150,000.00, including, without limitation, the
reasonable fees and expenses of Lenders' counsel Bergman, Stein & Bird, L.L.P.
and Elias, Matz, Tiernan & Herrick, L.L.P. on behalf of the Lender(s). Such fees
shall be paid in accordance with Section 3 above. The failure of such fees and
expenses to be paid pursuant to paragraph 3 above shall not release Borrower
from its obligation to promptly pay such sums.
13. Continued Effect. Except to the extent amended hereby or in
connection herewith, all terms, provisions, and conditions of the Loan Documents
shall remain enforceable and binding in
LOAN AGREEMENT, PAGE 6
<PAGE> 7
accordance with their respective terms.
14. Governing Law. THE PARTIES HERETO ACKNOWLEDGE THAT THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE NOTES BEAR A REASONABLE
RELATION TO THE STATE OF MARYLAND IN THAT, INTERALIA, A SIGNIFICANT PURCHASER
HAS ITS PRINCIPAL PLACE OF BUSINESS IN THE STATE OF MARYLAND AND PART OF THE
NEGOTIATING RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY OCCURRED IN THE
STATE OF MARYLAND. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS THEREOF.
15. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of the parties
hereto, and each of the parties hereto, hereby represent, warrant, and covenant
to the other that the persons executing this Agreement on behalf of each such
party have full authority, power, and authorization to execute such document and
to bind its principal.
16. Entire Agreement. This Agreement supersedes all prior oral and
written agreements and understandings of the parties hereto with respect to the
subject matter hereof.
17. Headings. The headings of the sections and subsections hereof
are inserted as a matter of convenience and for reference only and in no way
define, limit or describe the scope of this Agreement or the meaning of any
provision hereof.
18. Waivers. The failure of any party to act to enforce rights
under any of the Loan Documents shall not be deemed a waiver and shall not
preclude enforcement of any rights in the Loan Documents. No waiver of any term
or provision of any of the Loan Documents on the part of a party shall be
effective for any purpose whatsoever unless such waiver is in writing and signed
by such party.
19. Invalid Provisions. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under present or future laws effective
during the terms hereof, such provision shall be fully severable. This Agreement
shall be construed and enforced as if such illegal, invalid or unenforceable
provision had never comprised a part hereof, and the remaining provisions hereof
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore, in
lieu of such illegal, invalid or unenforceable provision there shall be added
automatically as a part of this Agreement a provision as similar in terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
20. Notices. Any request, demand, authorization, direction,
notice, consent, waiver,
LOAN AGREEMENT, PAGE 7
<PAGE> 8
instruction, document or other communication provided or permitted by this
Agreement to be made upon, given or furnished to, or filed shall be sufficient
for every purpose hereunder if in writing and mailed, registered or certified
mail, postage prepaid or delivered by facsimile or telecopier (if confirmed), as
follows:
If to Borrowers, to:
Altiva Financial Corporation
1000 Parkwood Circle
Suite 600
Atlanta, Georgia 30339
Attn:
With copies to:
King & Spalding
191 Peachtree
Atlanta, Georgia 30303-1763
Attn: Jack Capers
If to Lenders, to:
Value Partners, Ltd.
4514 Cole Avenue
Suite 808
Dallas, Texas 75205
Attn: Timothy G. Ewing
T. Rowe Price Recovery Fund II, L.P.
100 East Pratt
Baltimore, Maryland 21202
Attn: Hubert M. Stiles, Jr.
With copies to:
Bergman, Stein & Bird L.L.P.
4514 Travis Street
Travis Walk, Suite 300
Dallas, Texas 75205
Attn: Jack R. Bird, Esquire
and
Elias, Matz, Tiernan & Herrick
LOAN AGREEMENT, PAGE 8
<PAGE> 9
734 15th Street, N.W.
12th Floor
Washington, DC 20005
Attn: Tim Matz and Gerard Hawkins
21. Attorney's Fees. In the event attorneys' fees or other costs
are incurred to secure performance of any of the obligations herein provided
for, or to establish damages for the breach thereof, or to obtain any other
appropriate relief, whether by way of prosecution or defense, the prevailing
party shall be entitled to recover reasonable attorneys' fees and costs incurred
therein.
22. Further Assurances. Each party hereto agrees to execute any
and all documents, and to perform such other acts, whether before or after
closing, that may be reasonably necessary or expedient to further the purposes
of this Agreement or to further assure the benefits intended to be conferred
hereby.
23. NOTICE OF INVALIDITY OF ORAL AGREEMENTS. THIS WRITTEN
AGREEMENT, THE OTHER LOAN DOCUMENTS, AND ALL EXHIBITS HERETO REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
24. Usury. All agreements between Borrower and Lenders, whether
now existing or hereafter arising and whether written or oral, are hereby
limited so that in no contingency, whether by reason of demand or acceleration
of the Final Maturity Date, as that term is defined in the Notes, or otherwise,
shall the interest contracted for, charged, received, paid or agreed to be paid
to Lenders exceed the maximum amount permissible under the laws of the State of
Maryland (hereinafter the "Applicable Law"). If, from any circumstance
whatsoever, interest would otherwise be payable to Lenders in excess of the
maximum amount permissible under the Applicable Law, the interest payable to
Lenders shall be reduced to the maximum amount permissible under the Applicable
Law, and if from any circumstance Lenders shall ever receive anything of value
deemed interest by the Applicable Law in excess of the maximum amount
permissible under the Applicable Law, an amount equal to the excessive interest
shall be applied to the reduction of the principal hereof and not to the payment
of interest, or if such excessive amount of interest exceeds the unpaid balance
of principal hereof, such excess shall be refunded to Borrower. All interest
paid or agreed to be paid to Lenders shall, to the extent permitted by the
Applicable Law, be amortized, prorated, allocated and spread throughout the full
period (including any renewal or extension) until payment in full of the
principal so that the interest hereon for such full period shall not exceed the
maximum amount permissible under the Applicable Law. Lenders expressly disavows
any intent to contract for, charge or receive interest in an amount which
exceeds the maximum amount permissible under the Applicable Law. This paragraph
as well as similar paragraphs as set forth in the Notes shall control all
agreements
LOAN AGREEMENT, PAGE 9
<PAGE> 10
between Borrower and Lenders.
25. Counterparts. This Agreement may be executed in separate or
multiple counterparts by the parties, and all of such counterparts shall be
considered as one and the same instrument notwithstanding the fact that various
counterparts are signed by only one or more of the parties, and all of such
Agreements shall be deemed but one and the same Agreement.
26. Best Efforts. As of the date hereof, the parties to this
Agreement were in the process of negotiating a financing transaction in a
principal amount of $7,000,000.00 to be loaned by the Lenders to the Borrower,
the proceeds of which were to be used to acquire the capital stock of MCI. The
parties desire to continue negotiations with respect to such transaction, a
portion of the proceeds of which, if consummated, shall be used by the Borrower
to satisfy the Notes. The parties hereby agree to use their best efforts to
conclude that transaction as expeditiously as possible; however, the provisions
of this paragraph 26 do not constitute a binding obligation on the part of
either party to close that transaction.
LOAN AGREEMENT, PAGE 10
<PAGE> 11
EXECUTED as of the date first above written.
LENDERS:
VALUE PARTNERS, LTD.
By: /s/ Timothy G. Ewing
------------------------------------------------
Timothy G. Ewing
Managing Partner of Ewing & Partners
general partner of Value Partners, Ltd.
Its: General Partner
T. ROWE PRICE RECOVERY FUND II, L.P.
By: /s/ Hubert M. Stiles, Jr.
----------------------------------------
Hubert M. Stiles, Jr.
President of T. Rowe Price Recovery Fund II
Associates, L.L.C., General Partner
BORROWER:
ALTIVA FINANCIAL CORPORATION
A DELAWARE CORPORATION
By: /s/ Champ Meyercord
------------------------------------------------
Its: Chief Executive Officer
-----------------------------------------------
LOAN AGREEMENT, PAGE 11
<PAGE> 12
EXHIBIT A
THE TRANSFER OF THIS NOTE IS RESTRICTED - SEE SECTION 18 HEREOF
PROMISSORY NOTE
$1,825,000.00 July 14, 1999
FOR VALUE RECEIVED, Altiva Financial Corporation, a Delaware Corporation
("Maker"), does hereby promise to pay to the order of Value Partners, Ltd.
("Payee"), at its office at 4514 Cole Avenue, Suite 808, Dallas, Texas 75205, or
at such other place as the holder hereof may from time to time designate in
writing, in lawful money of the United States of America, the principal sum of
ONE MILLION EIGHT HUNDRED TWENTY-FIVE THOUSAND DOLLARS and NO/100
($1,825,000.00), or so much thereof as may be advanced, with interest thereon as
follows:
1. Certain Definitions. For the purposes hereof, the terms set
forth below shall have the following meanings:
(a) "Applicable Law" shall mean (i) the laws of the United
States of America applicable to contracts made or performed in the
State of Maryland, now or at any time hereafter prescribing maximum
rates of interest or eliminating maximum rates of interest on loans and
extensions of credit; (ii) laws of the state of Maryland, including,
without limitation, any items prescribing or eliminating maximum rate
of interest on loans and extensions of credit, and (iii) any other laws
at any time applicable to contracts made or performed in the State of
Maryland which permit a higher interest rate ceiling hereunder.
(b) "Base Rate" shall mean twelve percent (12%) per annum.
(c) "Final Maturity Date" shall mean August 1, 1999 or such
earlier date as a result of acceleration as permitted by the terms
hereof or in any of the Loan Documents.
(d) "Highest Lawful Rate" shall mean at the particular time in
question the lesser of eighteen percent (18%) or the maximum
non-usurious rate of interest which, under Applicable Law, Payee is
then permitted to charge Maker on this note. If the maximum rate of
interest which, under Applicable Law, Payee is permitted to charge
Maker on this note shall change after the date hereof, the Highest
Lawful Rate shall be automatically increased or decreased, as the case
may be, from time to time as of the effective date of each change in
the Highest Lawful Rate without notice to Maker.
