<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 3, 1998
REGISTRATION NO. 333-46603
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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UNICAPITAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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Delaware 6159 65-0788314
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
1111 Kane Concourse
Suite 301
Bay Harbor Island, Florida 33154
(305) 861-0603
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
Robert New
Chairman and Chief Executive Officer
UniCapital Corporation
1111 Kane Concourse
Bay Harbor Island, Florida 33154
(305) 861-0603
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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Copies to:
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David A. Gerson, Esq. Jeffrey Small, Esq.
Morgan, Lewis & Bockius LLP Davis Polk & Wardwell
One Oxford Centre 450 Lexington Avenue
Thirty-Second Floor New York, New York 10017
Pittsburgh, Pennsylvania 15219 (212) 450-4000
(412) 560-3300
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) AMOUNT OF REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------
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Common stock, par value $.001 per share.................... $629,473,680 $185,850(2)
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(1) Estimated solely for the purpose of calculating the registration fee; based
on a bona fide estimate of the maximum offering price of the securities
being registered in accordance with Rule 457(o).
(2) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and one to be used in connection with a concurrent international
offering outside the United States and Canada (the "International Prospectus").
The U.S. Prospectus and the International Prospectus will be identical in all
respects except for the front cover pages. The form of the U.S. Prospectus is
included herein and the form of the front cover page of the International
Prospectus follows the front cover page of the U.S. Prospectus.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS (Subject to Completion)
Issued April , 1998
Shares
UniCapital Corporation
COMMON STOCK
------------------------
Of the Shares of Common Stock offered hereby, Shares are being
offered initially in the United States and Canada by the U.S. Underwriters and
Shares are being offered initially outside the United States and Canada
by the International Underwriters. See "Underwriters." All of the Shares of
Common Stock being offered hereby are being sold by the Company. Prior to this
offering, there has been no public market for the Common Stock of the Company.
Simultaneously with, and as a condition to, the consummation of the offering,
the Company will acquire all of the outstanding stock of the Founding Companies
(as defined herein). See "Formation of the Company." It is currently estimated
that the initial public offering price per Share will be between $ and $ .
See "Underwriters" for a discussion of the factors to be considered in
determining the initial public offering price.
------------------------
THE COMMON STOCK HAS BEEN APPROVED FOR LISTING, SUBJECT TO OFFICIAL NOTICE OF
ISSUANCE, ON THE NEW YORK STOCK EXCHANGE UNDER THE SYMBOL "UCP."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
PRICE $ A SHARE
------------------------
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share................................. $ $ $
Total(3).................................. $ $ $
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- ---------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company, estimated at $8,000,000.
(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
additional Shares at the price to public, less underwriting discounts and
commissions for the purpose of covering over-allotments, if any. If the U.S.
Underwriters exercise such option in full, the total price to public,
underwriting discounts and commissions and proceeds to Company will be
$ , $ , and $ , respectively. See "Underwriters."
------------------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein, and subject to approval of certain legal matters
by Davis Polk & Wardwell, counsel for the Underwriters. It is expected that
delivery of the Shares will be made on or about , 1998 at the
office of Morgan Stanley & Co. Incorporated, New York, New York, against payment
therefor in immediately available funds.
------------------------
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
NATIONSBANC MONTGOMERY SECURITIES LLC
FRIEDMAN, BILLINGS, RAMSEY & CO., INC.
, 1998
<PAGE> 4
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
[International Cover Page]
PROSPECTUS (Subject to Completion)
Issued April , 1998
Shares
UniCapital Corporation
COMMON STOCK
------------------------
Of the Shares of Common Stock offered hereby, Shares are being
offered initially outside the United States and Canada by the International
Underwriters and Shares are being offered initially in the United States
and Canada by the U.S. Underwriters. See "Underwriters." All of the Shares of
Common Stock being offered hereby are being sold by the Company. Prior to this
offering, there has been no public market for the Common Stock of the Company.
Simultaneously with, and as a condition to, the consummation of the offering,
the Company will acquire all of the outstanding stock of the Founding Companies
(as defined herein). See "Formation of the Company." It is currently estimated
that the initial public offering price per Share will be between $ and
$ . See "Underwriters" for a discussion of the factors to be considered
in determining the initial public offering price.
------------------------
THE COMMON STOCK HAS BEEN APPROVED FOR LISTING, SUBJECT TO OFFICIAL NOTICE OF
ISSUANCE, ON THE NEW YORK STOCK EXCHANGE UNDER THE SYMBOL "UCP."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
PRICE $ A SHARE
------------------------
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
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<S> <C> <C> <C>
Per Share................................. $ $ $
Total (3)................................. $ $ $
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended.
(2) Before deducting expenses payable by the Company estimated at $8,000,000.
(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
additional Shares at the price to public less underwriting discounts
and commissions for the purpose of covering over-allotments, if any. If the
U.S. Underwriters exercise such option in full, the total price to public,
underwriting discounts and commissions and proceeds to Company will be
$ , $ and $ , respectively. See "Underwriters."
---------------
The Shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein, and subject to approval of certain legal matters
by Davis Polk & Wardwell, counsel for the Underwriters. It is expected that
delivery of the Shares will be made on or about , 1998 at the office
of Morgan Stanley & Co. Incorporated, New York, New York, against payment
therefor in immediately available funds.
------------------------
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY INTERNATIONAL
NATIONSBANC MONTGOMERY SECURITIES LLC
FRIEDMAN, BILLINGS RAMSEY & CO., INC.
, 1998
<PAGE> 5
The inside front cover pictures a map of the United States indicating the
locations of UniCapital and the Founding Companies.
<PAGE> 6
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
FOR INVESTORS OUTSIDE THE UNITED STATES: NO ACTION HAS BEEN OR WILL BE
TAKEN IN ANY JURISDICTION BY THE COMPANY OR ANY UNDERWRITER THAT WOULD PERMIT A
PUBLIC OFFERING OF THE COMMON STOCK OR POSSESSION OR DISTRIBUTION OF THIS
PROSPECTUS IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED, OTHER
THAN IN THE UNITED STATES. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS COMES
ARE REQUIRED BY THE COMPANY AND THE UNDERWRITERS TO INFORM THEMSELVES ABOUT, AND
TO OBSERVE ANY RESTRICTIONS AS TO, THE OFFERING OF THE COMMON STOCK AND THE
DISTRIBUTION OF THIS PROSPECTUS.
------------------------
UNTIL , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary.................... 3
Risk Factors.......................... 12
Formation of the Company.............. 19
Use of Proceeds....................... 26
Dividend Policy....................... 26
Capitalization........................ 27
Dilution.............................. 28
Selected Pro Forma Combined
Financial Data...................... 30
Management's Discussion and Analysis
of Pro Forma Financial Condition and
Pro Forma Results of Operations..... 32
Management's Discussion and Analysis
of Financial Condition and Results
of Operations of the Founding
Companies........................... 36
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PAGE
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Business.............................. 69
Management............................ 78
Certain Relationships and Related
Party Transactions.................. 89
Principal Stockholders................ 98
Description of Capital Stock.......... 99
Certain Material U.S. Federal Tax
Considerations...................... 101
Shares Eligible for Future Sale....... 103
Underwriters.......................... 104
Legal Matters......................... 107
Experts............................... 107
Additional Information................ 108
Index to Financial Statements......... F-1
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CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."
------------------------
2
<PAGE> 7
PROSPECTUS SUMMARY
Simultaneously with the closing of the offering made by this Prospectus
(the "Offering"), UniCapital Corporation will acquire, in separate transactions
(the "Mergers"), a number of equipment leasing and related businesses
(collectively, the "Founding Companies"). See "Formation of the Company." Unless
otherwise indicated, all references to the "Company" include the Founding
Companies after the effectiveness of the Mergers, and references to "UniCapital"
mean UniCapital Corporation prior to the effectiveness of the Mergers.
References to the "stockholders" include the stockholders and equity partners of
the Founding Companies. The following summary is qualified in its entirety by,
and should be read in conjunction with, the more detailed information and the
financial statements, including the notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise indicated, all share, per share and financial
information set forth herein (i) has been adjusted to give effect to the Mergers
and (ii) assumes no exercise of the U.S. Underwriters' over-allotment option.
THE COMPANY
UniCapital was founded in October 1997 to create a national consolidator
and operator of equipment leasing and specialty finance businesses serving the
commercial market. Upon consummation of the Mergers, the Company, through the
Founding Companies, will originate, acquire, sell and service equipment leases
and arrange structured financings in the computer and telecommunications
equipment, large ticket and structured finance, middle market and small ticket
areas of the equipment leasing industry. In addition, one of the Founding
Companies will provide lease administration and processing services for certain
of the leases originated by the Founding Companies, as well as for any
securitizations undertaken by the Company. The Founding Companies' leases and
structured financing arrangements cover a broad range of equipment, including
aircraft, computer and telecommunications equipment, construction and
manufacturing equipment, office equipment, trucks, printing equipment, car
washes and petroleum retail equipment and vending machines. The Company will
fund the acquisition or origination of its leases through warehouse credit
facilities or through recourse or non-recourse financing and will retain the
leases for its own account or sell the leases to third parties. The Company
intends to sell certain of its lease receivables in the public and private
markets through a securitization program. For the year ended December 31, 1997,
the Company had pro forma combined direct financing and sales-type lease
originations of approximately $415.0 million, pro forma combined income from
operations of $38.6 million and pro forma combined net income before
extraordinary items of $22.9 million.
The Company's senior management team collectively has more than 70 years of
experience in the acquisition and integration of businesses, lease financing,
securitizations and other structured finance transactions. Robert New, the
Company's co-founder, Chairman and Chief Executive Officer, previously served as
an operating company president of and an Acquisition Consultant to U.S. Office
Products Company, where he participated in over 40 acquisitions. Theodore J.
Rogenski, the Company's Chief Operating Officer, has served as a senior
executive with three national leasing companies, including LINC Anthem
Corporation and its successor, Newcourt LINC Financial, Inc., and Wells Fargo
Leasing Corporation, where he served for ten years as the President and Chief
Executive Officer. Bruce E. Kropschot, the Company's Vice Chairman -- Mergers
and Acquisitions, founded and operated a private mergers and acquisitions
advisory firm which has arranged the sale of over 100 equipment leasing and
specialty finance businesses. Steven E. Hirsch, the Company's Executive Vice
President -- Structured Finance, was the Head of the Leasing Products Group at
Morgan Stanley & Co. Incorporated, where he was involved in arranging over $30
billion of transactions in structured lease financings, mergers and acquisitions
of leasing companies and securitizations.
The equipment leasing and financing industry in the United States has grown
consistently during the last decade and includes a wide range of entities that
provide funding for the purchase or use of equipment. The equipment leasing
industry in the United States is a significant factor in financing capital
expenditures of businesses. The Equipment Leasing Association (the "ELA")
projects that $183 billion of $593 billion invested in equipment in 1998 will be
financed by means of leasing. According to ELA estimates, from 1996 to 1997,
equipment placed on lease grew by approximately $10 billion from $170 billion to
an estimated $180 billion. The 1996 investment in equipment placed on lease
represents an increase of approximately 100% from comparable
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<PAGE> 8
1986 data. The ELA estimates that 80% of all U.S. businesses currently use
leasing or financing to acquire capital assets. The Company believes that
leasing helps businesses to acquire capital equipment more efficiently, receive
favorable tax and accounting treatment and avoid or mitigate the perceived risks
of equipment ownership including obsolescence.
STRATEGY
The Company's goal is to become a leading consolidator and operator of
equipment leasing and speciality finance businesses. Key elements of the
Company's strategy include:
PURSUE STRATEGIC ACQUISITIONS. The Company intends to capitalize upon
consolidation opportunities in the U.S. equipment leasing industry by pursuing
selective acquisitions. The Company will focus upon opportunities that
complement its existing equipment leasing and commercial specialty finance
businesses as well as opportunities that facilitate entry into new market
segments. The Company's senior management team has significant experience in the
acquisition and integration of businesses, including leasing companies, and
Jonathan J. Ledecky, the Company's co-founder and Non-Executive Chairman of the
Board, has considerable experience consolidating private businesses into
publicly-held entities. Mr. Ledecky has founded or co-founded three
publicly-held companies, U.S. Office Products Company, U.S.A. Floral Products,
Inc. and Consolidation Capital Corporation, each of which has implemented a
consolidation strategy.
PROVIDE GREATER ACCESS TO CAPITAL AT LOWER COST. The Company believes
that, due to its pro forma combined lease originations, the diversification of
its portfolio and the experience of its senior management team, it will be able
to provide increased sources of capital at a lower cost to the Founding
Companies. The Company expects to benefit from increased access to capital from
both public and private sources by utilizing traditional credit facilities and
accessing public and private capital through securitizations. The Company
believes that the effective interest rate obtained on borrowings by the Founding
Companies individually is higher than the interest rate that could be obtained
by an entity with the aggregate size of the Company. In addition to the
anticipated ability to lower the Founding Companies' cost of funds, the Company
believes that increased access to capital will allow the Founding Companies to
generate an increased volume of lease originations and develop new lease product
offerings.
ACHIEVE OPERATING EFFICIENCIES. The Company believes that it will be able
to increase the operating efficiency of and achieve certain synergies among the
Founding Companies as well as any subsequently acquired businesses. For example,
one of the Founding Companies, Portfolio Financial Servicing Company, L.P.
("PFSC"), provides servicing and administration for equipment lease and loan
portfolios. After the Mergers, the Company intends to transfer to PFSC, where
appropriate, certain servicing functions currently performed by the Founding
Companies. The Company will also seek to combine certain other administrative
functions, such as accounting and finance, treasury, insurance, employee
benefits, strategic marketing and legal support, at the corporate level, and to
institute a Company-wide management information system. The Company believes the
integration of these functions will enable the Founding Companies to focus on
their core business of lease origination as well as enable the Company to
operate in a more efficient and cost-effective manner.
EXPAND PRODUCTS AND SERVICE OPPORTUNITIES. The Company believes that the
diversity among the Founding Companies within the equipment leasing industry,
together with the size and geographic breadth of the Company, can create
significant opportunities to increase the volume and type of lease products and
service offerings. The Company plans to expand existing programs, such as
equipment vendor and manufacturer programs, pursue cross-selling opportunities
among the Founding Companies and any subsequently acquired entities, and develop
new products and service offerings. The Company believes potential opportunities
include national expansion of products currently offered by certain of the
Founding Companies on a local or regional basis and leveraging the expertise of
certain of the Founding Companies to enhance the Company's customer service and
off-lease asset remarketing capabilities. In addition, the Company intends to
market products and services under the name UniCapital to establish name
recognition and create a brand image while maintaining the identity and
associated goodwill of each of the Founding Companies.
OPERATE WITH DECENTRALIZED MANAGEMENT. The Company plans to conduct its
operations using a decentralized management approach through which individual
management teams, consisting primarily of current
4
<PAGE> 9
executive officers of the Founding Companies, will be responsible for the
day-to-day operations of the Founding Companies as well as for helping to
identify additional acquisition candidates in their respective markets. At the
same time, a Company-wide team of senior management will provide the Founding
Companies with strategic oversight and guidance with respect to acquisitions,
credit, financing, marketing and operations. As part of this strategy, the
Company intends to foster a culture of cooperation and teamwork that emphasizes
dissemination of "best practices" among its local management teams. The Company
believes stock ownership and incentive compensation will help to align the
objectives of local management with those of the Company, and that a
decentralized management philosophy will result in better customer service by
allowing local management the flexibility to implement policies and make
decisions based on the needs of local customers.
THE FOUNDING COMPANIES
The Founding Companies will be acquired contemporaneously with the
consummation of the Offering with a portion of the proceeds therefrom. The
following descriptions of each of the Founding Companies are categorized
according to the primary markets which each Founding Company serves.
COMPUTER AND TELECOMMUNICATIONS EQUIPMENT LEASING. Computer and
telecommunications equipment leasing includes lease financing for mainframe,
mid-range and personal computers, workstations, servers, telephone systems,
switches, networks, peripherals and related high-technology equipment. Companies
that specialize in computer and telecommunications equipment leasing must
understand customer usage patterns and equipment residual values, including
technological obsolescence issues.
JACOM COMPUTER SERVICES, INC. ("JACOM"). Founded in 1975, Jacom
provides lease financing for computer and telecommunications equipment to
large and middle market companies, including financial institutions,
throughout the United States. Leases originated by Jacom generally have an
average transaction size of approximately $81,000 and an average term of 36
months. Jacom funds purchases of the equipment underlying its leases
through borrowings and holds the leases for its own account or sells the
future lease payments to financial institutions. For the year ended
December 31, 1997, Jacom originated approximately $64.0 million in leases
for 157 lessees. Jacom employs 49 persons and maintains an office in
Northvale, New Jersey.
VARILEASE CORPORATION ("VARILEASE"). Founded in 1987, Varilease
provides lease financing for computer and telecommunications equipment to
Fortune 1000 companies and other businesses throughout the United States.
Upon origination of a lease, Varilease either sells the lease on a
non-recourse basis or retains the lease for its portfolio. Leases
originated by Varilease generally have an average transaction size of
approximately $200,000 and an average term of 36 months. For the fiscal
year ended September 30, 1997, Varilease originated over $162.0 million in
leases for 96 lessees. Varilease employs 78 persons and maintains 14
offices in the United States, including its headquarters in Farmington
Hills, Michigan, and one office in Canada.
LARGE TICKET LEASING AND STRUCTURED FINANCING. Large ticket leases are
typically for equipment with a purchase price in excess of $5.0 million, such as
aircraft, satellites, rail and other transportation equipment. Large ticket
leasing is characterized by fewer transactions involving greater amounts of
capital and lessees that require tailored structures and solutions to meet
particular needs.
CAUFF, LIPPMAN AVIATION, INC. ("CAUFF LIPPMAN"). Founded in 1981,
Cauff Lippman provides operating lease financing for used commercial jet
aircraft and jet aircraft engines, as well as brokering and advisory
services to domestic and foreign commercial airlines, aircraft lessors and
institutional investors and engages in the purchase and sale of aircraft
for its own account. Aircraft leases originated by Cauff Lippman generally
have an average transaction size of approximately $15.1 million and an
average term of 57 months, and aircraft engine leases have an average
transaction size of approximately $1.9 million and an average term of 84
months. Cauff Lippman participated in the sale, trading, brokerage and
financing of 37 aircraft and three aircraft engines during the year ended
December 31, 1997. Cauff Lippman employs seven persons and maintains an
office in Miami, Florida.
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<PAGE> 10
MUNICIPAL CAPITAL MARKETS GROUP, INC. ("MCMG"). Founded in 1989, MCMG
arranges structured financing, primarily for community-based mental health
/ mental retardation facilities and correctional facilities. MCMG is a
registered broker-dealer and places the bonds and leases that it arranges
primarily with institutional investors. Substantially all of MCMG's revenue
is derived from underwriting and advisory income. For the year ended
December 31, 1997, MCMG arranged approximately $155.3 million in municipal
leases and bonds for 40 lessees and borrowers. MCMG employs nine persons
and maintains three offices, including its headquarters in Dallas, Texas.
THE NSJ GROUP. ("NSJ") Founded in 1989, NSJ provides lease financing
for used commercial jet aircraft and jet aircraft engines to domestic and
foreign commercial airlines and engages in the purchase and sale of
aircraft for its own account. NSJ also engages in remarketing activities on
behalf of airlines, financial institutions and other leasing companies. NSJ
arranges financing for each aircraft it purchases, and either sells the
lease to investors on a non-recourse basis or holds the lease in its
portfolio. Leases originated by NSJ have an initial term of 36 to 84
months. For the year ended December 31, 1997, NSJ had total lease
originations of approximately $19.4 million for three lessees. NSJ employs
six persons and maintains an office in Orlando, Florida.
MIDDLE MARKET LEASING. Middle market leases generally include those leases
for equipment with a purchase price ranging from $250,000 to $5.0 million, such
as construction and manufacturing equipment. Middle market leasing is
characterized by lessees that are sensitive to both price and customer service
issues.
AMERICAN CAPITAL RESOURCES, INC. ("AMERICAN CAPITAL"). Founded in
1979, American Capital provides lease and secured financing for equipment,
primarily printing presses, to companies in the printing, packaging and
paper converting industries. Leases originated by American Capital are
direct financing leases, with an average transaction size of approximately
$727,000 and an average term of 82 months. American Capital either sells
the leases that it originates or borrows the required proceeds from various
funding sources on both a non-recourse and a limited recourse basis. For
the fiscal year ended July 31, 1997, American Capital originated
approximately $104.8 million in leases for approximately 143 lessees.
American Capital employs 26 persons and maintains three offices, including
its headquarters in Hackensack, New Jersey.
MATRIX FUNDING CORPORATION ("MATRIX"). Founded in 1978, Matrix
provides lease financing for a variety of equipment, primarily computer,
communication and electronic equipment, to companies throughout the United
States. Matrix originates the majority of its leases through its telesales
program. Upon origination, Matrix either sells the lease to a third party
on a non-recourse basis, or retains the lease for its portfolio. Leases
originated by Matrix generally have an average transaction size of
approximately $458,000 and an average term of 46 months. For the fiscal
year ended June 30, 1997, Matrix originated $50.6 million in leases for
approximately 60 lessees. Matrix employs 45 persons and maintains an office
in Midvale, Utah.
THE WALDEN ASSET GROUP, INC. ("WALDEN"). Founded in 1991, Walden
provides lease financing for a variety of equipment, including
communications, computer and manufacturing equipment, to Fortune 500 and
other businesses throughout the United States. Lease transactions are
either held in Walden's portfolio or sold on a non-recourse basis. Leases
originated by Walden generally have an average transaction size of
approximately $500,000 and an average term of 36 months. For the year ended
December 31, 1997, Walden originated approximately $82.9 million in leases
for 35 lessees. Walden employs ten persons and maintains four offices,
including its headquarters in Wellesley, Massachusetts.
SMALL TICKET LEASING. Small ticket leases generally include those leases
for equipment with a purchase price of less than $250,000. Small ticket leasing
generally is a vendor-oriented business in which lessors depend on transaction
flow and streamlined administrative operations.
BOULDER CAPITAL GROUP, INC. ("BOULDER"). Founded in 1986, Boulder
provides lease financing for petroleum retail equipment, including car
washes, fuel dispensers and convenience store operating equipment, to
petroleum retail businesses. Boulder originates leases directly with the
owner of the petroleum retail business, as well as through programs with
petroleum companies, equipment manufacturers and distributors. Upon
origination, Boulder either retains the lease for its portfolio or sells
the lease on a limited
6
<PAGE> 11
recourse basis while retaining the servicing responsibility. Leases
originated by Boulder generally have an average transaction size of
approximately $108,000 and an average term of 60 months. For the year ended
December 31, 1997, Boulder had total lease originations of approximately
$21.3 million for 144 lessees. Boulder employs 23 persons and maintains an
office in Boulder, Colorado.
K. L. C., INC. ("KEYSTONE"). Founded in 1972, Keystone provides lease
financing for a variety of equipment, primarily tractor trailers,
embroidery machines and construction equipment to companies throughout the
United States. Leases originated by Keystone generally have an average
transaction size of approximately $32,000 and an average term of
approximately 47 months. Upon origination, Keystone either retains the
lease for its portfolio or sells the lease to a third party, while
retaining the servicing responsibility. For the year ended December 31,
1997, Keystone originated approximately $43.0 million in leases for
approximately 1,342 lessees. Keystone employs 37 persons and maintains an
office in West Hartford, Connecticut.
MERRIMAC FINANCIAL ASSOCIATES ("MERRIMAC"). Founded in 1984, Merrimac
provides equipment financing to operating companies engaged in the
coin-operated, vending, amusement and coffee service businesses. Merrimac
enters into leases with the operating companies and in most instances has a
recourse agreement with the equipment vendor in the event of default by the
lessee. Leases originated by Merrimac generally have an average transaction
size of approximately $10,000 and an average term of 24 months. For the
year ended December 31, 1997, Merrimac had total lease originations of
approximately $8.9 million for approximately 1,050 lessees. Merrimac
employs four persons and maintains an office in Billerica, Massachusetts.
LEASE SERVICING. Lease servicing involves lease administration and
processing services, including lease accounting for both financial reporting and
federal income tax purposes, lien searches, UCC filings, asset tracking,
insurance tracking, preparation of sales, use and property tax returns,
invoicing and collections.
PORTFOLIO FINANCIAL SERVICING COMPANY, L.P. Founded in 1993, PFSC
provides servicing and processing services to leasing companies. PFSC
currently services approximately 14,400 contracts for 14 customers. The
contract sizes range from $1,180 to $31.6 million. During 1997, PFSC was
the servicer for 14 securitization pools, including 12 pools for which PFSC
was the primary servicer. PFSC derives its revenue from servicing fees,
including set-up, monthly and conversion fees. For the year ended December
31, 1997, PFSC had total revenues of approximately $1.5 million. PFSC
employs 45 persons and maintains an office in Portland, Oregon.
7
<PAGE> 12
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.........
U.S. Offering............................. Shares (1)
International Offering.................... Shares
Total.................................. Shares
Common Stock to be outstanding after the
Offering.................................. Shares (1)(2)(3)
Use of proceeds............................. To pay the cash portion of the purchase
price for the Founding Companies, to repay
indebtedness of Merrimac assumed by
UniCapital in the Merrimac Merger and
indebtedness of Jacom incurred to fund an S
Corporation distribution to the stockholder
of Jacom immediately prior to the Jacom
Merger and for general corporate purposes,
including possible acquisitions. See "Use of
Proceeds."
New York Stock Exchange Symbol.............. UCP
</TABLE>
- ---------------
(1) Assumes the U.S. Underwriters' over-allotment option is not exercised. See
"Underwriters."
(2) Does not include shares issuable upon the exercise of options to
be granted prior to or upon the effectiveness of the Registration Statement
of which this Prospectus forms a part (the "Registration Statement"). If all
such options were exercised, then the total number of shares of Common Stock
that would be outstanding immediately after the Offering would be
shares. Options to be granted prior to or upon the effectiveness of the
Registration Statement include 1,388,000 options that will be immediately
exercisable; the balance vest in future periods beginning one year after the
date of grant.
(3) Does not include: (i) shares which may be issued to the stockholders of the
Founding Companies, other than PFSC, pursuant to earn-out arrangements to be
calculated with reference to the performance of those Founding Companies
through December 31, 1999 (and, in the case of Boulder, Cauff Lippman and
NSJ, through December 31, 2000); (ii) shares of Common Stock equal to 15% of
the shares of Common Stock outstanding from time to time that are reserved
for issuance under the Company's 1998 Long-Term Incentive Plan, of which
options to purchase shares of Common Stock (including options to
purchase 500,000 shares to be granted to Robert New, the Company's Chairman
and Chief Executive Officer, and options to purchase 500,000 shares to be
granted to Jonathan J. Ledecky, the Company's Non-Executive Chairman of the
Board) will be granted upon effectiveness of the Registration Statement at
an exercise price equal to the initial public offering price per share;
(iii) 500,000 shares of Common Stock reserved for issuance under the
Company's 1998 Non-Employee Directors' Stock Plan, of which options to
purchase 63,000 shares of Common Stock will be granted upon effectiveness of
the Registration Statement at an exercise price equal to the initial public
offering price per share; (iv) 500,000 shares reserved for issuance under
the Company's 1997 Executive Non-Qualified Stock Option Plan, of which
options to purchase 200,000 shares of Common Stock are outstanding at an
exercise price of $3.00 per share; and options to purchase 60,000 shares of
Common Stock will be granted upon the effectiveness of the Registration
Statement at an exercise price equal to the initial public offering price
per share and (v) 2,000,000 shares of Common Stock reserved for issuance
under the Company's 1998 Employee Stock Purchase Plan. See "Formation of the
Company -- The Mergers," "Management -- 1997 Executive Non-Qualified Stock
Option Plan," "-- 1998 Long-Term Incentive Plan," " -- 1998 Non-Employee
Directors' Stock Plan," and " -- 1998 Employee Stock Purchase Plan" and
"Principal Stockholders."
8
<PAGE> 13
THE MERGERS
Simultaneously with, and as a condition to, the closing of the Offering,
UniCapital will consummate the Mergers pursuant to agreements that it has
entered into with the Founding Companies and their stockholders and partners
(the "Merger Agreements"). The aggregate consideration to be paid by the Company
upon consummation of the Mergers will be approximately $ million, consisting
of 13,334,064 shares of Common Stock with an estimated fair value of $
million and $331.6 million in cash. In addition, pursuant to earn-out
arrangements provided for in the Merger Agreements, the Company may make
additional payments to the stockholders of the Founding Companies (other than
PFSC), in cash and Common Stock, based upon the adjusted pre-tax income of the
Founding Companies for the years ended December 31, 1998 and 1999 (and, in the
case of Boulder, Cauff Lippman and NSJ, also for the year ended December 31,
2000). In addition, the Company will repay indebtedness of Jacom totaling $32.3
million incurred to fund an S Corporation distribution to the stockholder of
Jacom immediately prior to the Jacom Merger, and indebtedness of Merrimac
totaling $2.8 million assumed in the Merrimac Merger. Following the consummation
of the Mergers, the aggregate indebtedness of the Company will include the debt
of the Founding Companies which, as of December 31, 1997, was approximately
$426.7 million. The consummation of each Merger is contingent upon the
consummation of the Offering and customary closing conditions. The Merger
Agreements contain covenants not to compete (subject to certain exceptions) and
require certain of the executive officers of each of the Founding Companies to
enter into Employment Agreements with their respective Founding Companies and,
in certain cases, UniCapital, effective upon consummation of the Mergers. See
"Formation of the Company," "Use of Proceeds," "Management's Discussion and
Analysis of Pro Forma Financial Condition and Pro Forma Results of
Operations -- Liquidity and Capital Resources," "Management -- Employment
Agreements," "Certain Relationships and Related Party Transactions," "Shares
Eligible for Future Sale" and the Unaudited Pro Forma Combined Financial
Statements and the notes thereto appearing elsewhere in this Prospectus.
9
<PAGE> 14
SUMMARY PRO FORMA COMBINED FINANCIAL DATA
UniCapital was established in October 1997 and will acquire the Founding
Companies simultaneously with and as a condition to the consummation of the
Offering. For financial statement presentation purposes, UniCapital has been
identified as the "accounting acquiror." The following unaudited summary pro
forma combined financial data present data for the Company, adjusted to give
effect to (i) the consummation of the Mergers, (ii) certain pro forma
adjustments to the historical financial statements described below and (iii) the
consummation of the Offering and the application of the net proceeds therefrom.
The summary pro forma data are not necessarily indicative of operating results
or the financial position that would have been achieved had the events described
above been consummated and should not be construed as representative of future
operating results or financial position. The summary pro forma combined
financial data should be read in conjunction with the Unaudited Pro Forma
Combined Financial Statements and the notes thereto and the historical financial
statements of the Founding Companies and the notes thereto included elsewhere in
this Prospectus. The Company anticipates that, subsequent to the Mergers, it
will realize savings from the combination of functions such as accounting and
finance, treasury, insurance, employee benefits, strategic marketing and legal
support at the corporate level. These savings cannot be quantified or reasonably
estimated, however, and therefore have not been included in the Unaudited Pro
Forma Combined Financial Statements.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
-------------------
(IN THOUSANDS,
EXCEPT SHARE AND
PER SHARE DATA)
<S> <C>
STATEMENT OF OPERATIONS DATA (1):
Finance income from direct financing and sales-type
leases.................................................... $ 48,882
Rental income from operating leases......................... 55,432
Sales of equipment.......................................... 93,052
Gain on sale of leases...................................... 14,515
Fees, commissions and remarketing income.................... 20,273
Interest and other income................................... 6,295
-----------
Total revenues............................................ 238,449
-----------
Cost of operating leases.................................... 32,820
Cost of equipment sold...................................... 72,854
Interest expense............................................ 36,334
Selling, general and administrative (2)..................... 45,477
Goodwill amortization (3)................................... 12,384
-----------
Total expenses............................................ 199,869
-----------
Income from operations...................................... 38,580
Equity in income from minority owned affiliates............. 4,215
-----------
Income before income taxes and extraordinary item........... 42,795
Provision for income taxes (4).............................. 19,877
-----------
Net income before extraordinary item........................ 22,918
===========
Net income per share before extraordinary item (basic and
diluted).................................................. $
===========
Shares used in computing pro forma net income per share
before extraordinary item(5)..............................
</TABLE>
10
<PAGE> 15
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-------------------------
PRO FORMA AS
COMBINED ADJUSTED (7)
---------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA (6):
Cash and marketable securities.............................. $ 18,646 $
Total assets................................................ 1,113,934
Debt........................................................ 426,659 426,659
Stockholders' equity........................................ 229,036
</TABLE>
- ---------------
(1) Assumes that the Mergers and the Offering were consummated on January 1,
1997.
(2) Reflects an aggregate of approximately $14.5 million in pro forma
reductions in salaries, bonuses and benefits to the stockholders of the
Founding Companies to which they have agreed prospectively in the
employment agreements to be entered into upon consummation of the Offering
(the "Compensation Differential") offset by assumed public company costs,
primarily increased salaries and professional fees at UniCapital, of
approximately $4.8 million.
(3) Consists of amortization of the $ million of goodwill to be recorded as
a result of the Mergers over a 15 to 40 year period and computed on the
basis described in the Notes to the Unaudited Pro Forma Combined Financial
Statements.
(4) Assumes that all income is subject to a corporate income tax rate of 38%
and that all goodwill is non-deductible for tax purposes.
(5) Includes (i) 13,334,064 shares to be issued to stockholders of the Founding
Companies, (ii) 6,798,750 shares issued to the founders and initial
investors in UniCapital and (iii) of the shares sold in
the Offering to pay the cash portion of the Merger consideration, to repay
indebtedness of Merrimac assumed by UniCapital in the Merrimac Merger and
indebtedness of Jacom incurred to fund an S Corporation distribution to the
stockholder of Jacom immediately prior to the Jacom Merger, and to pay
certain expenses of the Offering.
(6) Assumes that the Mergers were consummated on December 31, 1997.
(7) Adjusted to reflect the sale of the shares of Common Stock
offered hereby and the application of the estimated net proceeds therefrom.
See "Use of Proceeds."
11
<PAGE> 16
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should consider carefully the following
risk factors, in addition to the other information contained in this Prospectus,
in evaluating an investment in the shares of Common Stock offered hereby.
ABSENCE OF COMBINED OPERATING HISTORY
UniCapital was founded in October 1997 and has conducted no operations to
date. UniCapital has entered into agreements to acquire the Founding Companies
simultaneously with the consummation of the Offering. The Founding Companies
have been operating independently and the Company may not be able to integrate
these businesses successfully on an economic basis. Until the Company
establishes centralized accounting, finance and other administrative systems, it
will rely upon the separate systems of the Founding Companies. The success of
the Company will depend, in part, upon the Company's ability to centralize these
functions effectively and otherwise integrate the Founding Companies and any
additional businesses the Company may acquire. The Company's management group
has been assembled only recently and the management control structure is still
in its formative stages. Management may not be able to oversee the combined
entity effectively or to implement effectively the Company's operating
strategies. Any failure by the Company to do so could have a material adverse
effect on the Company's business, financial condition and results of operations.
The pro forma combined financial results of UniCapital and the Founding
Companies cover periods when UniCapital and the Founding Companies were not
under common control or management and may not be indicative of the Company's
future financial or operating results. See "Formation of the Company," "Business
- -- The Founding Companies" and "Management."
RISKS ASSOCIATED WITH ACQUISITION STRATEGY
The Company intends to grow significantly through the acquisition of
equipment leasing and specialty finance businesses. This strategy will entail
reviewing and potentially reorganizing acquired business operations, corporate
infrastructure and systems and financial controls. Unforeseen expenses,
difficulties, complications and delays frequently encountered in connection with
the rapid expansion of operations could inhibit the Company's growth. The
Company may be unable to maintain or accelerate its growth or anticipate all of
the changing demands that expanding operations will impose on its management
personnel, operational and management information systems, and financial
systems. The Company may not be able to identify, acquire or manage profitably
additional businesses or to integrate successfully any acquired businesses into
the Company without substantial costs, delays or other operational or financial
difficulties. Any failure by the Company to do so could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Strategy."
RISKS RELATED TO ACQUISITION FINANCING
A significant portion of the Company's resources may be used for
acquisitions. The timing, size and success, if at all, of the Company's
acquisition efforts and any associated capital commitments cannot be readily
predicted. The Company currently intends to finance future acquisitions by using
shares of its Common Stock, cash or a combination of Common Stock and cash. If
the Common Stock does not maintain a sufficient market value, or if potential
acquisition candidates are otherwise unwilling to accept Common Stock as part or
all of the consideration for the sale of their businesses, the Company may be
required to utilize more of its cash resources, if available, in order to
initiate and maintain its acquisition program. Upon consummation of the
Offering, the Company will have approximately $ million of net proceeds
remaining for future acquisitions and working capital, after payment of the cash
portion of the purchase price for the Founding Companies, repayment of
indebtedness of Merrimac assumed by UniCapital in the Merrimac Merger and
indebtedness of Jacom incurred to fund an S Corporation distribution to the
stockholder of Jacom immediately prior to the Jacom Merger, and payment of the
expenses of the Offering. If the Company does not have sufficient cash
resources, its growth could be limited unless it is able to obtain additional
capital through debt or equity financings. The Company may be unable to obtain
additional financing on favorable terms, if at all. Any failure by the Company
to do so could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Use of
12
<PAGE> 17
Proceeds" and "Management's Discussion and Analysis of Pro Forma Financial
Condition and Pro Forma Results of Operations -- Liquidity and Capital
Resources."
RISKS RELATED TO INTERNAL GROWTH AND OPERATING STRATEGIES
A key element of the Company's business strategy is to improve the
profitability of the Founding Companies and any subsequently acquired
businesses. The Company's ability to improve profitability will be affected by
various factors, including the Company's cost of, and ability to obtain,
capital, the Company's ability to achieve operating efficiencies, the level of
continued demand by businesses for lease financing, the Company's ability to
expand the range of products and services that it offers and the Company's
ability to enter new markets successfully. Many of these factors are beyond the
control of the Company, and the Company's strategies may not be successful or
the Company may be unable to generate cash flow adequate for its operations and
to support internal growth. A key component of the Company's strategy is to
operate on a decentralized basis, with local management retaining responsibility
for day-to-day operations, profitability and the growth of the business. In
addition, the Founding Companies are operating with management, sales and
support personnel that may be insufficient to support growth in their respective
businesses without significant central oversight and coordination. The loss of
the services of any such personnel could have a material adverse effect upon the
Company's business, financial condition and results of operations. If proper
overall business controls are not implemented, the Company's decentralized
operating strategy could result in inconsistent operating and financial
practices at the Founding Companies and subsequently acquired businesses, which
could materially and adversely affect the Company's overall profitability, and
ultimately its business, financial condition and results of operations. See
"Business -- Strategy."
DEPENDENCE ON SECURITIZATION TRANSACTIONS
The Company intends to sell a significant portion of the equipment leases
that it acquires and originates through the issuance of securities backed by
such leases in securitization transactions or through other structured finance
products. In a securitization transaction, the Company sells and transfers a
pool of leases to one or more wholly-owned, special purpose subsidiaries of the
Company. The special purpose subsidiary, either directly or through a trust,
issues beneficial interests in the leases in the form of senior and subordinated
securities and sells such securities through public offerings and private
placement transactions.
The Company anticipates that it will utilize securitizations for
refinancing of amounts outstanding under its warehouse loan facilities. Several
factors will affect the Company's ability to complete securitizations, including
conditions in the securities markets generally, conditions in the asset-backed
securities markets, the credit quality and performance of the Company's lease
portfolio, compliance of the Company's leases with the eligibility requirements
established in connection with the securitizations, the Company's ability to
obtain third-party credit enhancement, the ability of the Company to service
adequately its lease portfolio and the absence of any material downgrading or
withdrawal of ratings given to securities previously issued in the Company's
securitizations. Any substantial reduction in the availability of the
securitization market for the Company's leases or any adverse change in the
terms of such securitizations could have a material adverse effect on the
Company's business, financial condition and results of operations.
ABILITY TO SUSTAIN INCREASING VOLUME OF RECEIVABLES
The Company's ability to sustain continued growth is dependent on its
capacity to attract, evaluate, finance and service increasing volumes of leases
of suitable yield and credit quality. Accomplishing this on a cost-effective
basis is largely a function of the Company's ability to market its products
effectively, to manage the credit evaluation process to assure adequate
portfolio quality, to provide competent, attentive and efficient servicing, and
to maintain access to institutional financing sources to achieve an acceptable
cost of funds for its financing programs. Any failure by the Company to market
its products effectively, to maintain its portfolio quality, to service its
leases effectively or to obtain institutional financing at reasonable rates
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Pro Forma Financial Condition and Pro Forma Results of Operations --
13
<PAGE> 18
Liquidity and Capital Resources," "Business -- Credit and Collection Policies
and Procedures" and "Business -- Servicing, Collection and Administration."
NEED FOR ADDITIONAL CAPITAL
The Company anticipates that it will fund the majority of the leases that
it originates or acquires through warehouse loan facilities; currently, such
facilities are only in place at certain of the individual Founding Companies,
with no such facility in place at the Company-wide level. The Company is seeking
to obtain a commitment from one or more commercial banks for a Company-wide
warehouse facility, but no such commitment may be obtained, and even if obtained
no such facility may ever be provided. The failure of the Company to obtain a
warehouse loan facility on terms acceptable to the Company, or the failure to
gain an increase or a renewal of any such facility once obtained, could have a
material adverse effect on the Company's business, financial condition and
results of operations. If the terms of the Company's warehouse facilities or the
structure of its securitization transactions are not appropriate in light of
future market conditions, then the Company may require additional capital to
fund its operations. The Company also may require additional capital to finance
future acquisitions. No such additional capital may be available, or if
available such additional capital may not be provided on terms acceptable to the
Company. The failure to obtain such additional capital when, as and if needed
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "-- Risks Related to Acquisition
Financing."
INTEREST RATE RISKS
The Company's profitability is determined in part by the difference between
the Company's cost of funds and the yield obtained by the Company on its leases.
Leases underwritten by the Company generally are non-cancelable and require
payments to be made by the lessee for specified terms at fixed rates based on
interest rates prevailing in the market at the time the lease is approved. Until
the Company sells or securitizes the leases, the Company generally funds such
leases under warehouse loan facilities or from working capital. Should the
Company be unable to sell or securitize leases with fixed rates within a
reasonable period of time after funding, the Company's operating margins could
be adversely affected by any increase in interest rates. Moreover, increases in
interest rates which cause the Company to raise the implicit rate charged to its
customers could cause a reduction in demand for the Company's lease funding. The
Company may undertake to hedge against the risk of interest rate increases,
based on the size of its equipment lease portfolio. Such hedging activities
would limit the Company's ability to participate in the benefits of lower
interest rates with respect to the hedged portfolio of leases. In addition, the
Company's hedging activities may not protect it from interest rate-related risks
in all interest rate environments. Adverse developments resulting from changes
in interest rates or hedging transactions could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Pro Forma Financial Condition and Pro
Forma Results of Operations -- Liquidity and Capital Resources."
DEPENDENCE ON CREDITWORTHINESS OF LESSEES
The Company acquires and originates equipment leases with a wide range of
purchase prices, many of which involve small and mid-size commercial businesses
located throughout the United States, or large cyclical businesses such as
airlines with operations in different regions around the world. Small business
leases and leases with highly cyclical businesses generally entail a greater
risk of non-performance and higher delinquencies and losses than leases entered
into with larger, more creditworthy lessees or lessees in less cyclical
businesses. The failure of the Company's lessees to comply with the terms of
their leases will result in the inability of such leases to qualify to serve as
collateral under the Company's warehouse facilities and securitization programs
and may have a material adverse effect on the Company's liquidity. Additionally,
delinquencies and defaults experienced in excess of levels estimated by
management in determining the Company's allowance for credit losses could have a
material adverse effect on the Company's ability to obtain financing and effect
securitization transactions which may, in turn, have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Management's Discussion and Analysis of Pro Forma Financial Condition and Pro
Forma Results of Operations -- Liquidity and Capital Resources."
14
<PAGE> 19
RISK OF ECONOMIC DOWNTURN
An economic downturn could result in a decline in the demand for some of
the types of equipment which the Company finances, which could lead to a decline
in originations of leases. Such a downturn could also adversely affect the
Company's ability to obtain capital to fund lease originations or to complete
securitizations. In addition, such a downturn could result in an increase in
delinquencies and defaults by lessees, which could have an adverse effect on the
Company's revenues as well as on its ability to sell or securitize leases.
Moreover, an economic downturn, either generally or within a specific industry,
could have a material adverse effect on the value of the equipment underlying
the leases, which could in turn affect the Company's ability to realize its
residual interest in such equipment. These results could have a material adverse
effect on the Company's business, financial condition and results of operations.
FLUCTUATIONS IN QUARTERLY RESULTS
The Company could experience fluctuations in quarterly operating results
due to a number of factors including, among others, the completion of a
securitization transaction in a particular calendar quarter (or the failure to
complete such a securitization transaction) and the interest rates on the
securities issued in connection with its securitization transactions, variations
in the volume of leases originated by the Company, differences between the
Company's cost of funds and the average implicit yield to the Company on its
leases prior to being securitized, the effectiveness of the Company's hedging
strategy, the degree to which the Company encounters competition in its markets
and general economic conditions. In addition, certain of the Founding Companies,
particularly those engaged in the lease and sale of aircraft, may experience
significant fluctuations due to the timing of sales of aircraft. As a result of
these fluctuations and the significant impact that the timing of any
securitization transactions may have on the Company's results of operations,
results for any one quarter should not be relied upon as being indicative of
performance in future quarters. See "Management's Discussion and Analysis of Pro
Forma Financial Condition and Pro Forma Results of Operations."
COMPETITION
The business of financing equipment is highly competitive. The Company
competes for customers with a number of national, regional and local equipment
leasing and finance companies. In addition, the Company's competitors include
those equipment manufacturers that finance the sale or lease of their products
themselves and other traditional types of financial services companies, such as
commercial banks and savings and loan associations, all of which provide
financing for the purchase of equipment. Many of the Company's competitors and
potential competitors possess substantially greater financial, marketing and
operational resources than the Company. The Company's competitors and potential
competitors include larger, more established companies which may have a lower
cost of funds than the Company and access to capital markets and to other
funding sources which may be unavailable to the Company. See "Business --
Competition."
RESIDUAL VALUE RISK
The Company retains a residual interest in the equipment covered by certain
of its leases. The estimated fair market value of the equipment at the end of
the contract term of the lease, if any, is reflected as an asset on the
Company's balance sheet. The Company's results of operations depend, to some
degree, upon its ability to realize such residual value. Realization of residual
values depends on many factors, several of which are not within the Company's
control, including general market conditions at the time of expiration of the
lease, whether there has been unusual wear and tear on, or use of, the
equipment, the cost of comparable new equipment, the extent, if any, to which
the equipment has become technologically or economically obsolete during the
contract term and the effects of any additional or amended government
regulations. If, upon the expiration of a lease, the Company sells the
underlying equipment and the amount realized is less than the recorded value of
the residual interest in such equipment, a loss reflecting the difference will
be recognized. Any failure by the Company to realize aggregate recorded residual
values could have a material adverse effect on its financial condition and
results of operations. See "Management's Discussion and Analysis of Pro Forma
Financial Condition and Pro Forma Results of Operations" and "Business --
Residual Interests in Equipment."
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<PAGE> 20
RISKS OF YEAR 2000 NONCOMPLIANCE
Computer programs that are "Year 2000 noncompliant" are incapable, in whole
or in part, of processing date data between periods before and periods after
January 1, 2000. Certain of the Founding Companies' computer programs are
currently partially year 2000 noncompliant. In particular, PFSC, a lease
portfolio servicing business and one of the Founding Companies, presently has
computer systems which do not interpret properly date data for the year 2000 and
beyond. PFSC has contracted with a consultant to modify its systems to interpret
properly date data, and PFSC and UniCapital expect to complete programs to
render all of the Company's computer systems year 2000 compliant by mid-1998.
The costs of such programs are not expected to be material, but there can be no
assurance that such conversion programs will be successful at the expected cost
or by the currently engaged vendors. The inability of UniCapital's or the
Founding Companies' computer systems to accept, store, interpret or display
dates for the year 2000 and beyond could materially impair the ability of the
Company to originate, service and sell leases. In addition, the Company utilizes
in its internal operations a number of computer software programs, including
programs used to manage the Company's financial and accounting functions as well
as in the Company's sales and marketing activities. The inability of such
programs to interpret properly date data for the year 2000 and beyond could have
a material adverse effect on the Company's operations. Failure by the Company to
identify a year 2000 problem in its software products or in any software program
used in its operations could require modification or replacement of such
software.
AMORTIZATION OF INTANGIBLE ASSETS
Approximately $ million, or %, of the Company's pro forma total
assets as of December 31, 1997, after giving effect to the Offering, consists of
goodwill arising from the acquisitions of the Founding Companies. Goodwill is an
intangible asset that represents the difference between the aggregate purchase
price for the net assets acquired and the amount of such purchase price
allocated to such assets for purposes of the Company's pro forma balance sheets.
The Company is required to amortize the goodwill from the Mergers (including
goodwill associated with the payment of any earn-out consideration) over a
period of time, with the amount amortized in a particular period constituting an
expense that reduces the Company's net income for that period. The amount
amortized, however, will not give rise to a deduction for tax purposes. In
addition, the Company will be required to amortize the goodwill from any future
acquisitions for which the purchase method of accounting is used. A reduction in
net income resulting from the amortization of goodwill may have an adverse
impact upon the market price of the Company's Common Stock.
DEPENDENCE ON KEY PERSONNEL
The Company believes that its success will depend to a significant extent
upon the efforts and abilities of Robert New, its co-founder, Chairman and Chief
Executive Officer, Jonathan J. Ledecky, its co-founder and Non-Executive
Chairman of the Board, the Company's other executive officers and, due to the
Company's decentralized operating strategy, senior management and sales
personnel of the Founding Companies. The Company likely will depend upon the
senior management of any significant business it acquires in the future. If the
Company loses the services of one or more of these key employees before the
Company is able to attract and retain qualified replacement personnel, the
Company's business could be adversely affected. The Company does not intend to
maintain policies of "key man" life insurance on the lives of its key personnel.
See "Management."
CONFLICTS OF INTEREST
Bruce E. Kropschot, who serves as the Company's Vice Chairman -- Mergers &
Acquisitions, was founder and President of Kropschot Financial Services ("KFS"),
a merger and acquisition advisor to equipment leasing companies, through
December 1997. KFS has provided financial advisory services to three of the
Founding Companies in connection with the Mergers, for which it will receive
fees. See "Certain Relationships and Related Party Transactions -- Financial
Advisory Service Fees." In connection with his employment with UniCapital, Mr.
Kropschot reached agreement with the two managing directors of KFS pursuant to
which Mr. Kropschot has redeemed his entire equity interest in KFS in exchange
for a note payable by the parent company of KFS. Since KFS is a prominent merger
and acquisition advisor to equipment leasing companies, it is likely that KFS
will be an advisor to future candidates to be acquired by the Company.
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<PAGE> 21
Jonathan J. Ledecky, who serves as the Non-Executive Chairman of the Board
of the Company, is a director of Consolidation Capital Corporation, a company
formed by Mr. Ledecky to pursue consolidation opportunities in a variety of
industries. Vincent Eades, a director of the Company, is also a director of
Consolidation Capital Corporation. As a director of the Company and
Consolidation Capital Corporation, Mr. Ledecky and Mr. Eades each owes a duty of
loyalty and a duty of care under Delaware law to both companies. These duties
obligate each such individual to present certain business opportunities to the
company to which he owes the duties before pursuing such opportunities himself.
Mr. Ledecky and Mr. Eades may thus have conflicts of interest in determining to
which of these entities, if any, a particular relevant business opportunity
should be presented. In addition, Mr. Ledecky and John A. Quelch, each of whom
is a director of both the Company and U.S. Office Products Company, may each
face similar conflicts of interest between and or among their respective
potentially conflicting duties and obligations.
POTENTIAL INFLUENCE OF EXISTING STOCKHOLDERS
After the consummation of the Offering, the Company's executive officers,
directors and five-percent stockholders will own beneficially an aggregate of
approximately % of the outstanding shares of Common Stock
(approximately % if the U.S. Underwriters' over-allotment option is
exercised in full). The Company's officers, directors and five-percent
stockholders if acting together may be able to control the election of directors
and matters requiring the approval of the stockholders of the Company. This
concentration of ownership may also have the effect of delaying or preventing a
change in control of the Company. See "Principal Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have
shares of Common Stock outstanding, based upon the number of shares outstanding
as of March 31, 1998. The shares sold in the Offering will be
freely tradeable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), unless acquired by an
"affiliate" of the Company, as that term is defined in Rule 144 promulgated
under the Securities Act ("Rule 144"); shares held by affiliates will be subject
to resale limitations of Rule 144. All of the remaining
outstanding shares of Common Stock will be available for resale at various dates
beginning 180 days after the date of this Prospectus, upon expiration of
applicable lock-up agreements described below and subject to compliance with
Rule 144 under the Securities Act as the holding provisions of Rule 144 are
satisfied. Further, upon consummation of the Offering, shares of
Common Stock will be issuable upon the exercise of stock options to be granted
prior to or upon the effectiveness of the Registration Statement, at an exercise
price equal to the initial public offering price per share. The Company intends
to file a registration statement on Form S-8 with respect to the shares of
Common Stock issuable upon exercise of such options, and a "shelf" registration
statement with respect to shares of Common Stock that may be issued in
connection with possible future acquisition transactions, as soon as practicable
after the consummation of the Offering.
Sales of substantial amounts of Common Stock, or the perception that such
sales could occur, could adversely affect prevailing market prices of the Common
Stock. Each of the Company and the directors, executive officers and certain
other stockholders of the Company has agreed that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it
will not, during the period ending 180 days after the date of this Prospectus,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Common Stock or such other securities, in cash or otherwise. See
"Underwriters."
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<PAGE> 22
NO PRIOR MARKET FOR THE COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Company's
Common Stock. There can be no assurance that an active public market for the
Common Stock will develop or be sustained after the Offering. The initial public
offering price of the Common Stock will be determined by negotiation between the
Company and the representatives of the Underwriters based on the factors
described under "Underwriters." The price at which the Common Stock will trade
in the public market after the Offering may be less than the initial public
offering price. In addition, the trading price of the Common Stock could be
subject to significant fluctuations in response to activities of the Company's
competitors, variations in quarterly operating results, changes in market
conditions, adverse developments that affect the industry in which the Company
conducts business (such as interest rate variations) and other events or
factors. Moreover, the stock market in the past has experienced significant
price and value fluctuations, which have not necessarily been related to
corporate operating performance. The volatility of the stock market could
adversely affect the market price of the Common Stock and the ability of the
Company to raise equity in the public markets. See "Underwriters."
DILUTION TO NEW INVESTORS
After giving effect to the Mergers, purchasers of Common Stock in the
Offering will experience immediate and substantial dilution in the pro forma as
adjusted net tangible book value of their shares in the amount of $ per
share. See "Dilution." If the Company issues additional Common Stock in the
future, including shares which may be issued pursuant to earn-out arrangements,
option grants and future acquisitions, purchasers of Common Stock in the
Offering may experience further dilution in the net tangible book value per
share of the Common Stock.
CERTAIN ANTITAKEOVER PROVISIONS
Certain provisions of the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") and Bylaws and Delaware law
may make a change in the control of the Company more difficult to effect, even
if a change in control were in the stockholders' interest. Pursuant to the
Certificate of Incorporation and Bylaws, the Board of Directors is divided into
three classes of directors elected for staggered three-year terms. In addition,
the Company is subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibit the Company from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an
"interested stockholder," unless the business combination is approved in a
prescribed manner. See "Description of Capital Stock -- Certain Provisions of
Delaware Law and the Company's Certificate of Incorporation and Bylaws."
Pursuant to the Company's Certificate of Incorporation, the Board of
Directors of the Company may issue shares of Preferred Stock of the Company,
without stockholder approval, on such terms as the Board of Directors may
determine. The rights of the holders of Common Stock will be subject to, and may
be adversely affected by, the rights of the holders of any Preferred Stock that
may be issued in the future. Moreover, although the ability to issue Preferred
Stock may provide flexibility in connection with possible acquisitions and other
corporate purposes, such issuances may make it more difficult for a third party
to acquire, or may discourage a third party from acquiring, stock of the
Company. The Company has no current plans to issue any shares of Preferred
Stock. See "Description of Capital Stock -- Preferred Stock."
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<PAGE> 23
FORMATION OF THE COMPANY
UNICAPITAL
UniCapital was incorporated in Delaware in October 1997 as a holding
company to acquire and operate equipment leasing and specialty finance
businesses serving the commercial market. As of March 31, 1998, UniCapital had
issued 6,798,750 shares of Common Stock for cash or notes to its co-founders,
management and certain other investors, including 2,115,000 shares to Robert
New, its co-founder, Chairman and Chief Executive Officer, 200,000 shares to
Theodore J. Rogenski, Chief Operating Officer, 470,000 shares to Bruce E.
Kropschot, Vice Chairman -- Mergers & Acquisitions, 412,500 shares to Martin
Kalb, Executive Vice President and General Counsel, or to entities over which
Mr. Kalb has control, 190,000 shares to Jonathan New, Chief Financial Officer,
315,000 shares to Steven E. Hirsch, Executive Vice President -- Structured
Finance, and 2,115,000 shares to Jonathan J. Ledecky, its co-founder and
Non-Executive Chairman of the Board. Subsequent to the Mergers and the Offering,
the co-founders of UniCapital will own beneficially in the aggregate
approximately % of the outstanding Common Stock of the Company. See "Certain
Relationships and Related Party Transactions -- Organization of UniCapital."
THE MERGERS
Simultaneously with and as a condition to the consummation of the Offering,
UniCapital will acquire in 12 separate transactions all of the issued and
outstanding capital stock and partnership interests of each of the Founding
Companies for an aggregate consideration of $ million, which consists of:
(i) $331.6 million in cash to be paid to the stockholders of the Founding
Companies; and (ii) the $ million estimated fair value of 13,334,064 shares
of Common Stock to be issued to the stockholders of the Founding Companies. In
addition, the Company may make additional payments to the stockholders of the
Founding Companies (other than PFSC), in cash and Common Stock, based upon
increases in the adjusted pre-tax income of the Founding Companies (i.e., the
amount by which each Founding Company's pre-tax income exceeds such Founding
Company's pre-tax income, adjusted to reflect the differential expenses expected
to be realized when operated in a manner consistent with that of a public
company, for the prior year) for the years ended December 31, 1998 and 1999
(and, in the case of Boulder, Cauff Lippman and NSJ, also for the year ended
December 31, 2000). In addition, the Company will repay indebtedness of Jacom
totaling $32.3 million incurred to fund an S Corporation distribution to the
stockholder of Jacom immediately prior to the Jacom Merger and indebtedness of
Merrimac totaling $2.8 million assumed in the Merrimac Merger. Following the
consummation of the Mergers, the aggregate indebtedness of the Company will
include the debt of the Founding Companies which, as of December 31, 1997, was
approximately $426.7 million. The purchase price for each Founding Company was
determined based on negotiations between UniCapital and that Founding Company.
The factors considered by the parties in determining the purchase price
included, among other factors, cash flows, historical operating results, growth
rates and business prospects of the Founding Companies. With the exception of
the consideration to be paid to the stockholders of each of the Founding
Companies, including the earn-out arrangements, the acquisition of each Founding
Company is subject to substantially the same terms and conditions as those to
which the acquisition of each other Founding Company
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<PAGE> 24
is subject. The following table contains information concerning the aggregate
cash to be paid and Common Stock to be issued in connection with the Mergers:
<TABLE>
<CAPTION>
SHARES OF VALUE OF SHARES TOTAL
FOUNDING COMPANY CASH COMMON STOCK OF COMMON STOCK CONSIDERATION
---------------- ---- ------------ --------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
American Capital..................... $ 20.4 1,071,053 $ $
Boulder.............................. 7.1 371,053
Cauff Lippman........................ 48.0 1,684,210
Jacom................................ 128.0(1) 3,368,368
Keystone............................. 27.9 1,468,421
Matrix............................... 19.4 1,035,811
Merrimac............................. --(2) 178,750
MCMG................................. 7.0 370,657
NSJ.................................. 16.0 561,979
PFSC................................. -- 184,210
Varilease............................ 36.8 1,934,368
Walden............................... 21.0 1,105,184
------ ---------- ------ ------
Total.............................. $331.6 13,334,064 $ $
====== ========== ====== ======
</TABLE>
- ---------------
(1) Does not include $32.3 million of indebtedness incurred to fund an S
Corporation distribution to the stockholder of Jacom immediately prior to
the Jacom Merger, which indebtedness will be repaid by the Company upon
consummation of the Jacom Merger from a portion of the net proceeds of the
Offering.
(2) Does not include $2.8 million in indebtedness assumed by the Company in the
Merrimac Merger, which indebtedness will be repaid by the Company upon
consummation of the Merrimac Merger from a portion of the net proceeds of
the Offering.
The consummation of each Merger Agreement is contingent upon the
consummation of the Offering and the satisfaction of customary closing
conditions. The Merger Agreements provide that options to purchase a number of
shares of Common Stock, equal to 6.25% of the Merger consideration received
(which includes the cash and Common Stock portion of the Merger consideration),
based on the initial public offering price, shall be made available to employees
of the Founding Companies. The options will have an exercise price equal to the
initial public offering price per share, with respect to options granted as of
the consummation of the Offering, and the fair market value as of the date of
grant, with respect to options granted thereafter, and will vest ratably over a
four-year period, beginning on the anniversary of the date of the grant. The
Merger Agreements further provide that the stockholders of the Founding
Companies will indemnify UniCapital from certain liabilities that may arise in
connection with the Mergers. A portion of the consideration payable to the
stockholders of each of the Founding Companies will be escrowed for a period of
twelve months from the consummation of the Offering, as security for the
stockholders' indemnification obligations. The Merger Agreements provide that
the stockholders of the Founding Companies covenant not to compete with the
Company and its affiliates for a period of two years from the date of the
Merger. Each of the Merger Agreements provides that UniCapital and certain key
employees of each of the Founding Companies will enter into employment
agreements. The following summaries of the Merger Agreements are qualified in
their entirety by reference to the complete texts of the Merger Agreements,
which are filed as exhibits to the Registration Statement of which this
Prospectus forms a part and are incorporated herein by reference.
AMERICAN CAPITAL
UniCapital will acquire all of the outstanding stock of American Capital
for: (i) $20.4 million in cash and (ii) 1,071,053 shares of Common Stock. In
addition, UniCapital will pay additional consideration, 50% in cash and 50% in
Common Stock, equal to (i) 50% of any increase in American Capital's adjusted
pre-tax income for the year ended December 31, 1998 over the year ended December
31, 1997 and (ii) 50% of any increase in American Capital's adjusted pre-tax
income for the year ended December 31, 1999 over the adjusted pre-tax income for
the year ended December 31, 1998 (unless adjusted pre-tax income for the year
ended December 31,
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<PAGE> 25
1998 is less than for the year ended December 31, 1997, in which case the
baseline for comparison will be the year ended December 31, 1997). Each of
Michael Pandolfelli, the President of American Capital, and Gerald P. Ennella,
the Executive Vice President of American Capital, respectively, will enter into
a two-year employment agreement with the subsidiary of the Company that will
operate the American Capital business after the Merger and a two-year,
post-employment covenant not to compete with the Company.
BOULDER
UniCapital will acquire all of the outstanding stock of Boulder for: (i)
$7.1 million in cash and (ii) 371,053 shares of Common Stock; provided, that for
every $1.00 by which the adjusted pre-tax income of Boulder for the year ended
December 31, 1998 is less than the adjusted pre-tax income for the year ended
December 31, 1997, the stockholders of Boulder will repay to UniCapital $6.00,
in Common Stock valued at the initial public offering price per share, up to a
maximum of $3.6 million. In addition, UniCapital will pay additional
consideration, 50% in cash and 50% in Common Stock, equal to (i) 50% of any
increase in Boulder's adjusted pre-tax income for the year ended December 31,
1998 over the year ended December 31, 1997; and (ii) 50% of any increase in
Boulder's adjusted pre-tax income for the year ended December 31, 1999 over the
adjusted pre-tax income for the year ended December 31, 1998 (unless adjusted
pre-tax income for the year ended December 31, 1998 is less than for the year
ended December 31, 1997, in which case the baseline for comparison will be the
year ended December 31, 1997). In addition, as part of the Boulder Merger,
UniCapital will acquire Boulder's interest in certain new vendor programs and a
real estate joint venture and will pay additional consideration, 50% in cash and
50% in Common Stock, equal to (i) the pre-tax income of Boulder attributable to
such new vendor programs and Boulder's interest in the real estate joint venture
for each of the years ending December 31, 1998, 1999 and 2000 and (ii) three
times Boulder's interest in the average pre-tax income of the real estate joint
venture for the years ending December 31, 1998, 1999 and 2000. Roy Burger, the
President of Boulder, will enter into a two-year employment agreement with the
subsidiary of the Company that will operate the Boulder business after the
Merger and a two-year, post-employment covenant not to compete with the Company.
CAUFF LIPPMAN
UniCapital will acquire all of the outstanding stock of Cauff Lippman for:
(i) $48.0 million in cash and (ii) 1,684,210 shares of Common Stock. In
addition, UniCapital will pay additional consideration, 60% in cash and 40% in
Common Stock, of up to $40.0 million based on the adjusted pre-tax income of the
"Big Ticket Leasing Division" (defined as Cauff Lippman and NSJ for the period
from January 1, 1998 through the date of consummation of the Mergers, and
thereafter as Cauff Lippman, NSJ and other operating subsidiaries of the Company
that conduct the business conducted by Cauff Lippman and NSJ prior to the
consummation of the Mergers) for the years ended December 31, 1998, 1999 and
2000. The Merger Agreement provides for such additional consideration to be paid
in three possible payments: (i) $13.3 million if the adjusted pre-tax income of
the Big Ticket Leasing Division for the year ended December 31, 1998 exceeds
$19.0 million; (ii) an additional $13.3 million if the adjusted pre-tax income
of the Big Ticket Leasing Division for the year ended December 31, 1999, plus
the excess of the adjusted pre-tax income of the Big Ticket Leasing Division for
the year ended December 31, 1998 over $26.7 million, exceeds $19.0 million; and
(iii) a third $13.3 million if the adjusted pre-tax income of the Big Ticket
Leasing Division for the year ended December 31, 2000, plus the excess of the
adjusted pre-tax income of the Big Ticket Leasing Division for the year ended
December 31, 1999 over $26.7 million, exceeds $19.0 million; provided, that if
the aggregate amount paid under clauses (i) and (ii) is less than $26.7 million
and if the aggregate adjusted pre-tax income of the Big Ticket Leasing Division
for the three years ended December 31, 2000 equals or exceeds $56.9 million,
then the payment under clause (iii) will equal $40.0 million minus the amounts
paid under clauses (i) and (ii). Stuart Cauff, the President of Cauff Lippman
will become the President and CEO of UniCapital's Big Ticket Leasing Division
and will enter into a three-year employment agreement with the Company and a
subsidiary of the Company that will operate the Cauff Lippman business after the
Merger and a two-year, post-employment covenant not to compete with the Company
(subject to certain limited exceptions). Wayne Lippman, the Vice-President of
Cauff Lippman will become the Executive Vice President of UniCapital's Big
Ticket Leasing Division and will enter into a three-year employment agreement
with the Company and a subsidiary of the Company that will operate the Cauff
Lippman business after the Merger and a two-year, post-employment covenant not
to compete with the Company (subject to certain limited exceptions). The
employment agreements of Messrs. Cauff and Lippman provide that for each
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<PAGE> 26
$30.0 million in cumulative adjusted pre-tax income of the Big Ticket Leasing
Division during the period beginning January 1, 1998 and ending December 31,
2001, each of Messrs. Cauff and Lippman will be granted options to purchase
125,000 shares of Common Stock, up to a maximum of 500,000 shares to each. Such
options will be granted at the fair market value on the date of grant of each
installment, if any, and will be immediately exercisable.
In addition to Cauff Lippman, Messrs. Cauff and Lippman are involved in
other entities with interests in the aircraft leasing business which are not
part of Cauff Lippman and are not being acquired in the Merger. In connection
with the Merger Agreement, however, Messrs. Cauff and Lippman have granted the
Company the option to purchase their interests in some or all of such entities,
for the following purchase prices: (i) Jumbo Jet Leasing LP and Jumbo Jet,
Inc. -- $1.0 million: (ii) CL Aircraft Marketing LP and CL Aircraft Marketing,
Inc. -- $4.0 million; (iii) Twin Jet Leasing, Inc and Aircraft 49402,
Inc. -- $100,000; and (iv) CL Aircraft XXV, Inc. -- $100,000. An additional
option may be granted to acquire Aircraft 46941, Inc. for a nominal purchase
price, if such entity is not a subsidiary of Cauff Lippman upon consummation of
the Merger. Each option is exercisable until the date that is twelve months
after the consummation of the Offering. Certain third party lenders which are
participants in some of these entities, must consent to the transfer of any
equity interest in such entities. Such consents may not be obtained. In
addition, under the terms of their agreement with Chase Manhattan Bank, Messrs.
Cauff and Lippman and any entities controlled by them will be prohibited from
engaging in any transaction involving Boeing 747-100 and -200 series aircraft
without the approval of Chase Manhattan Bank.
JACOM
UniCapital will acquire all of the outstanding stock of Jacom for: (i)
$128.0 million in cash and (ii) 3,368,368 shares of Common Stock. Immediately
prior to the Merger, Jacom will make a dividend to its stockholder in the amount
of $32.3 million. In addition, UniCapital will pay additional consideration, 50%
in cash and 50% in Common Stock, equal to (i) 50% of any increase in Jacom's
adjusted pre-tax income for the year ended December 31, 1998 over the year ended
December 31, 1997 and (ii) 50% of any increase in Jacom's adjusted pre-tax
income for the year ended December 31, 1999 over the adjusted pre-tax income for
the year ended December 31, 1998 (unless adjusted pre-tax income for the year
ended December 31, 1998 is less than for the year ended December 31, 1997, in
which case the baseline for comparison will be the year ended December 31,
1997). John Alfano, the President of Jacom, will become the Company's National
Marketing Director and will enter into a two-year employment agreement with the
subsidiary of the Company that will operate the Jacom business after the Merger
and a two-year, post-employment covenant not to compete with the Company. In
addition, the Company will enter into a consulting agreement with a corporation,
the sole stockholder of which is Robert Seaman, pursuant to which Mr. Seaman's
corporation will continue to provide such consulting services to Jacom as it
currently provides, and will render additional consulting services to the
Company in pursuing merger and acquisition activities and strategic alliances.
KEYSTONE
UniCapital will acquire all of the outstanding stock of Keystone for: (i)
$27.9 million in cash and (ii) 1,468,421 shares of Common Stock. In addition,
UniCapital will pay additional consideration, 50% in cash and 50% in Common
Stock, equal to (i) 50% of any increase in Keystone's adjusted pre-tax income
for the year ended December 31, 1998 over the year ended December 31, 1997 and
(ii) 50% of any increase in Keystone's adjusted pre-tax income for the year
ended December 31, 1999 over the adjusted pre-tax income for the year ended
December 31, 1998 (unless adjusted pre-tax income for the year ended December
31, 1998 is less than for the year ended December 31, 1997, in which case the
baseline for comparison will be the year ended December 31, 1997). Each of Alan
Kaufman and Edgar Lee, the President and Executive Vice President of Keystone,
respectively, will enter into a two-year employment agreement with the
subsidiary of the Company that will operate the Keystone business after the
Merger and a two-year, post-employment covenant not to compete with the Company.
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<PAGE> 27
MATRIX
UniCapital will acquire all of the outstanding stock of Matrix for: (i)
$19.4 million in cash and (ii) 1,035,811 shares of Common Stock. In addition,
UniCapital will pay additional consideration, 50% in cash and 50% in Common
Stock, equal to (i) 50% of any increase in Matrix's adjusted pre-tax income for
the year ended December 31, 1998 over the year ended December 31, 1997 and (ii)
50% of any increase in Matrix's adjusted pre-tax income for the year ended
December 31, 1999 over the adjusted pre-tax income for the year ended December
31, 1998 (unless adjusted pre-tax income for the year ended December 31, 1998 is
less than for the year ended December 31, 1997, in which case the baseline for
comparison will be the year ended December 31, 1997). Prior to the consummation
of the Merger, Matrix will distribute approximately $3.0 million to its
stockholders, through a redemption of a portion of Matrix's outstanding stock.
Each of Richard Emery, J. Robert Bonnemort and David A. DiCesaris, the
President, Executive Vice President and Vice President -- Sales of Matrix,
respectively, will enter into a two-year employment agreement with the
subsidiary of the Company that will operate the Matrix business after the Merger
and a two-year, post-employment covenant not to compete with the Company.
MERRIMAC
UniCapital will acquire all of the partnership interests in Merrimac for
178,750 shares of Common Stock. In addition, UniCapital will satisfy $2.8
million in debt assumed in the Merrimac Merger. In addition, UniCapital will pay
additional consideration in Common Stock equal to (i) 50% of any increase in
Merrimac's adjusted pre-tax income for the year ended December 31, 1998 over the
year ended December 31, 1997 and (ii) 50% of any increase in Merrimac's adjusted
pre-tax income for the year ended December 31, 1999 over the adjusted pre-tax
income for the year ended December 31, 1998 (unless adjusted pre-tax income for
the year ended December 31, 1998 is less than for the year ended December 31,
1997, in which case the baseline for comparison will be the year ended December
31, 1997). Mark Cignoli, General Manager of Merrimac, and Daniel Shatz, Sales
Manager, will each enter into a two-year employment agreement with the
subsidiary of the Company that will operate the Merrimac business after the
Merger and a two-year, post-employment covenant not to compete with the Company.
MCMG
UniCapital will acquire all of the outstanding stock of MCMG for: (i) $7.0
million in cash and (ii) 370,657 shares of Common Stock. In addition, UniCapital
will pay additional consideration, 50% in cash and 50% in Common Stock, equal to
(i) 50% of any increase in MCMG's adjusted pre-tax income for the year ended
December 31, 1998 over the year ended December 31, 1997 and (ii) 50% of any
increase in MCMG's adjusted pre-tax income for the year ended December 31, 1999
over the adjusted pre-tax income for the year ended December 31, 1998 (unless
adjusted pre-tax income for the year ended December 31, 1998 is less than for
the year ended December 31, 1997, in which case the baseline for comparison will
be the year ended December 31, 1997). Each of Fred R. Cornwall, Michael W.
Harling and James E. Craft, the President, Executive Vice President and Senior
Vice President of MCMG, respectively, will enter into a two-year employment
agreement with the subsidiary of the Company that will operate the MCMG business
after the Merger and a two-year, post-employment covenant not to compete with
the Company.
NSJ
UniCapital will acquire all of the outstanding stock of NSJ for: (i) $16.0
million in cash and (ii) 561,979 shares of Common Stock. In addition, UniCapital
will pay additional consideration, 60% in cash and 40% in Common Stock, of up to
$13.5 million based on the adjusted pre-tax income of the "Big Ticket Leasing
Division" (as defined in the Cauff Lippman and NSJ Merger Agreements) for the
years ended December 31, 1998, 1999 and 2000. The Merger Agreement provides for
such additional consideration to be paid in three possible payments: (i) $4.4
million if the adjusted pre-tax income of the Big Ticket Leasing Division for
the year ended December 31, 1998 exceeds $19.0 million; (ii) an additional $4.4
million if the adjusted pre-tax income of the Big Ticket Leasing Division for
the year ended December 31, 1999, plus the excess of the adjusted pre-tax income
of the Big Ticket Leasing Division for the year ended December 31, 1998 over
$26.7 million, exceeds
23
<PAGE> 28
$19.0 million; and (iii) a third $4.4 million if the adjusted pre-tax income of
the Big Ticket Leasing Division for the year ended December 31, 2000, plus the
excess of the adjusted pre-tax income of the Big Ticket Leasing Division for the
year ended December 31, 1999 over $26.7 million, exceeds $19.0 million;
provided, that if the aggregate amount paid under clauses (i) and (ii) is less
than $8.9 million and if the aggregate adjusted pre-tax income of the Big Ticket
Leasing Division for the three years ended December 31, 2000 equals or exceeds
$56.9 million, then the payment under clause (iii) will equal $13.3 million
minus the amounts paid under clauses (i) and (ii). Each of Jeptha Thornton,
Samuel Thornton and Richard Giles, the President, Vice President and Executive
Vice President and General Counsel of NSJ, respectively, will enter into a
three-year employment agreement with the subsidiary of the Company that will
operate the NSJ business after the Merger and a two-year, post-employment
covenant not to compete with the Company.
PFSC
UniCapital will acquire all of the partnership interests in PFSC for
184,210 shares of Common Stock. Each of Jerry Hudspeth and Chris Kane, the
Managing Director and Vice President -- Information Technology of PFSC,
respectively, will enter into a two-year employment agreement with the
subsidiary of the Company that will operate the PFSC business after the Merger
and a two-year, post-employment covenant not to compete with the Company.
VARILEASE
UniCapital will acquire all of the outstanding stock of Varilease for: (i)
$36.8 million in cash and (ii) 1,934,368 shares of Common Stock. In addition,
UniCapital will pay additional consideration, 50% in cash and 50% in Common
Stock, equal to (i) 50% of any increase in Varilease's adjusted pre-tax income
for the year ended December 31, 1998 over the year ended December 31, 1997 and
(ii) 50% of any increase in Varilease's adjusted pre-tax income for the year
ended December 31, 1999 over the adjusted pre-tax income for the year ended
December 31, 1998 (unless adjusted pre-tax income for the year ended December
31, 1998 is less than for the year ended December 31, 1997, in which case the
baseline for comparison will be the year ended December 31, 1997). Robert
VanHellemont, the President of Varilease, and Gary Miller, the Chief Financial
Officer of Varilease, will each enter into a two-year employment agreement with
the subsidiary of the Company that will operate the Varilease business after the
Merger and a two-year, post-employment covenant not to compete with the Company.
In connection with the Merger Agreement, Mr. VanHellemont has granted the
Company an option to purchase his equity interest in two entities, Worldwide
Maintenance Corp. ("Worldwide"), an entity that provides maintenance and related
services for computer and related equipment and Summa Leasing, Inc. ("Summa"), a
provider of vendor financing having total assets of approximately $1.0 million.
The Company has the option to purchase Worldwide for $1,000,000 plus the amount,
if any, owed to Mr. VanHellemont by Worldwide. The option is exercisable until
the date that is twelve months following the consummation of the Offering. The
Company has the option to purchase Mr. VanHellemont's equity interest in Summa
for an amount in cash equal to the fair market value of Mr. VanHellemont's
equity interest, as agreed upon by the parties at the time of purchase. The
option is exercisable until the date that is twenty-four months following the
consummation of the Offering. The Company has made no determination as to
whether it wishes to enter the businesses conducted by Worldwide and/or Summa.
24
<PAGE> 29
WALDEN
UniCapital will acquire all of the outstanding stock of Walden for: (i)
$21.0 million in cash and (ii) 1,105,184 shares of Common Stock. In addition,
UniCapital will pay additional consideration, 50% in cash and 50% in Common
Stock, equal to (i) 50% of any increase in Walden's adjusted pre-tax income for
the year ended December 31, 1998 over the year ended December 31, 1997 and (ii)
50% of any increase in Walden's adjusted pre-tax income for the year ended
December 31, 1999 over the adjusted pre-tax income for the year ended December
31, 1998 (unless adjusted pre-tax income for the year ended December 31, 1998 is
less than for the year ended December 31, 1997, in which case the baseline for
comparison will be the year ended December 31, 1997). Each of David Burmon,
Richard Albertelli and Robert Kopp, the President and Executive Vice Presidents,
of Walden, respectively, will enter into a two-year employment agreement with
the subsidiary of the Company that will operate the Walden business after the
Merger and a two-year, post-employment covenant not to compete with the Company.
25
<PAGE> 30
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby, after deducting estimated underwriting discounts and other
expenses of the Offering, all of which are payable by the Company, are estimated
to be approximately $ million (approximately $ million if the
U.S. Underwriters' over-allotment option is exercised in full), assuming an
initial public offering price of $ per share. The principal uses of
such net proceeds to the Company are described below. See "Formation of the
Company -- The Mergers" and "Certain Relationships and Related Party
Transactions -- The Mergers." The Company is currently negotiating to obtain a
bank credit facility, which may replace some or all of the Founding Companies'
existing credit facilities.
<TABLE>
<CAPTION>
USE AMOUNT
--- ------
<S> <C>
Cash portion of purchase price for Founding Companies....... $331.6 million
Repayment of indebtedness................................... 35.1 million(1)
General corporate purposes, including possible
acquisitions.............................................. million
</TABLE>
- ---------------
(1) Consists of (i) $32.3 million of indebtedness of Jacom incurred to fund an S
Corporation distribution to the stockholder of Jacom immediately prior to
the Jacom Merger, and (ii) $2.8 million of indebtedness of Merrimac assumed
in the Merrimac Merger, all of which indebtedness will be repaid by the
Company upon consummation of the Offering.
Pending application of the balance of the net proceeds for general
corporate purposes, including possible acquisitions, the Company intends to
invest the net proceeds of the Offering in short-term investment grade
securities. With the exception of the Mergers, the Company is not currently
involved in negotiations and has no current commitments or agreements with
respect to any acquisitions.
DIVIDEND POLICY
The Company does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future because it intends to retain its earnings, if
any, to finance the expansion of its business and for general corporate
purposes. Any payment of future dividends will be at the discretion of the Board
of Directors and will depend upon, among other factors, the Company's earnings,
financial condition, capital requirements, level of indebtedness, contractual
restrictions with respect to the payment of dividends and other considerations
that the Company's Board of Directors deems relevant.