(e) "Loan Agreement" shall mean that certain Loan Agreement
dated of even date herewith, executed by and between Maker, Payee, and
T. Rowe Price Recovery Fund II, L.P., the terms of which are
incorporated herein by reference and which shall govern this note.
(f) "Loan Documents" shall mean the Loan Agreement, the Pledge
Agreement, this note, the Promissory Note in the principal sum of
$1,825,000.00 executed by Maker in
PROMISSORY NOTE, PAGE 1
<PAGE> 13
favor of T. Rowe Price Recovery Fund II, L.P., that certain Notice and
Certification of No Oral Agreements of even date hereof and all
documents related or arising out of the Loan Agreement.
2. Calculation and Payment of Principal and Interest.
(a) Simple interest on the unpaid principal balance hereof
from time to time outstanding shall be computed at a rate equal to the
lesser of (i) the Base Rate and (ii) the Highest Lawful Rate.
(b) Principal and accrued and unpaid interest, computed as set
forth above, shall be due and payable in one installment on the Final
Maturity Date, together with all other sums payable under the Loan
Documents.
(c) Interest on this note shall be calculated as if each year
consisted of three hundred sixty (360) days, but to the extent such
computation of interest might cause the rate of interest which this
note bears to exceed the Highest Lawful Rate, such interest shall be
computed on the basis of three hundred sixty-five (365) day or three
hundred sixty-six (366) day years, as the case may be.
(d) Following the maturity of this note, whether by
acceleration or otherwise, the unpaid principal balance of this note
shall bear interest at a rate of interest equal to the Highest Lawful
Rate.
(e) If the date for any payment or prepayment hereunder falls
on a day which is a Saturday, Sunday or other legal holiday in the
state of Maryland, then for all purposes of this note, the same shall
be deemed to have fallen on the next following day, and such extension
of time shall in such case be included in the calculation of interest.
(f) Provided no Event of Default has occurred and is
continuing, all payments received by Payee shall be applied, to the
extent thereof, first, to accrued, unpaid interest upon this note,
second, to principal, and third, to any other outstanding portion of
the indebtedness. Upon and during the continuation of an Event of
Default, all payments received by Payee shall be applied, to the extent
thereof, to the indebtedness in the order and manner which Payee shall
deem appropriate, any instructions from Maker to the contrary
notwithstanding.
3. Negotiability; Offsets, Defenses or Counterclaims. This note
is freely negotiable. The Maker knows of no defenses, setoffs or counterclaims
existing as of the date hereof which could be asserted or brought by the Maker
or any other party in any suit or action for the collection of any sum due
hereunder.
4. Prepayment. Maker shall have the right to prepay the unpaid
principal balance of, and accrued interest upon, this note in whole at any time,
or in part from time to time, without permission or penalty.
PROMISSORY NOTE, PAGE 2
<PAGE> 14
5. Waiver. Maker and all sureties, endorsers, accommodation
parties, guarantors and other parties now or hereafter liable for the payment of
this note, in whole or in part, hereby severally (i) waive demand, notice of
demand, presentment for payment, notice of nonpayment, notice of default,
protest, notice of protest, notice of intent to accelerate, notice of
acceleration, notice of dishonor and all other notices, and further waive
diligence in collecting this note, in taking action to collect this note, in
bringing suit to collect this note, or in enforcing this note or any of the
security for this note; (ii) agree to any substitution, subordination, exchange
or release of any security for this note or the release of any party primarily
or secondarily liable for the payment of this note; (iii) agree that Payee shall
not be required to first institute suit or exhaust its remedies hereon against
Maker or others liable or to become liable for the payment of this note or to
enforce its rights against any security for the payment of this note; and (iv)
consent to any extension of time for the payment of this note, or any
installment hereof, made by agreement by Payee with any person now or hereafter
liable for the payment of this note, even if Maker is not a party to such
agreement.
6. Events of Default
(a) An "Event of Default" shall mean the occurrence or
existence of any of one or more of the following events, whether such
occurrence is voluntary or involuntary or comes about or is effected by
operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental authority, if:
(i) If Maker shall fail to pay any installment of
principal and/or interest under this note as and when same
becomes due and payable in accordance with the terms hereof or
any other obligation of Maker to Payee involving the payment
of money, or if Maker shall default in any other obligation
under this note, and/or the Loan Agreement which can be cured
by the payment of money;
(ii) If Maker shall default in the observance or
performance of any of the terms, covenants, agreements, or
conditions, not involving the payment of money, set forth
herein or in any other of the Loan Documents;
(iii) The occurrence of a default under any document
or instrument evidencing, securing or pertaining to the
indebtedness evidenced hereby including, without limitation,
the Loan Agreement;
(iv) If any representation, warranty or other
statement of fact, in the Loan Documents or in any writing,
certificate, report or statement at any time furnished by
Maker or any other party obligated in relation hereto to the
Payee pursuant to or in connection thereto shall be false or
misleading in any material respect; or
(v) The liquidation, termination or dissolution of
the Maker or any other parties obligated hereunder;
PROMISSORY NOTE, PAGE 3
<PAGE> 15
(vi) The bankruptcy or insolvency of, the assignment
for the benefit of creditors by, or the appointment of a
receiver for any property of Maker or any other parties
obligated hereunder;
(vii) Default in the payment of any other
indebtedness due to the holder hereof or default in the
performance of any other obligation to the holder hereof by
Maker of this note, or
(ix) If any creditor of the Maker for any reason
whatsoever hereafter shall accelerate payment in whole or in
part of any outstanding material obligation owed to it by the
Maker under any agreement or arrangement due to a default or
an event of default by the Maker, or if any judgment against
the Maker or any execution against any property of the Maker
or any amount remains unpaid, unstayed or undismissed for a
period in excess of ten (10) days; or
(x) If the Maker shall cease to exist.
(b) It is understood and agreed that time is of the
essence of the note. If an Event of Default exists, then all principal
amounts under the note at the time outstanding shall immediately become
due and payable, together with interest accrued thereon, without
presentment, demand, grace, protest or notice of any kind, including
notice of intent to accelerate the payment of the unpaid balance of the
note or in any other Loan Documents, of notice of acceleration, all of
which are hereby waived by the Maker. Any holder of the note and of
rights under the Loan Documents may also proceed to protect and enforce
its rights either by suit in equity and/or by action at law, or by
other appropriate proceedings, whether for the specific performance (to
the extent permitted by law) of any covenant or agreement contained in
such Loan Documents, or in aid of the exercise of any power granted in
such Loan Documents, or may proceed to enforce the payment of such Loan
Documents or to enforce any other legal or equitable right of the
holder of such Loan Documents. The failure to exercise the foregoing
option upon the happening of one or more Events of Default shall not
constitute a waiver of the right to exercise the same or any other
option at any subsequent time, and no such failure shall nullify any
prior exercise of any such option without the express written consent
of Payee.
7. Loan Agreement. This note is governed by the terms of that
certain Loan Agreement executed on even date hereof, the terms of which are by
this reference incorporated herein.
8. Default Interest; Late Charge. If the entire unpaid principal
balance and accrued but unpaid interest is not paid on or before the earlier to
occur of the Final Maturity Date or any acceleration of payment permitted
hereby, all unpaid amounts of this note, including principal and interest, shall
thereafter bear interest at the Highest Lawful Rate.
PROMISSORY NOTE, PAGE 4
<PAGE> 16
9. Compliance with Law. All agreements between Maker and Payee,
whether now existing or hereafter arising and whether written or oral, are
hereby limited so that in no contingency, whether by reason of demand or
acceleration of the Final Maturity Date or otherwise, shall the interest
contracted for, charged, received, paid or agreed to be paid to Payee exceed the
maximum amount permissible under Applicable Law. If, from any circumstance
whatsoever, interest would otherwise be payable to Payee in excess of the
maximum amount permissible under Applicable Law, the interest payable to Payee
shall be reduced to the maximum amount permissible under Applicable Law; and if
from any circumstance Payee shall ever receive anything of value deemed interest
by Applicable Law in excess of the maximum amount permissible under Applicable
Law, an amount equal to the excessive interest shall be applied to the reduction
of the principal hereof and not to the payment of interest, or if such excessive
amount of interest exceeds the unpaid balance of principal hereof, such excess
shall be refunded to Maker. All interest paid or agreed to be paid to Payee
shall, to the extent permitted by Applicable Law, be amortized, prorated,
allocated, and spread throughout the full period (including any renewal or
extension) until payment in full of the principal so that the interest hereon
for such full period shall not exceed the maximum amount permissible under
Applicable Law. Payee expressly disavows any intent to contract for, charge or
receive interest in an amount which exceeds the maximum amount permissible under
Applicable Law. This paragraph shall control all agreements between Maker and
Payee.
10. Attorneys' Fees and Costs. If an event of default shall occur,
and in the event that thereafter this note is placed in the hands of an attorney
for collection, or in the event this note is collected in whole or in part
through legal proceedings of any nature, then and in any such case Maker
promises to pay, and there shall be added to the unpaid principal balance
hereof, all reasonable costs of collection, including but not limited to
reasonable attorneys' fees incurred by the holder hereof, on account of such
collection, whether or not suit is filed.
11. Consents, Waivers and Modifications. No term, covenant,
agreement or condition of the note may be amended, supplemented or modified, or
compliance therewith waived (either generally or in a particular instance and
either retroactively or prospectively), except pursuant to a written instrument
signed by the Maker and the holder. No course of dealing between the Maker and
the holder of the note or any delay or failure on the part of the holder of the
note in exercising any rights hereunder shall operate as a waiver of any rights
of such holder.
12. Cumulative Rights. No delay on the part of the holder of this
note in the exercise of any power or right under this note or under any other
instrument executed pursuant hereto shall operate as a waiver thereof, nor shall
a single or partial exercise of any power or right preclude other or further
exercise thereof or the exercise of any other power or right. Enforcement by the
holder of this note of any security for the payment hereof shall not constitute
any election by it of remedies so as to preclude the exercise of any other
remedy available to it.
13. Headings. The paragraph headings used in this note are for
convenience of reference only, and shall not affect the meaning or
interpretation of this note.
PROMISSORY NOTE, PAGE 5
<PAGE> 17
14. Notices and Demands. Any notice or demand to be given or to be
served upon Maker in connection with this note must be in writing and shall be
given by certified or registered mail, properly addressed, with postage prepaid,
addressed to Maker as follows:
Altiva Financial Corporation
1000 Parkwood Circle
Suite 600
Atlanta, Georgia 30339
Attn: Champ Meyercord
or at such other address as Maker may designate from time to time by written
notice given to the holder hereof. Any notice or demand will be deemed given
when notice or demand is deposited in an authorized depository under the care
and custody of the United States Postal Service.
15. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND AND THE LAWS OF THE UNITED
STATES APPLICABLE TO TRANSACTIONS IN THE STATE OF MARYLAND. COURTS WITHIN THE
STATE OF MARYLAND SHALL HAVE JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN
MAKER AND PAYEE, WHETHER AT LAW OR IN EQUITY.
16. ENTIRE AGREEMENT. THE TERMS OF THIS NOTE, TOGETHER WITH THE
OTHER LOAN DOCUMENTS, ARE INTENDED BY THE PARTIES HERETO AS A FINAL EXPRESSION
OF THEIR AGREEMENT WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND MAY NOT BE
CONSTRUED BY EVIDENCE OF ANY PRIOR OR CONTEMPORANEOUS INSTRUMENT. THIS NOTE,
TOGETHER WITH THE OTHER LOAN DOCUMENTS, CONSTITUTES THE COMPLETE AND EXCLUSIVE
STATEMENT OF ITS TERMS, AND NO EXTRINSIC EVIDENCE WHATSOEVER MAY BE INTRODUCED
IN ANY PROCEEDINGS, IF ANY (JUDICIAL OR OTHERWISE), INVOLVING THIS NOTE, EXCEPT
FOR EVIDENCE OF A WRITTEN MODIFICATION ENTERED INTO SUBSEQUENT TO THE DATE OF
THIS NOTE.
PROMISSORY NOTE, PAGE 6
<PAGE> 18
17. Successors and Assigns. The term "Payee" shall include all of
Payee's successors and assigns to whom the benefits of this Note shall inure.
18. SECURITIES LAWS. THIS NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE.
THIS NOTE THEREFORE MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
OTHERWISE DISTRIBUTED FOR VALUE IN THE ABSENCE OF (i) AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE MAKER THAT SUCH SALE, TRANSFER, ASSIGNMENT, PLEDGE
OR OTHER DISTRIBUTION IS EXEMPT FROM (OR NOT OTHERWISE SUBJECT TO) THE
REGISTRATION (OR QUALIFICATION) AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT
OR LAWS, OR (ii) SUCH REGISTRATION OR QUALIFICATION.
MAKER:
ALTIVA FINANCIAL CORPORATION,
A DELAWARE CORPORATION
By:
--------------------------------------
Its:
-------------------------------------
PROMISSORY NOTE, PAGE 7
<PAGE> 1
Exhibit 10.2
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Agreement"), dated as of July 14, 1999, is
entered into by and between Altiva Financial Corporation ("Pledgor") and Value
Partners, Ltd., as agent ("Agent") on its own behalf and on behalf of T. Rowe
Price Recovery Fund II, L.P. (collectively the "Secured Parties"), in order to
secure the payment of the indebtedness hereinafter referred to of Pledgor to the
Secured Parties.
R E C I T A L S
As of the date hereof, the Pledgor entered into that certain Loan
Agreement with the Secured Parties and issued, pursuant to the Loan Agreement,
two Promissory Notes, each in the principal sum of $1,825,000.00. The first Note
was issued to the Value Partners, Ltd. and the second to T. Rowe Price Recovery
Fund, which parties collectively are the Secured Parties pursuant to the terms
hereof. As a condition to entering into the Loan Agreement and making the loans
contemplated therein, the Secured Parties have required the execution of this
Pledge Agreement and performance of the obligations thereunder by the Pledgor.
The "Pledged Securities" as used herein shall refer to those certain Residual
Interest Certificates, copies of which are attached hereto as Exhibit "A", which
Pledged Securities were issued pursuant to securitizations of certain home loans
as described in Exhibit "B" hereto.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. Capitalized terms used herein shall have the
meaning specified herein.
SECTION 2. PLEDGE. Pledgor hereby pledges, assigns, transfers and
delivers to the Secured Parties, and hereby grants a security interest (the
"Security Interest") in, the following (the "Collateral"): the Pledged
Securities, the certificates representing such Pledged Securities and all
dividends, cash, securities, proceeds, investment property, instruments, general
intangibles and other property from time to time paid, payable or otherwise
distributed in respect of or in exchange for or related to any or all of such
Pledged Securities.
SECTION 3. SECURED OBLIGATIONS. The Security Interest shall secure,
under the circumstances set forth herein, the Secured Obligations. For purposes
of this Agreement, the term "Secured Obligations" shall mean the following (i)
the due and punctual payment and performance of each of the two (2) Promissory
Notes, each in the principal sum of $1,825,000.00, issued to Value Partners,
Ltd. and T. Rowe Price Recovery Fund, respectively, pursuant to that certain
Loan Agreement as of the date hereof between the Pledgor and the Secured Parties
(the "Notes") and (ii) the reimbursement of all costs incurred by the Secured
Parties to obtain, preserve and enforce this Agreement, collect
PLEDGE AGREEMENT, PAGE 1
<PAGE> 2
the Secured Obligations and maintain and preserve the Collateral, including
without limitation the Secured Parties' reasonable attorneys' fees,
disbursements and legal expenses.
SECTION 4. DELIVERY OF COLLATERAL. Upon the execution hereof, Pledgor
shall deliver to the Agent all documents, including the certificates
representing or evidencing the Collateral, in suitable form for transfer by
delivery, or accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance reasonably satisfactory to the Agent. Upon
the occurrence and during the continuance of an Event of Default, as defined
herein, the Agent shall have the right, at any time in its discretion and
without notice to Pledgor, to transfer to or to register in the name of the
Agent any or all of the Collateral.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
Pledgor represent and warrant as follows:
(i) the Security Interest constitutes a valid and, upon
delivery of the certificates evidencing the Pledged Securities, first
perfected security interest in all of the Collateral for payment and
performance of the Secured Obligations.
(ii) The Collateral is owned by Pledgor free and clear of
any lien, claim or encumbrance except for the Security Interest.
All representations and warranties of Pledgor contained herein shall survive the
execution, delivery and performance of this Agreement until termination of this
Agreement under SECTION 16.
SECTION 6. FURTHER ASSURANCES. Pledgor agrees that at any time and from
time to time, at Pledgor's expense, Pledgor will promptly execute and deliver
all further instruments and documents, (including financing statements), and
take all further action that the Secured Party may reasonably request, including
in obtaining all requisite consents (including, if necessary, that of the
indenture trustees of the securitization trusts (the "Trusts") as set forth on
Exhibit "B") in order to perfect and protect the Security Interest granted or
purported to be granted hereby or to enable the Secured Parties to exercise and
enforce the rights and remedies hereunder with respect to any Collateral.
Pledgor shall also promptly cause the Collateral to be registered in the name of
the Agent with the certificate registrar and indenture trustee of such
securitizations and obtain the consent of such trustees or persons to disburse
payments and proceeds of such Collateral as directed by the Agent.
SECTION 7. RELEASES OF COLLATERAL. Pledgor shall not sell or otherwise
dispose of the Collateral, or any part thereof or any interest therein. If the
Collateral, or any part thereof, is sold or otherwise disposed of in violation
of these provisions, the Security Interest of the Secured Party shall continue
in such Collateral or any part thereof notwithstanding such sale or other
disposition, and Pledgor will deliver any proceeds thereof to the Secured Party
to be held as Collateral hereunder.
SECTION 8. AGENT APPOINTED ATTORNEY-IN-FACT. Pledgor hereby irrevocably
appoints the Agent as Pledgor's attorney-in-fact, with full authority in the
place and stead of Pledgor and in its name or otherwise, from time to time in
the Agent's discretion, to take any action and to execute any instrument that
the Agent may deem reasonably necessary or advisable to accomplish the purposes
PLEDGE AGREEMENT, PAGE 2
<PAGE> 3
of this Agreement, including, without limitation, to receive, endorse and
collect all instruments, certificates made payable to Pledgor representing any
dividend, interest payment, payment of residual interests or other distribution
in respect of the Collateral or any part thereof and to give full discharge for
the same, when and to the extent permitted by this Agreement.
SECTION 9. SECURED PARTY MAY PERFORM. Upon the occurrence and during
the continuance of an Event of Default (as that term is used in the Loan
Agreement and Notes) (including an Event of Default resulting from a failure to
perform any agreement contained herein) (collectively, an "Event of Default"),
if Pledgor fails to perform any agreement contained herein, the Secured Party
may itself perform, or cause performance of, such agreement, and the expenses of
the Secured Party incurred in connection therewith shall be payable by Pledgor
under SECTION 12.
SECTION 10. REASONABLE CARE. The Agent shall have an obligation to
exercise reasonable care with respect to Collateral in its possession; provided,
however, that the Secured Party shall be deemed to have exercised reasonable
care if the Collateral is accorded treatment substantially comparable to that
which the Agent accords its own property.