26
<PAGE> 31
CAPITALIZATION
The following table sets forth the capitalization of the Company at
December 31, 1997, on a pro forma combined basis (i) to reflect the consummation
of the Mergers and the issuance of 13,334,064 shares of Common Stock in
connection therewith, and (ii) as adjusted to give effect to the sale of
shares of Common Stock offered hereby at an assumed initial public offering
price of $ per share and the application of the estimated net proceeds
therefrom. See "Use of Proceeds." This table should be read in conjunction with
the Unaudited Pro Forma Combined Financial Statements and the notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
--------------------------
PRO FORMA
COMBINED AS ADJUSTED(1)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
Total debt.................................................. $426,659 $ 426,659
Stockholders' equity:
Common stock, $.001 par value per share, 100,000,000 shares
authorized, 20,132,814 shares issued and outstanding pro
forma, shares issued and outstanding pro forma as
adjusted.................................................. 20
Preferred stock, $.001 par value per share, 10,000,000
shares authorized, 0 shares issued and outstanding........ -- --
Additional paid-in capital.................................. 230,673
Stock subscription notes receivable......................... (129) (129)
Retained earnings........................................... (1,528) (1,344)
-------- ----------
Total stockholders' equity.................................. 229,036
-------- ----------
Total capitalization........................................ $655,695 $
======== ==========
</TABLE>
- ---------------
(1) Does not include shares issuable upon the exercise of options to
be granted prior to or upon effectiveness of the Registration Statement. If
all such options were exercised, then the total number of shares of Common
Stock that would be outstanding immediately after the Offering would be
shares. Options to be granted prior to or upon the effectiveness of
the Registration Statement include options that will be
immediately exercisable; the balance vest in future periods beginning one
year after the date of grant. More specifically, does not include: (i)
shares which may be issued to the stockholders of the Founding Companies,
other than PFSC, pursuant to earn-out arrangements to be calculated with
reference to the performance of those Founding Companies through December
31, 1999 (and, in the case of Boulder, Cauff Lippman and NSJ, through
December 31, 2000); (ii) shares of Common Stock equal to 15% of the shares
of Common Stock outstanding from time to time that are reserved for issuance
under the Company's 1998 Long-Term Incentive Plan, of which options to
purchase shares of Common Stock (including options to purchase
500,000 shares to be granted to Robert New, the Company's Chairman and Chief
Executive Officer, and options to purchase 500,000 shares to be granted to
Jonathan J. Ledecky, the Company's Non-Executive Chairman of the Board) will
be granted upon the effectiveness of the Registration Statement at an
exercise price equal to the initial public offering price per share; (iii)
500,000 shares of Common Stock reserved for issuance under the Company's
1998 Non-Employee Directors' Stock Plan, of which options to purchase 63,000
shares of Common Stock will be granted upon the effectiveness of the
Registration Statement at an exercise price equal to the initial public
offering price per share; (iv) 500,000 shares reserved for issuance under
the Company's 1997 Executive Non-Qualified Stock Option Plan, of which
options to purchase 200,000 shares of Common Stock are outstanding under the
Company's 1997 Executive Non-Qualified Stock Option Plan at an exercise
price of $3.00 per share and options to purchase 60,000 shares of Common
Stock will be granted upon the effectiveness of the Registration Statement
at an exercise price equal to the initial public offering price per share;
and (v) 2,000,000 shares of Common Stock reserved for issuance under the
Company's 1998 Employee Stock Purchase Plan. See "Formation of the Company
-- The Mergers," "Management -- 1997 Executive Non-Qualified Stock Option
Plan," "-- 1998 Long-Term Incentive Plan" "-- 1998 Non-Employee Directors'
Stock Plan" and "-- 1998 Employee Stock Purchase Plan" and "Principal
Stockholders."
27
<PAGE> 32
DILUTION
After giving effect to the initial capitalization of UniCapital as if such
capitalization had occurred on December 31, 1997, the Company had a pro forma
net tangible book value deficit at December 31, 1997, of $248.8 million, or a
deficit of $ per share of Common Stock. Pro forma net tangible book value
deficit per share is determined by dividing the pro forma net tangible book
value deficit of the Company (tangible assets less liabilities) by the number of
shares of Common Stock outstanding. Adjusting for the Mergers and the sale by
the Company of the shares of Common Stock offered hereby at an
assumed initial public offering price of $ per share, the application
of the estimated proceeds therefrom as described under "Use of Proceeds," and
the exercise of options to purchase 200,000 shares of Common Stock at an
exercise price of $3.00 per share, the pro forma net tangible book value of the
Company, as adjusted, at December 31, 1997 would have been $ million, or
$ per share. This amount represents an immediate dilution to new investors
of $
per share and an immediate increase in pro forma as adjusted net tangible book
value per share to existing stockholders of $ per share. The following table
illustrates this per share dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value deficit per share after
initial capitalization................................. $
Increase in net tangible book value per share resulting
from the Mergers and the Offering......................
-------
Pro forma as adjusted net tangible book value per share
after the Mergers and the Offering........................
------
Pro forma as adjusted dilution to new investors (1)(2)...... $
======
</TABLE>
- ---------------
(1) Determined by subtracting the pro forma as adjusted net tangible book value
per share after the Offering from the assumed initial public offering price
per share.
(2) Shares of Common Stock that might be used pursuant to earn-out arrangements
will be recorded at fair value at the time of their issuance which, at such
time, may be less than the initial offering price per share. Accordingly,
any such future issuance may serve to dilute the then book value of
investors.
The following table sets forth at December 31, 1997, after giving effect to
the Mergers and the sale of the Common Stock offered by the Company in the
Offering: (i) the number of shares of Common Stock purchased by existing
stockholders from the Company and the total consideration (including the fair
value of the shares of Common Stock issued to the stockholders of the Founding
Companies) and the average price per share paid to the Company for such shares;
(ii) the number of shares of Common Stock purchased by new investors in the
Offering from the Company and the total consideration and the price per share
paid by them for such shares; and (iii) the percentage of shares purchased from
the Company by existing stockholders and the new investors and the percentages
of consideration paid to the Company for such shares by existing stockholders
and new investors.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)........... 20,132,814 % $239,617,000 % $11.90
New investors...................... % % $
---------- ----- ------------ -----
Total............................ 100.0% $ 100.0%
========== ===== ============ =====
</TABLE>
- ---------------
(1) Does not include shares issuable upon the exercise of options to
be granted prior to or upon effectiveness of the Registration Statement. If
all such options were exercised, then the total number of shares of Common
Stock that would be outstanding immediately after the Offering would be
shares. Options to be granted prior to or upon effectiveness of
the Registration Statement include options that will be
immediately exercisable; the balance vest in future periods beginning one
year after the date of grant. More specifically, does not include: (i)
shares which may be issued to the stockholders of the Founding Companies,
other than PFSC, pursuant to earn-out arrangements to be calculated with
reference to the performance of those Founding Companies through December
31, 1999 (and, in the case of Boulder, Cauff
28
<PAGE> 33
Lippman and NSJ, through December 31, 2000); (ii) shares of Common Stock
equal to 15% of the shares of Common Stock outstanding from time to time
that are reserved for issuance under the Company's 1998 Long-Term Incentive
Plan, of which options to purchase , shares of Common Stock
(including options to purchase 500,000 shares to be granted to Robert New,
the Company's Chairman and Chief Executive Officer, and options to purchase
500,000 shares to be granted to Jonathan J. Ledecky, the Company's Non-
Executive Chairman of the Board) will be granted upon the effectiveness of
the Registration Statement at an exercise price equal to the initial public
offering price per share; (iii) 500,000 shares of Common Stock reserved for
issuance under the Company's 1998 Non-Employee Directors' Stock Plan, of
which options to purchase 63,000 shares of Common Stock will be granted upon
the effectiveness of the Registration Statement at an exercise price equal
to the initial public offering price per share; (iv) 500,000 shares reserved
for issuance under the Company's 1997 Executive Non-Qualified Stock Option
Plan, of which options to purchase 200,000 shares of Common Stock are
outstanding at an exercise price of $3.00 per share and options to purchase
60,000 shares of Common Stock will be granted upon the effectiveness of the
Registration Statement at an exercise price equal to the initial public
offering price per share; and (v) 2,000,000 shares of Common Stock reserved
for issuance under the Company's 1998 Employee Stock Purchase Plan. See
"Formation of the Company -- The Mergers," "Management -- 1997 Executive
Non-Qualified Stock Option Plan," "-- 1998 Long-Term Incentive Plan,"
"--1998 Non-Employee Directors' Stock Plan" and "-- 1998 Employee Stock
Purchase Plan" and "Principal Stockholders."
29
<PAGE> 34
SELECTED PRO FORMA COMBINED FINANCIAL DATA
UniCapital was established in October 1997 and will acquire the Founding
Companies simultaneously with and as a condition to the consummation of the
Offering. For financial statement presentation purposes, UniCapital has been
identified as the "accounting acquiror." The following unaudited summary pro
forma combined financial data present data for the Company, adjusted to give
effect to (i) the consummation of the Mergers, (ii) certain pro forma
adjustments to the historical financial statements described below and (iii) the
consummation of the Offering and the application of the net proceeds therefrom.
The summary pro forma data are not necessarily indicative of operating results
or the financial position that would have been achieved had the events described
above been consummated and should not be construed as representative of future
operating results or financial position. The summary pro forma combined
financial data should be read in conjunction with the Unaudited Pro Forma
Combined Financial Statements and the notes thereto and the historical financial
statements of the Founding Companies and the notes thereto included elsewhere in
this Prospectus. The Company anticipates that, subsequent to the Mergers, it
will realize savings from the combination of functions such as accounting and
finance, treasury, insurance, employee benefits, strategic marketing and legal
support at the corporate level. However, these savings cannot be quantified or
reasonably estimated and therefore have not been included in the Unaudited Pro
Forma Combined Financial Statements.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
-------------------
(IN THOUSANDS,
EXCEPT SHARE AND
PER SHARE DATA)
<S> <C>
STATEMENT OF OPERATIONS DATA (1):
Finance income from direct financing and sales-type
leases.................................................... $ 48,882
Rental income from operating leases......................... 55,432
Sales of equipment.......................................... 93,052
Gain on sale of leases...................................... 14,515
Fees, commissions and remarketing income.................... 20,273
Interest and other income................................... 6,295
-----------
Total revenues......................................... 238,449
-----------
Cost of operating leases.................................... 32,820
Cost of equipment sold...................................... 72,854
Interest expense............................................ 36,334
Selling, general and administrative expense (2)............. 45,477
Goodwill amortization (3)................................... 12,384
-----------
Total expenses......................................... 199,869
-----------
Income from operations...................................... 38,580
Equity in income from minority owned affiliates............. 4,215
-----------
Income before income taxes and extraordinary item........... 42,795
Provision for income taxes (4).............................. 19,877
-----------
Net income before extraordinary item........................ $ 22,918
===========
Net income per share before extraordinary item (basic and
diluted).................................................. $
===========
Shares used in computing pro forma net income per share
before extraordinary item (5).............................
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-------------------------
PRO FORMA AS
COMBINED ADJUSTED(7)
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA (6):
Cash and marketable securities.............................. $ 18,646 $
Total assets................................................ 1,113,934
Debt........................................................ 426,659 426,659
Stockholders' equity........................................ 229,036 --
</TABLE>
30
<PAGE> 35
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
(DOLLARS IN
THOUSANDS)
<S> <C>
OPERATING DATA:
Direct financing and sales-type leases acquired and
originated
Number of leases.......................................... 4,120
Net investment in direct financing and sales-type
leases................................................. $415,384
Finance income from direct financing and sales-type
leases................................................. 48,882
Average balance of net investment in direct financing and
sales-type leases...................................... 414,049
Average yield............................................. 11.81%
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
1997
------------
<S> <C>
Direct financing and sales-type leases
Number of leases.......................................... 6,612
Net investment in direct financing and sales-type
leases................................................. $419,323
Credit quality statistics
Gross lease receivables serviced and owned................ 536,428
Delinquencies............................................. 16,644
31-60 days................................................ 7,963
61-90 days................................................ 4,479
91 + days................................................. 4,203
Net charge-offs for the twelve months ended December 31,
1997:
Net investment in direct financing and sales-type leases
charged off............................................... 0.41%
Operating lease data at December 31, 1997 and for the twelve
months ended December 31, 1997;
Carrying value of equipment under operating leases........ $ 88,234
Number of leases at December 31, 1997..................... 1,268
Rental income from operating leases....................... $ 55,432
</TABLE>
- ---------------
(1) Assumes that the Mergers and the Offering were consummated on January 1,
1997.
(2) Reflects an aggregate of approximately (i) $14.5 million in Compensation
Differential, offset by assumed public company costs, primarily increased
salaries and professional fees at UniCapital, of approximately $4.8
million.
(3) Consists of amortization of the $ million of goodwill to be recorded
as a result of the Mergers over a 15 to 40 year period and computed on the
basis described in the Notes to the Unaudited Pro Forma Combined Financial
Statements.
(4) Assumes that all income is subject to a corporate income tax rate of 38%
and that all goodwill is non-deductible for tax purposes.
(5) Includes (i) 13,334,064 shares to be issued to stockholders of the Founding
Companies, (ii) 6,798,750 shares issued to the founders and initial
investors in UniCapital and (iii) of the shares sold in
the Offering to pay the cash portion of the purchase price for the Founding
Companies, to repay indebtedness of Merrimac assumed by UniCapital in the
Merrimac Merger and indebtedness of Jacom incurred to fund an S Corporation
distribution to the stockholder of Jacom immediately prior to the Jacom
Merger, and to pay certain expenses of the Offering.
(6) Assumes that the Mergers were consummated on December 31, 1997.
(7) Adjusted to reflect the sale of the shares of Common Stock
offered hereby and the application of the estimated net proceeds therefrom.
See "Use of Proceeds."
31
<PAGE> 36
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PRO FORMA FINANCIAL
CONDITION AND PRO FORMA RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Unaudited
Pro Forma Financial Statements and the related notes thereto and the historical
financial statements of UniCapital and the Founding Companies and the related
notes appearing elsewhere in this Prospectus.
GENERAL
UniCapital was founded in October 1997 to create a national consolidator
and operator of equipment leasing and specialty finance businesses serving the
commercial market. Upon consummation of the Mergers, the Company, through the
Founding Companies, will originate, acquire, sell and service equipment leases
and arrange structured financings in the computer and telecommunications
equipment, large ticket and structured finance, middle market and small ticket
areas of the equipment leasing industry. In addition, one of the Founding
Companies will provide lease administration and processing services for certain
of the leases originated by the Founding Companies, as well as for any
securitizations undertaken by the Company. The Founding Companies' leases and
structured financing arrangements cover a broad range of equipment, including
aircraft, computer and telecommunications equipment, construction and
manufacturing equipment, office equipment, trucks, printing equipment, car
washes and petroleum retail equipment and vending machines. The Company will
fund the acquisition or origination of its leases through warehouse credit
facilities or through recourse or non-recourse financing and will retain the
leases for its own account or sell the leases to third parties. The Company
intends to sell certain of its lease receivables in the public and private
markets through a securitization program. For the year ended December 31, 1997,
the Company had pro forma combined direct financing and sales-type lease
originations of approximately $415.0 million, pro forma combined income from
operations of $38.6 million, and pro forma combined net income before
extraordinary item of $22.9 million.
The Company, which has conducted no operations to date, has entered into
agreements to acquire the Founding Companies simultaneously with the
consummation of the Offering. The Company intends to integrate these businesses,
their operations and their administrative functions over a period of time. Such
integration may present opportunities to reduce costs through the elimination of
duplicate functions and through economies of scale, and may necessitate
additional costs and expenditures for corporate management and administration,
corporate expenses related to being a public company, systems integration,
employee relocation and severance and facilities expansion. These various costs
and possible cost-savings make comparison of future operating results with
historical operating results difficult.
The Founding Companies have operated historically as independent,
privately-owned entities, and their results of operations reflect varying tax
structures, including both S and C Corporations, which have influenced the
historical level of owners' compensation. The selling, general and
administrative expenses of the Founding Companies include compensation to
employee-stockholders totaling $15.4 million, $15.0 million and $18.6 million
for the years ended December 31, 1995, 1996 and 1997, respectively. As a result
of varying tax structures and practices regarding compensation to
employee-stockholders among the Founding Companies, the comparison of operating
margins among the Founding Companies and from period to period in respect of a
particular Founding Company may be difficult. Upon consummation of the Mergers,
certain employee-stockholders of the Founding Companies will enter into
employment agreements and the aggregate compensation paid to the management of
the Founding Companies will be reduced. This Compensation Differential has been
reflected in the Unaudited Pro Forma Combined Statement of Operations.
Subsequent to December 31, 1997, the Company issued an additional 1,522,500
shares of Common Stock to individuals serving as consultants to the Company,
each of whom will become employees of the Company upon consummation of the
Offering, and certain other stockholders and recorded a non-cash compensation
charge of $4.5 million related to the difference between amounts paid and the
value of these shares. In addition, in January 1998, the Company issued an
option to a consultant to the Company, who will become an employee of the
Company upon consummation of the Offering, to purchase 200,000 shares of Common
Stock at $3.00 per share, which expires on January 31, 2008. The Company
recorded a charge in the amount of $576,000 in January 1998 reflecting the
compensatory value of the option.
32
<PAGE> 37
The Company derives the majority of its revenue from lease payments on
leases originated and held by the Company, gains on sale of leases and sales of
equipment subject to leases. In addition, the Company derives revenue from sales
of equipment off-lease and the sale of new equipment, as well as from servicing
fees, late charges and administrative fees. In addition, the Company receives
remarketing fees for the sale of off-lease equipment on behalf of equity
investors in leases originated by the Company and may obtain a premium for sales
prices in excess of an agreed-upon amount.
The Company expects to fund the majority of the leases that it originates
through credit facilities. The Company anticipates that a significant portion of
its future leases will be sold to third parties or refinanced through a
securitization program or other structured finance products. Should the Company
be unable to sell or securitize leases with fixed rates within a reasonable
period of time after funding, the Company's operating margins could be adversely
affected by any increase in interest rates. Moreover, increases in interest
rates which cause the Company to raise the implicit rate charged to its
customers could cause a reduction in demand for the Company's lease products.
The leases acquired or originated by the Company generally are
noncancelable for a specified term during which the Company generally receives
scheduled payments sufficient, in the aggregate, to cover the Company's
borrowing costs and, when aggregated with the residual, the costs of the
underlying equipment. The noncancelable term of each lease is equal to or less
than the equipment's estimated economic life. Initial terms of the leases in the
Company's portfolio, on a pro forma basis, generally range from 12 to 84 months.
Certain of the leases acquired or originated by the Company carry a $1.00
buy-out provision upon maturity of the lease.
The Company's leases are collateralized by the equipment leased as well as,
in some cases, a personal guarantee provided by a principal of the lessee. The
Company manages credit risk through diversifying its business customer base,
geographic location of lessees and the type of business equipment leased. The
Company believes that prepayment and charge-off risks are mitigated by the
noncancelable, full payout structure of the majority of its leases which cover
equipment used in business operations.
The Company currently intends to maintain the present business mix of
leasing activities within the Founding Companies. While the Company intends to
disseminate among the Founding Companies "best practices" for the various
leasing activities conducted within the entities, the Company does not intend to
require the Founding Companies to alter their activities in such a manner so as
to impair their core origination strengths. However, the present pro forma
combined mix of leasing activities may change if the Company consummates
acquisitions of leasing companies subsequent to the Mergers or as the Founding
Companies change their business practices in response to market changes. Except
for the Mergers, the Company is not currently involved in negotiations and is
not a party to any arrangements, agreements or understandings with respect to
any acquisitions.
CERTAIN ACCOUNTING CONSIDERATIONS
Direct Financing Leases. A significant portion of the Company's leases are
"direct financing" leases, which transfer substantially all of the benefits and
risks of equipment ownership to the lessee. At December 31, 1997, on a pro forma
combined basis, the Company's net investment in direct financing leases totaled
$323.3 million, or 26.1% of total assets. A lease is classified as a direct
financing lease if the collection of the minimum lease payments is reasonably
predictable, no significant uncertainties exist relating to unreimbursable costs
yet to be incurred by the lessor under the lease and the lease meets one of the
following criteria: (i) ownership of the property is transferred to the lessee
at the end of the lease term; (ii) the lease contains a bargain purchase option;
(iii) the term of the lease is at least equal to 75% of the estimated economic
life of the leased equipment; or (iv) the present value of the minimum lease
payments is at least equal to 90% of the fair value of the leased equipment at
the inception of the lease. With respect to its direct financing leases, the
Company records total lease rentals receivable, estimated unguaranteed residual
value and initial direct costs (which are those costs, including sales
commissions, incurred in connection with consummating the lease) as the gross
investment in the lease. The difference between the gross investment in the
lease and the cost of the leased equipment is defined as "unearned income."
Finance income is recognized over the term of the lease by amortizing the
unearned income using the interest method.
33
<PAGE> 38
Sales-Type Leases. At December 31, 1997, on a pro forma combined basis,
the Company's net investment in sales-type leases totaled $86.3 million, or 7.0%
of total assets. Sales-type leases, like direct financing leases, transfer
substantially all of the benefits and risks of equipment ownership to the
lessee. However, sales-type leases include profit at lease inception to the
extent the fair value of the equipment exceeds the Company's carrying value.
Sales-type leases can arise in connection with new leases, or upon
classification of lease renewals. A lease is classified as a sales-type lease if
the collection of the minimum lease payments is reasonably predictable, no
significant uncertainties exist relating to unreimbursable costs yet to be
incurred by the lessor under the lease and the lease meets one of the following
criteria: (i) ownership of the property is transferred to the lessee at the end
of the lease term; (ii) the lease contains a bargain purchase option; (iii) the
term of the lease is at least equal to 75% of the estimated economic life of the
leased equipment; or (iv) the present value of the minimum lease payments is at
least equal to 90% of the fair value of the leased equipment at the inception of
the lease. With respect to its sales-type leases, the Company records total
lease rentals receivable, estimated unguaranteed residual value as the gross
investment in the lease. The difference between gross investment in the lease
and the present value of the gross investment in the lease is defined as
"unearned income." The present value of the minimum lease payments computed at
the interest rate implicit in the lease shall be recorded as sales revenue. The
cost of the equipment less the present value of the unguaranteed residual value,
computed at the interest rate implicit in the lease, is reflected as the cost of
sale. Finance income is recognized over the term of the lease by amortizing the
unearned income using the interest method.
Operating Leases. All lease contracts which do not meet the criteria of
direct financing leases or sales-type leases are accounted for as operating
leases. Monthly lease payments are recorded as income from operating leases.
Leased equipment is recorded, at the Company's cost, as "Equipment under
operating leases" and depreciated on a straight-line basis over the estimated
life of the equipment. The residual value of an item of leased equipment is its
estimated fair market value at the expiration of the lease. When equipment is
sold, the net proceeds realized in excess of the carrying value are recorded as
"Gain on sale of equipment;" if the net proceeds are less than the carrying
value, the amount by which the carrying value exceeds the net proceeds is
recorded as a loss. At December 31, 1997, the net book value of equipment under
operating leases totaled $110.1 million, or 8.9% of total assets on a pro forma
combined basis.
Gain on Sale. The Company also generates gain on sale income from the sale
of leases to third party financing sources for cash. Gain on sale of leases is
calculated as the difference between the proceeds received, net of related
selling expenses, and the carrying amount of the related leases, adjusted for
ongoing obligations of the Company, if any. In June 1996 the Financial
Accounting Standards Board adopted Statement of Financial Accounting Standards
No. 125 ("SFAS 125"), "Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities." SFAS 125 is effective for
transactions occurring after December 31, 1996. Among other things, SFAS 125
requires that servicing assets and other retained interests in transferred
assets be measured by allocating the previous carrying amount between the assets
sold, if any, and retained interests, if any, based on relative fair values at
the date of transfer.
Residual Interests. At the inception of a direct financing lease or a
sales-type lease, the Company estimates a residual value based upon the expected
net realizable value of the equipment at the end of the lease term. The residual
value of equipment subject to operating lease is defined by the depreciable life
and method adopted for the equipment. At the end of the initial term of a lease,
the lease may be extended, the equipment may be sold to the lessee or the
equipment may be sold or leased to another party. A gain or loss is recognized
based upon the excess or deficiency of sale proceeds compared to the estimated
residual value. The original estimate of the residual value is adjusted downward
during the lease term if a decline in value is projected; however, accounting
rules do not permit upward adjustments in residual estimates.
The Company periodically evaluates the collectibility of its leases based
on the level of recourse provided, if any, delinquency statistics, historical
loss experience, current economic conditions and other relevant factors.
34
<PAGE> 39
LIQUIDITY AND CAPITAL RESOURCES
Approximately $331.6 million of the proceeds from the Offering will be used
to fund the cash portion of the consideration to be paid in connection with the
Mergers and approximately $35.1 million will be used to repay certain
indebtedness of Jacom and Merrimac. The remaining $ million will be used for
general corporate purposes, including possible acquisitions. See "Use of
Proceeds." As of December 31, 1997, the Company had cash and marketable
securities of approximately $18.6 million on a pro forma basis before the
Offering. The Company's business is capital intensive and requires access to
substantial short-term and long-term credit to fund new equipment leases. The
Founding Companies have funded their operations primarily through sales of
leases and non-recourse or recourse borrowings. The Company will continue to
require access to significant additional capital to maintain and expand its
volume of leases funded, as well as to fund any future acquisitions of leasing
and specialty finance companies.
The Company's uses of cash include the origination of equipment leases,
payment of interest expenses, repayment of borrowings under its warehouse
facilities, operating and administrative expenses, income taxes and capital
expenditures and may include payment of the cash portion of the earn-out
arrangements with the stockholders of the Founding Companies (other than PFSC).
On a pro forma basis, the Company generated positive cash flow from operations
in 1997.
The Company currently does not have any commitments to make significant
capital expenditures in the next twelve months. The Company believes that funds
generated from operations, together with the proceeds from the Offering and
possible future sources of borrowings will be sufficient to finance its current
operations and planned capital expenditure requirements at least through 1998.
Although the Company is not currently involved in negotiations and has no
current commitments or agreements with respect to any acquisitions (other than
the Mergers), to the extent that the Company is successful in consummating
acquisitions, it may be necessary to finance such acquisitions through the
issuance of additional equity securities, incurrence of indebtedness or a
combination of both.
HEDGING STRATEGY
When the Company borrows funds, it is exposed to a certain degree of risk
caused by interest rate fluctuations. Although the Company's equipment loans are
generally structured and permanently funded on a fixed interest rate basis, the
Company may initially fund the lease by borrowing on a floating rate basis. The
Company anticipates that it will use hedging techniques to protect its interest
rate margin during the period that floating rate funds are used. To manage its
interest rate risk, the Company expects to use derivative financial instruments,
such as forward rate agreements and Treasury locks and interest rate swaps, caps
and collars. The Company's hedging techniques may not protect it from interest
rate-related risks in all interest rate environments.
FLUCTUATIONS IN QUARTERLY RESULTS
The Company could experience fluctuations in quarterly operating results
due to a number of factors including, among others, the completion of a
securitization transaction in a particular calendar quarter (or the failure to
complete such a securitization transaction) and the interest rates on the
securities issued in connection with its securitization transactions, variations
in the volume of leases funded by the Company, differences between the Company's
cost of funds and the average implicit yield to the Company on its leases prior
to being securitized, the effectiveness of the Company's hedging strategy, the
degree to which the Company encounters competition in its markets and general
economic conditions. In addition, certain of the Founding Companies,
particularly those engaged in the lease and sale of aircraft, may experience
significant fluctuations due to the timing of sales of aircraft. As a result of
these fluctuations and the significant impact that the timing of any
securitization transactions may have on the Company's results of operations,
results for any one quarter should not be relied upon as being indicative of
performance in future quarters.
35
<PAGE> 40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF THE FOUNDING COMPANIES
The following discussion should be read in conjunction with the historical
financial statements of the Founding Companies and related notes thereto
appearing elsewhere in this Prospectus.
FOUNDING COMPANIES
Of the Founding Companies, Cauff Lippman, Jacom, MCMG, NSJ and Walden have
elected to be treated as S Corporations, Merrimac and PFSC are organized as
partnerships and American Capital, Boulder, Keystone, Matrix and Varilease are C
Corporations. As a result, only American Capital, Boulder, Keystone, Matrix and
Varilease were subject to federal income taxes. The selling, general and
administrative expenses of the Founding Companies include compensation to
employee-stockholders of the Founding Companies totaling $15.4 million, $15.0
million and $18.6 million for the years ended December 31, 1995, 1996 and 1997,
respectively. Upon consummation of the Mergers, certain employee-stockholders
will enter into employment agreements and the aggregate compensation paid to
stockholders of the Founding Companies will be reduced. As a result of varying
tax structures and practices regarding compensation to employee-stockholders,
the comparison of operating margins among the Founding Companies and from period
to period in respect of a particular Founding Company may be difficult.
AMERICAN CAPITAL RESOURCES, INC.
American Capital provides lease and secured financing for equipment,
primarily printing presses, to companies in the printing, packaging and paper
converting industries. Leases originated by American Capital are direct
financing leases, with an average transaction size for the fiscal year ended
July 31, 1997 of approximately $727,000 and an average term of 82 months. To
fund the acquisition of equipment, American Capital either sells the leases that
it originates or borrows the required proceeds from various funding sources on
both a non-recourse and a limited recourse basis. The substantial majority of
American Capital's lessees are businesses operating in the graphic arts and
paper converting industries.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31, SIX MONTHS ENDED JANUARY 31,
------------------------------------------------------- ----------------------------------
1995 1996 1997 1997 1998
--------------- ---------------- ---------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Finance income from
direct financing
leases and
contracts............. $4,680 50.6% $ 5,069 49.5% $ 4,986 46.4% $2,535 54.1% $2,428 51.8%
Gain on sale of leases
and contracts......... 3,533 38.2 4,039 39.5 4,426 41.2 1,625 34.7 1,409 30.1
Fee income.............. 89 1.0 84 0.8 80 0.7 36 0.8 29 0.6
Interest and other
income................ 944 10.2 1,042 10.2 1,262 11.7 486 10.4 817 17.5
------ ------- ------- ------ ------
Total revenues...... 9,246 100.0 10,234 100.0 10,754 100.0 4,682 100.0 4,683 100.0
------ ------- ------- ------ ------
Interest expense........ 4,697 50.8 5,160 50.4 5,390 50.1 2,465 52.7 2,486 53.1
Selling, general and
administrative........ 4,147 44.9 4,617 45.1 5,194 48.3 2,234 47.7 2,869 61.3
------ ------- ------- ------ ------
Total expenses...... 8,844 95.7 9,777 95.5 10,584 98.4 4,699 100.4 5,355 114.4
------ ------- ------- ------ ------
Income (loss) from
operations............ $ 402 4.3% $ 457 4.5% $ 170 1.6% $ (17) (0.4)% $ (672) (14.4)%
====== ======= ======= ====== ======
</TABLE>
Six Months Ended January 31, 1998 Compared to Six Months Ended January 31, 1997
Finance Income from Direct Financing Leases and Contracts. Finance income
from direct financing leases and contracts decreased to $2.4 million in the six
months ended January 31, 1998 from $2.5 million in the six months ended January
31, 1997, a decrease of $0.1 million or 4.4%. As a percentage of revenues,
finance income from direct financing leases and contracts decreased by 2.3% to
51.8% in the six months ended January 31, 1998 from 54.1% in the six months
ended January 31, 1997.
36
<PAGE> 41
Gain on Sale of Leases and Contracts. Gain on sale of leases and contracts
decreased to $1.4 million in the six months ended January 31, 1998 from $1.6
million in the six months ended January 31, 1997, a decrease of $0.2 million, or
13.3%, primarily as a result of a lower volume of leases sold during the six
months ended January 31, 1997. As a percentage of revenues, gain on sale of
leases and contracts decreased by 4.6% to 30.1% in the six months ended January
31, 1998 from 34.7% in the six months ended January 31, 1997.
Fee Income. Fee income decreased by $7,000, or 19.4%, to $29,000 in the
six months ended January 31, 1998 from $36,000 in the six months ended January
31, 1997. As a percentage of revenues, fee income decreased by 0.2% to 0.6% in
the six months ended January 31, 1998 from 0.8% in the six months ended January
31, 1997.
Interest and Other Income. Interest and other income, which consists
primarily of interest income and late charges, increased to $0.8 million in the
six months ended January 31, 1998 from $0.5 million in the six months ended
January 31, 1997, an increase of $0.3 million, or 68.1%, primarily as a result
of final settlement of certain transactions. As a percentage of revenues,
interest and other income increased by 7.1% to 17.5% in the six months ended
January 31, 1998 from 10.4% in the six months ended January 31, 1997.
Interest Expense. Interest expense increased by $21,000, or 0.9%, to $2.5
million in the six months ended January 31, 1998, primarily as a result of
higher borrowings. As a percentage of revenues, interest expense increased by
0.4% to 53.1% in the six months ended January 31, 1998 from 52.7% in the six
months ended January 31, 1997.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $2.9 million in the six months ended January 31, 1998 from
$2.2 million in the six months ended January 31, 1997, an increase of $0.6
million, or 28.4%, primarily as a result of an increase in officers'
compensation and bad debt expense. As a percentage of revenues, selling, general
and administrative expenses increased by 13.6% to 61.3% in the six months ended
January 31, 1998 from 47.7% in the six months ended January 31, 1997.
Income (Loss) from Operations. As a result of the factors discussed above,
loss from operations increased to $0.7 million in the six months ended January
31, 1998 from $17,000 in the six months ended January 31, 1997, an increase of
$0.7 million. As a percentage of revenues, loss from operations increased by
14.0% to 14.4% in the six months ended January 31, 1998 from 0.4% in the six
months ended January 31, 1997.
Year Ended July 31, 1997 Compared to Year Ended July 31, 1996
Finance Income from Direct Financing Leases and Contracts. Finance income
from direct financing leases and contracts decreased to $5.0 million in the year
ended July 31, 1997 from $5.1 million in the year ended July 31, 1996, a
decrease of $0.1 million, or 1.6%. As a percentage of revenues, finance income
from direct financing leases decreased by 3.1% to 46.4% in the year ended July
31, 1997 from 49.5% in the year ended July 31, 1996.
Gain on Sale of Leases and Contracts. Gain on sale of leases and contracts
increased to $4.4 million in the year ended July 31, 1997 from $4.0 million in
the year ended July 31, 1996, an increase of $0.4 million, or 9.6%, primarily as
a result of sales at higher margins, partially offset by a slightly reduced
volume of sales. As a percentage of revenues, gain on sale of leases and
contracts increased by 1.7% to 41.2% in the year ended July 31, 1997 from 39.5%
in the year ended July 31, 1996.
Fee Income. Fee income was $0.1 million in the years ended July 31, 1997
and 1996. As a percentage of revenues, fee income decreased by 0.1% to 0.7% in
the year ended July 31, 1997 from 0.8% in the year ended July 31, 1996.
Interest and Other Income. Interest and other income increased to $1.3
million in the year ended July 31, 1997 from $1.0 million in the year ended July
31, 1996, an increase of $0.2 million, or 21.1%, primarily as a result of
increased late fees. As a percentage of revenues, interest and other income
increased by 1.5% to 11.7% in the year ended July 31, 1997 from 10.2% in the
year ended July 31, 1996.
37
<PAGE> 42
Interest Expense. Interest expense increased to $5.4 million in the year
ended July 31, 1997 from $5.2 million in the year ended July 31, 1996, an
increase of $0.2 million, or 4.5%, primarily as a result of the timings and mix
of borrowings. As a percentage of revenues, interest expense decreased by 0.3%
to 50.1% in the year ended July 31, 1997 from 50.4% in the year ended July 31,
1996.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $5.2 million in the year ended July 31, 1997 from $4.6
million in the year ended July 31, 1996, an increase of $0.6 million, or 12.5%,
as a result of increased bad debt expense, increased travel expenses associated
with developing new business, increased compensation to officers and the
addition of sales personnel. As a percentage of revenues, selling, general and
administrative expenses increased by 3.2% to 48.3% in the year ended July 31,
1997 from 45.1% in the year ended July 31, 1996.
Income (Loss) from Operations. As a result of the factors discussed above,
income from operations decreased to $0.2 million in the year ended July 31, 1997
from $0.5 million in the year ended July 31, 1996, a decrease of $0.3 million,
or 62.8%. As a percentage of revenues, income from operations decreased by 2.9%
to 1.6% in the year ended July 31, 1997 from 4.5% in the year ended July 31,
1996.
Year Ended July 31, 1996 Compared to Year Ended July 31, 1995
Finance Income from Direct Financing Leases and Contracts. Finance income
from direct financing leases and contracts increased to $5.1 million in the year
ended July 31, 1996 from $4.7 million in the year ended July 31, 1995, an
increase of $0.4 million, or 8.3%, primarily as a result of an increase in the
portfolio of receivables held. As a percentage of revenues, finance income from
direct financing leases and contracts decreased by 1.1% to 49.5% in the year
ended July 31, 1996 from 50.6% in the year ended July 31,1995.
Gain on Sale of Leases and Contracts. Gain on sale of leases and contracts
increased to $4.0 million in the year ended July 31, 1996 from $3.5 million in
the year ended July 31, 1995, an increase of $0.5 million, or 14.3%, primarily
as a result of an increase in the volume of leases sold. As a percentage of
revenues, gain on sale of leases and contracts increased by 1.3% to 39.5% in the
year ended July 31, 1996 from 38.2% in the year ended July 31, 1995.
Fee Income. Fee income was $0.1 million in the years ended July 31, 1996
and 1995. As a percentage of revenues, fee income decreased by 0.2% to 0.8% in
the year ended July 31, 1996 from 1.0% in the year ended July 31, 1995.
Interest and Other Income. Interest and other income increased to $1.0
million in the year ended July 31, 1996 from $0.9 million in the year ended July
31, 1995, an increase of $0.1 million, or 10.4% due to the increased size of the
portfolio held. As a percentage of revenues, interest and other income was 10.2%
in the years ended July 31, 1996 and 1995.
Interest Expense. Interest expense increased to $5.2 million in the year
ended July 31, 1996 from $4.7 million in the year ended July 31, 1995, an
increase of $0.5 million, or 9.9%, primarily as a result of additional
borrowings to support the increased volume of receivables held. As a percentage
of revenues, interest expense decreased by 0.4% to 50.4% in the year ended July
31, 1996 from 50.8% in the year ended July 31, 1995.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $4.6 million in the year ended July 31, 1996 from $4.1
million in the year ended July 31, 1995, an increase of $0.5 million, or 11.3%,
as a result of increased travel and marketing expenses associated with efforts
to attract new business, increased bad debt expense attributable to the increase
in the portfolio held and increased compensation. As a percentage of revenues,
selling, general and administrative expenses increased by 0.2% to 45.1% in the
year ended July 31, 1996 from 44.9% in the year ended July 31, 1995.
Income (Loss) from Operations. As a result of the factors discussed above,
income from operations increased to $0.5 million in the year ended July 31, 1996
from $0.4 million in the year ended July 31, 1995, an increase of $55,000, or
13.7%. As a percentage of revenues, income from operations increased by 0.2% to
4.5% in the year ended July 31, 1996 from 4.3% in the year ended July 31, 1995.
38
<PAGE> 43
BOULDER CAPITAL GROUP, INC.
Boulder provides lease financing for petroleum retail equipment, including
car washes, fuel dispensers and convenience store operating equipment, to
petroleum retail businesses. Boulder originates leases directly with the owner
of the petroleum retail business, as well as through programs with petroleum
companies, equipment manufacturers and vendors. During the year ended December
31, 1997, car washes constituted approximately 64% of the equipment leased by
Boulder, and fuel dispensers approximately 15%. Boulder originates direct
financing leases and operating leases. After the inception of the lease, Boulder
either retains the lease for its portfolio or, from time to time may transfer
direct financing leases to unrelated third parties in transactions accounted for
as sales while retaining the servicing responsibility. Boulder also engages in
the sale and remarketing of equipment on lease.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1997
--------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Finance income from direct financing leases....... $2,663 63.0% $3,618 56.6%
Rental income from operating leases............... 404 9.6 344 5.4
Gain on sale of leases............................ 100 2.4 727 11.4
Sales of equipment................................ 1,029 24.3 1,522 23.8
Interest and other income......................... 32 0.8 186 2.9
------ ------
Total revenues............................... 4,228 100.0 6,397 100.0
------ ------
Depreciation on equipment under operating
leases.......................................... 361 8.5 238 3.7
Cost of equipment sold............................ 883 20.9 1,338 20.9
Interest expense.................................. 1,966 46.5 2,696 42.1
Selling, general and administrative .............. 1,346 31.8 1,652 25.8
------ ------
Total expenses............................... 4,556 107.8 5,924 92.6
------ ------
Income (loss) from operations..................... $ (328) (7.8)% $ 473 7.4%
====== ======
</TABLE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Finance Income from Direct Financing Leases. Finance income from direct
financing leases increased to $3.6 million in the year ended December 31, 1997
from $2.7 million in the year ended December 31, 1996, an increase of $1.0
million, or 35.9%, as a result of incremental lease originations, primarily
associated with Boulder's vendor financing programs. As a percentage of
revenues, finance income from direct financing leases decreased by 6.4% to 56.6%
in the year ended December 31, 1997 from 63.0% in the year ended December 31,
1996.
Rental Income from Operating Leases. Rental income from operating leases
decreased to $0.3 million in the year ended December 31, 1997 from $0.4 million
in the year ended December 31, 1996, a decrease of $60,000, or 14.9%, primarily
as a result of a greater number of leases maturing during the year ended
December 31, 1997. As a percentage of revenues, rental income from operating
leases decreased by 4.2% to 5.4% in the year ended December 31, 1997 from 9.6%
in the year ended December 31, 1996.
Gain on Sale of Leases. Gain on sale of leases increased to $0.7 million
in the year ended December 31, 1997 from $0.1 million in the year ended December
31, 1996, an increase of $0.6 million, or 627.0%, as a result of Boulder
originating and selling a greater number of direct financing leases. As a
percentage of revenues, gain on sale of leases increased by 9.0% to 11.4% in the
year ended December 31, 1997 from 2.4% in the year ended December 31, 1996.
39
<PAGE> 44
Sales of Equipment. Income from sales of equipment increased to $1.5
million in the year ended December 31, 1997 from $1.0 million in the year ended
December 31, 1996, an increase of $0.5 million, or 47.9%, primarily attributable
to maturing of leases. As a percentage of revenues, sale of equipment decreased
by 0.5% to 23.8% in the year ended December 31, 1997 from 24.3% in the year
ended December 31, 1996.
Interest and Other Income. Interest and other income, which includes late
charges and administrative fees, increased to $0.2 million in the year ended
December 31, 1997 from $32,000 in the year ended December 31, 1996, an increase
of $0.2 million, or 481.3%, as a result of Boulder's increased collection
efforts. As a percentage of revenues, interest and other income increased by
2.1% to 2.9% in the year ended December 31, 1997 from 0.8% in the year ended
December 31, 1996.
Depreciation on Equipment under Operating Leases. Depreciation on
equipment under operating leases decreased to $0.2 million in the year ended
December 31, 1997 from $0.4 million in the year ended December 31, 1996, a
decrease of $0.1 million, or 34.1%, primarily as a result of the maturity of
operating leases. As a percentage of revenues, depreciation on equipment under
operating leases decreased by 4.8% to 3.7% in the year ended December 31, 1997
from 8.5% in the year ended December 31, 1996.
Cost of Equipment Sold. Cost of equipment sold increased to $1.3 million
in the year ended December 31, 1997 from $0.9 million in the year ended December
31, 1996, an increase of $0.5 million, or 51.5%, as a result of increased sales
of equipment, principally car washes, attributable to maturing leases. As a
percentage of revenues, cost of equipment sold was 20.9% for the years ended
December 31, 1997 and 1996.
Interest Expense. Interest expense increased to $2.7 million in the year
ended December 31, 1997 from $2.0 million in the year ended December 31, 1996,
an increase of $0.7 million, or 37.1%, primarily as a result of increased
borrowing due to the expansion of Boulder's lease portfolio. As a percentage of
revenues, interest expense decreased by 4.4% to 42.1% in the year ended December
31, 1997 from 46.5% in the year ended December 31, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $1.7 million in the year ended December 31, 1997 from $1.3
million in the year ended December 31, 1996, an increase of $0.3 million, or
22.7%, primarily as a result of hiring additional personnel and increased
professional fees, including costs associated with terminating S Corporation
status effective January 1, 1997. As a percentage of revenues, selling, general
and administrative expenses decreased by 6.0% to 25.8% in the year ended
December 31, 1997 from 31.8% in the year ended December 31, 1996.
Income (Loss) from Operations. As a result of the factors discussed above,
income (loss) from operations increased to $0.5 million in the year ended
December 31, 1997 from ($0.3) million in the year ended December 31, 1996, an
increase of $0.8 million. As a percentage of revenues, operating income
increased to 7.4% in the year ended December 31, 1997 from (7.8%) in the year
ended December 31, 1996. Boulder operated at a loss in the year ended December
31, 1996 due to expenses incurred in that year associated with the expansion of
vendor programs. This investment in 1996 resulted in increased lease
originations associated with vendor programs in the year ended December 31,
1997.
40
<PAGE> 45
CAUFF, LIPPMAN AVIATION, INC.
Cauff Lippman provides operating lease financing for used commercial jet
aircraft and aircraft engines, as well as brokering and advisory services to
domestic and foreign commercial airlines, aircraft lessors and institutional
investors and engages in the purchase and sale of aircraft for its own account.
Cauff Lippman's revenues are derived primarily from rentals of aircraft and sale
and remarketing of aircraft.
Rental income from operating leases is reported over the life of the lease
as rentals become receivable under the provisions of the lease or, in the case
of leases with varying payments, under the straight-line method over the
noncancelable term of the lease. Revenues from commissions include fees and
commissions earned from remarketing on behalf of third parties. Due in part to
the substantial purchase price of aircraft, Cauff Lippman's operating results
can fluctuate significantly, based in part on the timing of sales of aircraft
and commissions on sales of aircraft.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1995 1996 1997
--------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Rental income from operating leases....... $20,997 78.4% $18,517 75.0% $17,596 54.7%
Sales of equipment........................ -- -- 40 0.2 5,725 17.8
Fees, commissions and remarketing
income.................................. 4,979 18.6 5,390 21.8 8,156 25.3
Interest and other income................. 821 3.1 749 3.0 708 2.2
------- ------- -------
Total revenues....................... 26,797 100.0 24,696 100.0 32,185 100.0
------- ------- -------
Cost of operating leases.................. 12,430 46.4 12,415 50.3 12,660 39.3
Cost of equipment sold.................... -- -- 32 0.1 4,325 13.4
Interest expense.......................... 3,279 12.2 2,998 12.1 2,769 8.6
Selling, general and administrative....... 2,690 10.0 3,959 16.0 4,871 15.1
------- ------- -------
Total expenses....................... 18,399 68.7 19,404 78.6 24,625 76.5
------- ------- -------
Income from operations.................... $ 8,398 31.3% $ 5,292 21.4% $ 7,560 23.5%
------- ------- -------
Equity in income of minority-owned
affiliates.............................. -- -- 239 -- 219 --
</TABLE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Rental Income from Operating Leases. Rental income from operating leases
decreased to $17.6 million in the year ended December 31, 1997 from $18.5
million in the year ended December 31, 1996, a decrease of $0.9 million, or
5.0%, primarily due to the decrease in lease revenue associated with the
renegotiation of an aircraft lease, partially offset by the addition of certain
aircraft engines subject to lease. As a percentage of revenues, rental income
from operating leases decreased by 20.3% to 54.7% in the year ended December 31,
1997 from 75.0% in the year ended December 31, 1996.
Sales of Equipment. Income from sales of equipment increased to $5.7
million in the year ended December 31, 1997 due to the sale of a Boeing 727.
Cauff Lippman sold a nominal amount of equipment in the year ended December 31,
1996. As a percentage of revenues, income from sales of equipment increased by
17.6% to 17.8% in the year ended December 31, 1997 from 0.2% in the year ended
December 31, 1996.
Fees, Commissions and Remarketing Income. Fees, commissions and
remarketing income increased to $8.2 million in the year ended December 31, 1997
from $5.4 million in the year ended December 31, 1996, an increase of $2.8
million, or 51.3%, primarily as a result of increased commissions attributable
to sales of aircraft during the year ended December 31, 1997. As a percentage of
revenues, fees, commissions and remarketing
41
<PAGE> 46
income increased by 3.5% to 25.3% in the year ended December 31, 1997 from 21.8%
in the year ended December 31, 1996.
Interest and Other Income. Interest and other income, which primarily
consists of interest income, was $0.7 million in the years ended December 31,
1997 and 1996. As a percentage of revenues, interest and other income decreased
by 0.8% to 2.2% in the year ended December 31, 1997 from 3.0% in the year ended
December 31, 1996.
Cost of Operating Leases. Cost of operating leases increased to $12.7
million in the year ended December 31, 1997 from $12.4 million in the year ended
December 31, 1996, an increase of $0.2 million, or 2.0%. As a percentage of
revenues, cost of operating leases decreased by 11.0% to 39.3% in the year ended
December 31, 1997 from 50.3% in the year ended December 31, 1996.
Cost of Equipment Sold. Cost of equipment sold increased to $4.3 million
in the year ended December 31, 1997 from $32,000 in the year ended December 31,
1996, an increase of 13,415.6%, due to the purchase and sale of a Boeing 727 in
1997. As a percentage of revenues, cost of equipment sold increased by 13.3% to
13.4% in the year ended December 31, 1997 from 0.1% in the year ended December
31, 1996.
Interest Expense. Interest expense decreased to $2.8 million in the year
ended December 31, 1997 from $3.0 million in the year ended December 31, 1996, a
decrease of $0.2 million, or 7.6%, primarily due to lower average outstanding
indebtedness. As a percentage of revenues, interest expense decreased by 3.5% to
8.6% in the year ended December 31, 1997 from 12.1% in the year ended December
31, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $4.9 million in the year ended December 31, 1997 from $4.0
million in the year ended December 31, 1996, an increase of $0.9 million, or
23.0%, primarily as a result of increased professional fees associated with the
proposed sale of the business. As a percentage of revenues, selling, general and
administrative expenses decreased by 0.9% to 15.1% in the year ended December
31, 1997 from 16.0% in the year ended December 31, 1996.
Income from Operations. As a result of the factors discussed above, income
from operations increased to $7.6 million in the year ended December 31, 1997
from $5.3 million in the year ended December 31, 1996, an increase of $2.3
million, or 42.9%. As a percentage of revenues, income from operations increased
by 2.1% to 23.5% in the year ended December 31, 1997 from 21.4% in the year
ended December 31, 1996.
Equity in Income of Minority-Owned Affiliates. Equity in income of
minority-owned affiliates was $0.2 million in the years ended December 31, 1997
and 1996. This represents Cauff Lippman's portion of the earnings of certain
unconsolidated entities involved in the sale and/or lease of aircraft.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Rental Income from Operating Leases. Rental income from operating leases
decreased to $18.5 million in the year ended December 31, 1996 from $21.0
million in the year ended December 31, 1995, a decrease of $2.5 million, or
11.8%, primarily as a result of renegotiation of aircraft leases, partially
offset by increased income from new leases of aircraft. As a percentage of
revenues, rental income from operating leases decreased by 3.4% to 75.0% in the
year ended December 31, 1996 from 78.4% in the year ended December 31, 1995.
Sales of Equipment. Income from sales of equipment amounted to $40,000 in
the year ended December 31, 1996, due to the sale of a piece of aircraft
equipment. Cauff Lippman sold no equipment in the year ended December 31, 1995.
As a percentage of revenues, income from sales of equipment was 0.2% in the year
ended December 31, 1995.
Fees, Commissions and Remarketing Income. Fees, commissions and
remarketing income increased to $5.4 million in the year ended December 31, 1996
from $5.0 million in the year ended December 31, 1995, an increase of $0.4
million, or 8.3%, primarily as a result of increased commissions attributable to
sales of aircraft during the year ended December 31, 1996. As a percentage of
revenues, fees, commissions and remarketing
42
<PAGE> 47
income increased by 3.2% to 21.8% in the year ended December 31, 1996 from 18.6%
in the year ended December 31, 1995.
Interest and Other Income. Interest and other income decreased to $0.7
million in the year ended December 31, 1996 from $0.8 million in the year ended
December 31, 1995, a decrease of $0.1 million, or 8.8%. As a percentage of
revenues, interest and other income decreased by 0.1% to 3.0% in the year ended
December 31, 1996 from 3.1% in the year ended December 31, 1995.
Cost of Operating Leases. Cost of operating leases was $12.4 million in
the years ended December 31, 1996 and 1995. As a percentage of revenues, cost of
operating leases increased by 3.9% to 50.3% in the year ended December 31, 1996
from 46.4% in the year ended December 31, 1995.
Cost of Equipment Sold. Cost of equipment sold increased to $32,000 in the
year ended December 31, 1996 from zero in the year ended December 31, 1995. As a
percentage of revenues, cost of equipment sold was 0.1% in the year ended
December 31, 1996.
Interest Expense. Interest expense decreased to $3.0 million in the year
ended December 31, 1996 from $3.3 million in the year ended December 31, 1995, a
decrease of $0.3 million, or 8.6%, primarily due to lower average outstanding
indebtedness. As a percentage of revenues, interest expense decreased by 0.1% to
12.1% in the year ended December 31, 1996 from 12.2% in the year ended December
31, 1995.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $4.0 million in the year ended December 31, 1996 from $2.7
million in the year ended December 31, 1995, an increase of $1.3 million, or
47.2%, primarily as a result of increased professional fees associated with the
proposed sale of the business. As a percentage of revenues, selling, general and
administrative expenses increased by 6.0% to 16.0% in the year ended December
31, 1996 from 10.0% in the year ended December 31, 1995.
Income from Operations. As a result of the factors discussed above, income
from operations decreased to $5.3 million in the year ended December 31, 1996
from $8.4 million in the year ended December 31, 1995, a decrease of $3.1
million, or 37.0%. As a percentage of revenues, income from operations decreased
by 9.9% to 21.4% in the year ended December 31, 1996 from 31.3% in the year
ended December 31, 1995.
Equity in Income of Minority-Owned Affiliates. Equity in income of
minority-owned affiliates increased to $0.2 million in the year ended December
31, 1996 from zero in the year ended December 31, 1995. This represents Cauff
Lippman's portion of the earnings of certain unconsolidated entities involved in
the sale and/or lease of aircraft.
43
<PAGE> 48
JACOM COMPUTER SERVICES, INC.
Jacom provides lease financing for computer and telecommunications
equipment to large and middle market companies, including financial
institutions, throughout the United States. Jacom acquires equipment from many
sources and leases or sells the equipment to its customers. Jacom provides or
arranges to provide installation, maintenance and modification of the equipment.
Jacom funds the equipment purchases through borrowings and either holds the
leases for its own account or sells the future lease stream to financial
institutions.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1995 1996 1997
---------------- ---------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Finance income from direct financing
and sales-type leases.............. $ 9,184 11.1% $ 9,337 12.7% $ 8,377 9.3%
Rental income from operating
leases............................. 11,416 13.9 13,304 18.1 16,531 18.4
Gain on sale of leases............... -- -- -- -- 472 0.5
Sales of equipment................... 60,867 73.9 49,123 67.0 62,897 69.8
Interest and other income............ 927 1.1 1,554 2.1 1,794 2.0
------- ------- -------
Total revenues.................. 82,394 100.0 73,318 100.0 90,071 100.0
------- ------- -------
Depreciation on equipment under
operating leases................... 4,512 5.5 5,831 8.0 6,448 7.2
Cost of equipment sold............... 53,382 64.8 43,473 59.3 47,914 53.2
Interest expense..................... 5,824 7.1 5,586 7.6 4,645 5.2
Selling, general and
administrative..................... 11,797 14.3 11,082 15.1 13,183 14.6
------- ------- -------
Total expenses.................. 75,515 91.7 65,972 90.0 72,190 80.1
------- ------- -------
Income from operations............... $ 6,879 8.3% $ 7,346 10.0% $17,881 19.9%
======= ======= =======
</TABLE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Finance Income from Direct Financing and Sales-Type Leases. Finance income
from direct financing and sales-type leases decreased to $8.4 million in the
year ended December 31, 1997 from $9.3 million in the year ended December 31,
1996, a decrease of $1.0 million, or 10.3%, primarily as a result of sales of
future lease payments. As a percentage of revenues, finance income from direct
financing and sales-type leases decreased by 3.4% to 9.3% in the year ended
December 31, 1997 from 12.7%.
Rental Income from Operating Leases. Rental income from operating leases
increased to $16.5 million in the year ended December 31, 1997 from $13.3
million in the year ended December 31, 1996, an increase of $3.2 million, or
24.3%, primarily as a result of an increase in the number of operating leases.
As a percentage of revenues, rental income from operating leases increased by
0.3% to 18.4% in the year ended December 31, 1997 from 18.1% in the year ended
December 31, 1996.
Gain on Sale of Leases. During 1997, Jacom sold $44.5 million of future
lease payments, resulting in a gain of $0.5 million. As a percentage of
revenues, gain on sale of leases was 0.5% in the year ended December 31, 1997.
Sales of Equipment. Income from sales of equipment increased to $62.9
million in the year ended December 31, 1997 from $49.1 million in the year ended
December 31, 1996, an increase of $13.8 million, or 28.0%, primarily as a result
of customer demand for specifically configured high technology equipment. As a
percentage of revenues, sales of equipment increased by 2.8% to 69.8% in the
year ended December 31, 1997 from 67.0% in the year ended December 31, 1996.
44
<PAGE> 49
Interest and Other Income. Interest and other income, which includes
maintenance fees, freight on delivery of equipment and installation fees,
increased to $1.8 million in the year ended December 31, 1997 from $1.6 million
in the year ended December 31, 1996, an increase of $0.2 million or 15.4%, as a
result of increased interest income attributable to higher levels of cash
balances invested and an increase in consulting, installation and freight fees,
due to the increased volume of sales in the year ended December 31, 1996. As a
percentage of revenues, interest and other income decreased by 0.1% to 2.0% in
the year ended December 31, 1997 from 2.1% in the year ended December 31, 1996.
Depreciation on Equipment under Operating Leases. Depreciation on
equipment under operating leases increased to $6.4 million in the year ended
December 31, 1997 from $5.8 million in the year ended December 31, 1996, an
increase of $0.6 million, or 10.6%, primarily as a result of an increase in the
amount of equipment held subject to lease. As a percentage of revenues,
depreciation on equipment under operating leases decreased by 0.8% to 7.2% in
the year ended December 31, 1997 from 8.0% in the year ended December 31, 1996.
Cost of Equipment Sold. Cost of equipment sold increased to $47.9 million
in the year ended December 31, 1997 from $43.5 million in the year ended
December 31, 1996, an increase of $4.4 million, or 10.2%, primarily as a result
of the increase in sales of equipment. As a percentage of revenues, cost of
equipment sold decreased by 6.1% to 53.2% in the year ended December 31, 1997
from 59.3% in the year ended December 31, 1996. This decrease was caused by (i)
increased discounts and efficiencies in the acquisition process and (ii) Jacom's
revision of the rates used for estimating values for leases originated in 1997
as compared to rates used in prior years. As a result of these two factors, cost
of equipment sold was $1.9 million lower than if these rates had not been
revised.
Interest Expense. Interest expense decreased to $4.6 million in the year
ended December 31, 1997 from $5.6 million in the year ended December 31, 1996, a
decrease of $0.9 million, or 16.8%, primarily as a result of a reduction in
borrowings outstanding due to leases sold. As a percentage of revenues, interest
expense decreased by 2.4% to 5.2% in year ended December 31, 1997 from 7.6% in
the year ended December 31, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $13.2 million in the year ended December 31, 1997 from
$11.1 million in the year ended December 31, 1996, an increase of $2.1 million,
or 19.0%, primarily as a result of salary increases to existing employees and
the hiring of additional personnel necessary to support the expansion of the
business. As a percentage of revenues, selling, general and administrative
expenses decreased by 0.5% to 14.6% in the year ended December 31, 1997 from
15.1% in the year ended December 31, 1996.
Income from Operations. As a result of the factors discussed above, income
from operations increased to $17.9 million in the year ended December 31, 1997
from $7.3 million in the year ended December 31, 1996, an increase of $10.5
million, or 143.4%. As a percentage of revenues, income from operations
increased by 9.9% to 19.9% in the year ended December 31, 1997 from 10.0% in the
year ended December 31, 1996.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Finance Income from Direct Financing and Sales-Type Leases. Finance income
from direct financing and sales-type leases increased to $9.3 million in the
year ended December 31, 1996 from $9.2 million in the year ended December 31,
1995, an increase of $0.2 million, or 1.7%, primarily as a result of the timing
of financings during 1996. As a percentage of revenues, finance income from
direct financing and sales-type leases increased by 1.6% to 12.7% in the year
ended December 31, 1996 from 11.1% in the year ended December 31, 1995.
Rental Income from Operating Leases. Rental income from operating leases
increased to $13.3 million in the year ended December 31, 1996 from $11.4
million in the year ended December 31, 1995, an increase of $1.9 million, or
16.5%, primarily as a result of increased volume of lease originations. As a
percentage of revenues, rental income from operating leases increased by 4.2% to
18.1% in the year ended December 31, 1996 from 13.9% in the year ended December
31, 1995.
Gain on Sale of Leases. Gain on sale of leases was zero in the years ended
December 31, 1996 and 1995.
45
<PAGE> 50
Sales of Equipment. Income from sales of equipment decreased to $49.1
million in the year ended December 31, 1996 from $60.9 million in the year ended
December 31, 1995, a decrease of $11.7 million, or 19.3% primarily as a result
of increased customer demand for operating leases and the cyclical nature of
replacement schedules for customer equipment acquisitions. As a percentage of
revenues, income from sales of equipment decreased by 6.9% to 67.0% in the year
ended December 31, 1996 from 73.9% in the year ended December 31, 1995.
Interest and Other Income. Interest and other income increased to $1.6
million in the year ended December 31, 1996 from $0.9 million in the year ended
December 31, 1995, an increase of $0.6 million or 67.6%, primarily as a result
of an increase in fees resulting from services provided to existing lease
customers. As a percentage of revenues, interest and other income increased by
1.0% to 2.1% in the year ended December 31, 1996 from 1.1% in the year ended
December 31, 1995.
Depreciation on Equipment under Operating Leases. Depreciation on
equipment under operating leases increased to $5.8 million in the year ended
December 31, 1996 from $4.5 million in the year ended December 31, 1995, an
increase of $1.3 million, or 29.2%, primarily as a result of an increase in the
amount of equipment held subject to operating leases. As a percentage of
revenues, depreciation on equipment under operating leases increased by 2.5% to
8.0% in the year ended December 31, 1996 from 5.5% in the year ended December
31, 1995.
Cost of Equipment Sold. Cost of equipment sold decreased to $43.5 million
in the year ended December 31, 1996 from $53.4 million in the year ended
December 31, 1995, a decrease of $9.9 million, or 18.6%, primarily as a result
of a decrease in sales of equipment. As a percentage of revenues, cost of
equipment sold decreased by 5.5% to 59.3% in the year ended December 31, 1996
from 64.8% in the year ended December 31, 1995.
Interest Expense. Interest expense decreased to $5.6 million in the year
ended December 31, 1996 from $5.8 million in the year ended December 31, 1995, a
decrease of $0.2 million, or 4.1%, primarily as a result of lower average
outstanding borrowings. As a percentage of revenues, interest expense increased
by 0.5% to 7.6% in year ended December 31, 1996 from 7.1% in the year ended
December 31, 1995.
Selling, General and Administrative. Selling, general and administrative
expenses decreased to $11.1 million in the year ended December 31, 1996 from
$11.8 million in the year ended December 31, 1995, a decrease of $0.7 million,
or 6.1%, primarily as a result of decreased commissions due to origination of
fewer sales-type leases. As a percentage of revenues, selling, general and
administrative expenses increased by 0.8% to 15.1% in the year ended December
31, 1996 from 14.3% in the year ended December 31, 1995.
Income from Operations. As a result of the factors discussed above, income
from operations increased to $7.3 million in the year ended December 31, 1996
from $6.9 million in the year ended December 31, 1995, an increase of $0.5
million, or 6.8%. As a percentage of revenues income from operations increased
by 1.7% to 10.0% in the year ended December 31, 1996 from 8.3% in the year ended
December 31, 1995.
46
<PAGE> 51
K.L.C., INC.
Keystone provides lease financing for a variety of equipment, primarily
tractor trailers, embroidery machines and construction equipment to companies
throughout the United States. Upon origination, Keystone either retains the
lease for its portfolio, or sells the lease to a third party, while retaining
the servicing responsibility.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1995 1996 1997
--------------- ---------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Finance income from direct financing
leases............................... $5,688 74.8% $ 7,967 52.2% $7,573 84.2%
Gain on sale of leases................. -- -- 5,363 35.2 -- --
Fees, commissions and remarketing
income............................... 1,652 21.7 1,338 8.8 772 8.6
Other income........................... 267 3.5 579 3.8 648 7.2
------ ------- ------
Total revenues.................... 7,607 100.0 15,247 100.0 8,993 100.0
------ ------- ------
Interest expense....................... 2,173 28.5 2,823 18.5 2,458 27.2
Selling, general and administrative.... 3,405 44.8 3,764 24.7 4,842 53.8
------ ------- ------
Total expenses.................... 5,578 73.3 6,587 43.2 7,300 81.2
------ ------- ------
Income from operations................. $2,029 26.7% $ 8,660 56.8% $1,693 18.8%
====== ======= ======
</TABLE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Finance Income from Direct Financing Leases. Finance income from direct
financing leases decreased to $7.6 million in the year ended December 31, 1997
from $8.0 million in the year ended December 31, 1996, a decrease of $0.4
million, or 4.9%, primarily as a result of a decrease in the number of leases
held by Keystone due to the sale of a significant portion of the portfolio to a
third party in October 1996. As a percentage of revenues, finance income from
direct financing leases increased by 31.9% to 84.2% in the year ended December
31, 1997 from 52.3% in the year ended December 31, 1996.
Gain on Sale of Leases. Gain on sale of leases decreased to zero in the
year ended December 31, 1997 from $5.4 million in the year ended December 31,
1996. As a percentage of revenues, gain on sale of leases was 35.2% in the year
ended December 31, 1996.
Fees, Commissions and Remarketing Income. Fees, commissions and
remarketing income, which includes servicing income for the leases sold by
Keystone and remarketing of equipment, decreased to $0.8 million in the year
ended December 31, 1997 from $1.3 million in the year ended December 31, 1996, a
decrease of $0.6 million, or 42.3%, due to a decrease in the number of leases
serviced and equipment remarketed. Leases for which servicing ceased were
principally contained in portfolios sold in 1992 and 1994, for which Keystone
had retained servicing rights. As a percentage of revenues, fees, commissions
and remarketing income decreased by 0.2% to 8.6% in the year ended December 31,
1997 from 8.8% in the year ended December 31, 1996.
Other Income. Other income, which includes late fees, increased by
$69,000, or 11.9% to $0.6 million in the year ended December 31, 1997, as a
result of a decrease in late fees received due to the reduced number of leases
held by Keystone. As a percentage of revenues, other income increased by 3.4% to
7.2% in the year ended December 31, 1997 from 3.8% in the year ended December
31, 1996.
Interest Expense. Interest expense decreased to $2.5 million in the year
ended December 31, 1997 from $2.8 million in the year ended December 31, 1996, a
decrease of $0.4 million, or 12.9%, primarily as a result of the repayment of
borrowings associated with the leases sold by Keystone in October 1996. As a
percentage of revenues, interest expense increased by 8.8% to 27.3% in the year
ended December 31, 1997 from 18.5% in the year ended December 31, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $4.8 million in the year ended December 31, 1997 from $3.8
million in the year ended December 31, 1996, an increase of
47
<PAGE> 52
$1.1 million, or 28.6%, primarily as a result of a higher provision for lease
losses and higher professional fees associated with collection of delinquent
leases and general corporate matters. As a percentage of revenues, selling,
general and administrative expenses increased by 29.1% to 53.8% in the year
ended December 31, 1997 from 24.7% in the year ended December 31, 1996.
Income from Operations. As a result of the factors discussed above,
principally the absence of gain on sale of leases in 1997 and the increase in
selling, general and administrative expenses over 1996, income from operations
decreased to $1.7 million in the year ended December 31, 1997 from $8.7 million
in the year ended December 31, 1996, a decrease of $7.0 million, or 80.5%. As a
percentage of revenues, income from operations decreased by 38.0% to 18.8% in
the year ended December 31, 1997 from 56.8% in the year ended December 31, 1996.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Finance Income from Direct Financing Leases. Finance income from direct
financing leases increased to $8.0 million in the year ended December 31, 1996
from $5.7 million in the year ended December 31, 1995, an increase of $2.3
million, or 40.1%, primarily as a result of increased lease originations. As a
percentage of revenues, finance income from direct financing leases decreased by
22.5% to 52.3% in the year ended December 31, 1996 from 74.8% in the year ended
December 31, 1995.
Gain on Sale of Leases. Gain on sale of leases increased to $5.4 million
in the year ended December 31, 1996 from zero in the year ended December 31,
1995, as a result of the sale of a portion of Keystone's portfolio to a third
party. As a percentage of revenues, gain on sale of leases was 35.2% in the year
ended December 31, 1996.
Fees, Commissions and Remarketing Income. Fees, commissions and
remarketing income decreased to $1.3 million in the year ended December 31, 1996
from $1.7 million in the year ended December 31, 1995, a decrease of $0.3
million, or 19.0%, due to a decrease in the number of leases serviced and a
decline in remarketing of equipment. Leases for which servicing ceased were
principally contained in portfolios sold in 1992 and 1994, for which Keystone
had retained servicing rights. As a percentage of revenues, fees, commissions
and remarketing income decreased by 12.9% to 8.8% in the year ended December 31,
1996 from 21.7% in the year ended December 31, 1995.
Other Income. Other income increased to $0.6 million in the year ended
December 31, 1996 from $0.3 million in the year ended December 31, 1995, an
increase of $0.3 million, or 116.9%, primarily as a result of increased
collection of late fees. As a percentage of revenues, other income increased by
0.3% to 3.8% in the year ended December 31, 1996 from 3.5% in the year ended
December 31, 1995.
Interest Expense. Interest expense increased to $2.8 million in the year
ended December 31, 1996 from $2.2 million in the year ended December 31, 1995,
an increase of $0.7 million, or 29.9%, primarily as a result of higher
outstanding average borrowings during the year ended December 31, 1996,
associated with the increase in the leases held by Keystone, until the sale of a
portion of the portfolio in October 1996. As a percentage of revenues, interest
expense decreased by 10.1% to 18.5% in the year ended December 31, 1996 from
28.6% in the year ended December 31, 1995.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $3.8 million in the year ended December 31, 1996 from $3.4
million in the year ended December 31, 1995, an increase of $0.4 million, or
10.5%, as a result of increased professional fees, principally associated with
the sale of a portion of Keystone's lease portfolio. As a percentage of
revenues, selling, general and administrative expenses decreased by 20.1% to
24.7% in the year ended December 31, 1996 from 44.8% in the year ended December
31, 1995.
Income from Operations. As a result of the factors discussed above,
principally the gain on sale associated with the sale of a portion of Keystone's
lease portfolio, income from operations increased to $8.7 million in the year
ended December 31, 1996 from $2.0 million in the year ended December 31, 1995,
an increase of $6.6 million, or 326.8%. As a percentage of revenues, income from
operations increased by 30.1% to 56.8% in the year ended December 31, 1996 from
26.7% in the year ended December 31, 1995.
48
<PAGE> 53
MATRIX FUNDING CORPORATION
Matrix provides lease financing for a variety of equipment, primarily
computer, communication and electronic equipment, to companies throughout the
United States. Matrix originates the majority of its leases through its
telesales program. Matrix originates both direct financing leases and operating
leases. Upon origination, Matrix either sells the lease on a non-recourse basis,
or retains it for its own portfolio.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, SIX MONTHS ENDED DECEMBER 31,
--------------------------------------------------- ---------------------------------
1995 1996 1997 1996 1997
--------------- --------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Finance income from direct
financing and leveraged leases... $ 1,376 29.2% $ 2,331 47.4% $ 6,705 72.5% $ 2,753 70.9% $ 5,317 76.6%
Rental income from operating
leases........................... 1,098 23.3 1,062 21.6 985 10.7 437 11.3 443 6.4
Gain on sale of leases............. 1,729 36.7 1,034 21.0 1,070 11.6 462 11.9 539 7.8
Remarketing income................. 333 7.1 156 3.2 335 3.6 165 4.2 200 2.9
Other income....................... 173 3.7 333 6.8 148 1.6 67 1.7 438 6.3
------- ------- ------- ------- -------
Total revenues............. 4,709 100.0 4,916 100.0 9,243 100.0 3,884 100.0 6,937 100.0
------- ------- ------- ------- -------
Depreciation on equipment under
operating leases................. 897 19.0 805 16.4 835 9.0 355 9.1 374 5.4
Interest expense................... 506 10.7 765 15.6 2,773 30.0 1,015 26.1 2,191 31.6
Selling, general and
administrative................... 2,686 57.0 2,885 58.7 3,849 41.6 1,872 48.2 2,097 30.2
------- ------- ------- ------- -------
Total expenses............. 4,089 86.8 4,455 90.6 7,457 80.7 3,242 83.5 4,662 67.2
------- ------- ------- ------- -------
Income from operations............. $ 620 13.2% $ 461 9.4% $ 1,786 19.3% $ 642 16.5% $ 2,275 32.8%
======= ======= ======= ======= =======
</TABLE>
Six Months Ended December 31, 1997 Compared to Six Months Ended December 31,
1996
Finance Income from Direct Financing and Leveraged Leases. Finance income
from direct financing and leveraged leases increased to $5.3 million in the six
months ended December 31, 1997 from $2.8 million in the six months ended
December 31, 1996, an increase of $2.6 million, or 93.1%, primarily as a result
of Matrix retaining a greater number of the leases that it originated for its
own account, as well as an increased volume of lease originations due to the
hiring of additional telesales representatives and increased originations from
existing telesales representatives. As a percentage of revenues, finance income
from direct financing and leveraged leases increased by 5.7% to 76.6% in the six
months ended December 31, 1997 from 70.9% in the six months ended December 31,
1996.
Rental Income from Operating Leases. Rental income from operating leases
was $0.4 million in the six months ended December 31, 1997 and 1996. As a
percentage of revenues, rental income from operating leases decreased by 4.9% to
6.4% in the six months ended December 31, 1997 from 11.3% in the six months
ended December 31, 1996.
Gain of Sale of Leases. Gain on sale of leases was $0.5 million in the six
months ended December 31, 1997 and 1996. As a percentage of revenues, gain on
sale of leases decreased by 4.1% to 7.8% in the six months ended December 31,
1997 from 11.9% in the six months ended December 31, 1996.
Remarketing Income. Remarketing income was $0.2 million in the six months
ended December 31, 1997 and 1996. As a percentage of revenues, remarketing
income decreased by 1.3% to 2.9% in the six months ended December 31, 1997 from
4.2% in the six months ended December 31, 1996.
Other Income. Other income, which includes late fees, filing and
administrative fees and discounts, increased to $0.4 million in the six months
ended December 31, 1997 from $67,000 in the six months ended
49
<PAGE> 54
December 31, 1996, an increase of $0.4 million, or 553.3%, primarily as a result
of the increased volume of lease originations. As a percentage of revenues,
other income increased by 4.6% to 6.3% in the six months ended December 31, 1997
from 1.7% in the six months ended December 31, 1996.
Depreciation on Equipment Under Operating Leases. Depreciation on
equipment under operating leases was $0.4 million in the six months ended
December 31, 1997 and 1996. As a percentage of revenues, depreciation in
equipment under operating leases decreased by 3.7% to 5.4% in the six months
ended December 31, 1997 from 9.1% in the six months ended December 31, 1996.
Interest Expense. Interest expense increased to $2.2 million in the six
months ended December 31, 1997 from $1.0 million in the six months ended
December 31, 1996, an increase of $1.2 million, or 115.9%, as a result of
increased borrowing associated with Matrix retaining a greater number of the
leases that it originated. As a percentage of revenues, interest expense
increased by 5.5% to 31.6% in the six months ended December 31, 1997 from 26.1%
in the six months ended December 31, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $2.1 million in the six months ended December 31, 1997
from $1.9 million in the six months ended December 31, 1996, an increase of $0.2
million, or 12.0%, primarily as a result of the hiring of additional telesales
representatives. As a percentage of revenues, selling, general and
administrative expenses decreased by 18.0% to 30.2% in the six months ended
December 31, 1997 from 48.2% in the six months ended December 31, 1996.
Income from Operations. As a result of the factors discussed above, income
from operations increased to $2.3 million in the six months ended December 31,
1997 from $0.6 million in the six months ended December 31, 1996, an increase of
$1.6 million, or 254.4%. As a percentage of revenues, income from operations
increased by 16.3% to 32.8% in the six months ended December 31, 1997 from 16.5%
in the six months ended December 31, 1996.
Year Ended June 30, 1997 Compared to Year Ended June 30, 1996
Finance Income from Direct Financing and Leveraged Leases. Finance income
from direct financing and leveraged leases increased to $6.7 million in the year
ended June 30, 1997 from $2.3 million in the year ended June 30, 1996, an
increase of $4.4 million, or 187.6%, primarily as a result of Matrix retaining a
greater number of the leases that it originated for its own account, as well as
an increased volume of lease originations due to the hiring of additional
telesales representatives and increased originations from existing telesales
representatives. As a percentage of revenues, finance income from direct
financing and leveraged leases increased by 25.1% to 72.5% in the year ended
June 30, 1997 from 47.4% in the year ended June 30, 1996.
Rental Income from Operating Leases. Rental income from operating leases
decreased to $1.0 million in the year ended June 30, 1997 from $1.1 million in
the year ended June 30, 1996, a decrease of $77,000, or 7.2%, as a result of new
lease originations consisting primarily of direct financing leases. As a
percentage of revenues, rental income from operating leases decreased by 10.9%
to 10.7% in the year ended June 30, 1997 from 21.6% in the year ended June 30,
1996.
Gain on Sale of Leases. Gain on sale of leases increased to $1.1 million
in the year ended June 30, 1997 from $1.0 million in the year ended June 30,
1996, an increase of $36,000 or 3.5%. As a percentage of revenues, gain on sale
of leases decreased by 9.4% to 11.6% in the year ended June 30, 1997 from 21.0%
in the year ended June 30, 1996.
Remarketing Income. Remarketing income increased to $0.3 million in the
year ended June 30, 1997 from $0.2 million in the year ended June 30, 1996, an
increase of $0.2 million, or 115.6%, primarily as a result of an increase in
lease expirations for leases sold to third parties in which Matrix retained
remarketing rights. As a percentage of revenues, remarketing income increased by
0.4% to 3.6% in the year ended June 30, 1997 from 3.2% in the year ended June
30, 1996.
50
<PAGE> 55
Other Income. Other income decreased to $0.1 million in the year ended
June 30, 1997 from $0.3 million in the year ended June 30, 1996, a decrease of
$0.2 million, or 55.6%. As a percentage of revenues, other income decreased by
5.2% to 1.6% in the year ended June 30, 1997 from 6.8% in the year ended June
30, 1996.
Depreciation on Equipment under Operating Leases. Depreciation on
equipment under operating leases was $0.8 million in the years ended June 30,
1997 and 1996. As a percentage of revenues, depreciation on equipment under
operating leases decreased by 7.4% to 9.0% in the year ended June 30, 1997 from
16.4% in the year ended June 30, 1996.
Interest Expense. Interest expense increased to $2.8 million in the year
ended June 30, 1997 from $0.8 million in the year ended June 30, 1996, an
increase of $2.0 million, or 262.5%, as a result of increased borrowing
associated with Matrix retaining a greater number of the leases that it
originated. As a percentage of revenues, interest expense increased by 14.4% to
30.0% in the year ended June 30, 1997 from 15.6% in the year ended June 30,
1996.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $3.8 million in the year ended June 30, 1997 from $2.9
million in the year ended June 30, 1996, an increase of $1.0 million, or 33.4%,
primarily as a result of the expanded implementation of the telesales program,
including hiring of additional telesales representatives, increased expenses,
including telephone expenses, and an increased allowance for bad debts, due to
the greater number of leases retained by Matrix. As a percentage of revenues,
selling, general and administrative expenses decreased by 17.1% to 41.6% in the
year ended June 30, 1997 from 58.7% in the year ended June 30, 1996.
Income from Operations. As a result of the factors discussed above, income
from operations increased to $1.8 million in the year ended June 30, 1997 from
$0.5 million in the year ended June 30, 1996, an increase of $1.3 million, or
287.1%. As a percentage of revenues, income from operations increased by 9.9% to
19.3% in the year ended June 30, 1997 from 9.4% in the year ended June 30, 1996.
Year Ended June 30, 1996 Compared to Year Ended June 30, 1995
Finance Income from Direct Financing and Leveraged Leases. Finance income
from direct financing and leveraged leases increased to $2.3 million in the year
ended June 30, 1996 from $1.4 million in the year ended June 30, 1995, an
increase of $1.0 million, or 69.6%, primarily as a result of Matrix retaining a
greater number of the leases that it originated for its own account, as well as
an increased volume of lease originations due to the hiring of additional
telesales representatives and increased originations from existing telesales
representatives. As a percentage of revenues, finance income from direct
financing and leveraged leases increased by 18.2% to 47.4% in the year ended
June 30, 1996 from 29.2% in the year ended June 30, 1995.
Rental Income from Operating Leases. Rental income from operating leases
was $1.1 million in the years ended June 30, 1996 and 1995. As a percentage of
revenues, rental income from operating leases decreased by 1.7% to 21.6% in the
year ended June 30, 1996 from 23.3% in the year ended June 30, 1995.
Gain on Sale of Leases. Gain on sale of leases decreased to $1.0 million
in the year ended June 30, 1996 from $1.7 million in the year ended June 30,
1995, a decrease of $0.7 million, or 40.2%. As a percentage of revenues, gain on
sale of leases decreased by 15.7% to 21.0% in the year ended June 30, 1996 from
36.7% in the year ended June 30, 1995.
Remarketing Income. Remarketing income decreased to $0.2 million in the
year ended June 30, 1996 from $0.3 million in the year ended June 30, 1995, a
decrease of $0.2 million, or 53.3%, attributable to several significant
remarketings on behalf of investors in the year ended June 30, 1995. As a
percentage of revenues, remarketing income decreased by 3.9% to 3.2% in the year
ended June 30, 1996 from 7.1% in the year ended June 30, 1995.
51
<PAGE> 56
Other Income. Other income increased to $0.3 million in the year ended
June 30, 1996 from $0.2 million in the year ended June 30, 1995, an increase of
$0.2 million, or 92.8%. As a percentage of revenues, other income increased by
3.1% to 6.8% in the year ended June 30, 1996 from 3.7% in the year ended June
30, 1995.
Depreciation on Equipment Under Operating Leases. Depreciation on
equipment under operating leases decreased to $0.8 million in the year ended
June 30, 1996 from $0.9 million in the year ended June 30, 1995, a decrease of
$0.1 million, or 10.3%, primarily as a result of Matrix originating primarily
direct financing leases. As a percentage of revenues, depreciation on equipment
under operating leases decreased by 2.6% to 16.4% in the year ended June 30,
1996 from 19.0% in the year ended June 30, 1995.