SECTION 11. EVENTS OF DEFAULT: REMEDIES UPON DEFAULT. If upon or after
the occurrence of any Event of Default and during the occurrence of an Event of
Default, the Agent elects to exercise remedies under this Agreement (the
occurrence of any such event shall be referred to as an "Acceleration"), then
upon minimum notice to the Pledgor required by applicable law, but subject to
the terms of the Trusts and related agreements described in Exhibit "B":
(a) The Agent may exercise (in compliance with all applicable
securities laws) in respect of the Collateral, in addition to other rights and
remedies provided for herein or otherwise available to it, all the rights and
remedies of a secured party after default under the Uniform Commercial Code in
effect in the State of Maryland at that time, and the Agent may also, without
notice except as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any exchange, over the counter or
at the Agent's offices or elsewhere, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms as the Agent may deem
commercially reasonable or otherwise in such manner as necessary to comply with
applicable federal and state securities laws. Upon consummation of any such
sale, the Agent shall have the right to assign, transfer and deliver to the
purchaser or purchasers at any such sale and such purchasers shall hold the
property sold absolutely, free from any claim or right on the part of either
Pledgor, and Pledgor hereby waive (to the extent permitted by law) all rights of
redemption, stay or appraisal that it now has or may at any time in the future
have under any rule of law or statute now existing or hereafter enacted.
Pledgor agrees that the Agent shall not be required to register or
qualify any of the Collateral under applicable state or federal securities laws
in connection with any such sale if the sale is effected in a manner that
complies with all applicable federal and state securities laws or exemptions
therefrom. The Agent shall be authorized at any such sale (if it deems it
advisable to do so) to restrict the prospective bidders or purchasers to persons
who will represent and agree that they are purchasing the Collateral for their
own account for investment and not with a view to the distribution or sale
thereof. In the event that any such Collateral is sold at private sale, Pledgor
agree that if such Collateral is sold for a price that the Agent in good faith
believes to be reasonable under the
PLEDGE AGREEMENT, PAGE 3
<PAGE> 4
circumstances then existing, then (a) the sale shall be deemed to be
commercially reasonable in all respects, (b) Pledgor shall not be entitled to a
credit against the Secured Obligations in an amount in excess of the purchase
price, and (c) the Agent shall not incur any liability or responsibility to
Pledgor in connection therewith, notwithstanding the possibility that a
substantially higher price might have been realized at a public sale. Pledgor
hereby waives any claims against the Agent arising by reason of the fact that
the price at which the Collateral may have been sold at such private sale was
less than the price which might have been obtained at a public sale or was less
than the Secured Obligations, even if the Agent accepts the first offer received
and does not offer the Collateral to more than one offeree (other than the Agent
or an affiliate of the Agent), unless such sale was not commercially reasonable
under the circumstances.
To the extent notice of sale shall be required by law, the Agent shall
give Pledgor at least ten (10) days' (or such longer period as shall be
specified by applicable laws) notice of the time and place of any public sale or
the time after which any private sale is to be made, which Pledgor agrees shall
constitute commercially reasonable notification. At any such sale, the Agent, to
the extent permitted by law, may bid (which bid may be, in whole or in part, in
the form of cancellation of Secured Obligations) for and purchase for the
account of the Agent the whole or any part of the Collateral. The Agent shall
not be obligated to make any sale of Collateral regardless of notice of sale
having been given. The Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. If sale of all or any part of the Collateral is made on credit or for
future delivery, the Collateral so sold may be retained by the Agent until the
sale price is paid by the purchaser or purchasers thereof, but the Agent shall
not incur any liability in case any such purchaser or purchasers shall fail to
take up and pay for the Collateral so sold and, in case of any such failure,
such Collateral may be sold again upon like notice. Pledgor agrees that any sale
of the Collateral conducted by the Agent in accordance with the foregoing
provisions of this SECTION 11(A) shall be deemed to be a commercially reasonable
sale under the Uniform Commercial Code as in effect in the State of Maryland
from time to time.
As an alternative to exercising the power of sale herein conferred upon
it, the Secured Parties may proceed by a suit or suits at law or in equity to
foreclose the security interest granted under this Agreement and to sell the
Collateral, or any portion thereof, pursuant to a judgment or decree of a court
or courts of competent jurisdiction.
(b) Any cash held by the Secured Parties as Collateral and all
cash proceeds received by the Secured Parties in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral (i)
prior to the occurrence of an Acceleration shall be held by the Secured Party as
collateral for the Notes, and (ii) following the occurrence of an Acceleration
as provided in Section 4 of the Loan Agreement.
SECTION 12. EXPENSES. The Secured Parties shall be entitled to receive
from any proceeds of the Collateral, the amount of any and all reasonable
expenses, including the fees and expenses of its counsel and of any experts and
agents which the Secured Party may incur in connection with (i) the
administration of this Agreement, (ii) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Collateral,
(iii) the exercise or enforcement of any of the
PLEDGE AGREEMENT, PAGE 4
<PAGE> 5
rights of the Secured Party hereunder, or (iv) the failure by either Pledgor to
perform or observe any of the provisions hereof.
SECTION 13. SECURITY INTEREST ABSOLUTE. All rights of the Secured
Parties hereunder, the interest, and all obligations of Pledgor hereunder, shall
be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of the Notes,
Loan Agreement or related loan documents or the Secured Obligations or
any other agreement or instrument relating to the Notes, Loan Agreement
or related loan documents or the Secured Obligations;
(ii) any change in the time, manner or place of payment
of, or in any other term of, the Notes, Loan Agreement or related loan
documents or the Secured Obligations, or any renewal or extension of
the Notes, Loan Agreement or related loan documents or the Secured
Obligations or any other amendment or waiver of or any consent to any
departure from this Agreement or any other agreement or instrument;
(iii) any sale, exchange, release or nonperfection of any
other collateral, or any release of any guarantor or any person liable
in any manner for the collection of the Notes, Loan Agreement or
related loan documents or the Secured Obligations, or any amendment or
waiver of or consent to or departure from any guaranty, for the Notes,
Loan Agreement or related loan documents or the Secured Obligations; or
(iv) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, Pledgor in
respect of the Notes, Loan Agreement or related loan documents or the
Secured Obligations or in respect of this Agreement.
SECTION 14. AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Agreement nor consent to any departure by Pledgor herefrom
shall in any event be effective unless the same shall be in writing and signed
by the Agent and Pledgor, and then such waiver or consent shall be effective
only for the specific purpose for which given.
SECTION 15. TIME IS OF THE ESSENCE; NO WAIVER: CUMULATIVE REMEDIES.
Time and exactitude of each of the terms, obligations, covenants and conditions
of this Agreement are hereby declared to be of the essence. No failure on the
part of the Secured Parties to exercise, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or remedy by the Secured
Parties preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law.
SECTION 16. TERMINATION. This Agreement shall terminate upon the
payment in full of the Secured Obligations. Upon such termination, the Secured
Parties shall reassign and redeliver (or cause to be reassigned and redelivered)
to Pledgor, or to such person or persons as Pledgor shall designate or to
whomever may be lawfully entitled to receive such surplus, against receipt, such
of the Collateral (if any) as shall not have been sold or otherwise applied by
the Secured Party pursuant to the terms hereof and shall still be held by it
hereunder, together with appropriate instruments of reassignment and release.
Any such reassignment shall be free and clear of all liens created in favor
PLEDGE AGREEMENT, PAGE 5
<PAGE> 6
of or by the Secured Parties herein, without recourse upon or warranty by the
Secured Party and at the expense of Pledgor.
SECTION 17. ADDRESSES FOR NOTICES. Any notice or communication to be
given or made hereunder shall be in writing (including facsimile communication)
and may be given or made personally or by first class letter, telecopy, courier
telex or tested telex, telegram or cable (confirmed, in the case of a telecopy,
telex, telegram or cable, by a letter delivered personally within, or dispatched
by first class mall within, twenty-four hours of the dispatch of such telecopy,
telex, telegram or cable) and shall be effective when actually received. For the
purposes hereof, the address of the Pledgor shall be the address maintained in
the records of the Secured Party (until notice of a change thereof is given as
provided in this SECTION 17), and the address of the Agent (until notice of a
change thereof is given as provided in this SECTION 17) shall be as follows:
Value Partners, Ltd.
4514 Cole Avenue
Suite 808
Dallas, Texas 75205
SECTION 18. CONTINUING SECURITY INTEREST; ASSIGNMENTS. This Agreement
shall create a continuing security interest in the Collateral and shall (i)
remain in full force and effect until termination as provided in SECTION 16,
(ii) be binding upon Pledgor, the Secured Party and their respective successors
and assigns, and (iii) inure, together with the rights, powers and remedies of
Pledgor and the Secured Party hereunder, to the benefit of Pledgor, the Secured
Party and their respective successors, transferees and assigns, as the case may
be.
SECTION 19. GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND (OTHER THAN
CONFLICT OF LAWS RULES).
SECTION 20. SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective. If any
provisions of this Agreement or any lien, security interest or other right of
the Secured Parties hereunder shall be held to be invalid, illegal or
unenforceable under applicable law, such invalidity, illegality or
unenforceability shall not affect any other provision herein or any lien,
security interest or other right granted hereby.
PLEDGE AGREEMENT, PAGE 6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
of the date first above written.
SECURED PARTY:
VALUE PARTNERS, LTD.