Interest Expense. Interest expense increased to $0.8 million in the year
ended June 30, 1996 from $0.5 million in the year ended June 30, 1995, an
increase of $0.3 million, or 51.3%, as a result of increased borrowing
associated with Matrix retaining a greater number of the leases that it
originated. As a percentage of revenues, interest expense increased by 4.9% to
15.6% in the year ended June 30, 1996 from 10.7% in the year ended June 30,
1995.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $2.9 million in the year ended June 30, 1996 from $2.7
million in the year ended June 30, 1995, an increase of $0.2 million, or 7.4%,
primarily as a result of the hiring of additional personnel, principally
telesales representatives. As a percentage of revenues, selling, general and
administrative expenses increased by 1.7% to 58.7% in the year ended June 30,
1996 from 57.0% in the year ended June 30, 1995.
Income from Operations. As a result of the factors discussed above, income
from operations decreased to $0.5 million in the year ended June 30, 1996 from
$0.6 million in the year ended June 30, 1995, a decrease of $0.2 million, or
25.6%. As a percentage of revenues, income from operations decreased by 3.8% to
9.4% in the year ended June 30, 1996 from 13.2% in the year ended June 30, 1995.
52
<PAGE> 57
MERRIMAC FINANCIAL ASSOCIATES
Merrimac provides equipment financing to operating companies that are
engaged in the coin-operated, vending, amusement and coffee service businesses.
Merrimac provides direct finance leasing to the operating companies and has a
recourse agreement with the equipment vendor in the event of default by the
lessee. Merrimac retains the leases it originates for its own portfolio.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1997
--------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Finance income from direct financing leases............ $1,977 90.9% $1,930 92.8%
Other income........................................... 199 9.1 149 7.2
------ ------
Total revenues............................... 2,176 100.0 2,079 100.0
------ ------
Interest expense....................................... 683 31.4 663 31.9
Selling, general and administrative.................... 814 37.4 805 38.7
------ ------
Total expenses............................... 1,497 68.8 1,468 70.6
------ ------
Income from operations................................. $ 679 31.2% $ 611 29.4%
====== ======
</TABLE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Finance Income from Direct Financing Leases. Finance income from direct
financing leases decreased to $1.9 million in the year ended December 31, 1997
from $2.0 million in the year ended December 31, 1996, a decrease of $47,000, or
2.4%, primarily as a result of the loss of customers to a competitor that offers
leases to lessees without requiring a recourse agreement from the equipment
vendor. As a percentage of revenues, finance income from direct financing leases
increased by 1.9% to 92.8% in the year ended December 31, 1997 from 90.9% in the
year ended December 31, 1996.
Other Income. Other income, which includes late fees and administrative
fees, decreased to $0.1 million in the year ended December 31, 1997 from $0.2
million in the year ended December 31, 1996, a decrease of $50,000, or 25.1%,
primarily as a result of a decrease in administrative fees charged for servicing
the liquidation of certain lease portfolios. As a percentage of revenues, other
income decreased by 1.9% to 7.2% in the year ended December 31, 1997 from 9.1%
in the year ended December 31, 1996.
Interest Expense. Interest expense decreased by $20,000 to $0.7 million in
the year ended December 31, 1997, a decrease of 2.9%, primarily as a result of a
decrease in the average debt outstanding, and a decrease in the interest rate
and commitment fee applicable to Merrimac's credit facility. As a percentage of
revenues, interest expense increased by 0.5% to 31.9% in the year ended December
31, 1997 from 31.4% in the year ended December 31, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses remained relatively constant at $0.8 million in the years ended
December 31, 1997 and 1996. As a percentage of revenues, selling, general and
administrative expenses increased by 1.3% to 38.7% in the year ended December
31, 1997 from 37.4% in the year ended December 31, 1996, primarily as a result
of increased compensation to owner/employees, partially offset by a decrease in
the provision for lease losses.
Income from Operations. As a result of the factors discussed above, income
from operations decreased to $0.6 million in the year ended December 31, 1997
from $0.7 million in the year ended December 31, 1996, a decrease of $0.1
million, or 10.0%. As a percentage of revenues, income from operations decreased
by 1.8% to 29.4% in the year ended December 31, 1997 from 31.2% in the year
ended December 31, 1996.
53
<PAGE> 58
MUNICIPAL CAPITAL MARKETS GROUP, INC.
MCMG arranges for the financing of bonds and leases primarily for
community-based mental health/mental retardation facilities and correctional
facilities. MCMG is a registered broker-dealer and places the leases that it
arranges with institutional investors. Substantially all of MCMG's revenue is
derived from underwriting and advisory income.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1996 1997
--------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Underwriting and advisory income...... $ 782 66.7% $1,482 81.7% $3,358 74.7%
Brokerage fee income.................. -- -- -- -- 790 17.6
Management fee income................. 147 12.5 184 10.1 164 3.6
Mutual fund fee income................ -- -- 104 5.7 102 2.3
Consulting fees....................... 200 17.1 -- -- -- --
Other income.......................... 43 3.7 43 2.4 83 1.8
------ ------ ------
Total revenues................... 1,172 100.0 1,813 100.0 4,497 100.0
------ ------ ------
Commission expense.................... 809 69.0 1,186 65.4 3,077 68.4
Underwriting expenses................. 119 10.2 220 12.1 726 16.1
Management fee expenses............... 104 8.9 124 6.8 109 2.4
Selling, general and administrative... 236 20.1 215 11.9 266 5.9
------ ------ ------
Total expenses................... 1,268 108.2 1,745 96.2 4,178 92.9
------ ------ ------
Income (loss) from operations......... $ (96) (8.2)% $ 68 3.8% $ 319 7.1%
====== ====== ======
</TABLE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Underwriting and Advisory Income. Underwriting and advisory income
increased to $3.4 million in the year ended December 31, 1997 from $1.5 million
in the year ended December 31, 1996, an increase of $1.9 million, or 126.6%,
primarily as a result of transactions generated by a recently opened branch
office in Denver, Colorado and an overall increase in the volume of
transactions. As a percentage of revenues, underwriting and advisory income
decreased by 7.0% to 74.7% in the year ended December 31, 1997 from 81.7% in the
year ended December 31, 1996.
Brokerage Fee Income. Brokerage fee income increased to $0.8 million in
the year ended December 31, 1997 from zero in the year ended December 31, 1996.
MCMG commenced the business of brokerage of other financial products in the year
ended December 31, 1997. As a percentage of revenues, brokerage fee income was
17.6% in the year ended December 31, 1997.
Management Fee Income. Management fee income decreased by $20,000, or
10.9%, to $0.2 million in the year ended December 31, 1997, as a result of the
transfer of a portion of clients' investments into an investment vehicle with a
front-end fee. As a percentage of revenues, management fee income decreased by
6.5% to 3.6% in the year ended December 31, 1997 from 10.1% in the year ended
December 31, 1996.
Mutual Fund Fee Income. Mutual fund fee income was $0.1 million in the
years ended December 31, 1997 and 1996. As a percentage of revenues, mutual fund
fee income decreased by 3.4% to 2.3% in the year ended December 31, 1997 from
5.7% in the year ended December 31, 1996.
Other Income. Other income, which primarily includes reimbursement income
for expenses, increased by $40,000, or 93.0% to $0.1 million in the year ended
December 31, 1997. As a percentage of revenues, other
54
<PAGE> 59
income decreased by 0.6% to 1.8% in the year ended December 31, 1997 from 2.4%
in the year ended December 31, 1996.
Commission Expense. Commission expense increased to $3.1 million in the
year ended December 31, 1997 from $1.2 million in the year ended December 31,
1996, an increase of $1.9 million or 159.4%, primarily as a result of the
increased number of transactions. As a percentage of revenues, commission
expense increased by 3.0% to 68.4% in the year ended December 31, 1997 from
65.4% in the year ended December 31, 1996.
Underwriting Expenses. Underwriting expenses increased to $0.7 million in
the year ended December 31, 1997 from $0.2 million in the year ended December
31, 1996, an increase of $0.5 million, or 230.0%, primarily as a result of the
increased number of transactions. As a percentage of revenues, underwriting
expense increased by 4.0% to 16.1% in the year ended December 31, 1997 from
12.1% in the year ended December 31, 1996.
Management Fee Expenses. Management fee expenses, which include the cost
of marketing and managing a money market fund for social service providers in
Illinois, decreased by $15,000, or 12.1%, to $0.1 million in the year ended
December 31, 1997. As a percentage of revenue, management fee expenses decreased
by 4.4% to 2.4% in the year ended December 31,1997 from 6.8% in the year ended
December, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $0.3 million in the year ended December 31, 1997 from $0.2
million in the year ended December 31, 1996, an increase of $51,000, or 23.7%,
primarily as a result of expenses attributable to MCMG's new office in
Uniondale, New York and the increase in variable costs associated with the
increased number of transactions. As a percentage of revenues, selling, general
and administrative expenses decreased by 6.0% to 5.9% in the year ended December
31, 1997 from 11.9% in the year ended December 31, 1996.
Income from Operations. As a result of the factors discussed above, income
from operations increased to $0.3 million in the year ended December 31, 1997
from $0.1 million in the year ended December 31, 1996, an increase of $0.3
million, or 369.1%. As a percentage of revenues, income from operations
increased by 3.3% to 7.1% in the year ended December 31, 1997 from 3.8% in the
year ended December 31, 1996.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Underwriting and Advisory Income. Underwriting and advisory income
increased to $1.5 million in the year ended December 31, 1996 from $0.8 million
in the year ended December 31, 1995, an increase of $0.7 million, or 89.5%,
primarily as a result of the increased volume of transactions. As a percentage
of revenues, underwriting and advisory income increased by 15.0% to 81.7% in the
year ended December 31, 1996 from 66.7% in the year ended December 31, 1995.
Management Fee Income. Management fee income increased to $0.2 million in
the year ended December 31, 1996 from $0.1 million in the year ended December
31, 1995, an increase of $37,000, or 25.2%, primarily as a result of the
increase in the number of clients utilizing MCMG's money market mutual fund. As
a percentage of revenues, management fee income decreased by 2.4% to 10.1% in
the year ended December 31, 1996 from 12.5% in the year ended December 31, 1995.
Mutual Fund Fee Income. Mutual fund fee income increased to $0.1 million
in the year ended December 31, 1996 from zero in the year ended December 31,
1995. MCMG began setting up and overseeing 401(k) retirement plans for small
businesses during the year ended December 31, 1996. As a percentage of revenues,
mutual fund fee income was 5.7% in the year ended December 31, 1996.
Consulting Fees. Consulting fees decreased to zero in the year ended
December 31, 1995 from $0.2 million the year ended December 31, 1995, as a
result of a consulting fee received in connection with the sale of a retirement
facility in 1995. As a percentage of revenues, consulting fees was 17.1% in the
year ended December 31, 1995.
55
<PAGE> 60
Other Income. Other income was $43,000 in the years ended December 31,
1996 and 1995. As a percentage of revenues, other income decreased by 1.3% to
2.4% in the year ended December 31, 1996 from 3.7% in the year ended December
31, 1995.
Commission Expense. Commission expense increased to $1.2 million in the
year ended December 31, 1996 from $0.8 million in the year ended December 31,
1995, an increase of $0.4 million, or 46.6%, primarily as a result of the
increased number of transactions. As a percentage of revenues, commission
expense decreased by 3.6% to 65.4% in the year ended December 31, 1996 from
69.0% in the year ended December 31, 1995.
Underwriting Expenses. Underwriting expenses increased to $0.2 million in
the year ended December 31, 1996 from $0.1 million in the year ended December
31, 1995, an increase of $0.1 million, or 84.9%, primarily as a result of the
increased number of transactions. As a percentage of revenues, underwriting
expenses increased by 1.9% to 12.1% in the year ended December 31, 1996 from
10.2% in the year ended December 31, 1995.
Management Fee Expenses. Management fee expenses, which are a percentage
of management fee income, increased by $20,000, or 19.2%, to $0.1 million in the
year ended December 31, 1996, as a result of the increase in management fee
income. As a percentage of revenues, management fee expenses decreased by 2.1%
to 6.8% in the year ended December 31, 1996 from 8.9% in the year ended December
31, 1995.
Selling, General and Administrative. Selling, general and administrative
expenses decreased by $21,000, or 8.9%, to $0.2 million in the year ended
December 31, 1996, as a result of costs incurred in the year ended December 31,
1995 associated with an arbitration action filed by MCMG against another
securities broker-dealer, partially offset by contributions to a retirement plan
established by MCMG in the year ended December 31, 1996. As a percentage of
revenues, general and administrative expenses decreased by 8.2% to 11.9% in the
year ended December 31, 1996 from 20.1% in the year ended December 31, 1995.
Income (Loss) from Operations. As a result of the factors discussed above,
income from operations increased to $0.1 million in the year ended December 31,
1996 from ($0.1) million in the year ended December 31, 1995, an increase of
$0.2 million. As a percentage of revenues, income from operations increased by
12.0% to 3.8% in the year ended December 31, 1996 from (8.2%) in the year ended
December 31, 1995.
56
<PAGE> 61
THE NSJ GROUP
NSJ provides lease financing for commercial jet aircraft and jet aircraft
engines to commercial airlines and engages in the purchase and sale of aircraft
for its own account, as well as remarketing activities on behalf of airlines,
financial institutions and other leasing companies. NSJ arranges financing for
each aircraft that it purchases, and either sells the lease to investors on a
non-recourse basis or holds the lease in its portfolio. NSJ acquires aircraft
and aircraft engines for its portfolio with a combination of equity capital and
debt financing.
NSJ's revenues are derived primarily from the sale and remarketing of
aircraft and rentals of aircraft. NSJ's leases are operating leases and revenues
are recognized over the life of the lease as rentals are earned. Revenues from
NSJ's remarketing activities consist primarily of gains on the sale of aircraft
from NSJ's portfolio and also include fees and commissions earned from
remarketing on behalf of third parties. Interest income is derived from notes
receivable and investment of cash. Due in part to the substantial purchase price
of aircraft, NSJ's operating results can fluctuate significantly, based in part
on the timing of sales of aircraft and commissions on sales of aircraft.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1995 1996 1997
--------------- --------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Rental income from operating
leases............................. $1,757 19.7% $3,343 94.6% $ 7,320 42.1%
Sales of equipment................... 7,084 79.5 -- -- 9,560 55.0
Interest and other income............ 75 0.8 191 5.4 511 2.9
------ ------ -------
Total revenues.................. 8,916 100.0 3,534 100.0 17,391 100.0
------ ------ -------
Depreciation on equipment under
operating leases................... 740 8.3 1,124 31.8 1,866 10.7
Cost of equipment sold............... 6,271 70.3 -- -- 8,723 50.2
Interest expense..................... 938 10.5 1,810 51.2 3,034 17.4
Selling, general and
administrative..................... 741 8.3 1,270 35.9 3,015 17.3
------ ------ -------
Total expenses.................. 8,690 97.5 4,204 119.0 16,638 95.7
------ ------ -------
Income (loss) from operations........ $ 226 2.5% $ (670) (19.0%) $ 753 4.3%
------ ------ -------
Equity in net earnings (loss) of
affiliated companies............... (5) -- 896 -- 3,996 --
</TABLE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Rental Income from Operating Leases. Rental income from operating leases
increased to $7.3 million in the year ended December 31, 1997 from $3.3 million
in the year ended December 31, 1996, an increase of $4.0 million, or 119.0%,
primarily due to the lease of additional aircraft purchased during the fourth
quarter of 1996 and during 1997. As a percentage of revenues, rental income from
operating leases decreased by 52.5% to 42.1% in the year ended December 31, 1997
from 94.6% in the year ended December 31, 1996.
Sales of Equipment. Income from sales of equipment increased to $9.6
million in the year ended December 31, 1997 from zero in the year ended December
31, 1996, due to the sale of a Boeing 727-200 aircraft. As a percentage of
revenues, income from sales of equipment was 55.0% in the year ended December
31, 1997.
Interest and Other Income. Interest and other income increased to $0.5
million in the year ended December 31, 1997 from $0.2 million in the year ended
December 31, 1996, an increase of $0.3 million, or 167.5%, primarily as a result
of income attributable to a settlement with a lessee in December 1997, relating
to
57
<PAGE> 62
the return condition of an aircraft. As a percentage of revenues, interest and
other income decreased by 2.5% to 2.9% in the year ended December 31, 1997 from
5.4% in the year ended December 31, 1996.
Depreciation on Equipment under Operating Leases. Depreciation on
equipment under operating leases increased to $1.9 million in the year ended
December 31, 1997 from $1.1 million in the year ended December 31, 1996, an
increase of $0.7 million, or 66.0%, due to the increased number of aircraft in
NSJ's portfolio. As a percentage of revenues, depreciation on equipment under
operating leases decreased by 21.1% to 10.7% in the year ended December 31, 1997
from 31.8% in the year ended December 31, 1996.
Cost of Equipment Sold. Cost of equipment sold of $8.7 million in the year
ended December 31, 1997 relates to the purchase and sale of a Boeing 727-200 in
1997. As a percentage of revenues, cost of equipment sold amounted to 50.2% in
the year ended December 31, 1997.
Interest Expense. Interest expense increased to $3.0 million in the year
ended December 31, 1997 from $1.8 million in the year ended December 31, 1996,
an increase of $1.2 million, or 67.6% as a result of increased borrowings
associated with additional aircraft purchased in the fourth quarter of 1996 and
in 1997. As a percentage of revenues, interest expense decreased by 33.8% to
17.4% in the year ended December 31, 1997 from 51.2% in the year ended December
31, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses, including commission expenses, all of which were paid to Cauff
Lippman, increased to $3.0 million in the year ended December 31, 1997 from $1.3
million in the year ended December 31, 1996, an increase of $1.7 million, or
137.4%, primarily as a result of expenses associated with NSJ's increased volume
of operating leases and buying and selling of aircraft with Cauff Lippman,
partially offset by a reduction in compensation to stockholder/employees. As a
percentage of revenues, selling, general and administrative expenses decreased
by 18.6% to 17.3% in the year ended December 31, 1997 from 35.9% in the year
ended December 31, 1996.
Income (Loss) from Operations. As a result of the factors discussed above,
income from operations increased to $0.8 million in the year ended December 31,
1997 from ($0.7) million in the year ended December 31, 1996, an increase of
$1.4 million. As a percentage of revenues, operating income increased by 23.3%
to 4.3% in the year ended December 31, 1997 from (19.0)% in the year ended
December 31, 1996.
Equity in Net Earnings (Loss) of Affiliated Companies. Equity in net
earnings of affiliated companies increased to $4.0 million in the year ended
December 31, 1997 from $0.9 million in the year ended December 31, 1996, an
increase of $3.1 million, or 346.0%, as a result of sales of ten aircraft by
affiliated companies in the year ended December 31, 1997, compared to three
aircraft in the year ended December 31, 1996.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Rental Income from Operating Leases. Rental income from operating leases
increased to $3.3 million in the year ended December 31, 1996 from $1.8 million
in the year ended December 31, 1995, an increase of $1.6 million, or 90.3%,
primarily due to the lease of additional aircraft purchased during the fourth
quarter of 1995 and during 1996. As a percentage of revenues, rental income from
operating leases increased by 74.9% to 94.6% in the year ended December 31, 1996
from 19.7% in the year ended December 31, 1995.
Sales of Equipment. Income from sales of equipment decreased to zero in
the year ended December 31, 1996 from $7.1 million in the year ended December
31, 1995. As a percentage of revenues, income from sales of equipment was 79.5%
in the year ended December 31, 1995.
Interest and Other Income. Interest income increased to $0.2 million in
the year ended December 31, 1996 from $0.1 million in the year ended December
31, 1995, an increase of $0.1 million, or 154.7%. The increase was primarily
attributable to income from a single commission in 1996. As a percentage of
revenues, interest and other income increased by 4.6% to 5.4% in the year ended
December 31, 1996 from 0.8% in the year ended December 31, 1995.
58
<PAGE> 63
Depreciation on Equipment under Operating Leases. Depreciation on
equipment under operating leases increased to $1.1 million in the year ended
December 31, 1996 from $0.7 million in the year ended December 31, 1995, an
increase of $0.4 million, or 51.9%, due to the increased number of aircraft in
NSJ's portfolio. As a percentage of revenues, depreciation on equipment under
operating leases increased by 23.5% to 31.8% in the year ended December 31, 1996
from 8.3% in the year ended December 31, 1995.
Cost of Equipment Sold. Cost of equipment sold decreased to zero in the
year ended December 31, 1996 from $6.3 million in the year ended December 31,
1995, due to sales of aircraft in the year ended December 31, 1995 and no sales
of aircraft in the year ended December 31, 1996. As a percentage of revenues,
cost of equipment sold amounted to 70.3% in the year ended December 31, 1995.
Interest Expense. Interest expense increased to $1.8 million in the year
ended December 31, 1996 from $0.9 million in the year ended December 31, 1995,
an increase of $0.9 million, or 93.0% as a result of increased borrowings
associated with additional aircraft purchased in the fourth quarter of 1995 and
in 1996. As a percentage of revenues, interest expense increased by 40.7% to
51.2% in the year ended December 31, 1996 from 10.5% in the year ended December
31, 1995.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $1.3 million in the year ended December 31, 1996 from $0.7
million in the year ended December 31, 1995, an increase of $0.5 million, or
71.4%, primarily as a result of expenses associated with a Boeing 737-200
aircraft purchased by NSJ which required a high level of marketing and technical
support. As a percentage of revenues, selling, general and administrative
expenses increased by 27.6% to 35.9% in the year ended December 31, 1996 from
8.3% in the year ended December 31, 1995.
Income (Loss) from Operations. As a result of the factors discussed above,
income (loss) from operations decreased to ($0.7) million in the year ended
December 31, 1996 from $0.2 million in the year ended December 31, 1995, a
decrease of $0.9 million, or 396.5%. As a percentage of revenues, income (loss)
from operations decreased by 21.5% to (19.0%) in the year ended December 31,
1996 from 2.5% in the year ended December 31, 1995.
Equity in Net Earnings (Loss) of Affiliated Companies. Equity in net
earnings (loss) of affiliated companies increased to $0.9 million in the year
ended December 31, 1996 from ($5,000) in the year ended December 31, 1995 due to
the affiliated companies having no leasing or sales activities in the year ended
December 31, 1995.
59
<PAGE> 64
PORTFOLIO FINANCIAL SERVICING COMPANY, L.P.
PFSC provides servicing and processing services to leasing companies,
including lease accounting for both financial reporting and federal income tax
purposes, lien searches, UCC filings, asset tracking, insurance tracking,
preparation of sales, use and property tax returns, invoicing and collections.
PFSC derives its revenues from servicing fees, including set-up, monthly and
conversion fees.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1997
----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Servicing fees..................................... $ 1,322 100.0% $ 1,480 100.0%
------- -------
Total revenues................................ 1,322 100.0 1,480 100.0
------- -------
Selling, general and administrative................ 3,356 253.9 3,356 226.8
------- -------
Total expenses................................ 3,356 253.9 3,356 226.8
------- -------
Loss from operations............................... $(2,034) (153.9)% $(1,876) (126.8)%
======= =======
</TABLE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Servicing Fees. Servicing fees increased to $1.5 million in the year ended
December 31, 1997 from $1.3 million in the year ended December 31, 1996, an
increase of $0.2 million or 12.0% as a result of an increase in the number of
leases serviced.
Selling, General and Administrative. Selling, general, and administrative
expenses were $3.4 million in the years ended December 31, 1997 and 1996.
Increased expenses in the year ended December 31, 1997 include hiring additional
information technology, customer service and sales personnel associated with
broadening the services available to clients, and were offset by a decrease in
depreciation expense due to write downs of obsolete computer equipment in the
year ended December 31, 1996. As a percentage of revenues, selling, general, and
administrative expenses decreased by 27.1% to 226.8% in the year ended December
31, 1997 from 253.9% in the year ended December 31, 1996.
Loss from Operations. Loss from operations, which was primarily the result
of costs incurred in connection with updating and broadening PFSC's capabilities
to provide lease and loan portfolio servicing to third parties, decreased to
($1.9) million in the year ended December 31, 1997 from ($2.0) million in the
year ended December 31, 1996, a decrease of $0.2 million or 7.8%. As a
percentage of revenues, loss from operations decreased by 27.1% to (126.8%) in
the year ended December 31, 1997 from (153.9%) in the year ended December 31,
1996.
60
<PAGE> 65
VARILEASE CORPORATION
Varilease provides lease financing for high-technology equipment, primarily
computers, workstations/desktops, servers and telecommunications equipment, to
Fortune 1000 companies and other businesses throughout the United States. Upon
origination of a lease, Varilease either sells the lease to a third party on a
non-recourse basis or retains the lease for its portfolio.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, THREE MONTHS ENDED DECEMBER 31,
------------------------------------------------------- ----------------------------------
1995 1996 1997 1996 1997
---------------- ---------------- --------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Finance income from
direct financing
leases............... $ 1,716 13.8% $ 3,759 21.9% $ 6,572 16.8% $1,469 23.8% $ 1,653 16.0%
Rental income from
operating leases..... 4,365 35.1 5,374 31.4 10,240 26.2 2,168 35.2 3,035 29.3
Gain on sale of
leases............... 1,478 11.9 2,054 12.0 4,953 12.7 647 10.5 2,210 21.3
Sales of equipment..... 3,854 31.0 3,890 22.7 12,197 31.3 1,042 16.9 1,147 11.1
Remarketing income..... 832 6.7 1,967 11.5 4,913 12.6 793 12.9 2,269 21.9
Other income........... 177 1.4 82 0.5 138 0.4 42 0.7 47 0.5
------- ------- ------- ------ -------
Total revenues..... 12,422 100.0 17,126 100.0 39,013 100.0 6,161 100.0 10,361 100.0
------- ------- ------- ------ -------
Depreciation on
equipment under
operating leases..... 3,319 26.7 3,904 22.8 7,915 20.3 1,130 18.3 2,338 22.6
Cost of equipment
sold................. 2,923 23.5 3,719 21.7 10,091 25.9 716 11.6 790 7.6
Interest expense....... 2,231 18.0 3,524 20.6 6,297 16.1 1,185 19.2 1,811 17.5
Selling, general and
administrative....... 3,575 28.8 5,712 33.4 8,449 21.7 1,960 31.8 1,476 14.2
------- ------- ------- ------ -------
Total expenses..... 12,048 97.0 16,859 98.4 32,752 84.0 4,991 81.0 6,415 61.9
------- ------- ------- ------ -------
Income from
operations........... $ 374 3.0% $ 267 1.6% $ 6,261 16.0% $1,170 19.0% $ 3,946 38.1%
======= ======= ======= ====== =======
</TABLE>
Three Months Ended December 31, 1997 Compared to Three Months Ended December 31,
1996
Finance Income from Direct Financing Leases. Finance income from direct
financing leases increased to $1.7 million in the three months ended December
31, 1997 from $1.5 million in the three months ended December 31, 1996, an
increase of $0.2 million, or 12.5%, primarily as a result of Varilease retaining
a greater portion of leases for its own account. As a percentage of revenues,
finance income from direct financing leases decreased by 7.8% to 16.0% in the
three months ended December 31, 1997 from 23.8% in the three months ended
December 31, 1996.
Rental Income from Operating Leases. Rental income from operating leases
increased to $3.0 million in the three months ended December 31, 1997 from $2.2
million in the three months ended December 31, 1996, an increase of $0.9
million, or 40.0%, primarily as a result of increased lease originations. As a
percentage of revenues, income from operating leases decreased by 5.9% to 29.3%
in the three months ended December 31, 1997 from 35.2% in the three months ended
December 31, 1996.
Gain on Sale of Leases. Gain on sale of leases increased to $2.2 million
in the three months ended December 31, 1997 from $0.6 million in the three
months ended December 31, 1996, an increase of $1.6 million, or 241.6%,
primarily as a result of increased originations. As a percentage of revenues,
gain on sale of leases increased by 10.8% to 21.3% in the three months ended
December 31, 1997 from 10.5% in the three months ended December 31, 1996.
Sales of Equipment. Income from sales of equipment increased to $1.1
million in the three months ended December 31, 1997 from $1.0 million in the
three months ended December 31, 1996, an increase of $0.1 million,
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<PAGE> 66
or 10.1%. As a percentage of revenues, income from sales of equipment decreased
by 5.8% to 11.1% in the three months ended December 31, 1997 from 16.9% in the
three months ended December 31, 1996.
Remarketing Income. Remarketing income increased to $2.3 million in the
three months ended December 31, 1997 from $0.8 million in the three months ended
December 31, 1996, an increase of $1.5 million, or 186.1%, primarily as a result
of proceeds associated with the remarketing agreement awarded to Varilease in
connection with its acquisition of its St. Louis, Missouri operations in the
fourth quarter of fiscal 1996. As a percentage of revenues, remarketing income
increased 9% to 21.9% in the three months ended December 31, 1997 from 12.9% in
the three months ended December 31, 1996.
Other Income. Other income increased by $5,000, or 11.9% to $47,000 for
the three months ended December 31, 1997 from $42,000 in the three months ended
December 31, 1996. As a percentage of revenues, other income decreased by 0.2%
to 0.5% in the three months ended December 31, 1997 from 0.7% in the three
months ended December 31, 1996.
Depreciation on Equipment under Operating Leases. Depreciation on
equipment under operating leases increased to $2.3 million in the three months
ended December 31, 1997 from $1.1 million in the three months ended December 31,
1996, an increase of $1.2 million, or 106.9%, as a result of a higher operating
lease average investment balance. As a percentage of revenues, depreciation on
equipment under operating leases increased by 4.3% to 22.6% in the three months
ended December 31, 1997 from 18.3% in the three months ended December 31, 1996.
Cost of Equipment Sold. Cost of equipment sold increased to $0.8 million
in the three months ended December 31, 1997 from $0.7 million in the three
months ended December 31, 1996, an increase of $0.1 million, or 10.3%. As a
percentage of revenues, cost of equipment sold decreased by 4.0% to 7.6% in the
three months ended December 31, 1997 from 11.6% in the three months ended
December 31, 1996.
Interest Expense. Interest expense increased to $1.8 million in the three
months ended December 31, 1997 from $1.2 million in the three months ended
December 31, 1996, an increase of $0.6 million, or 52.8%, as a result of higher
average borrowings required to fund additional investments in equipment under
lease. As a percentage of revenues, interest expense decreased by 1.7% to 17.5%
in the three months ended December 31, 1997 from 19.2% in the three months ended
December 31, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses decreased to $1.5 million in the three months ended December 31, 1997
from $2.0 million in the three months ended December 31, 1996, a decrease of
$0.5 million, or 24.7%, primarily as a result of the termination of certain
highly compensated employees at the remarketing facility in the second quarter
of fiscal 1997, as well as increased lease origination activity. As a percentage
of revenues, selling, general and administrative expenses decreased by 17.6% to
14.2% in the three months ended December 31, 1997 from 31.8% in the three months
ended December 31, 1996.
Income from Operations. As a result of the factors discussed above, income
from operations increased to $3.9 million in the three months ended December 31,
1997 from $1.2 million in the three months ended December 31, 1996, an increase
of $2.8 million, or 237.3%. As a percentage of revenues, income from operations
increased by 19.1% to 38.1% in the three months ended December 31, 1997 from
19.0% in the three months ended December 31, 1996.
Year Ended September 30, 1997 Compared to Year Ended September 30, 1996
Finance Income from Direct Financing Leases. Finance income from direct
financing leases increased to $6.6 million in the year ended September 30, 1997
from $3.8 million in the year ended September 30, 1996, an increase of $2.8
million, or 74.8%, as a result of increased originations, primarily to existing
customers, as well as to new customers. As a percentage of revenues, finance
income from direct financing leases decreased by 5.1% to 16.8% in the year ended
September 30, 1997 from 21.9% in the year ended September 30, 1996.
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<PAGE> 67
Rental Income from Operating Leases. Rental income from operating leases
increased to $10.2 million in the year ended September 30, 1997 from $5.4
million in the year ended September 30, 1996, an increase of $4.9 million, or
90.5%, primarily as a result of originations generated by Varilease's St. Louis,
Missouri location, which was acquired during the fourth quarter of fiscal 1996.
As a percentage of revenues, rental income from operating leases decreased by
5.2% to 26.2% in the year ended September 30, 1997 from 31.4% in the year ended
September 30, 1996.
Gain on Sale of Leases. Gain on sale of leases increased to $5.0 million
in the year ended September 30, 1997 from $2.1 million in the year ended
September 30, 1996, an increase of $2.9 million, or 141.1%, primarily as a
result of increased sales of leases originated from one customer and an overall
increase in the volume of leases sold. As a percentage of revenues, gain on sale
of leases increased by 0.7% to 12.7% in the year ended September 30, 1997 from
12% in the year ended September 30, 1996.
Sales of Equipment. Income from sales of equipment increased to $12.2
million in the year ended September 30, 1997 from $3.9 million in the year ended
September 30, 1996, an increase of $8.3 million, or 213.5%, primarily as a
result of increased sales of computer equipment. As a percentage of revenues,
income from sales of equipment increased by 8.6% to 31.3% in the year ended
September 30, 1997 from 22.7% in the year ended September 30, 1996.
Remarketing Income. Remarketing income increased to $4.9 million in the
year ended September 30, 1997 from $2.0 million in the year ended September 30,
1996, an increase of $2.9 million, or 149.8%, primarily as a result of proceeds
associated with the remarketing agreement awarded to Varilease in connection
with its acquisition of the St. Louis, Missouri operations in the fourth quarter
of fiscal 1996. As a percentage of revenues, remarketing income increased by
1.1% to 12.6% in the year ended September 30, 1997 from 11.5% in the year ended
September 30, 1996.
Other Income. Other income increased by $56,000 or 68.3% to $0.1 million
in the year ended September 30, 1997. As a percentage of revenues, other income
decreased by 0.1% to 0.4% in the year ended September 30, 1997 from 0.5% in the
year ended September 30, 1996.
Depreciation on Equipment under Operating Leases. Depreciation on
equipment under operating leases increased to $7.9 million in the year ended
September 30, 1997 from $3.9 million in the year ended September 30, 1996, an
increase of $4.0 million, or 102.7%, as a result of a higher operating lease
average investment balance, primarily attributable to operating leases
originated by Varilease's St. Louis, Missouri location. As a percentage of
revenues, depreciation on equipment under operating leases decreased by 2.5% to
20.3% in the year ended September 30, 1997 from 22.8% in the year ended
September 30, 1996.
Cost of Equipment Sold. Cost of equipment sold increased to $10.1 million
in the year ended September 30, 1997 from $3.7 million in the year ended
September 30, 1996, an increase of $6.4 million, or 171.3%. As a percentage of
revenues, cost of equipment sold increased by 4.2% to 25.9% in the year ended
September 30, 1997 from 21.7% in the year ended September 30, 1996.
Interest Expense. Interest expense increased to $6.3 million in the year
ended September 30, 1997 from $3.5 million in the year ended September 30, 1996,
an increase of $2.8 million, or 78.7%, as a result of higher average borrowings
required to fund additional investments in equipment under lease. As a
percentage of revenues, interest expense decreased by 4.5% to 16.1% in the year
ended September 30, 1997 from 20.6% in the year ended September 30, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $8.4 million in the year ended September 30, 1997 from
$5.7 million in the year ended September 30, 1996, an increase of $2.7 million,
or 47.9%, as a result of increased lease origination activity and operating
expenses, including additional personnel costs, associated with the St. Louis,
Missouri location. As a percentage of revenues, selling, general and
administrative expenses decreased by 11.7% to 21.7% in the year ended September
30, 1997 from 33.4% in the year ended September 30, 1996.
Income from Operations. As a result of the factors discussed above, income
from operations increased to $6.3 million in the year ended September 30, 1997
from $0.3 million in the year ended September 30, 1996, an
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increase of $6.0 million, or 2,244.9%. As a percentage of revenues, income from
operations increased by 14.4% to 16.0% in the year ended September 30, 1997 from
1.6% in the year ended September 30, 1996.
Year Ended September 30, 1996 Compared to Year Ended September 30, 1995
Finance Income from Direct Financing Leases. Finance income from direct
financing leases increased to $3.8 million in the year ended September 30, 1996
from $1.7 million in the year ended September 30, 1995, an increase of $2.0
million, or 119.1%, as a result of increased originations, primarily to existing
customers. As a percentage of revenues, finance income from direct financing
leases increased by 8.1% to 21.9% in the year ended September 30, 1996 from
13.8% in the year ended September 30, 1995.
Rental Income from Operating Leases. Rental income from operating leases
increased to $5.4 million in the year ended September 30, 1996 from $4.4 million
in the year ended September 30, 1995, an increase of $1.0 million, or 23.1%, as
a result of increased lease originations. As a percentage of revenues, rental
income from operating leases decreased by 3.7% to 31.4% in the year ended
September 30, 1996 from 35.1% in the year ended September 30, 1995.
Gain on Sale of Leases. Gain on sale of leases increased to $2.1 million
in the year ended September 30, 1996 from $1.5 million in the year ended
September 30, 1995, an increase of $0.6 million, or 39.0%, primarily as a result
of increased sales of leases originated from one customer and an overall
increase in the volume of leases sold. As a percentage of revenues, gain on sale
of leases increased by 0.1% to 12.0% in the year ended September 30, 1996 from
11.9% in the year ended September 30, 1995.
Sales of Equipment. Income from sales of equipment were $3.9 million in
the years ended September 30, 1996 and 1995. As a percentage of revenues, sales
of equipment decreased by 8.3% to 22.7% in the year ended September 30, 1996
from 31.0% in the year ended September 30, 1995.
Remarketing Income. Remarketing income increased to $2.0 million in the
year ended September 30, 1996 from $0.8 million in the year ended September 30,
1995, an increase of $1.1 million, or 136.4%, primarily as a result of
Varilease's acquisition, in the first quarter of fiscal 1996 of an equipment
refurbishing and remarketing facility. As a percentage of revenues, remarketing
income increased by 4.8% to 11.5% in the year ended September 30, 1996 from 6.7%
in the year ended September 30, 1995.
Other Income. Other income decreased to $0.1 million in the year ended
September 30, 1996 from $0.2 million in the year ended September 30, 1995, a
decrease of $0.1 million, or 53.7%. As a percentage of revenues, other income
decreased by 0.9% to 0.5% in the year ended September 30, 1996 from 1.4% in the
year ended September 30, 1995.
Depreciation on Equipment under Operating Leases. Depreciation on
equipment under operating leases increased to $3.9 million in the year ended
September 30, 1996 from $3.3 million in the year ended September 30, 1995, an
increase of $0.6 million, or 17.6%, primarily as a result of increased lease
originations. As a percentage of revenues, depreciation on equipment under
operating leases decreased by 3.9% to 22.8% in the year ended September 30, 1996
from 26.7% in the year ended September 30, 1995.
Cost of Equipment Sold. Cost of equipment sold increased to $3.7 million
in the year ended September 30, 1996 from $2.9 million in the year ended
September 30, 1995, an increase of $0.8 million, or 27.2%. As a percentage of
revenues, cost of equipment sold decreased by 1.8% to 21.7% in the year ended
September 30, 1996 from 23.5% in the year ended September 30, 1995.
Interest Expense. Interest expense increased to $3.5 million in the year
ended September 30, 1996 from $2.2 million in the year ended September 30, 1995,
an increase of $1.3 million, or 58.0%, as a result of higher average borrowings
required to fund additional investments in equipment under lease. As a
percentage of revenues, interest expense increased by 2.6% to 20.6% in the year
ended September 30, 1996 from 18.0% in the year ended September 30, 1995.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $5.7 million in the year ended September 30, 1996 from
$3.6 million in the year ended September 30, 1995, an increase of $2.1 million,
or 59.8%, as a result of increased lease origination activity and operating
expenses, including
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additional personnel costs associated with the remarketing facility acquired in
the first quarter of fiscal 1996. As a percentage of revenues, selling, general
and administrative expenses increased by 4.6% to 33.4% in the year ended
September 30, 1996 from 28.8% in the year ended September 30, 1995.
Income from Operations. As a result of the factors discussed above, income
from operations decreased to $0.3 million in the year ended September 30, 1996
from $0.4 million in the year ended September 30, 1995, a decrease of $0.1
million, or 28.6%. As a percentage of revenues, income from operations decreased
by 1.4% to 1.6% in the year ended September 30, 1996 from 3.0% in the year ended
September 30, 1995.
THE WALDEN ASSET GROUP, INC.
Walden provides equipment lease financing for a variety of equipment,
including communications, computer and manufacturing equipment, to Fortune 500
and other businesses throughout the United States. Lease transactions are either
held in Walden's portfolio or sold, on a non-recourse basis.
Income generated by leasing activities is comprised of operating lease
revenues and interest income on direct financing leases. Remarketing income
represents fees charged by Walden under agreements with third parties to market
their equipment for re-lease or sale at the end of a lease term. Walden
depreciates equipment on operating leases on a straight-line basis over a
five-year period. Walden finances its lease transactions primarily through
non-recourse debt agreements with several lending institutions.
RESULTS OF OPERATIONS
The following table sets forth selected financial data and data as a
percentage of revenues for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1996 1997
--------------- --------------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Finance income from direct financing
leases.............................. $3,262 62.4% $4,234 55.9% $6,575 63.6%
Rental income from operating leases... 314 6.0 316 4.2 1,543 14.9
Sales of equipment.................... 74 1.4 1,089 14.4 1,046 10.1
Gain on sale of leases................ 1,502 28.7 1,470 19.4 573 5.5
Remarketing income.................... 73 1.4 470 6.2 602 5.8
------ ------ ------
Total revenues.............. 5,225 100.0 7,579 100.0 10,339 100.0
------ ------ ------
Depreciation on equipment under
operating leases.................... 180 3.4 243 3.2 683 6.6
Cost of equipment sold................ -- -- 899 11.9 389 3.8
Interest expense...................... 2,124 40.7 3,110 41.0 3,868 37.4
Selling, general and administrative... 1,790 34.3 2,384 31.5 3,128 30.3
------ ------ ------
Total expenses.............. 4,094 78.4 6,636 87.6 8,068 78.0
------ ------ ------
Income from operations................ $1,131 21.6% $ 943 12.4% $2,271 22.0%
====== ====== ======
</TABLE>
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Finance Income from Direct Financing Leases. Finance income from direct
financing leases increased to $6.6 million in the year ended December 31, 1997
from $4.2 million in the year ended December 31, 1996, an increase of $2.3
million, or 55.3%, primarily as a result of increased originations and of Walden
retaining for its own account a greater portion of the leases that it
originated. As a percentage of revenues, finance income from direct financing
leases increased by 7.7% to 63.6% in the year ended December 31, 1997 from 55.9%
in the year ended December 31, 1996.
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Rental Income from Operating Leases. Rental income from operating leases
increased to $1.5 million in the year ended December 31, 1997 from $0.3 million
in the year ended December 31, 1996, an increase of $1.2 million, or 388.3%,
primarily as a result of increased originations. As a percentage of revenues,
rental income from operating leases increased by 10.7% to 14.9% in the year
ended December 31, 1997 from 4.2% in the year ended December 31, 1996.
Sales of Equipment. Income from sales of equipment decreased to $1.0
million in the year ended December 31, 1997 from $1.1 million in the year ended
December 31, 1996, a decrease of $43,000, or 3.9%. As a percentage of revenues,
income from sales of equipment decreased by 4.3% to 10.1% in the year ended
December 31, 1997 from 14.4% in the year ended December 31, 1996.
Gain on Sale of Leases. Gain on sale of leases decreased to $0.6 million
in the year ended December 31, 1997 from $1.5 million in the year ended December
31, 1996, a decrease of $0.9 million or 61.0%, primarily as a result of Walden
retaining a greater portion of leases for its own account. As a percentage of
revenues, gain on sale of leases decreased by 13.9% to 5.5% in the year ended
December 31, 1997 from 19.4% in the year ended December 31, 1996.
Remarketing Income. Remarketing income increased to $0.6 million in the
year ended December 31, 1997 from $0.5 million in the year ended December 31,
1996, an increase of $0.1 million, or 28.1%, primarily as a result of an
increase in fees associated with remarketing equipment on behalf of third
parties. As a percentage of revenues, remarketing income decreased by 0.4% to
5.8% in the year ended December 31, 1997 from 6.2% in the year ended December
31, 1996.
Depreciation on Equipment under Operating Leases. Depreciation on
equipment under operating leases increased to $0.7 million in the year ended
December 31, 1997 from $0.2 million in the year ended December 31, 1996, an
increase of $0.4 million, or 181.1%, as a result of increased purchases of
equipment due to increased lease originations. As a percentage of revenues,
depreciation on equipment under operating leases increased by 3.4% to 6.6% in
the year ended December 31, 1997 from 3.2% in the year ended December 31, 1996.
Cost of Equipment Sold. Cost of equipment sold decreased to $0.4 million
in the year ended December 31, 1997 from $0.9 million in the year ended December
31, 1996, a decrease of $0.5 million, or 56.7%. As a percentage of revenues,
cost of equipment sold decreased by 8.1% to 3.8% in the year ended December 31,
1997 from 11.9% in the year ended December 31, 1996.
Interest Expense. Interest expense increased to $3.9 million in the year
ended December 31, 1997 from $3.1 million in the year ended December 31, 1996,
an increase of $0.8 million, or 24.4%, primarily as a result of the incurrence
of increased debt to finance increased lease originations. As a percentage of
revenues, interest expense decreased by 3.6% to 37.4% in the year ended December
31, 1997 from 41.0% in the year ended December 31, 1996.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $3.1 million in the year ended December 31, 1997 from $2.4
million in the year ended December 31, 1996, an increase of $0.7 million, or
31.2%, primarily as a result of increased rent due to the relocation and
expansion of Walden's headquarters and increased compensation to
stockholders/employees. As a percentage of revenues, selling, general and
administrative expenses decreased by 1.2% to 30.3% in the year ended December
31, 1997 from 31.5% in the year ended December 31, 1996.
Income from Operations. As a result of the factors discussed above, income
from operations increased to $2.3 million in the year ended December 31, 1997
from $0.9 million in the year ended December 31, 1996, an increase of $1.3
million, or 140.8%. As a percentage of revenues, income from operations
increased by 9.6% to 22.0% in the year ended December 31, 1997 from 12.4% in the
year ended December 31, 1996.
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Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Finance Income from Direct Financing Leases. Finance income from direct
financing leases increased to $4.2 million in the year ended December 31, 1996
from $3.3 million in the year ended December 31, 1995, an increase of $1.0
million, or 29.8%, primarily as a result of Walden retaining for its own account
a greater portion of the leases that it originated. As a percentage of revenues,
finance income from direct financing leases decreased by 6.5% to 55.9% in the
year ended December 31, 1996 from 62.4% in the year ended December 31, 1995.
Rental Income from Operating Leases. Rental income from operating leases
increased by $2,000, or 0.6% to $0.3 million in the year ended December 31,
1996. As a percentage of revenues, rental income from operating leases decreased
by 1.8% to 4.2% in the year ended December 31, 1996 from 6.0% in the year ended
December 31, 1995.
Sales of Equipment. Income from sales of equipment increased to $1.1
million in the year ended December 31, 1996 from $0.1 million in the year ended
December 31, 1995, an increase of $1.0 million, or 1,371.6%, primarily as a
result of the increase in sales of equipment at lease maturity associated with
the increase in Walden's portfolio. As a percentage of revenues, income from
sales of equipment increased by 13.0% to 14.4% in the year ended December 31,
1996 from 1.4% in the year ended December 31, 1995.
Gain on Sale of Leases. Gain on sale of leases decreased by $32,000, or
2.1%, to $1.5 million in the year ended December 31, 1996, primarily as a result
of Walden retaining a greater portion of leases for its own account. As a
percentage of revenues, gain on sale of leases decreased by 9.3% to 19.4% in the
year ended December 31, 1996 from 28.7% in the year ended December 31, 1995.
Remarketing Income. Remarketing income increased to $0.5 million in the
year ended December 31, 1996 from $0.1 million in the year ended December 31,
1995, an increase of $0.4 million, or 543.8%, primarily as a result of an
increase in fees associated with remarketing equipment on behalf of third
parties. As a percentage of revenues, remarketing income increased by 4.8% to
6.2% in the year ended December 31, 1996 from 1.4% in the year ended December
31, 1995.
Depreciation on Equipment under Operating Leases. Depreciation on
equipment under operating leases increased by $0.1 million to $0.2 million in
the year ended December 31, 1996, an increase of 35.0%, as a result of increased
purchases of equipment due to increased originations. As a percentage of
revenues, depreciation on equipment under operating leases decreased by 0.2% to
3.2% in the year ended December 31, 1996 from 3.4% in the year ended December
31, 1995.
Cost of Equipment Sold. Cost of equipment sold increased to $0.9 million
in the year ended December 31, 1996 from zero in the year ended December 31,
1995, as a result of the increase in sales of equipment and principally as a
result of the early termination of a lease and the sale of the underlying
equipment in 1996. As a percentage of revenues, cost of equipment sold was 11.9%
in the year ended December 31, 1996.
Interest Expense. Interest expense increased to $3.1 million in the year
ended December 31, 1996 from $2.1 million in the year ended December 31, 1995,
an increase of $1.0 million, or 46.4%, primarily as a result of the incurrence
of increased debt to finance increased lease originations. As a percentage of
revenues, interest expense increased by 0.3% to 41.0% in the year ended December
31, 1996 from 40.7% in the year ended December 31, 1995.
Selling, General and Administrative. Selling, general and administrative
expenses increased to $2.4 million in the year ended December 31, 1996 from $1.8
million in the year ended December 31, 1995, an increase of $0.6 million, or
33.2%, primarily as a result in increases in salaries to stockholders/employees.
As a percentage of revenues, selling, general and administrative expenses
decreased by 2.8% to 31.5% in the year ended December 31, 1996 from 34.3% in the
year ended December 31, 1995.
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Income from Operations. As a result of the factors discussed above, income
from operations decreased to $0.9 million in the year ended December 31, 1996
from $1.1 million in the year ended December 31, 1995, a decrease of $0.2
million, or 16.6%. As a percentage of revenues, income from operations decreased
by 9.2% to 12.4% in the year ended December 31, 1996 from 21.6% in the year
ended December 31, 1995.
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BUSINESS
OVERVIEW
UniCapital was founded in October 1997 to create a national consolidator
and operator of equipment leasing and specialty finance businesses serving the
commercial market. Upon consummation of the Mergers, the Company, through the
Founding Companies, will originate, acquire, sell and service equipment leases
and arrange structured financings in the computer and telecommunications
equipment, large ticket and structured finance, middle market and small ticket
areas of the equipment leasing industry. In addition, one of the Founding
Companies will provide lease administration and processing services for certain
of the leases originated by the Founding Companies, as well as for any
securitizations undertaken by the Company. The Founding Companies' leases and
structured financing arrangements cover a broad range of equipment, including
aircraft, computer and telecommunications equipment, construction and
manufacturing equipment, office equipment, trucks, printing equipment, car
washes and petroleum retail equipment and vending machines. The Company will
fund the acquisition or origination of its leases through warehouse credit
facilities or through recourse or non-recourse financing and will retain the
leases for its own account or sell the leases to third parties. The Company
intends to sell certain of its lease receivables in the public and private
markets through a securitization program. For the year ended December 31, 1997,
the Company had pro forma combined direct financing and sales-type lease
originations of approximately $415.0 million, pro forma combined income from
operations of $38.6 million and pro forma combined net income before
extraordinary item of $22.9 million.
The Company's senior management team collectively has more than 70 years of
experience in the acquisition and integration of businesses, lease financing,
securitizations and other structured finance transactions. Robert New, the
Company's co-founder, Chairman and Chief Executive Officer, previously served as
an operating company president of and an Acquisition Consultant to U.S. Office
Products Company where he participated in over 40 acquisitions. Theodore J.
Rogenski, the Company's Chief Operating Officer, has served as a senior
executive with three national leasing companies, including Chief Operating
Officer of LINC Anthem Corporation and its successor, Newcourt LINC Financial
Inc., and Wells Fargo Leasing Corporation, where he served for ten years as the
President and Chief Executive Officer. Bruce E. Kropschot, the Company's Vice
Chairman -- Mergers and Acquisitions, founded and operated a private mergers and
acquisitions advisory firm which has arranged the sale of over 100 equipment
leasing and specialty finance businesses. Steven E. Hirsch, the Company's
Executive Vice President -- Structured Finance, was the Head of the Leasing
Products Group at Morgan Stanley & Co. Incorporated where he was involved in
arranging over $30 billion of transactions in structured lease financings,
advising on mergers and acquisitions of leasing companies and securitizations.
INDUSTRY OVERVIEW
The equipment leasing and financing industry in the United States has grown
consistently during the last decade and includes a wide range of entities that
provide funding for the purchase or use of equipment. The equipment leasing
industry in the United States is a significant factor in financing capital
expenditures of businesses. The ELA projects that $183 billion of $593 billion
invested in equipment in 1998 will be financed by means of leasing. According to
ELA estimates, from 1996 to 1997, equipment placed on lease grew by
approximately $10 billion from $170 billion to an estimated $180 billion. The
1996 investment in equipment placed on lease represents an increase of
approximately 100% from comparable 1986 data. The ELA estimates that 80% of all
U.S. businesses currently use leasing or financing to acquire capital assets.
The Company believes that leasing helps businesses to more efficiently acquire
capital equipment, receive favorable and tax and accounting treatment and avoid
or mitigate the perceived risks of equipment ownership including obsolescence.
The Company believes the equipment leasing industry is a growing business
in part due to (i) the consolidation of the banking industry, which has
eliminated many of the smaller community banks that traditionally provided
equipment financing for small to mid-size businesses, (ii) stricter lending
requirements imposed by commercial banks, (iii) a trend toward rapid credit
approvals at the point of sale made possible by improved technology, and (iv)
the adoption of accounting pronouncements concerning the accounting treatment of
transactions with captive finance company subsidiaries, which has caused a
number of manufacturers to eliminate their finance companies, resulting in an
increased demand for independent financing. According to the
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ELA, two primary factors contributing to the favorable funding environment
experienced by the commercial leasing industry are a better understanding of the
leasing business by bank regulators and a growing understanding of the leasing
industry by the investment community and the rating agencies.
As a result of the operating efficiencies made possible by advances in
technology and access to the asset-backed securities markets, the Company
believes the larger, better capitalized participants in the equipment leasing
market will have opportunities to consolidate a portion of the market. The
Company believes this consolidation will be driven by: (i) the highly fragmented
nature of the equipment leasing industry; (ii) the need for reductions in the
cost of funds to remain competitive, which will require market participants to
access capital through securitizations or other low cost sources of funds; (iii)
the need for productivity gains and reductions in overhead as a percentage of
revenues by increasing the size of lease portfolios; and (iv) the increased cost
of new technologies that may not be accessible to small to mid-size market
participants due to the relatively high cost.
STRATEGY
The Company's goal is to become a leading consolidator and operator of
equipment leasing and speciality finance businesses. Key elements of the
Company's strategy include:
PURSUE STRATEGIC ACQUISITIONS. The Company intends to capitalize upon
consolidation opportunities in the U.S. equipment leasing industry by pursuing
selective acquisitions. The Company will focus upon opportunities that
complement its existing equipment leasing and commercial specialty finance
businesses as well as opportunities that facilitate entry into new market
segments. The Company's senior management team has significant experience in the
acquisition and integration of businesses, including leasing companies, and
Jonathan J. Ledecky, the Company's co-founder and Non-Executive Chairman of the
Board, has considerable experience consolidating private businesses into
publicly-held entities. Mr. Ledecky has founded or co-founded three
publicly-held companies, U.S. Office Products Company, U.S.A. Floral Products,
Inc. and Consolidation Capital Corporation, each of which has implemented a
consolidation strategy.
PROVIDE GREATER ACCESS TO CAPITAL AT LOWER COST. The Company believes that,
due to its pro forma combined lease originations, the diversification of its
portfolio and the experience of its senior management team, it will be able to
provide increased sources of capital at a lower cost to the Founding Companies.
The Company expects to benefit from increased access to capital from both public
and private sources by utilizing traditional credit facilities and accessing
public and private capital through securitizations. The Company believes that
the effective interest rate obtained on borrowings by the Founding Companies
individually is higher than the interest rate that could be obtained by an
entity with the aggregate size of the Company. In addition to the anticipated
ability to lower the Founding Companies' cost of funds, the Company believes
that increased access to capital will allow the Founding Companies to generate
an increased volume of lease originations and develop new lease product
offerings.
ACHIEVE OPERATING EFFICIENCIES. The Company believes that it will be able
to increase the operating efficiency of and achieve certain synergies among the
Founding Companies as well as any subsequently acquired businesses. For example,
one of the Founding Companies, Portfolio Financial Servicing Company, L.P.,
provides servicing and administration for equipment leases and loan portfolios.
After the Mergers, the Company intends to transfer to PFSC, where appropriate,
certain servicing functions currently performed by the Founding Companies. The
Company will also seek to combine certain other administrative functions, such
as accounting and finance, treasury, insurance, employee benefits, strategic
marketing and legal support, at the corporate level, and to institute a
Company-wide management information system. The Company believes the integration
of these functions will enable the Founding Companies to focus on their core
business of lease origination as well as enable the Company to operate in a more
efficient and cost-effective manner.
EXPAND PRODUCTS AND SERVICE OPPORTUNITIES. The Company believes that the
diversity among the Founding Companies within the equipment leasing industry,
together with the size and geographic breadth of the Company, can create
significant opportunities to increase the volume and type of lease products and
service offerings. The
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Company plans to expand existing programs, such as equipment vendor and
manufacturer programs, pursue cross-selling opportunities among the Founding
Companies and any subsequently acquired entities, and develop new products and
service offerings. The Company believes potential opportunities include national
expansion of products currently offered by certain of the Founding Companies on
a local or regional basis and leveraging the expertise of certain of the
Founding Companies to enhance the Company's customer service and off-lease asset
remarketing capabilities. In addition, the Company intends to market products
and services under the name UniCapital to establish name recognition and create
a brand image while maintaining the identity and associated goodwill of each of
the Founding Companies.
OPERATE WITH DECENTRALIZED MANAGEMENT. The Company plans to conduct its
operations using a decentralized management approach through which individual
management teams, consisting primarily of current executive officers of the
Founding Companies, will be responsible for the day-to-day operations of the
Founding Companies as well as for helping to identify additional acquisition
candidates in their respective markets. At the same time, a Company-wide team of
senior management will provide the Founding Companies with strategic oversight
and guidance with respect to acquisitions, credit, financing, marketing and
operations. As part of this strategy, the Company intends to foster a culture of
cooperation and teamwork that emphasizes dissemination of "best practices" among
its local management teams. The Company believes stock ownership and incentive
compensation will help to align the objectives of local management with those of
the Company, and that a decentralized management philosophy will result in
better customer service by allowing local management the flexibility to
implement policies and make decisions based on the needs of their customers.
THE FOUNDING COMPANIES
The Founding Companies will be acquired contemporaneously with the
consummation of the Offering with a portion of the proceeds therefrom. The
following descriptions of each of the Founding Companies are categorized
according to the primary markets which each Founding Company serves.
COMPUTER AND TELECOMMUNICATIONS EQUIPMENT LEASING. Computer and
telecommunications equipment leasing includes lease financing for mainframe,
mid-range and personal computers, workstations, servers, telephone systems,
switches, networks, peripherals and related high-technology equipment. Companies
that specialize in computer and telecommunications equipment leasing must
understand customer usage patterns and equipment residual values, including
technological obsolescence issues.
JACOM COMPUTER SERVICES, INC. Founded in 1975, Jacom provides lease
financing for computer and telecommunications equipment to large and middle
market companies, including financial institutions, throughout the United
States. Leases originated by Jacom generally have an average transaction
size of approximately $81,000 and an average term of 36 months. Jacom funds
purchases of the equipment underlying its leases through borrowings and
holds the leases for its own account or sells the future lease payments to
financial institutions. For the year ended December 31, 1997, Jacom
originated approximately $64.0 million in leases for 157 lessees. Jacom
employs 49 persons and maintains an office in Northvale, New Jersey.
VARILEASE CORPORATION. Founded in 1987, Varilease provides lease
financing for computer and telecommunications equipment to Fortune 1000
companies and other businesses throughout the United States. Upon
origination of a lease, Varilease either sells the lease on a non-recourse
basis or retains the lease for its portfolio. Leases originated by
Varilease generally have an average transaction size of approximately
$200,000 and an average term of 36 months. For the fiscal year ended
September 30, 1997, Varilease originated over $162.0 million in leases for
96 lessees. Varilease employs 78 persons and maintains 14 offices in the
United States, including its headquarters in Farmington Hills, Michigan,
and one office in Canada.
LARGE TICKET LEASING AND STRUCTURED FINANCING. Large ticket leases are
typically for equipment with a purchase price in excess of $5.0 million, such as
aircraft, satellites, rail and other transportation equipment. Large ticket
leasing is characterized by fewer transactions involving greater amounts of
capital and lessees that require tailored structures and solutions to meet
particular needs.
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CAUFF, LIPPMAN AVIATION, INC. Founded in 1981, Cauff Lippman provides
operating lease financing for used commercial jet aircraft and jet aircraft
engines, as well as brokerage and advisory services to domestic and foreign
commercial airlines, aircraft lessors and institutional investors and
engages in the purchase and sale of aircraft for its own account. Aircraft
leases originated by Cauff Lippman have an average transaction size of
approximately $15.1 million and an average term of 57 months, and aircraft
engine leases have an average transaction size of approximately $1.9
million and an average term of 84 months. Cauff Lippman participated in the
sale, trading, brokerage and financing of 37 aircraft and three aircraft
engines during the year ended December 31, 1997. Cauff Lippman employs
seven persons and maintains an office in Miami, Florida.
MUNICIPAL CAPITAL MARKETS GROUP, INC. Founded in 1989, MCMG arranges
structured financing primarily for community-based mental health/mental
retardation facilities and correctional facilities. MCMG is a registered
broker-dealer and places the bonds and leases that it arranges primarily
with institutional investors. Substantially all of MCMG's revenue is
derived from underwriting and advisory income. For the year ended December
31, 1997, MCMG arranged approximately $152.4 million in municipal leases
and bonds for 40 lessees and borrowers. MCMG employs nine persons and
maintains three offices, including its headquarters in Dallas, Texas.
THE NSJ GROUP. Founded in 1989, NSJ provides lease financing for used
commercial jet aircraft and jet aircraft engines to domestic and foreign
commercial airlines and engages in the purchase and sale of aircraft for
its own account. NSJ also engages in remarketing activities on behalf of
airlines, financial institutions and other leasing companies. NSJ arranges
financing for each aircraft it purchases, and either sells the lease to
investors on a non-recourse basis or holds the lease in its portfolio.
Leases originated by NSJ have an initial term of 36 to 84 months. For the
year ended December 31, 1997, NSJ had total lease originations of
approximately $19.4 million for three lessees. NSJ employs six persons and
maintains an office in Orlando, Florida.
MIDDLE MARKET LEASING. Middle market leases generally include those leases
for equipment with a purchase price ranging from $250,000 to $5.0 million, such
as construction and manufacturing equipment. Middle market leasing is
characterized by lessees that are sensitive to both price and customer service
issues.
AMERICAN CAPITAL RESOURCES, INC. Founded in 1979, American Capital
provides lease and secured financing for equipment, primarily printing
presses, to companies in the printing, packaging and paper converting
industries. Leases originated by American Capital are direct financing
leases, with an average transaction size of approximately $727,000 and an
average term of 82 months. American Capital either sells the leases that it
originates or borrows the required proceeds from various funding sources on
both a non-recourse and a limited recourse basis. For the fiscal year ended
July 31, 1997, American Capital originated approximately $104.8 million in
leases for approximately 143 lessees. American Capital employs 26 persons
and maintains three offices, including its headquarters in Hackensack, New
Jersey.
MATRIX FUNDING CORPORATION. Founded in 1978, Matrix provides lease
financing for a variety of equipment, primarily computer, communication and
electronic equipment, to companies throughout the United States. Matrix
originates the majority of its leases through its telesales program. Upon
origination, Matrix either sells the lease to a third party on a
non-recourse basis, or retains the lease for its portfolio. Leases
originated by Matrix generally have an average transaction size of
approximately $458,000 and an average term of 46 months. For the fiscal
year ended June 30, 1997, Matrix originated $50.6 million in leases for
approximately 60 lessees. Matrix employs 45 persons and maintains an office
in Midvale, Utah.
THE WALDEN ASSET GROUP, INC. Founded in 1991, Walden provides
equipment lease financing for a variety of equipment, including
communications, computer and manufacturing equipment, to Fortune 500 and
other businesses throughout the United States. Lease transactions are
either held in Walden's portfolio or sold, on a non-recourse basis. Leases
originated by Walden generally have an average transaction size of
approximately $500,000 and an average term of 36 months. For the year ended
December 31, 1997, Walden originated approximately $82.9 million in leases
for 35 lessees. Walden employs ten persons and maintains four offices,
including its headquarters in Wellesley, Massachusetts.
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SMALL TICKET LEASING. Small ticket leases generally include those leases
for equipment with a purchase price of less than $250,000. Small ticket leasing
generally is a vendor-oriented business in which lessors depend on transaction
flow and streamlined administrative operations.
BOULDER CAPITAL GROUP, INC. Founded in 1986, Boulder provides lease
financing for petroleum retail equipment, including car washes, fuel
dispensers and convenience store operating equipment, to petroleum retail
businesses. Boulder originates leases directly with the owner of the
petroleum retail business, as well as through programs with petroleum
companies, equipment manufacturers and distributors. Upon origination,
Boulder either retains the lease for its portfolio or sells the lease on a
limited recourse basis while retaining the servicing responsibility. Leases
originated by Boulder generally have an average transaction size of
approximately $108,000 and an average term of 60 months. For the year ended
December 31, 1997, Boulder had total lease originations of approximately
$21.3 million for 144 lessees. Boulder employs 23 persons and maintains an
office in Boulder, Colorado.
K.L.C. INC. Founded in 1972, Keystone provides lease financing for a
variety of equipment, primarily tractor trailers, embroidery machines and
construction equipment to companies throughout the United States. Leases
originated by Keystone generally have an average transaction size of
approximately $32,000 and an average term of approximately 47 months. Upon
origination, Keystone either retains the lease for its portfolio, or sells
the lease to a third party, while retaining the servicing responsibility.
For the year ended December 31, 1997, Keystone originated approximately
$43.0 million in leases for approximately 1,342 lessees. Keystone employs
37 persons and maintains an office in West Hartford, Connecticut.
MERRIMAC FINANCIAL ASSOCIATES. Founded in 1984, Merrimac provides
equipment financing to operating companies that engaged in the
coin-operated, vending, amusement and coffee service businesses. Merrimac
enters into leases with the operating companies and in most instances has a
recourse agreement with the equipment vendor in the event of default by the
lessee. Leases originated by Merrimac have an average transaction size of
approximately $10,000 and an average term of 24 months. For the year ended
December 31, 1997, Merrimac had total lease originations of approximately
$8.9 million for approximately 1,050 lessees. Merrimac employs four persons
and maintains an office in Billerica, Massachusetts.
LEASE SERVICING. Lease servicing involves lease administrations and
processing services, including lease accounting for both financial reporting and
federal income tax purposes, lien searches, UCC filings, asset tracking,
insurance tracking, preparation of sales, use and property tax returns,
invoicing and collections.
PORTFOLIO FINANCIAL SERVICING COMPANY, L.P. Founded in 1993, PFSC
provides servicing and processing services to leasing companies. PFSC
currently services approximately 20,000 contracts for 14 customers. The
contract sizes range from $1,180 to $31.6 million. During 1997, PFSC was
the servicer for 14 securitization pools, including 12 pools for which PFSC
was the primary servicer. PFSC derives its revenue from servicing fees,
including set-up, monthly and conversion fees. For the year ended December
31, 1997, PFSC had total revenues of approximately $1.5 million. PFSC
employs 45 persons and maintains an office in Portland, Oregon.
PRODUCTS AND SERVICES
The Company provides lease financing and related services to a broad range
of commercial customers. The Company originates direct financing leases,
sales-type leases and operating leases. In addition to financing equipment
through leases, the Company sells new equipment and provides lease- and
equipment-related services, such as servicing, brokering and remarketing, which
is the sale of equipment that has come off lease.
Direct Financing Leases. A significant portion of the Company's leases are
direct financing leases, which transfer substantially all of the benefits and
risks of equipment ownership to the lessees. A lease is classified as a direct
financing lease if the collection of the minimum lease payments is reasonably
predictable, no significant uncertainties exist relating to unreimbursable costs
yet to be incurred by the lessor under the lease and the lease meets one of the
following criteria: (i) ownership of the property is transferred to the lessee
at the end of the lease term; (ii) the lease contains a bargain purchase option;
(iii) the term of the lease is at least equal to 75% of the
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estimated economic life of the leased equipment; or (iv) the present value of
the minimum lease payments is at least equal to 90% of the fair value of the
leased equipment at the inception of the lease.
Sales-Type Leases. Sales-type leases, like direct financing leases,
transfer substantially all of the benefits and risks of equipment ownership to
the lessees. However, sales-type leases include profit at lease inception to the
extent the fair value of the equipment exceeds the Company's carrying value. A
lease is classified as a sales-type lease if the collection of the minimum lease
payments is reasonably predictable, no significant uncertainties exist relating
to unreimbursable costs yet to be incurred by the lessor under the lease and the
lease meets one of the following criteria: (i) ownership of the property is
transferred to the lessee at the end of the lease term; (ii) the lease contains
a bargain purchase option; (iii) the term of the lease is at least equal to 75%
of the estimated economic life of the leased equipment; or (iv) the present
value of the minimum lease payments is at least equal to 90% of the fair value
of the leased equipment at the inception of the lease.
Operating Leases. All lease contracts which do not meet the criteria of
direct financing leases or sales-type leases are accounted for as operating
leases.
Some of the Founding Companies use master lease agreements as a means to
establish an ongoing relationship with customers. Once a master lease has been
negotiated and entered into, the lease of a particular piece of equipment is
documented by a schedule to that lease, thereby facilitating the fast and
efficient funding of a lease.
In general, the Company's lease transactions are net leases with a
specified noncancelable lease term. The leases include a "hell-or-high-water"
provision which requires the lessee to make all lease payments under all
circumstances and which requires the lessee to maintain the equipment, pay all
property, sales and use taxes and insure the equipment against casualty loss.
RESIDUAL INTEREST IN EQUIPMENT
The Company retains a residual interest in the equipment covered by many of
its leases. The Company generally seeks to determine the best remarketing plan
for such equipment prior to the expiration of the lease. In many cases, the
remarketing plan provides for the continuation of the lease or the negotiated
sale of the underlying equipment.
CREDIT AND COLLECTION POLICIES AND PROCEDURES
The Company will employ underwriting policies and procedures that are
intended to minimize the risk of delinquencies and credit losses. The Company
will have a corporate credit officer and a Credit Committee that will establish
overall corporate credit guidelines and individual guidelines tailored to the
business of each Founding Company. The corporate credit officer will review a
sample of credit decisions made by each Founding Company to ensure compliance
with corporate credit guidelines and may also make credit decisions for those
transactions which exceed the credit approval authority of the Founding Company.
The Company's credit underwriting policies will include specific criteria for
those leases that the Company intends to securitize.
The credit approval process generally takes place at the Founding Company
level and includes a review of financial statements, a credit report, and,
depending upon the size of the proposed transaction and the business, credit
references and a review of the personal credit of the principals of the
business. The Company anticipates utilizing a credit scoring model for approving
credits on small ticket leases. Proposed transactions which are not within the
credit parameters authorized for the Founding Company originating the lease,
must be reviewed by the corporate credit officer or the Credit Committee.
The Founding Companies have developed collection procedures designed to
identify accounts experiencing payment problems quickly and, if necessary, take
action to preserve the Founding Companies' equity interest in the equipment.
Generally, when payments are past due, the Founding Companies send a notice of
delinquency and charge a late fee to the lessee. After the Mergers, the Company
will transfer certain servicing and collection functions to PFSC. See
"-- Servicing, Collection and Administration."
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SERVICING, COLLECTION AND ADMINISTRATION
The Company anticipates that upon consummation of the Mergers, PFSC, will
provide servicing, collection and administration services for certain of the
leases originated by the Founding Companies. PFSC has the capability to provide
transaction processing and management services for each lease contract, from the
time it is originated through its termination, including set-up, billing, cash
posting, customer service, accounting, collection, tax compliance and asset
management. PFSC will also be the service provider for the Company's
securitizations. PFSC's service offerings include lien searches, UCC filings,
asset tracking, insurance tracking, preparation of sales, use and property tax
returns, invoicing and collections. Currently, PFSC services approximately
20,000 contracts for 14 customers, with contract sizes ranging from $2,000 to
$25.0 million. During 1997, PFSC was a servicer for 14 securitization pools,
including 12 pools for which PFSC was the primary servicer.
The Company will determine, on a company-by-company and
customer-by-customer basis, whether to transfer the servicing functions
performed by the Founding Companies, and any subsequently acquired businesses,
to PFSC. The Company expects that it will transfer the servicing and collection
function to PFSC in those circumstances in which the Company anticipates that
the transfer will not have a significant adverse effect on servicing,
collections or customer relations.
SALES AND MARKETING
Each of the Founding Companies employs sales representatives to originate
leases. Sales and marketing efforts are conducted on a one-on-one basis with
established accounts, through equipment manufacturers and vendors and also
through advertising, participation in trade associations and telesales. The
Founding Companies employ an aggregate of approximately 106 salespersons. Most
of the salespersons are compensated on a commission basis or through other
incentive-based compensation programs. After the Mergers, the Company expects
that each Founding Company will continue to operate its business using its
current name. In addition, the Company intends to market products and services
under the name UniCapital to establish name recognition and create a brand image
while maintaining the identity and associated goodwill of each of the Founding
Companies.
COMPETITION
The financing of equipment is highly competitive. The Company competes for
customers with a number of national, regional and local finance companies. In
addition, the Company's competitors include those equipment manufacturers that
finance the sale or lease of their products themselves and other traditional
types of financial services companies, such as commercial banks and savings and
loan associations, all of which provide financing for the purchase of equipment.
Many of the Company's competitors and potential competitors possess
substantially greater financial, marketing and operational resources than the
Company. The Company's competitors and potential competitors include many
larger, more established companies which may have a lower cost of funds than the
Company and access to capital markets and to other funding sources which may be
unavailable to the Company.
Competition in the equipment lease finance market is based primarily on
lease rates, terms, reliability in meeting commitments, customer service and
market presence. Although the Company expects that credit facilities, sales of
leases and securitizations will have the effect of making capital available at a
cost which will allow the Company to offer competitive lease rates, the Company
may not be successful in completing future securitizations, or any such
securitizations may not result in increased proceeds to the Company from lease
sales. The Company will continue to encounter significant competition, and the
Company may not be able to compete effectively in its chosen market segments or
any new market segments which the Company enters.
FACILITIES
The Company's corporate offices are located in leased space at 1111 Kane
Concourse, Bay Harbor Island, Florida 33154. The telephone number of its
principal executive offices is (305) 861-0603.
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In addition to its corporate offices, upon consummation of the Mergers the
Company will lease the following facilities (except for the Farmington Hills,
Michigan headquarters of Varilease which the Company will acquire in connection
with the Varilease Merger):
<TABLE>
<CAPTION>
FOUNDING COMPANY LOCATION PRINCIPAL USE
- ---------------- ------------------------------- -------------
<S> <C> <C>
American Capital Hackensack, New Jersey Headquarters
Los Angeles, California Sales office
Charlotte, North Carolina Sales office
Boulder Boulder, Colorado Headquarters
Cauff Lippman Miami, Florida Headquarters
Jacom Northvale, New Jersey Headquarters
Keystone West Hartford, Connecticut Headquarters
Matrix Midvale, Utah Headquarters
Salt Lake City, Utah Warehouse
Merrimac Billerica, Massachusetts Headquarters
MCMG Dallas, Texas Headquarters
Denver, Colorado Sales office
Uniondale, New York Sales office
NSJ Orlando, Florida Headquarters
PFSC Portland, Oregon Headquarters
Varilease Farmington Hills, Michigan Headquarters
Phoenix, Arizona Warehouse
Scottsdale, Arizona Sales office
San Juan Capistrano, California Sales office
Huntington Beach, California Sales office
Santa Barbara, California Sales office
Westport, Connecticut Sales office
Atlanta, Georgia Sales office
Columbia, Maryland Sales office
Ashland, Massachusetts Sales office
St. Louis, Missouri Sales office
Absecon, New Jersey Sales office
Brooklyn, New York Sales office
Suffern, New York Sales office
Warrenton, Virginia Sales office
Toronto, Ontario, Canada Sales office
Walden Wellesley, Massachusetts Headquarters
Norwalk, Connecticut Sales office
Delmar, New York Sales office
Northfield, Ohio Sales office
</TABLE>
The Company believes that all of the facilities of the Founding Companies
are adequate for their respective current and anticipated operations.
EMPLOYEES
As of March 31, 1998, UniCapital retains the services of 18 consultants and
employees, primarily engaged in mergers and acquisitions, finance and
accounting, and administration. The Company anticipates that such consultants
will become employees upon consummation of the Offering. As of January 31, 1998,
the Founding Companies collectively employed approximately 339 people, of whom
approximately 336 were full-time employees and approximately 3 were part-time
employees. Approximately 135 employees were engaged in operations, 106 were
engaged in sales, and 98 were engaged in a variety of administrative and
managerial functions. The Company believes that its relations with all of its
employees are good.
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LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
GOVERNMENT REGULATION
Although most states do not regulate the equipment financing business,
certain states require licensing of lenders and financiers, impose limitations
on interest rates and other charges, mandate adequate disclosure of certain
contract terms and constrain certain collection practices and creditor remedies.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning each of the
executive officers and directors of the Company following the consummation of
this Offering:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Robert New 33 Chairman and Chief Executive Officer
Jonathan J. Ledecky 40 Non-Executive Chairman of the Board
Theodore J. Rogenski 57 Chief Operating Officer
Bruce E. Kropschot 57 Vice Chairman -- Mergers & Acquisitions
Martin Kalb 55 Executive Vice President and General Counsel
Steven E. Hirsch 44 Executive Vice President -- Structured
Finance
Jonathan New 37 Chief Financial Officer
Vincent W. Eades 38 Director
John A. Quelch 45 Director
Anthony K. Shriver 33 Director
</TABLE>
ROBERT NEW co-founded UniCapital in October 1997 and has since served as
its Chairman and Chief Executive Officer. From July 1996 until December 1997,
Mr. New served as an operating company president of and as acquisition
consultant to U.S. Office Products Company, a publicly-held supplier of a broad
range of office products and business services, where Mr. New participated in
over 40 acquisitions. From March 1990 until August 1997, Mr. New served as Chief
Executive Officer of Prudential of Florida Leasing, Inc., a small-ticket leasing
company. From December 1989 through July 1996, Mr. New served as President and
Chief Executive Officer of Prudential of Florida, Inc., an office services
company. Robert New is the brother of Jonathan New.
JONATHAN J. LEDECKY co-founded UniCapital in October 1997 and has since
served as its Non-Executive Chairman of the Board. Mr. Ledecky founded U.S.
Office Products Company in October 1994 and has served as its Chairman of the
Board and, until November 1997, its Chief Executive Officer. Since its
inception, U.S. Office Products Company has acquired over 190 companies. Mr.
Ledecky has also served as the Non-Executive Chairman of the Board of U.S.A.
Floral Products, Inc. since April 1997. Mr. Ledecky founded Consolidation
Capital Corporation in February 1997 and serves as its Chairman and Chief
Executive Officer. From 1991 until September 1994 Mr. Ledecky served as
President and Chief Executive Officer of Legacy Dealer Capital Fund, Inc.
THEODORE J. ROGENSKI has served as a consultant to UniCapital providing
services consistent with the duties and responsibilities of Chief Operating
Officer since February 1998. From December 1994 until January 1997, Mr. Rogenski
served as Chief Operating Officer of LINC Anthem Corporation and its successor,
Newcourt LINC Financial, Inc., a leasing company specializing in small-ticket
leasing as well as financial products for the health care industry, after which
he was subject to a noncompetition agreement. From 1990 until April 1992, Mr.
Rogenski served as the President and Chief Executive Officer of John Hancock
Leasing Corporation, after which he pursued personal interests. From 1981 until
1990, Mr. Rogenski served as President and Chief Executive Officer of Wells
Fargo Leasing Corporation.
BRUCE E. KROPSCHOT has served as a consultant to UniCapital providing
services consistent with the duties and responsibilities of Vice
Chairman -- Mergers & Acquisitions since November 1997. From 1987 through
December 1997, he was founder and President of Kropschot Financial Services, a
merger and acquisition advisor to equipment leasing companies, which has
arranged for the sale of over 100 equipment leasing and specialty finance
businesses. From 1980 to 1986, Mr. Kropschot served as President and Vice
Chairman of Master Lease Corporation, which is now known as Tokai Financial
Services, Inc. From 1972 to 1980, Mr. Kropschot served as Executive Vice
President of HBE Leasing Corporation and Vice President -- Finance, of its
parent corporation, HBE Corporation. Mr. Kropschot serves on the board of
directors of the Equipment Leasing Association of America.
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MARTIN KALB has served as a consultant to UniCapital providing services
consistent with the duties and responsibilities of Executive Vice President and
General Counsel of UniCapital since October 1997. From 1987 until November 1997,
he was a senior partner in the Miami, Florida office of Greenberg Traurig
Hoffman Lipoff Rosen & Quentel, P.A. whose practice focused upon mergers and
acquisitions, income taxation and estate planning.
STEVEN E. HIRSCH has served as a consultant to UniCapital providing
services consistent with the duties and responsibilities of Executive Vice
President -- Structured Finance of UniCapital since January 1998. From 1987
until January 1998, Mr. Hirsch was associated with Morgan Stanley & Co.
Incorporated, most recently as the Head of the Leasing Products Group. From 1984
until 1987 Mr. Hirsch served as Senior Vice President of Matrix Leasing
International, Inc., an equipment leasing brokerage and packaging concern and a
wholly-owned subsidiary of First Bank Systems. From 1980 until 1983, Mr. Hirsch
served as Vice President and Eastern Regional Manager of Wells Fargo Leasing
Corporation.
JONATHAN NEW has served as the Chief Financial Officer of UniCapital since
October 1997. Mr. New served as Vice President and Controller of Delta Financial
Corporation, a securitizing mortgage bank, from August 1995 until December 1997.
From March 1993 until August 1995, Mr. New was the Controller of RAI Credit
Corporation, a securitizing private label credit card and data processing
business. Jonathan New is the brother of Robert New.
VINCENT W. EADES has been a Director of UniCapital since October 1997. Mr.
Eades has served as the Senior Vice President of Sales and Marketing for
Starbucks Coffee Co. Inc. since May 1995. Mr. Eades was employed by Hallmark
Cards Inc., most recently as a General Manager, from November 1985 through April
1995. Mr. Eades also serves as a director of U.S.A. Floral Products, Inc. and as
a director of Consolidation Capital Corporation.
JOHN A. QUELCH has been a Director of UniCapital since October 1997. Dr.
Quelch has been a director of U.S. Office Products Company since February 1995.
Dr. Quelch is the Sebastian S. Kresge Professor of Marketing at the Harvard
Business School. Dr. Quelch serves on the board of directors of WPP Group plc, a
marketing services company that includes Ogilvy & Mather, J. Walter Thompson and
Hill & Knowlton. Mr. Quelch also serves as a director of U.S.A. Floral Products,
Inc.