/s/ Timothy G. Ewing
--------------------------------------------
Timothy G. Ewing
Managing Partner for Ewing & Partners
General Partner for Value Partners, Ltd.
as agent for itself and
T. Rowe Price Recovery Fund, II, L.P.
PLEDGOR:
ALTIVA FINANCIAL CORPORATION
By: /s/ Champ Meyercord
-----------------------------------------
Its: Chief Executive Officer
-----------------------------------------
PLEDGE AGREEMENT, PAGE 7
<PAGE> 8
EXHIBIT "B"
A. 1996-1 RESIDUAL INTEREST INSTRUMENT
Residual Interest Instrument No. 1 dated March 29, 1996 for a 100%
residual interest in the Mego Mortgage FHA Title 1 Loan Trust 1996-1 (as from
time to time modified or amended, together with any other securities issued and
replaced and/or exchanged therefor or in refinancing thereof) issued in
connection with, interalia, the following agreements (as from time to time
modified or amended), as from time to time in effect, represent Collateral:
1. Pooling and Servicing Agreement dated as of March 21, 1996 among the
Borrower, Financial Asset Securities Corp. ("Financial Asset"), Norwest Bank
Minnesota, N.A. ("Norwest") and First Trust of New York, N.A. ("First Trust").
2. Servicing Agreement dated as of March 21, 1996 among Mego Mortgage
FHA Title Loan Trust 1996-1 (the "1996-1 Trust"), the Borrower, Norwest and
First Trust.
B. 1996-2 RESIDUAL INTEREST INSTRUMENT
Residual Interest Instrument No. 1 dated August 15, 1996 for a 100%
residual interest in the Mego Mortgage FHA Title 1 Loan Trust 1996-2 (as from
time to time modified or amended, together with any other securities issued and
replaced and/or exchanged therefor or in refinancing thereof) issued in
connection with, interalia, the following agreements (as from time to time
modified or amended), as from time to time in effect, represent Collateral:
1. Pooling and Servicing Agreement dated as of August 1, 1996 among the
Borrower, Financial Asset, Norwest and First Trust.
2. Servicing Agreement dated as of August 1, 1996 among Mego Mortgage
FHA Title 1 Loan Trust 1996-2 (the "1996-2 Trust"), the Borrower, Norwest and
First Trust.
C. 1996-3 RESIDUAL INTEREST INSTRUMENT
Residual Interest Instrument No. 1 dated December 17, 1996 for a 100%
residual interest in the Group 1 Loans in the Mego Mortgage Home Loan Trust
1996-3 (as from time to time modified or amended, together with, interalia, any
other securities issued and replaced and/or exchanged therefor or in refinancing
thereof) issued in connection with, interalia, the following agreements (as from
time to time modified or amended), as from time to time in effect, represent
Collateral:
1. Pooling and Servicing Agreement dated as of November 1, 1996 among
the Borrower, Financial Asset, Norwest and First Trust.
2. Servicing Agreement dated as of November 1, 1996 among Mego Mortgage
Home Loan Trust 1996-3 (the "1996-3 Trust"), the Borrower, Norwest and First
Trust.
PLEDGE AGREEMENT, PAGE 8
<PAGE> 9
NOTICE AND CERTIFICATION OF
NO ORAL AGREEMENTS
THIS NOTICE AND CERTIFICATION OF NO ORAL AGREEMENTS (this "Agreement")
is made by and among VALUE PARTNERS, LTD., a Texas Limited Partnership, and T.
Rowe Price Recovery Fund II, L.P. (collectively the "Lenders") and ALTIVA
FINANCIAL CORPORATION, a Delaware Corporation as of July 14, 1999 ("Borrower").
Lenders hereby gives the following notice to Borrower and Borrower
hereby acknowledges and agrees with such notice:
THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
FOR PURPOSES OF THIS NOTICE, THE WRITTEN LOAN DOCUMENTS ARE COMPRISED
OF THE FOLLOWING (all of which are dated as of July 14, 1999);
1. Loan Agreement;
2. Promissory Note in the principal sum of $1,825,000.00 payable
to Value Partners, Ltd.;
3. Promissory Note in the principal sum of $1,825,000.00 payable
to T. Rowe Price Recovery Fund II, L.P.
4. Pledge Agreement; and
5. Notice and Certification of No Oral Agreements;
6. Such financing statements, consents, notices and other
documents as are contemplated by the above documents, together with any
Collateral to be delivered pursuant to such documents.
This Agreement may be executed in separate or multiple counterparts by
the parties, and all of such counterparts shall be considered as one and the
same instrument notwithstanding the fact that various counterparts are signed by
only one or more of the parties, and all of such Agreements shall be deemed but
one and the same Agreement.
NOTICE AND CERTIFICATION OF NO ORAL AGREEMENTS PAGE 1
August 13 1999 8:24 PM
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as
of the date first above written.
LENDERS:
VALUE PARTNERS, LTD.
By: /s/ Timothy G. Ewing
----------------------------------------------
Timothy G. Ewing
Managing Partner of Ewing & Partners
general partner of Value Partners, Ltd.
T. ROWE PRICE RECOVERY FUND II, L.P.
By: /s/ Hubert M. Stiles, Jr.
----------------------------------------------
Hubert M. Stiles, Jr.
President of T. Rowe Price Recovery Fund II
Associates, L.L.C., General Partner
BORROWER:
ALTIVA FINANCIAL CORPORATION,
A DELAWARE CORPORATION
By: /s/ Champ Meyercord
----------------------------------------------
Its: Chief Executive Officer
--------------------------------------------
NOTICE AND CERTIFICATION OF NO ORAL AGREEMENTS PAGE 2
August 13 1999 8:24 PM
<PAGE> 1
EXHIBIT 99.1
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
The Money Centre, Inc.
Audited Financial Statements for the Years ended December 31, 1997 and 1998
Independent Auditors' Report.......................................................... 2
Consolidated Balance Sheets as of December 31, 1997 and 1998.......................... 3
Consolidated Statements of Operations and Retained Earnings for the Years ended
December 31, 1997 and 1998........................................................ 5
Consolidated Statements of Shareholders' Equity for the Years ended
December 31, 1997 and 1998........................................................ 6
Consolidated Statements of Cash Flows for the Years ended December 31, 1997
and 1998.......................................................................... 7
Notes to Consolidated Financial Statements for the Years ended December 31, 1997
and 1998.......................................................................... 9
Unaudited Interim Financial Statements for the Five Month Period ended May 31, 1999
Condensed Consolidated Balance Sheet as of May 31, 1999............................... 17
Condensed Consolidated Statement of Operations and Retained Earnings for the
Five Months ended May 31, 1999.................................................... 18
Condensed Consolidated Statement of Cash Flows for the Five Months
ended May 31, 1999................................................................ 19
Notes to Condensed Consolidated Financial Statements for the Five Months ended
May 31, 1999...................................................................... 20
</TABLE>
1
<PAGE> 2
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
The Money Centre, Inc. And Subsidiaries
Charlotte, North Carolina
We have audited the consolidated balance sheets of The Money Centre, Inc. (an S
Corporation) and Subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, retained earnings, stockholders' equity
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Money Centre,
Inc. and Subsidiaries as of December 31, 1998 and 1997, and the results of
its operations and its cash flows for the years then ended in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying other financial information on
page 11 is presented for the purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ Moyer, Smith & Roller, P.A.
February 10, 1999 (except as to Note L; which is as of June 4, 1999)
2
<PAGE> 3
THE MONEY CENTRE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ASSETS
1998 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash -- Operating $ 1,353,518 $ 1,069,072
Cash -- Escrow 455,261 147,309
Mortgage Receivables, less allowance of
$140,000 in 1998 and $140,000 in 1997 38,743,616 27,133,557
Accrued Interest Receivables 415,163 258,775
Other Receivables 29,103 99,941
Note Receivable--short term 1,849,015 3,017,837
Employee Advances 20,626 62,834
Stockholder Advances 293,629 438,526
Other Assets 33,750 11,750
----------- -----------
Total Current Assets 43,193,681 32,239,601
----------- -----------
PROPERTY AND EQUIPMENT:
Computer Equipment 569,828 204,210
Office Equipment 550,285 373,598
Furniture and Fixtures 337,034 242,441
Leasehold Improvements 120,254 90,184
----------- -----------
1,577,401 910,433
Less: Accumulated Depreciation (384,619) (259,311)
----------- -----------
Property and Equipment, Net 1,192,782 651,122
----------- -----------
OTHER ASSETS:
Covenant not to compete, net of accumulated
amortization of $6,943 in 1998 and $3,611 in 1997 43,057 46,389
Deposits 59,120 31,401
Investment in Subsidiary 16,893 10,500
Investment--Other 20,400 20,400
Goodwill, net of accumulated amortization
of $4,100 in 1998 241,900 --
Note Receivable--long term 329,070 371,487
----------- -----------
Total Other Assets 710,440 480,177
----------- -----------
TOTAL ASSETS $45,096,903 $33,370,900
=========== ===========
</TABLE>
See Independent Auditors' Report And Accompanying Notes.
-3-
<PAGE> 4
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable and Accrued Liabilities $ 259,755 $ 457,530
Accounts Payable - Escrow 455,859 144,342
Notes Payable - Line of Credit 37,541,478 27,484,613
Current Portion of Long-Term Debt 466,008 583,618
Accrued Interest Expense 286,353 218,244
Accrued Salaries and Payroll Liabilities 165,047 500,113
----------- -----------
Total Current Liabilities 39,174,500 29,388,460
----------- -----------
LONG-TERM DEBT:
Net of Current Portion 231,989 166,389
----------- -----------
Total Liabilities 39,406,489 29,554,849
----------- -----------
STOCKHOLDERS' EQUITY:
Common Stock - par value $1.00;
100,000 shares authorized;
25,000 shares issued and outstanding 25,000 25,000
Additional Paid-In Capital 47,565 47,565
Retained Earnings 6,117,849 4,243,486
----------- -----------
6,190,414 4,316,051
Treasury Stock (500,000) (500,000)
----------- -----------
Total Stockholders' Equity 5,690,414 3,816,051
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $45,096,903 $33,370,900
=========== ===========
</TABLE>
-4-
<PAGE> 5
THE MONEY CENTRE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Retained Earnings
For The Years Ended December 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
GAIN ON SALE OF LOANS $16,944,805 $ 9,413,990
----------- -----------
OPERATING EXPENSES
10,176,468 7,639,440
----------- -----------
INCOME FROM OPERATIONS 6,678,337 1,774,550
OTHER INCOME (EXPENSES)
Rental Income 10,044 -
Interest Income 3,446,200 2,432,791
Interest Expense (3,281,703) (2,143,852)
Loss on Investment in Subsidiary (9,607) -
Loss on Disposal of Fixed Assets (4,338) (32,121)
Loss on Disposal of REO (26,263) -
----------- -----------
Total Other Income (Expenses) 134,333 256,818
----------- -----------
INCOME BEFORE INCOME TAXES 6,902,670 2,031,368
PROVISION FOR (BENEFIT FROM)
INCOME TAXES - -
----------- -----------
NET INCOME 6,902,670 2,031,368
RETAINED EARNINGS, beginning of year 4,243,486 3,163,617
Prior period adjustment (16,000) 640,341
----------- -----------
RETAINED EARNINGS, beginning of year as restated 4,227,486 3,803,958
Less: Retained (Deficit) from Acquisition
of Subsidiary - (2,840)
Less: S Corporation Distributions (5,012,307) (1,589,000)
----------- -----------
RETAINED EARNINGS, end of year $ 6,117,849 $ 4,243,486
=========== ===========
</TABLE>
See Independent Auditors' Report and Accompanying Notes.
-5-
<PAGE> 6
THE MONEY CENTRE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Common Paid-In Treasury Retained
Stock Capital Stock Earnings Total
------- ------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $25,000 $47,565 $(500,000) $3,163,617 $2,736,182
Prior period adjustment -
correction of prior years for
implementation of SFAS 91
and accrued interest income -- -- -- 640,341 640,341
------- ------- --------- ---------- ----------
Restated balance at December 31, 1996 25,000 47,565 (500,000) 3,803,958 3,376,523
Retained (deficit) from Acquisition
of Subsidiary -- -- -- (2,840) (2,840)
Net income for 1997 -- -- -- 2,031,368 2,031,368
Cash dividends:
Common stock, $63.56 on
25,000 shares, $1,589,000 -- -- -- (1,589,000) (1,589,000)
------- ------- --------- ---------- ----------
Balance at December 31, 1997 25,000 47,565 (500,000) 4,243,486 3,816,051
Prior period adjustment -
correction of prior year over (under)
tax accrual -- -- -- (16,000) (16,000)
------- ------- --------- ---------- ----------
Restated balance at December 31, 1997 25,000 47,565 (500,000) 4,227,486 3,800,051
Net income for 1998 -- -- -- 6,902,670 6,902,670
Cash dividends:
Common stock, $200.49 on
25,000 shares, $5,012,307 -- -- -- (5,012,307) (5,012,307)
------- ------- --------- ---------- ----------
Balance at December 31, 1998 $25,000 $47,565 $(500,000) $6,117,849 $5,690,414
======= ======= ========= ========== ==========
</TABLE>
See Independent Auditors' Report and Accompanying Notes.
6
<PAGE> 7
THE MONEY CENTRE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
Net Income $ 6,902,670 $ 2,031,368
Non-cash expenses included in net income:
Amortization 7,431 3,333
Depreciation 125,698 86,383
Loss on disposal of fixed assets 4,338 32,121
Changes in current and other asset accounts:
(Increase) in Loans Held for Sale (11,610,059) (10,921,745)
Decrease in Other Receivables 70,838 231,782
(Increase) in Accrued Interest Receivable (156,388) (47,606)
Decrease in Employee Advances 42,208 96,313
Decrease in Prepaid Expenses - 35,472
(Increase) Decrease in Stockholder Advances 144,897 (438,526)
(Increase) in Other Assets (22,000) (11,750)
Changes in current and other liability accounts:
Increase in Accounts Payable and Accrued
Liabilities (197,776) 397,073
Increase in Accounts Payable - Escrow 311,517 28,706
Increase in Notes Payable - Line of Credit 10,056,865 13,266,819
Increase in Accrued Interest Expense 68,109 39,594
Increase (Decrease) in Accrued Salaries
and Payroll Liabilities (335,066) 268,982
Increase (Decrease) in Accrued Income Taxes - (1,234,243)
------------ ------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ 5,413,282 $ 3,864,076
============ ============
</TABLE>
See Independent Auditors' Report and Accompanying Notes.
7
<PAGE> 8
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Property and Equipment............ $ (671,694) $ (421,370)
(Increase) Decrease in Notes Receivable........ 1,211,239 (2,529,621)
(Increase) in Deposits and Other Investments... (34,112) (16,390)
(Increase) Decrease in Goodwill................ (246,000) (-)
----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES..................................... 259,433 2,967,381
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Long-Term Debt.................... 556,161 731,932
Purchase of Retained (Deficit) from Subsidiary.. - (2,840)
S Distributions of Earnings..................... (5,012,307) (1,589,000)
Principal Payments on Long-term Debt............ (608,171) (508,205)
Prior Period Adjustment......................... (16,000) 23,492
----------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES............................ (5,080,317) (1,344,621)
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS............................ 592,398 (447,926)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR............................... 1,216,381 1,664,307
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF YEAR..................................... $ 1,808,779 $ 1,216,381
=========== ===========
</TABLE>
8
<PAGE> 9
THE MONEY CENTRE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITY
The Money Centre, Inc. is engaged in the mortgage banking industry with
branches throughout North Carolina, South Carolina, Tennessee, Georgia,
Colorado, Indiana, Florida, Kentucky, Maryland, Montana, and Oklahoma. It is
the originator of mortgages on residential real estate. It then sells those
loans to permanent investors. The accounting policies of The Money Centre, Inc.
are in accordance with generally accepted accounting principles and conform to
general practices within the mortgage origination industry.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of The Money Centre,
Inc. and all controlled, majority-owned subsidiaries. Investments in companies
in which The Money Center, Inc.'s interest is between 20 percent and 50 percent
are accounted for using the equity method.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, less accumulated depreciation.
Depreciation expense is computed under the straight-line method over the
estimated useful life of the asset. For income tax purposes, depreciation is
calculated under IRS accelerated cost recovery methods.
INCOME TAXES
On January 1, 1997, The Money Centre, Inc., with the consent of its
shareholders, elected under the Internal Revenue Code to be an S Corporation.
In lieu of corporation income taxes, the shareholders of an S Corporation are
taxed on their proportionate share of the company's taxable income. Therefore,
no provision or liability for income taxes has been included in these financial
statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
9
<PAGE> 10
THE MONEY CENTRE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid unrestricted investments with
maturities of three months or less to be cash equivalents for purposes of the
statement of cash flows.
LOANS HELD FOR SALE
Loans held for sale are carried at the lower of aggregate cost or market value
in the accompanying Consolidated Balance Sheet, net of allowance for valuation
losses.
VALUATION ALLOWANCE
Provision for decreases in the market value relating to unsold loans is recorded
as expense in amounts sufficient to maintain the allowance at a level considered
adequate to provide for anticipated probable losses from liquidation of
outstanding loans. The provision for valuation is based upon the estimated fair
market value of the portfolio primarily derived from recent sale data in the
marketplace.
LOAN ORIGINATION COSTS AND FEES
Loan origination costs and fees including non-refundable loan origination fees
and incremental direct costs associated with loan production are deferred in
compliance with Statement of Financial Accounting Standards ("SFAS") No. 91
"Accounting for Non-refundable Fees and costs associated with Originating or
Acquiring Loans and Indirect Direct Costs of Leases." ("SFAS 91") and recorded
as expense or income upon the sale of the related loans.
REVENUE RECOGNITION
The Money Centre, Inc. derives its revenue principally from the gains on the
sale of loans. Upon the sale of the loans, gain or loss is recognized when the
loans are transferred to a permanent investor and the sales proceeds are
received. Interest income on loans held for sale is accrued based on the
anticipated yield-to-maturity. Market valuation adjustments on loans held for
sale are included in gain on sale of loans.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, The Financial Accounting Standards Board (the "FASB") issued SFAS
No. 130, "Reporting Comprehensive Income" ("SFAS 130"), and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information", ("SFAS
131"), SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. SFAS No. 131 establishes standards of reporting by
publicly-held business enterprises and disclosure of information about operating
segments in annual financial statements and, to a lesser extent, in interim
financial reports issued to shareholders. SFAS Nos. 130 and 131 are effective
for fiscal years beginning after December 15, 1997. As both SFAS Nos. 130 and
131 deal with financial statement disclosure, the Company does not anticipate
the adoption of these new standards will have a material impact on its financial
position, results of operations or cash flows. The Company has not yet
determined what its reporting segments will be under SFAS 131.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which establishes accounting
and reporting standards and derivative instruments and for hedging activities.
It requires the entity to recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. The accounting for changes in fair value of those designated
derivatives ("Hedge Accounting") depends on the intended use and designation. An
entity that elects to apply Hedge Accounting is required to establish at the
inception of its hedge the method it will use for assessing the effectiveness of
the hedging derivative and the measurement approach for determining the
ineffective aspect of the hedge. Those methods must be consistent with the
entity's approach to managing risk. SFAS 133 is effective for the fiscal years
beginning after June 15, 1999. The Company has not yet evaluated the effect of
adopting SFAS 133.
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Cash paid during the year:
Interest $3,213,594 $2,104,258
Income Tax $ 16,000 $1,210,751
</TABLE>
NOTE B - LOANS HELD FOR SALE
The Company funds loans to residential customers using its lines of credit. The
loans are collateralized by the real estate and are normally resold to permanent
investors within sixty (60) days. Historically, the Company has held very few
loans for over ninety (90) days. However, due to the increased volume, the
Company has held some loans for over ninety (90) days. The Company has
established a reserve of 5% of the original loan amounts for all loans over
ninety (90) days for potential uncollectible amounts. The allowance for doubtful
accounts is $140,000 for 1998 and 1997.