ANTHONY K. SHRIVER has been a director of UniCapital since March 1998. Mr.
Shriver has been Chairman and Chief Executive Officer of Best Buddies
International, Inc., a non-profit organization that provides mentally
handicapped adults with employment services and promotes their social
integration, since February 1989. From May 1996 to March 1998, he also served as
Chairman and Chief Executive Officer of Fast Rx, Inc., a pharmaceutical sales
company which provides physicians the technology to dispense products at the
point of care, and from March 1997 to September 1997 he was Chairman of Larkin
Community Hospital.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has established an Audit Committee and a
Compensation Committee.
The responsibilities of the Audit Committee include recommending to the
Board of Directors the independent public accountants to be selected to conduct
the annual audit of the books and records of the Company, reviewing the proposed
scope of such audit and approving the audit fees to be paid, reviewing
accounting and financial controls of the Company with the independent public
accountants and the Company's financial and accounting staff and reviewing and
approving transactions between the Company and its directors, officers and
affiliates. Mr. Ledecky and a non-employee director to be elected to the Board
prior to the consummation of the Offering will be the members of the Audit
Committee.
The Compensation Committee provides a general review of the Company's
compensation plans to ensure that they meet corporate objectives. The
responsibilities of the Compensation Committee also include administering the
1998 Long-Term Incentive Plan, including selecting the officers and salaried
employees to whom awards
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will be granted. Mr. Eades and a non-employee director to be elected to the
Board prior to the consummation of the Offering will be the members of the
Compensation Committee.
DIRECTOR COMPENSATION
Directors who are not currently receiving compensation as officers,
employees or consultants of the Company are entitled to receive an annual
retainer fee of $25,000, plus reimbursement of expenses for each meeting of the
Board of Directors and each committee meeting that they attend in person. In
addition, non-employee directors receive certain formula grants of non-qualified
stock options under the 1998 Non-Employee Directors' Stock Plan. See " -- 1998
Non-Employee Directors' Stock Plan."
EXECUTIVE COMPENSATION
UniCapital was incorporated in October 1997. Effective upon consummation of
the Mergers, the Company anticipates that it will, pursuant to employment
agreements, pay compensation based on the following annual salaries to the
executive officers named below (together, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
------------ UNDERLYING
NAME POSITION SALARY(1) OPTIONS
- ------------------------------------- ---------------------------- ------------ ------------
<S> <C> <C> <C>
Robert New Chairman and Chief Executive $650,000 500,000(2)
Officer
Theodore J. Rogenski Chief Operating Officer 475,000 200,000(3)
Bruce E. Kropschot Vice Chairman -- Mergers & 450,000 --
Acquisitions
Martin Kalb Executive Vice President and 450,000 --
General Counsel
Steven E. Hirsch Executive Vice President -- 250,000 60,000(2)
Structured Finance
Jonathan New Chief Financial Officer 250,000 --
</TABLE>
- ---------------
(1) For Messrs. Rogenski, Kropschot, Kalb and Hirsch, the amount listed is the
annualized consulting fee payable to each such individual for periods prior
to the consummation of the Offering and the annual salary to be paid under
each such individual's agreed upon Employment Agreement from and after
consummation of the Offering.
(2) Consists of options to be granted under the 1998 Long-Term Incentive Plan
upon the consummation of the Offering at an exercise price equal to the
initial public offering price per share, which options are immediately
exercisable.
(3) Consists of options granted under the 1997 Executive Non-Qualified Stock
Option Plan, at an exercise price of $3.00 per share, which options are
immediately exercisable.
The Company currently has no bonus plan for the Named Executive Officers.
Pursuant to their post-Offering Employment Agreements to be entered into with
each Named Executive Officer in connection with the Offering, such individual
will be entitled to participate in any such bonus plan that the Company may
adopt.
1997 EXECUTIVE NON-QUALIFIED STOCK OPTION PLAN
The Company's Board of Directors has adopted and the stockholders have
approved the UniCapital Corporation 1997 Executive Non-Qualified Stock Option
Plan (the "Executive Plan"), under which awards of options to acquire shares of
Common Stock may be made to employees, directors, consultants and advisors of
the
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Company or any of its subsidiaries. The purpose of the Executive Plan is to
promote the interests of the Company and its stockholders by (i) attracting and
retaining employees, consultants and advisors of outstanding ability, (ii)
motivating such persons, by means of performance-related incentives, to achieve
longer-range performance goals, and (iii) enabling such persons to participate
in the long-term growth and financial success of the Company.
Administration. The Executive Plan is to be administered by a committee of
the Board (the "Committee"). The Board has designated the Compensation Committee
of the Board to serve as the Committee that administers the Executive Plan.
After the effective date of the registration statement of which this Prospectus
forms a part, the Committee must at all times consist of two or more persons,
each of whom qualifies as an "outside director" within the meaning of Section
162(m) or any successor provision of the Internal Revenue Code of 1986, as
amended (the "Code"), and applicable Treasury regulations thereunder, if such
qualification is deemed necessary in order for the grant or the exercise of
awards made under the Executive Plan to qualify for any tax or other material
benefit to participants or the Company under applicable law.
Shares Available. The maximum number of shares of Common Stock as to which
awards may be granted under the Executive Plan is 500,000 shares. After the
effective date of the registration statement of which this Prospectus forms a
part, no participant in the Executive Plan will be granted awards in respect of
more than 100,000 shares of Common Stock in any calendar year. The Common Stock
to be offered under the Executive Plan will be authorized but unissued Common
Stock, or issued Common Stock which will have been reacquired by the Company and
held in its treasury. As of the date of this Prospectus, awards of options to
purchase an aggregate of 260,000 shares of Common Stock had been made under the
Executive Plan.
Shares Subject to Terminated Awards. The Common Stock covered by any
unexercised portion of terminated stock options granted under the Executive Plan
cannot again be subject to new awards under the Executive Plan. In the event the
purchase price of a stock option is paid in whole or in part through the
delivery of Common Stock, only the net number of shares of Common Stock issuable
in connection with the exercise of the stock option will be counted against the
number of shares remaining available for the grant of awards under the Executive
Plan.
Adjustments. The number of shares subject to outstanding options under the
Executive Plan, the exercise price of such stock options and the number of
shares available for stock options subsequently granted under the Executive Plan
will be appropriately adjusted to reflect any stock dividend, stock split,
combination or exchange of shares, merger, consolidation or other change in
capitalization with a similar substantive effect upon the Executive Plan or the
awards granted under the Executive Plan.
Awards. The Committee will have discretion to grant awards under the
Executive Plan to employees, directors, consultants or advisors of the Company
or any of its subsidiaries, provided that such consultants or advisors render
bona fide services which are not in connection with the offer or sale of
securities in a capital-raising transaction. The Committee will determine those
individuals who will receive awards and the number of shares of Common Stock to
be covered by each award. Discretionary Awards shall be in the form of stock
options which do not and are not intended to meet the requirements of Section
422 of the Code ("Nonqualified Options").
Terms and Conditions of Awards. The Committee will determine the terms and
conditions of each award, including the exercise price (which may be less than
the fair market value of the Common Stock on the date of grant). Unless
otherwise determined by the Committee, all rights to exercise options under
Discretionary Awards will terminate on the first to occur of (i) the scheduled
expiration date as set forth in the applicable stock option agreement, (ii)
thirty days following the date of termination of employment for any reason other
than death or permanent disability (as defined in the Code) of the participant
or (iii) one year following the date of termination of employment by reason of
the participant's death or permanent disability. The exercise price of all stock
options granted under the Executive Plan will be payable in cash or in such
other form of considerations as the Committee may approve in the applicable
option agreement, including, without limitation, (i) by the delivery to the
Company by the participant of a promissory note containing such terms as the
Committee may determine, (ii) by the delivery to the Company by the participant
of shares of Common Stock that have been held by the
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participant for at least six months prior to exercise of the option, valued at
the fair market value of such shares on the date of exercise or (iii) pursuant
to a cashless exercise arrangement with a broker. Options awarded under the
Executive Plan are transferable by will or the laws of descent and distribution,
or to the extent determined by the Committee and set forth in the applicable
option agreement. Options granted under the Executive Plan may be exercised by
the participant or by any permitted transferee.
Consequences of Change of Control. Upon a "Change of Control" (as defined
in the Executive Plan), each outstanding option granted under the Executive Plan
shall automatically accelerate vesting and become immediately exercisable in
full, unless the option is, in connection with the Change of Control, either
assumed by the "Acquiring Corporation" (as defined in the Executive Plan) or
parent thereof in connection with the Change of Control or replaced with a
comparable option to purchase shares of the capital stock of the Acquiring
Corporation or parent thereof. Assumed or replaced options held by an employee
whose employment with the Company or the Acquiring Corporation is terminated
without "cause" (as defined in the Executive Plan) or who resigns for "good
reason" (as defined in the Executive Plan) in the period beginning upon the
Change of Control and ending 12 months following the Change of Control will
become immediately exercisable upon the date of such termination or resignation
of employment. The Executive Plan provides that no action described in the
Executive Plan, including any acceleration of vesting, shall be taken that would
make a Change of Control ineligible for "pooling of interest" accounting
treatment or that would make a Change of Control ineligible for desired tax
treatment if, in the absence of such action, the Change of Control would qualify
for such treatment and if the Company intends to use such treatment with respect
to such Change of Control.
Withholding Obligations. The Company has the right to deduct from a
participant's salary, bonus or other compensation any taxes required by law to
be withheld with respect to awards made under the Executive Plan. In the
Committee's discretion, a participant may be permitted to elect to have withheld
from the shares otherwise issuable to the participant, or to tender to the
Company, the number of shares of Common Stock whose fair market value equals the
amount required to be withheld.
Amendment and Termination. The Board may, by resolution, amend or revise
the Executive Plan. Such action will not be effective without stockholder
approval if such approval is required to maintain the compliance of the
Executive Plan and/or awards granted to directors, executive officers or other
persons with Rule 16b-3 promulgated under the Securities Exchange Act or 1934,
as amended, or any successor rule. The Board may not modify any options
previously granted under the Executive Plan in a manner adverse to the holders
thereof without the consent of such holders (other than such adjustments
required to reflect capital changes). The Executive Plan will terminate on
November 13, 2007, unless it is earlier terminated by the Board. Termination of
the Executive Plan will not affect awards previously granted under the Executive
Plan.
1998 LONG-TERM INCENTIVE PLAN
The Company's Board of Directors has adopted and the stockholders have
approved the UniCapital Corporation 1998 Long-Term Incentive Plan (the "LTIP"),
under which awards of options to acquire shares of Common Stock may be made to
employees, directors (other than non-employee directors who receive options
under the Company's 1998 Non-Employee Directors' Stock Plan), consultants and
advisors of the Company or any of its subsidiaries. The purpose of the LTIP is
to promote the interests of the Company and its stockholders by (i) attracting
and retaining employees, consultants and advisors of outstanding ability, (ii)
motivating such persons, by means of performance-related incentives, to achieve
longer-range performance goals, and (iii) enabling such persons to participate
in the long-term growth and financial success of the Company.
Administration. The LTIP is to be administered by a Committee, which the
Board has designated to be the Compensation Committee. After the effective date
of the registration statement of which this Prospectus forms a part, the
Committee must at all times consist of two or more persons, each of whom
qualifies as an "outside director" within the meaning of Section 162(m) or any
successor provision of the Internal Revenue Code of 1986, as amended (the
"Code"), and applicable Treasury regulations thereunder, if such qualification
is deemed necessary in order for the grant or the exercise of awards made under
the LTIP to qualify for any tax or other material benefit to participants or the
Company under applicable law.
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Shares Available. The maximum number of shares of Common Stock as to which
awards may be granted under the LTIP is equal to 15% of the total number of
shares of Common Stock outstanding from time to time. After the effective date
of the registration statement of which this Prospectus forms a part, no
participant in the LTIP will be granted awards in respect of more than 500,000
shares of Common Stock in any calendar year. The Common Stock to be offered
under the LTIP will be authorized but unissued Common Stock, or issued Common
Stock which will have been reacquired by the Company and held in its treasury.
As of the date of this Prospectus, no awards of options had been made under the
LTIP.
Shares Subject to Terminated Awards. The Common Stock covered by any
unexercised portion of terminated stock options granted under the LTIP may again
be subject to new awards under the LTIP. In the event the purchase price of a
stock option is paid in whole or in part through the delivery of Common Stock,
only the net number of shares of Common Stock issuable in connection with the
exercise of the stock option will be counted against the number of shares
remaining available for the grant of awards under the LTIP.
Adjustments. The number of shares subject to outstanding options under the
LTIP, the exercise price of such stock options and the number of shares
available for stock options subsequently granted under the LTIP will be
appropriately adjusted to reflect any stock dividend, stock split, combination
or exchange of shares, merger, consolidation or other change in capitalization
with a similar substantive effect upon the LTIP or the awards granted under the
LTIP.
Discretionary Awards. The Committee will have discretion to grant awards
under the LTIP to employees, directors, consultants or advisors of the Company
or any of its subsidiaries, provided that such consultants or advisors render
bona fide services which are not in connection with the offer or sale of
securities in a capital-raising transaction. The Committee will determine those
individuals who will receive discretionary awards and the number of shares of
Common Stock to be covered by each discretionary award. Discretionary awards may
be in the form of stock options meeting the requirements of Section 422 of the
Code ("Incentive Stock Options") or Nonqualified Options which do not meet such
requirements. The maximum number of shares as to which Incentive Stock Options
may be granted under the LTIP is 5,000,000.
Terms and Conditions of Discretionary Awards. The Committee will determine
the terms and conditions of each Discretionary Award, provided that (i)
Discretionary Awards will be granted at an exercise price of not less than 100%
of the fair market value of the Common Stock on the date of grant (110% of the
fair market value in the case of a grant of Incentive Stock Options) to a
participant who at the time of such grant owns (within the meaning of Section
424(d) of the Code) more than 10% of the voting power of all classes of stock or
the Company (a "10% Holder"), (ii) the period within which a Discretionary Award
may be exercised will not exceed ten years from the date of grant (five years in
the case of a grant of Incentive Stock Options to a 10% Holder), and (iii) the
aggregate fair market value (determined on the date of grant) of Common Stock
with respect to which Incentive Stock Options granted to a participant under the
LTIP or any other plan of the Company and its subsidiaries become exercisable
for the first time in any single calendar year will not exceed $100,000. Unless
otherwise determined by the Committee, all rights to exercise options under
Discretionary Awards will terminate on the first to occur of (i) the scheduled
expiration date as set forth in the applicable stock option agreement, (ii)
thirty days following the date of termination of employment for any reason other
than death or permanent disability (as defined in the Code) of the participant
or (iii) one year following the date of termination of employment by reason of
the participant's death or permanent disability.
Withholding Obligations. The Company has the right to deduct from a
participant's salary, bonus or other compensation any taxes required by law to
be withheld with respect to awards made under the LTIP. In the Committee's
discretion, a participant may be permitted to elect to have withheld from the
shares otherwise issuable to the participant, or to tender to the Company, the
number of shares of Common Stock whose fair market value equals the amount
required to be withheld.
Amendment and Termination. The Board may, by resolution, amend or revise
the LTIP. Such action will not be effective without stockholder approval if such
approval is required to maintain the compliance of the LTIP and/or awards
granted to directors, executive officers or other persons with Rule 16b-3
promulgated under the Securities Exchange Act or 1934, as amended, or any
successor rule. The Board may not modify any options
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previously granted under the LTIP in a manner adverse to the holders thereof
without the consent of such holders (other than such adjustments required to
reflect capital changes). The LTIP will terminate on the tenth anniversary of
the effective date of the LTIP, unless it is earlier terminated by the Board.
Termination of the LTIP will not affect awards previously granted under the
LTIP.
1998 NON-EMPLOYEE DIRECTORS' STOCK PLAN
The Company's Board of Directors has adopted and the stockholders have
approved the UniCapital Corporation 1998 Non-Employee Directors' Stock Plan (the
"Directors' Plan"), under which awards of options to acquire shares of Common
Stock will be made automatically to non-employee directors. The purpose of the
Directors' Plan is to promote the interests of the Company and its stockholders
by enabling non-employee directors, who are ineligible to participate in the
LTIP, to participate in the long-term growth and financial success of the
Company.
Shares Available. Awards under the Directors' Plan may be granted as to a
maximum of 500,000 shares of Common Stock. The Common Stock to be offered under
the Directors' Plan will be authorized but unissued Common Stock, or issued
Common Stock which will have been reacquired by the Company and held in its
treasury. As of the date of this Prospectus, no awards of options had been made
under the Directors' Plan.
Shares Subject to Terminated Awards. The Common Stock covered by any
unexercised portion of terminated stock options granted under the Directors'
Plan may again be subject to new awards under the Directors' Plan. In the event
the purchase price of a stock option is paid in whole or in part through the
delivery of Common Stock, only the net number of shares of Common Stock issuable
in connection with the exercise of the stock option will be counted against the
number of shares remaining available for the grant of awards under the
Directors' Plan.
Adjustments. The number of shares subject to outstanding options under the
Directors' Plan, the exercise price of such stock options and the number of
shares available for stock options subsequently granted under the Directors'
Plan will be appropriately adjusted to reflect any stock dividend, stock split,
combination or exchange of shares, merger, consolidation or other change in
capitalization with a similar substantive effect upon the Directors' Plan or the
awards granted under the Directors' Plan.
Initial Awards. Each non-employee director as of the effective date of the
registration statement of which this Prospectus forms a part, and each
individual who is not an employee of the Company or any subsidiary and who is a
member of the Board after that date, will receive a Nonqualified Option to
purchase 21,000 shares of Common Stock on the later of the effective date of the
registration statement of which this Prospectus forms a part or the date of his
or her election to the Board (an "Initial Award"). Initial Awards will become
immediately exercisable in full on the date of grant.
Annual Awards. Each person who is a member of the Board immediately
preceding the annual meeting of stockholders in each year beginning in 1999 (the
"Annual Meeting Date") will receive a Nonqualified Option to purchase 6,000
shares of Common Stock (an "Annual Award") on the Annual Meeting Date. Annual
Awards will be immediately exercisable in full.
Terms and Conditions of Automatic Awards. The exercise price of each
Initial Award and each Annual Award will be the fair market value of the Common
Stock on the date of grant. The term of each Initial Grant and each Annual Grant
will be ten years. All rights to exercise options will terminate on the first to
occur of (i) the scheduled expiration date of such option or (ii) one year
following the date of termination of service as a director.
Withholding Obligations. The Company has the right to deduct from a
participant's salary, bonus or other compensation any taxes required by law to
be withheld with respect to awards made under the Directors' Plan. In the
Committee's discretion, a participant may be permitted to elect to have withheld
from the shares otherwise issuable to the participant, or to tender to the
Company, the number of shares of Common Stock whose fair market value equals the
amount required to be withheld.
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Amendment and Termination. The Board may, by resolution, amend or revise
the Directors' Plan. Such action will not be effective without stockholder
approval if such approval is required to maintain the compliance of the
Directors' Plan and/or awards granted to directors, executive officers or other
persons with Rule 16b-3 promulgated under the Securities Exchange Act or 1934,
as amended, or any successor rule. The Board may not modify any options
previously granted under the Directors' Plan in a manner adverse to the holders
thereof without the consent of such holders (other than such adjustments
required to reflect capital changes). The Directors' Plan will terminate on the
tenth anniversary of the effective date of the Directors' Plan, unless it is
earlier terminated by the Board. Termination of the Directors' Plan will not
affect awards previously granted under the Directors' Plan.
1998 EMPLOYEE STOCK PURCHASE PLAN
The Company's Board of Directors has adopted and the stockholders have
approved the 1998 Employee Stock Purchase Plan (the "Purchase Plan"). The
Purchase Plan will permit eligible employees of the Company and its subsidiaries
(generally all full-time employees who have completed one year of service) to
purchase shares of Common Stock at a discount. Employees who elect to
participate will have amounts withheld through payroll deduction during purchase
periods. At the end of each purchase period, accumulated payroll deductions will
be used to purchase stock at a price equal to 85% of the market price at the
beginning of the period or the end of the period, whichever is lower. Stock
purchased under the Purchase Plan will be subject to a six-month holding period.
The Company has reserved 2,000,000 shares of Common Stock for issuance under the
Purchase Plan.
The Purchase Plan will remain in effect until terminated by the Board. The
Purchase Plan may be amended by the Board without the consent of the
stockholders of the Company, except that any amendment, although effective when
made, will be subject to stockholder approval if required by any federal or
state law or regulation or by the rules of any stock exchange or automated
quotation system on which the Common Stock may then be listed or quoted.
NEW PLAN BENEFITS
Upon the effective date of the registration statement of which this
Prospectus forms a part, it is contemplated that the Company will grant stock
options under the LTIP to purchase a number of shares of Common Stock equal to
6.25% of the aggregate consideration to be paid in the Mergers divided by the
initial public offering price per share (the "Merger Option Amount"). Based upon
an assumed initial public offering price per share of $ , the Merger Option
Amount would be shares. See "Formation of the Company" and "Certain
Relationships and Related Party Transactions -- the Mergers." The exercise price
of such options shall be equal to the initial public offering price per share.
The options granted pursuant to the Merger Agreements will vest 25% each on the
first four anniversaries of the date of grant. Options granted to Jonathan
Ledecky and Robert New and Initial Awards under the Directors' Plan shall be
fully vested and immediately exercisable on the date of grant. All such options
will expire on the tenth anniversary of the date of grant. In addition, it is
contemplated that Initial Grants will be made under the Directors' Plan upon the
effective date of the registration statement of which
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this Prospectus forms a part. The following table sets forth certain information
with respect to such contemplated option grants, and the outstanding grant of
options under the Executive Plan:
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION DOLLAR VALUE UNITS(2)
----------------- ---------------- ---------
<S> <C> <C>
Robert New
Chairman and Chief Executive Officer...................... (1) 500,000
Theodore J. Rogenski
Chief Operating Officer................................... (1) 200,000
Bruce E. Kropschot
Vice Chairman -- Mergers & Acquisitions................... -- --
Martin Kalb
Executive Vice President and General Counsel.............. -- --
Steven E. Hirsch
Executive Vice President -- Structured Finance............ -- 60,000
Jonathan New
Chief Financial Officer................................... -- --
All current executive officers as a group................... (1) 760,000
All current directors who are not executive officers as a
group..................................................... (1) 563,000
All employees, including all current officers who are not
executive officers, as a group............................ (1)
</TABLE>
- ---------------
(1) The dollar values of the awards under the LTIP and the Directors' Plan are
not determinable at this time, since the options are expected to be granted
at an exercise price equal to, or calculated with reference to, the initial
public offering price of the Common Stock.
(2) The number of units represents the number of shares of Common Stock
underlying the options expected to be granted.
EMPLOYMENT AND CONSULTING AGREEMENTS
Upon consummation of the Offering, the Company will enter into employment
agreements with Robert New and Jonathan New, Chairman and Chief Executive
Officer, and Chief Financial Officer, respectively. In addition, UniCapital has
entered into consulting agreements with Theodore Rogenski, Bruce Kropschot,
Martin Kalb and Steven Hirsch. Each such consulting agreement contemplates that,
effective upon the consummation of the Offering, the individual consultant will
enter into an employment agreement with the Company on the terms and conditions
set forth in the form of employment agreement attached to such consulting
agreement.
Upon consummation of the Offering, the Company will enter into an
Employment Agreement with Robert New, pursuant to which Mr. New will continue in
the employ of the Company as Chairman and Chief Executive Officer. The
Employment Agreement will provide for a term of employment beginning on the date
of consummation of the Offering and ending on April 1, 2000. Under the
Employment Agreement, Mr. New will receive an annual base salary of $650,000.
The Employment Agreement will include a two-year post-termination
non-competition and non-solicitation provision that restrains Mr. New from
engaging in, directly or indirectly, any "Competing Business" (as defined in the
Employment Agreement). If Mr. New's employment is terminated without cause after
his term of employment commences, he will be entitled to receive his salary then
in effect for the shorter of (i) the three-month period following his
termination or (ii) the remaining term of the Employment Agreement.
Effective February 4, 1998, UniCapital entered into a Consulting Agreement
with Theodore J. Rogenski, pursuant to which Mr. Rogenski is providing
consulting services to UniCapital consistent with the duties and
responsibilities that would be assigned to a Chief Operating Officer. The
Consulting Agreement provides that, upon consummation of the Offering, Mr.
Rogenski will be employed as the Company's Chief Operating Officer for a term
beginning on such date and ending on April 1, 2000. The Consulting Agreement
expires on the earlier of (i) April 1, 2000 or (ii) the commencement of the term
of employment under Mr. Rogenski's Employment Agreement with the Company. Under
the Consulting Agreement, Mr. Rogenski is paid a consulting fee at a rate
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of $39,583.33 per month in cash. As an employee, Mr. Rogenski will receive an
annual base salary of $475,000. Both the Consulting Agreement and the Employment
Agreement contemplated thereby include a two-year post-termination
non-competition and non-solicitation provision that restrains Mr. Rogenski from
engaging in, directly or indirectly, any "Competing Business" (as defined in the
Consulting Agreement and the Employment Agreement). If Mr. Rogenski's employment
is terminated without cause after his term of employment commences, then he will
be entitled to receive his salary then in effect for the shorter of (i) the
eight-month period following his termination or (ii) the remaining term of the
Employment Agreement.
Effective November 14, 1997, UniCapital entered into an oral consulting
arrangement with Bruce E. Kropschot, pursuant to which Mr. Kropschot is
providing consulting services to UniCapital consistent with the duties and
responsibilities that would be assigned to a Vice Chairman -- Mergers &
Acquisitions. The consulting arrangement provides that, upon consummation of the
Offering, Mr. Kropschot will be employed as the Company's Vice
Chairman -- Mergers & Acquisitions for a term beginning on such date and ending
on February 20, 2000. The consulting arrangement expires on the earlier of (i)
April 1, 2000 or (ii) the commencement of the term of employment under Mr.
Kropschot's Employment Agreement with the Company. Under the consulting
arrangement, Mr. Kropschot is paid a consulting fee at a rate of $37,500 per
month, provided, that no fee was accrued or is payable with respect to any
period prior to February 20, 1998. As an employee, Mr. Kropschot will receive an
annual base salary of $450,000. Both the consulting arrangement and the
Employment Agreement contemplated thereby include a two-year post-termination
non-competition and non-solicitation provision that restrains Mr. Kropschot from
engaging in, directly or indirectly, any "Competing Business" (as defined in the
Employment Agreement), except that Mr. Kropschot will be entitled to provide
investment advisory services to any Competing Business beginning six months
after the termination or expiration of his consultancy to or employment with the
Company for any reason whatsoever. If Mr. Kropschot's employment is terminated
without cause after his term of employment commences, then he will be entitled
to receive his salary then in effect for the shorter of (i) the 12-month period
following his termination or (ii) the remaining term of the Employment
Agreement.
Effective November 1, 1997, UniCapital entered into a Consulting Agreement
with Martin Kalb, pursuant to which Mr. Kalb is providing consulting services to
UniCapital consistent with the duties and responsibilities that would be
assigned to an Executive Vice President and General Counsel. The Consulting
Agreement provides that, upon the consummation of the Offering, Mr. Kalb will be
employed as the Company's Executive Vice President and General Counsel for a
term beginning on such date and ending on April 1, 2000. The Consulting
Agreement expires on the earlier of (i) April 1, 2000 or (ii) the commencement
of the term of employment under Mr. Kalb's Employment Agreement with the
Company. Under the Consulting Agreement, Mr. Kalb is paid a consulting fee at a
rate of $37,500 per month, of which $16,666.67 per month is paid in cash and
$20,833.33 per month is accrued for payment upon consummation of the Offering
(net of any amounts then receivable by the Company from Mr. Kalb). As an
employee, Mr. Kalb will receive an annual base salary of $450,000. Both the
Consulting Agreement and the Employment Agreement contemplated thereby include a
two-year post-termination non-competition and non-solicitation provision that
restrains Mr. Kalb from engaging in, directly or indirectly, any "Competing
Business" (as defined in the Consulting Agreement and the Employment Agreement).
If Mr. Kalb's employment is terminated without cause after his term of
employment commences, then he will be entitled to receive his salary then in
effect for the shorter of (i) the eight-month period following his termination
or (ii) the remaining term of the Employment Agreement.
Effective January 24, 1998, UniCapital entered into a Consulting Agreement
with Steven E. Hirsch, pursuant to which Mr. Hirsch is providing consulting
services to UniCapital consistent with the duties and responsibilities that
would be assigned to an Executive Vice President -- Structured Finance. The
Consulting Agreement provides that, upon the consummation of the Offering, Mr.
Hirsch will be employed as the Company's Executive Vice President -- Structured
Finance for a term beginning on such date and ending on the January 24, 2000.
The Consulting Agreement expires on the earlier of (i) April 1, 2000 or (ii) the
commencement of the term of employment under Mr. Hirsch's Employment Agreement
with the Company. Under the Consulting Agreement, Mr. Hirsch is paid a
consulting fee at a rate of $20,833.33 per month in cash. As an employee, Mr.
Hirsch will receive an annual base salary of $250,000. Both the Consulting
Agreement and the Employment Agreement contemplated thereby include a two-year
post-termination non-competition and non-solicitation provision (nine months in
the event that the non-solicitation and confidentiality provisions of the
agreement are not breached) that
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restrains Mr. Hirsch from engaging in, directly or indirectly, any "Competing
Business" (as defined in the Consulting Agreement and the Employment Agreement),
other than employment with an investment banking or financial advisory firm or
boutique (or the investment banking or financial advisory division of a
commercial bank) in a position analogous to, or providing services analogous to,
the position in which Mr. Hirsch was employed with, or those services provided
by Mr. Hirsch at, Morgan Stanley & Co. Incorporated prior to January 24, 1998.
If Mr. Hirsch's employment is terminated without cause after his term of
employment commences, then he will be entitled to receive his salary then in
effect plus benefits for the longer of (i) the 12-month period following his
termination or (ii) the remaining term of the Employment Agreement.
Effective upon consummation of the Offering, the Company will enter into an
Employment Agreement with Jonathan New, pursuant to which Mr. New will continue
in the employ of the Company as Chief Financial Officer. The Employment
Agreement will provide for a term of employment beginning on the date of
consummation of the Offering and ending on April 1, 2000. Under the Employment
Agreement, Mr. New will receive an annual base salary of $250,000. The
Employment Agreement will include a two-year post-termination non-competition
and non-solicitation provision that restrains Mr. New from engaging in, directly
or indirectly, any "Competing Business" (as defined in the Consulting Agreement
and the Employment Agreement). If Mr. New's employment is terminated without
cause after his term of employment commences, then he will be entitled to
receive his salary then in effect for the shorter of (i) the eight-month period
following his termination or (ii) the remaining term of the Employment
Agreement.
In addition, the Merger Agreements provide that the Company, through its
wholly-owned subsidiaries, will enter into employment agreements with certain of
the individuals principally responsible for management of the Founding
Companies. Each such employment agreement provides for a base salary, plus a
bonus based in part upon the performance of the applicable Founding Company and
in part upon the performance of the Company. Each such agreement also includes a
two-year post-employment non-competition provision.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Set forth below is a description of certain transactions and relationships
between UniCapital and certain persons who will become officers, directors and
principal stockholders of the Company following the Mergers and the Offering. In
addition, set forth below is certain information regarding transactions and
relationships prior to the Mergers between certain of the Founding Companies and
their respective officers, directors and principal stockholders.
ORGANIZATION OF UNICAPITAL
UniCapital was incorporated in Delaware in October 1997 as a holding
company to acquire and operate equipment leasing and specialty finance
businesses serving the commercial market. As of March 31, 1998, UniCapital had
issued 6,798,750 shares of Common Stock for cash or notes to its co-founders,
management and certain other investors, including 2,115,000 shares to Robert
New, its co-founder, Chairman and Chief Executive Officer, 200,000 shares to
Theodore J. Rogenski, Chief Operating Officer, 470,000 shares to Bruce E.
Kropschot, Vice Chairman -- Mergers & Acquisitions, 412,500 shares to Martin
Kalb, Executive Vice President and General Counsel, or to entities over which
Mr. Kalb has control, 190,000 shares to Jonathan New, Chief Financial Officer,
315,000 shares to Steven E. Hirsch, Executive Vice President -- Structured
Finance, and 2,115,000 shares to Jonathan J. Ledecky, its co-founder and
Non-Executive Chairman of the Board. Subsequent to the Mergers and the Offering,
the co-founders of UniCapital will own beneficially in the aggregate
approximately % of the outstanding Common Stock of the Company.
THE MERGERS
Simultaneously with and as a condition to the consummation of the Offering,
UniCapital will acquire in 12 separate transactions all of the issued and
outstanding capital stock and partnership interests of each of the Founding
Companies for an aggregate consideration of $ million, which consists of:
(i) $331.6 million in cash to be paid to the stockholders of the Founding
Companies; and (ii) the $ million estimated fair value of 13,334,064
shares of Common Stock to be issued to the stockholders of the Founding
Companies. In addition, the Company may make additional payments to the
stockholders of the Founding Companies (other than PFSC), in cash and Common
Stock, based upon increases in the operating income of the Founding Companies
(i.e., the amount by which each Founding Company's adjusted pre-tax income
exceeds such Founding Company's pre-tax income, adjusted to reflect the
differential expenses expected to be realized when operated in a manner
consistent with that of a public company, for the prior year) for the years
ended December 31, 1998 and 1999 (and, in the case of Boulder, Cauff Lippman and
NSJ, the year ended December 31, 2000). In addition, the Company will repay
indebtedness of Jacom totaling approximately $32.3 million incurred to fund an S
Corporation distribution to the stockholder of Jacom immediately prior to the
Jacom Merger and indebtedness of Merrimac totaling $2.8 million assumed in the
Merrimac Merger. Following the consummation of the Mergers, the aggregate long-
term indebtedness of the Company will include the debt of the Founding Companies
which, as of December 31, 1997, was approximately $426.7 million. The purchase
price for each Founding Company was determined based on negotiations between
UniCapital and that Founding Company. The factors considered by the parties in
determining the purchase price included, among other factors, cash flows,
historical operating results, growth rates and business prospects of the
Founding Companies. With the exception of the consideration to be paid to the
stockholders of each of the Founding Companies, including the earn-out
arrangements, the acquisition of each Founding Company is subject to
substantially the same terms and conditions as those to which the acquisition of
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each other Founding Company is subject. The following table contains information
concerning the aggregate cash to be paid and Common Stock to be issued in
connection with the Mergers:
<TABLE>
<CAPTION>
SHARES OF VALUES OF SHARES
COMMON OF TOTAL
FOUNDING COMPANY CASH STOCK COMMON STOCK CONSIDERATION
---------------- ------ ------------ ---------------- -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
American Capital........................ $ 20.4 1,071,053
Boulder................................. 7.1 371,053
Cauff Lippman........................... 48.0 1,684,210
Jacom................................... 128.0(1) 3,368,368
Keystone................................ 27.9 1,468,421
Matrix.................................. 19.4 1,035,811
Merrimac................................ --(2) 178,750
MCMG.................................... 7.0 370,657
NSJ..................................... 16.0 561,979
PFSC.................................... -- 184,210
Varilease............................... 36.8 1,934,368
Walden.................................. 21.0 1,105,184
------ ---------- ---------------- ------
Total................................... $331.6 13,334,064
====== ========== ================ ======
</TABLE>
- ---------------
(1) Does not include $32.3 million of indebtedness incurred to fund an S
Corporation distribution to the stockholder of Jacom immediately prior to
the Jacom Merger, which indebtedness will be repaid by the Company upon
consummation of the Jacom Merger from a portion of the net proceeds of the
Offering.
(2) Does not include $2.8 million in indebtedness assumed by the Company in the
Merrimac Merger, which indebtedness will be repaid by the Company upon
consummation of the Merrimac Merger from a portion of the net proceeds of
the Offering.
The consummation of each Merger Agreement is contingent upon the
consummation of the Offering and the satisfaction of customary closing
conditions. The Merger Agreements provide that options to purchase a number of
shares of Common Stock, equal to 6.25% of the Merger consideration received
(which includes the cash and Common Stock portion of the Merger consideration),
based on the initial public offering price, shall be made available to employees
of the Founding Companies. The options will have an exercise price equal to the
initial public offering price per share, with respect to options granted as of
the consummation of the Offering, and the fair market value as of the date of
grant, with respect to options granted thereafter, and will vest ratably over a
four-year period, beginning on the anniversary of the date of the grant. The
Merger Agreements further provide that the stockholders of the Founding
Companies will indemnify UniCapital from certain liabilities that may arise in
connection with the Mergers. A portion of the consideration payable to the
stockholders of each of the Founding Companies will be escrowed for a period of
twelve months from the consummation of the Offering, as security for the
stockholders' indemnification obligations. The Merger Agreements provide that
the stockholders of the Founding Companies covenant not to compete with the
Company and its affiliates for a period of two years from the date of the
Merger. Each of the Merger Agreements provides that UniCapital and certain key
employees of each of the Founding Companies will enter into employment
agreements. The following summaries of the Merger Agreements are qualified in
their entirety by reference to the complete texts of the Merger Agreements,
which are filed as exhibits to the Registration Statement of which this
Prospectus forms a part and are incorporated herein by reference.
AMERICAN CAPITAL
UniCapital will acquire all of the outstanding stock of American Capital
for: (i) $20.4 million in cash and (ii) 1,071,053 shares of Common Stock. In
addition, UniCapital will pay additional consideration, 50% in cash and 50% in
Common Stock, equal to (i) 50% of any increase in American Capital's adjusted
pre-tax income for the year ended December 31, 1998 over the year ended December
31, 1997 and (ii) 50% of any increase in American Capital's adjusted pre-tax
income for the year ended December 31, 1999 over the adjusted pre-tax income for
the year ended December 31, 1998 (unless adjusted pre-tax income for the year
ended December 31,
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1998 is less than for the year ended December 31, 1997, in which case the
baseline for comparison will be the year ended December 31, 1997). Each of
Michael Pandolfelli, the President of American Capital, and Gerald P. Ennella,
the Executive Vice President of American Capital, will each enter into a
two-year employment agreement with the subsidiary of the Company that will
operate the American Capital business after the Merger and a two-year,
post-employment covenant not to compete with the Company.
From time to time, Mr. Pandolfelli has borrowed money from American
Capital. As of January 31, 1998, the amount due from Mr. Pandolfelli totaled
$697,000. Upon consummation of the Merger, all amounts due to American Capital
from Mr. Pandolfelli will have been repaid.
Mr. Pandolfelli is a 25% stockholder in Phase I Management, Inc. ("Phase
I"), a real estate development company which has obtained loans from American
Capital. As of January 31, 1998 Phase I owed approximately $622,000 to American
Capital. Upon consummation of the Merger, all amounts due to American Capital
from Phase I will have been repaid.
Mr. Pandolfelli owns a 51% interest in DML Associates ("DML"), a general
partnership which has obtained loans from American Capital. As of January 31,
1998 DML owed approximately $118,200 to American Capital. Upon consummation of
the Merger, all amounts due to American Capital from DML will have been repaid.
Mr. Pandolfelli leases real property and office furnishings to American
Capital. For the year ended December 31, 1997, American Capital paid a total of
$63,600 in lease payments to Mr. Pandolfelli. Upon consummation of the Merger,
the leases will have been terminated.
BOULDER
UniCapital will acquire all of the outstanding stock of Boulder for: (i)
$7.1 million in cash and (ii) 371,053 shares of Common Stock; provided that for
every $1.00 by which the adjusted pre-tax income of Boulder for the year ended
December 31, 1998 is less than the adjusted pre-tax income for the year ended
December 31, 1997, the stockholders of Boulder will repay to UniCapital $6.00,
in Common Stock valued at the initial public offering price per share, up to a
maximum of $3.6 million. In addition, UniCapital will pay additional
consideration, 50% in cash and 50% in Common Stock equal to (i) 50% of any
increase in Boulder's adjusted pre-tax income for the year ended December 31,
1998 over the year ended December 31, 1997; and (ii) 50% of any increase in
Boulder's adjusted pre-tax income for the year ended December 31, 1999 over the
pre-tax income for the year ended December 31, 1998 (unless adjusted pre-tax
income for the year ended December 31, 1998 is less than for the year ended
December 31, 1997, in which case the baseline for comparison will be the year
ended December 31, 1997). In addition, as part of the Boulder Merger, UniCapital
will acquire Boulder's interest in certain new vendor programs and a real estate
joint venture and will pay additional consideration, 50% in cash and 50% in
Common Stock equal to (i) the pre-tax income of Boulder attributable to such new
vendor programs and Boulder's interest in the real estate joint venture for each
of the years ending December 31, 1998, 1999 and 2000 and (ii) three times
Boulder's interest in the average pre-tax income of the real estate joint
venture for the years ending December 31, 1998, 1999 and 2000. Roy Burger, the
President of Boulder, will enter into a two-year employment agreement with the
subsidiary of the Company that will operate the Boulder business after the
Merger and a two-year, post-employment covenant not to compete with the Company.
Mr. Burger is the lender under a revolving credit agreement with Boulder
that permits Boulder to borrow up to $200,000 as of December 31, 1997. Interest
on the amount outstanding under the credit agreement accrues at an annual rate
equal to the prime rate plus one percent. On August 15, 1997, Boulder repaid the
outstanding principal balance, plus interest, in the aggregate amount of
$211,668. As of December 31, 1997, no amounts were outstanding under the credit
agreement. As of the consummation of the Merger, any amounts due under the
credit agreement will have been repaid and the credit agreement will have been
terminated.
CAUFF LIPPMAN
UniCapital will acquire all of the outstanding stock of Cauff Lippman for:
(i) $48.0 million in cash and (ii) 1,684,210 shares of Common Stock. In
addition, UniCapital will pay additional consideration, 60% in cash and 40% in
Common Stock, of up to $40.0 million based on the adjusted pre-tax income of the
"Big Ticket
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Leasing Division" (defined as Cauff Lippman and NSJ for the period from January
1, 1998 through the date of consummation of the Mergers, and thereafter as Cauff
Lippman, NSJ and other operating subsidiaries of the Company that conduct the
business conducted by Cauff Lippman and NSJ prior to the consummation of the
Mergers) for the years ended December 31, 1998, 1999 and 2000. The Merger
Agreement provides for such additional consideration to be paid in three
possible payments: (i) $13.3 million if the adjusted pre-tax income of the Big
Ticket Leasing Division for the year ended December 31, 1998 exceeds $19.0
million; (ii) an additional $13.3 million if the adjusted pre-tax income of the
Big Ticket Leasing Division for the year ended December 31, 1999, plus the
excess of the adjusted pre-tax income of the Big Ticket Leasing Division for the
year ended December 31, 1998 over $26.7 million, exceeds $19.0 million; and
(iii) a third $13.3 million if the adjusted pre-tax income of the Big Ticket
Leasing Division for the year ended December 31, 2000, plus the excess of the
adjusted pre-tax income of the Big Ticket Leasing Division for the year ended
December 31, 1999 over $26.7 million, exceeds $19.0 million; provided, that if
the aggregate amount paid under clauses (i) and (ii) is less than $26.7 million
and if the aggregate adjusted pre-tax income of the Big Ticket Leasing Division
for the three years ended December 31, 2000 equals or exceeds $56.9 million,
then the payment under clause (iii) will equal $40.0 million minus the amounts
paid under clauses (i) and (ii). Stuart Cauff, the President of Cauff Lippman
will become the President and CEO of UniCapital's Big Ticket Leasing Division
and will enter into a three-year employment agreement with the Company and a
subsidiary of the Company that will operate the Cauff Lippman business after the
Merger and a two-year, post-employment covenant not to compete with the Company
(subject to certain limited exceptions). Wayne Lippman, the Vice President of
Cauff Lippman will become the Executive Vice President of UniCapital's Big
Ticket Leasing Division and will enter into a three-year employment agreement
with the Company and a subsidiary of the Company that will operate the Cauff
Lippman business after the Merger and a two-year, post-employment covenant not
to compete with the Company (subject to certain limited exceptions).
In addition to Cauff Lippman, Messrs. Cauff and Lippman are involved in
other entities with interests in the aircraft leasing business which are not
part of Cauff Lippman and are not being acquired in the Merger. In connection
with the Merger Agreement, however, Messrs. Cauff and Lippman have granted the
Company the option to purchase their interests in some or all of such entities,
for the following purchase prices: (i) Jumbo Jet Leasing LP and Jumbo Jet,
Inc. -- $1.0 million: (ii) CL Aircraft Marketing LP and CL Aircraft Marketing,
Inc. -- $4.0 million; (iii) Twin Jet Leasing, Inc and Aircraft 49402,
Inc. -- $100,000; and (iv) CL Aircraft XXV, Inc. -- $100,000. An additional
option may be granted to acquire Aircraft 46941, Inc. for a nominal purchase
price, if such entity is not a subsidiary of Cauff Lippman upon consummation of
the Merger. Each option is exercisable until the date that is twelve months
after the consummation of the Offering. Certain third party lenders, which are
participants in some of these entities, must consent to the transfer of any
equity interest in such entities. Such consents may not be obtained. In
addition, under the terms of their agreement with Chase Manhattan Bank, Messrs.
Cauff and Lippman and any entities controlled by them will be prohibited from
engaging in any transaction involving Boeing 747-100 and -200 series aircraft
without the approval of Chase Manhattan Bank.
From time to time, the stockholders have advanced funds to Cauff Lippman.
As of December 31, 1997, the amount due from Cauff Lippman to the stockholders
and certain of their affiliates totaled $8,188,080. Upon consummation of the
Merger, all amounts due from Cauff Lippman to the stockholders will have been
repaid, other than certain promissory notes in the aggregate principal amount of
$3.5 million held by Messrs. Cauff and Lippman and certain of their respective
affiliates, which are to be assumed by the Company.
Cauff Lippman has procured services from certain affiliated entities. For
the year ended December 31, 1997, such affiliated entities performed services
for Cauff Lippman having an aggregate value of $1,344,000. Upon consummation of
the Merger, the Company will review the terms upon which Cauff Lippman procures
services, if any, from affiliated entities so that the terms are no less
favorable than those the Company could obtain from an unaffiliated third party.
JACOM
UniCapital will acquire all of the outstanding stock of Jacom for: (i)
$128.0 million in cash and (ii) 3,368,368 shares of Common Stock. Immediately
prior to the Merger, Jacom will make a dividend to its stockholder in the amount
of $32.3 million. In addition, UniCapital will pay additional consideration, 50%
in
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cash and 50% in Common Stock, equal to (i) 50% of any increase in Jacom's
adjusted pre-tax income for the year ended December 31, 1998 over the year ended
December 31, 1997 and (ii) 50% of any increase in Jacom's adjusted pre-tax
income for the year ended December 31, 1999 over the adjusted pre-tax income for
the year ended December 31, 1998 (unless adjusted pre-tax income for the year
ended December 31, 1998 is less than for the year ended December 31, 1997, in
which case the baseline for comparison will be the year ended December 31,
1997). John Alfano, the President of Jacom, will become the Company's National
Marketing Director and will enter into a two-year employment agreement with the
subsidiary of the Company that will operate the Jacom business after the Merger
and a two-year, post-employment covenant not to compete with the Company. In
addition, the Company will enter into a consulting agreement with a corporation
the sole stockholder of which is Robert Seaman, pursuant to which Mr. Seaman's
corporation will continue to provide such consulting services to Jacom as it
currently provides, and will render additional consulting services to the
Company in pursuing merger and acquisition activities and forming strategic
alliances. The agreement includes a two-year post-consulting covenant not to
compete.
From time to time, Jacom has advanced funds to Mr. Alfano. As of December
31, 1997, amounts outstanding under such advances totaled $451,000. Upon
consummation of the Merger, all amounts due from Mr. Alfano will have been
repaid.
From time to time, Jacom has sold lease receivables to Mr. Alfano. As of
December 31, 1997 Jacom owed approximately $781,000 to Mr. Alfano. Upon
consummation of the Merger, the amount due to Mr. Alfano will have been repaid
and Jacom will no longer sell its lease receivables to Mr. Alfano.
Jacom leases its office space from Mr. Alfano. For the year ended December
31, 1997 rental payments for the office space totaled $120,000. Upon
consummation of the Merger, the Company will renegotiate as necessary, the lease
arrangement so that the terms are no less favorable than those the Company could
obtain from an unaffiliated third party.
Trusts established for the benefit of Mr. Alfano's children are the
indirect stockholders of Museum Monthly, Inc. and RKL Publishing, Inc., which
entities have provided consulting services to Jacom from time to time. For the
year ended December 31, 1997, Jacom paid approximately $87,000 in consulting
fees to such entities. Upon consummation of the Merger, Jacom will no longer
procure consulting services from these entities.
KEYSTONE
UniCapital will acquire all of the outstanding stock of Keystone for: (i)
$27.9 million in cash and (ii) 1,468,421 shares of Common Stock. In addition,
UniCapital will pay additional consideration, 50% in cash and 50% in Common
Stock, equal to (i) 50% of any increase in Keystone's adjusted pre-tax income
for the year ended December 31, 1998 over the year ended December 31, 1997 and
(ii) 50% of any increase in Keystone's adjusted pre-tax income for the year
ended December 31, 1999 over the adjusted pre-tax income for the year ended
December 31, 1998 (unless adjusted pre-tax income for the year ended December
31, 1998 is less than for the year ended December 31, 1997, in which case the
baseline for comparison will be the year ended December 31, 1997). Each of Alan
Kaufman and Edgar Lee, the President and Executive Vice President of Keystone,
respectively, will enter into a two-year employment agreement with the
subsidiary of the Company that will operate the Keystone business after the
Merger and a two-year, post-employment covenant not to compete with the Company.
Messrs. Lee and Kaufman are the partners of Alored Associates ("Alored"), a
general partnership from which Keystone leases its office space. For the year
ended December 31, 1997, the lease payments totaled $180,000. Upon consummation
of the Merger, the lease will have been terminated and Keystone will enter into
a new lease with Alored on terms that are no less favorable than those the
Company could obtain from an unaffiliated third party.
From time to time, Keystone has made loans to its stockholders. As of
December 31, 1997, amounts outstanding under such loans totaled $220,000. From
time to time, Keystone has made loans to Alored. As of December 31, 1997,
amounts outstanding under such loans totaled $326,029. In addition, Keystone has
guaranteed a mortgage loan to Alored. The outstanding principal of such loan
totaled $641,041 as of December 31, 1997. Messrs. Lee and Kaufman are the sole
stockholders of Keystone Mortgage Service
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Corporation ("KMSC"). From time to time, Keystone has made loans to KMSC. As of
December 31, 1997, amounts outstanding under such loans totaled $200,000. Upon
consummation of the Merger, the stockholders of Keystone will repay $246,029 to
Keystone and Keystone will assign to the stockholders its rights to collect all
outstanding amounts due to Keystone from the stockholders, Alored and KMSC.
MATRIX
UniCapital will acquire all of the outstanding stock of Matrix for: (i)
$19.4 million in cash and (ii) 1,035,811 shares of Common Stock. In addition,
UniCapital will pay additional consideration, 50% in cash and 50% in Common
Stock, equal to (i) 50% of any increase in Matrix's adjusted pre-tax income for
the year ended December 31, 1998 over the year ended December 31, 1997 and (ii)
50% of any increase in Matrix's adjusted pre-tax income for the year ended
December 31, 1999 over the adjusted pre-tax income for the year ended December
31, 1998 (unless adjusted pre-tax income for the year ended December 31, 1998 is
less than for the year ended December 31, 1997, in which case the baseline for
comparison will be the year ended December 31, 1997). Prior to the consummation
of the Merger, Matrix will distribute approximately $3.0 million to its
stockholders, through a redemption of a portion of the outstanding stock. Each
of Richard Emery, J. Robert Bonnemort and David DiCesaris, the President,
Executive Vice President and Vice President -- Sales, respectively of Matrix,
will enter into a two-year employment agreement with the subsidiary of the
Company that will operate the Matrix business after the Merger and a two-year,
post-employment covenant not to compete with the Company.
Emco Associates ("Emco"), a Utah general partnership, in which Mr. Emery
has a one-third ownership interest, entered into a loan agreement with Matrix on
January 12, 1995. As of December 31, 1997, the amount due to Matrix from Emco
totaled $61,000. Upon consummation of the Merger, all amounts due to Matrix from
Emco Associates will have been repaid.
Mr. Bonnemort owns a 17% interest in Union Park Associates, a Utah limited
partnership from which Matrix leases office space, and in which Matrix owns a
1.83% interest. For the year ended December 31, 1997, Matrix made aggregate
lease payments to Union Park Associates of $144,583. Upon consummation of the
Merger, Matrix will continue to lease office space from Union Park Associates.
The Company believes that the terms are no less favorable than those the Company
could obtain from an unaffiliated third party.
MERRIMAC
UniCapital will acquire all of the partnership interests of Merrimac for:
(i) the satisfaction of $2.8 million in debt and (ii) 178,750 shares of Common
Stock. In addition, UniCapital will pay additional consideration in Common
Stock, equal to (i) 50% of any increase in Merrimac's adjusted pre-tax income
for the year ended December 31, 1998 over the year ended December 31, 1997 and
(ii) 50% of any increase in Merrimac's adjusted pre-tax income for the year
ended December 31, 1999 over the adjusted pre-tax income for the year ended
December 31, 1998 (unless adjusted pre-tax income for the year ended December
31, 1998 is less than for the year ended December 31, 1997, in which case the
baseline for comparison will be the year ended December 31, 1997). Each of Mark
Cignoli and Daniel Shatz, the General Manager and Sales Manager of Merrimac,
respectively, will enter into a two-year employment agreement with the
subsidiary of the Company that will operate the Merrimac business after the
Merger and a two-year, post-employment covenant not to compete with the Company.
Merrimac leases office space from JAM Associates, a Massachusetts general
partnership owned by Jordan Shatz and Allan Gilbert, both of whom are partners
in Merrimac. For the year ended December 31, 1997, Merrimac made rental payments
to JAM Associates in the amount of $60,000. Upon consummation of the Offering,
the lease will be terminated and a new lease will be entered into, which will be
based on terms no less favorable than those the Company could obtain from an
unaffiliated third party.
MCMG
UniCapital will acquire all of the outstanding stock of MCMG for: (i) $7.0
million in cash and (ii) 370,657 shares of Common Stock. In addition, UniCapital
will pay additional consideration, 50% in cash and 50% in
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Common Stock, equal to (i) 50% of any increase in MCMG's adjusted pre-tax income
for the year ended December 31, 1998 over the year ended December 31, 1997 and
(ii) 50% of any increase in MCMG's adjusted pre-tax income for the year ended
December 31, 1999 over the adjusted pre-tax income for the year ended December
31, 1998 (unless adjusted pre-tax income for the year ended December 31, 1998 is
less than for the year ended December 31, 1997, in which case the baseline for
comparison will be the year ended December 31, 1997). Each of Fred R. Cornwall,
Michael W. Harling and James E. Craft, the President, Executive Vice President
and Senior Vice President of MCMG, respectively, will enter into a two-year
employment agreement with the subsidiary of the Company that will operate the
MCMG business after the Merger and a two-year, post-employment covenant not to
compete with the Company.
Mr. Cornwall owns approximately 6% of Colorado Natural Gas, Inc ("CNG").
For the year ended December 31, 1997, MCMG received $532,950 from CNG in
connection with underwriting an equity and bond financing on behalf of CNG.
NSJ
UniCapital will acquire all of the outstanding stock of NSJ for: (i) $16.0
million in cash and (ii) 561,979 shares of Common Stock. In addition, UniCapital
will pay additional consideration, 60% in cash and 40% in Common Stock, of up to
$13.5 million based on the adjusted pre-tax income of the "Big Ticket Leasing
Division" (as defined in the Cauff Lippman and NSJ Merger Agreements) for the
years ended December 31, 1998, 1999 and 2000. The Merger Agreement provides for
such additional consideration to be paid in three possible payments: (i) $4.4
million if the adjusted pre-tax income of the Big Ticket Leasing Division for
the year ended December 31, 1998 exceeds $19.0 million; (ii) an additional $4.4
million if the adjusted pre-tax income of the Big Ticket Leasing Division for
the year ended December 31, 1999, plus the excess of the adjusted pre-tax income
of the Big Ticket Leasing Division for the year ended December 31, 1998 over
$26.7 million, exceeds $19.0 million; and (iii) a third $4.4 million if the
adjusted pre-tax income of the Big Ticket Leasing Division for the year ended
December 31, 2000, plus the excess of the adjusted pre-tax income of the Big
Ticket Leasing Division for the year ended December 31, 1999 over $26.7 million,
exceeds $19.0 million; provided, that if the aggregate amount paid under clauses
(i) and (ii) is less than $8.9 million and if the aggregate adjusted pre-tax
income of the Big Ticket Leasing Division for the three years ended December 31,
2000 equals or exceeds $56.9 million, then the payment under clause (iii) will
equal $13.3 million minus the amounts paid under clauses (i) and (ii). Each of
Jeptha Thornton, Samuel Thornton and Richard Giles, the President, Vice
President and Executive Vice President and General Counsel of NSJ, respectively,
will enter into a three-year employment agreement with the subsidiary of the
Company that will operate the NSJ business after the Merger and a two-year,
post-employment covenant not to compete with the Company.
Jeptha Thornton, a stockholder of NSJ, owns NSJ Corporation of Florida
("NSJ Florida"). NSJ Florida provides certain management and administrative
services to NSJ. Such management services were valued at $250,000 in 1997 and
were recorded as contributed capital. Upon consummation of the Merger, NSJ
Florida will no longer provide these services to NSJ.
PFSC
UniCapital will acquire all of the partnership interests in PFSC for
184,210 shares of Common Stock. Each of Jerry Hudspeth and Chris Kane, the
Managing Director and Vice President -- Information Technology of PFSC,
respectively, will enter into a two-year employment agreement with the
subsidiary of the Company that will operate the PFSC business after the Merger
and a two-year, post-employment covenant not to compete with the Company.
During the year ended December 31, 1997, PFSC provided contract lease
portfolio management services to PLC Lease Receivables 1993-A Trust (the
"Trust"), an entity affiliated with PFSC by common ownership, and received
$118,521 in service and late fees from the Trust.
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VARILEASE
UniCapital will acquire all of the outstanding stock of Varilease for: (i)
$36.8 million in cash and (ii) 1,934,368 shares of Common Stock. In addition,
UniCapital will pay additional consideration, 50% in cash and 50% in Common
Stock, equal to (i) 50% of any increase in Varilease's adjusted pre-tax income
for the year ended December 31, 1998 over the year ended December 31, 1997 and
(ii) 50% of any increase in Varilease's adjusted pre-tax income for the year
ended December 31, 1999 over the adjusted pre-tax income for the year ended
December 31, 1998 (unless adjusted pre-tax income for the year ended December
31, 1998 is less than for the year ended December 31, 1997, in which case the
baseline for comparison will be the year ended December 31, 1997). Each of
Robert VanHellemont and Gary Miller, the President and Chief Financial Officer
of Varilease, respectively, will enter into a two-year employment agreement with
the subsidiary of the Company that will operate the Varilease business after the
Merger and a two-year, post-employment covenant not to compete with the Company.
In connection with the Merger Agreement, Mr. VanHellemont has granted the
Company an option to purchase his equity interest in two entities, Worldwide and
Summa. The Company has the option to purchase Worldwide for $1,000,000 plus the
amount, if any, owed to Mr. VanHellemont by Worldwide. The option is exercisable
until the date that is twelve months following the consummation of the Offering.
The Company has the option to purchase Mr. VanHellemont's equity interest in
Summa for an amount equal to the fair market value of Mr. VanHellemont's equity
interest, as agreed upon by the parties at the time of purchase. The option is
exercisable until the date that is twenty-four months following the consummation
of the Offering. The Company has made no determination as to whether it wishes
to enter the businesses conducted by Worldwide and/or Summa.
In connection with the Merger Agreement, the Company has agreed to cause
the subsidiary of the Company that will operate the Varilease business to enter
into a lease of a building to be built upon real property owned by Mr.
VanHellemont.
From time to time, Varilease has made loans to Mr. VanHellemont. As of
December 31, 1997, amounts due with respect to such loans from Varilease to Mr.
VanHellemont totaled approximately $1,489,561. Upon consummation of the Merger,
all amounts due from Mr. VanHellemont with respect to such loans will have been
repaid.
WALDEN
UniCapital will acquire all of the outstanding stock of Walden for: (i)
$21.0 million in cash and (ii) 1,105,184 shares of Common Stock. In addition,
UniCapital will pay additional consideration, 50% in cash and 50% in Common
Stock, equal to (i) 50% of any increase in Walden's adjusted pre-tax income for
the year ended December 31, 1998 over the year ended December 31, 1997 and (ii)
50% of any increase in Walden's adjusted pre-tax income for the year ended
December 31, 1999 over the adjusted pre-tax income for the year ended December
31, 1998 (unless adjusted pre-tax income for the year ended December 31, 1998 is
less than for the year ended December 31, 1997, in which case the baseline for
comparison will be for the year ended December 31, 1997). Each of David Burmon,
Richard Albertelli and Robert Kopp, the President and Executive Vice Presidents,
of Walden, respectively, will enter into a two-year employment agreement with
the subsidiary of the Company that will operate the Walden business after the
Merger and a two-year, post-employment covenant not to compete with the Company.
Walden Asset Associates ("WAA"), a New York partnership in which the
stockholders of Walden have equal ownership interests, was established to hold
key man life insurance policies on the principals of Walden. Walden sold its
rights under certain remarketing contracts to WAA. Upon consummation of the
Merger, WAA will have been dissolved and the rights under the remarketing
contracts will have reverted to Walden.
FINANCIAL ADVISORY SERVICE FEES
Bruce E. Kropschot, the Company's Vice Chairman -- Mergers & Acquisitions,
was founder and President of Kropschot Financial Services ("KFS"), a merger and
acquisition advisor to equipment leasing companies, through December 1997. KFS
has provided financial advisory services to three of the Founding Companies in
connection with the Mergers. As compensation for these services, KFS will
receive the following fees: (i) from
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<PAGE> 101
Walden's shareholders, $200,000 which is payable in cash (none of which will be
received directly or indirectly by Mr. Kropschot, and all of which will be paid
directly to Martin Shames, who is currently a managing director of KFS); (ii)
from Matrix's shareholders, $500,000 which is payable in cash and 10,526 shares
of Common Stock (all of which will be payable directly to Mr. Kropschot in
accordance with an arrangement between Mr. Kropschot and KFS regarding such
fee); and (iii) from Jacom's shareholder, $350,000 which is payable in cash
($200,000 will be payable directly to Mr. Kropschot and $150,000 will be payable
to Mr. Shames in accordance with an arrangement between Mr. Kropschot and KFS
regarding such fee).
In connection with his employment with UniCapital, Mr. Kropschot reached
agreement with the two managing directors of KFS pursuant to which Mr. Kropschot
has redeemed his entire equity interest in KFS in exchange for a note payable by
the parent company of KFS. Since KFS is a prominent merger and acquisition
advisor to equipment leasing companies, it is likely that KFS will be an advisor
to future candidates to be acquired by the Company.
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<PAGE> 102
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 31, 1998, based upon 6,798,750 shares
outstanding as of such date and assuming completion of the Mergers and the
issuance of 13,334,064 shares therein, and as adjusted to reflect the sale of
the Common Stock being offered hereby, by: (i) each person (or group of
affiliated persons) known by the Company to be the beneficial owner of more than
five percent of the outstanding Common Stock; (ii) each Named Executive Officer
of the Company; (iii) each director of the Company and (iv) all of the Company's
directors and executive officers as a group. Each stockholder possesses sole
voting and investment power with respect to the shares listed, unless otherwise
noted.
<TABLE>
<CAPTION>
PERCENTAGE OF COMMON
STOCK OWNED
-----------------------
NUMBER OF SHARES BEFORE THE AFTER THE
BENEFICIAL OWNER OF COMMON STOCK OFFERING OFFERING
---------------- ---------------- ---------- ---------
<S> <C> <C> <C>
Robert New(1).......................................... 1,851,513 9.0
c/o UniCapital Corporation
1111 Kane Concourse
Suite 301
Bay Harbor Island, FL 33154
Theodore J. Rogenski(2)................................ 400,000 2.0
Bruce E. Kropschot(3).................................. 480,526 2.4
Martin Kalb(4)......................................... 412,500 2.0
Steven E. Hirsch....................................... 375,000 1.6
Jonathan New........................................... 190,000 *
Jonathan J. Ledecky(1)................................. 2,415,000 11.7
c/o UniCapital Corporation
1111 Kane Concourse
Suite 301
Bay Harbor Island, FL 33154
Vincent W. Eades(5).................................... 96,000 *
John A. Quelch(5)...................................... 96,000 *
Anthony K. Shriver(5)(6)............................... 81,000 *
John Alfano(7)......................................... 3,368,368 16.7
c/o Jacom Computer Services, Inc.
207 Washington Street
Northvale, NJ 07647
All directors and executive officers, as a group(8).... 6,337,539 29.3
</TABLE>
- ---------------
* Less than one percent.
(1) Includes 500,000 shares issuable upon the exercise of options to be granted
on the effective date of the registration statement of which this Prospectus
forms a part, which options will be immediately exercisable.
(2) Includes 200,000 shares issuable upon the exercise of options granted to Mr.
Rogenski, which options are immediately exercisable.
(3) Includes 10,526 shares to be received by Mr. Kropschot from Matrix's
shareholders after the consummation of the Merger in accordance with a fee
arrangement among Mr. Kropschot, KFS and Matrix.
(4) Represents shares owned by the Kalb Investment Limited Partnership.
(5) Includes 21,000 shares issuable upon the exercise of options to be granted
on the effective date of the registration statement of which this Prospectus
forms a part under the 1998 Non-Employee Directors' Stock Plan, which
options will be immediately exercisable.
(6) Includes 60,000 shares issuable upon the exercise of options to be granted
to Mr. Shriver on the effective date of the Registration Statement, which
options will be immediately exercisable.
(7) Represents shares to be issued to Mr. Alfano in payment of a portion of the
Merger consideration in connection with the Jacom Merger.
(8) See notes (1) through (6).
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<PAGE> 103
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, par value $.001 per share and 10,000,000 shares of Preferred
Stock, par value $.001 per share. The following summary description of the
capital stock of the Company reflects the material provisions of the Company's
Certificate of Incorporation and Bylaws that affect capital stock. The
description does not purport to be complete and is subject to the detailed
provisions of, and qualified in its entirety by reference to, the Company's
Certificate of Incorporation and Bylaws, copies of which have been filed as
exhibits to the registration statement of which this Prospectus forms a part,
and to the applicable provisions of the General Corporation Law of the State of
Delaware (the "DGCL").
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to the
rights of any holders of Preferred Stock, holders of Common Stock are entitled
to receive ratably such dividends as may be declared by the Board of Directors
out of funds legally available. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of the Company, holders of the Common
Stock are entitled to share ratably in the distribution of all assets remaining
after payment of liabilities, subject to the rights of any holders of preferred
stock of the Company. The holders of Common Stock have no preemptive rights to
subscribe for additional shares of the Company and no right to convert their
Common Stock into any other securities. In addition, there are no redemption or
sinking fund provisions applicable to the Common Stock. All of the outstanding
shares of Common Stock are, and the shares of Common Stock offered hereby will
be, fully paid and nonassessable.
PREFERRED STOCK
The Company is authorized to issue up to 10,000,000 shares of Preferred
Stock. The Board of Directors is authorized, subject to any limitations
prescribed by law, without further shareholder approval, to issue such shares of
Preferred Stock in one or more series, with such rights, preferences, privileges
and restrictions, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences, as shall be established by
the Board of Directors at the time of issuance.
The issuance of Preferred Stock by the Board of Directors could adversely
affect the rights of holders of Common Stock. For example, the issuance of
shares of Preferred Stock could result in securities outstanding that would have
preference over the Common Stock with respect to dividends and in liquidation
and that could (upon conversion or otherwise) enjoy all of the rights of the
Common Stock.
The authority possessed by the Board of Directors to issue Preferred Stock
could potentially be used to discourage attempts by third persons to obtain
control of the Company through merger, tender offer, proxy or consent
solicitation or otherwise, by making such attempts more difficult to achieve or
more costly. The Board of Directors may issue Preferred Stock without
stockholder approval and with voting rights that could adversely affect the
voting power of holders of Common Stock. There are no agreements or
understandings for the issuance of Preferred Stock, and the Company has no plans
to issue any shares of Preferred Stock.
CERTAIN PROVISIONS OF DELAWARE LAW AND THE COMPANY'S CERTIFICATE OF
INCORPORATION AND BYLAWS
The Company is subject to the provisions of Section 203 of the DGCL.
Section 203 prohibits a publicly-held Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder. Subject to
certain exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years prior to the proposed
business combination has owned 15% or more of the corporation's voting stock.
The Company's Certificate of Incorporation and Bylaws divide the Board of
Directors of the Company into three classes, each class to be as nearly equal in
number of directors as possible. At each annual meeting of
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<PAGE> 104
stockholders, directors in each class will be elected for three-year terms to
succeed the directors of that class whose terms are expiring. John A. Quelch and
Anthony K. Shriver will be Class I directors whose terms will expire in 1999.
Vincent W. Eades and Bruce E. Kropschot will be Class II directors whose terms
will expire in 2000. Jonathan J. Ledecky and Robert New will be Class III
directors whose terms will expire in 2001. In accordance with the DGCL,
directors serving on classified boards of directors may only be removed from
office for cause. These provisions could, under certain circumstances, operate
to delay, defer or prevent a change in control of the Company.
The Bylaws of the Company provide that stockholders must follow an advance
notification procedure for certain stockholder nominations of candidates for the
Board of Directors and for certain other stockholder business to be conducted at
an annual meeting. These provisions could, under certain circumstances, operate
to delay, defer or prevent a change in control of the Company.
The Company's Certificate of Incorporation provides that liability of
directors of the Company is eliminated to the fullest extent permitted under
Section 102(b)(7) of the DGCL. As a result, no director of the Company will be
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability: (i) for any breach of the
director's duty of loyalty to the Company or its stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) for any wilful or negligent payment of an unlawful
dividend, stock purchase or redemption; or (iv) for any transaction from which
the director derived an improper personal benefit.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company.
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<PAGE> 105
CERTAIN MATERIAL U.S. FEDERAL TAX CONSIDERATIONS
The following is a general discussion of certain material U.S. federal
income and estate tax consequences of the ownership and disposition of Common
Stock by a beneficial owner that is a "Non-U.S. Holder." A "Non-U.S. Holder" is
a person or entity that, for U.S. federal income tax purposes, is a non-resident
alien individual, a foreign corporation, a foreign partnership, or a foreign
estate or trust.
This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), and administrative interpretations as of the date hereof, all of
which are subject to changes, including changes with retroactive effect. This
discussion does not address all aspects of U.S. federal income and estate
taxation that may be relevant to Non-U.S. Holders in light of their particular
circumstances and does not address any tax consequences arising under the laws
of any state, local or foreign jurisdiction. Prospective holders are advised to
should consult their tax advisors with respect to the particular tax
consequences to them of owning and disposing of Common Stock, including the
consequences under the laws of any state, local or foreign jurisdiction.
DIVIDENDS
Subject to the discussion below, dividends, if any, paid to a Non-U.S.
Holder of Common Stock generally will be subject to withholding tax at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.
See "Dividend Policy." For purposes of determining whether tax is to be withheld
at a 30% rate or at a reduced rate as specified by an income tax treaty, the
Company ordinarily will presume that dividends paid on or before December 31,
1998 to an address in a foreign country are paid to a resident of such country
absent knowledge that such presumption is not warranted.
Under the recently finalized United States Treasury Regulations applicable
to dividends paid after December 31, 1998 (the "Final Regulations"), to obtain a
reduced rate of withholding under a treaty a Non-U.S. Holder will generally be
required to provide an Internal Revenue Service Form W-8 certifying such
Non-U.S. Holder's entitlement to benefits under a treaty. The Final Regulations
also provide special rules to determine whether, for purposes of determining the
applicability of a tax treaty, dividends paid to a Non-U.S. Holder that is an
entity should be treated as paid to the entity or those holding an interest in
that entity.
There will be no withholding tax on dividends paid to a Non-U.S. Holder
that are effectively connected with the Non-U.S. Holder's conduct of a trade or
business within the United States if a Form 4224 (or, after December 31, 1998, a
Form W-8) stating that the dividends are so connected is filed with the Company.
Instead, the effectively connected dividends will be subject to regular U.S.
income tax in the same manner as if the Non-U.S. Holder were a U.S. resident. A
non-U.S. corporation receiving effectively connected dividends may also be
subject to an additional "branch profits tax" which is imposed, under certain
circumstances, at a rate of 30% (or such lower rate as may be specified by an
applicable treaty) on the non-U.S. corporation's effectively connected earnings
and profits, subject to certain adjustments.
Generally, the Company must report to the U.S. Internal Revenue Service the
amount of dividends paid, the name and address of the recipient, and the amount,
if any, of tax withheld. A similar report is sent to the holder. Pursuant to tax
treaties or certain other agreements, the U.S. Internal Revenue Service may make
its reports available to tax authorities in the recipient's country of
residence. Dividends paid to a Non-U.S. Holder at an address within the United
States may be subject to backup withholding imposed at a rate of 31% if the
Non-U.S. Holder fails to establish that it is entitled to an exemption or to
provide a correct taxpayer identification number and certain other information
to the Company.
Under current United States federal income tax law, backup withholding
imposed at a rate of 31% generally will not apply to dividends paid on or before
December 31, 1998 to a Non-U.S. Holder at an address outside the United States
(unless the payer has knowledge that the payee is a U.S. person). Under the
Final Regulations, however, a Non-U.S. Holder will be subject to backup
withholding unless applicable certification requirements are met.
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<PAGE> 106
DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to U.S. federal income tax
with respect to gain realized on a sale or other disposition of Common Stock
unless (i) the gain is effectively connected with a trade or business of such
holder in the United States, (ii) in the case of certain Non-U.S. Holders who
are non-resident alien individuals and hold Common Stock as a capital asset,
such individuals are present in the United States for 183 or more days in the
taxable year of the disposition, (iii) the Non-U.S. Holder is subject to tax
pursuant to the provisions of the Code regarding the taxation of U.S.
expatriates, or (iv) the Company is or has been a "U.S. real property holding
corporation" within the meaning of Section 897(c)(2) of the Code at any time
within the shorter of the five-year period preceding such disposition or such
holder's holding period. The Company is not, and does not anticipate becoming, a
U.S. real property holding corporation.
Under current United States federal income tax law, information reporting
and backup withholding imposed at a rate of 31% will apply to the proceeds of a
disposition of Common Stock effected by or through a U.S. office of a broker
unless the disposing holder certifies as to its non-U.S. status or otherwise
establishes an exemption. Generally, U.S. information reporting and backup
withholding will not apply to a payment of disposition proceeds where the
transaction is effected outside the United States through a non-U.S. office of a
non-U.S. broker. However, U.S. information reporting requirements (but not
backup withholding) will apply to a payment of disposition proceeds where the
transaction is effected outside the United States by or through an office
outside the United States of a broker that is either (i) a U.S. person, (ii) a
foreign person which derives 50% or more of its gross income for certain periods
from the conduct of a trade or business in the United States, (iii) a
"controlled foreign corporation" for U.S. federal income tax purposes, or (iv)
effective after December 31, 1998, certain brokers that are partnerships with
U.S. partners or that are engaged in a U.S. trade or business, and the broker
fails to maintain documentary evidence that the holder is a Non-U.S. Holder and
that certain conditions are met, or that the holder otherwise is entitled to an
exemption.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the U.S.
Internal Revenue Service.
FEDERAL ESTATE TAX
An individual Non-U.S. Holder who is treated as the owner of, or has made
certain lifetime transfers of, an interest in the Common Stock will be required
to include the value thereof in his gross estate for U.S. federal estate tax
purposes, and may be subject to U.S. federal estate tax unless an applicable
estate tax treaty provides otherwise.
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<PAGE> 107
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have
shares of Common Stock outstanding, based upon the number of shares outstanding
as of March 31, 1998. The shares sold in the Offering will be
freely tradeable without restriction or further registration under the
Securities Act, unless acquired by an "affiliate" of the Company, as that term
is defined in Rule 144; shares held by affiliates will be subject to resale
limitations of Rule 144 described below. All of the remaining
outstanding shares of Common Stock will be available for resale at various dates
beginning 180 days after the date of this Prospectus, upon expiration of
applicable lock-up agreements described below and subject to compliance with
Rule 144 under the Securities Act as the holding provisions of Rule 144 are
satisfied. Further, upon consummation of the Offering, shares of
Common Stock will be issuable upon the exercise of stock options to be granted
on or prior to the effective date of the Registration Statement. The Company
intends to file a registration statement on Form S-8 with respect to the shares
of Common Stock issuable upon exercise of such options, and a "shelf"
registration statement with respect to shares of Common Stock that may be issued
in connection with possible future acquisition transactions, as soon as
practicable after the consummation of the Offering.
In general, under Rule 144 as currently in effect, a stockholder who has
beneficially owned for at least one year shares privately acquired directly or
indirectly from the Company or from an affiliate of the Company, and persons who
are affiliates of the Company who have acquired the shares in registered
transactions, will be entitled to sell within any three-month period a number of
shares that does not exceed the greater of: (i) one percent of the outstanding
shares of Common Stock (approximately shares immediately after
completion of the Offering); or (ii) the average weekly trading volume in the
Common Stock during the four calendar weeks preceding such sale. Sales under
Rule 144 are also subject to certain requirements relating to the manner and
notice of sale and the availability of current public information about the
Company.
The Company, each of its directors and officers, the holders of the shares
of Common Stock issued or to be issued in the Mergers and certain related
persons have agreed with the Underwriters not to offer, sell or otherwise
dispose of any shares of Common Stock or securities convertible into or
exercisable or exchangeable for such shares for a period of 180 days after the
date of this Prospectus without the prior written consent of Morgan Stanley &
Co. Incorporated.
Prior to this Offering, there has been no public market for the Common
Stock. No predictions can be made with respect to the effect, if any, that
public sales of shares of the Common Stock or the availability of shares for
sale will have on the market price of the Common Stock after the completion of
the Offering. Sales of substantial amounts of Common Stock in the public market
following the Offering, or the perception that such sales may occur, could
adversely affect the market price of the Common Stock or the ability of the
Company to raise capital through sales of its equity securities. See "Risk
Factors -- No Prior Market for Common Stock; Possible Volatility of Stock
Price."
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<PAGE> 108
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date of this Prospectus (the "Underwriting Agreement"), the
U.S. Underwriters named below, for whom Morgan Stanley & Co. Incorporated, Smith
Barney Inc., Nationsbanc Montgomery Securities LLC and Friedman, Billings,
Ramsey & Co., Inc. are acting as U.S. Representatives, and the International
Underwriters named below for whom Morgan Stanley & Co. International Limited,
Smith Barney Inc., Nationsbanc Montgomery Securities LLC and Friedman, Billings,
Ramsey & Co., Inc. are acting as International Representatives, have severally
agreed to purchase, and the Company has agreed to sell to them, severally, the
respective number of shares of Common Stock set forth opposite the names of such
Underwriters below:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
---- ----------------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated.........................
Smith Barney Inc. ........................................
Nationsbanc Montgomery Securities LLC.....................
Friedman, Billings, Ramsey & Co., Inc. ...................
Subtotal..................................................
International Underwriters:
Morgan Stanley & Co. International Limited................
Smith Barney Inc. ........................................
Nationsbanc Montgomery Securities LLC.....................
Friedman, Billings, Ramsey & Co., Inc.....................
Subtotal..................................................
----------------
Total..................................................
================
</TABLE>
The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively referred
to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several Underwriters
to pay for and accept delivery of the shares of Common Stock offered hereby are
subject to the approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all of the
shares of Common Stock offered hereby (other than those covered by the U.S.
Underwriters' over-allotment option described below) if any such shares are
taken.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any Shares (as defined herein) for the account of anyone
other than a United States or Canadian Person (as defined herein) and (ii) it
has not offered or sold, and will not offer or sell, directly or indirectly, any
Shares or distribute any prospectus relating to the Shares outside the United
States or Canada or to anyone other than a United States or Canadian Person.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that, with certain
exceptions: (i) it is not purchasing any Shares for the account of any United
States or Canadian Person and (ii) it has not offered or sold, and will not
offer or sell, directly or indirectly, any Shares or distribute any prospectus
relating to the Shares in the United States or Canada or to any United States or
Canadian Person. With respect to any Underwriter that is a U.S. Underwriter and
an International Underwriter, the foregoing representations and agreements (i)
made by it in its capacity as a U.S. Underwriter apply only to it in its
capacity as a U.S. Underwriter and (ii) made by it in its capacity as an
International Underwriter apply only to it in its capacity as an International
Underwriter. The foregoing limitations do not apply to stabilization
transactions or to certain other transactions specified in the Agreement between
U.S. and International Underwriters. As used herein, "United States or Canadian
Person" means any national or resident of the United States or Canada, or any
corporation, pension, profit-sharing or other trust or other entity organized
under the laws of the United States or Canada or of any political subdivision
thereof (other than a branch located outside the United States and Canada of any
United States or Canadian Person), and includes any United States or Canadian
branch of a person who is otherwise not a United States or Canadian Person. All
shares of Common
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<PAGE> 109
Stock to be purchased by the Underwriters under the Underwriting Agreement are
referred to herein as the "Shares."
Pursuant to the Agreement between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of Shares as may be mutually agreed. The per share price of any
Shares so sold shall be the public offering price set forth on the cover page
hereof, in United States dollars, less an amount not greater than the per share
amount of the concession to dealers set forth below.
Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any Shares, directly or indirectly, in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and has
represented that any offer or sale of Shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer or sale is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchases from it any
of the Shares a notice stating in substance that, by purchasing such Shares,
such dealer represents and agrees that it has not offered or sold, and will not
offer or sell, directly or indirectly, any of such Shares in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and that
any offer or sale of Shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the province or territory of Canada
in which such offer or sale is made, and that such dealer will deliver to any
other dealer to whom its sells any of such Shares a notice containing
substantially the same statement as is contained in this sentence.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and, prior to the date six months after the closing date for the sale of
the Shares to the International Underwriters, will not offer or sell, any Shares
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act of 1986 with respect to
anything done by it in relation to the Shares in, from or otherwise involving
the United Kingdom; and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in connection
with the offering of the Shares to a person who is of a kind described in
Article 11(3) of the Financial Services Act of 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.
Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the Shares acquired in
connection with the distribution contemplated hereby, except for offers or sales
to Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law. Each
International Underwriter has further agreed to send to any dealer who purchases
from it any of the Shares a notice stating in substance that, by purchasing such
Shares, such dealer represents and agrees that it has not offered or sold, and
will not offer or sell, any of such Shares, directly or indirectly, in Japan or
to for the account of any resident thereof except for offers or sales to
Japanese International Underwriters or dealers and except pursuant to any
exemption from the registration requirements of the Securities and Exchange Law
and otherwise in compliance with applicable provisions of Japanese law, and that
such dealer will send to any other dealer to whom it sells any of such Shares a
notice containing substantially the same statement as is contained in this
sentence.
The Underwriters initially propose to offer part of the shares of Common
Stock directly to the public at the public offering price set forth on the cover
page hereof and part to certain dealers at a price that represents a concession
not in excess of $ a share under the public offering price. Any
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $ a share to other Underwriters or to certain other dealers. After
the initial offering of the shares of Common Stock, the offering price and other
selling terms may from time to time be varied by the Representatives.
105
<PAGE> 110
The Company has granted to the U.S. Underwriters an option, exercisable for
30 days from the date of this Prospectus, to purchase up to an aggregate of
additional shares of Common Stock at the public offering price set
forth on the cover page hereof, less underwriting discounts and commissions. The
U.S. Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, made in connection with the offering of the shares of
Common Stock offered hereby. To the extent such option is exercised, each U.S.
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of Common Stock as
the number set forth next to such U.S. Underwriter's name in the preceding table
bears to the total number of shares of Common Stock offered by the U.S.
Underwriters hereby.
The Common Stock has been approved for listing on the New York Stock
Exchange, subject to official notice of issuance, under the symbol "UCP."
At the request of the Company, the Underwriters have reserved up to
shares of Common Stock offered hereby for sale at the initial public offering
price to certain employees of the Company and other persons. The number of
shares available for sale to the general public will be reduced to the extent
that such persons purchase such reserved shares. Any reserved shares not so
purchased will be offered by the Underwriters to the general public on the same
basis as the other shares of Common Stock offered hereby.
Each of the Company and the directors, executive officers and certain other
stockholders of the Company has agreed that, without the prior written consent
of Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending 180 days after the date of this Prospectus, with
certain limited exceptions, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contact to sell, grant
any option, right or warrant to purchase, lend, or otherwise transfer or dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Common Stock, whether
any such transaction described in clause (i) or (ii) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise. The
restrictions described in this paragraph do not apply to (x) the sale of the
Shares to the Underwriters or (y) the issuance by the Company of the shares of
Common Stock upon the exercise of any option or a warrant or the conversion of a
security outstanding on the date of this Prospectus of which the Underwriters
have been advised in writing provided that the recipient of such shares agrees
to be bound by the transfer restrictions set forth herein.
The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Common Stock offered by them.
From time to time, each of the Underwriters and their respective affiliates
may provide investment banking services to the Company.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act.
In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with the offering, creating a short position in the Common Stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
Common Stock in the open market. Finally, the underwriting syndicate may reclaim
selling concessions allowed to an Underwriter or a dealer for distributing the
Common Stock in the Offering, if the syndicate repurchases previously
distributed Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Common Stock above independent market
levels. The Underwriters are not required to engage in these activities, and may
end any of these activities at any time.
PRICING OF THE OFFERING
Prior to the Offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiations
between the Company and the Representatives. Among the factors to be
106
<PAGE> 111
considered in determining the initial public offering price will be the future
prospects of the Company and its industry in general, sales, earnings and
certain other financial and operating information of the Company in recent
periods, and the price-earnings ratios, price-sales ratios, market prices of
securities and certain financial and operating information of companies engaged
in activities similar to those of the Company. The estimated initial public
offering price range set forth on the cover page of this Preliminary Prospectus
is subject to change as a result of market conditions and other factors.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Morgan, Lewis & Bockius LLP, Pittsburgh, Pennsylvania.
Certain legal matters relating to the shares of Common Stock offered hereby will
be passed upon for the Underwriters by Davis Polk & Wardwell, New York, New
York.
EXPERTS
The financial statements of UniCapital as of December 31, 1997 and for the
period from inception (October 9, 1997) to December 31, 1997 included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent certified public accountants, given on the authority of said
firm as experts in auditing and accounting.
The financial statements of Boulder as of December 31, 1997 and for the
year then ended included in this Prospectus have been so included in reliance on
the report of Price Waterhouse LLP, independent certified public accountants,
given on the authority of said firm as experts in auditing and accounting.
The financial statements of Merrimac as of December 31, 1997 and for each
of the two years in the period ended December 31, 1997 included in this
Prospectus have been so included in reliance on the report of Price Waterhouse
LLP, independent certified public accountants, given on the authority of said
firm as experts in auditing and accounting.
The financial statements of NSJ and Walden as of December 31, 1996 and 1997
and for each of the three years in the period ended December 31, 1997 included
in this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent certified public accountants, given on the authority
of said firm as experts in auditing and accounting.
The financial statements of Varilease as of September 30, 1996 and 1997 and
for each of the three years in the period ended September 30, 1997 included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent certified public accountants, given on the authority
of said firm as experts in auditing and accounting.
The financial statements of American Capital as of July 31, 1996 and 1997
and for each of the years in the three-year period ended July 31, 1997 and the
financial statements of Boulder for the year ended December 31, 1996 included in
this Prospectus have been so included in reliance on the report of KPMG Peat
Marwick LLP, independent certified public accountants, given on the authority of
said firm as experts in auditing and accounting.
The combined financial statements of Cauff Lippman at December 31, 1996 and
1997, and for each of the three years in the period ended December 31, 1997,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent certified public accountants, as set forth in
their report thereon appearing elsewhere herein and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
The financial statements of Jacom as of December 31, 1996 and 1997 and for
each of the three years in the period ended December 31, 1997 included in this
Prospectus have been so included in reliance on the report of BDO Seidman LLP,
independent certified public accountants, given on the authority of said firm as
experts in auditing and accounting.
107
<PAGE> 112
The financial statements of Matrix as of June 30, 1996 and 1997 and for
each of the three years in the period ended June 30, 1997 included in this
Prospectus have been so included in reliance on the report of Tanner + Co.,
independent certified public accountants, given on the authority of said firm as
experts in auditing and accounting.
The financial statements of MCMG as of December 31, 1996 and 1997 and for
each of the three years in the period ended December 31, 1997 included in this
Prospectus have been so included in reliance on the report of Grant Thornton
LLP, independent certified public accountants, given on the authority of said
firm as experts in auditing and accounting.
The financial statements of PFSC as of December 31, 1996 and 1997 and for
each of the two years in the period ended December 31, 1997 included in this
Prospectus have been so included in reliance on the report of Arthur Andersen
LLP, independent certified public accountants, given on the authority of said
firm as experts in auditing and accounting.
The financial statements of Keystone as of December 31, 1996 and 1997 and
for each of the three years in the period ended December 31, 1997 included in
this Prospectus have been so included in reliance on the report of Coopers &
Lybrand L.L.P., independent certified public accountants, given on the authority
of said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (the "Registration
Statement") under the Securities Act and the rules and regulations promulgated
thereunder, covering the Common Stock offered hereby. This Prospectus omits
certain information contained in the Registration Statement, and reference is
made to the Registration Statement, and the exhibits and schedules thereto for
further information with respect to the Company and the Common Stock offered
hereby. Statements contained in this Prospectus as to the contents of any
contract, agreement or other document filed as an exhibit to the Registration
Statement are not necessarily complete, and in each instance, reference is made
to the exhibit for a more complete description of the matter involved, each such
statement being qualified in its entirety by such reference. The Registration
Statement may be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission maintained
at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World
Trade Center, Suite 1300, New York, New York 10048. Copies of such materials may
be obtained from the Public Reference Section of the Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, registration statements and certain other filings made with
the Commission through its Electronic Data Gathering, Analysis and Retrieval
("EDGAR") system are publicly available through the Commission's site on the
Internet's World Wide Web, located at http://www.sec.gov. The Registration
Statement, including all exhibits thereto and amendments thereof, has been filed
with the Commission through EDGAR.
108
<PAGE> 113
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNICAPITAL CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Introduction.............................................. F-4
Unaudited Pro Forma Combined Balance Sheet................ F-5
Unaudited Pro Forma Combined Statement of Operations...... F-7
Notes to Unaudited Pro Forma Combined Financial
Statements............................................. F-9
UNICAPITAL CORPORATION
Report of Independent Certified Public Accountants........ F-14
Balance Sheet............................................. F-15
Notes to Balance Sheet.................................... F-16
AMERICAN CAPITAL RESOURCES, INC.
Independent Auditors' Report.............................. F-20
Balance Sheets............................................ F-21
Statements of Income and Retained Earnings................ F-22
Statements of Cash Flows.................................. F-23
Notes to Financial Statements............................. F-24
BOULDER CAPITAL GROUP, INC.
Report of Independent Certified Public Accountants........ F-31
Balance Sheet............................................. F-32
Statement of Operations................................... F-33
Statement of Stockholders' Equity......................... F-34
Statement of Cash Flows................................... F-35
Notes to Financial Statements............................. F-36
Independent Auditors' Report.............................. F-43
Statements of Operations and Retained Earnings............ F-44
Statement of Cash Flows................................... F-45
Notes to Financial Statements............................. F-46
CAUFF, LIPPMAN AVIATION, INC. AND CERTAIN AFFILIATES
Report of Independent Certified Public Accountants........ F-50
Combined Balance Sheets................................... F-51
Combined Statements of Income............................. F-52
Combined Statements of Changes in Equity (Deficit)........ F-53
Combined Statements of Cash Flows......................... F-54
Notes to Combined Financial Statements.................... F-55
JACOM COMPUTER SERVICES, INC.
Report of Independent Certified Public Accountants........ F-60
Balance Sheets............................................ F-61
Statements of Income and Retained Earnings................ F-62
Statements of Cash Flows.................................. F-63
</TABLE>
F-1
<PAGE> 114
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Accounting Policies............................ F-64
Notes to Financial Statements............................. F-67
K.L.C., INC.
Report of Independent Accountants......................... F-70
Balance Sheets............................................ F-71
Statements of Income and Retained Earnings................ F-72
Statements of Cash Flows.................................. F-73
Notes to Financial Statements............................. F-74
MATRIX FUNDING CORPORATION AND SUBSIDIARY
Independent Auditors' Report.............................. F-79
Consolidated Balance Sheet................................ F-80
Consolidated Statement of Income.......................... F-81
Consolidated Statement of Stockholders' Equity............ F-82
Consolidated Statement of Cash Flows...................... F-83
Notes to Consolidated Financial Statements................ F-84
MERRIMAC FINANCIAL ASSOCIATES
Report of Independent Certified Public Accountants........ F-92
Balance Sheet............................................. F-93
Statement of Operations................................... F-94
Statement of Partners' Capital............................ F-95
Statement of Cash Flows................................... F-96
Notes to Financial Statements............................. F-97
MUNICIPAL CAPITAL MARKETS GROUP, INC.
Report of Independent Certified Public Accountants........ F-100
Balance Sheets............................................ F-101
Statements of Operations.................................. F-102
Statement of Stockholders' Equity......................... F-103
Statements of Cash Flows.................................. F-104
Notes to Financial Statements............................. F-105
THE NSJ GROUP
Report of Independent Certified Public Accountants........ F-107
Combined Balance Sheet.................................... F-108
Combined Statement of Operations.......................... F-109
Combined Statement of Stockholders' Equity................ F-110
Combined Statement of Cash Flows.......................... F-111
Notes to Combined Financial Statements.................... F-112
PORTFOLIO FINANCIAL SERVICING COMPANY, L.P.
Report of Independent Public Accountants.................. F-118
Balance Sheets............................................ F-119
Statements of Operations.................................. F-120
</TABLE>
F-2
<PAGE> 115
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Statements of Changes in Partners' Equity................. F-121
Statements of Cash Flows.................................. F-122
Notes to Financial Statements............................. F-123
VARILEASE CORPORATION AND SUBSIDIARY
Report of Independent Certified Public Accountants........ F-126
Consolidated Balance Sheet................................ F-127
Consolidated Statement of Operations...................... F-128
Consolidated Statement of Stockholders' Equity............ F-129
Consolidated Statement of Cash Flows...................... F-130
Notes to Consolidated Financial Statements................ F-131
THE WALDEN ASSET GROUP, INC.
Report of Independent Certified Public Accountants........ F-139
Balance Sheet............................................. F-140
Statement of Operations................................... F-141
Statement of Stockholders' Equity......................... F-142
Statement of Cash Flows................................... F-143
Notes to Financial Statements............................. F-144
</TABLE>
F-3
<PAGE> 116
UNICAPITAL CORPORATION AND FOUNDING COMPANIES
INTRODUCTION TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements give effect
to the acquisitions by UniCapital Corporation ("UniCapital") of the outstanding
capital stock of American Capital Resources, Inc. ("American Capital"), Boulder
Capital Group, Inc. ("Boulder"), Cauff, Lippman Aviation, Inc. and Certain
Affiliates ("Cauff Lippman"), Jacom Computer Services, Inc. ("Jacom"), K.L.C.,
Inc. ("Keystone"), Matrix Funding Corporation and Subsidiary ("Matrix"),
Municipal Capital Markets Group, Inc. ("MCMG"), The NSJ Group ("NSJ"), Varilease
Corporation and Subsidiary ("Varilease") and The Walden Asset Group, Inc.
("Walden") and the partnership interests of Merrimac Financial Associates
("Merrimac") and Portfolio Financial Servicing Company, L.P. ("PFSC"). These
acquisitions will occur simultaneously with the closing of UniCapital's initial
public offering and will be accounted for using the purchase method of
accounting. UniCapital has been identified as the "accounting acquiror" in
accordance with the provisions of Securities and Exchange Commission Staff
Accounting Bulletin No. 97, which states that the combining company that
receives the largest portion of voting rights in the combined corporation is
presumed to be the "accounting acquiror" for financial statement presentation
purposes. The consideration to be paid to the stockholders of the Founding
Companies in the Mergers consists of a combination of cash and Common Stock. In
addition, the Company may make additional payments to the stockholders of the
Founding Companies (other than PFSC), in cash and Common Stock, based upon
increases in the adjusted pre-tax income of the Founding Companies for the years
ended December 31, 1998 and 1999 (and, in the case of Boulder, Cauff Lippman and
NSJ, also for the year ended December 31, 2000). If and when such additional
consideration is paid to the stockholders of the Founding Companies, the fair
value of such consideration will be recorded in a manner consistent with the
consideration paid at closing for each Founding Company. Any shares of Common
Stock issued as contingent consideration will impact earnings per share in the
period in which the contingencies are resolved and the Common Stock is
distributable. The additional goodwill will be amortized over the remaining term
of the original goodwill recorded by the Company at closing.
The unaudited pro forma combined balance sheet gives effect to the Mergers
and the Offering as if they had occurred on December 31, 1997. The unaudited pro
forma combined statement of operations gives effect to these transactions as if
they had occurred on January 1, 1997.
UniCapital has preliminarily analyzed the savings that it expects to
realize from reductions in salaries and certain benefits to the stockholders and
management of the Founding Companies. To the extent that the stockholders and
management of the Founding Companies have agreed prospectively to reductions in
salary, bonuses and benefits, these reductions have been reflected in the pro
forma combined statement of operations. With respect to other potential cost
savings, UniCapital has not and cannot quantify these savings until completion
of the combination of the Founding Companies. Additionally, the pro forma
combined statement of operations gives effect to anticipated compensation of
UniCapital's new corporate management and associated costs of being a public
company.
The pro forma adjustments are based on estimates, available information and
certain assumptions and may be revised as additional information becomes
available. The pro forma financial data do not purport to represent what
UniCapital's financial position or results of operations would actually have
been if such transactions in fact had occurred on those dates and are not
necessarily representative of UniCapital's financial position or results of
operations for any future period. Since the Founding Companies were not under
common control or management, historical combined results may not be comparable
to, or indicative of, future performance. The unaudited pro forma combined
financial statements should be read in conjunction with the other financial
statements and notes thereto included elsewhere in this Prospectus. See "Risk
Factors" included elsewhere in this Prospectus.
F-4
<PAGE> 117
UNICAPITAL CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1997
(in thousands)
<TABLE>
<CAPTION>
AMERICAN CAUFF
UNICAPITAL CAPITAL BOULDER LIPPMAN JACOM KEYSTONE
---------- ------- ------- ------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Assets:
Cash and cash equivalents............................. $ 30 $ 849 $ 200 $ 8,354 $ 2,596 $ 1,479
Marketable securities................................. -- -- -- -- -- --
Accounts receivable................................... -- -- 510 10,369 3,655 1,861
Net investment in direct financing and sales-type
leases.............................................. -- 67,526 32,162 -- 86,278 47,508
Equipment under operating leases, net................. -- -- 557 23,340 13,319 --
Equipment held for sale/lease......................... -- -- 2,382 -- -- 2,250
Property and equipment, net........................... -- 211 213 -- -- 294
Notes receivable...................................... -- -- -- -- -- --
Receivable from stockholders.......................... -- 526 -- -- 451 --
Investments........................................... -- -- -- -- -- --
Other assets.......................................... 601 4,535 -- 4,865 729 702
Deposits on equipment held for lease.................. -- -- -- 500 11,920 --
Goodwill.............................................. -- -- -- -- -- --
------- ------- ------- ------- -------- -------
Total assets........................................ $ 631 $73,647 $36,024 $47,428 $118,948 $54,094
======= ======= ======= ======= ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Recourse debt......................................... $ -- $35,552 $ 2,720 $ -- $ 7,304 $39,659
Non-recourse and limited recourse debt................ -- 17,513 28,265 26,749 35,751 --
Subordinated debt..................................... -- -- 2,250 -- -- --
Payable to shareholders, officers and affiliates...... -- -- -- 8,188 -- --
Accounts payable and accrued expenses................. 355 11,033 1,670 448 3,467 1,825
Security and other deposits........................... -- -- -- 6,338 -- --
Other liabilities..................................... -- 6 -- -- -- --
Income taxes payable.................................. -- -- -- -- 580 --
Deferred income taxes payable......................... -- 1,610 598 -- 2,678 565
------- ------- ------- ------- -------- -------
Total liabilities................................... 355 65,714 35,503 41,723 49,780 42,049
------- ------- ------- ------- -------- -------
Minority interest....................................... -- -- -- 698 -- --
Stockholders' equity:
Preferred stock....................................... -- -- -- -- -- --
Common stock.......................................... 5 -- -- 1 1 100
Additional paid-in capital............................ 1,744 1,030 536 1,818 -- 6
Loans receivable from related party................... -- -- -- -- -- (746)
Stock subscription notes receivable................... (129) -- -- -- -- --
Retained earnings (deficit)........................... (1,344) 6,903 (15) 3,188 69,167 12,685
Partners' equity...................................... -- -- -- -- -- --
Unrealized gain (loss) on securities.................. -- -- -- -- -- --
------- ------- ------- ------- -------- -------
Total stockholders' equity.......................... 276 7,933 521 5,007 69,168 12,045
------- ------- ------- ------- -------- -------
Total liabilities and stockholders' equity.......... $ 631 $73,647 $36,024 $47,428 $118,948 $54,094
======= ======= ======= ======= ======== =======
<CAPTION>
MATRIX MERRIMAC MCMG NSJ
------ -------- ---- ---
<S> <C> <C> <C> <C>
ASSETS
Assets:
Cash and cash equivalents............................. $ 7,675 $ 197 $464 $ 20
Marketable securities................................. 940 -- -- --
Accounts receivable................................... 1,367 238 37 1,039
Net investment in direct financing and sales-type
leases.............................................. 46,690 12,110 -- --
Equipment under operating leases, net................. 1,075 -- -- 23,780
Equipment held for sale/lease......................... 10,090 -- -- 2,471
Property and equipment, net........................... 306 20 9 --
Notes receivable...................................... -- -- -- --
Receivable from stockholders.......................... -- -- 40 10
Investments........................................... -- -- 114 5,737
Other assets.......................................... 367 40 5 400
Deposits on equipment held for lease.................. -- -- -- 2,497
Goodwill.............................................. -- -- -- --
------- ------- ---- -------
Total assets........................................ $68,510 $12,605 $669 $35,954
======= ======= ==== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Recourse debt......................................... $11,657 $ 9,495 $-- $ --
Non-recourse and limited recourse debt................ 39,171 -- -- 23,803
Subordinated debt..................................... -- -- -- --
Payable to shareholders, officers and affiliates...... -- -- -- --
Accounts payable and accrued expenses................. 2,980 59 28 539
Security and other deposits........................... -- 122 -- 2,107
Other liabilities..................................... -- -- 290 2,446
Income taxes payable.................................. 2,839 -- -- --
Deferred income taxes payable......................... 2,317 -- -- --
------- ------- ---- -------
Total liabilities................................... 58,964 9,676 318 28,895
------- ------- ---- -------
Minority interest....................................... -- -- -- --
Stockholders' equity:
Preferred stock....................................... 5,540 -- -- --
Common stock.......................................... 250 -- 1 1
Additional paid-in capital............................ -- -- 41 2,566
Loans receivable from related party................... -- -- -- --
Stock subscription notes receivable................... -- -- -- --
Retained earnings (deficit)........................... 3,497 -- 309 4,492
Partners' equity...................................... -- 2,929 -- --
Unrealized gain (loss) on securities.................. 259 -- -- --
------- ------- ---- -------
Total stockholders' equity.......................... 9,546 2,929 351 7,059
------- ------- ---- -------
Total liabilities and stockholders' equity.......... $68,510 $12,605 $669 $35,954
======= ======= ==== =======
</TABLE>
F-5
<PAGE> 118
UNICAPITAL CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1997
(in thousands)
<TABLE>
<CAPTION>
PRO FORMA POST MERGER
PFSC VARILEASE WALDEN TOTAL ADJUSTMENTS COMBINED ADJUSTMENTS AS ADJUSTED
---- --------- ------ ----- ----------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Assets:
Cash and cash equivalents....... $ 5 $ 2,834 $ 693 $ 25,396 $ (7,690) $ 17,706 $ 125,494 $ 143,200
Marketable securities........... -- -- -- 940 -- 940 -- 940
Accounts receivable............. 181 4,028 697 23,982 (100) 23,882 -- 23,882
Net investment in direct
financing and sales-type
leases........................ -- 65,619 51,713 409,606 -- 409,606 -- 409,606
Equipment under operating
leases, net................... -- 22,496 3,667 88,234 21,845 110,079 -- 110,079
Equipment held for sale/lease... -- 12,800 4,814 34,807 -- 34,807 -- 34,807
Property and equipment, net..... 534 1,886 -- 3,473 (146) 3,327 -- 3,327
Notes receivable................ -- -- -- -- -- -- -- --
Receivable from stockholders.... -- 1,529 -- 2,556 (2,556) -- -- --
Investments..................... -- 2,890 -- 8,741 -- 8,741 -- 8,741
Other assets.................... 58 -- 98 12,400 (740) 11,660 (573) 11,087
Deposits on equipment held for
lease......................... -- 393 -- 15,310 -- 15,310 -- 15,310
Goodwill........................ -- -- -- -- 477,876 477,876 -- 477,876
---- -------- ------- -------- --------- ---------- --------- ----------
Total assets.................. $778 $114,475 $61,682 $625,445 $ 488,489 $1,113,934 $ 124,921 $1,238,855
==== ======== ======= ======== ========= ========== ========= ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities:
Recourse debt................... $ -- $ 5,882 $ 561 $112,830 $ -- $ 112,830 $ -- $ 112,830
Non-recourse and limited
recourse debt................. -- 86,895 53,432 311,579 -- 311,579 -- 311,579
Subordinated debt............... -- -- -- 2,250 -- 2,250 -- 2,250
Payable to shareholders,
officers and affiliates....... -- -- -- 8,188 358,418 366,606 (366,606) --
Accounts payable and accrued
expenses...................... 151 9,190 2,553 34,298 (290) 34,008 -- 34,008
Security and other deposits..... -- -- -- 8,567 -- 8,567 -- 8,567
Other liabilities............... 156 650 -- 3,548 -- 3,548 -- 3,548
Income taxes payable............ -- -- -- 3,419 -- 3,419 -- 3,419
Deferred income taxes payable... -- 7,805 -- 15,573 26,518 42,091 -- 42,091
---- -------- ------- -------- --------- ---------- --------- ----------
Total liabilities............. 307 110,422 56,546 500,252 384,646 884,898 (366,606) 518,292
---- -------- ------- -------- --------- ---------- --------- ----------
Minority interest................. -- -- -- 698 (698) -- -- --
Stockholders' equity:
Preferred stock................. -- -- -- 5,540 (5,540) -- -- --
Common stock.................... -- 5 -- 364 (344) 20 28 48
Additional paid-in capital...... -- -- 75 7,816 222,673 230,489 491,499 721,988
Loans receivable from related
party......................... -- -- -- (746) 746 -- -- --
Stock subscription notes
receivable.................... -- -- -- (129) -- (129) -- (129)
Retained earnings (deficit)..... -- 4,048 5,061 107,991 (109,335) (1,344) -- (1,344)
Partners' equity................ 471 -- -- 3,400 (3,400) -- -- --
Unrealized gain (loss) on
securities.................... -- -- -- 259 (259) -- -- --
---- -------- ------- -------- --------- ---------- --------- ----------
Total stockholders' equity.... 471 4,053 5,136 124,495 104,541 229,036 491,527 720,563
---- -------- ------- -------- --------- ---------- --------- ----------
Total liabilities and
stockholders' equity........ $778 $114,475 $61,682 $625,445 $ 488,489 $1,113,934 $ 124,921 $1,238,855
==== ======== ======= ======== ========= ========== ========= ==========
</TABLE>
F-6
<PAGE> 119
UNICAPITAL CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
AMERICAN CAUFF
UNICAPITAL CAPITAL BOULDER LIPPMAN JACOM KEYSTONE MATRIX MERRIMAC MCMG
---------- ------- ------- ------- ----- -------- ------ -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Finance income from direct
financing and sales-type
leases........................... $ -- $ 4,784 $3,618 $ -- $ 8,377 $7,573 $ 9,269 $1,930 $ --
Rental income from operating
leases........................... -- -- 344 17,596 16,531 -- 991 -- --
Sales of equipment................. -- -- 1,522 5,725 62,897 -- -- --
Gain on sale of leases............. -- 5,079 727 -- 472 -- 1,148 -- --
Fees, commissions and remarketing
income........................... -- 87 -- 8,156 -- 772 370 -- 4,414
Interest and other income.......... -- 1,555 186 708 1,794 648 519 149 83
------- ------- ------ ------- ------- ------ ------- ------ ------
Total revenues................. -- 11,505 6,397 32,185 90,071 8,993 12,297 2,079 4,497
Cost of operating leases........... -- -- 238 12,660 6,448 -- 854 -- --
Cost of equipment sold............. -- -- 1,338 4,325 47,914 -- -- -- --
Interest expense................... -- 5,328 2,696 2,769 4,645 2,458 3,949 663 --
Selling, general and
administrative................... 1,344 6,089 1,652 4,871 13,183 4,842 4,075 805 4,178
Goodwill amortization.............. -- -- -- -- -- -- -- -- --
------- ------- ------ ------- ------- ------ ------- ------ ------
Total expenses................. 1,344 11,417 5,924 24,625 72,190 7,300 8,878 1,468 4,178
------- ------- ------ ------- ------- ------ ------- ------ ------
Income from operations............. (1,344) 88 473 7,560 17,881 1,693 3,419 611 319
Minority interest.................. -- -- -- 645 -- -- -- -- --
Equity in income from minority
owned affiliates................. -- -- -- 219 -- -- -- -- --
------- ------- ------ ------- ------- ------ ------- ------ ------
Net income (loss) before income
taxes and extraordinary item..... (1,344) 88 473 7,134 17,881 1,693 3,419 611 319
Provision for income taxes......... -- 36 598 -- 755 689 1,316 -- --
------- ------- ------ ------- ------- ------ ------- ------ ------
Net income (loss) before
extraordinary item............... $(1,344) $ 52 $ (125) $7,134 $17,126 $1,004 $ 2,103 $ 611 $ 319
======= ======= ====== ======= ======= ====== ======= ====== ======
</TABLE>
F-7
<PAGE> 120
UNICAPITAL CORPORATION AND FOUNDING COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(in thousands, except per share data)
<TABLE>
<CAPTION>
COMBINED PRO FORMA PRO FORMA
NSJ PFSC VARILEASE WALDEN TOTAL ADJUSTMENTS COMBINED
--- ---- --------- ------ ----- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Finance income from direct financing and
sales-type leases.............................. $ -- $ -- $ 6,756 $ 6,575 $48,882 $ -- $ 48,882
Rental income from operating leases.............. 7,320 -- 11,107 1,543 55,432 -- 55,432
Sales of equipment............................... 9,560 -- 12,302 1,046 93,052 -- 93,052
Gain on sale of leases........................... -- -- 6,516 573 14,515 -- 14,515
Fees, commissions and remarketing income......... -- 1,480 6,390 602 22,271 (1,998) 20,273
Interest and other income........................ 511 -- 142 -- 6,295 -- 6,295
------- ------- ------- ------- -------- -------- -----------
Total revenues................................. 17,391 1,480 43,213 10,339 240,447 (1,998) 238,449
------- ------- ------- ------- -------- -------- -----------
Cost of operating leases......................... 1,866 -- 9,122 683 31,871 949 32,820
Cost of equipment sold........................... 8,723 -- 10,165 389 72,854 -- 72,854
Interest expense................................. 3,034 -- 6,924 3,868 36,334 -- 36,334
Selling, general and administrative.............. 3,015 3,356 7,966 3,128 58,504 (13,027) 45,477
Goodwill amortization............................ -- -- -- -- -- 12,384 12,384
------- ------- ------- ------- -------- -------- -----------
Total expenses................................. 16,638 3,356 34,177 8,068 199,563 306 199,869
------- ------- ------- ------- -------- -------- -----------
Income from operations........................... 753 (1,876) 9,036 2,271 40,884 (2,304) 38,580
Minority interest................................ -- -- -- -- 645 (645) --
Equity in income from minority owned
affiliates..................................... 3,996 -- -- -- 4,215 -- 4,215
------- ------- ------- ------- -------- -------- -----------
Net income (loss) before income taxes and
extraordinary item............................. 4,749 (1,876) 9,036 2,271 44,454 (1,659) 42,795
Provision for income taxes....................... -- -- 3,557 122 7,073 12,804 19,877
------- ------- ------- ------- -------- -------- -----------
Net income (loss) before extraordinary item...... $ 4,749 $(1,876) $ 5,479 $ 2,149 $37,381 $(14,463) $ 22,918
======= ======= ======= ======= ======== ======== ===========
Net income per share before extraordinary item
(basic and diluted)............................ $
Shares used in computing pro forma net income per
share before extraordinary item (see Note 5)...
</TABLE>
F-8
<PAGE> 121
UNICAPITAL CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
NOTE 1--GENERAL
UniCapital was established to create a national consolidator and operator
of equipment leasing and speciality finance businesses serving the commercial
market. UniCapital has conducted no operations to date and will acquire the
Founding Companies concurrently with and as a condition to the closing of the
Offering.
The historical financial statements reflect the financial position and
results of operations of UniCapital and the Founding Companies and were derived
from the respective Founding Companies' financial statements where indicated.
The periods included in these pro forma combined financial statements are as of
December 31, 1997 and for the year then ended, regardless of the fiscal year end
of the Founding Companies. The audited historical financial statements of
UniCapital and the Founding Companies included elsewhere in this Prospectus have
been included in accordance with Securities and Exchange Commission Staff
Accounting Bulletin No. 80.
NOTE 2--ACQUISITION OF FOUNDING COMPANIES
Concurrently with and as a condition to the closing of the Offering,
UniCapital will acquire all of the outstanding capital stock or partnership
interests of the Founding Companies. The acquisitions will be accounted for
using the purchase method of accounting with UniCapital identified as the
accounting acquiror. The carrying value of intangible assets is periodically
reviewed by the Company based on the expected future undiscounted operating cash
flows of the related business unit.
The following table sets forth the consideration to be paid in cash and
shares of Common Stock to the stockholders of each of the Founding Companies.
For purposes of computing the estimated purchase price for accounting purposes,
the value of shares is determined using an estimated fair value of $ per
share, which represents a discount of percent from the assumed initial public
offering price of $ per share due to restrictions on the sale and
transferability of the shares issued. The estimated purchase price allocations
for the acquisitions are based upon preliminary estimates and are subject to
certain adjustments. The Company does not anticipate that the final allocation
of purchase price will differ significantly from that presented.
<TABLE>
<CAPTION>
VALUE OF TOTAL
FOUNDING COMPANY CASH SHARES CONSIDERATION
---------------- -------- -------- -------------
<S> <C> <C> <C>
American Capital Resources, Inc............................. $ 20,350
Boulder Capital Group, Inc.................................. 7,050
Cauff, Lippman Aviation, Inc. and Certain Affiliates........ 48,000
Jacom Computer Services, Inc................................ 128,000
K.L.C., Inc................................................. 27,900
Matrix Funding Corporation and Subsidiary................... 19,416
Merrimac Financial Associates............................... --
Municipal Capital Markets Group, Inc........................ 7,043
The NSJ Group............................................... 16,016
Portfolio Financial Servicing Company, L.P.................. --
Varilease Corporation and Subsidiary........................ 36,753
The Walden Asset Group, Inc................................. 20,999
-------- -------- --------
$331,527
======== ======== ========
</TABLE>
F-9
<PAGE> 122
UNICAPITAL CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--CONTINUED
NOTE 3--UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
The following table summarizes unaudited pro forma combined balance sheet
adjustments as of December 31, 1997:
<TABLE>
<CAPTION>
MERGER ADJUSTMENTS
-------------------------------------------------------------- PRO FORMA
(A) (B) (C) (D) (E) ADJUSTMENTS
---------- ---------- -------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents..................... $ -- $ (3,500) $ -- $ (4,190) $ -- $ (7,690)
Accounts receivable........................... -- -- -- (100) -- (100)
Net investment in direct financing and
sales-type leases........................... -- -- -- -- -- --
Equipment under operating leases, net......... -- -- -- -- 21,845 21,845
Property and equipment, net................... -- -- -- (146) -- (146)
Receivable from stockholders.................. -- -- -- (2,556) -- (2,556)
Other assets.................................. -- -- -- (740) -- (740)
Goodwill...................................... -- -- -- -- 477,876 477,896
---------- ---------- -------- -------- ---------- ---------
Total assets............................ $ -- $ (3,500) $ -- $ (7,732) $ 499,721 $ 488,489
========== ========== ======== ======== ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Payable to shareholders, officers and
affiliates.................................. $ 331,527 $ -- $ 32,300 $ (8,188) $ 2,779 $ 358,418
Accounts payable and accrued expenses......... -- -- -- (290) -- (290)
Deferred income taxes payable................. -- -- -- -- 26,518 26,518
---------- ---------- -------- -------- ---------- ---------
Total liabilities....................... 331,527 -- 32,300 (8,478) 29,297 384,646
Minority interest............................. -- (698) -- -- -- (698)
Stockholders' equity:
Preferred Stock............................. -- -- -- -- (5,540) (5,540)
Common Stock................................ -- -- -- -- (344) (344)
Additional paid-in capital.................. (331,527) (2,802) -- -- 554,200 222,673
Loan receivable from related party.......... -- -- -- 746 -- 746
Retained earnings (deficit)................. -- (32,300) -- (74,233) (109,335)
Partners' equity............................ -- -- -- -- (3,400) (3,400)
Unrealized gain (loss) on securities........ -- -- -- -- (259) (259)
---------- ---------- -------- -------- ---------- ---------
Total stockholders' equity.............. (331,527) (2,802) (32,300) 746 470,424 104,541
---------- ---------- -------- -------- ---------- ---------
Total liabilities and stockholders'
equity................................ $ -- $ (3,500) $ -- $ (7,732) $ 499,721 $ 488,489
========== ========== ======== ======== ========== =========
<CAPTION>
OFFERING ADJUSTMENTS POST
---------------------- MERGER
(F) (G) ADJUSTMENTS
--------- --------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents..................... $ 492,100 $(366,606) $ 125,494
Accounts receivable........................... -- -- --
Net investment in direct financing and
sales-type leases........................... -- -- --
Equipment under operating leases, net......... -- -- --
Property and equipment, net................... -- -- --
Receivable from stockholders.................. -- -- --
Other assets.................................. (573) -- (573)
Goodwill...................................... -- -- --
--------- --------- ---------
Total assets............................ $ 491,527 $(366,606) $ 124,921
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Payable to shareholders, officers and
affiliates.................................. $ -- $(366,606) $(366,606)
Accounts payable and accrued expenses......... -- -- --
Deferred income taxes payable................. -- -- --
--------- --------- ---------
Total liabilities....................... -- (366,606) (366,606)
Minority interest............................. -- -- --
Stockholders' equity:
Preferred Stock............................. -- -- --
Common Stock................................ 28 -- 28
Additional paid-in capital.................. 491,499 -- 491,499
Loan receivable from related party.......... -- -- --
Retained earnings (deficit)................. -- -- --
Partners' equity............................ -- -- --
Unrealized gain (loss) on securities........ -- -- --
--------- --------- ---------
Total stockholders' equity.............. 491,527 -- 491,527
--------- --------- ---------
Total liabilities and stockholders'
equity................................ $ 491,527 $(366,606) $ 124,921
========= ========= =========
</TABLE>
F-10
<PAGE> 123
UNICAPITAL CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--CONTINUED
(A) Records the liability for the cash portion of the consideration to be paid
to the stockholders of the Founding Companies in connection with the
Mergers.
(B) Reflects reimbursement of stockholders of Cauff Lippman for their repurchase
of the minority interest in Cauff Lippman immediately prior to the Mergers.
(C) Reflects a distribution taken by the stockholder of Jacom immediately prior
to the Mergers.
(D) Reflects the payment of amounts payable to and receivable from stockholders
at American Capital, Cauff Lippman, Jacom, Matrix, MCMG, NSJ and Varilease.
(E) Reflects the acquisitions of the Founding Companies for a total estimated
purchase price of $ million consisting of $ million in cash and
13,334,064 shares of common stock with an estimated fair value of $ per
share (or $ million), which represents a discount of percent from the
assumed initial public offering price of $ per share due to restrictions
on the sale and transferability of the shares issued. $21.8 million of the
purchase price has been allocated to aircraft under operating leases and
$26.5 million to a deferred tax liability to be established upon the
conversion from S Corporation or partnership status of certain of the
Founding Companies and the remaining purchase price in excess of book value
of assets acquired has been allocated to goodwill.
(F) Reflects the cash proceeds from the issuance of shares of Common
Stock net of estimated expenses of the Offering (based on an estimated
initial public offering price of $ per share). Expenses of the Offering
primarily consist of underwriting discounts and commissions, accounting
fees, legal fees and printing expenses.
(G) Reflects payment of the cash portion of the purchase price to be paid to the
stockholders of the Founding Companies and the repayment of indebtedness of
Merrimac assumed by UniCapital in the Merrimac Merger and indebtedness of
Jacom incurred to fund an S Corporation distribution to the stockholder of
Jacom immediately prior to the Jacom Merger with a portion of the net
proceeds from the Offering.
NOTE 4--UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS
The following table summarizes unaudited pro forma combined statement of
operations adjustments for the year ended December 31, 1997:
(Unaudited)
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E) (F) (G) (H) TOTAL
--------- --------- -------- ------ -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fees, commissions and
remarketing income...... $ -- $ -- $ -- $ -- $ -- $ -- $ (1,998) $ -- $ (1,998)
--------- --------- -------- ------ -------- --------- --------- --------- ---------
Cost of operating
leases.................. -- -- 949 -- -- -- -- -- 949
Cost of equipment sold.... -- -- -- -- -- -- -- -- --
Interest expense.......... -- -- -- -- -- -- -- -- --
Selling, general &
administrative.......... (14,490) -- -- -- (1,340) -- (1,998) 4,801 (13,027)
Goodwill amortization..... -- 12,384 -- -- -- -- -- -- 12,384
--------- --------- -------- ------ -------- --------- --------- --------- ---------
(14,490) 12,384 949 -- (1,340) -- (1,998) 4,801 306
--------- --------- -------- ------ -------- --------- --------- --------- ---------
Income (loss) from
continuing operations... 14,490 (12,384) (949) -- 1,340 -- -- (4,801) (2,304)
Extraordinary item........ -- -- -- -- -- -- -- -- --
Minority interest......... -- -- -- (645) -- -- -- -- (645)
--------- --------- -------- ------ -------- --------- --------- --------- ---------
Pretax earnings (loss).... 14,490 (12,384) (949) 645 1,340 -- -- (4,801) (1,659)
Provision for income
taxes................... -- -- -- -- -- 12,804 -- -- 12,804
--------- --------- -------- ------ -------- --------- --------- --------- ---------
Net income (loss)......... $ 14,490 $ (12,384) $ (949) $ 645 $ 1,340 $ (12,804) $ -- $ (4,801) $ (14,463)
========= ========= ======== ====== ======== ========= ========= ========= =========
</TABLE>
F-11
<PAGE> 124
UNICAPITAL CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--CONTINUED
NOTE 4--UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS
(CONTINUED)
(A) Reflects the net reduction in compensation to the stockholders and
management of the Founding Companies to which they have agreed prospectively
in employment agreements to be effective upon completion of the Offering.
(B) Reflects the amortization of goodwill to be recorded as a result of the
Mergers over estimated useful lives ranging from 15 to 40 years.
(C) Reflects an increase in the depreciation for the aircraft under operating
leases based on the fair value of the assets to be recorded in purchase
accounting for these Mergers.
(D) Reflects the increase in Cauff Lippman's net income resulting from the
purchase of the minority interest.
(E) Reflects the reduction in compensation expense related to the non-cash
compensation charge recorded by UniCapital in the fourth quarter of 1997
related to Common Stock issued to management and consultants of UniCapital.
(F) Reflects (i) the incremental provision for federal and state income taxes
assuming all entities were subject to federal and state income taxes at a
combined effective rate of 38%; (ii) federal and state income taxes relating
to the other statement of operations' adjustments; and (iii) the
non-deductibility of goodwill amortization for tax purposes.
(G) Reflects the elimination of revenue/expenses recorded by NSJ and Cauff
Lippman relating to activities between the two companies during 1997.
(H) Reflects an estimate of additional costs to be incurred by UniCapital as a
public company. These expenses are primarily salaries and professional fees.
NOTE 5--SHARES USED IN COMPUTING PRO FORMA NET INCOME PER SHARE BEFORE
EXTRAORDINARY ITEM
Includes (i) 6,798,750 shares issued to the founders and initial investors
of UniCapital; (ii) 13,334,064 shares to be issued to stockholders of the
Founding Companies as part of the purchase price of the Founding Companies; and
(iii) of the shares sold in the Offering necessary to pay the cash
portion of the purchase price of the Founding Companies, to repay indebtedness
of Merrimac assumed by UniCapital in the Merrimac Merger and indebtedness of
Jacom incurred to fund an S Corporation distribution to the stockholder of Jacom
immediately prior to the Jacom Merger, and to pay certain expenses of the
Offering.
NOTE 6--STOCK OPTION PLANS
UniCapital has adopted the 1998 Long-Term Incentive Plan (the "1998
Incentive Plan") under which awards of options to acquire shares of Common Stock
may be made to employees, directors (other than non-employee directors),
consultants and advisors of the UniCapital. The maximum number of shares of
Common Stock which may be awarded under the 1998 Incentive Plan is 15% of the
total number of shares of Common Stock outstanding from time to time. In
connection with the Offering, UniCapital intends to grant to employees of the
Founding Companies, stock options to purchase a number of shares of Common Stock
equal to 6.25% of the aggregate consideration to be paid in the Mergers, divided
by the initial public offering price per share (such number of grants estimated
shares). The options will vest ratable over a four-year period and will
expire 10 years from the date of grant. In addition, in connection with the
Offering, UniCapital intends to grant 1,065,000 options to certain directors of
UniCapital that will be exercisable immediately at an exercise price equal to
the initial offering price, which will expire 10 years from the date of grant
and 303,500 options to certain members of management of UniCapital with an
exercise price equal to the initial offering price that will be exercisable over
a four year period. At December 31, 1997, no options had been granted under this
Plan.
F-12
<PAGE> 125
UNICAPITAL CORPORATION AND FOUNDING COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS--CONTINUED
NOTE 6--STOCK OPTION PLANS (CONTINUED)
UniCapital has also adopted the 1997 Executive Non-Qualified Stock Option
Plan (the "1997 Executive Plan") under which awards of options to acquire shares
of Common Stock may be made to employees, directors, consultants and advisors of
UniCapital. The maximum number of shares of Common Stock which may be awarded
under options is 500,000. Options to purchase 200,000 shares at an exercise
price of $3.00 under the 1997 Executive Plan have been awarded as of February
19, 1998. Accordingly, under APB No. 25 UniCapital recorded compensation expense
of $576,000 in relation to these options in January 1998. In addition, in
connection with the Offering, UniCapital intends to grant 60,000 options that
will be exercisable immediately at an exercise price per share equal to the
initial offering price, which will expire 10 years from the date of grant.
UniCapital has also adopted the 1998 Non-Employee Directors' Stock Plan
(the "1998 Non-Directors' Plan") under which awards of options to acquire shares
of Common Stock may be made automatically to non-employee directors of
UniCapital. The maximum number of shares of Common Stock which may be awarded
under options is 500,000. In connection with the Offering, UniCapital intends to
grant 63,000 options that will be exercisable immediately at an exercise price
equal to the initial offering price, which will expire 10 years from the date of
grant.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," ("SFAS 123") allows entities to choose between a new
fair value based method of accounting for employee stock options or similar
equity instruments and the current intrinsic value-based method of accounting
prescribed by Accounting Principles Board Opinion No. 25 ("APB No. 25").
Entities electing to account for employee stock options or similar equity
instruments under APB No. 25 must make pro forma disclosures of net income and
earnings per share as if the fair value method of accounting has been applied.
UniCapital has elected APB No. 25, and will provide pro forma disclosure of net
income and earnings per share, as applicable, in the notes to future
consolidated financial statements. For pro forma disclosure purposes, had pro
forma compensation cost for UniCapital's stock based compensation plans been
determined based on the pro forma fair value at the grant dates for awards under
those plans consistent with the method of SFAS 123, UniCapital's pro forma net
income before extraordinary item for the year ended December 31, 1997 would have
been $15.1 million. Pro forma net income per share before extraordinary item
(basic and diluted) would have been $ .
The pro forma fair value of the options was estimated on the assumed date
of grant using the Black-Scholes option pricing model with the following
weighted average assumptions: dividend yield of 0%, expected volatility of 50%,
risk free interest rates of 5.70% and expected lives of four years.
F-13
<PAGE> 126
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of UniCapital Corporation
In our opinion, the accompanying balance sheet presents fairly, in all
material respects, the financial position of UniCapital Corporation at December
31, 1997, in conformity with generally accepted accounting principles. This
financial statement is the responsibility of the Company's management; our
responsibility is to express an opinion on this financial statement based on our
audit. We conducted our audit of this statement in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Ft. Lauderdale, Florida
February 19, 1998
F-14
<PAGE> 127
UNICAPITAL CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
<S> <C>
ASSETS
Cash........................................................ $ 30,406
Deferred offering costs..................................... 573,090
Prepaid expenses and other assets........................... 27,702
-----------
Total assets...................................... $ 631,198
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses....................... $ 355,053
-----------
Commitments (Note 5)
Stockholders' equity:
Preferred stock, $0.001 par value, 10,000,000 shares
authorized, no shares issued and outstanding........... --
Common stock, $0.001 par value, 100,000,000 shares
authorized, 5,276,250 shares issued and outstanding.... 5,276
Stock subscription notes receivable....................... (128,750)
Additional paid-in capital................................ 1,743,474
Accumulated deficit....................................... (1,343,855)
-----------
Net stockholders' equity.......................... 276,145
-----------
Total liabilities and stockholders' equity........ $ 631,198
===========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-15
<PAGE> 128
UNICAPITAL CORPORATION
NOTES TO BALANCE SHEET
NOTE 1--NATURE OF OPERATIONS
UniCapital Corporation, a Delaware Corporation, ("UniCapital" or the
"Company", formerly known as "U.S. Leasing, Inc.") was founded in October 1997,
to create a national consolidator and operator of equipment leasing and
specialty finance businesses serving the commercial market. UniCapital intends
to acquire twelve equipment leasing and related businesses (the "Mergers"), upon
consummation of an initial public offering (the "Offering") of its common stock
and, subsequent to the Offering, continue to acquire through merger or purchase,
similar companies to expand its national operations.
UniCapital has not conducted any operations, and all activities to date
have related to the Offering and the Mergers. The Company's cash balances were
generated from the sale of common stock of the Company to investors.
Accordingly, statements of operations, of cash flows and of changes in
stockholders' equity from inception of the Company to December 31, 1997 would
not provide meaningful information and have been omitted. Operating expenses
subsequent to inception consist primarily of the salary and benefits of the
Company's one employee which have been expensed. As of December 31, 1997, the
Company has incurred $573,090 in costs associated with the Offering, which have
been capitalized as deferred offering costs. These costs primarily include
professional and consulting fees, and will be recorded as a reduction of
proceeds of the Offering. The Company is dependent upon the Offering to execute
the pending Mergers. There is no assurance that the pending Mergers will be
completed or the Company will be able to generate future operating revenues.
NOTE 2--STOCKHOLDERS' EQUITY
Common Stock. In connection with the organization and initial
capitalization of UniCapital, on October 9, 1997, the Company authorized
100,000,000 shares of common stock with a par value of $.001 per share, and
issued 4,000,000 shares to certain individuals who have assisted the Company in
their capacity as consultants. One of the co-founders will become an employee of
the Company pursuant to an employment agreement upon completion of the Offering.
In addition, the Company sold 1,276,250 additional shares of common stock
between October 9, 1997 and December 31, 1997, to consultants and investors. As
a result of the sale of these shares, the Company recorded a non-cash
compensation charge of $1,340,000 during 1997, representing the excess of the
estimated fair value of the shares over the consideration received for the
shares at issuance.
Consideration received by the Company from the sale of shares of common
stock included $128,750 in notes receivable from two stockholders, which is
reflected in the balance sheet as a reduction from stockholders' equity. The
notes are due one year from completion of the Offering and bear interest at the
Applicable short term Federal Rate (5.68% at December 31, 1997).
NOTE 3--STOCK OPTION AND STOCK PURCHASE PLANS
The Company has adopted certain stock option plans and an employee stock
purchase plan, which are summarized below. Each of the option plans are
administered by a compensation committee composed of outside members of the
Board of Directors. Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," allows entities to choose between a
new fair value based method of accounting for employee stock options or similar
equity instruments and the current intrinsic value-based method of accounting
prescribed by Accounting Principles Board Opinion No. 25 ("APB No. 25").
Entities electing to account for employee stock options or similar equity
instruments under APB No. 25 must make pro forma disclosures of net income and
earnings per share as if the fair value method of accounting has been applied.
The Company has elected APB No. 25, and will provide pro forma disclosure of net
income and earnings per share, as applicable, in the notes to future
consolidated financial statements.
F-16
<PAGE> 129
UNICAPITAL CORPORATION
NOTES TO BALANCE SHEET--CONTINUED
NOTE 3--STOCK OPTION AND STOCK PURCHASE PLANS (CONTINUED)
1997 Executive Non-Qualified Stock Option Plan
The Company has adopted and the stockholders have approved the 1997
Executive Non-Qualified Stock Option Plan (the "1997 Executive Plan") under
which awards of options to acquire shares of common stock may be made to
employees, directors, consultants and advisors of the Company. The maximum
number of shares of common stock which may be awarded under options is 500,000
shares, of which, after the Offering, no more than 100,000 shares may be awarded
to an optionee in any calendar year. Options to purchase 200,000 shares under
the 1997 Executive Plan have been awarded as of February 19, 1998.
The terms and conditions of awards under the 1997 Executive Plan are
determined from time to time by the compensation committee and will constitute
nonqualified options under Section 422 of the Internal Revenue Code, as amended.
Outstanding awards will vest and become exercisable in the event of a change in
control of the Company, as defined.
1998 Long-Term Incentive Plan
The Company expects to adopt, and submit to the stockholders for approval,
the 1998 Long-Term Incentive Plan (the "1998 Incentive Plan") under which awards
of options to acquire shares of common stock may be made to employees, directors
(other than non-employee directors), consultants and advisors of the Company.
The maximum number of shares of common stock which may be awarded under the 1998
Incentive Plan is 15% of the total number of shares of common stock outstanding
from time to time. After the Offering, no more than 500,000 shares may be
awarded to an optionee in any calendar year. As of February 12, 1998, no awards
under the 1998 Incentive Plan are outstanding. Upon successful completion of the
Offering, the Company intends to grant to employees of the Founding Companies,
stock options to purchase a number of shares of common stock equal to 6.25% of
the aggregate consideration to be paid in the Mergers, divided by the initial
public offering price per share. The options will vest ratably over a four year
period and will expire 10 years from the date of grant. In addition, the Company
intends to grant 1,000,000 options (500,000 each to the Company's co-founders)
that will be exercisable immediately at an exercise price equal to the initial
offering price, which will expire 10 years from the date of grant.
The terms and conditions of awards under the 1998 Incentive Plan are
determined from time to time by the compensation committee. Exercise prices may
not be less than the fair value of the common stock on the date of grant and
exercise periods may not exceed 10 years.
1998 Non-Employee Directors' Stock Plan
The Company expects to adopt, and submit to the stockholders for approval,
the 1998 Non-Employee Directors' Stock Plan (the "1998 Non-Employee Directors'
Plan") under which awards of options to acquire shares of common stock may be
made automatically to non-employee directors. The maximum number of shares of
common stock which may be awarded under the 1998 Non-Employee Directors' Plan is
500,000 shares. Each non-employee director will receive on the date of the
Offering an initial award of an option to purchase 21,000 shares of common stock
(63,000 shares in the aggregate) at an exercise price equal to the initial
offering price of the common stock in the Offering. Thereafter, each
non-employee director will receive an annual award of an option to purchase
6,000 shares of common stock at an exercise price equal to the fair value of the
common stock. All awards are immediately exercisable.
1998 Employee Stock Purchase Plan
The Company expects to adopt, and submit to the stockholders for approval,
the 1998 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") under
which eligible employees of the Company may purchase shares of common stock
through payroll deductions at a price equal to 85% of the fair value of the
F-17
<PAGE> 130
UNICAPITAL CORPORATION
NOTES TO BALANCE SHEET--CONTINUED
NOTE 3--STOCK OPTION AND STOCK PURCHASE PLANS (CONTINUED)
common stock. The Company has reserved 2,000,000 shares of common stock for
issuance under the Employee Stock Purchase Plan.
NOTE 4--LINE OF CREDIT
The Company has a $250,000 line of credit facility with a financial
institution, due on July 31, 1998, all of which was unused at December 31, 1997.
Subsequent to December 31, 1997 the maximum borrowings allowed under the line of
credit agreement were increased to $500,000. The agreement expires in July 1998,
and is guaranteed jointly and severally by one of the Company's stockholders and
another related party. Interest on the facility is payable monthly computed at
the prime lending rate plus 0.75%.
NOTE 5--COMMITMENTS
Employment Agreements. The Company has entered into separate employment
agreements with seven management executives which will be effective at the time
of the Offering, each with a term of two years expiring at various dates in the
year 2000. The agreements provide for annual base salaries ranging from $175,000
to $650,000. These agreements would generally remain an obligation of the
Company in the event the Company terminates employment without cause after the
employment term commences.
Consulting Agreement. The Company intends to enter into a two-year
consulting agreement, which will be effective at the time of the Offering, with
a corporation the sole stockholder of which is a consultant to Jacom Computer
Services, Inc. ("Jacom"), one of the Founding Companies. The agreement provides
that such corporation will continue to provide such consulting services to Jacom
as it currently provides, and will render additional consulting services to the
Company in pursuing merger and acquisition activities and forming strategic
alliances. The agreement provides for base annual consulting fees of $500,000,
payable monthly.
NOTE 6--SUBSEQUENT EVENTS
Subsequent to December 31, 1997, the Company issued an additional 1,522,500
shares of Common Stock to individuals serving as consultants to the Company,
each of whom will become employees of the Company upon consummation of the
Offering, and certain other stockholders and recorded a non-cash compensation
charge of $4.5 million related to the difference between amounts paid and the
value of these shares. In addition, in January 1998, the Company issued an
option to a consultant to the Company, who will become an employee of the
Company upon consummation of the Offering, to purchase 200,000 shares of Common
Stock at $3.00 per share, which expires on January 31, 2008. The Company
recorded a charge in the amount of $576,000 in January 1998 reflecting the
compensatory value of the option.
On January 27, 1998, the Board of Directors approved a resolution to change
the Company's name to UniCapital Corporation and authorized 10,000,000 shares of
preferred stock with a par value of $.001 per share. No preferred stock has been
issued by the Company as of February 19, 1998.
Unaudited subsequent event. UniCapital has signed definitive agreements to
acquire by merger twelve equipment leasing and related companies ("Founding
Companies") to be effective contemporaneously with the Offering. The
consideration to be paid by UniCapital in acquiring the Founding Companies will
be a combination of cash and common stock, currently estimated to be
approximately $ million.
The total consideration does not reflect contingent consideration which may
be issued pursuant to earn out arrangements included in the definitive
agreements for the Founding Companies. These arrangements provide for the
Company to pay additional consideration based on earnings before taxes generated
by the Founding Companies for the years ended December 31, 1998 and 1999 (and in
certain cases also for the year ended December 31, 2000). Contingent
consideration, if earned, will be recorded in a manner consistent with the
consideration paid at closing for each Founding Company. Any shares of common
stock issued as contingent
F-18
<PAGE> 131
UNICAPITAL CORPORATION
NOTES TO BALANCE SHEET--CONTINUED
NOTE 6--SUBSEQUENT EVENTS (CONTINUED)
consideration will be included in shares used to compute earnings per share in
the period in which the contingencies are resolved and the common stock is
distributable.
F-19
<PAGE> 132
INDEPENDENT AUDITORS' REPORT
The Board of Directors
American Capital Resources, Inc.
We have audited the accompanying balance sheets of American Capital
Resources, Inc. as of July 31, 1996 and 1997, and the related statements of
income and retained earnings and cash flows for each of the years in the
three-year period ended July 31, 1997. 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 audit 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 incudes
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 financial statements referred to above present fairly,
in all material respects, the financial position of American Capital Resources,
Inc. as of July 31, 1996 and 1997, and the results of its operations and its
cash flows for each of the years in the three-year period ended July 31, 1997 in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
October 27, 1997
F-20
<PAGE> 133
AMERICAN CAPITAL RESOURCES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31,
------------------------- JANUARY 31,
1996 1997 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash................................................... $ 1,652,341 $ 2,032,544 $ 701,200
Net investment in contracts and leases receivable (note
2)................................................... 60,205,674 60,803,133 70,697,638
Property and equipment, net (note 3)................... 296,850 265,214 208,251
Other receivables (note 4)............................. 4,401,309 4,694,060 4,412,342
Receivable from stockholder (note 4)................... 418,872 488,172 697,341
Prepaid expenses and other assets...................... 425,041 308,315 332,501
----------- ----------- -----------
Total assets...................................... $67,400,087 $68,591,438 $77,049,273
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Notes payable--banks--recourse (note 5)................ $26,992,365 $28,442,676 $35,144,900
Notes payable--banks--limited recourse and nonrecourse
(note 6)............................................. 21,640,834 19,482,937 15,772,711
Notes payable--other................................... 19,961 7,970 5,237
Accounts payable and accrued expenses.................. 9,366,194 10,493,585 16,642,564
Deferred income taxes payable (note 7)................. 1,522,000 1,860,000 1,622,000
----------- ----------- -----------
Total liabilities................................. 59,541,354 60,287,168 69,187,412
----------- ----------- -----------
Commitments (note 8)
Stockholder's equity:
Common Stock--no par value, 200 shares authorized,
issued and outstanding............................ 200 200 200
Additional paid in capital........................... 1,029,882 1,029,882 1,029,882
Retained earnings.................................... 6,828,651 7,274,188 6,831,779
----------- ----------- -----------
Total stockholder's equity........................ 7,858,733 8,304,270 7,861,861
----------- ----------- -----------
Total liabilities and stockholder's equity........ $67,400,087 $68,591,438 $77,049,273
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-21
<PAGE> 134
AMERICAN CAPITAL RESOURCES, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
-------------------------------------- -----------------------
1995 1996 1997 1997 1998
---------- ----------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Finance income from direct
financing leases and
contracts...................... $4,679,763 $5,069,687 $4,986,537 $2,535,358 $2,427,724
Gain on sale of contracts........ 3,533,063 4,038,683 4,425,745 1,624,420 1,408,704
Fee income....................... 89,374 83,936 79,825 35,950 29,325
Interest and other income........ 943,940 1,041,628 1,261,582 486,139 817,107
---------- ----------- ----------- ---------- ----------
Total revenues.............. 9,246,140 10,233,934 10,753,689 4,681,867 4,682,860
---------- ----------- ----------- ---------- ----------
Interest expense................. 4,696,591 5,159,682 5,389,659 2,464,805 2,486,428
Selling, general and
administrative................. 4,147,134 4,617,400 5,194,250 2,234,424 2,868,841
---------- ----------- ----------- ---------- ----------
Total expenses.............. 8,843,725 9,777,082 10,583,909 4,699,229 5,355,269
---------- ----------- ----------- ---------- ----------
Income (loss) before income taxes
and extraordinary item......... 402,415 456,852 169,780 (17,362) (672,409)
Provision (benefit) for income
taxes (note 7)................. 163,000 193,000 117,000 (7,000) (230,000)
---------- ----------- ----------- ---------- ----------
Income (loss) before
extraordinary item............. 239,415 263,852 52,780 (10,362) (442,409)
Extraordinary item, net of income
taxes of $321,000 (note 10).... -- -- 392,757 -- --
---------- ----------- ----------- ---------- ----------
Net income (loss)................ 239,415 263,852 445,537 (10,362) (442,409)
Retained earnings--beginning of
period......................... 6,325,384 6,564,799 6,828,651 6,828,650 7,274,188
---------- ----------- ----------- ---------- ----------
Retained earnings--end of
period......................... $6,564,799 $6,828,651 $7,274,188 $6,818,288 $6,831,779
========== =========== =========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-22
<PAGE> 135
AMERICAN CAPITAL RESOURCES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JULY 31, JANUARY 31,
------------------------------------------ ---------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)................ $ 239,415 $ 263,852 $ 445,537 $ (10,362) $ (442,409)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and
amortization................. 97,856 120,703 137,749 68,154 61,500
Amortization and charge off of
initial direct costs......... 980,785 1,266,440 1,251,746 750,953 935,601
Deferred income taxes.......... 61,000 106,020 338,000 (7,000) (238,000)
Extraordinary item............. -- -- (713,757) -- --
Change in operating assets and
liabilities..................
Other receivables............ (1,993,044) (145,942) (292,751) 1,291,958 281,718
Prepaid expenses and other
assets.................... 1,341 (113,045) 116,726 8,271 (24,186)
Accounts payable and accrued
expenses.................. 200,411 (148,460) 9,021 (102,338) (104,931)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in)
operating activities......... (412,236) 1,349,568 1,292,271 1,999,636 469,293
------------ ------------ ------------ ------------ ------------
Cash flows from investing
activities:
Investment in contracts and
leases, net.................... (33,015,679) (36,668,775) (37,494,893) (36,810,361) (30,137,974)
Principal received from contracts
and leases..................... 34,071,704 32,208,370 37,970,626 18,141,057 26,833,240
Initial direct costs
capitalized.................... (1,194,582) (1,098,192) (1,206,568) (1,002,399) (1,271,462)
Purchase of property and
equipment...................... (53,377) (113,038) (106,113) (11,696) (4,537)
------------ ------------ ------------ ------------ ------------
Net cash used in investing
activities................... (191,934) (5,671,635) (836,948) (19,683,399) (4,580,733)
------------ ------------ ------------ ------------ ------------
Cash flows from financing
activities:
Proceeds from issuance of notes
payable--banks................. 97,468,067 98,018,194 105,403,415 44,216,520 54,221,970
Payments of notes
payable--banks................. (95,080,117) (94,938,030) (105,397,244) (27,868,405) (51,229,972)
Decrease in notes
payable--other................. (11,766) (13,239) (11,991) (5,116) (2,733)
(Increase) decrease in receivable
from stockholder............... (2,557) (37,523) (69,300) 16,673 (209,169)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in)
financing activities......... 2,373,627 3,029,402 (75,120) 16,359,672 2,780,096
------------ ------------ ------------ ------------ ------------
Increase (decrease) in cash.... 1,769,457 (1,292,665) 380,203 (1,324,091) (1,331,344)
Cash at beginning of period........ 1,175,549 2,945,006 1,652,341 1,652,341 2,032,544
------------ ------------ ------------ ------------ ------------
Cash at end of period.............. $ 2,945,006 $ 1,652,341 $ 2,032,544 $ 328,250 $ 701,200
============ ============ ============ ============ ============
Supplemental disclosures of cash
flow information:
Cash paid during the period for:
Interest....................... $ 4,696,591 $ 5,159,682 $ 5,389,659 $ 2,464,805 $ 2,486,428
============ ============ ============ ============ ============
Income taxes................... $ -- $ 173,688 $ 78,890 $ -- $ 561
============ ============ ============ ============ ============
Other non-cash transaction:
Assumption of debt by
stockholder.................. $ -- $ -- $ 437,000 $ -- $ --
============ ============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-23
<PAGE> 136
AMERICAN CAPITAL RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1996 AND 1997
(INFORMATION AS OF JANUARY 31, 1998 AND FOR THE SIX MONTHS ENDED
JANUARY 31, 1997 AND 1998 IS UNAUDITED.)
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business. American Capital Resources, Inc. (the
"Company"), a privately held financial services company, provides a wide array
of financial products and services to both manufacturers/dealers and end-users.
Among the products offered are equipment financing and leasing (both new and
used equipment), commercial collateralized lending, including both accounts
receivable and inventory financing, working capital loans, mergers and
acquisitions, portfolio financing and retail marketing programs for
manufacturers and dealers of equipment.
Headquartered in Hackensack, New Jersey, the Company operates on a
nation-wide basis with sales representation resulting in a geographical customer
mix throughout the United States with no specific concentration in any one area.
While continuing as a prime source of funds for the graphic arts and paper
converting industries, including commercial printing, corrugating, packaging,
bindery, etc., the Company also provides financing for various other industries,
including but not limited to, plastics, electronics, machine tools, etc.
However, as of July 31, 1996 and 1997, substantially all of the customers'
receivables are concentrated in the graphic arts and paper converting
industries.
Revenue Recognition. The Company purchases and finances equipment for its
customers. To fund the purchase of such equipment, the Company sells its
customers' contracts and leases and the payments receivable thereunder to a bank
or borrows the required proceeds from various funding sources. The Company does
not provide servicing for receivables sold. For borrowings, the finance method
of accounting is followed for financial statement reporting purposes and the
proceeds received are reflected as borrowings (See note 2).
Contracts and leases are accounted for by recording as an asset, the total
minimum payments receivable, the guaranteed residual (the stated purchase
agreement amount) and the unearned income which is a contra-asset account. The
unearned income represents the excess of the total minimum payments, including
the stated purchase agreement amount to be realized, over the cost of the
related equipment. The unearned income is recognized as revenue over the terms
of the related contracts following the interest method. When a contract or lease
is sold, the excess of the proceeds from the sale over the carrying value of the
receivable, net of the related unearned income, is recorded as a gain on sale of
the contract. Effective for transactions occurring after December 31, 1996, the
Company adopted the provisions of Statement of Financial Accounting Standards
No. 125 (FASB 125), "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities." The adoption of FASB 125 did not have a
material effect on the Company's financial position or results of operations.
Initial direct costs are deferred and included as part of the net
investment. Amortization of the deferred initial direct costs is computed using
the interest method over the lives of the contracts or leases. When a contract
or lease is sold, the related initial direct costs are charged to gain on sale
of contracts.
Allowance for Doubtful Receivables. The allowance for doubtful receivables
represents the Company's recognition of the assumed risks of extending credit
and the quality of the contracts and leases. The allowance is maintained at a
level considered adequate to provide for potential credit losses based on
management's assessment of various factors affecting the quality of the
portfolio, including loss experience, review of problem accounts, aging of the
portfolio and general business conditions. The allowance for doubtful
receivables is an estimate and ultimate losses may vary from current estimates
and future additions to the allowance may be necessary.
F-24
<PAGE> 137
AMERICAN CAPITAL RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(INFORMATION AS OF JANUARY 31, 1998 AND FOR THE SIX MONTHS ENDED
JANUARY 31, 1997 AND 1998 IS UNAUDITED.)
NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment. Property and equipment are stated at cost and are
being depreciated over their estimated useful lives as follows:
<TABLE>
<CAPTION>
CATEGORY USEFUL LIFE
-------- -----------
<S> <C>
Furniture, fixtures and computer equipment... 3 to 7 years
Transportation equipment..................... 3 to 10 years
Leasehold improvements....................... Shorter of useful life or lease term
</TABLE>
Income Taxes. The Company utilizes the asset and liability method of
accounting for income taxes. Under the asset and liability method, deferred
income tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred income
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under this method, the effect on deferred
income tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
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.
Interim Financial Information. The financial statements and notes related
thereto as of January 31, 1998 and for the six months ended January 31, 1997 and
1998 are unaudited, but in the opinion of management, include all normal
recurring adjustments necessary for a fair presentation of financial position
and results of operations. The operating results for the interim periods are not
necessarily indicative of a full year's operations.
NOTE 2--NET INVESTMENT IN CONTRACTS AND LEASES RECEIVABLE
The following comprise the net investment in contracts and leases
receivable as of July 31, 1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Payments receivable in installments, including
the stated purchase agreement amount due at
the end of the term........................... $ 76,291,394 $ 78,208,635
Initial direct costs............................ 1,897,554 1,852,376
Unearned income................................. (17,668,274) (18,751,878)
Allowance for doubtful receivables.............. (315,000) (506,000)
------------ ------------
Net investment in contracts and leases
receivable.................................... $ 60,205,674 $ 60,803,133
============ ============
</TABLE>
Included in gross payments receivable is a loan in the amount of $622,000
due from an entity in which the stockholder of the Company owns a minority
interest.
The changes in the allowance for doubtful receivables were as follows:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Balance, beginning of fiscal year........ $ 315,000 $ 315,000 $ 315,000
Provision for doubtful receivables....... 204,000 291,000 591,000
Receivables written off.................. (204,000) (291,000) (400,000)
--------- --------- ---------
Balance, end of fiscal year.............. $ 315,000 $ 315,000 $ 506,000
========= ========= =========
</TABLE>
F-25
<PAGE> 138
AMERICAN CAPITAL RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(INFORMATION AS OF JANUARY 31, 1998 AND FOR THE SIX MONTHS ENDED
JANUARY 31, 1997 AND 1998 IS UNAUDITED.)
NOTE 2--NET INVESTMENT IN CONTRACTS AND LEASES RECEIVABLE (CONTINUED)
Contracts and leases receivable at July 31, 1997 are due in installments
approximately as follows:
<TABLE>
<CAPTION>
FISCAL YEARS
ENDING JULY 31,
---------------
<S> <C>
1998........................................................ $20,543,876
1999........................................................ 13,844,119
2000........................................................ 13,351,481
2001........................................................ 10,985,093
2002........................................................ 8,259,946
Thereafter.................................................. 11,224,120
-----------
$78,208,635
===========
</TABLE>
Contracts and leases financed under nonrecourse borrowings have been
structured in such a way that the payments to be received are equal to or
greater than the underlying debt service. Because customers may prepay balances
due or the Company may sell, or assign the future payment stream, the above is
not intended to be a projection of future cash flow.
NOTE 3--PROPERTY AND EQUIPMENT
Property and equipment at July 31, 1996 and 1997 consists of the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Furniture, fixtures and computer equipment.......... $405,969 $419,773
Transportation equipment............................ 270,252 175,767
Leasehold improvements.............................. 133,079 --
-------- --------
809,300 595,540
Less accumulated depreciation and amortization...... (512,450) (330,326)
-------- --------
$296,850 $265,214
======== ========
</TABLE>
During 1997, $92,008 and $94,486 of fully depreciated furniture, fixtures
and computer equipment and transportation equipment, respectively, and $133,079
of fully amortized leasehold improvements were written off against the related
accumulated depreciation and amortization balances.
NOTE 4--OTHER RECEIVABLES
Other receivables are summarized as follows:
<TABLE>
<CAPTION>
JULY 31,
------------------------
1996 1997
---------- ----------
<S> <C> <C>
Due from funding sources for completed
transactions..................................... $4,132,174 $4,476,042
Notes, loans and other receivables................. 132,172 99,755
Due from DML Associates............................ 136,963 118,263
---------- ----------
$4,401,309 $4,694,060
========== ==========
</TABLE>
DML Associates ("DML") is a partnership controlled by the stockholder of
the Company. The amount due from DML at July 31, 1996 and 1997 is secured by
DML's purchase agreements on leases which are in excess of the receivables at
those dates.
F-26
<PAGE> 139
AMERICAN CAPITAL RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(INFORMATION AS OF JANUARY 31, 1998 AND FOR THE SIX MONTHS ENDED
JANUARY 31, 1997 AND 1998 IS UNAUDITED.)
NOTE 4--OTHER RECEIVABLES (CONTINUED)
The receivable from stockholder, who is also an officer of the Company,
represents net advances to the stockholder. Such amounts are not interest
bearing and do not have a specific due date.
NOTE 5--NOTES PAYABLE--BANKS--RECOURSE
The Company funds certain contracts under secured lines of credit. The
amount of credit available to the Company under these lines was $46,466,000 and
$54,757,000 at July 31, 1996 and 1997, respectively.
As of July 31, 1996 and 1997, $26,992,365 and $28,442,676, respectively,
were outstanding under such lines, are due on demand and are collateralized by
contracts receivable.
The interest rates on the outstanding borrowings under the secured lines of
credit range from LIBOR plus 200 basis points to prime plus 1%. At July 31, 1996
and 1997, the LIBOR rate was 5.465% and 5.69%, respectively, and the prime rate
was 8.25% and 8.50%, respectively.
NOTE 6--NOTES PAYABLE--BANKS--LIMITED RECOURSE AND NONRECOURSE
The following table summarizes the Company's future obligations by year for
notes payable--banks, collateralized by contracts or leases assigned, on both a
limited recourse and nonrecourse basis, as of July 31, 1997:
<TABLE>
<CAPTION>
FISCAL YEARS
ENDING JULY 31,
---------------
<S> <C>
1998........................................................ $ 4,552,816
1999........................................................ 4,037,061
2000........................................................ 4,034,038
2001........................................................ 3,346,659
2002........................................................ 1,741,318
Thereafter.................................................. 1,771,045
-----------
$19,482,937
===========
</TABLE>
Of the $19,482,937, the Company has recourse for a maximum amount of
approximately $2,150,000 under the limited recourse provisions.
Interest on the notes is generally at the rate of prime plus 1%. At July
31, 1996 and 1997, the prime rate was 8.25% and 8.5%, respectively. The above
notes will be prepaid early to the extent customers prepay their contract or
lease balances or if the Company sells the related collateral. See Note 2.
F-27
<PAGE> 140
AMERICAN CAPITAL RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(INFORMATION AS OF JANUARY 31, 1998 AND FOR THE SIX MONTHS ENDED
JANUARY 31, 1997 AND 1998 IS UNAUDITED.)
NOTE 7--INCOME TAXES
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED JULY 31,
--------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Federal:
Current............................... $ 56,000 $ 61,000 $ 80,000
Deferred.............................. 67,000 106,000 288,000
-------- -------- --------
123,000 167,000 368,000
-------- -------- --------
State:
Current............................... 46,000 26,000 20,000
Deferred.............................. (6,000) -- 50,000
-------- -------- --------
40,000 26,000 70,000
-------- -------- --------
Total:
Current............................... 102,000 87,000 100,000
Deferred.............................. 61,000 106,000 338,000
-------- -------- --------
$163,000 $193,000 $438,000
======== ======== ========
Total income tax expense was allocated as
follows:
Income before extraordinary item......... $163,000 $193,000 $117,000
Extraordinary item....................... -- -- 321,000
-------- -------- --------
Total.................................... $163,000 $193,000 $438,000
======== ======== ========
</TABLE>
The effective annual tax rate for 1997 was higher than expected due to
$42,000 of investment tax credit carry forwards expiring unused.
The tax effects of temporary differences that give rise to significant
portions of the deferred income tax assets and deferred income tax liabilities
at July 31, 1996 and 1997 are presented below:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Deferred income tax assets:
Investment tax credit carry forwards............ $ 350,000 $ 281,000
Net operating loss carry forwards............... 80,000 77,000
Alternative minimum tax credit carry forwards... 533,000 640,000
----------- -----------
Total deferred income tax assets........ 963,000 998,000
Deferred income tax liabilities:
Contracts receivable, net principally due to
treating certain contracts as operating
leases for income tax purposes............... (2,485,000) (2,858,000)
----------- -----------
Net deferred income tax liability................. $(1,522,000) $(1,860,000)
=========== ===========
</TABLE>
For income tax reporting purposes, as of July 31, 1997, the Company has
investment tax credit carry forwards of approximately $281,000 available
expiring as follows: 1998, $107,000; 1999, $54,000; 2000, $86,000 and 2001,
$34,000 and net operating loss carry forwards of $207,000, which expire in the
year 2011. It also has as of that date, for income tax reporting purposes,
$640,000 of alternative minimum tax credit carryovers
F-28
<PAGE> 141
AMERICAN CAPITAL RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(INFORMATION AS OF JANUARY 31, 1998 AND FOR THE SIX MONTHS ENDED
JANUARY 31, 1997 AND 1998 IS UNAUDITED.)
NOTE 7--INCOME TAXES (CONTINUED)
available which can be carried forward indefinitely and used to reduce future
regular income tax liabilities. A valuation allowance for deferred income tax
assets has not been recorded since management believes the credits will be taken
and existing deductible temporary differences will reverse during periods in
which the Company expects to generate net taxable income.
The Company is undergoing an audit by the Internal Revenue Service for the
years ended July 31, 1994, 1995 and 1996. Management does not believe the
results of such examination will materially affect the financial statements of
the Company.
NOTE 8--COMMITMENTS
Rent expense charged to income for office facilities for the fiscal years
ended July 31, 1995, 1996 and 1997 was $261,775, $205,872 and $223,558,
respectively. The Company has minimum rental commitments under a noncancellable
operating lease for office space in New Jersey expiring on December 31, 2000.
The lease contains renewal options and escalation clauses based on increased
operating costs. Estimated minimum annual rentals under the lease are as
follows:
<TABLE>
<CAPTION>
FISCAL YEARS
ENDING JULY 31, ANNUAL RENTALS
--------------- ---------------
<S> <C>
1998........................................................ $177,006
1999........................................................ 182,589
2000........................................................ 186,576
2001........................................................ 77,740
--------
$623,911
========
</TABLE>
The Company has committed to extend credit to its customers in the normal
course of business. Commitments to extend credit are agreements to lend to a
customer as long as there is no violation of any condition established in the
contract or lease and generally have fixed expiration dates or other termination
clauses; such commitments may also provide for a fee to the Company. The amount
of collateral obtained by the Company upon extension of credit is based on
management's credit evaluations of the counter-party. The Company evaluates each
customer's credit worthiness on a case-by-case basis. At such time as a
commitment is made, the collateral value supporting such commitment is at least
equal to or greater than the value of the commitment. In some cases, these
transactions also may have vendor support.
Most of the commitments are expected to be drawn upon and, accordingly, the
total commitment amounts normally represent future cash requirements. Over the
twelve months ending July 31, 1998, the Company expects to fund such commitments
from its unused credit lines (see note 5), from the sale of receivables, or from
working capital. Collateral obtained includes the equipment financed and may
include other property, plant, and equipment, as well as personal guarantees. At
July 31, 1997, the Company had contracts to extend credit to customers
aggregating approximately $33,403,000.
The Company has several vendor guarantee programs in existence whereby, in
the event of a customer default, the vendors involved would be obligated to
"repurchase" the transaction from the Company up to certain predetermined limits
under certain programs and up to 100% of the equipment cost under other
programs.
F-29
<PAGE> 142
AMERICAN CAPITAL RESOURCES, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(INFORMATION AS OF JANUARY 31, 1998 AND FOR THE SIX MONTHS ENDED
JANUARY 31, 1997 AND 1998 IS UNAUDITED.)
NOTE 9--PENSION PLAN
The Company has a 401(k) defined contribution pension plan (the "Plan")
covering substantially all employees of the Company. Employees become eligible
to participate in the Plan upon completion of one year of service. Employee
contributions are matched by the Company to a maximum of 3% of each
participant's compensation. For the years ended July 31, 1995, 1996 and 1997 the
Company's matching contributions aggregated $31,933, $25,156 and $33,898,
respectively.
NOTE 10--EXTRAORDINARY ITEM
On May 2, 1997, the Company concluded an agreement with the Federal Deposit
Insurance Corporation ("FDIC") as receiver for a failed bank involving a dispute
over the repurchase of a portfolio previously assigned to the failed bank. The
agreement settled indebtedness of $1,875,757 for $1,162,000 resulting in an
extraordinary gain of $713,757. Under the terms of the settlement, the Company
paid $725,000 in installments through September 4, 1997. The balance of $437,000
was due in 62 monthly installments of $7,662 beginning November 1, 1997 and one
payment of $50,000 due January 19, 1998. Such installments include interest at
the rate of 8% per annum. Effective July 30, 1997, the stockholder of the
Company, who is also an officer, with the consent of the FDIC, assumed the
obligation for the note for consideration of $437,000.
NOTE 11--SUBSEQUENT EVENT (UNAUDITED)
The Company and its stockholders have entered into a merger agreement with
UniCapital Corporation ("UniCapital") pursuant to which UniCapital will acquire
all outstanding shares of the Company's Common Stock in exchange for cash and
Common Stock of UniCapital, concurrent with the consummation of an initial
public offering of the Common Stock of UniCapital.