-10-
<PAGE> 11
THE MONEY CENTRE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION> 1998
-----------
NOTE C - NOTES RECEIVABLE
<S> <C>
A secured note from an officer due on December 31, 1998,
interest due in monthly installments beginning May 1, 1998
at 7%, secured by real estate. $ 1,824,378
An unsecured note with an affiliated corporation due on
demand with 10% interest. 12,150
An unsecured note with an affiliated limited liability company
due in monthly installments of $3,000.00 including interest at
7% beginning March 1, 1998. 341,557
-----------
Total 2,178,085
Less amounts due within one year (1,849,015)
-----------
Long-term note receivables $329,070
===========
</TABLE>
NOTE D - COVENANT NOT TO COMPETE
On November 20, 1996, the Company purchased the stock of one of the minority
stockholders. The Company paid the minority stockholder $50,000 for a covenant
not to compete. The $50,000 covenant not to compete is being amortized over
fifteen years. Amortization expense was $3,333 and $3,333 for 1998 and 1997
respectively.
NOTE E - FINANCING AGREEMENTS
The Money Centre, Inc. has various lines of credit established with commercial
banks which allows for funding of loans to potential customers. The financing
agreements include certain financial covenants including requirements to
maintain defined levels of tangible net worth, debt to tangible net worth, and
other financial covenants. The Company was in violation of certain of these
covenants as of December 31, 1998. The lender has waived the violation of these
covenants as of December 31, 1998, and through the period ending March 31, 1999,
but has not waived these violations for any period beyond March 31, 1999.
-11-
<PAGE> 12
THE MONEY CENTRE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
NOTE F - NOTES PAYABLE - LINE OF CREDIT
1998 1997
------------ ------------
<S> <C> <C>
A line of credit with a bank with interest payable monthly at prime
plus .375%, secured by mortgages receivable maximum of $15,000,000. $ 16,482,878 $ 14,867,045
A line of credit with a bank with interest payable at prime plus
.5%, secured by mortgages receivable, maximum of $20,000,000. 16,943,724 10,174,724
A line of credit with a bank with interest payable monthly at
prime plus 1.5%, secured by mortgages receivable, maximum
$5,000,000. 3,754,995 1,944,272
A line of credit with a mortgage company with interest
payable monthly at prime plus 1%, secured by mortgages
receivable. 359,881 498,572
------------ ------------
Notes Payable - Lines of Credit $ 37,541,478 $ 27,484,613
============ ============
NOTE G - LONG TERM-DEBT
A note payable with a bank due in monthly installments of
$1,059.72, including interest at 9.5%, unsecured. $ 14,003 $ 24,815
A note payable with a bank due in monthly installments of
$18,750.00, including interest at prime plus 1.25%, secured by
17.5 shares of The Money Centre, Inc. stock. -- 225,000
A note payable with a bank due in monthly installments of
$25,000.00 including interest at prime plus 1.25%, unsecured. 50,000 350,000
A capital lease obligation with a leasing corporation due in
monthly payments of $202.57 due May 23, 1998, including
interest imputed at 20.69%, secured by equipment. -- 587
A capital lease obligation with a leasing corporation due in
monthly payments of $750.20 due August 27, 1999, including
interest imputed at 14.55%, secured by equipment. 5,687 13,253
</TABLE>
-12-
<PAGE> 13
THE MONEY CENTRE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE G - LONG TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
A capital lease obligation with a leasing corporation due in
monthly payments of $1,562.48 due August 13, 1999, including
interest imputed at 17.10%, secured by telephone system. 8,925 24,654
A capital lease obligation with a leasing corporation due in
monthly payments of $2,701.97 due January 26, 2002, including
interest imputed at 8.424%, secured by furniture. 87,774 111,698
A capital lease obligation with a leasing corporation due in
monthly payments of $1,430.69 due February 4, 2001, including
interest imputed at 12.416%, secured by cubicles. 32,468 --
A capital lease obligation with a leasing corporation due in
monthly payments of $7,785.51 due October 5, 2001, including
interest imputed at 9.892%, secured by software. 224,139 --
A note payable with a corporation due in quarterly installments
of $68,750 due October 15, 1999, unsecured. 275,000 --
-------- --------
697,997 750,007
Less amounts due within one year 466,008 583,618
-------- --------
Long-term debt $231,989 $166,389
======== ========
</TABLE>
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31 Amount
----------- --------
<S> <C>
1999 466,008
2000 128,446
2001 100,860
2002 2,683
2003 --
Thereafter --
--------
TOTAL $697,997
========
</TABLE>
-13-
<PAGE> 14
THE MONEY CENTRE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE H - LEASES
The Company leases facilities for its headquarters under an operating lease
that expires February 28, 2007. It leases facilities for its branch offices in
various cities under operating leases having terms ranging from month-to-month
to three years.
The Company also leases vehicles and certain office equipment. Most of these
are operating leases with two- and three-year terms.
The following is a schedule of future minimum rental payments required by the
operating leases as of December 31, 1998:
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 Total
-------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Property $473,950 $370,126 $339,279 $351,207 $311,932 $1,846,494
Vehicles &
Equipment 64,102 22,073 - - - 86,175
-------- -------- -------- -------- -------- ----------
$538,052 $392,199 $339,279 $351,207 $311,932 $1,932,669
======== ======== ======== ======== ======== ==========
</TABLE>
NOTE I - RELATED PARTIES
The Money Centre, Inc. is owned 70% by one individual. During 1997, the Company
loaned $3,000,328 to the 70% owner and accepted a note for the repayment which
was collateralized by his residence. The note was due on December 31, 1998, with
interest payable in monthly installments. The balance of the note as of December
31, 1998 is $1,824,379.
The Money Centre, Inc. owns 49% of the stock of Carolina One Mortgage, Inc. The
Money Centre, Inc. made an initial investment of $10,000 for the purchase of
49% of the stock and subsequently loaned Carolina One Mortgage, Inc. an
additional $12,150 which is due on demand.
The Money Centre, Inc. is leasing office space for its headquarters from Royal
County Downs, LLC. Royal County Downs, LLC is owned 100% by the 70% owner of
the Money Center, Inc. The Money Centre, Inc. loaned Royal County Downs, LLC
$376,846 for the purchase of the land where the office was built. The note is to
be repaid in monthly installments of $3,000.00 each, including interest at 7%.
The balance of the note as of December 31, 1998 is $341,556.62.
On October 15, 1997, The Money Centre, Inc. purchased 100% of Mortgage Security,
Inc. This acquisition has been accounted for under the purchase method. Net
assets and results of operations have been included in the consolidated
financial statements since the acquisition date. The acquisition did not have a
material impact on consolidated earnings.
-14-
<PAGE> 15
THE MONEY CENTRE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998 AND 1997
NOTE I - RELATED PARTIES (CONTINUED)
The Money Centre, Inc. has advanced the following amounts to stockholders as of
December 31, 1998:
<TABLE>
<S> <C>
Bo Lewis $ 78,746
Richie Love 56,615
Chuck Cunningham 80,876
Steve Walker 77,392
--------
$293,629
========
</TABLE>
NOTE J - CONCENTRATION OF CREDIT RISK
The Company maintains most of its cash balances at two financial institutions.
Accounts are insured by the Federal Deposit Insurance Corporation up to
$100,000. At December 31, 1998, uninsured cash totaled $1,502,985. At
December 31, 1997, the uninsured cash balance was $956,509.
NOTE K - 401(K) PLAN
The Company maintains a 401(k) Plan which became effective January 1, 1994. The
employees are allowed to make deferral contributions to the plan according to
plan specifications. The Company will match one-half of the employees
contribution up to 4% of the employee's gross earnings. Employer contributions
for 1998 and 1997 were $127,264 and $92,909, respectively.
NOTE L - PRIOR PERIOD ADJUSTMENTS AND RESTATEMENT
The Company has restated the financial statements for the implementation of
Statement of Financial Accounting Standards ("SFAS") No. 91, SFAS No. 91
requires that loan origination fees, processing fees and direct loan origination
costs be deferred and recognized over the life of the loan a an adjustment to
gain on sale of loans. The Money Centre, Inc. properly and retroactively
implemented SFAS No. 91 and restated the financial statements to reflect the
implementation. The effects of the implementation resulted in an increase in
loans held for ale of $554,746 and $464,905 for 1998 and 1997, respectively.
The Company also began accruing interest on loans held for sale as of December
31. Accrued interest receivables was $415,163 and $258,775 for 1998 and 1997,
respectively. Interest income increased by $156,338 and $47,606 for 1998 and
1997, respectively. The financial statements have also been restated to reflect
prior year over (under) accrual of tax liabilities. The prior period adjustment
reflects a $16,000 under accrual from 1998 and a $23,492 over accrual from 1997.
-15-
<PAGE> 16
THE MONEY CENTRE, INC. AND SUBSIDIARIES
CONSOLIDATED SCHEDULES OF OPERATING EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
OPERATING EXPENSES
Officers Salaries $ 2,072,047 $1,035,577
Salaries and Wages 1,500,674 1,869,804
Advertising 368,683 281,686
Amortization 7,431 3,333
Appraisals and Closing Costs 26,675 44,907
Automobile Expenses 158,095 113,624
Awards and Contests 13,707 --
Bank Charges 19,107 20,871
Bad Debt Expense 939,915 798,030
Computer Software 148,304 10,046
Consulting Fees 30,000 --
Contracts Terminated 201,000 --
Contributions 27,022 5,848
Credit Reports 54,854 44,669
Depreciation 125,698 86,383
Document Preparation Fees 130 --
Dues and Subscriptions 12,855 12,549
Employee Benefits 127,264 92,909
Entertainment 124,522 95,532
General Corporate Taxes and Licenses 62,779 27,291
Insurance Expenses 343,872 156,091
Miscellaneous Expense 43,882 126,177
Office Expenses 265,706 241,540
Payroll Taxes 721,017 602,486
Postage and Delivery 398,653 229,521
Printing Services 52,045 52,238
Professional Fees 133,891 99,988
Rent 759,930 567,683
Repairs and Maintenance 87,607 92,079
Telephone and Utilities 581,474 482,297
Temporary Staffing 307,473 135,822
Training and Workshops 7,430 3,421
Travel 139,324 125,842
Warehouse Line Fees 313,402 181,196
----------- ----------
Total Operating Expenses $10,176,468 $7,639,440
=========== ==========
</TABLE>
See Independent Auditors' Report And Accompany Notes.
16
<PAGE> 17
THE MONEY CENTRE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
MAY 31, 1999
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
Cash $ 2,211,218
Loans Held for Sale, net 37,381,687
Accrued Interest Receivable 390,438
Other Receivables 94,575
Note Receivable - short-term 1,893,668
Employee Advances 33,354
Stockholder Advances 346,797
Other Assets 33,750
-----------
Total Current Assets 42,385,487
-----------
Property Plant & Equipment, net 1,171,157
Covenant not to compete, net 41,946
Deposits 79,206
Investment in Sub. 16,893
Goodwill 241,900
Note Receivable - long term 349,526
-----------
Total Other Assets 1,900,628
-----------
TOTAL ASSETS $44,286,115
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Accounts Payable $ 396,076
Notes Payable - Line of Credit 35,596,875
Current Portion of Long Term Debt 916,301
Accrued Expenses 304,287
Accrued Payroll 76,525
-----------
Total Current Liabilities 37,290,064
-----------
Long Term Debt 174,602
-----------
TOTAL LIABILITIES 37,464,666
-----------
Common Stock 25,000
Additional Paid in Capital 47,565
Retained Earnings 7,248,884
Treasury Stock (500,000)
-----------
TOTAL STOCKHOLDERS' EQUITY 6,821,449
-----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $44,286,115
===========
</TABLE>
17
<PAGE> 18
THE MONEY CENTRE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE FIVE MONTHS ENDED MAY 31, 1999
<TABLE>
<S> <C>
GAIN ON SALE OF LOANS $5,315,142
OPERATING EXPENSES 4,316,125
----------
INCOME FROM OPERATIONS 999,017
OTHER INCOME (EXPENSES) 132,018
----------
INCOME BEFORE INCOME TAXES 1,131,035
PROVISION FOR INCOME TAXES 0
----------
NET INCOME 1,131,035
RETAINED EARNINGS, BEGINNING OF PERIOD 6,117,849
----------
RETAINED EARNINGS, END OF PERIOD $7,248,884
==========
</TABLE>
18
<PAGE> 19
THE MONEY CENTRE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE FIVE MONTHS ENDED MAY 31, 1999
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,131,035
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and Amortization 59,397
Changes in operating assets and liabilities:
Loans Held for Sale 1,361,929
Accrued Interest Receivable 24,725
Other Receivables (65,472)
Employee Advances (12,728)
Stockholder Advances (53,168)
Deposits (20,085)
Accounts Payable (319,538)
Accrued Expenses (70,590)
-----------
Net cash provided by operating activities 2,035,505
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances on notes receivable (65,109)
Purchases of property, plant & equipment (36,660)
Proceeds from sale of investment 20,400
-----------
Net cash used in investing activities (81,369)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on line of credit, net (1,944,603)
Proceeds from Long-Term Debt 392,906
-----------
Net cash used in financing activities (1,551,697)
-----------
Net increase in cash 402,439
Cash at beginning of period 1,808,779
-----------
Cash at end of period $ 2,211,218
===========
</TABLE>
19
<PAGE> 20
THE MONEY CENTRE INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FIVE MONTHS ENDED MAY 31, 1999
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, when read in conjunction with the audited
Consolidated Financial Statements for the years ended December 31, 1997 and
1998, the accompanying unaudited Condensed Consolidated Financial Statements
contain all of the information necessary to present fairly the financial
position of The Money Centre Inc. and Subsidiaries (the "Company") at May 31,
1999, the results of its operations for the five months ended May 31, 1999, the
change in retained earnings for the five months ended May 31, 1999 and the cash
flows for the five months ended May 31, 1999.
The preparation of financial statements, in conformity with generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. In the
opinion of management, all material adjustments necessary for the fair
presentation of these statements have been included herein, which are normal and
recurring in nature. The results of operations for the five months ended May
31, 1999 are not necessarily indicative of the results to be expected for the
full year.
Capitalized terms not defined herein are defined in the Company's audited
Financial Statements for the years ended December 31, 1997 and 1998.
20
<PAGE> 1
EXHIBIT 99.2
INDEX TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
<TABLE>
<S> <C>
ALTIVA FINANCIAL CORPORATION
Unaudited Pro Forma Condensed Consolidating Balance Sheet as of May 31, 1999.......... 2
Unaudited Pro Forma Condensed Consolidating Statement of Operations for the
Year ended August 31, 1998........................................................ 3
Unaudited Pro Forma Condensed Consolidating Statement of Operations for the
Nine months ended May 31, 1999.................................................... 4
</TABLE>
1
<PAGE> 2
ALTIVA FINANCIAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
MAY 31, 1999
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
MONEY PRO FORMA PRO FORMA
ALTIVA CENTRE ADJUSTMENTS ADJUSTED
------- ------ ----------- ---------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 9,231 $ 2,221 $ 11,442
Loans held for sale 15,557 37,382 52,939
Mortgage related securities 34,214 34,214
Total assets 84,709 44,286 10,600 (1) 139,595
Total debt 57,342 36,688 3,650 (2) 97,680
Stockholders' equity 22,917 6,821 (3,821)(3) 25,917
</TABLE>
Notes to pro forma condensed consolidated balance sheet:
(1) To record goodwill recorded in conjunction with the purchase of MC, Inc.
(2) To record the $3.65M of debt incurred in conjunction with the purchase of
MC, Inc.
(3) To record the issuance of Altiva Financial, Inc. stock (600,000 shares at
$5) and eliminate the equity of MC, Inc.
2
<PAGE> 3
ALTIVA FINANCIAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1998
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MONEY PRO FORMA PRO FORMA
ALTIVA CENTRE ADJUSTMENTS ADJUSTED
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Total Revenues (Losses)................................ $ (93,979) $ 14,755 $ (438)(1) $ (79,662)
Cost and Expenses...................................... 32,010 10,836 708(2) 43,554
---------- ---------- ---------- ----------
Income (Loss) before taxes............................. (125,989) 3,919 (1,146) (123,216)
Income tax (benefit).................................. (6,334) 28 (6,306)
---------- ---------- ---------- ----------
Net Income (Loss)...................................... $ (119,655) $ 3,891 $ (1,146) $ (116,910)
========== ========== ========== ==========
EARNINGS PER SHARE:
Basic:
Net Income (Loss)...................................... $ (32.72) $ 1.06 $ (0.31) $ (31.97)
========== ========== ========== ==========
Weighted-average number of common shares............... 3,656,666 3,656,666 3,656,666 3,656,666
========== ========== ========== ==========
Diluted:
Net Income (Loss)...................................... $ (32.72) $ 1.06 $ (0.31) $ (31.97)
========== ========== ========== ==========
Weighted-average number of common shares and assumed
conversions.......................................... 3,656,666 3,656,666 3,656,666 3,656,666
========== ========== ========== ==========
</TABLE>
Notes to pro forma condensed financial statement of operations for the year
ended August 31, 1998.
The following entries are made to adjust the condensed consolidated statement of
operations for the year ended August 31, 1998 as if the acquisition of MC, Inc.
had occurred on September 1, 1997.
(1) To record interest expense on the $3,650,000 borrowed for the acquisition of
MC, Inc. for the year ended August 31, 1998.
(2) To amortize the goodwill recorded in conjunction with the purchase of
The Money Centre, Inc. over 15 years.
3
<PAGE> 4
ALTIVA FINANCIAL, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED MAY 31, 1999
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MONEY PRO FORMA PRO FORMA
ALTIVA CENTRE ADJUSTMENTS ADJUSTED
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Total Revenues (Losses) $ (197) $ 10,648 $ (329)(1) $ 10,122
Cost and Expenses 13,469 7,700 531(2) 21,700
---------------------------------------- ----------
Income (Loss) before taxes (13,666) 2,948 (860) (11,578)
Income tax (benefit) (5,177) (28) (5,205)
Extraordinary item, net of taxes of
$2.9 million 4,812 4,812
---------------------------------------- ----------
Net Income (Loss) $ (3,677) $ 2,976 $ (860) $ (1,561)
======================================== ==========
EARNINGS PER SHARE:
Basic:
Net Income (Loss) $ (1.01) $ 0.82 $ (0.24) $ (0.43)
======================================== ==========
Weighted-average number of common
shares 3,656,666 3,656,666 3,656,666 3,656,666
======================================== ==========
Diluted
Net Income (Loss) $ (1.01) $ 0.82 $ (0.24) $ (0.43)
======================================== ==========
Weighted-average number of common
shares and assumed conversions 3,656,666 3,656,666 3,656,666 3,656,666
======================================== ==========
</TABLE>
Notes to pro forma condensed consolidated financial statement of operations for
the nine months ended May 31, 1999.
The following entries are made to adjust the condensed consolidated statement
of operations to give effect to the acquisition of MC, Inc. as if it has
occurred at the beginning of the period, September 1, 1998.
(1) To record interest expense on the $3,650,000 borrowed for the acquisition
of MC, Inc. for the nine month period ended May 31, 1999.
(2) To amortize the goodwill recorded in conjunction with the purchase of The
Money Centre, Inc. over 15 years.
4