F-30
<PAGE> 143
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
Boulder Capital Group, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of Boulder Capital Group, Inc. at
December 31, 1997, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
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 audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Ft. Lauderdale, Florida
January 21, 1998, except as to Note 10
which is as of February 5, 1998
F-31
<PAGE> 144
BOULDER CAPITAL GROUP, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
1997
----------------
<S> <C>
ASSETS
Cash........................................................ $ 200,323
Rents and accounts receivable............................... 510,146
Equipment acquired to fulfill leasing commitments........... 2,381,636
Net investment in direct financing leases................... 32,161,585
Equipment under operating leases, net....................... 557,240
Property and equipment, net................................. 213,166
-----------
Total assets......................................... $36,024,096
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable:
Recourse.................................................. $ 2,720,335
Nonrecourse............................................... 28,264,315
Subordinated.............................................. 2,250,000
Accounts payable and accrued expenses....................... 1,670,029
Deferred income taxes....................................... 598,000
-----------
Total liabilities.................................... 35,502,679
-----------
Commitments (Notes 6, 7, 9, 12 and 13)
Stockholders' equity:
Common stock, $0.01 par value, 25,000
shares authorized, 12,523 issued and outstanding....... 125
Additional paid-in capital................................ 536,323
Accumulated deficit....................................... (15,031)
-----------
Total stockholders' equity........................... 521,417
-----------
Total liabilities and stockholders' equity........... $36,024,096
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE> 145
BOULDER CAPITAL GROUP, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Finance income from direct financing leases............... $3,618,212
Rental income from operating leases....................... 343,669
Sales of equipment........................................ 1,522,246
Gain on sale of leases.................................... 726,700
Other income.............................................. 186,499
----------
Total revenues....................................... 6,397,326
----------
Depreciation on equipment under operating leases.......... 238,038
Cost of equipment sold.................................... 1,337,800
Interest expense.......................................... 2,695,806
Selling, general and administrative....................... 1,652,298
----------
Total expenses....................................... 5,923,942
----------
Income before income taxes................................ 473,384
Provision for income taxes (Note 11)...................... 598,000
----------
Net loss.................................................. $ (124,616)
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE> 146
BOULDER CAPITAL GROUP, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ACCUMULATED
COMMON ADDITIONAL PAID EARNINGS
STOCK IN CAPITAL (DEFICIT) TOTAL
----- ---------- --------- -----
<S> <C> <C> <C> <C>
Balance January 1, 1997......................... $125 $536,323 $ 109,585 $ 646,033
Net loss........................................ -- -- (124,616) (124,616)
---- -------- --------- ---------
Balance December 31, 1997....................... $125 $536,323 $ (15,031) $ 521,417
==== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE> 147
BOULDER CAPITAL GROUP, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $ (124,616)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation on equipment under operating leases....... 238,038
Other depreciation..................................... 59,548
Amortization of initial direct costs................... 205,299
Gain on sale of leases................................. (726,700)
Gain on sales of equipment............................. (184,446)
Provision for lease losses............................. 90,676
Deferred income taxes.................................. 598,000
Changes in other assets and liabilities
Rents and accounts receivable........................ (111,551)
Accounts payable and accrued expenses................ (925,244)
------------
Net cash used in operating activities....................... (880,996)
------------
Cash flows from investing activities:
Investment in direct financing leases..................... (20,255,528)
Collection of direct financing leases..................... 8,639,453
Proceeds from sale of leases.............................. 10,978,354
Proceeds from sales of equipment.......................... 1,522,246
Purchases of property and equipment....................... (80,832)
------------
Net cash provided by investing activities................... 803,693
------------
Cash flows from financing activities:
Repayments of short term recourse debt.................... (9,845,087)
Repayment of subordinated notes........................... (200,000)
Proceeds from nonrecourse notes payable................... 17,754,178
Repayments of nonrecourse notes payable................... (7,668,325)
------------
Net cash provided by financing activities................... 40,766
------------
Net decrease in cash and cash equivalents................... (36,537)
Cash and cash equivalents at beginning of year.............. 236,860
------------
Cash and cash equivalents at end of year.................... $ 200,323
============
Supplemental disclosures of cash flow information:
Cash paid for:
Interest............................................... $ 2,712,255
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE> 148
BOULDER CAPITAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--NATURE OF OPERATIONS
Boulder Capital Group, Inc. (the "Company") was founded in 1986. Its
principal business activity is the lease financing of above ground equipment to
the retail petroleum industry.
The Company has developed vendor financing programs, with the leading
manufacturers of automated car washers and fuel dispensers. The Company is also
endorsed by a number of major petroleum companies to provide financing to their
branded retailers.
The Company operates from a single location in Boulder, CO. The Company's
customers range in size from major petroleum companies to single-site dealers.
Lessees are located in 42 states and financing is provided through a variety of
lease structures.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 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. While management believes that the estimates and
related assumptions used in the preparation of these financial statements are
appropriate, actual results could differ from those estimates. Estimates are
made in the assessment of collectibility of direct financing leases and
receivables, recovery of residual values of leased equipment, recourse
liabilities, and depreciation and amortization.
Direct financing leases. The Company invests in leases classified as
direct financing leases. The Company's net investment in direct financing leases
includes the gross rentals receivable, estimates of residual values, deferred
initial direct costs accounted for in accordance with Statement of Financial
Accounting Standards No. 91 "Accounting for Nonrefundable Fees and Costs
Associated with Originating or Acquiring Loans and Initial Direct Costs of
Leases" and unearned finance income. Unearned finance income represents the
excess of the total receivable plus the initial direct costs and the estimated
residual value over the cost of equipment or contract acquired. Revenue from
direct financing leases is recognized over the lease term on the interest method
which results in a level rate of return on the net investment in the lease.
At the inception of the lease, management uses available evidence and
historical experience to estimate the residual value at the end of the lease
term. Estimated residual values not guaranteed by lessees are reviewed annually
and adjusted to reflect declines in current market value.
The Company has, from time-to-time, transferred selected direct financing
leases to lenders while continuing to service the leases on behalf of the
transferee. The Company has accounted for these transactions as sales under
Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." The
difference between the transfer price and the net investment in direct financing
leases, excluding interests in residual values retained (if any), is recognized
as a gain or loss.
Operating leases. All lease transactions not qualifying as direct
financing are classified as operating leases. Revenue is recognized over the
minimum term of operating leases on a straight-line basis.
Equipment under operating leases is depreciated on a straight-line basis
over the estimated useful life of the equipment leased.
Equipment acquired to fulfill leasing commitments. Equipment acquired to
fulfill leasing commitments represents cost of equipment purchased pursuant to
firm leasing commitments which will be delivered to lessees in the next quarter.
Allowance for lease losses. The Company maintains an allowance for lease
losses in an amount sufficient to absorb inherent lease losses resulting from
lessee defaults and certain recourse liabilities. Management
F-36
<PAGE> 149
BOULDER CAPITAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
periodically evaluates the adequacy of the allowance and records a provision
necessary to maintain the allowance at an adequate level and considers such
factors as overall economic conditions and the growth in the investment in
direct financing leases and performance of lessees.
Depreciation. Property and equipment is stated at cost and is depreciated
over the useful lives of the related assets on the straight-line method. Useful
lives range from three to five years.
Income taxes. Prior to January 1, 1997, the Company elected to be taxed as
a Subchapter S Corporation for federal income tax purposes. As a result, no
taxes were recorded prior to that date. Instead, the revenues and expenses of
the Company were included in the tax returns of the individual stockholders.
Effective, January 1, 1997, the Company discontinued its election to be treated
as an S Corporation, and elected to be taxed as a C Corporation.
Subsequent to December 31, 1996, the Company accounted for income taxes
under the liability method. Under this method deferred tax assets and
liabilities are determined based on the differences between financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse. The initial adoption of the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"),
resulted in the recording of a deferred tax liability of $415,000 at January 1,
1997.
Cash and cash equivalents. For purposes of the Statement of Cash Flows,
the Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
Fair value of financial instruments. The carrying value of the Company's
financial instruments, including cash, accounts receivable, and accounts payable
approximated fair value because of the short maturity of these instruments. The
carrying value of notes payable approximated fair value based upon comparability
of market rates for similar instruments.
NOTE 3--RELATED PARTY TRANSACTIONS
At December 31, 1997, the Company has a revolving credit agreement with the
majority stockholder of the Company that allows the Company to borrow up to
$200,000. No amounts were borrowed under this agreement at December 31, 1997;
however $200,000 was borrowed at December 31, 1996 and repaid on August 15,
1997. Interest is payable monthly at the prime-rate plus one percent (9.5% at
December 31, 1997), and aggregated $11,668 during 1997.
The Company is a related party with respect to a corporate lender discussed
in Notes 6 and 7, since the minority stockholder owns an equity interest in the
lender. The amount of subordinated debt owed to this corporate lender was
$500,000 at December 31, 1997. Interest expense of $41,607 was incurred related
to this subordinated debt for the year ended December 31, 1997. In addition, at
December 31, 1996 the Company had $300,000 outstanding in short term borrowings
with this lender. This amount was repaid in full on August 15, 1997. Interest
was payable monthly at prime rate plus 1/2 percent. Interest expense of $16,572
was incurred related to this note for the year ended December 31, 1997.
During the year ended December 31, 1997, the Company paid a guarantee fee
of $31,362 to the minority stockholder for being a limited guarantor of the line
of credit for the Company disclosed in Note 6.
F-37
<PAGE> 150
BOULDER CAPITAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 4--LEASING TRANSACTIONS
Direct financing leases. Direct financing leases consist principally of
retail automotive washing equipment and fuel dispensers with terms ranging to
five years. The components of the Company's net investment in direct financing
leases at December 31, 1997 were as follows:
<TABLE>
<S> <C>
Future minimum rentals receivable........................... $33,621,980
Estimated unguaranteed residual values...................... 4,497,440
Unearned finance income..................................... (6,409,322)
Initial direct costs........................................ 545,097
-----------
32,255,195
Allowance for lease losses.................................. (93,610)
-----------
$32,161,585
===========
</TABLE>
Future minimum rentals receivable represent earning assets held by the
Company which are generally due in monthly installments over original periods
ranging to 60 months. Future minimum rentals receivable under direct financing
leases were as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1998........................................................ $10,677,596
1999........................................................ 9,508,228
2000........................................................ 7,371,009
2001........................................................ 4,656,861
2002........................................................ 1,408,286
-----------
$33,621,980
===========
</TABLE>
The components of the Company's allowance for lease losses for the year
ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Allowance for lease losses, beginning....................... $ 110,934
Provision for lease losses.................................. 90,676
Leases written off.......................................... (108,000)
---------
Allowance for lease losses, ending.......................... $ 93,610
=========
</TABLE>
Operating leases. The Company is the lessor of retail automotive washing
equipment under revenue sharing agreements with terms of principally five years.
Under the revenue sharing agreements, the Company receives a majority of revenue
generated by the equipment from which it pays for supplies and the services of
the manufacturer's distributor. The components of equipment placed under revenue
sharing agreements at December 31, 1997 were as follows:
<TABLE>
<S> <C>
Cost........................................................ $1,151,326
Accumulated depreciation.................................... (594,086)
----------
$ 557,240
==========
</TABLE>
Since all rentals are contingent upon revenue earned from the operation of
the equipment, there are no future minimum lease payments on the above owned
equipment.
Significant lease terms. The Company's lease agreements provide that the
lessee pays taxes, insurance and maintenance costs of the related equipment.
F-38
<PAGE> 151
BOULDER CAPITAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 4--LEASING TRANSACTIONS (CONTINUED)
Significant concentrations. The majority of the Company's net lease
receivables are collateralized by retail automotive automobile washing equipment
of which approximately 35% of the 1997 lease originations related to a single
manufacturer.
NOTE 5--PROPERTY AND EQUIPMENT
The components of property and equipment at December 31, 1997, were as follows:
<TABLE>
<S> <C>
Office equipment............................................ $ 311,120
Computer equipment.......................................... 66,275
---------
377,395
Accumulated depreciation.................................... (164,229)
---------
$ 213,166
=========
</TABLE>
NOTE 6--NOTES PAYABLE
Recourse debt at December 31, 1997 consisted of the following:
<TABLE>
<S> <C>
Line of credit.............................................. $2,167,519
Secured by equipment and lease payments..................... 552,816
----------
$2,720,335
==========
</TABLE>
Line of credit. The Company has a $15,000,000 line of credit with a
financial institution which is subject to annual renewal each June. The line of
credit is guaranteed by the Company's stockholders and is secured by the
Company's eligible leases. Interest on borrowings outstanding from time to time
varies at the lender's prime rate (8.25% at December 31, 1997) or LIBOR options
and is payable monthly. The maximum amount outstanding during the year ended
December 31, 1997 was $14,500,000.
Recourse debt secured by equipment and lease payments. On October 31,
1997, the Company borrowed $600,000 which is secured by equipment placed under
revenue sharing agreements. Principal and interest at 8% are payable monthly.
Nonrecourse debt. Nonrecourse debt at December 31, 1997 consisted of the
following:
<TABLE>
<S> <C>
Secured by equipment and lease payments..................... $28,264,315
===========
</TABLE>
The Company has certain borrowings outstanding from various financial
institutions on a nonrecourse basis. Under these borrowings, the Company assigns
all lease payments due under the applicable leases and grants a security
interest in the leased equipment to the lending institution. In the event of a
default by a lessee, the lender has a security interest in the lease payments
and underlying equipment, but except as disclosed below, has no further recourse
against the Company. Interest on these borrowings is fixed at the time of the
advance to the Company, with rates ranging from 5% to 9% at December 31, 1997.
The Company has provided limited guarantee provisions to certain lenders
providing up to 5% recourse which declines over the term of the debt. The
Company's total possible recourse exposure to credit risk under these loans was
approximately $568,000 at December 31, 1997.
Subordinated notes
The Company has issued various subordinated notes to third-party lenders,
which are in some cases secured by the Company's residual interest in certain
equipment on lease. The notes are subordinated in all respects to any
nonrecourse debt of the Company and to the interest of any lenders who may from
time to time provide
F-39
<PAGE> 152
BOULDER CAPITAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 6--NOTES PAYABLE (CONTINUED)
working capital, bridge and/or warehouse financing to the Company. The
subordinated notes consisted of the following at December 31, 1997:
<TABLE>
<S> <C>
Subordinated promissory note payable to a lender, who is a
related party to a minority stockholder of the Company,
interest payable on the last day of January, April, July
and October at 8% with principal and final interest
payment due July 31, 1998................................. $ 500,000
Subordinated promissory note payable, personally guaranteed
by the minority stockholder, with interest payable the
last day of each quarter at 9.83% with principal payments
due as follows:........................................... 1,750,000
$250,000 due January 31, 1998
$350,000 due January 31, 1999
$550,000 due January 31, 2000
$600,000 due January 31, 2001
----------
$2,250,000
==========
</TABLE>
NOTE 7--OPTION FEES
A related corporation has the option to participate in the residual values
of certain equipment by paying $750,000 on or before certain dates that coincide
with the expiration of the lease terms of the equipment, which range through
1999. The related corporation will then receive 100% of all re-lease or sale
proceeds up to $1,125,000 after payment of direct costs associated with such
transactions, if any. The related corporation and the Company then share equally
any proceeds in excess of this amount. Fees of $250,000 previously received by
the Company have been recorded in accrued expenses.
The residual values recorded by the Company in connection with such
equipment do not exceed the $750,000 stated above.
NOTE 8--RETIREMENT PLAN
The Company has established a 401(k) Retirement Plan whereby an employee
upon reaching minimum age and service requirements, may contribute up to 10% of
compensation to the Plan. Employee contributions totaled $61,373 for the year
ended December 31, 1997. Additionally, the Company will provide matching
contributions for 25% of the employee's contribution which does not exceed 8%
and may make other discretionary contributions. The Company's contributions were
$23,393 during the year ended December 31, 1997.
NOTE 9--COMMITMENTS
The Company leases office space under a noncancelable operating lease,
which contains renewal and expansion options, and provides for annual escalation
for cost of living increases, taxes, and maintenance. Rent expense incurred by
the Company was $101,033 for the year ended December 31, 1997.
Future minimum rental payments under the lease agreement were as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1998........................................................ $ 98,981
1999........................................................ 57,738
--------
$156,719
========
</TABLE>
The Company has entered into a letter of intent with an unrelated third
party pursuant to which the Company and such party will form a new company to
serve as the manager and/or general partner of a new real estate
F-40
<PAGE> 153
BOULDER CAPITAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 9--COMMITMENTS (CONTINUED)
finance company. The Company and such party intend to provide fixed rate
mortgages and sale/leaseback financing to petroleum retail and convenience store
operators nationwide.
NOTE 10--STOCK OPTIONS
The Company had an option outstanding to a minority stockholder to purchase
1,250 shares of common stock of the Company at $260 per share, which expires on
October 7, 1999. The majority stockholder of the Company, at his sole option,
could elect to have the Company redeem from him up to an equivalent number of
shares of common stock of the Company at the same price to be simultaneously
issued to the option holder upon exercise in lieu of the Company's issuance of
new shares.
On February 5, 1998, the minority stockholder exercised the option and
purchased 1,250 shares of common stock of the Company for $260 per share. These
shares were redeemed from the majority stockholder for the same price in lieu of
the Company issuing new shares.
NOTE 11--INCOME TAXES
The Company's provision for income tax expense was composed of the
following for the year ended December 31, 1997:
<TABLE>
<S> <C>
Current:
Federal................................................... $ --
State..................................................... --
-----------
Total current.......................................... --
-----------
Deferred:
Federal................................................... 523,000
State..................................................... 62,000
Adoption of SFAS 109 due to discontinuance of S
Corporation election................................... 415,000
-----------
1,000,000
Benefit of net operating loss carryforward................ (402,000)
-----------
Total deferred......................................... $ 598,000
===========
</TABLE>
The effective income tax rate for the year ended December 31, 1997 varied
from the federal statutory rate as follows:
<TABLE>
<S> <C>
Tax provision computed at statutory 34% rate................ $ 162,000
State taxes, net of federal benefit......................... 19,000
Other....................................................... 2,000
Adoption of SFAS 109 due to discontinuance of S Corporation
election.................................................. 415,000
-----------
$ 598,000
===========
</TABLE>
F-41
<PAGE> 154
BOULDER CAPITAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 11--INCOME TAXES (CONTINUED)
The components of the net deferred tax liability at December 31, 1997 were
as follows:
<TABLE>
<S> <C>
Deferred tax liabilities:
Lease revenue and related depreciation.................... $(1,022,000)
Other..................................................... (13,000)
-----------
(1,035,000)
-----------
Deferred tax assets:
Net operating loss carryforward........................... 402,000
Allowance for lease losses................................ 35,000
-----------
437,000
-----------
$ (598,000)
===========
</TABLE>
The net operating loss carryforward will expire in 2012 if not utilized
sooner. Subsequent to the contemplated merger discussed in Note 13, the
utilization of the Company's net operating loss carryforward may be limited.
NOTE 12--TRANSFER OF LEASES
The Company from time to time, transfers to unrelated third parties direct
financing leases, while continuing to service such leases on behalf of the
transferee, in transactions accounted for as sales under Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities." In connection with certain
transfers, the Company has provided recourse to the transferee for lease losses
up to an amount not exceeding 5% of the transfer price which declines over the
terms of the leases transferred and which approximated $560,000 at December 31,
1997. In the event of a default by a lessee, the Company has the option, but not
the obligation, to repurchase the remaining unrecovered net investment in the
defaulted leases in order to maximize the disposition of such property and to
minimize the Company's loss exposure. Management considers this recourse
liability in their periodic determination of the adequacy of the allowance for
lease losses.
During the year ended December 31, 1997 the Company transferred $10,479,000
of carrying value of net investment in direct financing leases and recorded a
gain of $726,700.
NOTE 13--SUBSEQUENT EVENT (UNAUDITED)
The Company and its stockholders have entered into a merger agreement with
UniCapital Corporation ("UniCapital") pursuant to which UniCapital will acquire
all outstanding shares of the Company's common stock in exchange for cash and
common stock of UniCapital, concurrent with the consummation of the initial
public offering of the common stock of UniCapital.
F-42
<PAGE> 155
INDEPENDENT AUDITORS' REPORT
To Board of Directors
Boulder Capital Group, Inc.
We have audited the accompanying statements of operations and retained
earnings and cash flows of Boulder Capital Group, Inc. for the year ended
December 31, 1996. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and the cash flows of
Boulder Capital Group, Inc. for the year ended December 31, 1996, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Boulder, Colorado
March 28, 1997
F-43
<PAGE> 156
BOULDER CAPITAL GROUP, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Finance income from direct financing leases............... $2,663,174
Rental income from operating leases....................... 404,115
Sales of equipment........................................ 1,029,046
Gain on sale of leases.................................... 100,297
Interest and other income................................. 31,727
----------
Total revenues 4,228,359
----------
Depreciation on equipment under operating leases.......... 361,246
Cost of equipment sold.................................... 882,679
Interest expense.......................................... 1,965,982
Selling, general and administrative....................... 1,346,024
----------
Total expenses....................................... 4,555,931
----------
Net loss............................................. (327,572)
Retained earnings, beginning of year...................... 437,157
----------
Retained earnings, end of year............................ $ 109,585
==========
</TABLE>
See accompanying notes to financial statements.
F-44
<PAGE> 157
BOULDER CAPITAL GROUP, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
<S> <C>
Cash flows from operating activities:
Net loss.................................................. $ (327,572)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation on equipment under operating leases....... 361,246
Other depreciation..................................... 44,716
Provision for lease losses............................. 90,331
Amortization of initial direct costs................... 136,168
Gain on sale of leases................................. (100,297)
Gain on sale of equipment.............................. (146,367)
Increase in accounts receivable........................ (301,170)
Increase in accounts payable and other liabilities..... 1,673,034
------------
Net cash provided by operating activities................... 1,430,089
------------
Cash flows from investing activities:
Payments received on direct financing leases.............. 5,989,329
Investment in direct financing leases..................... (23,647,744)
Cost of leased equipment acquired......................... (396,909)
Purchases of property and equipment....................... (121,017)
Proceeds from sale of leases.............................. 1,702,623
Proceeds from sales of leased equipment................... 845,851
------------
Net cash used in investing activities.................. (15,627,867)
------------
Cash flows from financing activities:
Net proceeds from short-term borrowings................... 8,286,662
Payments on long-term subordinated debt................... (100,000)
Proceeds from non-recourse debt........................... 10,521,575
Payments on non-recourse debt............................. (4,503,845)
------------
Net cash provided by financing activities................... 14,204,392
------------
Net increase in cash and cash equivalents................... 6,614
Cash and cash equivalents at the beginning of the year...... 230,246
------------
Cash and cash equivalents at the end of year................ $ 236,860
============
Supplemental disclosure of cash flow information:
Cash paid for interest.................................... $ 1,898,654
============
</TABLE>
See accompanying notes to financial statements.
F-45
<PAGE> 158
BOULDER CAPITAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations. Boulder Capital Group, Inc. ("Boulder Capital" or
the "Company") was founded in 1986. Boulder Capital is primarily engaged in the
lease financing of above ground equipment to the petroleum retail industry.
Boulder Capital has customers ranging in size from major petroleum
companies to multi-unit jobbers to single-site dealers. Customers are served in
41 states, and financing is provided through a variety of lease structures.
Use of Estimates. The preparation of the 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 revenue and expenses during
the reporting period. Significant estimates include the estimate of residual
values and the determination of the allowance for lease losses. Actual results
could differ from those estimates.
Cash Equivalents. The Company considers all short-term investments with a
maturity of three months or less to be cash equivalents.
Income Taxes. At inception, the Company elected to be treated as an S
corporation for tax purposes. Under this structure, the elements of income and
expense of the Company are passed to the shareholder and taxed at the
shareholders' individual tax rate. Accordingly, no income tax expense is
reflected in the accompanying financial statements. As of January 1, 1997, the
Company has elected to be treated as a C corporation.
New Accounting Pronouncement. In March of 1995, the Financial Accounting
Standards Board (the "FASB") issued Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of (Statement No. 121) effective for fiscal years
beginning after December 15, 1995. Statement No. 121 requires impairment losses
to be recorded on long-lived assets used in operations, including leased
equipment, when indicators of impairment are present and either the undiscounted
future cash flows estimated to be generated by those assets or the fair market
value are less than the assets carrying amount. Statement No. 121 also addresses
the accounting for long-lived assets that are expected to be disposed of. The
Company adopted Statement No. 121 effective January 1, 1996. The adoption of
Statement No. 121 did not have a material impact on the accompanying financial
statements.
Equipment Leasing. Statement of Financial Accounting Standards No. 13
requires that a lessor account for each lease by either the direct financing,
sales-type or operating lease method. Direct financing and sales-type leases are
defined as those leases which transfer substantially all of the benefits and
risks of ownership of the equipment to the lessee. The Company utilizes the
direct financing method and operating method for substantially all of the
Company's equipment under lease. For most types of leases, the determination of
profit considers the estimated value of the equipment at lease termination,
referred to as the residual value. After the inception of a lease, the Company
may engage in the financing of lease receivables on a non-recourse basis and/or
equipment sale transactions to reduce or recover its investment in the
equipment. Certain of the outstanding non-recourse debt contain a 5% first loss
provision. The Company's exposure declines with the net investment in such
leases.
LEASE INCEPTION
Direct Financing Leases. Leasing revenue, which is recognized over the
term of the lease, consists of the excess of lease payments plus the estimated
residual value over the equipment's cost. Earned income is recognized to provide
a constant yield over the lease term and is recorded in leasing revenue in the
accompanying statement of operations and retained earnings. Residual values are
recorded at lease inception equal to the estimated value of the leased equipment
at lease termination, as determined by the Company. In estimating such
F-46
<PAGE> 159
BOULDER CAPITAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
YEAR ENDED DECEMBER 31, 1996
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
values, the Company considers independent appraisals and unique circumstances
regarding the equipment. The Company evaluates residual estimates on an ongoing
basis for any impairment in value.
Operating Leases. Leasing revenue consists principally of rental payments.
The cost of equipment is recorded as leased equipment and is depreciated
primarily on the straight-line basis over the estimated life of the equipment
leased.
Significant Lease Terms. The Company's lease agreements provide that the
lessee pays taxes, insurance and maintenance costs. Lease agreements generally
provide for penalty provisions in the event of early termination.
Significant Concentrations. The majority of the Company's net lease
receivables are collateralized by retail automotive automobile washing equipment
of which approximately 35% of the 1996 lease originations related to a single
manufacturer.
TRANSACTIONS SUBSEQUENT TO LEASE INCEPTION
Private Equipment Sales. The Company may from time to time sell its title
to leased equipment to third-party investors. In some cases, the equipment is
subject to existing non-recourse debt. In such transactions, the investors may
obtain rights to residual interests, equipment rentals and tax benefits. Upon
sale, the Company records equipment sales revenue equal to the sales price of
the equipment. Cost of equipment sales equals the carrying value of the related
asset reduced by any residual interest retained by the Company. The estimated
residual interest retained by the Company, if any, is recorded as an asset at
present value using an interest rate approximating the Company's then
incremental borrowing rate. Fees for administering and remarketing the equipment
associated with such transactions are reflected in operations as earned. The
residual interest in such transactions is determined in the same manner as
direct financing leases. Income is recorded on residual interests retained by
the Company after cash collections on such residuals exceed the recorded asset
amount.
Sale of Leases. During 1996, the Company transferred selected direct
financing leases to a third party lender. The difference between the sales price
of $1,702,623 and the net investment in the direct financing leases of
$1,602,326 is recognized as a gain in the accompanying financial statements. In
connection with the transfers, the Company provided recourse to the transferee
for lease losses up to an amount not exceeding 5% of the sales price of the
direct financing leases transferred. The Company did not retain an interest in
the corresponding residual values.
Allowance for Losses. The Company recognizes a credit loss reserve equal
to one-half of one percent of equipment cost for all equipment leased to
petroleum distributors and dealers. To further minimize credit risk as well as
interest rate risk, the Company typically finances lease obligations on a
non-recourse, fixed-rate basis with various lenders. The non-recourse loans
transfer substantially all credit risk to third parties.
Activity in the Company's allowance for losses during the year ended
December 31, 1996 is summarized as follows:
<TABLE>
<CAPTION>
1996
--------
<S> <C>
Allowance for lease losses, beginning....................... $ 63,004
Provision for lease losses.................................. 90,331
Leases written off.......................................... (42,401)
--------
Allowance for lease losses, ending.......................... $110,934
========
</TABLE>
F-47
<PAGE> 160
BOULDER CAPITAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
YEAR ENDED DECEMBER 31, 1996
NOTE 2--REVENUE SHARING AGREEMENTS AND DEPRECIATION ON LEASED EQUIPMENT
At December 31, 1996, the Company owned $1,209,626 of car wash equipment
placed under five-year revenue sharing agreements primarily with major oil
company customers. Under the revenue sharing agreements, the Company receives a
majority of the revenues generated by the car washes from which it pays for
supplies and the services of the manufacturer's distributor. Depreciation on
leased equipment totaled $361,246 for the year ended December 31, 1996.
NOTE 3--OPTION FEE
A related corporation has the option to participate in the residual values
of certain equipment by paying $750,000 on or before certain dates that coincide
with the expiration of the lease terms of the equipment, which occur between
1997 and 1999. The corporation will then receive 100% of all re-lease or sale
proceeds up to $1,125,000 after payment of direct costs associated with such
transaction, if any. The related corporation and the Company then share equally
any proceeds in excess of this amount. Fees of $250,000 received by the Company
in 1992 have been recorded in accrued expenses.
The residual values recorded by the Company in connection with such
equipment do not exceed the $750,000 stated above.
NOTE 4--RETIREMENT PLAN
During 1992, the Company established a 401(k) Retirement Plan whereby an
employee upon reaching minimum age and service requirements, may contribute up
to 10% of compensation to the Plan. Employee contributions totaled $49,999
during the year ended December 31, 1996. Additionally, the Company will provide
matching contributions for 25% of the employee's contribution which does not
exceed 8% and may make other voluntary contributions. The Company's
contributions were $15,869 during the year ended December 31, 1996.
NOTE 5--RELATED PARTY TRANSACTIONS
The Company has a revolving credit agreement with the majority shareholder
of the Company that allows the Company to borrow up to $200,000. At December 31,
1996, $200,000 was outstanding under this agreement. Interest is payable monthly
at the prime-rate plus one percent (9.25% at December 31, 1996) and is due,
together with any unpaid principal, on May 31, 1997.
The Company is a related party with respect to a corporate lender, since
the minority shareholder owns an equity interest in the lender. The amount of
subordinated debt owed to this corporate lender is $547,297 at December 31,
1996. Interest expense of $44,243 was incurred related to this subordinated debt
for the year ended December 31, 1996. The amount of short-term borrowings owed
to this corporate lender is $300,000 at December 31, 1996. Interest is payable
monthly at the prime rate plus 1/2 percent (8.75% at December 31, 1996) and is
due, together with unpaid principal, on May 31, 1997. Interest expense of
approximately $3,000 was incurred related to this short-term borrowing for the
year ended December 31, 1996.
NOTE 6--OFFICE LEASE EXPENSE
During 1994, the Company entered into a five-year, noncancelable operating
lease for newly constructed office space which, in the opinion of the
management, will adequately provide for present and future needs, as currently
planned. The lease contains renewal and expansion options, some of which were
exercised during 1996, and provides for annual escalation for cost of living
increases, taxes, and maintenance and the Company's responsibility for its own
utilities. Rent expense incurred by the Company was $89,148 for the year ended
December 31, 1996.
F-48
<PAGE> 161
BOULDER CAPITAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
YEAR ENDED DECEMBER 31, 1996
NOTE 6--OFFICE LEASE EXPENSE (CONTINUED)
The minimum future rentals under said lease is as follows:
<TABLE>
<S> <C>
Years Ending December 31:
1997........................................................ $ 98,981
1998........................................................ 98,981
1999........................................................ 57,738
--------
$255,700
========
</TABLE>
NOTE 7--STOCK OPTION
The Company has granted an option to a minority shareholder to purchase an
additional 1,250 shares of common stock of the Company at $260 per share. The
option expires on October 7, 1999 and has not been exercised. The majority
shareholder of the Company, at his sole option, may elect to have the Company
redeem from him an equivalent number of shares at the same price to be
simultaneously resold to the option shareholder in lieu of the issuance of new
shares.
NOTE 8-- EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITORS'
REPORT
On February 5, 1998, the minority shareholder exercised the option
described in Note 7 and purchased 1,250 shares of common stock of the Company
for $260 per share. These shares were redeemed from the majority shareholder for
the same price in lieu of the Company issuing new shares.
The Company and its shareholders have entered into a letter of intent with
UniCapital Corporation (UniCapital) pursuant to which UniCapital will acquire
all outstanding shares of the Company's common stock in exchange for cash and
common stock of UniCapital, concurrent with the consummation of the initial
public offering of the common stock of UniCapital.
The Company entered into a letter of intent with an unrelated third party
pursuant to which the Company and such party will form a new company to serve as
the manager and/or general partner of a new real estate finance company. The
Company and such party intend to provide fixed rate mortgages and sale/leaseback
financing to petroleum retail and convenience store operators nationwide.
F-49
<PAGE> 162
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholders
Cauff, Lippman Aviation, Inc. and Certain Affiliates
We have audited the accompanying combined balance sheets of Cauff, Lippman
Aviation, Inc. and Certain Affiliates (includes only certain entities under
common ownership) (collectively, the Company) as of December 31, 1996 and 1997,
and the related combined statements of income, changes in equity (deficit) and
cash flows for each of the three years in the period ended December 31, 1997.
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 audit 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of Cauff,
Lippman Aviation, Inc. and Certain Affiliates at December 31, 1996 and 1997, and
the combined results of their operations and their cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
Ernst and Young LLP
Miami, Florida
January 14, 1998,
except for Note 14, as to which the date is
February 7, 1998
F-50
<PAGE> 163
CAUFF, LIPPMAN AVIATION, INC. AND CERTAIN AFFILIATES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................. $ 638,528 $ 8,354,347
Accounts receivable....................................... 9,053,451 10,368,862
Equipment under operating leases, net..................... 25,119,357 23,339,737
Investments............................................... 238,967 --
Deposits on equipment held for lease...................... 312,168 500,000
Other assets.............................................. 4,213,276 4,865,378
----------- -----------
Total assets................................................ $39,575,747 $47,428,324
=========== ===========
LIABILITIES AND COMBINED EQUITY (DEFICIT)
Liabilities:
Non-recourse debt......................................... $31,718,416 $26,748,739
Payable to stockholders and affiliates, net............... 2,249,858 8,188,080
Accounts payable and accrued expenses..................... 404,801 448,161
Security and other deposits............................... 4,995,617 6,338,196
----------- -----------
Total liabilities........................................... 39,368,692 41,723,176
----------- -----------
Minority interest........................................... 368,880 697,968
Combined equity (deficit):
Common stock.............................................. 1,300 1,300
Additional paid-in capital................................ 1,817,405 1,817,405
Retained earnings (deficit)............................... (1,980,530) 3,188,475
----------- -----------
Total combined equity (deficit)............................. (161,825) 5,007,180
----------- -----------
Total liabilities and combined equity (deficit)............. $39,575,747 $47,428,324
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-51
<PAGE> 164
CAUFF, LIPPMAN AVIATION, INC. AND CERTAIN AFFILIATES
COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Rental income from operating leases................ $20,997,203 $18,516,574 $17,596,063
Sales of equipment................................. -- 40,500 5,725,000
Fees, commissions and remarketing income........... 4,979,215 5,390,367 8,156,334
Interest and other income.......................... 820,609 748,983 707,477
----------- ----------- -----------
Total revenues.............................. 26,797,027 24,696,424 32,184,874
----------- ----------- -----------
Cost of equipment under operating leases........... 12,429,989 12,414,929 12,659,751
Cost of equipment sold............................. -- 31,999 4,325,020
Interest expense................................... 3,279,432 2,997,717 2,768,602
Selling, general and administrative expenses....... 2,689,616 3,959,288 4,870,839
----------- ----------- -----------
Total expenses.............................. 18,399,037 19,403,933 24,624,212
----------- ----------- -----------
Income from operations............................. 8,397,990 5,292,491 7,560,662
Equity in income of minority owned affiliates...... -- 238,967 219,438
Minority interest.................................. (777,611) (692,328) (646,128)
----------- ----------- -----------
Net income before extraordinary gain............... 7,620,379 4,839,130 7,133,972
Extraordinary gain on extinguishment of debt....... -- 598,414 --
----------- ----------- -----------
Net income......................................... $ 7,620,379 $ 5,437,544 $ 7,133,972
=========== =========== ===========
Unaudited pro forma information (Note 3):
Pro forma net income before income taxes........... $ 7,620,379 $ 5,437,544 $ 7,133,972
Provision for income taxes......................... 3,161,741 2,307,976 2,921,939
----------- ----------- -----------
Pro forma net income............................... $ 4,458,638 $ 3,129,568 $ 4,212,033
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-52
<PAGE> 165
CAUFF, LIPPMAN AVIATION, INC. AND CERTAIN AFFILIATES
COMBINED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
<TABLE>
<CAPTION>
TOTAL
ADDITIONAL RETAINED COMBINED
COMMON PAID-IN EARNINGS EQUITY
STOCK CAPITAL (DEFICIT) (DEFICIT)
------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Balance at January 1, 1995............... $1,100 $ 913,359 $(10,252,357) $(9,337,898)
Net income............................. -- -- 7,620,379 7,620,379
Contributions.......................... 200 1,021,086 -- 1,021,286
Distributions and dividends............ -- -- (3,422,799) (3,422,799)
------ ---------- ------------ -----------
Balance at December 31, 1995............. 1,300 1,934,445 (6,054,777) (4,119,032)
Net income............................. -- -- 5,437,544 5,437,544
Distributions and dividends............ -- (117,040) (1,363,297) (1,480,337)
------ ---------- ------------ -----------
Balance at December 31, 1996............. 1,300 1,817,405 (1,980,530) (161,825)
Net income............................. -- -- 7,133,972 7,133,972
Contributions.......................... -- 6,109,426 -- 6,109,426
Distributions and dividends............ -- (6,109,426) (1,964,967) (8,074,393)
------ ---------- ------------ -----------
Balance at December 31, 1997............. $1,300 $1,817,405 $ 3,188,475 $ 5,007,180
====== ========== ============ ===========
</TABLE>
See accompanying notes to financial statements.
F-53
<PAGE> 166
CAUFF, LIPPMAN AVIATION, INC. AND CERTAIN AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 7,620,379 $ 5,437,544 $ 7,133,972
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation on equipment under operating
leases...................................... 1,856,441 2,034,929 2,279,751
Minority interest............................. 777,611 692,328 646,128
Extraordinary gain on extinguishment of
debt........................................ -- (598,414) --
Equity in income of uncombined affiliates
(net of Dividends Received)................. -- (238,967) 238,967
Changes in operating assets and liabilities:
Accounts receivable........................... (545,371) (3,044,417) (1,315,411)
Equipment under operating leases.............. -- (7,418,352) (489,500)
Deposits on equipment held for lease and other
assets...................................... (1,170,856) (716,935) (850,565)
Accounts payable and accrued expenses......... (135,542) 51,956 43,360
Security and other deposits................... 1,261,324 670,120 1,342,579
----------- ----------- ------------
Net cash provided by (used in) operating
activities.................................. 9,663,986 (3,130,208) 9,029,281
----------- ----------- ------------
Cash flows from financing activities:
Proceeds from nonrecourse obligations............ -- 13,208,071 7,817,874
Payments on nonrecourse obligations.............. (6,546,892) (9,838,270) (12,787,552)
Advances from (to) stockholders.................. (105,376) (276,490) 5,879,479
Advances from affiliates......................... -- 2,286,141 58,744
Capital contributions............................ 1,021,286 -- 6,109,426
Distributions to minority shareholders (net)..... (921,751) (339,695) (317,040)
Distributions and dividends...................... (3,422,799) (1,363,297) (8,074,393)
----------- ----------- ------------
Net cash provided by (used in) financing
activities............................... (9,975,532) 3,676,460 (1,313,462)
----------- ----------- ------------
Net increase (decrease) in cash............. (311,546) 546,252 7,715,819
Cash and cash equivalents at beginning of year..... 403,822 92,276 638,528
----------- ----------- ------------
Cash and cash equivalents at end of year........... $ 92,276 $ 638,528 $ 8,354,347
=========== =========== ============
</TABLE>
See accompanying notes to financial statements.
F-54
<PAGE> 167
CAUFF, LIPPMAN AVIATION, INC. AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE--1 BUSINESS
Cauff, Lippman Aviation, Inc. and Certain Affiliates (collectively, the Company
or the Combined Affiliates) is primarily engaged in the acquisition and leasing
of used commercial jet aircraft and aircraft equipment and the leasing and sale
of such aircraft and aircraft equipment to domestic and foreign airlines and
other aircraft investors and lessors.
On November 7, 1997, the Company signed a letter of intent to enter into a
definitive agreement to merge with UniCapital Corporation. The accompanying
combined financial statements include the following entities that will merge:
<TABLE>
<CAPTION>
PERCENTAGE
ENTITY OWNERSHIP
------ ----------
<S> <C>
Cauff Lippman Aviation, Inc................................. 100%
CL Aircraft VIII, Inc....................................... 100%
CL Aircraft XXXIV, Inc...................................... 100%
Aircraft 46941, Inc......................................... 100%
SWR Aircraft Group, Inc..................................... 80%
SWR 767, Inc................................................ 78%
SWR Brazil 767, Inc......................................... 80%
CLC Engine Leasing, Inc..................................... 78%
CLA Canada, Inc............................................. 100%
Aircraft 49632, Inc......................................... 78%
Jetz, Inc................................................... 78%
CLC 747, Inc................................................ 26%
</TABLE>
Various other entities affiliated with the Company are not contemplated in the
merger and have not been included in the accompanying financial statements.
NOTE--2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of combination
The accompanying combined financial statements include the accounts of the
entities outlined above affiliated by common ownership and control. CLC 747,
Inc., the 26% owned entity is accounted for under the equity method (see Note
7). All significant intercompany balances and transactions have been eliminated
in combination.
Rental income from operating leases
The Company, as lessor, leases aircraft and aircraft equipment principally under
operating leases. Accordingly, income is reported over the life of the lease as
rentals become receivable under the provisions of the lease or, in the case of
leases with varying payments, under the straight-line method over the
noncancelable term of the lease. In certain cases, leases provide for additional
amounts based on usage.
Sales of equipment and commissions
Sales of equipment are recorded when title passes from the seller to the buyer.
Commissions are earned on the sale of aircraft between third party buyers and
sellers without the Company taking title.
Equipment under operating leases
Equipment under operating leases is stated at cost. Major additions and
modifications are capitalized. Normal maintenance and repairs; airframe and
engine overhauls; and compliance with return conditions of aircraft and aircraft
equipment on lease are provided by and paid for by the lessee.
F-55
<PAGE> 168
CAUFF, LIPPMAN AVIATION, INC. AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
NOTE--2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Generally, aircraft and aircraft equipment are depreciated using the
straight-line method over a 30 year life from the date of manufacture to a 15%
residual value. Aircraft and aircraft equipment that are under lease as of the
date of acquisition, are depreciated over the longer of the remainder of their
30 year life or the remaining lease term.
Deferred loan costs
Deferred loan costs incurred in connection with debt financing are being
amortized over the life of the debt using the straight-line method, which
approximates the interest method.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Cash equivalents
The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.
Concentration of credit risk
The Company leases and sells aircraft and aircraft equipment to domestic and
foreign airlines and other aircraft investors and lessors located throughout the
world. The Company generally obtains deposits on leases and generally does not
require collateral. The Company has no single customer which accounts for 10% or
more of revenues and continually monitors its exposure for credit losses.
Accounting for the impairment of long lived assets
In 1996, the Company adopted the provisions of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets" ("FAS 121"). FAS
121 requires impairment losses to be recorded on long-lived assets when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. The
Company believes no impairment indicators exist at December 31, 1997.
NOTE--3 PRO FORMA INCOME TAX INFORMATION (UNAUDITED)
The Combined affiliates are organized as S-Corporations under the provisions of
the Internal Revenue Code, which provides that the Corporations' taxable income
is taxable to the stockholders, rather than at the corporate level.
The unaudited pro forma income tax information included in the Combined
Statements of Income is presented in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," as if the Company
had been subject to federal and state income taxes for all periods presented.
There are differences between the financial statements carrying amounts and the
tax bases of existing assets and liabilities of the entities affiliated under
common control. At December 31, 1997, the Company's net assets for financial
reporting purposes exceed the tax basis by approximately $13.0 million. In
connection with the proposed merger with UniCapital Corporation discussed in
Note 14, the Company's S Corporation election will terminate and the tax effect
of the net differences, exclusive of previous S Corporation net operating loss
carryforward, between the book and tax bases of net assets at that date
(approximately $4.9 million at December 31, 1997) will be recorded in the
financial statements.
NOTE--4 OTHER ASSETS
As of December 31, 1996 and 1997, other assets consist primarily of maintenance
reserves. Maintenance reserves are charged to lessees based upon usage of the
leased aircraft. Such amounts are reimbursed to the lessee as
F-56
<PAGE> 169
CAUFF, LIPPMAN AVIATION, INC. AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
NOTE--4 OTHER ASSETS (CONTINUED)
required maintenance is performed. As of December 31, 1996 and 1997, maintenance
reserves were approximately $3.9 and $4.7 million, respectively.
NOTE--5 NONRECOURSE DEBT
Nonrecourse obligations are secured by the underlying leases and leased aircraft
and aircraft equipment having a carrying value of $23,339,737 at December 31,
1997. Of this amount, $1,469,000 has been guaranteed by the Company. For all
other nonrecourse obligations, in the event of lessee default, the lenders have
recourse only to the pledged aircraft and aircraft equipment. As of December 31,
1996 and 1997, nonrecourse obligations bear interest at varying rates ranging
from 7.84% to 11.18%, inclusive, with maturities ranging from 1998 through 2004.
As of December 31, 1997, maturities of nonrecourse obligations for each of the
five years and thereafter, are approximately as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C> <C>
1998............................................................... $ 5,733,000
1999............................................................... 16,671,000
2000............................................................... 736,000
2001............................................................... 1,559,000
2002............................................................... 825,000
Thereafter......................................................... 1,225,000
-----------
$26,749,000
===========
</TABLE>
Under certain of the above agreements, certain lenders and other outside parties
are participants in the residual values of certain aircraft.
Cash paid during the year for interest was $3,294,644, $2,850,952 and $2,638,886
in 1995, 1996 and 1997, respectively.
NOTE--6 RENTAL INCOME FROM OPERATING LEASES
Minimum future rentals on noncancelable operating leases of aircraft and
aircraft equipment as of December 31, 1997 are approximately as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C> <C>
1998............................................................... $13,224,000
1999............................................................... 3,733,000
2000............................................................... 1,191,000
2001............................................................... 931,000
2002............................................................... 537,000
Thereafter......................................................... 403,000
-----------
$20,019,000
===========
</TABLE>
F-57
<PAGE> 170
CAUFF, LIPPMAN AVIATION, INC. AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
NOTE--7 RELATED PARTY TRANSACTIONS
The accompanying combined financial statements reflect an applicable percentage
of income from CLC 747, Inc., an entity which the shareholders of the Company
own a 26% equity interest. As of December 31, 1997, CLC 747 had no operating
assets and no contracts for future operating revenues.
On October 1, 1997, Jumbo Jet Leasing LP, ("JJL"), an entity 100% owned by the
shareholders of the Company, entered into a transaction in which the net assets
and certain contractual rights held by CLC 747, Inc. were transferred to JJL in
exchange for approximately $25 million. Subsequent to the transaction CLC 747,
Inc. distributed the resulting proceeds to its shareholders. Accordingly, the
Company's proportionate share of these proceeds (approximately $6.2 million) has
been reflected as a capital contribution and distribution in the accompanying
combined financial statements.
At December 31, 1996 and 1997, payables to stockholders and affiliates, net
include $0.9 million and $6.8 million, respectively, of the net outstanding
balance of advances from the Company's stockholders. Such advances are unsecured
and bear interest at 9% with no fixed or determinable due dates.
Due to affiliates represent the net payable to entities affiliated with the
Company which have not been combined in the accompanying financial statements.
In January 1998, the Company repaid approximately $6.4 million of advances from
stockholders and $635,000 of advances from minority shareholders.
In 1995 and 1996 the Company allocated expenses of approximately $800,000 and
$1,544,000, respectively, related to services performed on behalf of affiliated
entities which have not been combined in the accompanying financial statements.
NOTE--8 COMMITMENTS AND CONTINGENCIES
During 1993, the Company had entered into two noncancelable operating leases of
aircraft for a term of five years with aggregated annual payments of
$10,380,000. In connection with these leases, the Company entered into sublease
agreements also for a term of five years with aggregated annual payments of
approximately $11,280,000. These leases mature in September, 1998.
The Company leases its office space pursuant to a lease with average annual
payments of approximately $85,000. The lease expires in 1999. The Company has
subleased approximately half of its leased premises for approximately $43,000
per year through March, 1998.
The Company is engaged in litigation arising in the normal course of business.
Management believes that the outcome of such litigation will not have a material
adverse effect on its financial position or the results of its operations.
NOTE--9 EMPLOYMENT AGREEMENTS
Effective January 1, 1994, the Company entered into employment agreements with
its three officers. Under the terms of the agreements, the officers were
entitled to receive a base salary of $700,000 in the aggregate, in addition to
transaction origination bonuses. On November 12, 1996, one of the officers
terminated his agreement with the Company, effective December 31, 1996.
Beginning January 1, 1997, the remaining officers were entitled to receive a
base salary of $500,000 in the aggregate, in addition to transaction origination
bonuses. Such bonuses totaled $236,000 in 1996 and $11,700 in 1997.
Additionally, the officers were paid supplemental salaries totaling $1,932,000
and $800,000 in 1996 and 1997, respectively.
F-58
<PAGE> 171
CAUFF, LIPPMAN AVIATION, INC. AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
NOTE--10 PROFIT SHARING PLAN
On January 1, 1994, the Company adopted a defined contribution profit sharing
plan (the Plan) for the benefit of all employees meeting minimum age and service
requirements. Contributions made to the Plan for the years ended December 31,
1995, 1996 and 1997 approximated $92,000, $103,000 and $89,000, respectively.
Benefits under the Plan vest ratably over a five year period.
NOTE--11 FINANCIAL INSTRUMENTS
In 1996, the Company entered into two interest rate swap agreements with
aggregate notional amounts of approximately $10,200,000 to manage its exposure
to interest rates of the Company's floating rate nonrecourse obligations. These
agreements effectively convert certain variable rate obligations with interest
rates ranging from LIBOR to LIBOR plus 2.5% to a weighted average fixed rate of
7.9%. The difference to be paid or received varies as short-term interest rates
change and is accrued and recognized as an adjustment to interest expense.
Market risks arise from the movement in interest rates. The Company's credit
risk is limited to the fair market value of the interest rate swaps. During
February, 1997, the Company terminated one of the swap agreements and incurred a
loss of approximately $178,000. The remaining agreement was entered into on
December 9, 1996, matures in July, 1999, and has a notional amount of
approximately $1,469,000 at December 31, 1997.
The Company does not require its counterparties to provide security for its
positions with the Company. Any failure of the instruments or counterparties to
perform under the derivative contracts would have an immaterial impact on the
Company's earnings.
The fair value of the Company's interest rate swap agreements are estimated
using discounted cash flows based on the Company's current incremental borrowing
rate. As of December 31, 1997, the fair value of the Company's interest rate
swap agreement approximated its notional amount.
The carrying value of cash and rents and other receivables in the accompanying
financial statements approximate their fair value because of the short-term
maturity of these instruments, and in the case of nonrecourse obligations
because such instruments bear variable interest rates which approximate market.
NOTE--12 EXTRAORDINARY ITEMS
In 1996, the Company recognized an extraordinary gain of $598,414 on the
extinguishment of debt.
NOTE--13 YEAR 2000 ISSUES (UNAUDITED)
The Company is assessing the modifications or replacement of its software that
may be necessary for its computer systems to function properly with respect to
the dates in the year 2000 and thereafter. The Company does not believe that the
cost of either modifying existing software or converting to new software will be
significant or that the year 2000 issue will pose significant operational
problems for its computer systems.
NOTE--14 SUBSEQUENT EVENT
The Company and its stockholders have entered into a merger agreement with
UniCapital Corporation ("UniCapital") pursuant to which UniCapital will acquire
all outstanding shares of common stock of the combined entities affiliated by
common ownership in exchange for cash and common stock of UniCapital, concurrent
with the consummation of the initial public offering of the common stock of
UniCapital.
On February 7, 1998, the majority stockholders entered into an agreement to
purchase minority stockholder's interest in the Company.
F-59
<PAGE> 172
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Jacom Computer Services, Inc.
Northvale, New Jersey
We have audited the accompanying balance sheets of Jacom Computer Services,
Inc. as of December 31, 1996 and 1997, and the related statements of income and
retained earnings and cash flows for each of the years in the three-year period
ended December 31, 1997. 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 audit 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 financial statements referred to above present fairly,
in all material respects, the financial position of Jacom Computer Services,
Inc. as of December 31, 1996 and 1997, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1997, in conformity with generally accepted accounting principles.
BDO Seidman, LLP
New York, NY
January 28, 1998
F-60
<PAGE> 173
JACOM COMPUTER SERVICES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 1,307 $ 2,596
Accounts receivable, less allowance of $100 and $250 for
possible losses........................................... 2,354 3,655
Net investment in sales-type leases (Notes 1 and 3)......... 114,507 86,278
Equipment under operating leases, net (Notes 2 and 3)....... 12,098 13,319
Receivable from stockholder................................. 200 451
Other assets................................................ 354 729
Deposits on equipment held for lease........................ 7,221 11,920
-------- --------
Total assets $138,041 $118,948
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Discounted lease payments with recourse (Notes 3 and 6)... $ 6,169 $ 7,304
Discounted lease payments without recourse (Notes 3 and
6)..................................................... 62,574 35,751
Vendor payables and accruals.............................. 7,665 3,467
Note payable to stockholder............................... 6,500 --
Income taxes payable...................................... 241 580
Deferred income taxes payable (Note 4).................... 2,850 2,678
-------- --------
Total liabilities...................................... $ 85,999 $ 49,780
-------- --------
Stockholder's equity:
Common stock, no par value--200 shares authorized; 100
issued and outstanding................................. 1 1
Retained earnings......................................... 52,041 69,167
-------- --------
Total stockholder's equity............................. 52,042 69,168
-------- --------
Total liabilities and stockholder's equity............. $138,041 $118,948
======== ========
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
F-61
<PAGE> 174
JACOM COMPUTER SERVICES, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1995 1996 1997
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales of equipment.................................... $ 60,867 $ 49,123 $ 62,897
Finance income from direct financing and sales-type
leases.............................................. 9,184 9,337 8,377
Rental income from operating leases................... 11,416 13,304 16,531
Gain on sale of leases................................ -- -- 472
Interest and other income............................. 927 1,554 1,794
---------- ---------- ----------
Total revenues...................................... 82,394 73,318 90,071
---------- ---------- ----------
Depreciation on equipment under operating leases...... 4,512 5,831 6,448
Cost of equipment sold................................ 53,382 43,473 47,914
Interest expense...................................... 5,824 5,586 4,645
Selling, general and administrative................... 11,797 11,082 13,183
---------- ---------- ----------
Total expenses...................................... 75,515 65,972 72,190
---------- ---------- ----------
Income from operations.............................. 6,879 7,346 17,881
Provision (benefit) for income taxes (Note 4)......... 460 (44) 755
---------- ---------- ----------
Net income............................................ 6,419 7,390 17,126
Retained earnings, beginning of year.................. 38,232 44,651 52,041
---------- ---------- ----------
Retained earnings, end of year........................ $ 44,651 $ 52,041 $ 69,167
========== ========== ==========
Unaudited pro forma information:
Pro forma income from operations.................... $ 6,879 $ 7,346 $ 17,881
Pro forma provision for income taxes................ 2,823 3,045 7,438
---------- ---------- ----------
Pro forma net income................................ $ 4,056 $ 4,301 $ 10,443
========== ========== ==========
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
F-62
<PAGE> 175
JACOM COMPUTER SERVICES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1996 1997
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 6,419 $ 7,390 $ 17,126
Adjustments to reconcile net income to net cash provided
by operating activities:
Gain on sale of leases................................. -- -- (472)
Depreciation........................................... 4,514 5,836 6,453
Gain on sale at inception of lease..................... (5,609) (6,634) (10,487)
Gain on sale of equipment at end of lease.............. (2,857) (2,647) (2,609)
Provision for possible losses on receivables........... -- 80 150
Amortization of unearned income........................ (9,184) (9,337) (8,377)
Decrease (increase) in assets:
Accounts receivable.................................. (872) (1,426) (1,451)
Lease receivables:
Purchase of equipment for lease receivables....... (50,613) (38,486) (51,410)
Sale of sales-type lease receivables.............. -- -- 39,856
Proceeds received from lessees.................... 60,257 62,110 60,897
Deposits on equipment held for lease................. (50) (672) (4,699)
Other assets......................................... (48) (101) (90)
Increase (decrease) in liabilities:
Vendor payables and accruals......................... 2,422 (5,769) (4,198)
Income taxes payable................................. 281 (1,101) 339
Deferred income taxes payable........................ 16 161 (172)
------- ------- --------
Total adjustments............................... (1,743) 2,014 23,730
------- ------- --------
Net cash provided by operating activities....... 4,676 9,404 40,856
------- ------- --------
Cash flows from investing activities:
Purchase of equipment for operating leases................ (9,668) (8,222) (7,128)
Advances to stockholder................................... -- (200) (251)
Capital expenditures...................................... (12) (7) --
------- ------- --------
Net cash used in investing activities........... (9,680) (8,429) (7,379)
------- ------- --------
Cash flows from financing activities:
Proceeds from borrowings under lines of credit............ 14,500 9,500 3,000
Repayments of borrowings under lines of credit............ (14,500) (9,500) (3,000)
Proceeds from borrowings under line of credit guaranteed
by stockholder......................................... -- 6,500 2,000
Repayments of borrowings under line of credit guaranteed
by stockholder......................................... (2,000) -- (8,500)
Proceeds from discounting leases with recourse or
collateralizing operating equipment.................... 35,830 27,423 6,464
Repayment of recourse and nonrecourse debt................ (29,845) (34,401) (32,152)
------- ------- --------
Net cash provided by (used in) financing
activities................................... 3,985 (478) (32,188)
------- ------- --------
Net increase (decrease) in cash and cash equivalents........ (1,019) 497 1,289
Cash and cash equivalents, beginning of year................ 1,829 810 1,307
------- ------- --------
Cash and cash equivalents, end of year...................... $ 810 $ 1,307 $ 2,596
======= ======= ========
</TABLE>
See accompanying summary of accounting policies and notes to financial
statements.
F-63
<PAGE> 176
JACOM COMPUTER SERVICES, INC.
SUMMARY OF ACCOUNTING POLICIES
(IN THOUSANDS)
BUSINESS
Jacom Computer Services, Inc. (the "Company") is primarily engaged in the
acquisition, leasing, and sales of data processing and telecommunications
equipment. The Company acquires equipment from many sources and leases or sells
the equipment to its customers. The Company provides or arranges to provide
installation, maintenance and modification of the equipment.
REVENUE RECOGNITION
(a) Net Investment in Sales-Type Leases
The Company originates sales-type leases and recognizes a sale upon
acceptance by the customer of the equipment. Unearned income represents the
excess of the gross lease receivable plus the estimated residual value over the
present value of the gross investment in the lease. Unearned income is
recognized as revenue over the term of the lease at a constant rate of return on
the net investment.
(b) Discounted Lease Payments
The Company finances the originations of leases either by utilizing its own
funds; utilizing available funds under credit facilities, or by discounting the
stream of future lease payments with various financial institutions.
A sale is recorded when the Company sells these receivables (which includes
sales type leases) on a nonrecourse basis and has no significant continuing
interest or risk of loss in the lease stream, but maintains ownership in the
residual value of the equipment at the end of the lease. A gain on sale is
recognized as the difference between the cash proceeds and the remaining lease
payments and unearned income on the date of sale. The Company provides billing
and collecting services for leases sold under these arrangements. The Company
follows Statement of Financial Accounting Standards No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".
The Company did not sell lease receivables prior to 1997.
(c) Operating Leases
The Company purchases equipment from selected vendors of the lessee. At the
inception of the lease, no revenue is recognized and the equipment is recorded
at cost plus installation charges. The cost is depreciated by an accelerated
method over an average life of 5 years. At the end of the initial lease term,
equipment is rented by the customer according to the original rental terms, the
leases are renegotiated into new contracts, or the equipment is placed in
inventory. Items returned to the Company are either sold, released or recorded
at the lower of cost or their remaining value.
Rental income is recognized in equal monthly installments over the life of
the lease. If the future lease stream is discounted, lease rental payments are
assigned and remitted to financial institutions to reduce discounted lease
payments payable.
(d) Sales of Leased Equipment
Revenue is recognized when the sale is consummated.
(e) Cost of Equipment Sold
The cost of the leased property, less the present value of the unguaranteed
residual value computed at the interest rate implied in the lease, represents
the cost of equipment sold for sales-type leases.
RESIDUAL VALUE
The fair value of leased equipment at the end of the sales-type lease is
estimated at the inception of the lease. The present value of the unguaranteed
residual is recorded as a reduction against the cost of the equipment sold.
Unearned income is credited to revenue over the term of the lease at a constant
rate of return on the net investment. The Company revised its rates for
estimating residual values for leases originated in 1997 from those
F-64
<PAGE> 177
JACOM COMPUTER SERVICES, INC.
SUMMARY OF ACCOUNTING POLICIES--CONTINUED
(IN THOUSANDS)
rates used in prior years. The results of this change over what would have been
reported using prior years rates increased net income by approximately $1,900.
DEPOSITS ON EQUIPMENT
Advances for equipment purchased and delivered to customers which do not
have a completed lease contract are recorded at cost. Once a final contract is
completed, this cost is reclassified to cost of sales or equipment for operating
leases.
ALLOWANCE FOR POSSIBLE LOSSES
In connection with the financing of leases, the Company records an
allowance for possible losses to provide for estimated future losses in the
portfolio and billings on monthly rentals and service. The allowance for
possible losses is based on a detailed analysis of any delinquencies or problem
accounts, an assessment of overall risks, management's evaluation of probable
losses in the portfolio as a whole and a review of historical loss experience.
Specific accounts are written off when the probability of loss has been
established in amounts determined to cover such losses after giving
consideration to the customer's financial condition and the value of underlying
collateral, including any guarantees.
TAXES ON INCOME
The Company has elected S Corporation status for federal and state income
taxes. As an S Corporation, the Company is generally not subject to federal
income taxes since the operating results are included in the tax returns of
their individual stockholders. The Company is directly liable for state
franchise taxes in certain jurisdictions.
The unaudited pro forma income tax information included in the Statement of
Operations is presented in accordance with the Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," as if the Company had been
subject to federal and state income taxes for all periods presented.
There are differences between the financial carrying amounts and the tax
basis of existing assets and liabilities. At December 31, 1997, the Company's
net assets for financial reporting purposes exceed the tax basis by
approximately $43,000. In connection with the proposed merger with UniCapital
Corporation discussed in Note 9, the Company's S Corporation election will
terminate and the tax effect of the net difference between the book and tax
basis of net assets at that date will be recorded in the combined company's
financial statements.
STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
USE OF ESTIMATES
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect 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. Among the more significant estimates included in these
financial statements are the estimates for possible losses and residual value of
leased equipment. Actual results could differ from those and other estimates.
F-65
<PAGE> 178
JACOM COMPUTER SERVICES, INC.
SUMMARY OF ACCOUNTING POLICIES--CONTINUED
(IN THOUSANDS)
FINANCIAL INSTRUMENTS
The carrying amounts of financial instruments including cash and cash
equivalents, accounts receivable and accounts payable approximated fair value
because of the relatively short maturity of these instruments. The carrying
value of minimum lease payments and discounted lease payments approximated fair
value based upon quoted market prices of similar instruments.
RECLASSIFICATIONS
Certain reclassifications have been made to prior years' information to
conform with the current year's presentation.
F-66
<PAGE> 179
JACOM COMPUTER SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1--NET INVESTMENT IN SALES-TYPE LEASES
The Company's net investment in sales-type leases consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- -------
<S> <C> <C>
Total minimum lease payments to be received............ $115,973 $77,349
Estimated unguaranteed residual values of leased
equipment............................................ 12,153 18,726
Less: Unearned income................................ (13,619) (9,797)
-------- -------
$114,507 $86,278
======== =======
</TABLE>
Estimated unguaranteed residual values include the present value of the
residual equipment from lease payments which have been sold.
Sales-type leases primarily expire over the next five years and, at
December 31, 1997, the future minimum lease receivables are due as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1998........................................................ $35,698
1999........................................................ 25,605
2000........................................................ 12,842
2001........................................................ 2,128
2002........................................................ 1,038
Thereafter.................................................. 38
-------
$77,349
=======
</TABLE>
NOTE 2--EQUIPMENT UNDER OPERATING LEASES, NET
Equipment under operating leases, net consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
Equipment.............................................. $ 23,863 $ 28,689
Less: Accumulated depreciation......................... (11,765) (15,370)
-------- --------
$ 12,098 $ 13,319
======== ========
</TABLE>
The operating leases related to the equipment under operating leases expire
over the next five years. At December 31, 1997, the future minimum lease
receivables are due as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1998........................................................ $5,335
1999........................................................ 1,934
2000........................................................ 381
2001........................................................ 196
2002........................................................ 152
------
$7,998
======
</TABLE>
F-67
<PAGE> 180
JACOM COMPUTER SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(IN THOUSANDS)
NOTE 3--DISCOUNTED LEASE PAYMENTS
Discounted lease payments represent the Company's liability incurred by
assigning the noncancellable rentals for certain sales-type and operating lease
receivables to financial institutions.
The principal and interest due on these loans at December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING SALES-TYPE OPERATING
DECEMBER 31, LEASES LEASES TOTAL
------------ ---------- --------- -------
<S> <C> <C> <C>
1998......................................... $20,445 $1,814 $22,259
1999......................................... 14,700 998 15,698
2000......................................... 6,894 165 7,059
2001......................................... 1,065 40 1,105
2002......................................... 438 -- 438
------- ------ -------
43,542 3,017 46,559
Less: Amount representing interest........... 3,504
-------
$43,055
=======
</TABLE>
The effective average interest rate related to the loans outstanding was
approximately 8% during 1997.
NOTE 4--TAXES (RECOVERIES) ON INCOME
The Company has elected, and the stockholder has consented, to include the
taxable income of the Company in his individual tax return. As a result, no
income tax is imposed on the Company for Federal and certain state purposes.
Recoveries of taxes are due to overaccruals in prior years.
Provisions for state and local taxes (recoveries) on income are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1995 1996 1997
---- ----- -----
<S> <C> <C> <C>
Current............................................. $444 $(205) $ 927
Deferred............................................ 16 161 (172)
---- ----- -----
$460 $ (44) $ 755
==== ===== =====
</TABLE>
Deferred taxes result primarily from the use of the operating lease method
for income tax purposes for sales-type leases and the related timing differences
generated from depreciation.
NOTE 5--PROFIT SHARING PLAN
The Company has a profit sharing plan for eligible employees. Contributions
are at the discretion of the Board of Directors. Contributions aggregated
approximately $66, $74, and $62 for the years ended December 31, 1995, 1996 and
1997, respectively.
NOTE 6--RELATED PARTY TRANSACTIONS
The balance of non interest bearing advances to the stockholder and his
affiliates approximated $200 and $451 respectively, at December 31, 1996 and
1997.
The Company rents a building from the stockholder for $120 per year until
the year 2001, at which time an increase will be made based on cost of living
adjustments until October 2006. Rent expense for 1995, 1996 and 1997 was $120.
F-68
<PAGE> 181
JACOM COMPUTER SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
(IN THOUSANDS)
NOTE 6--RELATED PARTY TRANSACTIONS (CONTINUED)
$1,578 and $2,935 of gross lease receivables on sales-type leases and
rental commitments on operating leases were financed through nonrecourse
discounted lease payments from the stockholder and his affiliates during 1995
and 1996, respectively. Discounted lease payments include approximately $2,677
and $781 as of December 31, 1996 and 1997, respectively. The Company has
continued to service the balance of these receivables for billings and
collection purposes during 1997.
NOTE 7--OFF-BALANCE SHEET AND CREDIT RISK
(A) LEASE CONCENTRATIONS
The Company originates equipment leases with its clients primarily for data
processing and telecommunication equipment throughout the United States.
Concentrations of credit risk arise when counterparties have similar economic
characteristics that would cause their ability to meet contractual obligations
to be similarly affected by changes in economic or other conditions. Credit risk
with respect to these receivables is mitigated through the Company's review of
each customer's credit history and the residual value of all equipment under
lease collateralizing these receivables. One customer comprised 13% of total
originations of sales-type leases and two customers comprised 40% and 32% of
originations of operating leases during 1997. The major concentrations of credit
risk for originations of sales-type leases grouped by geographic region are New
York--45% and New Jersey--18% with no other state accounting for more than 10%.
The major concentrations of credit risk for originations of operating leases are
New York--22%, New Jersey--21%, Pennsylvania--20%, and Massachusetts--13% with
no other state accounting for more than 10%. No one customer comprises more than
10% of the outstanding sales-type lease receivables and related accounts
receivable.
(B) LINES OF CREDIT
The Company maintains two unsecured working capital lines of credit with a
maximum borrowing capacity of $7,000 and $3,000. The Company borrows on a
short-term basis as capital is required to maintain the volume of originations.
Amounts are paid back as the Company sells lease receivables or obtains recourse
financing at a lower rate.
The $7,000 line is guaranteed presently by the stockholder of the Company.
The balance outstanding at year-end is $-0-.
The average aggregate monthly balance outstanding during 1997 was $250.
NOTE 8--SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Cash paid during the year for:
Interest....................................... $5,824 $5,586 $4,645
Taxes.......................................... 163 896 588
</TABLE>
NOTE 9-- EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Company and its shareholder have entered into a letter of intent with
UniCapital Corporation ("UniCapital") pursuant to which UniCapital will acquire
all outstanding shares of the Company's common stock in exchange for cash and
common stock of UniCapital, concurrent with the consummation of the initial
public offering of the common stock of UniCapital.
F-69
<PAGE> 182
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
K.L.C., Inc.:
We have audited the accompanying balance sheets of K.L.C., Inc. (the
"Company") as of December 31, 1996 and 1997, and the related statements of
income and retained earnings and cash flows for each of the three years in the
period ended December 31, 1997. 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 audit 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 financial statements referred to above present fairly,
in all material respects, the financial position of K.L.C., Inc. as of December
31, 1996 and 1997, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
February 4, 1998, except for Note 9, as
to which the date is February 10, 1998
F-70
<PAGE> 183
K.L.C., INC.
BALANCE SHEETS
December 31, 1996 and 1997
<TABLE>
<CAPTION>
1996 1997
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 3,561,943 $ 1,478,811
Net investment in direct financing leases, net of allowance
for lease losses of $397,000 and $1,150,000 (Note 2)...... 24,082,854 47,508,044
Equipment held for leasing.................................. 1,058,409 2,250,188
Property and equipment (Note 3)............................. 181,648 293,769
Receivable related to leases sold (Note 2).................. 3,513,527 1,861,291
Prepaid income taxes (Note 4)............................... -- 272,956
Other....................................................... 318,722 429,430
----------- -----------
Total assets......................................... $32,717,103 $54,094,489
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Installment loans payable (Note 5)........................ $17,977,931 $39,658,610
Accounts payable.......................................... 589,395 1,095,943
Accrued expenses and other liabilities.................... 984,643 729,023
Accrued income taxes (Note 4)............................. 297,620 --
Net deferred income tax liability (Note 4)................ 1,742,560 565,576
----------- -----------
Total liabilities.................................... 21,592,149 42,049,152
----------- -----------
Commitments and contingencies (Notes 6 and 8)............... -- --
Stockholders' equity:
Common stock, par value $100 per share, authorized 5,000
shares, 1,000 shares issued and outstanding............ 100,000 100,000
Paid-in capital........................................... 5,806 5,806
Retained earnings......................................... 11,681,613 12,685,560
----------- -----------
11,787,419 12,791,366
Less--loans receivable from related parties (Note 6)... (662,465) (746,029)
Total stockholders' equity........................... 11,124,954 12,045,337
----------- -----------
Total liabilities and stockholders' equity........... $32,717,103 $54,094,489
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-71
<PAGE> 184
K.L.C., INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
for the years ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Finance income from direct financing leases......... $5,687,636 $ 7,966,795 $ 7,573,494
Servicing fees and remarketing income............... 1,651,855 1,337,726 772,375
Gain on sale of leases (Note 2)..................... -- 5,362,864 --
Other income........................................ 267,578 579,778 647,942
---------- ----------- -----------
Total revenues................................. 7,606,799 15,247,163 8,993,811
---------- ----------- -----------
Selling, general and administrative................. 3,404,662 3,764,512 4,841,897
Interest expense.................................... 2,173,247 2,822,651 2,458,434
---------- ----------- -----------
Total expenses................................. 5,577,909 6,587,163 7,300,331
---------- ----------- -----------
Income before provision for income taxes....... 2,028,890 8,660,000 1,693,480
Provision for income taxes (Note 4)................. 869,159 3,341,889 689,533
---------- ----------- -----------
Net income..................................... 1,159,731 5,318,111 1,003,947
Retained earnings, beginning of year................ 5,203,771 6,363,502 11,681,613
---------- ----------- -----------
Retained earnings, end of year...................... $6,363,502 $11,681,613 $12,685,560
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-72
<PAGE> 185
K.L.C., INC.
STATEMENTS OF CASH FLOWS
for the years ended December 31, 1995, 1996 and 1997
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 1,159,731 $ 5,318,111 $ 1,003,947
------------ ------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............. 21,012 21,012 28,990
Amortization of initial direct costs...... 340,388 684,212 824,921
Provision for lease losses................ 464,895 475,380 1,019,748
Gain on sale of leases.................... -- (5,362,864) --
Changes in:
Equipment held for leasing............. (740,199) 204,683 (1,191,779)
Prepaid income taxes................... -- -- (272,956)
Other assets........................... (93,640) 105,692 (110,708)
Accrued income taxes................... 218,415 154,181 (297,620)
Accounts payable and accrued
liabilities.......................... 121,987 (1,050,311) 250,928
Deferred income taxes.................. (476,318) 1,448,481 (1,176,984)
Receivable related to leases sold...... -- 274,266 1,652,236
------------ ------------ ------------
Total adjustments.................... (143,460) (3,045,268) 726,776
------------ ------------ ------------
Net cash provided by operating activities........ 1,016,271 2,272,843 1,730,723
------------ ------------ ------------
Cash flows from investing activities:
Investment in direct financing leases.......... (29,886,281) (33,925,630) (35,763,054)
Principal collected on direct financing
leases...................................... 14,391,360 16,196,837 10,493,195
Proceeds from sale of direct financing
leases...................................... -- 30,800,000 --
Decrease (increase) in loans receivable from
related parties............................. 609,863 (450,000) (83,564)
Acquisition of property and equipment.......... (19,489) (20,352) (141,111)
------------ ------------ ------------
Net cash provided by (used in) investing
activities..................................... (14,904,547) 12,600,855 (25,494,534)
------------ ------------ ------------
Cash flows from financing activities:
Borrowings..................................... 28,392,314 27,691,687 32,378,000
Repayment of debt.............................. (14,168,241) (39,612,469) (10,697,321)
Repayment of stockholder loans................. -- (745,000) --
------------ ------------ ------------
Net cash provided by (used in) financing
activities..................................... 14,224,073 (12,665,782) 21,680,679
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents.................................... 335,797 2,207,916 (2,083,132)
Cash and cash equivalents at beginning of year... 1,018,230 1,354,027 3,561,943
------------ ------------ ------------
Cash and cash equivalents at end of year......... $ 1,354,027 $ 3,561,943 $ 1,478,811
============ ============ ============
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest.................................... $ 2,003,441 $ 2,917,345 $ 2,452,769
============ ============ ============
Income taxes................................ $ 1,127,062 $ 1,542,597 $ 2,437,093
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-73
<PAGE> 186
K.L.C., INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of business
K.L.C., Inc. (the "Company") is in the business of leasing various types of
equipment throughout forty-four states, with concentration on the East coast.
The Company's diversified portfolio consists of 1,844 leases as of December 31,
1997 in a variety of industries. These arrangements are accounted for as direct
financing leases.
Use of estimates in the preparation of financial statements
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. Material
estimates that are particularly susceptible to significant change in the
near-term relate to the valuation of estimated residuals on leased assets, the
determination of the allowance for lease losses and the valuation of equipment
held for leasing acquired in connection with repossessions.
Management believes estimated residual values are reasonable, that the
allowance for lease losses is adequate and that equipment held for leasing is
recorded at the lower of cost or estimated fair value. While management uses
available information to recognize reductions in estimated residual values,
losses on leases and equipment held for leasing, future reductions in estimated
residual values, additions to the allowance for lease losses or write-downs on
equipment held for leasing may be necessary based on changes in economic
conditions.
Direct financing leases
Direct financing leases are reported at the present value of minimum lease
payments plus the estimated residual value at the end of the lease using a
discount factor equal to the lessor's implicit interest rate. Financing income
is recognized over the term of the direct financing lease using the interest
method.
Certain initial direct lease costs are deferred and amortized over the term
of the related lease as a reduction of financing income using the interest
method.
Equipment held for leasing
Equipment held for leasing represents equipment received from lessees which
management intends to either re-lease to a different customer or sell. It is
recorded at the lower of cost or estimated market value.
Property and equipment
Property and equipment is carried at cost. Depreciation and amortization is
computed using the straight-line method over the estimated useful lives of the
assets which range from 5 to 7 years.
Repairs and maintenance are charged to operations as incurred. For assets
sold or otherwise disposed of, the cost and related accumulated depreciation are
removed from the accounts and any gain or loss is reflected in the year of
disposition.
Income taxes
Deferred income taxes are recognized for the tax consequences of "temporary
differences" between the financial statement carrying amounts and the tax bases
of assets and liabilities by applying enacted statutory tax rates applicable to
future years to those differences. The effect on deferred taxes of a change in
tax rates is recognized in income in the period that includes the enactment
date.
F-74
<PAGE> 187
K.L.C., INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and cash equivalents
Cash and cash equivalents include amounts due from banks and
interest-bearing deposits at financial institutions.
Reclassifications
Certain amounts in the 1995 and 1996 financial statements have been
reclassified to conform to the 1997 presentation.
NOTE 2--NET INVESTMENT IN DIRECT FINANCING LEASES
The components of the net investment in direct financing leases were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1997
---- ----
<S> <C> <C>
Minimum lease payments receivable........................ $32,371,388 $ 63,367,389
Less--allowance for lease losses.................... (397,000) (1,150,000)
----------- ------------
Net minimum lease payments receivable............... 31,974,388 62,217,389
Deferred initial direct costs............................ 564,258 1,214,465
Estimated residual value of leased property
(unguaranteed)......................................... 943,017 1,397,706
Unearned income.......................................... (9,772,606) (17,693,117)
----------- ------------
23,709,057 47,136,443
Service fee receivable................................... 373,797 371,601
----------- ------------
$24,082,854 $ 47,508,044
=========== ============
</TABLE>
Periodically, the Company sells portions of its lease portfolio and retains
the servicing rights. These direct financing leases are sold with recourse in
the event of a default by the lessee. The purchaser's recourse is limited to a
fixed percentage amount for each pool of leases purchased. Sales of leases
occurred in 1994 and 1996. The purchaser's recourse is limited to 16.7% and
11.5% for the 1994 and 1996 sales, respectively. The Company received initial
proceeds of $10.2 million and $30.8 million for the 1994 and 1996 sales,
respectively.
In connection with the 1996 sale, the Company realized a gain of
$5,362,864. Also, in connection with the 1996 sale, the Company has recorded a
receivable in the amount of $3,513,527 and $1,861,291 as of December 31, 1996
and 1997, respectively, which represents the maximum amount receivable under the
11.5% recourse provision, net of reserves of $215,027 and $350,000 as of
December 31, 1996 and 1997, respectively.
In connection with the 1994 sale, the realized gain was deferred and is
being amortized into income over the life of the leases as service fee income.
Service fee income on leases sold also includes late charges, over-residual
and buyout income realized through the servicing of the leases.
F-75
<PAGE> 188
K.L.C., INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2--NET INVESTMENT IN DIRECT FINANCING LEASES (CONTINUED)
The net investment in direct financing leases as of December 31, 1997
(without the unguaranteed residual values and allowance for lease losses) is to
be received with income amortized as follows:
<TABLE>
<CAPTION>
MINIMUM
LEASE PAYMENTS
RECEIVABLE, NET UNEARNED LEASE UNGUARANTEED
YEAR OF UNEARNED INCOME INCOME RECEIVABLE RESIDUALS
---- ------------------ ------ ---------- ---------
<S> <C> <C> <C> <C>
1998................................. $14,800,911 $ 8,820,229 $23,621,140 $ 124,254
1999................................. 14,426,704 5,516,713 19,943,417 230,844
2000................................. 10,665,934 2,494,507 13,160,441 382,073
2001................................. 4,631,028 742,255 5,373,283 428,653
2002 and thereafter.................. 1,149,695 119,413 1,269,108 231,882
----------- ----------- ----------- ----------
$45,674,272 $17,693,117 $63,367,389 $1,397,706
=========== =========== =========== ==========
</TABLE>
NOTE 3--PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
---- ----
<S> <C> <C>
Office furniture............................................ $265,376 $385,051
Leasehold improvements...................................... 172,152 193,588
-------- --------
437,528 578,639
Less--accumulated depreciation and amortization............. (255,880) (284,870)
-------- --------
$181,648 $293,769
======== ========
</TABLE>
Depreciation and amortization totaled $21,012 in 1995 and 1996 and $28,990
in 1997.
NOTE 4--INCOME TAXES
The provision for income taxes for the years ended December 31, is as
follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Currently payable:
Federal..................................... $1,006,730 $1,549,277 $ 1,490,821
State....................................... 338,747 344,131 375,696
---------- ---------- -----------
1,345,477 1,893,408 1,866,517
---------- ---------- -----------
Deferred:
Federal..................................... (375,679) 1,181,183 (965,617)
State....................................... (100,639) 267,298 (211,367)
---------- ---------- -----------
(476,318) 1,448,481 (1,176,984)
---------- ---------- -----------
$ 869,159 $3,341,889 $ 689,533
========== ========== ===========
</TABLE>
F-76
<PAGE> 189
K.L.C., INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 4--INCOME TAXES (CONTINUED)
The components of the net deferred tax liability are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Allowance for lease losses.............................. $ 411,200 $ 564,433
Other................................................... 239,127 47,302
----------- -----------
650,327 611,735
----------- -----------
Deferred tax liabilities:
Deferred gain on sale................................... (2,172,813) (995,402)
Other................................................... (220,074) (181,909)
----------- -----------
(2,392,887) (1,177,311)
----------- -----------
Net deferred tax liability...................... $(1,742,560) $ (565,576)
=========== ===========
</TABLE>
The following is a reconciliation of the expected federal income tax
expense to the provision for income tax expense for the years ended December 31:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Income tax expense at statutory rate............. $689,823 $2,944,400 $575,783
Increase (decrease) resulting from:
State tax, net of federal benefit.............. 157,151 403,543 108,457
Other.......................................... 22,185 (6,054) 5,293
-------- ---------- --------
Provision for income taxes....................... $869,159 $3,341,889 $689,533
======== ========== ========
</TABLE>
NOTE 5--INSTALLMENT LOANS PAYABLE
The Company finances substantially all leased equipment with installment
notes payable. The installment notes, with interest rates ranging from 8.00% to
9.00%, are collateralized by the equipment under lease and are personally
guaranteed by the Company's two stockholders. Upon sale of all or a portion of
the lease portfolio, the Company is required to pay down a substantial portion
of the related underlying debt. The installment note agreements contain various
covenants which, among other things, require maintenance of a minimum tangible
net worth and specific debt to equity ratios.
Future principal payments on installment loans payable is as follows:
<TABLE>
<CAPTION>
YEAR ENDED AMOUNT
---------- ------
<S> <C>
1998................................................. $14,832,089
1999................................................. 13,651,333
2000................................................. 8,793,124
2001................................................. 2,382,064
-----------
$39,658,610
===========
</TABLE>
As of December 31, 1997, the Company had drawn down approximately $39.6
million on its leasing lines of credit which aggregate $67 million.
F-77
<PAGE> 190
K.L.C., INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 6--RELATED PARTY TRANSACTIONS
The Company leases its office facilities from a partnership owned by its
stockholders under an agreement which expires on December 31, 1998. Rent expense
incurred was $180,000 in 1995, 1996 and 1997.
Minimum future rental payments under this lease as of December 31, 1997 are
as follows:
<TABLE>
<CAPTION>
YEAR ENDED AMOUNT
---------- ------
<S> <C>
1998.................................................... $180,000
========
</TABLE>
Effective January 1, 1998, the Company will enter into a new lease with the
partnership owned by its stockholders for its office facilities for a five year
term. The minimum lease payments for the first 3 years under the new lease will
be $216,000.
Loans receivable (from the stockholders or entities controlled by the
stockholders) consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
---- ----
<S> <C> <C>
Alored Associates........................................... $212,465 $326,029
Keystone Mortgage Services Corporation...................... 300,000 200,000
Stockholders................................................ 150,000 220,000
-------- --------
$662,465 $746,029
======== ========
</TABLE>
Loans receivable have been reflected as a reduction of stockholders' equity
in the accompanying balance sheet.
In addition, the Company has guaranteed a bank loan of $641,041 for Alored
Associates as of December 31, 1997.
NOTE 7--RETIREMENT PLAN
The Company sponsors a non-contributory defined contribution profit-sharing
plan which covers all of its employees. Contributions to the plan are determined
by the Board of Directors annually. The amount of profit-sharing expense was
$120,000, $121,250 and $124,528 in 1995, 1996 and 1997, respectively.
NOTE 8--COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal actions arising out of, and
incidental to, activities conducted in the normal course of business. In the
opinion of management, resolution of these matters will not have a material
effect on the Company's financial condition, results of operations or cash
flows.
NOTE 9--SUBSEQUENT EVENT
On February 10, 1998, the Company and its stockholders entered into a
merger agreement with UniCapital Corporation ("UniCapital") pursuant to which
UniCapital will acquire all of the outstanding shares of the Company's common
stock in exchange for cash and common stock of UniCapital, concurrent with the
consummation of the initial public offering of the common stock of UniCapital.
F-78
<PAGE> 191
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Matrix Funding Corporation
We have audited the accompanying consolidated balance sheet of Matrix
Funding Corporation and Subsidiary as of June 30, 1996 and 1997, and the related
consolidated statements of income, stockholders' equity, and cash flows for the
years ended June 30, 1995, 1996 and 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 audit 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 consolidated financial position of
Matrix Funding Corporation and Subsidiary as of June 30, 1996 and 1997, and the
results of their operations and their cash flows for the years ended June 30,
1995, 1996 and 1997, in conformity with generally accepted accounting
principles.
TANNER + CO.
Salt Lake City, Utah
August 8, 1997, except for
Notes 1, 3, 15 and 16 which
are dated January 17, 1998
F-79
<PAGE> 192
MATRIX FUNDING CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
------------------------- -------------
1996 1997 1997
----------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................. $ 1,659,673 $ 2,032,405 $ 7,675,376
Marketable securities................................. 38,500 450,814 939,781
Accounts receivable................................... 384,913 738,371 1,367,235
Income taxes receivable............................... 216,000 -- --
Net investment in direct financing leases............. 15,897,274 31,704,518 46,690,376
Net investment in leveraged leases.................... 5,925,962 6,161,942 --
Equipment under operating leases, net................. 2,018,434 1,626,147 1,075,116
Equipment held for lease.............................. 6,391,777 13,379,213 10,089,688
Property and equipment, net........................... 170,952 267,481 305,837
Other assets.......................................... 522,779 429,640 366,472
----------- ----------- -----------
Total assets................................... $33,226,264 $56,790,531 $68,509,881
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Recourse debt....................................... $ 5,022,466 $12,813,451 $11,656,848
Non-recourse debt................................... 16,310,098 28,606,561 39,171,133
Accounts payable and accrued expenses............... 799,606 2,884,892 2,980,018
Income taxes payable................................ -- 202,863 2,839,195
Deferred income taxes payable....................... 3,645,794 4,130,179 2,317,179
----------- ----------- -----------
Total liabilities.............................. 25,777,964 48,637,946 58,964,373
----------- ----------- -----------
Commitments and contingencies......................... -- -- --
Stockholders' equity:
7% Preferred stock, $1 par value; 20,000,000 shares
authorized, 5,603,936 shares, 5,540,058 shares,
and 5,540,058 shares issued and outstanding,
respectively..................................... 5,603,936 5,540,058 5,540,058
Common stock, $1 par value; 30,000,000 shares
authorized, 250,000 shares issued and
outstanding...................................... 250,000 250,000 250,000
Retained earnings................................... 1,594,364 2,302,277 3,496,733
Unrealized holding gain on marketable securities.... -- 60,250 258,717
----------- ----------- -----------
Total stockholders' equity....................... 7,448,300 8,152,585 9,545,508
----------- ----------- -----------
Total liabilities and stockholders' equity....... $33,226,264 $56,790,531 $68,509,881
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-80
<PAGE> 193
MATRIX FUNDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------------ -----------------------
1995 1996 1997 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Rental income from operating
leases........................... $1,097,884 $1,061,674 $ 984,815 $ 436,760 $ 442,919
Finance income from direct
financing and leveraged leases... 1,375,617 2,331,381 6,704,763 2,753,341 5,317,015
Gain on sale of leases............. 1,728,857 1,033,853 1,070,389 462,177 539,341
Remarketing income................. 333,644 155,770 335,481 164,667 199,639
Other income....................... 172,709 333,069 147,842 67,112 438,433
---------- ---------- ---------- ---------- ----------
Total revenues................ 4,708,711 4,915,747 9,243,290 3,884,057 6,937,347
---------- ---------- ---------- ---------- ----------
Depreciation on equipment under
operating leases................. 897,213 805,147 834,632 354,621 373,982
Interest expense................... 505,620 765,162 2,773,352 1,015,560 2,191,005
Selling, general and
administrative................... 2,685,773 2,884,105 3,849,774 1,871,955 2,097,002
---------- ---------- ---------- ---------- ----------
Total expenses................ 4,088,606 4,454,414 7,457,758 3,242,136 4,661,989
---------- ---------- ---------- ---------- ----------
Income before income taxes......... 620,105 461,333 1,785,532 641,921 2,275,358
---------- ---------- ---------- ---------- ----------
Income taxes:
Current.......................... -- (193,989) 256,927 138,000 2,700,000
Deferred......................... 229,857 363,981 410,531 100,000 (1,813,000)
---------- ---------- ---------- ---------- ----------
229,857 169,992 667,458 238,000 887,000
---------- ---------- ---------- ---------- ----------
Net income......................... $ 390,248 $ 291,341 $1,118,074 $ 403,921 $1,388,358
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-81
<PAGE> 194
MATRIX FUNDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1995, 1996, AND 1997
AND SIX MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
UNREALIZED
HOLDING
GAIN ON TOTAL
PREFERRED COMMON RETAINED MARKETABLE STOCKHOLDERS'
STOCK STOCK EARNINGS SECURITIES EQUITY
---------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance, July 1, 1994............... $4,878,500 $ 40,000 $2,148,348 $ -- $7,066,848
Redemption and retirement of
preferred stock................... (56,510) -- (13,490) -- (70,000)
Net income.......................... -- -- 390,248 -- 390,248
---------- -------- ---------- -------- ----------
Balance, June 30, 1995.............. 4,821,990 40,000 2,525,106 -- 7,387,096
Preferred stock dividend............ 845,824 -- (845,824) -- --
Common stock dividend............... -- 160,000 (160,000) -- --
Sale of common stock................ -- 50,000 -- -- 50,000
Redemption and retirement of
preferred stock................... (63,878) -- (20,122) -- (84,000)
Dividends paid...................... -- -- (196,137) -- (196,137)
Net income.......................... -- -- 291,341 -- 291,341
---------- -------- ---------- -------- ----------
Balance, June 30, 1996.............. 5,603,936 250,000 1,594,364 -- 7,448,300
Redemption and retirement of
preferred stock................... (63,878) -- (20,122) -- (84,000)
Dividends paid...................... -- -- (390,039) -- (390,039)
Net increase in unrealized holding
gain on marketable securities..... -- -- -- 60,250 60,250
Net income.......................... -- -- 1,118,074 -- 1,118,074
---------- -------- ---------- -------- ----------
Balance, June 30, 1997.............. 5,540,058 250,000 2,302,277 60,250 8,152,585
Dividends paid (unaudited).......... -- -- (193,902) -- (193,902)
Net increase in unrealized holding
gain on marketable securities
(unaudited)....................... -- -- -- 198,467 198,467
Net income (unaudited).............. -- -- 1,388,358 -- 1,388,358
---------- -------- ---------- -------- ----------
Balance, December 31, 1997
(unaudited)....................... $5,540,058 $250,000 $3,496,733 $258,717 $9,545,508
========== ======== ========== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-82
<PAGE> 195
MATRIX FUNDING CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
------------------------------------------ ---------------------------
1995 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................ $ 390,248 $ 291,341 $ 1,118,074 $ 403,921 $ 1,388,358
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation on operating leases................ 897,213 805,147 834,632 354,621 373,982
Depreciation of property and equipment.......... 80,843 74,283 66,061 31,330 37,526
Increase in allowance for doubtful accounts..... 100,000 20,000 39,312 82,000 20,000
Amortization of unearned income on leveraged
leases........................................ (624,131) (561,733) (507,988) (261,157) (240,011)
Amortization of unearned income on direct
financing leases.............................. (1,048,283) (1,021,694) (2,893,232) (1,346,883) (2,251,965)
Gain on sale of leases.......................... (1,728,857) (1,033,853) (1,070,389) (462,177) (891,934)
Deferred income taxes........................... 229,857 363,981 447,458 100,000 (1,935,000)
(Increase) decrease in:
Accounts receivable........................... (426,571) 130,814 (353,458) 35,072 (128,864)
Income taxes receivable....................... 90,952 (199,000) 216,000 167,321 --
Other assets.................................. 118,132 (106,876) 93,139 1,268 63,168
(Decrease) increase in:
Accounts payable and accrued expenses......... 44,437 (4,106) 2,085,286 752,151 95,126
Income taxes payable.......................... -- -- 202,863 138,000 2,636,332
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in) operating
activities................................ (1,876,160) (1,241,696) 277,758 (4,533) (833,282)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of equipment subject to lease............... 21,551,884 10,392,365 20,263,728 11,214,109 10,927,380
Purchases of equipment subject to lease........... (23,708,136) (25,975,500) (51,124,814) (29,281,822) (22,337,464)
Payments received on direct financing leases...... 2,237,684... 4,757,944 11,820,378 5,680,436 8,916,652
Increase in marketable securities................. -- (38,500) (315,137) (145,500) (168,500)
Purchase of property and equipment................ (84,903) (57,418) (162,590) (79,582) (75,882)
------------ ------------ ------------ ------------ ------------
Net cash used in investing activities....... (3,471) (10,921,109) (19,518,435) (12,612,359) (2,737,814)
------------ ------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term debt borrowings......................... 2,233,707 12,379,909 20,584,954 11,549,758 16,816,331
Net increase (decrease) in line of credit......... 3,043,800 714,593 7,793,325 3,309,404 (999,831)
Principal payments on long-term debt.............. (2,732,035) (1,246,376) (8,290,831) (3,009,245) (6,408,531)
Cash dividends paid............................... -- (196,137) (390,039) (196,136) (193,902)
Repurchase of preferred stock (70,000) (84,000) (84,000) -- --
Issuance of common stock for cash................. -- 50,000 -- -- --
------------ ------------ ------------ ------------ ------------
Net cash provided by financing activities... 2,475,472 11,617,989 19,613,409 11,653,781 9,214,067
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents....................................... 595,841 (544,816) 372,732 (963,111) 5,642,971
Cash and cash equivalents, beginning of period...... 1,608,648 2,204,489 1,659,673 1,659,673 2,032,405
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents, end of period............ $ 2,204,489 $ 1,659,673 $ 2,032,405 $ 696,562 $ 7,675,376
============ ============ ============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid................................... $ 519,620 $ 752,162 $ 2,663,351 $ 1,015,560 $ 2,191,005
============ ============ ============ ============ ============
Income taxes paid............................... $ 1,035 $ 1,135 $ -- $ -- $ 200,000
============ ============ ============ ============ ============
NONCASH INVESTING AND FINANCING ACTIVITIES CONSISTED
OF THE FOLLOWING:
Increase in unrealized holding gain on marketable
securities...................................... $ -- $ -- $ 97,177 $ -- $ 320,467
Effect on deferred income taxes................... -- -- (36,927) -- (122,000)
------------ ------------ ------------ ------------ ------------
Net unrealized holding gain on marketable
securities.................................. $ -- $ -- $ 60,250 $ -- $ 198,467
============ ============ ============ ============ ============
</TABLE>
During the six months ended December 31, 1997, $500,000 of the proceeds of
a leveraged lease sale is included in accounts receivable.
See accompanying notes to consolidated financial statements.
F-83
<PAGE> 196
MATRIX FUNDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995, 1996, AND 1997
NOTE--1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and consolidation. Matrix Funding Corporation and Subsidiary,
(the Company) are primarily engaged in the business of leasing personal
property. Upon origination of the leases, the Company either sells the leases to
unrelated third parties or retains the leases for its own portfolio.
The consolidated financial statements include the accounts and activity of
Matrix Funding Corporation and its wholly owned subsidiary, Matcan Leasing, Inc.
All intercompany amounts have been eliminated in the consolidation.
Concentration of credit risk. Financial instruments which potentially
subject the Company to concentration of credit risk consist primarily of
investments in leases and receivables. The Company performs ongoing evaluations
of its lease investments and receivables and maintains allowances for possible
losses which, when realized, have been within the range of management's
expectations.
The Company maintains its cash in bank deposit accounts which, at times,
may exceed federally insured limits. The Company has not experienced any losses
in such accounts and believes it is not exposed to any significant credit risk
on cash and cash equivalents.
Cash and cash equivalents. For purposes of the statement of cash flows, the
Company considers all highly liquid debt instruments with an original maturity
of three months or less to be cash equivalents
Marketable securities. The Company classifies its marketable debt and
equity securities as "held to maturity" if it has the positive intent and
ability to hold the securities to maturity. All other marketable debt and equity
securities are classified as "available for sale." Securities classified as
"available for sale" are carried in the financial statements at fair value.
Realized gains and losses, determined using the specific identification method,
are included in earnings; unrealized holding gains and losses are reported as a
separate component of stockholders' equity. Securities classified as held to
maturity are carried at amortized cost. For both categories of securities,
declines in fair value below amortized cost that are other than temporary are
included in earnings.
Investments in leases. Investments in leases consist of direct financing
leases, leveraged leases and operating leases with terms ranging from 2 to 10
years. Income on direct financing leases is recognized by a method which
produces a constant periodic rate of return on the outstanding investment in the
lease. Income on leveraged leases is recognized by a method which produces a
constant rate of return on the outstanding investment in the lease in the years
in which the net investment is positive. Initial direct costs are deferred and
amortized over the lease period. Leveraged lease assets acquired by the Company
are financed primarily through nonrecourse loans from third party debt
participants. These loans are secured by the lessee's rental obligations and the
leased property. Equipment under operating leases is recorded at cost, net of
accumulated depreciation. Income from operating leases is recognized ratably
over the term of the leases.
Initial direct costs, including sales commissions, related to direct
financing leases, operating leases, and leveraged leases, are capitalized and
recorded as part of the net investment in leases and are amortized over the
lease term in the same ratio as income is recognized.
Residual values estimated by management based on past experience and
judgement, are recorded in the financial statements at the inception of each
direct financing lease and leveraged lease. The residual values for operating
leases are included in the leased equipment's net book value.
The Company evaluates residual values on an ongoing basis and records any
required changes. In accordance with generally accepted accounting principles,
no upward revision of residual values is made subsequent to the period of the
inception of the lease. Residual values for direct financing leases and
leveraged leases are recorded at their net present value and the unearned
interest is amortized over the lease term so as to produce a constant percentage
return on the net present value.
F-84
<PAGE> 197
MATRIX FUNDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
NOTE--1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Equipment held for lease. Equipment held for lease is valued at the lower
of specific unit cost or net realizable value and consists of equipment assigned
to lease contracts that are yet to commence.
Property and equipment. Property and equipment are recorded at cost, less
accumulated depreciation. Depreciation on property and equipment is determined
using the straight-line method over the estimated useful lives of the assets
ranging from 5 to 7 years. Expenditures for maintenance and repairs are expensed
when incurred.
Operating lease depreciation. The cost of equipment under operating leases
is depreciated using a straight-line method over the estimated useful lives of
the assets.
Accounting estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Significant estimates made by management
include the determination of the allowance for lease losses and residual values.
Actual amounts may differ from these estimates.
Income taxes. Deferred income taxes are provided in amounts sufficient to
give effect to temporary differences between financial and tax reporting,
principally related to lease accounting differences between book and tax methods
and a net operating loss carryforward.
Reclassifications. Certain amounts in the 1995 and 1996 financial
statements have been reclassified to conform with the 1997 presentation.
Unaudited financial information. The unaudited consolidated financial
statements presented include the accounts of Matrix Funding Corporation and
subsidiary, and include all adjustments (consisting of normal recurring items)
which are, in the opinion of management, necessary to present fairly the
financial position as of December 31, 1997 and the results of operations and
cash flows for the six months ended December 31, 1997 and 1996. The results of
operations for the six months ended December 31, 1997 are not necessarily
indicative of the results to be expected for the entire year.
NOTE--2 NET INVESTMENT IN DIRECT FINANCING LEASES
Direct financing leases expire through 2003. The lease agreements require
the lessee to pay normal maintenance, insurance, and taxes. The Company's net
investment in direct financing leases at June 30, 1996 and 1997 is summarized as
follows:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Total minimum lease payments to be received................. $17,524,190 $32,277,901
Less allowance of uncollectible............................. (190,000) (236,312)
----------- -----------
Net minimum lease payments receivable....................... 17,334,190 32,041,589
Estimated residual values of leased equipment............... 1,993,224 5,235,929
Less unearned income........................................ (3,430,140) (5,573,000)
----------- -----------
Net investment in direct financing leases................... $15,897,274 $31,704,518
=========== ===========
</TABLE>
F-85
<PAGE> 198
MATRIX FUNDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
NOTE--2 NET INVESTMENT IN DIRECT FINANCING LEASES (CONTINUED)
The future minimum lease payments due the Company under direct financing
leases, which have initial noncancellable lease terms in excess of one year at
June 30, 1997, are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDING JUNE 30,
---------------------
<S> <C>
1998........................................... $13,001,363
1999........................................... 10,822,704
2000........................................... 5,597,056
2001........................................... 1,823,125
2002........................................... 896,053
Thereafter..................................... 137,600
-----------
$32,277,901
===========
</TABLE>
NOTE--3 NET INVESTMENT IN LEVERAGED LEASES
At June 30, 1996 and 1997, the Company is the lessor of equipment accounted
for as leveraged leases expiring in various years through 2003. The Company's
aggregate equity investment represented 8 percent of the purchase price; the
remaining 92 percent was furnished by third party financing in the form of
long-term debt that provides for no recourse against the Company and is secured
by a first lien on the property. The debt is payable in aggregate monthly
installments of $362,459 with interest ranging from 8.00 to 11.00 percent. At
the end of the lease term, the equipment is turned back to the Company. The
aggregate residual balance at that time is estimated to be 18.75 percent of
cost.
For income tax purposes, the Company has the benefit of tax deductions for
depreciation on the leased assets and for interest on the long-term debt. During
the early years of the leases, those deductions generally exceed rental income
from the related lease and are available to be applied against the Company's
other income. In the later years of the leases, rental income will exceed the
deductions and taxes will be payable. Deferred income taxes are provided to
reflect this reversal.
During the six months ended December 31, 1997 the Company sold its
investment in leveraged leases for $5,925,289 and realized a loss for financial
statements of $352,593.
The Company's net investment in leveraged leases at June 30, 1996, and 1997
is summarized as follows:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Lease receivable (net of principal and interest on
nonrecourse notes)........................................ $ 4,001,325 $ 3,788,020
Less allowance for uncollectible............................ (7,000) --
----------- -----------
Net leases receivable....................................... 3,994,325 3,788,020
Estimated residual value of leased equipment................ 6,115,401 6,071,803
Less unearned income........................................ (4,183,764) (3,697,881)
----------- -----------
Net investment in leveraged leases.......................... 5,925,962 6,161,942
Less deferred income taxes arising from leveraged leases.... (2,856,480) (3,125,577)
----------- -----------
Net investment in leveraged leases after deferred income
taxes..................................................... $ 3,069,482 $ 3,036,365
=========== ===========
</TABLE>
F-86
<PAGE> 199
MATRIX FUNDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
NOTE--4 EQUIPMENT UNDER OPERATING LEASES
Equipment under operating leases consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
Equipment under lease....................................... $ 3,220,785 $ 3,207,254
Accumulated depreciation.................................... (1,202,351) (1,581,107)
----------- -----------
$ 2,018,434 $ 1,626,147
=========== ===========
</TABLE>
The future minimum lease payments due the Company under operating leases
that have initial noncancellable lease terms in excess of one year at June 30,
1997, are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDING JUNE 30,
---------------------
<S> <C>
1998.................................................... $ 877,800
1999.................................................... 261,568
----------
$1,139,368
==========
</TABLE>
The original lease terms run from two to five years and require the lessee
to pay normal maintenance, insurance, and taxes.
NOTE--5 PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of June 30:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Furniture and fixtures................................. $ 274,232 $ 271,682
Vehicles............................................... 88,438 92,437
Leasehold improvements................................. 1,291 12,344
--------- ---------
363,961 376,463
Accumulated depreciation............................... (193,009) (108,982)
--------- ---------
$ 170,952 $ 267,481
========= =========
</TABLE>
F-87
<PAGE> 200
MATRIX FUNDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
NOTE--6 RECOURSE AND NONRECOURSE DEBT
Recourse and nonrecourse debt payable is summarized as follows:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
Notes payable to financial institutions, corporations, and
others, with interest rates ranging from 6.13% to 12%,
secured by equipment subject to certain operating and
direct financing leases................................... $17,574,172 $29,868,295
Revolving lines of credit with a base amount of $10 million
(June 1997, $15 million December 1997) (due October 31,
1999) plus an additional $5.2 million (due June 30, 1997)
approved for a specific transaction, payable to a bank,
interest rate equal to the bank's prime rate (8.5% at June
30, 1997), secured by certain equipment held for lease.... 3,758,392 11,551,717
Line of credit with a $3 million base due January 31, 1998,
interest at prime rate, secured by certain equipment...... -- --
----------- -----------
Total....................................................... $21,332,564 $41,420,012
Less recourse portion....................................... 5,022,466 12,813,451
----------- -----------
$16,310,098 $28,606,561
=========== ===========
</TABLE>
Maturities of notes payable are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDING JUNE 30:
---------------------
<S> <C>
1998...................................................... $23,103,102
1999...................................................... 10,250,242
2000...................................................... 5,012,576
2001...................................................... 1,765,535
2002...................................................... 1,024,873
Thereafter................................................ 263,684
-----------
$41,420,012
===========
</TABLE>
NOTE--7 PREFERRED STOCK
The preferred stockholders are entitled to an appropriation of retained
earnings at an annual rate of seven percent of the par value of preferred stock
reduced dollar-for-dollar by the amount the Company's net income for such year
is less than the seven percent amount.
All shares of preferred stock are subject, at the option of the Company's
Board of Directors, to redemption at anytime after issuance at a price of one
dollar per share and the sum of any accrued but unpaid dividends and other
amounts attributable to the preferred stock as required by formula under the
Articles of Domestication.
In the event of any consolidation or merger of the Company, or sale or
transfer of all of its assets, or in the event of any liquidation or dissolution
or winding up of the corporation, whether voluntary or involuntary, the holders
of preferred stock shall be entitled to be paid in full the sum of the par value
of their shares, accrued dividends, allocated retained earnings, and other
agreed to amounts.
F-88
<PAGE> 201
MATRIX FUNDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
NOTE--8 UNREALIZED HOLDING GAIN ON MARKETABLE SECURITIES
The unrealized holding gain or marketable securities consists of the
following:
<TABLE>
<CAPTION>
JUNE 30,
--------------------
1996 1997
-------- ---------
<S> <C> <C>
Market value of available for sale securities............... $ 38,500 $ 450,814
Less cost of securities..................................... (38,500) (353,637)
-------- ---------
Unrealized holding gain on marketable securities............ -- 97,177
Less deferred tax effect.................................... -- (36,927)
-------- ---------
Net unrealized holding gain on marketable securities........ $ -- $ 60,250
======== =========
</TABLE>
NOTE--9 INCOME TAXES
The provision for income taxes is different from the amount which would be
provided by applying the statutory federal income tax rate for the following
reasons:
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Federal income tax provision at statutory rate.............. $212,886.. $156,853 $607,000
State income taxes.......................................... -- 1,100 60,000
Officers' life insurance and meals and entertainment
limitations............................................... 18,950 15,290 14,000
Other....................................................... (1,979) (3,251) (13,542)
-------- -------- --------
$229,857 $169,992 $667,458
======== ======== ========
</TABLE>
Deferred income taxes are principally related to lease accounting
differences between book and tax methods, accrued liabilities and allowances
which are not deductible until paid or realized for tax purposes, a net
operating loss carryforward and tax credit carryforwards.
At June 30, 1997, the Company has a net operating loss carryforward
available to offset future taxable income of approximately $1,800,000, which
will begin to expire in 2011. The utilization of the net operating loss
carryforward is dependent upon the tax laws in effect at the time the net
operating loss carryforward can be utilized. A change in ownership may reduce
the amount of loss allowable.
The Company also has general business and other tax credit carryforwards.
The general business credit expires in 2001.
NOTE--10 RELATED PARTY TRANSACTIONS
At June 30, 1996 and 1997, amounts due from shareholders and a company
controlled by certain shareholders totaled $104,971 and $99,971, respectively.
These amounts are included in receivables on the balance sheet.
NOTE--11 EMPLOYEE BENEFIT PLANS
The Company has adopted a 401(k) Plan for all employees who meet the plan's
eligibility requirements. The Company made matching contributions to the plan of
approximately $34,535, $46,100, and $53,600 during the years ended June 30,
1995, 1996, and 1997, respectively.
The Company has established a profit sharing plan which covers all
employees who meet the plan's eligibility requirements. Contributions to the
plan are at the discretion of the Board of Directors. Contributions to
F-89
<PAGE> 202
MATRIX FUNDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
NOTE--11 EMPLOYEE BENEFIT PLANS (CONTINUED)
the plan for the years ended June 30, 1995, 1996, and 1997 were approximately
$60,000, $50,000, and $60,000, respectively.
NOTE--12 DEFERRED COMPENSATION PLAN
The Company has a non-qualified deferred compensation plan for certain
executives, officers, and key employees. Under the terms of the plan, the
Company, by authorization of its Board of Directors, may elect to contribute an
amount to the plan in addition to the compensation elected to be deferred by
participants in the plan. Each participant's account is credited with a uniform
interest rate of 8%, compounded monthly. Plan participants elected to defer
approximately $-0-, $57,750, and $304,000 of compensation for the years ended
June 30, 1995, 1996, and 1997, respectively, and the Company accrued interest
thereon at 8%.
NOTE--13 COMMITMENTS AND CONTINGENCIES
Stock Repurchase Agreement. The Company has a stock repurchase agreement,
funded by life insurance policies, whereby it is obligated to acquire all shares
of common and preferred stock upon the death of a stockholder. The purchase
price for common stock is subject to change annually upon agreement of the
stockholders. The most recent agreed upon price is $5.00 per common share. The
purchase price for preferred stock is equal to $1.00 per share plus, a) accrued
but unpaid dividends attributable to each share, and b) the proportionate share
of retained earnings pertaining to each share.
Operating leases. The Company is obligated under certain operating leases
for office and storage space. Total lease expense for the years ended June 30,
1995, 1996, and 1997 was approximately $97,000, $132,000, and $153,000,
respectively. Future minimum lease payments under noncancellable operating
leases with initial terms of one year or more are as follows at June 30, 1997:
<TABLE>
<CAPTION>
YEARS ENDING JUNE 30,
---------------------
<S> <C>
1998........................................................ $168,146
1999........................................................ 171,217
2000........................................................ 171,807
2001........................................................ 156,057
2002........................................................ 50,269
--------
$717,496
========
</TABLE>
NOTE--14 FINANCIAL INSTRUMENTS
None of the Company's financial instruments are held for trading purposes.
The Company estimates that the fair value of all financial instruments at June
30, 1996 and 1997 does not differ materially from the aggregate carrying values
of its financial instruments recorded in the accompanying balance sheet. The
estimated fair value amounts have been determined by the Company using available
market information and appropriate valuation methodologies. Considerable
judgement is necessarily required in interpreting market data to develop the
estimates of fair value, and, accordingly, the estimates are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange.
NOTE--15 STOCK-BASED COMPENSATION
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (FAS
123) which established financial accounting and reporting standards for
stock-based compensation. The new standard defines a fair value method of
accounting for an employee stock option or similar equity instrument. This
statement gives entities the choice between
F-90
<PAGE> 203
MATRIX FUNDING CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
NOTE--15 STOCK-BASED COMPENSATION (CONTINUED)
adopting the fair value method or continuing to use the intrinsic value method
under Accounting Principles Board (APB) Opinion No. 25 with footnote disclosures
of the pro forma effects if the fair value method had been adopted. The Company
has opted for the latter approach. Accordingly, no compensation expense has been
recognized for the stock option plans. Had compensation expense for the
Company's stock option plan been determined based on the fair value at the grant
date for awards in fiscal 1997 consistent with the provisions of FAS No. 123,
the Company's results of operations would have been reduced to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------
<S> <C>
Net Income--as reported..................................... $1,118,074
Net Income--pro forma....................................... $1,116,278
Earnings per share--as reported............................. $ 4.47
Earnings per share--pro forma............................... $ 4.47
</TABLE>
The fair value of each option grant is estimated in the date of grant using
the Black-Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------
<S> <C>
Expected dividend yield........................ $ --
Expected stock price volatility................ 0%
Risk-free interest rate........................ 4.5%
Expected life of options....................... 10 years
========
</TABLE>
The weighted average fair value of options granted during fiscal 1997 is
$.36.
In fiscal 1996, the Company did not grant any stock options nor were any
stock options outstanding, therefore, no information is presented for 1996.
The following table summarizes information about fixed stock options
outstanding at June 30, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------- -------------------------
WEIGHTED
AVERAGE
NUMBER REMAINING WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING CONTRACTUAL AVERAGE EXERCISABLE AVERAGE
EXERCISE AT LIFE EXERCISE AT EXERCISE
PRICES 6/30/97 (YEARS) PRICE 6/30/97 PRICE
- --------- ----------- ----------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
$1.00 5,000 9.5 $1.00 5,000 $1.00
</TABLE>
NOTE--16 SUBSEQUENT EVENT
The Company has entered into a letter of intent on November 17, 1997 to
merge with another company. Completion of the merger is contingent upon certain
requirements being met by both parties.
F-91
<PAGE> 204
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners of
Merrimac Financial Associates
In our opinion, the accompanying balance sheet and the related statements
of operations, of partners' capital and of cash flows present fairly, in all
material respects, the financial position of Merrimac Financial Associates (a
partnership) at December 31, 1997, and the results of its operations and its
cash flows for each of the two years in the period then ended, in conformity
with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Ft. Lauderdale, Florida
January 15, 1998
F-92
<PAGE> 205
MERRIMAC FINANCIAL ASSOCIATES
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------
<S> <C>
ASSETS
Cash........................................................ $ 196,904
Accounts receivable......................................... 238,273
Net investment in direct financing leases................... 12,109,579
Prepaid expenses and other assets........................... 40,199
Property and equipment, net of accumulated depreciation of
$66,901................................................... 19,790
-----------
Total assets........................................... $12,604,745
===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Note payable--recourse...................................... $ 9,494,965
Accounts payable and accrued expenses....................... 59,222
Deposits and payments received in advance................... 121,438
-----------
Total liabilities...................................... 9,675,625
Commitments (Note 6)
Partners' capital........................................... 2,929,120
-----------
Total liabilities and partners' capital................ $12,604,745
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-93
<PAGE> 206
MERRIMAC FINANCIAL ASSOCIATES
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1997
---------- ----------
<S> <C> <C>
Finance income from direct financing leases................. $1,976,844 $1,930,375
Other income................................................ 198,935 148,854
---------- ----------
Total revenues......................................... 2,175,779 2,079,229
---------- ----------
Interest expense............................................ 683,412 663,407
Selling, general and administrative......................... 813,125 805,125
---------- ----------
Total expenses......................................... 1,496,537 1,468,532
---------- ----------
Net income.................................................. $ 679,242 $ 610,697
========== ==========
Unaudited pro forma information (see Note 2):
Pro forma net income before income taxes.................. $ 679,242 $ 610,697
Pro forma provision for income taxes...................... 288,000 260,000
---------- ----------
Pro forma net income...................................... $ 391,242 $ 350,697
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-94
<PAGE> 207
MERRIMAC FINANCIAL ASSOCIATES
STATEMENT OF PARTNERS' CAPITAL
<TABLE>
<S> <C>
Partners' capital, January 1, 1996.......................... $2,271,158
Net income.................................................. 679,242
Partners' distributions..................................... (296,500)
----------
Partners' capital, December 31, 1996........................ 2,653,900
Net income.................................................. 610,697
Partners' distributions..................................... (335,477)
----------
Partners' capital, December 31, 1997........................ $2,929,120
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-95
<PAGE> 208
MERRIMAC FINANCIAL ASSOCIATES
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 679,242 $ 610,697
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation........................................... 6,037 5,748
Provision for lease losses............................. 162,624 98,702
Changes in operating assets and liabilities:
Accounts receivable.................................... (502) (1,687)
Prepaid expenses and other assets...................... (19,788) 10,626
Accounts payable and accrued expenses.................. 32,367 (38,985)
Deposits and payments received in advance.............. (20,530) (58,594)
------------ ------------
Net cash provided by operating activities................... 839,450 626,507
------------ ------------
Cash flows from investing activities:
Investment in direct financing leases..................... (9,421,331) (8,928,933)
Collection of direct financing leases, net of finance
income earned.......................................... 9,468,657 8,637,090
Purchases of property and equipment....................... (2,944) (8,907)
------------ ------------
Net cash provided by (used in) investing activities......... 44,382 (300,750)
------------ ------------
Cash flows from financing activities:
Proceeds from notes payable............................... 11,544,895 12,113,364
Repayment of notes payable................................ (12,048,081) (12,039,037)
Distributions to partners................................. (296,500) (335,477)
------------ ------------
Net cash used in financing activities....................... (799,686) (261,150)
------------ ------------
Net increase in cash........................................ 84,146 64,607
Cash at beginning of year................................... 48,151 132,297
------------ ------------
Cash at end of year......................................... $ 132,297 $ 196,904
============ ============
Supplemental disclosure of cash flow information:
Cash paid for:
Interest............................................... $ 659,326 $ 685,049
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-96
<PAGE> 209
MERRIMAC FINANCIAL ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
NOTE 1--NATURE OF OPERATIONS
Merrimac Financial Associates (the "Partnership") was organized January 1,
1984 in the State of Massachusetts. Its principal business activity is leasing
vending, amusement and coffee service equipment.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 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. While management believes that the estimates and
related assumptions used in the preparation of these financial statements are
appropriate, actual results could differ from those estimates. Estimates are
made in the assessment of collectibility of receivables and direct financing
leases, and depreciation.
Accounts receivable. Accounts receivable primarily consists of claims due
from equipment distributors pursuant to recourse provisions of certain
agreements with distributors, unpaid late fees and documentation fees assessed
at the inception of a new lease.
Direct financing leases. The Partnership invests in leases classified as
direct financing leases. The Partnership's net investment in direct financing
leases includes the gross rentals receivable and unearned finance income.
Unearned finance income represents the excess of the total receivable over the
cost of equipment or contract acquired. Revenue from direct financing leases is
recognized over the lease term using a method which approximates a level rate of
return on the net investment in the lease.
The Partnership's lease terms generally provide for full payment of the net
investment in the lease through minimum lease payments. The leases provide that
the lessee pay taxes, insurance and maintenance costs of the underlying
equipment.
The Partnership in most instances has agreements with certain distributors
of vending, amusement and coffee service equipment that provide the Partnership
recourse to such distributors in the event of default by the lessee.
Depreciation. Property and equipment are depreciated using the
straight-line method over an estimated five year useful life.
Income taxes. Merrimac Financial Associates is a partnership and, as such,
is not subject to federal or state income taxation; accordingly, no provision
for income taxes is reflected in the accompanying financial statements. However,
the individual partners are responsible for federal and state taxes on their
respective shares of taxable income.
There are differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities primarily related to the
Company's allowance for lease losses. At December 31, 1997, the Partnership's
net assets for financial reporting purposes is less than the tax basis by
approximately $239,000. In connection with the proposed merger with UniCapital
Corporation discussed in Note 7, the Company's tax exempt status will terminate
and the tax effect of the net difference between the book and tax bases of net
assets at that date will be recorded in the financial statements.
The unaudited pro forma income tax information included in the Statement of
Operations is presented in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," as if the Partnership had been
subject to federal and state income taxes for all periods presented.
Fair value of financial instruments. The carrying value of the
Partnership's financial instruments, including cash, accounts receivable, and
accounts payable approximate fair value because of the short maturity of these
F-97
<PAGE> 210
MERRIMAC FINANCIAL ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
instruments. The carrying value of notes payable approximates fair value based
upon comparability of market rates for similar instruments.
NOTE 3--RELATED PARTY TRANSACTIONS
Master Financial Associates, a related partnership having certain partners
which are also partners of the Partnership, paid administrative fees to the
Partnership of $61,552 and $30,160 for the years ended December 31, 1996 and
1997, respectively, for servicing the liquidation of certain lease portfolios
totaling approximately $205,000 at December 31, 1997. Such fees are included in
other income in the accompanying Statement of Operations.
NOTE 4--LEASING TRANSACTIONS
Direct financing leases. Direct financing leases consist principally of
vending, amusement and coffee service equipment with terms ranging to five
years. The components of the Partnership's net investment in direct financing
leases at December 31, 1997 were as follows:
<TABLE>
<S> <C>
Future minimum rentals receivable........................... $14,313,060
Unearned finance income..................................... (1,958,834)
-----------
12,354,226
Allowance for lease losses.................................. (244,647)
-----------
$12,109,579
===========
</TABLE>
Future minimum rentals receivable represent earning assets held by the
Partnership which are generally due in monthly installments over original
periods ranging to 60 months. Future minimum rentals receivable under direct
financing leases were as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C> <C>
1998......................................................... $ 8,509,190
1999............................................................. 4,272,693
2000............................................................. 1,418,972
2001............................................................. 75,558
2002............................................................. 36,647
-----------
$14,313,060
===========
</TABLE>
The components of the Partnership's allowance for lease losses for the
years ended December 31, 1996 and 1997 were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1997
---------- ----------
<S> <C> <C>
Allowance for lease losses, beginning................ $ 181,599 $ 239,505
Provision for lease losses........................... 162,624 98,702
Leases written off................................... (104,718) (93,560)
--------- ---------
Allowance for lease losses, ending................... $ 239,505 $ 244,647
========= =========
</TABLE>
Significant concentration. The majority of the Partnership's net lease
receivables are collateralized by vending equipment of which approximately 31%
of the portfolio at December 31, 1997 related to equipment acquired from three
distributors individually comprising 11%, 10% and 10% of the total net lease
receivables, respectively.
F-98
<PAGE> 211
MERRIMAC FINANCIAL ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 5--NOTE PAYABLE
Note payable at December 31, 1997 consisted of the following:
<TABLE>
<S> <C>
$10,000,000 revolving line of credit with a financial
institution, maturing May 31,1999, payable as follows:
Borrowings outstanding at 30 day LIBOR rate plus 1.25%,
7.14% at December 31, 1997............................. $9,200,000
Borrowings outstanding at Prime Rate, 8.50% at December
31, 1997............................................... 294,965
----------
$9,494,965
==========
</TABLE>
Line of credit. The $10,000,000 line of credit is collateralized by all of
the Partnership's assets and guaranteed jointly and severally by the partners.
The amount of outstanding debt bearing interest at LIBOR plus 1.25% is
determined by management and may be selected from time to time from the 30 or 90
day LIBOR rate plus 1.25%, and the rate is thereafter established for 30 or 90
days, respectively. Interest on outstanding borrowings is payable monthly. The
Partnership also pays a commitment fee equal to 0.25% of the unused portion of
the revolving line, payable quarterly. The maximum amounts outstanding were
$10,339,000 and $9,770,000 during the years ended December 31, 1996 and 1997,
respectively.
The terms of the revolving line of credit agreement contain restrictions,
among others, as to the maintenance of asset quality, debt-to-worth ratios,
allowance for lease losses, profitability standards and interest coverage.
Partnership distributions can be made only for the purpose of satisfying
partners' federal and state income taxes on the Partnership taxable income
allocated to each partner. As of December 31, 1997, the Partnership was in
compliance with the restrictive covenants.
The revolving credit agreement also accelerates the maturity of the entire
outstanding balance with resultant termination of the line in the event the
Partnership is not owned 100% by the current partners. Accordingly, the loan
will be paid or refinanced at the time the Partnership is acquired, as discussed
in Note 7.
NOTE 6--COMMITMENTS
The Partnership leases office space from a related entity with common
ownership under a lease agreement through 2001. Rent expense was $60,000 for the
years ended December 31, 1996 and 1997, respectively. Future minimum rental
payments under the lease agreement were as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1998........................................................ $ 60,000
1999........................................................ 60,000
2000........................................................ 60,000
2001........................................................ 60,000
--------
$240,000
========
</TABLE>
NOTE 7--SUBSEQUENT EVENTS (UNAUDITED)
The Partnership and its partners have entered into a merger agreement with
UniCapital Corporation ("UniCapital") pursuant to which UniCapital will acquire
all outstanding interests in the Partnership in exchange for common stock of
UniCapital and satisfaction of the indebtedness discussed below, concurrent with
the consummation of the initial public offering of the common stock of
UniCapital.
On January 21, 1998, the Partnership made capital distributions to its
partners of approximately $2.8 million, funded by increased bank borrowings by
the Partnership. After giving effect to these distributions, total partners'
capital was reduced to approximately $154,000.
F-99
<PAGE> 212
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Municipal Capital Markets Group, Inc.
We have audited the accompanying balance sheets of Municipal Capital
Markets Group, Inc. as of December 31, 1996 and 1997, and the related statements
of operations, stockholders' equity and cash flows for each of the three years
in the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the 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 audit 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 our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Municipal Capital Markets
Group, Inc. as of December 31, 1996 and 1997, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1997, in conformity with generally accepted accounting principles.
Grant Thornton LLP
Dallas, Texas
January 9, 1998
F-100
<PAGE> 213
MUNICIPAL CAPITAL MARKETS GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $325,500 $464,316
Accounts receivable......................................... 6,709 37,500
Property and equipment, net................................. 7,720 8,740
Receivable from stockholders................................ -- 39,700
Investments................................................. -- 114,162
Other assets................................................ 4,722 4,825
-------- --------
Total assets...................................... $344,651 $669,243
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses..................... $ 22,905 $ 28,560
Dividend payable.......................................... -- 289,700
-------- --------
Total liabilities...................................... 22,905 318,260
-------- --------
Stockholders' equity:
Common stock--authorized, 1,000,000 shares of $1 par
value; 1,000 shares issued and outstanding............. 1,000 1,000
Additional paid-in capital.................................. 41,000 41,000
Retained earnings........................................... 279,746 308,983
-------- --------
Total stockholders' equity........................ 321,746 350,983
-------- --------
Total liabilities and stockholders' equity........ $344,651 $669,243
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-101
<PAGE> 214
MUNICIPAL CAPITAL MARKETS GROUP, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Underwriting and advisory fee income................ $ 781,989 $1,481,829 $3,358,328
Brokerage fees...................................... -- -- 789,643
Management fee income 146,904 184,136 164,490
Mutual fund fee income.............................. -- 104,002 102,046
Consulting fees..................................... 200,000 -- --
Interest and other income........................... 42,931 42,543 82,972
---------- ---------- ----------
Total revenues.............................. 1,171,824 1,812,510 4,497,479
Commissions......................................... 809,368 1,185,831 3,077,166
Underwriting expenses............................... 119,059 219,945 726,463
Management fee expense.............................. 103,833 123,561 108,983
Selling, general and administrative................. 235,454 214,960 265,930
---------- ---------- ----------
Total expenses 1,267,714 1,744,297 4,178,542
---------- ---------- ----------
Net earnings (loss)......................... $ (95,890) $ 68,213 $ 318,937
========== ========== ==========
Unaudited pro forma information (Note 1):
Pro forma earnings (loss) before income taxes....... $ (95,890) $ 68,213 $ 318,937
Pro forma income tax benefit (expense).............. 25,940 (12,258) (111,904)
---------- ---------- ----------
Pro forma net earnings (loss)............... $ (69,950) $ 55,955 $ 207,033
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-102
<PAGE> 215
MUNICIPAL CAPITAL MARKETS GROUP, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
--------------------------------------------------------
COMMON STOCK ADDITIONAL TOTAL
---------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------- ------ ---------- --------- ------------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1995.................. 1,000 $1,000 $41,000 $ 307,423 $ 349,423
Net loss..................................... -- -- -- (95,890) (95,890)
----- ------ ------- --------- ---------
Balances at December 31, 1995................ 1,000 1,000 41,000 211,533 253,533
Net earnings................................. -- -- -- 68,213 68,213
----- ------ ------- --------- ---------
Balances at December 31, 1996................ 1,000 1,000 41,000 279,746 321,746
Cash dividends declared...................... -- -- -- (289,700) (289,700)
Net earnings................................. -- -- -- 318,937 318,937
----- ------ ------- --------- ---------
Balances at December 31, 1997................ 1,000 $1,000 $41,000 $ 308,983 $ 350,983
===== ====== ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-103
<PAGE> 216
MUNICIPAL CAPITAL MARKETS GROUP, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss)......................... $ (95,890) $ 68,213 $ 318,937
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in)
operating activities:
Depreciation............................. 14,665 14,304 9,335
Unrealized loss on securities............ -- -- 3,647
Noncash underwriting income.............. -- -- (39,700)
Changes in operating assets and
liabilities
Other assets........................... 18,166 9,702 (103)
Accounts receivable.................... -- (6,709) (30,791)
Accounts payable and accrued
expenses............................ 7,327 10,088 5,655
------------- ------------- -------------
Net cash provided by (used in) operating
activities.................................. (55,732) 95,598 266,980
------------- ------------- -------------
Cash flows from investing activities
Capital expenditures........................ (1,080) (1,703) (10,355)
Purchase of securities...................... -- -- (117,809)
------------- ------------- -------------
Net cash used in investing activities......... (1,080) (1,703) (128,164)
------------- ------------- -------------
Net increase (decrease) in cash and cash
equivalents................................. (56,812) 93,895 138,816
Cash and cash equivalents at beginning of
year........................................ 288,417 231,605 325,500
------------- ------------- -------------
Cash and cash equivalents at end of year...... $ 231,605 $ 325,500 $ 464,316
============= ============= =============
Supplemental disclosures of noncash investing
and financing activities:
Receivable from stockholders for sale of
securities............................... $ -- $ -- $ 39,700
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-104
<PAGE> 217
MUNICIPAL CAPITAL MARKETS GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1996 AND 1997
NOTE 1--SUMMARY OF ACCOUNTING POLICIES
The Company is registered with the Securities and Exchange Commission as a
securities broker/dealer. Its primary activity is underwriting tax-exempt
municipal bond and lease issues. A summary of the Company's significant
accounting policies applied in the preparation of the accompanying financial
statements follows.
Cash equivalents. For purposes of the statement of cash flows, all highly
liquid instruments purchased with a maturity of three months or less are
considered to be cash equivalents.
Securities. Securities are carried at market value. Transactions are
recorded on the trade date.
Depreciation and amortization. Depreciation and amortization are provided
for in amounts sufficient to relate the cost of depreciable assets to operations
over their estimated service lives. Furniture and equipment are being
depreciated by the straight-line method over five years.
Income taxes. Taxable income or loss from the operations of the Company is
reported in the personal tax returns of the stockholders pursuant to an election
under Subchapter S of the Internal Revenue Code. The unaudited pro forma income
tax information included in the statement of operations is presented in
accordance with Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes" as if the Company had been subject to federal income taxes for
all periods presented.
At December 31, 1997, the differences between the financial statement
carrying amounts and the tax bases of existing assets are not material. In
connection with the proposed merger with UniCapital Corporation contemplated
herein, the Company's S Corporation election will terminate, and the tax effect
of the net difference between the book and tax bases of net assets at that date
will be recorded in the 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.
Reclassifications. Certain prior year account balances have been
reclassified to conform to the 1997 presentation.
NOTE 2--NET CAPITAL
Pursuant to Rule 15c 3-1 of the Securities Exchange Act of 1934, the
Company is required to maintain minimum net capital, as defined under such rule.
Under the above rules, the Company's "aggregate indebtedness," as defined,
cannot exceed 1500% of its "net capital," as defined, and net capital must be no
less than $100,000. Net capital and the related percentage may fluctuate on a
daily basis. At December 31, 1997, net capital was $234,632, and the percentage
of aggregate indebtedness to net capital was 135.6% Net capital in excess of
requirements was $134,632.
NOTE 3--RETIREMENT PLAN
Effective December 31, 1996, the Company established a Simplified Employee
Pension Plan for eligible employees. Company contributions are voluntary and at
the discretion of the Board of Directors. The Company's contribution expense was
$64,247 and $67,500 for the years ended December 31, 1996 and 1997,
respectively.
F-105
<PAGE> 218
MUNICIPAL CAPITAL MARKETS GROUP, INC.
DECEMBER 31, 1995, 1996 AND 1997
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--OPERATING LEASE
The Company conducts its operations in leased premises. At December 31,
1997, the minimum future rental payments remaining under leases which expire
through June 30, 1999 are as follows:
<TABLE>
<S> <C>
1998............................................... $33,272
1999............................................... 15,636
-------
$48,908
=======
</TABLE>
Rent expense for the years ended December 31, 1995, 1996 and 1997 was
approximately $31,000, $34,000 and $46,000, respectively. Rent expense of
approximately $31,000, $34,000 and $33,000 was reimbursed to the Company by its
officers for the years ended December 31, 1995, 1996 and 1997, respectively.
F-106
<PAGE> 219
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The NSJ Group
In our opinion, the accompanying combined balance sheet and the related
statements of operations, of stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of The NSJ Group at
December 31, 1996 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Ft. Lauderdale, Florida
January 21, 1998
F-107
<PAGE> 220
THE NSJ GROUP
COMBINED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 107,841 $ 19,992
Rents and accounts receivable............................... 51,500 1,038,796
Equipment held for sale or lease............................ -- 2,471,107
Equipment under operating leases, net....................... 25,869,659 23,779,871
Investments in and advances to minority owned affiliates.... 1,741,061 5,737,174
Due from uncombined related entities, net................... 848,226 400,225
Due from stockholders, net.................................. 341,144 10,000
Deposits and other assets................................... 1,197,128 2,496,359
----------- -----------
Total assets......................................... $30,156,559 $35,953,524
=========== ===========
LIABILITIES AND COMBINED STOCKHOLDERS' EQUITY
Liabilities:
Nonrecourse obligations..................................... $26,172,489 $23,803,164
Accounts payable and accrued expenses....................... 400,031 538,876
Deposits, rents received in advance and other credits....... 741,767 2,106,251
Other liabilities........................................... 448,031 2,446,087
----------- -----------
Total liabilities.................................... 27,762,318 28,894,378
----------- -----------
Commitments (Notes 8 and 9)................................. -- --
Combined stockholders' equity:
Common stock, $1 par value, 1,000 shares authorized, 667
shares issued and outstanding.......................... 667 667
Common stock, $0 par value, 6,000 shares authorized, 3,400
shares issued and outstanding.......................... -- --
Contributed capital....................................... 2,316,104 2,566,142
Retained earnings......................................... 77,470 4,492,337
----------- -----------
Total combined stockholders' equity.................. 2,394,241 7,059,146
----------- -----------
Total liabilities and combined stockholders'
equity.............................................. $30,156,559 $35,953,524
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-108
<PAGE> 221
THE NSJ GROUP
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
Rental income from operating leases.................. $1,756,733 $3,343,400 $ 7,320,340
Sales of equipment................................... 7,084,221 -- 9,560,120
Interest and other income............................ 75,025 190,678 510,856
---------- ---------- -----------
Total revenues................................ 8,915,979 3,534,078 17,391,316
---------- ---------- -----------
Depreciation on equipment under operating leases..... 740,106 1,124,093 1,866,429
Cost of equipment sold............................... 6,270,881 -- 8,722,504
Interest expense..................................... 938,190 1,809,750 3,034,106
Commission expense................................... -- 448,031 1,998,056
Selling, general and administrative.................. 741,108 821,883 1,017,354
---------- ---------- -----------
Total expenses................................ 8,690,285 4,203,757 16,638,449
---------- ---------- -----------
Income (loss) before equity in net earnings (loss) of
minority owned affiliates.......................... 225,694 (669,679) 752,867
Equity in net earnings (loss) of minority owned
affiliates......................................... (5,000) 896,061 3,996,113
---------- ---------- -----------
Net income........................................... $ 220,694 $ 226,382 $ 4,748,980
========== ========== ===========
Unaudited pro forma information (Note 2):
Pro forma net income before income taxes........... $ 220,694 $ 226,382 $ 4,748,980
Provision for income taxes......................... 98,473 108,563 1,865,399
---------- ---------- -----------
Pro forma net income............................... $ 122,221 $ 117,819 $ 2,883,581
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-109
<PAGE> 222
THE NSJ GROUP
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
RETAINED TOTAL
EARNINGS COMBINED
COMMON CONTRIBUTED (ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT) EQUITY
------ ----------- ------------ -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1995...................... $667 $ 403,117 $ (128,471) $ 275,313
Net income.................................... -- -- 220,694 220,694
Contributions................................. -- 823,218 -- 823,218
---- ---------- ---------- ----------
Balance at December 31, 1995.................... 667 1,226,335 92,223 1,319,225
Net income.................................... -- -- 226,382 226,382
Contributions................................. -- 1,089,769 -- 1,089,769
Distributions................................. -- -- (241,135) (241,135)
---- ---------- ---------- ----------
Balance at December 31, 1996.................... 667 2,316,104 77,470 2,394,241
Net income.................................... -- -- 4,748,980 4,748,980
Contributions................................. -- 250,038 -- 250,038
Distributions................................. -- -- (334,113) (334,113)
---- ---------- ---------- ----------
Balance at December 31, 1997.................... $667 $2,566,142 $4,492,337 $7,059,146
==== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-110
<PAGE> 223
THE NSJ GROUP
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1995 1996 1997
------------ ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.......................................... $ 220,694 $ 226,382 $ 4,748,980
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of operating lease equipment........ 740,106 1,124,093 1,866,429
Other depreciation and amortization.............. 93,843 43,544 316,083
(Gain) loss on sales of leased equipment......... (813,340) 35,857 (837,616)
Equity in net (earnings) loss of minority owned
affiliates..................................... 5,000 (896,061) (3,996,113)
Changes in other assets and liabilities:
Rents and accounts receivable.................. (148,640) 354,935 (987,296)
Due from related entities...................... (553,326) (224,900) 448,001
Due from stockholders, net..................... (122,482) (217,662) 331,144
Deposits and other assets...................... (174,547) (280,000) (1,456,456)
Accounts payable and accrued expenses.......... 251,029 149,002 138,845
Deposits, rents received in advance and other
credits..................................... 625,058 116,709 1,364,484
Other liabilities.............................. -- 448,031 1,998,057
------------ ----------- ------------
Net cash provided by operating activities...... 123,395 879,930 3,934,542
------------ ----------- ------------
Cash flows from investing activities:
Proceeds from sales of leased equipment............. 7,084,289 -- 9,374,950
Purchases of equipment for sale or lease............ (21,852,921) (9,688,720) (10,785,082)
------------ ----------- ------------
Net cash used in investing activities.......... (14,768,632) (9,688,720) (1,410,132)
------------ ----------- ------------
Cash flows from financing activities:
Proceeds from notes payable......................... 15,137,468 9,786,805 136,000
Repayment of notes payable.......................... (747,707) (1,329,890) (2,505,325)
Loan fees paid...................................... -- (130,000) (158,858)
Contributions of capital............................ 323,218 739,769 250,038
Distributions to stockholders....................... -- (241,135) (334,114)
------------ ----------- ------------
Net cash provided by (used in) financing
activities.................................. 14,712,979 8,825,549 (2,612,259)
------------ ----------- ------------
Net increase (decrease) in cash and cash
equivalents................................. 67,742 16,759 (87,849)
Cash and cash equivalents at beginning of year........ 23,340 91,082 107,841
------------ ----------- ------------
Cash and cash equivalents at end of year.............. $ 91,082 $ 107,841 $ 19,992
============ =========== ============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest............................................ $ 644,133 $ 1,352,915 $ 2,399,512
============ =========== ============
Non-cash investing and financing activities:
Contribution of note receivable.................. $ 500,000 $ 350,000 $ --
============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-111
<PAGE> 224
THE NSJ GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1--NATURE OF OPERATIONS
The NSJ Group (the "Company") is comprised of five entities affiliated by
common ownership and control and certain investments in affiliated companies.
The Company is primarily engaged in the acquisition and leasing of used
commercial jet aircraft and aircraft equipment and the leasing and sale of such
aircraft and aircraft equipment, to domestic and foreign airlines and other
aircraft investors and lessors.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of combination and basis of presentation. The accompanying
combined financial statements include the accounts of five entities and
investments in less than majority-owned companies which are under common
ownership and control. Investments of between 20% and 50% are accounted for
under the equity method of accounting. All significant intercompany transactions
have been eliminated. Certain entities related to the Company (collectively, the
"Uncombined Related Entities") have not been combined in the accompanying
financial statements as the outstanding shares of these entities will not be
purchased by UniCapital Corporation (See Note 9).
The Combined Statement of Operations includes all revenues and expenses
directly attributable to the Company, including expenses for facilities,
functions and services used by the Company at shared sites and costs for certain
functions and services performed by the Uncombined Related Entities and also
includes allocations of costs for administrative functions and services
performed on behalf of the Company by the Uncombined Related Entities. These
costs have been allocated based upon estimates of the proportion of time spent
by management and other personnel of the Uncombined Related Entities in
connection with matters related to the Company. Such allocated costs, which
amounted to $293,218, $437,269 and $250,038 in 1995, 1996 and 1997,
respectively, have been reflected in the accompanying financial statements as
selling, general and administrative expenses and as a direct contribution to
capital.
Management believes the Combined Statement of Operations includes a
reasonable allocation of costs incurred by the Uncombined Related Entities which
benefit the Company. Accordingly, the financial information included herein is
not necessarily indicative of the results that would have been reported if the
Company had operated as a separate unaffiliated entity.
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 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. While management believes that the estimates and
related assumptions used in the preparation of these financial statements are
appropriate, actual results could differ from those estimates. Estimates are
made in the assessment of collectibility of receivables, recovery of residual
values of leased equipment, depreciation and amortization.
Accounts receivable and concentrations of credit risk. The Company leases
and sells aircraft and aircraft equipment to domestic and foreign airlines and
other aircraft investors and lessors located throughout the world. The Company
generally obtains deposits on leases and generally does not require collateral.
The Company continually monitors its exposure for credit losses.
F-112
<PAGE> 225
THE NSJ GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company's significant customers comprising greater than 10% of the
rental income from operating leases during the years ended December 31, 1995,
1996, and 1997, respectively, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
CUSTOMER 1995 1996 1997
-------- ---- ---- ----
<S> <C> <C> <C>
A....................................................... 83% 72% 33%
B....................................................... -- -- 29%
C....................................................... -- -- 21%
-- -- --
83% 72% 83%
== == ==
</TABLE>
Operating leases. The Company leases aircraft and aircraft equipment to
customers under operating leases as defined in Statement of Financial Accounting
Standards No. 13, "Accounting for Leases." Revenue is recognized over the
minimum term of operating leases on a straight-line basis.
Deferred loan costs. Deferred loan costs incurred in connection with debt
financing are being amortized on a straight-line basis over the life of the
debt.
Aircraft and aircraft equipment held for sale or lease. Aircraft and
aircraft equipment held for sale or lease is stated at cost. Major additions and
modifications are capitalized.
Depreciation. Aircraft and aircraft equipment are generally depreciated
using the straight-line method over a 30-year life from the date of manufacture
to a 15% residual value. Aircraft and aircraft equipment that are under lease as
of the date of acquisition, are depreciated over the longer of the remainder of
their 30 year life or the remaining lease term.
Income taxes. The entities affiliated under common control which comprise
the Company have elected S Corporation status under the Internal Revenue Code.
As an S Corporation, the entities generally are not subject to federal income
taxes since the operating results of the entities are included in the tax
returns of their individual stockholders. The entities are directly liable for
state income and franchise taxes in certain jurisdictions.
The unaudited pro forma income tax information included in the Combined
Statement of Operations is presented in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," as if the Company
had been subject to federal and state income taxes for all periods presented.
There are differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities of the entities affiliated
under common control. At December 31, 1997, the Company's net assets for
financial reporting purposes exceed the tax basis by approximately $6,100,000.
In connection with the proposed merger with UniCapital Corporation discussed in
Note 9, the Company's S Corporation election will terminate and the tax effect
of the net difference, exclusive of previous S Corporation net operating loss
carryforwards, between the book and tax bases of net assets at that date ($13.5
million at December 31, 1997) will be recorded in the financial statements.
Cash and cash equivalents. For purposes of the Combined Statement of Cash
Flows, the Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.
F-113
<PAGE> 226
THE NSJ GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair value of financial instruments. The carrying value of the Company's
financial instruments, including cash, accounts receivable, and accounts payable
approximated fair value because of the short maturity of these instruments. The
carrying value of long-term receivables and payables approximated fair value
based upon market rates for similar instruments.
NOTE 3--RELATED PARTY TRANSACTIONS
Due from uncombined related entities represents the net receivable from the
Uncombined Related Entities for net funds advanced to them by the Company.
NOTE 4--LEASING TRANSACTIONS
Operating leases. The Company is the lessor of aircraft and aircraft
equipment under operating leases. The components of aircraft and aircraft
equipment on operating leases at December 31, 1996 and 1997, were as follows:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Cost............................................. $28,577,255 $27,867,255
Accumulated depreciation......................... (2,707,596) (4,087,384)
----------- -----------
Net.............................................. $25,869,659 $23,779,871
=========== ===========
</TABLE>
Future minimum rentals receivable under noncancelable operating leases were
as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C> <C>
1998.............................................................. $ 4,254,750
1999............................................................... 4,030,000
2000............................................................... 4,090,000
2001............................................................... 3,850,000
2002............................................................... 2,400,000
Thereafter......................................................... 6,100,000
-----------
$24,724,750
===========
</TABLE>
Significant lease terms. The Company's lease agreements provide that the
lessee pays taxes, insurance and maintenance costs. Lease agreements generally
provide for penalty provisions in the event of early termination.
Significant concentrations. The majority of the Company's net lease
receivables are collateralized by aircraft and aircraft equipment of which
approximately 86% of the portfolio related to a single manufacturer.
NOTE 5--INVESTMENTS IN MINORITY OWNED AFFILIATES
The Company has investments in less than majority-owned companies which
engage in the buying, selling and leasing of aircraft and aircraft equipment.
The Company has four of such investments at December 31, 1997 and held three of
the four at December 31, 1996. The Company has a 20% ownership interest in three
of these affiliates and a 49% ownership interest in the remaining affiliate. The
Company shares in 50% of the profits and losses of all of these affiliates. The
Company accounts for these investments under the equity method. The summarized
financial information below represents an aggregation of the Company's
uncombined affiliates which are accounted for under the equity method.
Pursuant to compensation agreements between the Company and a third party,
the third party is entitled to receive 50% of the Company's equity in net
earnings and losses of minority owned affiliates. Amounts due under
F-114
<PAGE> 227
THE NSJ GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
NOTE 5--INVESTMENTS IN MINORITY OWNED AFFILIATES (CONTINUED)
these agreements are reflected as commission expense in the accompanying
financial statements and totaled $0, $448,031 and $1,998,056 for the years ended
December 31, 1995, 1996 and 1997, respectively.
SUMMARIZED BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Current assets................................... $ 3,555,175 $ 3,718,638
Aircraft and aircraft equipment, net............. 47,715,405 48,385,811
Other assets..................................... 634,523 8,913,281
----------- -----------
Total assets................................... 51,905,103 61,017,730
----------- -----------
Current liabilities.............................. 5,699,445 6,629,985
Advances from shareholders....................... 6,093,000 5,000,000
Nonrecourse obligations.......................... 34,230,535 37,757,305
----------- -----------
Total liabilities.............................. 46,022,980 49,387,290
----------- -----------
Net assets....................................... $ 5,882,123 $11,630,440
=========== ===========
</TABLE>
SUMMARIZED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1995 1996 1997
-------- ---------- ----------
<S> <C> <C> <C>
Rental income from operating leases..................... $ -- $1,343,334 $8,400,000
Gain on sale of equipment, net.......................... -- 3,448,478 9,225,635
Other................................................... -- 200,000 183,855
-------- ---------- ----------
Total revenues........................................ -- 4,991,812 17,809,490
-------- ---------- ----------
Depreciation on equipment under operating leases........ -- 484,595 3,073,097
Interest expense........................................ -- 1,175,059 4,488,366
Other................................................... 10,000 1,540,036 2,255,802
-------- ---------- ----------
Total expenses........................................ 10,000 3,199,690 9,817,265
-------- ---------- ----------
Net income (loss)....................................... $(10,000) $1,792,122 $7,992,225
======== ========== ==========
</TABLE>
Nature of operations. The affiliated companies lease and sell aircraft and
aircraft equipment to domestic and foreign airlines and other aircraft investors
and lessors located throughout the world. All lease transactions are classified
as operating leases.
Revenue recognition. Revenue is recognized over the minimum term of
operating leases on a straight-line basis. Revenue from sales of aircraft are
recorded at the time of transfer of title to the aircraft. Future minimum
rentals receivable under noncancelable operating leases were as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C> <C>
1998............................................................ $ 8,400,000
1999............................................................. 8,400,000
2000............................................................. 8,400,000
2001............................................................. 4,576,000
2002............................................................. 2,890,000
Thereafter....................................................... 175,000
-----------
$32,841,000
===========
</TABLE>
F-115
<PAGE> 228
THE NSJ GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
NOTE 5--INVESTMENTS IN MINORITY OWNED AFFILIATES (CONTINUED)
Aircraft and aircraft equipment. Aircraft and aircraft equipment held for
sale or lease are stated at cost. Major additions and modifications are
capitalized. Aircraft and aircraft equipment are depreciated using the
straight-line method over a 30-year life from the date of manufacture to a 15%
residual value. Aircraft and aircraft equipment that are under lease as of the
date of acquisition, are depreciated over the longer of the remainder of their
30 year life or the remaining lease term.
Advances from shareholders. The affiliated companies have funded certain
purchases of aircraft and aircraft equipment using funds advanced by their
shareholders. These shareholder loans are unsecured, bear interest at 12% and
have no stated maturity date. Advances will be repaid if and when there are
sufficient funds to make repayments.
Nonrecourse obligations. The affiliated companies have also funded
purchases of aircraft and aircraft equipment using nonrecourse debt. Under these
arrangements, the affiliated companies have assigned substantially all lease
payments from the applicable leases and granted a security interest in the
leased equipment to the lending institution. In the event of a default by a
lessee on the nonrecourse notes, the lender has a first lien against the lease
payments and underlying equipment, but has no further recourse against the
affiliated companies. In conjunction with these debt agreements, the
stockholders of the affiliated companies have also entered into stock pledge
agreements which pledge their stock in the affiliated companies to the
respective lending institution. Interest on these nonrecourse obligations is
principally at rates ranging from 8.45% to 10.67% at December 31, 1996 and 1997.
Maturities on these nonrecourse obligations range from the years 2003 to 2004.
Other. The Company's share of undistributed earnings of affiliated
companies included in consolidated retained earnings was ($5,000), $896,061 and
$3,715,220 at December 31, 1995, 1996 and 1997, respectively. Distributions from
affiliated companies were $0, $0 and $1,500,000 in 1995, 1996 and 1997,
respectively.
NOTE 6--DEPOSITS AND OTHER ASSETS
As of December 31, 1996 and 1997, deposits and other assets consist
primarily of lessee security deposits and maintenance reserves. Lessee deposits
are paid by the lessee prior to the inception of the lease and are refundable to
the lessee based on the terms of the various leases. Maintenance reserves are
funded by the lessees and charged to lessees based upon usage of the leased
aircraft and aircraft equipment. Such amounts are reimbursed to the lessee as
required maintenance is performed. As of December 31, 1996 and 1997, security
deposits and maintenance reserves were approximately $742,025 and $2,119,948,
respectively.
Other assets consist primarily of deferred loan costs of $298,647 and
$457,505 net of accumulated amortization of $43,544 and $316,094 at December
1996 and 1997, respectively, associated with the Company's nonrecourse
obligations.
NOTE 7--NONRECOURSE OBLIGATIONS
Notes payable at December 31, 1996 and 1997 consisted of the following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Nonrecourse installment notes secured by aircraft
and aircraft equipment and lease payments...... $26,172,489 $23,803,164
=========== ===========
</TABLE>
The Company has certain borrowings outstanding from financial institutions
on a nonrecourse basis. Under these borrowings, the Company assigns
substantially all lease payments from the applicable leases and grants a
security interest in the leased equipment to the lending institution. In the
event of a default by a lessee, the lender has a security interest in the lease
payments and underlying equipment, but has no further recourse against the
Company. In conjunction with these debt agreements, the stockholders of the
Company have also entered into
F-116
<PAGE> 229
THE NSJ GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS--CONTINUED
NOTE 7--NONRECOURSE OBLIGATIONS (CONTINUED)
stock pledge agreements which pledge their stock in the entities affiliated by
common ownership and control and grant a security interest in such stock to the
respective lending institution. Interest on these borrowings is principally at
rates ranging from 8.81% to 13.43% at December 31, 1996 and 9.22% to 10.86% at
December 31, 1997. Certain of these debt agreements provide for a sharing of
profits on sales of aircraft or lease terminations with the participating
lender. The profit sharing percentages payable by the Company to the lender
range from 20% to 70%. However, certain agreements limit the amount of profit
share that is payable by the Company. Amounts paid pursuant to such profit
sharing arrangement approximated $295,000, $0 and $660,000 for the years ended
December 31, 1995, 1996 and 1997, respectively, and are recorded as a reduction
of revenue from sales of equipment.
On January 14, 1998, the Company entered into an agreement for the partial
extinguishment of debt and accrued interest payable recorded at approximately
$1,434,000 and $393,000, respectively, at December 31, 1997 in the accompanying
financial statements. According to the terms of this agreement, if the Company
makes payments to the lender totaling approximately $457,000 on or before May
30, 1998, such payments will be accepted by the lender in full payment and
satisfaction of all obligations of the Company under the related notes payable.
Upon payment of the $457,000 by the Company in 1998, the gain on the
extinguishment of debt in the amount of $1,370,000 will be recorded as an
extraordinary item in the Company's 1998 results of operations.
Future minimum principal payments. The aggregate annual maturities of the
notes as of December 31, 1997 were as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1998............................................................... $ 5,112,724
1999............................................................. 2,529,722
2000............................................................. 6,039,397
2001............................................................. 7,012,061
2002............................................................. 3,109,260
-----------
$23,803,164
===========
</TABLE>
NOTE 8--COMMITMENTS
The Company subleases its office space from an Uncombined Related Entity.
The base rent pursuant to the sublease agreement is $13,500 per year. The
Company also pays the affiliated entity a pro rata share of common area
maintenance expenses. This sublease expires in 2001.
NOTE 9--SUBSEQUENT EVENT (UNAUDITED)
The Company and its stockholders have entered into a merger agreement with
UniCapital Corporation ("UniCapital") pursuant to which UniCapital will acquire
all outstanding shares of common stock of the combined entities affiliated by
common ownership in exchange for cash and common stock of UniCapital, concurrent
with the consummation of the initial public offering of the common stock of
UniCapital.
The Company has been advised by the IRS that one of its subsidiaries will
have its tax returns audited for the year ended December 31, 1995. Management
does not believe the results of such examination will materially affect the
financial statements of the Company.
F-117
<PAGE> 230
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Portfolio Financial Servicing Company, L.P.:
We have audited the accompanying balance sheets of Portfolio Financial
Servicing Company, L.P., a Delaware limited partnership, as of December 3l,
1996, and 1997 and the related statements of operations, changes in partners'
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 audit 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 financial statements referred to above present fairly,
in all material respects, the financial position of Portfolio Financial
Servicing Company, L.P. as of December 3l, 1996 and 1997, and the results of its
operations and cash flows for the years then ended in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Portland, Oregon
January 9, 1998
F-118
<PAGE> 231
PORTFOLIO FINANCIAL SERVICING COMPANY, L.P.
BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 20,201 $ 4,888
Accounts receivable......................................... 113,547 181,187
Property and equipment, net................................. 496,904 533,596
Other assets................................................ 92,621 58,818
-------- --------
Total assets........................................... $723,273 $778,489
======== ========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses....................... $247,729 $150,907
Other liabilities........................................... 98,351 156,089
Partners' equity............................................ 377,193 471,493
-------- --------
Total liabilities and partners' equity................. $723,273 $778,489
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-119
<PAGE> 232
PORTFOLIO FINANCIAL SERVICING COMPANY, L.P.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Servicing fees.............................................. $ 1,322,329 $ 1,480,041
Selling, general and administrative expenses................ 3,355,860 3,356,241
----------- -----------
Net loss.................................................... $(2,033,531) $(1,876,200)
=========== ===========
Unaudited pro forma information (Note 2)
Pro forma loss before taxes................................. $(2,033,531) $(1,876,200)
Pro forma provision for income taxes........................ -- --
----------- -----------
Pro forma net loss..................................... $(2,033,531) $(1,876,200)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-120
<PAGE> 233
PORTFOLIO FINANCIAL SERVICING COMPANY, L.P.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
LIMITED GENERAL
PARTNERS' PARTNERS'
EQUITY EQUITY TOTAL
----------- --------- -----------
<S> <C> <C> <C>
Balance, January 1, 1996................................ $ 802,617 $ 8,107 $ 810,724
Contributed capital................................... 1,584,000 16,000 1,600,000
Net loss.............................................. (2,013,196) (20,335) (2,033,531)
----------- -------- -----------
Balance, December 31, 1996.............................. 373,421 3,772 377,193
Contributed capital................................... 1,950,795 19,705 1,970,500
Net loss.............................................. (1,857,437) (18,763) (1,876,200)
----------- -------- -----------
Balance, December 31, 1997.............................. $ 466,779 $ 4,714 $ 471,493
=========== ======== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-121
<PAGE> 234
PORTFOLIO FINANCIAL SERVICING COMPANY, L.P.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $(2,033,531) $(1,876,200)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation........................................... 664,067 217,147
Loss on disposal of assets............................. 87,671 2,414
Decrease (increase) in accounts receivable............. 152,611 (67,640)
Decrease (increase) in other assets.................... (13,945) 33,803
Increase (decrease) in accounts payable and accrued
expenses............................................. (186,861) (96,822)
----------- -----------
Net cash used by operating activities....................... (1,329,988) (1,787,298)
----------- -----------
Cash flows from investing activities:
Capital additions......................................... (253,651) (161,910)
----------- -----------
Net cash used by investing activities....................... (253,651) (161,910)
----------- -----------
Cash flows from financing activities:
Principal payments on lease payable....................... (9,961) (36,605)
Contributed capital....................................... 1,600,000 1,970,500
----------- -----------
Net cash provided by financing activities................... 1,590,039 1,933,895
----------- -----------
Net increase (decrease) in cash and cash equivalents........ 6,400 (15,313)
Cash and cash equivalents, beginning of period.............. 13,801 20,201
----------- -----------
Cash and cash equivalents, end of period.................... $ 20,201 $ 4,888
=========== ===========
Supplemental disclosures:
Interest paid............................................. $ 2,463 $ 11,805
=========== ===========
Noncash transactions:
Equipment acquired under capital lease.................... $ 108,312 $ 94,343
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-122
<PAGE> 235
PORTFOLIO FINANCIAL SERVICING COMPANY, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION
Portfolio Financial Servicing Company, L.P. ("PFSC") (formerly known as
Parrish Financial Servicing Company, L.P.) is a limited partnership established
in May of 1993 pursuant to the provisions of the Delaware Revised Uniform
Limited Partnership Act. The general partner of PFSC is Equipment Servicing
Corp. ("ESC") with a distributive share of 1 percent. The limited partner of
PFSC is ILC Acquisition Partners, L.P. ("ILCAP") with a distributive share of 99
percent. PFSC was formed to service the partners' acquired lease portfolio,
market its servicing capabilities to third parties, and service lease portfolios
that may be acquired by the partners in the future.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
Property and equipment. Property and equipment are recorded at cost.
Depreciation of property and equipment is provided over the estimated useful
lives of the assets, which generally ranges from three to seven years, on a
straight-line basis. Amounts of property and equipment, and related accumulated
depreciation, included in the balance sheet are as follows:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Computer equipment and software............................. $1,939,649 $2,167,264
Furniture................................................... 197,324 214,938
Leasehold improvements...................................... 33,909 52,310
In progress................................................. 13,944 --
---------- ----------
2,184,826 2,434,512
Accumulated depreciation.................................... 1,687,922 1,900,916
---------- ----------
$ 496,904 $ 533,596
========== ==========
</TABLE>
In 1996, $266,000 of property which was no longer being used to provide
service was written off by increasing accumulated depreciation with a charge to
depreciation expense.
Capitalized leased equipment. As of December 31, 1996 and 1997, included
in property and equipment are capitalized leased equipment with original costs
of $108,312 and $202,655, respectively. The leased equipment is amortized over
the life of the lease using the straight-line method. Accumulated amortization
at December 31, 1996 and 1997 was $10,832 and $46,832 respectively. Amortization
expense is included in depreciation expense.
Income taxes. The Company is a partnership and is treated as such for
income tax purposes. Accordingly, it is not subject to payment of federal or
state income taxes. However, the individual partners are responsible for federal
and state taxes on their respective shares of taxable income.
The unaudited pro forma income tax information included in the Statements
of Operations is presented in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," as if the Company had been
subject to federal and state income taxes for all periods presented. As the
Company has historically incurred losses, the tax effect of these losses have
been offset by a valuation allowance and no tax benefits have been reflected in
the unaudited pro forma information.
Had the Company been subject to income taxes, there would be differences
between the financial statement carrying amounts and the tax bases of existing
assets and liabilities. At December 31, 1997, the Company's net assets for
financial reporting purposes would have been less than the tax basis by
approximately $175,000 (unaudited). Additionally, the Company would have a net
operating loss carryforward of approximately $6.6 million (unaudited).
Statements of cash flows. For purposes of reporting cash flows, cash and
cash equivalents include unrestricted cash in banks and temporary investments
with an original maturity of three months or less.
F-123
<PAGE> 236
PORTFOLIO FINANCIAL SERVICING COMPANY, L.P.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
certain 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.
Fair value of financial instruments. The Company's financial instruments
consist of accounts receivable and capital leases payable (other liabilities).
At December 31, 1996 and 1997, the fair value of the Company's receivables and
leases payable approximated the carrying value.
Revenue recognition. PFSC offers a variety of lease portfolio servicing
options, consisting of collections, customer service, contract booking, payment
application, collateral filing and perfection, information system help desk,
property, sales and use tax reporting, acting as servicer backup and other
services as they relate to leases. PFSC neither owns nor originates leases.
Lease servicing contracts are typically entered into with customers for a
period of one to three years. Contract revenues consist primarily of monthly
fees collected for booking contracts and monthly maintenance fees based on the
total number of contracts serviced.
For 1996, three of the Company's customers accounted for 45%, 21% and 19%
of total revenues. During the year ended December 31, 1997, two of the Company's
customers accounted for 50% and 13% of total revenues.
NOTE 3--PARTNERS' FINANCIAL SUPPORT
As reflected in the accompanying financial statements, PFSC has received
substantial equity contributions from its partners over the past several years
to support its operations. PFSC has received a financial commitment from its
partners to continue their financial support by providing funds necessary to
support PFSC's operations as anticipated in the 1998 budget. The financial
commitment is valid through the earlier of January 1, 1999 or the sale of PFSC
(see Note 6).
NOTE 4--COMMITMENTS AND CONTINGENCIES
Operating lease. PFSC has a noncancellable operating lease for office
space that expires August 31, 2000. Rent expense for the years ended December
31, 1996 and 1997 was $224,893 and $241,136, respectively. Future minimum
obligations under the lease are as follows:
<TABLE>
<S> <C>
1998........................................................ $259,404
1999........................................................ 259,404
2000........................................................ 172,936
--------
Total....................................................... $691,744
========
</TABLE>
The Company subleases a portion of its office facilities to a customer.
During 1996 and 1997, PFSC received $34,129 and $33,507, respectively, in
sublease rent from this customer.
F-124
<PAGE> 237
PORTFOLIO FINANCIAL SERVICING COMPANY, L.P.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 4--COMMITMENTS AND CONTINGENCIES (CONTINUED)
Capital lease. PFSC has noncancellable capital leases for computer and
office equipment with expiration dates ranging from April 30, 2000 to June 30,
2001. Future payments are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 64,668
1999........................................................ 64,668
2000........................................................ 41,642
2001........................................................ 12,426
--------
Total minimum lease payments................................ 183,404
Less - Amount representing interest (at rates ranging from
5.7% to 20.6%)............................................ (27,315)
--------
Present value of net minimum lease payments................. $156,089
========
</TABLE>
NOTE 5--RELATED PARTY TRANSACTIONS
During the years ended December 31, 1996 and 1997, PFSC provided contract
lease portfolio management services to an affiliated company, PLC Lease
Receivables 1993-A Trust (Trust). The agreement also provided PFSC with interest
and late fees earned on collection accounts, and commissions on end-of-lease
equipment sales. Following are the amounts received for these services in 1996
and 1997:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Service fees................................................ $ 49,514 $ 46,320
Interest.................................................... 28,840 --
Late fees earned on collection accounts..................... 359,272 72,201
Commissions on end-of-lease equipment sales................. 19,956 --
</TABLE>
NOTE 6--SUBSEQUENT EVENT (UNAUDITED)
The general and limited partners of PFSC have entered into a letter of
intent and intend to enter into a definitive agreement with UniCapital
Corporation, pursuant to which all of the partnership interest of PFSC will be
exchanged for shares of UniCapital Corporation common stock concurrent with the
consummation of the initial public offering of UniCapital Corporation.
Completion of the sale is dependent upon satisfactory negotiation of the terms
of the definitive sales agreement and consummation of the initial public
offering.
F-125
<PAGE> 238
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
Varilease Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Varilease
Corporation and its subsidiary at September 30, 1996 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended September 30, 1997, in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Ft. Lauderdale, Florida
January 21, 1998
F-126
<PAGE> 239
VARILEASE CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------- DECEMBER 31,
1996 1997 1997
----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents............................. $ 4,689,922 $ 4,100,034 $ 2,834,421
Rents and accounts receivable......................... 3,563,083 3,553,284 4,028,161
Equipment under direct financing and operating leases,
held for sale....................................... 5,523,701 42,534,401 12,800,002
Net investment in direct financing leases............. 43,048,977 65,761,579 65,618,539
Equipment under operating leases, net................. 9,513,610 19,987,247 22,495,995
Deposits, prepaid expenses and other assets........... 488,479 909,554 392,355
Property and equipment, net........................... 1,844,991 1,779,573 1,886,348
Investments........................................... 553,472 2,199,768 2,889,617
Notes receivable due from stockholders................ 1,009,386 771,989 1,529,220
----------- ------------ ------------
Total assets................................... $70,235,621 $141,597,429 $114,474,658
=========== ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable:
Recourse......................................... $11,365,901 $ 7,537,889 $ 5,882,277
Nonrecourse...................................... 49,374,535 115,183,233 86,894,896
Accounts payable and accrued expenses................. 6,694,255 10,314,742 9,189,957
Deferred income taxes................................. -- 6,285,000 7,805,000
Other liabilities..................................... 1,150,000 650,000 650,000
----------- ------------ ------------
Total liabilities.............................. 68,584,691 139,970,864 110,422,130
----------- ------------ ------------
Commitments and contingencies (Notes 12 and 13)
Stockholders' equity:
Common stock, $1.00 par value, 50,000 shares
authorized, 5,000 issued and outstanding............ 5,000 5,000 5,000
Retained earnings..................................... 1,645,930 1,621,565 4,047,528
----------- ------------ ------------
Total stockholders' equity..................... 1,650,930 1,626,565 4,052,528
----------- ------------ ------------
Total liabilities and stockholders' equity..... $70,235,621 $141,597,429 $114,474,658
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-127
<PAGE> 240
VARILEASE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
--------------------------------------- -------------------------
1995 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Finance income from direct
financing leases.......... $ 1,716,365 $ 3,759,293 $ 6,572,442 $ 1,469,262 $ 1,653,075
Rental income from operating
leases.................... 4,365,292 5,374,098 10,239,676 2,167,785 3,034,900
Sales of equipment........... 3,853,738 3,890,161 12,196,894 1,041,536 1,146,936
Gain on sale of leases....... 1,478,197 2,053,569 4,953,058 647,317 2,209,633
Remarketing income........... 832,394 1,967,241 4,913,368 792,721 2,269,082
Other income................. 176,311 81,903 137,455 42,802 47,627
----------- ----------- ----------- ----------- -----------
Total revenues.......... 12,422,297 17,126,265 39,012,893 6,161,423 10,361,253
----------- ----------- ----------- ----------- -----------
Depreciation on equipment
under operating leases.... 3,319,543 3,903,855 7,914,866 1,130,358 2,337,836
Cost of equipment sold....... 2,922,675 3,719,554 10,090,719 716,068 789,824
Interest expense............. 2,230,967 3,523,689 6,296,773 1,184,520 1,811,455
Selling, general and
administrative............ 3,575,365 5,712,314 8,449,900 1,959,998 1,476,175
----------- ----------- ----------- ----------- -----------
Total expenses.......... 12,048,550 16,859,412 32,752,258 4,990,944 6,415,290
----------- ----------- ----------- ----------- -----------
Income before income taxes..... 373,747 266,853 6,260,635 1,170,479 3,945,963
Provision for income taxes..... -- -- 6,285,000 4,248,000 1,520,000
----------- ----------- ----------- ----------- -----------
Net income (loss).............. $ 373,747 $ 266,853 $ (24,365) $(3,077,521) $ 2,425,963
=========== =========== =========== =========== ===========
Unaudited pro forma information
(Note 2):
Pro forma income before
income taxes.............. $ 373,747 $ 266,853
Pro forma provision for
income taxes.............. 177,000 183,000
----------- -----------
Pro forma net income.... $ 196,747 $ 83,853
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-128
<PAGE> 241
VARILEASE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
TOTAL
COMMON RETAINED STOCKHOLDERS'
STOCK EARNINGS EQUITY
------ ---------- -------------
<S> <C> <C> <C>
Balance at October 1, 1994............................... $5,000 $1,505,330 $1,510,330
Net income............................................... -- 373,747 373,747
------ ---------- ----------
Balance at September 30, 1995............................ 5,000 1,879,077 1,884,077
Net income............................................... -- 266,853 266,853
Cash dividends........................................... -- (500,000) (500,000)
------ ---------- ----------
Balance at September 30, 1996............................ 5,000 1,645,930 1,650,930
Net loss................................................. -- (24,365) (24,365)
------ ---------- ----------
Balance at September 30, 1997............................ 5,000 1,621,565 1,626,565
Net income (unaudited)................................... -- 2,425,963 2,425,963
------ ---------- ----------
Balance at December 31, 1997 (unaudited)................. $5,000 $4,047,528 $4,052,528
====== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-129
<PAGE> 242
VARILEASE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
-------------------------------------------- ---------------------------
1995 1996 1997 1996 1997
------------ ------------- ------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................ $ 373,747 $ 266,853 $ (24,365) $ (3,077,521) $ 2,425,963
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation of operating lease
equipment............................ 3,319,543 3,903,855 7,914,866 1,130,358 2,337,836
Amortization of initial direct costs... 457,777 717,584 1,206,320 286,000 301,000
Other depreciation..................... 74,371 94,503 125,544 25,553 35,453
Gain on sales of equipment............. (931,063) (170,607) (2,106,175) (325,468) (357,112)
Gain on sale of leases................. (1,478,197) (2,053,569) (4,953,058) (647,317) (2,209,633)
Deferred income taxes.................. -- -- 6,285,000 4,248,000 1,520,000
Changes in other assets and
liabilities:
Rents and accounts receivable........ 3,182,985 (1,981,911) 9,799 (4,290,342) (474,877)
Deposits, prepaid expenses and other
assets............................. 23,432 (338,922) (421,075) (48,144) 517,199
Accounts payable and accrued
expenses........................... (1,816,692) 1,766,050 3,620,487 4,792,810 (1,124,785)
Other liabilities.................... -- 650,000 -- -- --
------------ ------------- ------------- ------------ ------------
Net cash provided by operating
activities............................... 3,205,903 2,853,836 11,657,343 2,093,929 2,971,044
------------ ------------- ------------- ------------ ------------
Cash flows from investing activities:
Investment in direct financing leases.... (68,980,849) (119,723,914) (216,466,260) (76,135,563) (35,136,078)
Collection of direct financing leases,
net of finance income earned........... 18,509,729 30,117,495 37,707,193 28,125,755 14,315,568
Purchases of equipment for sale or
lease.................................. (8,406,970) (10,236,524) (65,489,922) (4,008,752) (8,338,168)
Proceeds from sale of direct financing
leases................................. 44,182,189 66,436,500 159,793,203 39,545,886 22,872,183
Increase in investments, net............. (222,317) (331,655) (1,646,296) (345,367) (689,849)
Purchases of property and equipment...... (420,606) (910,686) (60,126) (27,690) (142,165)
Proceeds from sales of equipment......... 3,853,738 3,890,161 12,196,894 1,041,536 33,583,032
------------ ------------- ------------- ------------ ------------
Net cash (used in) provided by investing
activities............................... (11,485,086) (30,758,623) (73,965,314) (11,804,195) 26,464,523
------------ ------------- ------------- ------------ ------------
Cash flows from financing activities:
Proceeds from notes payable.............. 60,710,522 135,421,244 321,395,266 69,474,493 42,997,075
Repayment of notes payable............... (53,460,810) (103,798,407) (259,414,580) (63,048,484) (72,941,024)
Proceeds (repayments) on borrowings from
stockholders........................... 442,741 (417,836) 237,397 -- (757,231)
Cash dividends........................... -- -- (500,000) -- --
------------ ------------- ------------- ------------ ------------
Net cash provided by (used in) financing
activities............................... 7,692,453 31,205,001 61,718,083 6,426,009 (30,701,180)
------------ ------------- ------------- ------------ ------------
Net (decrease) increase in cash and cash
equivalents.............................. (586,730) 3,300,214 (589,888) (3,284,257) (1,265,613)
Cash and cash equivalents at beginning of
year....................................... 1,976,438 1,389,708 4,689,922 4,689,922 4,100,034
------------ ------------- ------------- ------------ ------------
Cash and cash equivalents at end of year... $ 1,389,708 $ 4,689,922 $ 4,100,034 $ 1,405,665 $ 2,834,421
============ ============= ============= ============ ============
Supplemental disclosures of cash flow
information:
Cash paid for:
Interest............................... $ 2,136,646 $ 3,400,764 $ 6,296,320 $ 1,184,000 $ 1,812,000
Income taxes........................... -- -- -- -- 300,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-130
<PAGE> 243
VARILEASE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--NATURE OF OPERATIONS
Varilease Corporation (the "Company") was organized in 1987 in the State of
Michigan. The Company's principal business activity is acquiring computer,
computer-related and telecommunications equipment for sale or lease, as lessor,
under direct financing or operating leases.
The Company's principal operating facilities are located in Detroit, MI,
with operations in St. Louis, MO and Phoenix, AZ. Lessees are located in 45
states, and financing is provided through a variety of lease structures.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 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. While management believes that the estimates and
related assumptions used in the preparation of these financial statements are
appropriate, actual results could differ from those estimates. Estimates are
made in the assessment of collectibility of receivables and direct financing
leases, recovery of residual values of leased equipment and depreciation.
Principles of consolidation. The consolidated financial statements include
the accounts of Varilease Corporation and its wholly owned subsidiary, Varilease
Capital Corporation. All significant intercompany transactions have been
eliminated.
Investments. Investments in entities that are 20% owned are accounted for
on the equity method of accounting. All significant intercompany transactions
have been eliminated.
Accounts receivable. Accounts receivable primarily consists of lease
payments due from lessees on operating leases and from other parties for the
sale of equipment.
Direct financing leases. The Company invests in leases classified as
direct financing leases. The Company's net investment in direct financing leases
includes the gross rentals receivable, estimates of residual values, deferred
initial direct costs accounted for in accordance with Statement of Financial
Accounting Standards No. 91 "Accounting for Nonrefundable Fees and Costs
Associated with Originating or Acquiring Loans and Initial Direct Costs of
Leases" and unearned finance income. Unearned finance income represents the
excess of the total receivable plus the estimated residual value over the cost
of equipment or contract acquired. Revenue from direct financing leases is
recognized over the lease term on the interest method which results in a level
rate of return on the net investment in the lease. Initial direct costs related
to leases retained are capitalized and amortized over the lease term.
At the inception of the lease, management uses available evidence and
historical experience to estimate the residual value at the end of the lease
term. Estimated residual values not guaranteed by lessees are reviewed quarterly
and adjusted to reflect declines in current market value.
The Company also sells selected direct financing leases. For these
transactions subsequent to December 31, 1996, the Company follows Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." The difference between
the sales price and the net investment in direct financing leases is recognized
as a gain or loss. For such transactions prior to January 1, 1997, the Company
followed Statement of Financial Accounting Standards No. 77 "Reporting by
Transferors for Transfers of Receivables with Recourse." The difference between
the sale price and the net receivable is recognized as a gain or loss.
Operating leases. All lease transactions not qualifying as direct
financing leases are classified as operating leases. Revenue is recognized over
the minimum term of the operating lease on a straight-line basis.
F-131
<PAGE> 244
VARILEASE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Equipment under operating leases is depreciated to its estimated residual
value on a straight-line basis over the minimum term of the lease.
Initial direct costs related to leases retained are capitalized and
amortized over the lease term.
Equipment under lease held for sale. Computer and other equipment under
lease held for sale is stated at the lower of cost or fair market value of the
equipment.
Depreciation. Property and equipment is depreciated over the useful lives
of the related asset on methods which approximate a straight-line basis. Useful
lives range from three to five years for equipment and to 31 years for a
building.
Income taxes. Prior to October 1, 1996, the Company elected to be taxed as
a Subchapter S Corporation for federal income tax purposes. As a result, no
taxes were recorded prior to that date. Instead, the operating results of the
Company are included in the tax returns of the individual stockholders.
Effective October 1, 1996, the Company discontinued its election to be treated
as an S Corporation and elected to be taxed as a C Corporation.
Subsequent to September 30, 1996, the Company accounted for income taxes
under the liability method. Under this method, deferred tax assets and
liabilities are determined based on the differences between financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse. The initial adoption of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("SFAS 109"), resulted in the recording of a
deferred tax liability of $3,789,000 at October 1, 1996.
The unaudited pro forma income tax information included in the Consolidated
Statement of Operations is presented in accordance with SFAS 109, as if the
Company had been subject to federal and state income taxes for the periods
presented for which it operated as an S Corporation.
Cash and cash equivalents. For purposes of the Consolidated Statement of
Cash Flows, the Company considers all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash equivalents.
Unaudited interim financial information. The interim financial data as of
December 31, 1997 and for the three months ended December 31, 1996 and 1997 is
unaudited; however, in the opinion of the Company, the interim data includes all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair statement of the financial position and results of operations and of cash
flows for the interim periods. Such interim financial data is not necessarily
indicative of results for the entire fiscal year including such interim periods.
Fair value of financial instruments. The carrying value of the Company's
financial instruments, including cash, accounts receivable, and accounts payable
approximated fair value because of the short maturity of these instruments. The
carrying value of long-term receivables and payables approximated fair value
based upon comparability of market rates for similar instruments.
F-132
<PAGE> 245
VARILEASE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
NOTE 3--LEASING TRANSACTIONS
Direct financing leases. Direct financing leases consist principally of
computer and computer-related equipment with terms ranging to five years. The
components of the Company's net investment in direct financing leases at
September 30, 1996 and 1997 were as follows:
<TABLE>
<CAPTION>
1996 1997
----------- ------------
<S> <C> <C>
Future minimum rentals receivable................ $46,464,069 $ 68,644,752
Estimated unguaranteed residual values........... 5,172,570 7,285,516
Unearned finance income.......................... (9,649,032) (11,462,347)
Deferred initial direct costs, net............... 1,061,370 1,293,658
----------- ------------
$43,048,977 $ 65,761,579
=========== ============
</TABLE>
Future minimum rentals receivable represent earning assets held by the
Company which are generally due in monthly installments over original periods
ranging to 60 months. Future minimum rentals receivable under direct financing
leases were as follows:
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30,
-------------
<S> <C>
1998........................................................ $27,283,124
1999........................................................ 23,851,105
2000........................................................ 11,898,272
2001........................................................ 4,289,228
2002........................................................ 1,323,023
-----------
$68,644,752
===========
</TABLE>
Operating leases. The Company is the lessor of primarily computer and
computer-related equipment under operating leases. The components of equipment
on operating leases at September 30, 1996 and 1997, were as follows:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Cost............................................. $13,765,398 $28,645,164
Deferred initial direct costs, net............... 185,433 264,546
----------- -----------
13,950,831 28,909,710
Accumulated depreciation......................... (4,437,221) (8,922,463)
----------- -----------
$ 9,513,610 $19,987,247
=========== ===========
</TABLE>
Future minimum rentals receivable under noncancelable operating leases were
as follows:
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30,
-------------
<S> <C>
1998........................................................ $ 9,146,272
1999........................................................ 6,202,879
2000........................................................ 1,460,020
2001........................................................ 74,393
2002........................................................ 14,246
-----------
$16,897,810
===========
</TABLE>
Significant lease terms. The Company's lease agreements provide that the
lessee pays taxes, insurance and maintenance costs. Lease agreements generally
provide for penalty provisions in the event of early termination.
F-133
<PAGE> 246
VARILEASE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
NOTE 3--LEASING TRANSACTIONS (CONTINUED)
Significant concentrations. During the years ended September 30, 1996 and
1997, one lessee accounted for 19% and 53%, respectively, of the Company's total
lease originations, and 24% and 66%, respectively, of the Company's total lease
sales. The majority of the Company's net lease receivables are collateralized by
the underlying leased equipment, which is concentrated in computer and
computer-related equipment.
NOTE 4--INVESTMENTS
The Company's investments at September 30, 1996 and 1997 were as follows:
<TABLE>
<CAPTION>
1996 1997
-------- ----------
<S> <C> <C>
30% and 20% interest in a limited partnership at
September 30, 1996 and 1997, respectively........... $553,472 $1,585,480
20% interest in a limited liability corporation....... -- 614,288
-------- ----------
$553,472 $2,199,768
======== ==========
</TABLE>
In July 1995, the Company entered into a limited partnership with GATX
Capital Corporation and holds a 30% and 20% ownership interest in the limited
partnership at September 30, 1996 and 1997, respectively. The Company accounts
for this investment under the equity method. The Company sells qualifying leases
to the limited partnership, and for the year ended September 30, 1996 and 1997,
these sales totaled $8,513,397 and $2,400,550, respectively. The Company earns
an origination fee for originating the lease, and management fees for servicing
the lease portfolio. Management fees are recognized in income over the life of
the respective lease on which the fees are earned. In the opinion of management,
the terms and conditions of these transactions are no less favorable than those
that would be entered into with an unrelated party.
In April 1997, the Company formed a limited liability corporation in which
it holds a 20% interest and Cargill Leasing Corporation holds an 80% interest.
The Company accounts for this investment under the equity method. The Company
sells qualifying leases to the limited liability corporation, and for the year
ended September 30, 1997, these sales totaled $24,479,402. The Company earns an
origination fee for originating the lease, and management fees for servicing the
lease portfolio. Management fees are recognized in income over the life of the
respective lease on which the fees are earned. In the opinion of management, the
terms and conditions of these transactions are no less favorable than those that
would be entered into with an unrelated party.
NOTE 5--PROPERTY AND EQUIPMENT
The components of property and equipment at September 30, 1996 and 1997
were as follows:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Building and improvements............................ $1,689,847 $1,696,059
Furniture and fixtures............................... 421,900 455,866
---------- ----------
2,111,747 2,151,925
Accumulated depreciation............................. (266,756) (372,352)
---------- ----------
$1,844,991 $1,779,573
========== ==========
</TABLE>
F-134
<PAGE> 247
VARILEASE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
NOTE 6--ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The components of accounts payable and accrued expenses at September 30,
1996 and 1997 were as follows:
<TABLE>
<CAPTION>
1996 1997
---------- -----------
<S> <C> <C>
Accounts payable.................................... $3,283,279 $ 4,481,740
Accrued commissions................................. 1,425,716 2,147,402
Unremitted and unpaid sales tax, including accrued
interest and penalties of $180,000 and $238,000... 1,243,732 2,379,197
Deferred income..................................... 500,000 994,314
Accrued interest.................................... 165,557 187,496
Other............................................... 75,971 124,593
---------- -----------
$6,694,255 $10,314,742
========== ===========
</TABLE>
Unremitted and unpaid sales tax includes sales and use tax remitted by
lessees arising from lease transactions in various states, and include certain
remittances received since 1990 related to certain tax jurisdictions.
NOTE 7--NOTES PAYABLE
Notes payable at September 30, 1996 and 1997 consisted of the following:
<TABLE>
<CAPTION>
1996 1997
----------- ------------
<S> <C> <C>
Line of credit facility........................... $ 8,202,716 $ 5,483,992
Notes payable..................................... 2,999,911 2,053,897
Nonrecourse debt secured by equipment and lease
payments........................................ 49,374,535 115,183,233
Note payable to related parties................... 163,274 --
----------- ------------
$60,740,436 $122,721,122
=========== ============
</TABLE>
Line of credit facility. The Company has a $13.5 million line of credit
facility with a financial institution which is subject to annual renewal. The
line of credit is secured by accounts receivable and equipment. Interest on
borrowings outstanding from time to time is at the lender's prime lending rate
(8.0% and 8.75% at September 30, 1996 and 1997, respectively) and is payable
monthly. The maximum amount outstanding during the years ended September 30,
1995, 1996 and 1997 was $3,507,182, $9,293,097 and $12,194,107, respectively.
Notes payable. At September 30, 1996 and 1997, the Company has various
notes payable due to other parties, with terms ranging to 36 months. Interest on
these notes ranges from 12% to 14% and is payable on maturity of the respective
notes payable. These notes payable are secured by a secondary interest in the
underlying equipment.
Nonrecourse debt. The Company has certain borrowings outstanding from
financial institutions on a nonrecourse basis. Under these borrowings, the
Company assigns all lease payments due under the applicable leases and grants a
security interest in the leased equipment to the lending institution. In the
event of a default by a lessee, the lender has a security interest in the lease
payments and underlying equipment, but has no recourse against the Company.
Interest on these borrowings is fixed at the time of the advance to the Company,
with rates ranging from 6.7% to 10.8% at September 30, 1996 and 1997,
respectively.
F-135
<PAGE> 248
VARILEASE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
NOTE 7--NOTES PAYABLE (CONTINUED)
FUTURE MINIMUM PRINCIPAL PAYMENTS
The aggregate annual maturities of the notes as of September 30, 1997 were
as follows:
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30, NONRECOURSE RECOURSE
------------- ------------ ----------
<S> <C> <C>
1998............................................. $ 41,460,578 $7,537,889
1999............................................. 37,412,372 --
2000............................................. 22,244,444 --
2001............................................. 12,141,664 --
2002............................................. 1,924,175 --
------------ ----------
$115,183,233 $7,537,889
</TABLE>
NOTE 8--EMPLOYEE BENEFITS
The Company adopted a 401(k) Plan effective October 1, 1994. The master
agreement allows for eligible employees to have a percentage of their pre-tax
pay contributed to the plan. The Company does not contribute to the plan.
NOTE 9--RELATED PARTY TRANSACTIONS
At September 30, 1996 and 1997, the Company held an unsecured note
receivable from a majority stockholder totaling $876,000 and $522,104,
respectively. The note bears interest at 9% per annum and is due on demand.
At September 30, 1996 and 1997, the Company held unsecured notes receivable
of $133,386 and $249,885, respectively, from entities in which the Company's
majority stockholder owns a majority interest. The notes receivable bear
interest at 8% and are due upon demand.
At September 30, 1996, the Company had borrowings of $163,274 from the
majority stockholder. The unsecured note payable bears interest at 6% and is due
on demand.
NOTE 10--CONCENTRATION OF CREDIT RISK
The Company maintains cash accounts at five banks. Cash accounts at the
banks are insured by the Federal Deposit Insurance Corporation for up to
$100,000. Amounts in excess of insured limits were $4,589,922 and $4,000,034 at
September 30, 1996 and 1997, respectively.
F-136
<PAGE> 249
VARILEASE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
NOTE 11--INCOME TAXES
The Company's provision for income tax expense was composed of the
following for the year ended September 30, 1997:
<TABLE>
<S> <C>
Current: $ --
Federal................................................... --
State..................................................... --
-----------
Total current........................................ --
-----------
Deferred:
Federal................................................... 7,820,000
State..................................................... 910,000
Adoption of SFAS 109 due to discontinuance of S
Corporation election (approximately $395,000 of state
deferred tax).......................................... 3,789,000
-----------
12,519,000
Benefit of net operating loss carryforward................ (6,234,000)
-----------
Total deferred....................................... $ 6,285,000
===========
</TABLE>
The effective income tax rate for the year ended September 30, 1997 varied
from the federal statutory rate as follows:
<TABLE>
<S> <C>
Tax provision computed at statutory 35% rate................ $2,129,000
State taxes, net of federal benefit......................... 248,000
Other....................................................... 119,000
Adoption of SFAS 109 due to discontinuance of S Corporation
election.................................................. 3,789,000
----------
$6,285,000
==========
</TABLE>
The components of net deferred tax liability at September 30, 1997 were as
follows:
<TABLE>
<S> <C>
Deferred tax liabilities:
Lease revenue and related depreciation.................... $(12,177,000)
Other..................................................... (342,000)
------------
(12,519,000)
Deferred tax assets:
Net operating loss carryforward........................... 6,234,000
------------
$ (6,285,000)
============
</TABLE>
The net operating loss carryforward expires in 2012 unless utilized sooner.
Subsequent to the contemplated merger as discussed in Note 13, the utilization
of the Company's net operating loss carryforward may be limited.
NOTE 12--COMMITMENTS AND CONTINGENCIES
In conjunction with the Company's acquisition of certain assets of a
leasing entity ("Seller") seeking protection from creditors under Chapter 11 of
the United States Bankruptcy Code and the signing of a remarketing agreement for
certain leases, the Company guaranteed to the Seller $14,400,000 of net proceeds
from the results of remarketing activities for certain leases held by the
Seller. The Company believes that the remarketing proceeds generated by the sale
or release of the assets underlying the leases will be sufficient to satisfy, in
its entirety, the Company's obligation. At September 30, 1997, the Company's
guaranteed obligation which remained unpaid approximated $3,000,000.
F-137
<PAGE> 250
VARILEASE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
NOTE 12--COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company is party from time to time in various legal proceedings
incidental to its business. In the opinion of management, the resolution of
these items, individually or in the aggregate, would not have a significant
effect on the financial position, results of operations, or cash flows of the
Company.
NOTE 13--SUBSEQUENT EVENT (UNAUDITED)
The Company and its stockholders have entered into a merger agreement with
UniCapital Corporation ("UniCapital") pursuant to which UniCapital will acquire
all outstanding shares of the Company's common stock in exchange for cash and
common stock of UniCapital, concurrent with the consummation of the initial
public offering of the common stock of UniCapital.
F-138
<PAGE> 251
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
The Walden Asset Group, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of The Walden Asset Group, Inc. at
December 31, 1996 and 1997, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Ft. Lauderdale, Florida
January 20, 1998
F-139
<PAGE> 252
THE WALDEN ASSET GROUP, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 949,301 $ 692,591
Accounts receivable......................................... 1,001,526 697,384
Equipment acquired to fulfill leasing commitments or held
for sale or lease......................................... 2,918,690 4,813,860
Net investment in direct financing leases................... 42,732,264 51,712,945
Equipment under operating leases, net....................... 1,500,281 3,667,344
Deposits, prepaid expenses and other assets................. 78,707 97,913
----------- -----------
Total assets........................................... $49,180,769 $61,682,037
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable:
Recourse.................................................. $ 802,132 $ 560,642
Nonrecourse............................................... 43,149,230 53,431,569
Accounts payable and accrued expenses....................... 2,242,438 2,553,492
----------- -----------
Total liabilities...................................... 46,193,800 56,545,703
----------- -----------
Commitments (Notes 6 and 8)
Stockholders' equity:
Common stock, no par value, 10,000 shares authorized,
3,000 issued and outstanding........................... -- --
Additional paid-in capital................................ 75,000 75,000
Retained earnings......................................... 2,911,969 5,061,334
----------- -----------
Total stockholders' equity............................. 2,986,969 5,136,334
----------- -----------
Total liabilities and stockholders' equity............. $49,180,769 $61,682,037
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-140
<PAGE> 253
THE WALDEN ASSET GROUP, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
Finance income from direct financing leases.......... $3,261,517 $4,233,760 $ 6,575,218
Rental income from operating leases.................. 313,834 315,705 1,542,727
Sales of equipment................................... 73,865 1,089,232 1,046,517
Gain on sale of leases............................... 1,502,524 1,470,322 572,689
Remarketing income................................... 72,747 470,368 602,485
---------- ---------- -----------
Total revenues.................................. 5,224,487 7,579,387 10,339,636
---------- ---------- -----------
Depreciation on equipment under operating leases..... 179,821 242,725 682,916
Cost of equipment sold............................... -- 898,776 389,486
Interest expense..................................... 2,123,620 3,110,215 3,867,529
Selling, general and administrative.................. 1,790,083 2,384,706 3,128,340
---------- ---------- -----------
Total expenses.................................. 4,093,524 6,636,422 8,068,271
---------- ---------- -----------
Income before income taxes........................... 1,130,963 942,965 2,271,365
Provision for income taxes........................... 55,000 48,000 122,000
---------- ---------- -----------
Net income........................................... $1,075,963 $ 894,965 $ 2,149,365
========== ========== ===========
Unaudited pro forma information (Note 2):
Pro forma income before income taxes............... $1,130,963 $ 942,965 $ 2,271,365
Pro forma provision for income taxes............... 444,000 389,000 911,000
---------- ---------- -----------
Pro forma net income............................ $ 686,963 $ 553,965 $ 1,360,365
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-141
<PAGE> 254
THE WALDEN ASSET GROUP, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------------ ADDITIONAL
NUMBER OF PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995................. 3,000 $ -- $75,000 $ 996,649 $1,071,649
Net income............................. -- -- -- 1,075,963 1,075,963
----- ------ ------- ---------- ----------
Balance, December 31, 1995............... 3,000 -- 75,000 2,072,612 2,147,612
Net income............................. -- -- -- 894,965 894,965
Cash distributions to stockholders..... -- -- -- (55,608) (55,608)
----- ------ ------- ---------- ----------
Balance, December 31, 1996............... 3,000 -- 75,000 2,911,969 2,986,969
Net income............................. -- -- -- 2,149,365 2,149,365
----- ------ ------- ---------- ----------
Balance, December 31, 1997............... 3,000 $ -- $75,000 $5,061,334 $5,136,334
===== ====== ======= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-142
<PAGE> 255
THE WALDEN ASSET GROUP, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 1,075,963 $ 894,965 $ 2,149,365
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation of operating lease equipment... 179,821 242,725 682,916
Gain on sale of leases...................... (1,502,524) (1,470,322) (572,689)
Gain on sale of equipment................... (73,865) (190,456) (657,031)
Provision for lease losses.................. (30,000) -- --
Changes in other assets and liabilities:
Accounts receivable....................... (195,672) (292,324) 304,142
Equipment acquired to fulfill leasing
commitments or held for sale or
lease.................................. (2,602,203) 173,272 (1,895,170)
Deposits, prepaid expenses and other
assets................................. (71,446) 18,105 (19,206)
Accounts payable and accrued expenses..... 1,295,425 269,236 311,054
------------ ------------ ------------
Net cash (used in) provided by operating
activities..................................... (1,924,501) (354,799) 303,381
------------ ------------ ------------
Cash flows from investing activities:
Investment in direct financing leases.......... (18,252,642) (19,504,543) (26,269,030)
Collections of direct financing leases, net of
finance income earned....................... 8,643,237 10,570,839 17,288,349
Proceeds from sale of direct financing
leases...................................... 42,685,341 62,949,333 30,141,526
Purchases of equipment for sale or lease....... (41,157,570) (63,487,814) (32,808,302)
Proceeds from sales of equipment............... 73,865 1,089,232 1,046,517
------------ ------------ ------------
Net cash used in investing activities............ (8,007,769) (8,382,953) (10,600,940)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from notes payable.................... 18,086,338 23,547,934 30,793,837
Repayment of notes payable..................... (8,662,017) (14,208,176) (20,752,988)
Cash distributions to stockholders............. -- (55,608) --
------------ ------------ ------------
Net cash provided by financing activities........ 9,424,321 9,284,150 10,040,849
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents.................................... (507,949) 546,398 (256,710)
Cash and cash equivalents at beginning of year... 910,852 402,903 949,301
------------ ------------ ------------
Cash and cash equivalents at end of year......... $ 402,903 $ 949,301 $ 692,591
============ ============ ============
Supplemental disclosures of cash flow
information:
Cash paid for:
Interest.................................... $ 2,095,036 $ 3,091,608 $ 3,765,914
State income taxes.......................... 5,831 5,671 10,489
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-143
<PAGE> 256
THE WALDEN ASSET GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--NATURE OF OPERATIONS
The Walden Asset Group, Inc. (the "Company") is a Massachusetts
corporation, established in February 1991, under Subchapter S of the Internal
Revenue Code. Its principal business activity is the structuring of lease
financing to assist customers in the acquisition of capital and production
equipment, and computer hardware and peripherals.
The Company operates from locations in Wellesley, MA, Delmar, NY,
Northfield, OH and Norwalk, CT. Lessees are located in 15 states, and financing
is provided through a variety of lease structures.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 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. While management believes that the estimates and
related assumptions used in the preparation of these financial statements are
appropriate, actual results could differ from those estimates. Estimates are
made in the assessment of collectibility of receivables and direct financing
leases, recovery of residual values of leased equipment and depreciation.
Cash and cash equivalents. For purposes of the Statement of Cash Flows,
the Company considers all highly liquid instruments with an original maturity of
three months or less to be cash equivalents. The Company maintains cash balances
at financial institutions which, at times, are in excess of federally insured
limits.
Accounts receivable. Accounts receivable primarily consists of lease
payments receivable from lessees on operating leases and remarketing fees
receivable.
Direct financing leases. The Company invests in leases classified as
direct financing leases. The Company's net investment in direct financing leases
includes the gross rentals receivable, estimates of residual values and unearned
finance income. Unearned finance income represents the excess of the total
receivable plus the estimated residual value over the cost of equipment
acquired. Revenue from direct financing leases is recognized over the lease term
on the interest method which results in a level rate of return on the net
investment in the lease. Management does not consider initial direct costs
related to leasing activities material for capitalization; accordingly, such
costs are charged to operations in the period incurred.
At the inception of the lease, management uses available evidence and
historical experience to estimate the residual value at the end of the lease
term. Estimated residual values not guaranteed by lessees are reviewed annually
and adjusted to reflect declines in current market value.
The Company has, from time-to-time, sold selected direct financing leases.
The Company follows Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." The difference between the sales price and the net investment
in direct financing leases is recognized as a gain or loss. For such
transactions prior to January 1, 1997, the Company followed Statement of
Financial Accounting Standards No. 77, "Reporting by Transferors for Transfers
of Receivables with Recourse." The difference between the sales price and the
net receivable is recognized as a gain or loss.
Operating leases. All lease transactions not qualifying as direct
financing are classified as operating leases. Revenue is recognized over the
minimum term of operating leases on a straight-line basis. Equipment under
operating leases is depreciated to its estimated residual value on a
straight-line basis over five years.
Equipment acquired to fulfill leasing commitments. Computer and other
equipment acquired to fulfill leasing commitments represents cost of equipment
purchased pursuant to firm leasing commitments which will be delivered to
lessees in the near term.
F-144
<PAGE> 257
THE WALDEN ASSET GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income taxes. The Company has elected S Corporation status under the
Internal Revenue Code. As an S Corporation, the Company generally is not subject
to federal income taxes since the revenues and expenses of the Company are
included in the tax returns of the individual stockholders. The Company is
directly liable for state income and franchise taxes in certain jurisdictions.
There are differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities primarily related to direct
financing leases. At December 31, 1997, the Company's net assets for financial
reporting purposes exceeds the tax basis by approximately $3,064,000. In
connection with the proposed merger with UniCapital Corporation, as discussed in
Note 8, the Company's S Corporation election will terminate and the tax effect
of the net difference between the book and tax bases of net assets at that date
will be recorded in the financial statements.
The unaudited pro forma income tax information included in the Statement of
Operations is presented in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," as if the Company had been
subject to federal and state income taxes for all periods presented.
Fair value of financial instruments. The carrying value of the Company's
financial instruments, including cash, accounts receivable, and accounts payable
approximated fair value because of the short maturity of these instruments. The
carrying value of notes payable approximated fair value based upon comparability
of market rates for similar instruments.
NOTE 3--RELATED PARTY TRANSACTIONS
The Company periodically sells, for cash, its rights under certain
remarketing contracts to Walden Asset Associates, a New York partnership. The
Company and its three stockholders have equal ownership interests in the
partnership. Proceeds generated by the partnership from remarketing activities
are used to fund the key man life insurance policies on the Company's
stockholders. During 1997, remarketing income of $10,000 was recorded from these
transactions. There was no such activity in 1995 or 1996.
NOTE 4--LEASING TRANSACTIONS
Direct financing leases. Direct financing leases consist principally of
capital equipment (such as forklifts), media production and telecommunications
equipment, computer hardware and peripherals, and furniture with terms ranging
to five years. The components of the Company's net investment in direct
financing leases at December 31, 1996 and 1997 were as follows:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Future minimum rentals receivable........................ $49,671,546 $59,343,233
Estimated unguaranteed residual values................... 2,128,692 2,929,140
Unearned finance income.................................. (8,997,974) (10,489,428)
----------- -----------
42,802,264 51,782,945
Allowance for lease losses............................... (70,000) (70,000)
----------- -----------
$42,732,264 $51,712,945
=========== ===========
</TABLE>
F-145
<PAGE> 258
THE WALDEN ASSET GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 4--LEASING TRANSACTIONS (CONTINUED)
Future minimum rentals receivable represent earning assets held by the
Company which are generally due in monthly installments over original periods
ranging to 60 months. Future minimum rentals receivable under direct financing
leases were as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1998........................................................ $20,146,886
1999........................................................ 19,091,982
2000........................................................ 10,602,420
2001........................................................ 6,508,917
2002........................................................ 2,264,911
Thereafter.................................................. 728,117
-----------
$59,343,233
===========
</TABLE>
Operating leases. The Company is the lessor of various types of equipment
under operating leases, principally forklifts, production equipment and
furniture. The components of equipment on operating leases at December 31, 1996
and 1997 were as follows:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Cost............................................... $1,699,370 $4,508,668
Accumulated depreciation........................... (199,089) (841,324)
---------- ----------
$1,500,281 $3,667,344
========== ==========
</TABLE>
Future minimum rentals receivable under noncancelable operating leases were
as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1998........................................................ $1,337,735
1999........................................................ 922,376
2000........................................................ 433,734
2001........................................................ 223,173
2002........................................................ 119,326
----------
$3,036,344
==========
</TABLE>
Significant lease terms. The Company's lease agreements provide that the
lessee pay taxes, insurance and maintenance costs. Lease agreements generally
provide for penalty provisions in the event of early termination.
Significant concentrations. The Company's significant customers comprising
greater than 10% of the balance of the Company's net investment in direct
financing leases at December 31, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
CUSTOMER 1996 1997
-------- ---- ----
<S> <C> <C>
A........................................................... 12% 13%
B........................................................... 13 12
C........................................................... 12 11
D........................................................... -- 11
</TABLE>
F-146
<PAGE> 259
THE WALDEN ASSET GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 5--NOTES PAYABLE
Notes payable at December 31, 1996 and 1997 consisted of the following:
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Line of credit................................... $ 66,373 $ --
Recourse installment notes collateralized by
equipment and lease payments................... 735,759 560,642
Nonrecourse installment notes collateralized by
equipment and lease payments................... 43,149,230 53,431,569
----------- -----------
$43,951,362 $53,992,211
=========== ===========
</TABLE>
Line of credit. The Company has a $4,000,000 line of credit with a
financial institution, due on demand, all of which was unused at December 31,
1997. The line of credit agreement expires in May 1998, is collateralized by a
security interest in the assets of the Company, and is guaranteed jointly and
severally by the stockholders. Interest on the facility is computed at the prime
lending rate adjusted for a margin depending on the credit of the underlying
lessee. The maximum amounts outstanding were $2,837,095 and $1,050,000 during
the years ended December 31, 1996 and 1997, respectively.
The terms of the line of credit agreement contain restrictions, including
net worth requirements, profitability metrics and certain ratios. As of December
31, 1996 and 1997, the Company was in compliance with the restrictive covenants.
Recourse notes payable. At December 31, 1996 and 1997, the Company had
$735,759 and $560,642, respectively, in notes payable to a financial
institution, due in monthly installments of principal and interest at rates
ranging from 8.39% to 9.35%, through August 2000. The recourse notes are
collateralized by certain leases.
The aggregate annual maturities of the notes as of December 31, 1997 were
as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1998........................................................ $431,239
1999........................................................ 121,173
2000........................................................ 8,230
--------
$560,642
========
</TABLE>
Nonrecourse installment notes. The Company has certain borrowings
outstanding from financial institutions on a nonrecourse basis. Under these
borrowings, the Company assigns all lease payments due under the applicable
leases and grants a security interest in the leased equipment to the lending
institution. In the event of a default by a lessee, the lender has a security
interest in the lease payments and underlying equipment, but has no further
recourse against the Company. Interest on these borrowings is fixed at the time
of the advance to the Company, with rates primarily ranging from 6% to 9% at
December 31, 1996 and 1997, respectively. The aggregate annual maturities of
these notes were as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1998........................................................ $17,490,756
1999........................................................ 17,488,682
2000........................................................ 10,046,264
2001........................................................ 3,930,158
2002........................................................ 4,475,709
-----------
$53,431,569
===========
</TABLE>
F-147
<PAGE> 260
THE WALDEN ASSET GROUP, INC.
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 6--COMMITMENTS
The Company leases office space under noncancelable operating leases and
other month-to-month arrangements. Rent expense was $33,705, $35,027, and
$63,620 for the years ended December 31, 1995, 1996 and 1997, respectively.
Future minimum rental payments under the lease agreements were as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
1998........................................................ $ 49,775
1999........................................................ 40,800
2000........................................................ 40,800
2001........................................................ 40,800
2002........................................................ 13,600
--------
$185,775
========
</TABLE>
NOTE 7--EMPLOYEE BENEFIT PLAN
The Company maintains a profit sharing plan covering all full-time
employees of the Company. Contributions to the plan are made at the discretion
of the Board of Directors. In addition, the Company maintains a defined
contribution pension plan under which contributions are based upon a percentage
of compensation for all eligible employees meeting certain service requirements.
The Company contributed $100,000, $103,000 and $111,000 to the plans for the
years ended December 31, 1995, 1996 and 1997, respectively.
NOTE 8--SUBSEQUENT EVENT (UNAUDITED)
The Company and its stockholders have entered into a merger agreement with
UniCapital Corporation ("UniCapital") pursuant to which UniCapital will acquire
all outstanding shares of the Company's common stock in exchange for cash and
common stock of UniCapital, concurrent with the consummation of the initial
public offering of the common stock of UniCapital.
F-148
<PAGE> 261
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth fees payable to the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc., and other
estimated expenses expected to be incurred in connection with issuance and
distribution of securities being registered. All such fees and expenses shall be
paid by the Company.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $ 185,850
NASD Fee.................................................... 30,500
New York Stock Exchange Application Fee..................... *
Printing and Engraving Expenses............................. *
Accounting Fees and Expenses................................ *
Legal Fees and Expenses..................................... *
Directors and Officers Insurance............................ *
Transfer Agent Fees and Expenses............................ *
Miscellaneous............................................... *
----------
Total..................................................... $8,000,000
==========
</TABLE>
- ---------------
* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware General Corporation Law (the "DGCL")
permits a corporation, in its certificate of incorporation, to limit or
eliminate, subject to certain statutory limitations, the liability of directors
to the corporation or its stockholders for monetary damages for breaches of
fiduciary duty, except for liability (a) for any breach of the director's duty
of loyalty to the corporation or its stockholders, (b) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the DGCL, or (d) for any transaction from which
the director derived an improper personal benefit. Article 10 of the
registrant's Certificate of Incorporation provides that the personal liability
of directors of the registrant is eliminated to the fullest extent permitted by
Section 102(b)(7) of the DGCL.
Under Section 145 of the DGCL, a corporation has the power to indemnify
directors and officers under certain prescribed circumstances and subject to
certain limitations against certain costs and expenses, including attorneys'
fees actually and reasonably incurred in connection with any action, suit or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of being a director or officer of the
corporation if it is determined that the director or officer acted in accordance
with the applicable standard of conduct set forth in such statutory provision.
Article 7 of the registrant's Bylaws provides that the registrant will indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that he is or was a director, officer, employee or agent of the registrant,
or is or was serving at the request of the registrant as a director, officer,
employee or agent of another entity, against certain liabilities, costs and
expenses. Article 7 further permits the registrant to maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
registrant, or is or was serving at the request of the registrant as a director,
officer, employee or agent of another entity, against any liability asserted
against such person and incurred by such person in any such capacity or arising
out of his status as such, whether or not the registrant would have the power to
indemnify such person against such liability under the DGCL. The registrant
expects to maintain directors' and officers' liability insurance.
Under Section 7(b) of the Underwriting Agreement, the Underwriters are
obligated, under certain circumstances, to indemnify directors and officers of
the registrant against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act"). Reference is made to
the form of Underwriting Agreement filed as Exhibit 1.01 hereto.
II-1
<PAGE> 262
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since October 9, 1997, the registrant has sold the following shares of its
common stock. Each transaction was intended to be exempt from registration in
reliance upon Section 4(2) of the Securities Act.
<TABLE>
<CAPTION>
NO. OF SHARES OF AGGREGATE
PURCHASER DATE COMMON STOCK CONSIDERATION
--------- ------------------ ---------------- -------------
<S> <C> <C> <C>
Robert J. New................................... October 9, 1997 2,000,000 $100,000
Jonathan J. Ledecky............................. October 9, 1997 2,000,000 $100,000
The Kalb Family Trust........................... October 20, 1997 250,000 $ 12,500
Jonathan New.................................... October 20, 1997 100,000 $ 5,000
Steven Frederick................................ October 20, 1997 25,000 $ 1,250
Mark Liebman.................................... October 20, 1997 25,000 $ 1,250
Vincent W. Eades................................ October 20, 1997 75,000 $ 3,750
Edward J. Mathias............................... October 20, 1997 25,000 $ 1,250
Ellen Mathias................................... October 20, 1997 50,000 $ 2,500
John A. Quelch.................................. October 20, 1997 75,000 $ 3,750
H. Steve Swink.................................. October 20, 1997 100,000 $ 5,000
Allan Yarkin.................................... October 20, 1997 70,000 $ 3,500
The Genna Rachel Yarkin Trust................... October 20, 1997 25,000 $ 1,250
The Sophie Yarkin Trust......................... October 20, 1997 25,000 $ 1,250
Henry W. Boyce, III............................. October 20, 1997 5,000 $ 250
Bruce E. Kropschot.............................. November 13, 1997 250,000 $ 12,500
Bruce E. Kropschot.............................. December 14, 1997 150,000 $ 75,000
Michael Kalb.................................... December 31, 1997 26,250 $ 78,750
Gaston Friedlander Irrevocable Trust............ January 3, 1998 183,750 $551,250
Martin Kalb..................................... January 16, 1998 75,000 $225,000
Michael Rabinovitch............................. January 16, 1998 26,250 $ 78,750
Jonathan New.................................... January 18, 1998 52,500 $157,500
Bruce E. Kropschot.............................. January 23, 1998 20,000 $ 60,000
Steven E. Hirsch................................ January 24, 1998 315,000 $945,000
The G&T Trust................................... January 25, 1998 210,000 $630,000
Jonathan J. Ledecky............................. January 29, 1998 75,000 $225,000
Robert J. New................................... January 29, 1998 75,000 $225,000
Martin Kalb..................................... January 29, 1998 75,000 $225,000
Jonathan New.................................... January 29, 1998 25,000 $ 75,000
The G&T Trust................................... January 29, 1998 10,000 $ 30,000
Bruce E. Kropschot.............................. February 2, 1998 50,000 $150,000
Theodore J. Rogenski............................ February 4, 1998 200,000 $600,000
Robert Seaman................................... February 5, 1998 50,000 $150,000
Robert J. New................................... February 17, 1998 40,000 $400,000
Jonathan J. Ledecky............................. February 17, 1998 40,000 $400,000
</TABLE>
In addition, as of February 14, 1998 and February 16, 1998, the registrant
entered into 10 Amended and Restated Agreements and Plans of Contribution and
two Amended and Restated Purchase Agreements, pursuant to which the registrant
has agreed to issue an aggregate of 13,334,064 shares of its common stock and to
grant to certain employees of the entities that are parties to such agreements
(other than the registrant) options to purchase that number of shares of its
common stock as equals 6.25% of the consideration (as set forth in such
agreements) to be paid in such transactions. Each such transaction was intended
to be exempt from registration in reliance upon Section 4(2) of the Securities
Act.
II-2
<PAGE> 263
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following exhibits are filed as part of this registration
statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1.01 Form of Underwriting Agreement++
2.01 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, ACR Acquisition Corp.,
American Capital Resources, Inc. and Michael B. Pandolfelli
and Gerald P. Ennella, dated as of February 14, 1998.*
2.02 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, BCG Acquisition Corp.,
Boulder Capital Group, Inc., Roy L. Burger and Carl M.
Williams, dated as of February 14, 1998.*
2.03 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, CLA Acquisition Corp.,
Stuart L. Cauff, The 1998 Cauff Family Trust, Wayne D.
Lippman and The 1998 Lippman Family Trust, dated as of
February 14, 1998.*
2.04 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, JCS Acquisition Corp.,
Jacom Computer Services, Inc. and John L. Alfano, dated as
of February 16, 1998.*
2.05 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, KSTN Acquisition Corp.,
K.L.C., Inc. and Alan H. Kaufman and Edgar W. Lee, dated as
of February 14, 1998.*
2.06 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, XFC Acquisition Corp.,
Matrix Funding Corporation, and Richard C. Emery, J. Robert
Bonnemort, David A. DiCesaris, Jack S. and Judith F. Emery,
Trustees for Jack S. Emery Trust, Alvin W. and Lila E.
Emery, Trustees for Alvin W. and Lila E. Emery Trust, JSE
Partners, Ltd., a Utah Limited Partnership, LBK Limited
Partnership, a Utah Limited Partnership, John I. Kasteler,
Jr., Craig C. Mortensen, Shanni Staker, and Christian F.
Emery, dated as of February 14, 1998.*
2.07 Amended and Restated Purchase Agreement by and among
UniCapital Corporation, MFA Acquisition Corp., Merrimac
Financial Associates and Allan Z. Gilbert, Jordan L. Shatz
and Mark F. Cignoli, dated as of February 14, 1998.*
2.08 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, MCMG Acquisition Corp.,
Municipal Capital Markets Group, Inc., and the Stockholders
Named Therein, dated as of February 14, 1998.*
2.09 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, NSJ Acquisition Corp., W.
Jeptha Thornton, Richard C. Giles, Samuel J. Thornton, The
1998 Giles Family Trust and The 1998 Thornton Family Trust,
dated as of February 11, 1998.*
2.10 Amended and Restated Purchase Agreement by and among
UniCapital Corporation, PFSC Acquisition Corp., PFSC Limited
Acquisition Corp., Portfolio Financial Servicing Company,
L.P. and The Partners Listed on the Signature Page, dated as
of February 14, 1998.*
2.11 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, VC Acquisition Corp.,
Varilease Corporation, and the Stockholders of such company
listed on the Signature Page, dated as of February 14,
1998.*
2.12 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, WAG Acquisition Corp., The
Walden Asset Group, Inc. and the Stockholders of such
company listed on the Signature Page, dated as of February
14, 1998.*
3.01 Amended and Restated Certificate of Incorporation of
UniCapital Corporation.*
3.02 Bylaws of UniCapital Corporation.*
5.01 Opinion of Morgan, Lewis & Bockius LLP as to the legality of
the securities being registered.++
10.01 Consulting Agreement between UniCapital Corporation and
Theodore J. Rogenski, effective as of February 4, 1998.*
- -----------------------------------------------------------------------
* Filed herewith.
++ To be filed by amendment.
</TABLE>
II-3
<PAGE> 264
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.02 Form of Employment Agreement between UniCapital Corporation
and Bruce E. Kropschot.*
10.03 Consulting Agreement between UniCapital Corporation and
Martin Kalb, effective as of November 1, 1997.*
10.04 Consulting Agreement between UniCapital Corporation and
Steven E. Hirsch, effective as of January 24, 1998.++
10.05 UniCapital Corporation 1997 Executive Non-Qualified Stock
Option Plan.*
10.06 Line of Credit Agreement between UniCapital and Northern
Trust Bank due on July 31, 1998.++
10.07 UniCapital Corporation 1998 Long-Term Incentive Plan.*
10.08 UniCapital Corporation 1998 Non-Employee Directors' Stock
Plan.*
10.09 UniCapital Corporation 1998 Employee Stock Purchase Plan.*
10.10 Form of Employment Agreement between UniCapital Corporation
and Robert J. New.*
10.11 Form of Employment Agreement between UniCapital Corporation
and Jonathan New.*
23.01 Consent of Price Waterhouse LLP.*
23.02 Consent of KPMG Peat Marwick LLP.*
23.03 Consent of Ernst & Young LLP.*
23.04 Consent of BDO Seidman, LLP.*
23.05 Consent of Coopers & Lybrand L.L.P.*
23.06 Consent of Tanner + Co.*
23.07 Consent of Grant Thornton LLP.*
23.08 Consent of Arthur Andersen LLP.*
23.09 Consent of KPMG Peat Marwick LLP.*
23.10 Consent of Morgan, Lewis & Bockius LLP (to be included in
opinion filed as Exhibit 5.01).++
24.01 Power of Attorney (previously filed as to certain
individuals, and included on signature page of this
registration statement as to one further individual).*
27.01 Financial Data Schedule.**
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
++ To be filed by amendment.
(b) Financial statement schedules have been omitted because they are
inapplicable, are not required under applicable provisions of Regulation S-X, or
the information that would otherwise be included in such schedules is contained
in the registrant's financial statements or accompanying notes.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
<PAGE> 265
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registrations
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-5
<PAGE> 266
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Miami, State of Florida,
on April 2, 1998.
UNICAPITAL CORPORATION
By: /s/ ROBERT J. NEW
------------------------------------
Robert J. New
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/s/ ROBERT J. NEW Chairman and Chief Executive Officer April 2, 1998
- ----------------------------------------- and a Director (Principal Executive
Robert J. New Officer)
/s/ JONATHAN NEW Chief Financial Officer (Principal April 2, 1998
- ----------------------------------------- Financial and Accounting Officer)
Jonathan New
* Director April 2, 1998
- -----------------------------------------
Bruce E. Kropschot
* Director April 2, 1998
- -----------------------------------------
Jonathan J. Ledecky
* Director April 2, 1998
- -----------------------------------------
Vincent W. Eades
* Director April 2, 1998
- -----------------------------------------
John A. Quelch
*By /s/ ROBERT J. NEW
-------------------------------------
Robert J. New, Attorney-in-fact,
pursuant to powers of attorney
previously
filed as part of this registration
statement.
</TABLE>
KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears
below constitutes and appoints Robert J. New and Jonathan J. Ledecky, and each
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his person's name, place and
stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) to this registration statement and additional
registration statements pursuant to Rule 462(b) of the Securities Act of 1933,
as amended, and to file the same, with all exhibits thereto, and all other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto each said attorney-in-fact and agent full power and authority to
do and perform each and every act in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them or their or his
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
<TABLE>
<S> <C> <C>
/s/ ANTHONY K. SHRIVER Director April 2, 1998
- --------------------------------------------
Anthony K. Shriver
</TABLE>
II-6
<PAGE> 267
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGES
- ------- ----------- --------------
<S> <C> <C>
1.01 Form of Underwriting Agreement++
2.01 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, ACR Acquisition Corp.,
American Capital Resources, Inc. and Michael B. Pandolfelli
and Gerald P. Ennella, dated as of February 14, 1998.*
2.02 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, BCG Acquisition Corp.,
Boulder Capital Group, Inc., Roy L. Burger and Carl M.
Williams, dated as of February 14, 1998.*
2.03 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, CLA Acquisition Corp.,
Stuart L. Cauff, The 1998 Cauff Family Trust, Wayne D.
Lippman and The 1998 Lippman Family Trust, dated as of
February 14, 1998.*
2.04 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, JCS Acquisition Corp.,
Jacom Computer Services, Inc. and John L. Alfano, dated as
of February 16, 1998.*
2.05 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, KSTN Acquisition Corp.,
K.L.C., Inc. and Alan H. Kaufman and Edgar W. Lee, dated as
of February 14, 1998.*
2.06 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, XFC Acquisition Corp.,
Matrix Funding Corporation, and Richard C. Emery, J. Robert
Bonnemort, David A. DiCesaris, Jack S. and Judith F. Emery,
Trustees for Jack S. Emery Trust, Alvin W. and Lila E.
Emery, Trustees for Alvin W. and Lila E. Emery Trust, JSE
Partners, Ltd., a Utah Limited Partnership, LBK Limited
Partnership, a Utah Limited Partnership, John I. Kasteler,
Jr., Craig C. Mortensen, Shanni Staker, and Christian F.
Emery, dated as of February 14, 1998.*
2.07 Amended and Restated Purchase Agreement by and among
UniCapital Corporation, MFA Acquisition Corp., Merrimac
Financial Associates and Allan Z. Gilbert, Jordan L. Shatz
and Mark F. Cignoli, dated as of February 14, 1998.*
2.08 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, MCMG Acquisition Corp.,
Municipal Capital Markets Group, Inc., and the Stockholders
Named Therein, dated as of February 14, 1998.*
2.09 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, NSJ Acquisition Corp., W.
Jeptha Thornton, Richard C. Giles, Samuel J. Thornton, The
1998 Giles Family Trust and The 1998 Thornton Family Trust,
dated as of February 14, 1998.*
2.10 Amended and Restated Purchase Agreement by and among
UniCapital Corporation, PFSC Acquisition Corp., PFSC Limited
Acquisition Corp., Portfolio Financial Servicing Company,
L.P. and the Partners Listed on the Signature Page, dated as
of February 14, 1998.*
2.11 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, VC Acquisition Corp.,
Varilease Corporation, and the Stockholders of such company
listed on the Signature Page, dated as of February 14,
1998.*
2.12 Amended and Restated Agreement and Plan of Contribution by
and among UniCapital Corporation, WAG Acquisition Corp., The
Walden Asset Group, Inc. and the Stockholders of such
company listed on the Signature Page, dated as of February
14, 1998.*
</TABLE>
<PAGE> 268
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGES
- ------- ----------- --------------
<S> <C> <C>
3.01 Amended and Restated Certificate of Incorporation of
UniCapital Corporation.*
3.02 Bylaws of UniCapital Corporation.*
5.01 Opinion of Morgan, Lewis & Bockius LLP as to the legality of
the securities being registered.++
10.01 Consulting Agreement between UniCapital Corporation and
Theodore J. Rogenski, effective as of February 4, 1998.*
10.02 Form of Employment Agreement between UniCapital Corporation
and Bruce E. Kropschot.*
10.03 Consulting Agreement between UniCapital Corporation and
Martin Kalb, effective as of November 1, 1997.*
10.04 Consulting Agreement between UniCapital Corporation and
Steven E. Hirsch, effective as of January 24, 1998.++
10.05 UniCapital Corporation 1997 Executive Non-Qualified Stock
Option Plan.*
10.06 Line of Credit Agreement between UniCapital and Northern
Trust Bank due on July 31, 1998.++
10.07 UniCapital Corporation 1998 Long-Term Incentive Plan.*
10.08 UniCapital Corporation 1998 Non-Employee Directors' Stock
Plan.*
10.09 UniCapital Corporation 1998 Employee Stock Purchase Plan.*
10.10 Form of Employment Agreement between UniCapital Corporation
and Robert J. New.*
10.11 Form of Employment Agreement between UniCapital Corporation
and Johathan New.*
23.01 Consent of Price Waterhouse LLP.*
23.02 Consent of KPMG Peat Marwick LLP.*
23.03 Consent of Ernst & Young LLP.*
23.04 Consent of BDO Seidman, LLP.*
23.05 Consent of Coopers & Lybrand L.L.P.*
23.06 Consent of Tanner + Co.*
23.07 Consent of Grant Thornton LLP.*
23.08 Consent of Arthur Andersen LLP.*
23.09 Consent of KPMG Peat Marwick LLP.*
23.10 Consent of Morgan, Lewis & Bockius LLP (to be included in
opinion filed as Exhibit 5.01).++
24.01 Power of Attorney (previously filed as to certain
individuals, and included on signature page of this
registration statement as to one further individual).*
27.01 Financial Data Schedule.**
</TABLE>
- ---------------
* Filed herewith.
** Previously filed.
++ To be filed by amendment.
<PAGE> 1
Exhibit 2.01
- --------------------------------------------------------------------------------
AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION
by and among
UNICAPITAL CORPORATION
(a Delaware corporation),
ACR ACQUISITION CORP.
(a New York corporation),
AMERICAN CAPITAL RESOURCES, INC.
and
MICHAEL B. PANDOLFELLI
and
GERALD P. ENNELLA
Dated as of February 14, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. THE MERGER...............................................................................................2
1.1 Delivery and Filing of Certificate of Merger....................................................2
1.2 Merger Effective Date...........................................................................2
1.3 Certificate of Incorporation, Bylaws, Board of Directors and
Officers of the Surviving Corporation...........................................................2
2. MERGER CONSIDERATION.....................................................................................3
2.1 Conversion of Capital Stock; Merger Consideration...............................................3
2.2 Exchange Procedures.............................................................................3
2.3 No Fractional Shares............................................................................4
2.4 INTENTIONALLY OMITTED...........................................................................4
2.5 Earn-Out Consideration..........................................................................4
3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS'
REPRESENTATIVE...........................................................................................5
3.1 Computation.....................................................................................5
3.2 Disputes........................................................................................6
3.3 Stockholders' Representative....................................................................7
4. INDEMNITY ESCROW.........................................................................................7
4.1 Creation of Escrow..............................................................................7
4.2 Duration and Terms..............................................................................8
4.3 Voting and Investment...........................................................................8
5. CLOSING; MERGER EFFECTIVE DATE...........................................................................9
5.1 Closing.........................................................................................9
5.2 Closing Date; Location..........................................................................9
5.3 Effectiveness of Merger.........................................................................9
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS...........................................................9
6.1 Corporate Existence.............................................................................9
6.2 Corporate Power; Authorization; Enforceable Obligations........................................10
6.3 Authority; Ownership; Other Entities...........................................................10
6.4 Validity of Contemplated Transactions..........................................................10
6.5 Capital Stock of Company.......................................................................11
6.6 Transactions in Capital Stock..................................................................11
6.7 No Bonus Shares................................................................................11
6.8 Subsidiaries...................................................................................11
6.9 Predecessor Status; etc........................................................................11
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
6.10 Spin-offs by Company...........................................................................12
6.11 No Third Party Options.........................................................................12
6.12 Financial Statements...........................................................................12
6.13 Liabilities and Obligations....................................................................13
6.14 Accounts and Notes Receivable..................................................................14
6.15 Permits........................................................................................14
6.16 Real and Personal Property.....................................................................14
6.17 Contracts and Commitments......................................................................15
6.18 Government Contracts...........................................................................17
6.19 Title to Real Property.........................................................................17
6.20 Insurance......................................................................................17
6.21 Employees......................................................................................17
6.22 Employee Benefit Plans and Arrangements........................................................18
6.23 Compliance with Law; Authorizations............................................................21
6.24 Transactions With Affiliates...................................................................22
6.25 Litigation.....................................................................................22
6.26 Restrictions...................................................................................22
6.27 Taxes..........................................................................................23
6.28 Intellectual Property Matters..................................................................24
6.29 Completeness; No Violations....................................................................25
6.30 Existing Condition.............................................................................25
6.31 Deposit Accounts; Powers of Attorney...........................................................27
6.32 Books of Account...............................................................................27
6.33 Environmental Matters..........................................................................27
6.34 No Illegal Payments............................................................................28
6.35 Leases.........................................................................................28
6.36 Lease Funding..................................................................................31
6.37 Disclosure.....................................................................................31
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO.................................................................32
7.1 Corporate Existence............................................................................32
7.2 UniCapital Stock...............................................................................32
7.3 Corporate Power and Authorization..............................................................32
7.4 No Conflicts...................................................................................33
7.5 Capitalization of UniCapital...................................................................33
7.6 Compliance with Law; Authorizations............................................................33
7.7 Transactions With Affiliates...................................................................34
7.8 Litigation.....................................................................................34
7.9 Miscellaneous..................................................................................34
7.10 Registration Rights............................................................................34
8. COVENANTS OF STOCKHOLDERS AND COMPANY...................................................................34
8.1 Business in the Ordinary Course................................................................35
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
8.2 Existing Condition.............................................................................35
8.3 Maintenance of Properties and Assets...........................................................35
8.4 Employees and Business Relations...............................................................35
8.5 Maintenance of Insurance.......................................................................35
8.6 Compliance with Laws, etc......................................................................35
8.7 Conduct of Business............................................................................35
8.8 Access.........................................................................................36
8.9 Press Releases and Other Communications........................................................36
8.10 Exclusivity....................................................................................36
8.11 Third Party Approvals..........................................................................37
8.12 Notice to Bargaining Agents....................................................................37
8.13 Notification of Certain Matters................................................................37
8.14 Amendment of Schedules.........................................................................38
8.15 Repayment of Indebtedness; Cancellation of Contracts;
Pre-Closing Distributions......................................................................38
8.16 Delivery of Information........................................................................39
8.17 Release of Guarantees..........................................................................39
8.18 HSR Filing.....................................................................................39
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
COMPANY AND THE STOCKHOLDERS............................................................................39
9.1 Representations and Warranties; Performance of Obligations.....................................39
9.2 Employment Agreements..........................................................................39
9.3 Opinion of Counsel.............................................................................39
9.4 Registration Statement.........................................................................40
9.5 HSR Act........................................................................................40
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF
UNICAPITAL AND NEWCO....................................................................................40
10.1 Representations and Warranties; Performance of Obligations.....................................40
10.2 No Litigation..................................................................................41
10.3 Examination of Financial Statements............................................................41
10.4 No Material Adverse Change.....................................................................41
10.5 Regulatory Review..............................................................................41
10.6 Stockholders' Release..........................................................................41
10.7 Employment Agreements..........................................................................41
10.8 Opinion of Counsel.............................................................................42
10.9 Consents and Approvals.........................................................................43
10.10 Good Standing Certificates.....................................................................43
10.11 Registration Statement.........................................................................43
10.12 Repayment of Indebtedness; Pre-Closing Distributions;
Cancellation of Contracts......................................................................43
10.13 HSR Act........................................................................................43
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C> <C>
10.14 Release of Guarantees..........................................................................44
11. COVENANTS OF UNICAPITAL.................................................................................44
11.1 INTENTIONALLY OMITTED..........................................................................44
11.2 UniCapital Stock Options.......................................................................44
11.3 Information Filing.............................................................................44
11.4 Indebtedness...................................................................................44
11.5 Stub Period Tax Return.........................................................................44
11.6 HSR Filing.....................................................................................45
12. INDEMNIFICATION; SURVIVAL...............................................................................45
12.1 General Indemnification by Stockholders........................................................45
12.2 Specific Indemnification by Stockholders.......................................................46
12.3 Indemnification by UniCapital and Newco........................................................46
12.4 Third Party Claims.............................................................................47
12.5 Limitations on Indemnification.................................................................48
12.6 Survival of Representations and Warranties.....................................................49
13. TERMINATION OF AGREEMENT................................................................................50
13.1 Termination by UniCapital......................................................................50
13.2 Termination by the Stockholders................................................................50
13.3 Automatic Termination..........................................................................51
13.4 Liquidated Damages.............................................................................51
14. NONCOMPETITION AND NONSOLICITATION......................................................................51
14.1 Noncompetition.................................................................................51
14.2 Damages........................................................................................52
14.3 Reasonable Restraint...........................................................................52
14.4 Severability; Reformation......................................................................52
14.5 Independent Covenant...........................................................................53
14.6 Materiality....................................................................................53
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................53
15.1 Stockholders...................................................................................53
15.2 UniCapital.....................................................................................54
15.3 Damages........................................................................................54
16. LOCK-UP AGREEMENTS......................................................................................54
16.1 Agreement......................................................................................54
16.2 Intended Third Party Beneficiaries.............................................................55
</TABLE>
iv
<PAGE> 6
<TABLE>
<S> <C> <C>
17. FEDERAL SECURITIES ACT AND CONTRACTUAL
RESTRICTIONS ON UNICAPITAL STOCK........................................................................55
17.1 Investment Intent..............................................................................55
17.2 Compliance with Law............................................................................55
17.3 Economic Risk; Sophistication..................................................................55
17.4 Information Supplied...........................................................................55
18. SECURITIES LEGENDS......................................................................................56
19. GENERAL.................................................................................................57
19.1 Cooperation....................................................................................57
19.2 Successors and Assigns.........................................................................57
19.3 Entire Agreement...............................................................................57
19.4 Counterparts...................................................................................57
19.5 Brokers and Agents.............................................................................57
19.6 Expenses.......................................................................................58
19.7 Notices........................................................................................58
19.8 Governing Law..................................................................................59
19.9 Exercise of Rights and Remedies................................................................59
19.10 Time...........................................................................................59
19.11 Reformation and Severability...................................................................59
19.12 Remedies Cumulative............................................................................60
19.13 Captions.......................................................................................60
20. DEFINITIONS.............................................................................................60
</TABLE>
v
<PAGE> 7
AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION (the
"Agreement") is made as of the 14th day of February, 1998, between UNICAPITAL
CORPORATION, a Delaware corporation ("UniCapital"); ACR ACQUISITION CORP., a New
York corporation ("Newco"); AMERICAN CAPITAL RESOURCES, INC. (the "Company") and
Michael B. Pandolfelli and Gerald P. Ennella (collectively referred to as the
"Stockholders"), who are all of the stockholders of the Company. Certain
capitalized terms used herein are defined in Article 20 hereof.
WHEREAS, UniCapital was incorporated on October 9, 1997 under the laws
of the State of Delaware for the purpose of acquiring a number of equipment
leasing businesses in different locations; and
WHEREAS, UniCapital intends to undertake an initial public offering of
its Common Stock (the "IPO") and in connection therewith intends to file a
Registration Statement on Form S-1 with the Securities and Exchange Commission
within 90 days of the execution and delivery of this Agreement; and
WHEREAS, Newco was duly incorporated on January 26, 1998 under the laws
of the State of New York solely for the purpose of completing this transaction,
and is a wholly-owned subsidiary of UniCapital; and
WHEREAS, the Company is a corporation organized and existing under the
laws of the state of New York; and
WHEREAS, the respective Boards of Directors of UniCapital, Newco and
the Company deem it advisable and in the best interests of such corporations and
their respective stockholders that Newco merge with and into the Company
pursuant to this Agreement and the applicable pro visions of the laws of the
respective states of incorporation of Newco and the Company (such transaction
being herein called the "Merger" and the Company, Newco and UniCapital being
hereinafter collectively referred to as the "Constituent Corporations"); and
WHEREAS, the parties hereto intend that the transactions contemplated
in this Agreement constitute part of a single transaction involving the
simultaneous consummation of a number of similar agreements between UniCapital
and certain other corporations and partnerships and the IPO and that such single
transaction (the "Unified Transaction") shall fall within the provisions of
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code");
<PAGE> 8
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 DELIVERY AND FILING OF CERTIFICATE OF MERGER. The Constituent
Corporations will cause a Certificate of Merger, in substantially the form of
Annex I attached hereto with such changes therein as may be required by
applicable state laws (the "Certificate of Merger"), to be executed and
delivered to the Secretary of State of the state of incorporation of Newco and
the Company on or before the Merger Effective Date.
1.2 MERGER EFFECTIVE DATE. The "Merger Effective Date" shall be the
date specified in Section 5.3. At the Merger Effective Date, the Certificate of
Merger shall either be filed for immediate effectiveness with the Secretary of
State of the applicable state of incorporation of Newco and the Company or
become effective if filed with such Secretary of State prior to such date. On
the Merger Effective Date upon the effectiveness of the Merger, Newco shall be
merged with and into the Company, in accordance with the Certificate of Merger,
and the separate existence of Newco shall cease. The Company, as the entity
surviving the Merger, is hereinafter sometimes referred to as the "Surviving
Corporation." The Merger shall have the effects specified in the laws of the
state of incorporation of the Surviving Corporation.
1.3 CERTIFICATE OF INCORPORATION, BYLAWS, BOARD OF DIRECTORS AND
OFFICERS OF THE SURVIVING CORPORATION. Upon the effectiveness of the Merger:
(a) the Certificate of Incorporation of the Company, as
amended and restated in the Certificate of Merger shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law;
(b) the Bylaws of the Company shall be the Bylaws of the
Surviving Corporation and shall remain so until thereafter duly amended;
(c) the Surviving Corporation shall have a Board of
Directors consisting of one member, who shall be Robert New commencing upon the
effectiveness of the Merger and who shall hold office subject to the laws of the
state of incorporation and the Certificate of Incorporation and Bylaws of the
Surviving Corporation; and
(d) the officers of the Company immediately prior to the
Merger Effective Date shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, each of such officers to serve,
subject to the provisions of the Certificate of Incorporation and Bylaws of the
Surviving Corporation, until such officer's successor is elected and qualified;
provided, that the Chairman of the Board (if any), the Treasurer and the
Secretary of the Company shall not succeed to the corresponding offices of the
Surviving Corporation, but
2
<PAGE> 9
instead (i) the sole director of the Surviving Corporation shall be the Chairman
of the Board of the Surviving Corporation, (ii) the Treasurer of Newco shall be
the Treasurer of the Surviving Corporation and (iii) the Secretary of Newco
shall be the Secretary of the Surviving Corporation.
2. MERGER CONSIDERATION
2.1 CONVERSION OF CAPITAL STOCK; MERGER CONSIDERATION.
(a) Upon the effectiveness of the Merger, all of the shares
of capital stock of the Company issued and outstanding immediately prior to the
effectiveness of the Merger ("Company Stock") shall, by virtue of the Merger and
without any action on the part of the holder thereof but subject to the
effectiveness of the Merger, automatically be converted into the right to
receive, without interest,
(i) an aggregate of $20,350,000 in cash,
(ii) an aggregate of 1,071,053 shares of common
stock, par value $.001 per share, of UniCapital ("UniCapital Stock") (the
consideration referred to in clauses (i) and (ii), all of which is to be
distributed to the Stockholders on the Merger Effective Date in the percentages
set forth on Annex II, subject to Article 4 hereof, is referred to in this
Agreement as the "Effective Date Consideration"); provided, however, in the
event that the aggregate value (based on the IPO price of the UniCapital Stock)
of the 1,071,053 shares of UniCapital Stock is less than $16,065,795, then
UniCapital shall issue additional shares to the Stockholders so that the
aggregate value of the shares of UniCapital Stock equals $16,065,795 (with
appropriate adjustment to the cash and stock components of the Effective Date
Consideration so as to eliminate fractional shares), and
(iii) the Earn-Out Consideration as described in
Section 2.5, to be distributed to the Stockholders within five (5) business days
after the date the portion of the Earn-Out Consideration with respect to a given
calendar year (if any) is finally determined pursuant to Section 2.5 in the
percentages set forth on Annex II.
(b) Upon the effectiveness of the Merger, each share of
capital stock of Newco issued and outstanding immediately prior to the
effectiveness of the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, automatically be converted into one
fully paid and non-assessable share of common stock of the Surviving
Corporation, all of which converted common stock shall constitute all of the
outstanding shares of capital stock of the Surviving Corporation immediately
after the effectiveness of the Merger.
(c) The Effective Date Consideration and the Earn-Out
Consideration are referred to together in this Agreement as the "Merger
Consideration."
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2.2 EXCHANGE PROCEDURES. On the Merger Effective Date, upon surrender
to UniCapital of certificates representing all of the outstanding shares of
Company Stock ("Certificates"), each Stockholder shall, subject to Article 4, be
entitled to receive, in exchange therefor, such Stockholder's pro rata share of
the cash portion of the Effective Date Consideration, calculated in accordance
with Annex II, and, a certificate representing that number of whole shares of
UniCapital Stock which such holder has the right to receive in respect of the
Certificates surrendered, calculated in accordance with Annex II, and each
Certificate so surrendered shall forthwith be canceled. On the Merger Effective
Date or as promptly thereafter as is practicable, and subject to and in
accordance with the provisions of Article 4, UniCapital shall cause to be
distributed to the Indemnity Escrow Agent (as defined in Article 4) a
certificate or certificates representing the Escrow Shares (as defined in
Article 4), which shall be registered in the name of the Indemnity Escrow Agent
as nominee for the Stockholders and shall be held in accordance with the
provisions of Article 4 and the Indemnity Escrow Agreement referred to therein.
2.3 NO FRACTIONAL SHARES. Notwithstanding any other provision of this
Article 2, no fractional shares of UniCapital Stock will be issued and the
Stockholders shall instead each receive in lieu of any such fractional share a
cash payment in lieu thereof in an amount equal to such fraction multiplied by
the IPO Price.
2.4 INTENTIONALLY OMITTED.
2.5 EARN-OUT CONSIDERATION.
(a) If the earnings before taxes (the "EBT") of the Company
for the twelve months ending December 31, 1998, increased by amounts in respect
of those items set forth on Schedule 2.5 that affected net income during the
period from January 1, 1998 through the Closing Date and decreased by the amount
of UniCapital corporate overhead allocated to the Company for the period from
the Closing Date through December 31, 1998 (the "Adjusted 1998 EBT"), exceeds
the EBT of the Company for the twelve months ending December 31, 1997, inclusive
of the add-backs set forth in Schedule 2.5 ("Adjusted 1997 EBT"), then the
Stockholders shall be entitled to receive one-half of the difference between the
Adjusted 1998 EBT and the Adjusted 1997 EBT.
(b) If the EBT of the Company for the year ending December
31, 1999, adjusted for the amount of UniCapital corporate overhead allocated to
the Company ("Adjusted 1999 EBT", and together with Adjusted 1997 EBT and
Adjusted 1998 EBT, the "Company EBT"), exceeds the greater of Adjusted 1998 EBT
and Adjusted 1997 EBT, then the Stockholders shall be entitled to receive
one-half of the difference between (i) the Adjusted 1999 EBT and (ii) the
greater of the Adjusted 1998 EBT and the Adjusted 1997 EBT.
(c) The EBT of the Company for the years ending December 31,
1998 and December 31, 1999 shall be computed using generally accepted accounting
principles and
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practices as applied in the audited financial statements of the Company included
in the Registration Statement. The allocation of UniCapital overhead shall be
made on a pro rata basis applied consistently among UniCapital subsidiaries. To
the extent gain-on-sale treatment was accorded any Lease, whether in the
add-backs set forth on Schedule 2.5 or in any year, income from the payment
stream on such Lease shall not be included in the EBT of the Company for any
subsequent year.
(d) The amounts (if any) that the Stockholders become
entitled to receive pursuant to Sections 2.5(a) and/or 2.5(b) are referred to
herein as the "Earn-Out Consideration." The Earn-Out Consideration shall be paid
one-half in cash and one-half in shares of UniCapital Stock, valued at the
average of the closing prices per share of UniCapital Stock for the 20 trading
days preceding December 31 of the year to which the portion of Earn-Out
Consideration in question applies.
(e) Company EBT shall be determined within forty-five days
following December 31 of such year.
(f) Notwithstanding anything in this Section 2.5 to the
contrary, if the Stockholders dispute the determination of Company EBT, then the
Stockholders' Representative shall notify UniCapital in writing of such dispute
and specify the amount thereof within 20 business days after notification of the
determination of Company EBT for any year. If UniCapital and the Stockholders'
Representative cannot resolve any such dispute which would affect the Earn-Out
Consideration, then such dispute shall be resolved by an Independent Accounting
Firm (as defined in Section 3.2). The Independent Accounting Firm shall be
directed to consider only those agreements, contracts, commitments or other
documents (or summaries thereof) that were either (i) delivered or made
available to Price Waterhouse LLP in connection with the transactions
contemplated hereby, or (ii) reviewed by Price Waterhouse LLP during the course
of determining Company EBT. The determination of the Independent Accounting Firm
shall be made as promptly as practicable and shall be final and binding upon the
parties, absent manifest error which error may only be corrected by such
Independent Accounting Firm. The costs of the Independent Accounting Firm shall
be borne by the party (either UniCapital or the Stockholders as a group) whose
determination of Company EBT was further from the determination of the
Independent Accounting Firm. Pending resolution of any such dispute by the
Independent Accounting Firm only the amount of the Earn-Out Consideration as
determined by Price Waterhouse LLP shall be paid by UniCapital. Once Company EBT
is finally determined, the Earn-Out Consideration attendant thereto not
previously paid, if any, shall be paid in accordance with this Section 2.5 ;
provided that in the event the Stockholders' determination of EBT was closer to
the determination of the Independent Accounting Firm than UniCapital's
determination of EBT, the Stockholders shall receive such Earn-Out Consideration
plus interest which shall accrue at the rate of 10% per annum on any such
Earn-Out Consideration that is resolved in the Stockholders favor from the date
the Earn-Out Consideration was first payable and the date on which the Earn-Out
Consideration is received by the Stockholders.
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<PAGE> 12
(g) Any Earn-Out Consideration paid by UniCapital shall be
treated as additional consideration paid by UniCapital for the shares of Company
Stock.
3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS' REPRESENTATIVE
3.1 COMPUTATION. As soon as practicable, but in any event within 30
days after the Closing, UniCapital shall engage Price Waterhouse LLP to prepare,
in accordance with generally accepted accounting principles ("GAAP") and
consistent with previous practice, a balance sheet of the Company (the "Closing
Date Balance Sheet") as of the end of business on the day prior to the Closing
Date (as defined in Section 5). If the aggregate stockholders' equity of the
Company as shown on the Closing Date Balance Sheet is less than the aggregate
stockholders' equity as shown on the balance sheet of the Company at October 31,
1997 as reviewed by KPMG Peat Marwick LLP, then, subject to Section 3.2,
commencing 20 business days after delivery of the Closing Date Balance Sheet to
UniCapital, the aggregate Merger Consideration shall be adjusted downward
dollar-for-dollar in the amount of any such deficiency (the "Net Worth
Deficiency"). Upon adjustment, if any, of the Merger Consideration in accordance
with the foregoing, UniCapital shall be entitled to recover from the Escrow
Property pursuant to Article 4 that portion of the Net Worth Deficiency which
does not exceed one-half of the balance of the Escrow Property. For any amount
by which any Net Worth Deficiency exceeds one-half of the initial balance of the
Escrow Property, such portion of the Net Worth Deficiency shall be paid by the
Stockholders not later than the 25th business day after the delivery of the
Closing Date Balance Sheet (or if applicable, not later than the 5th business
day after the final determination of any Disputed Amount in accordance with
Section 3.2). At its sole and exclusive option, and at any time after such 25th
business day (or if applicable, not later than the fifth business day after the
final determination of any Disputed Amount in accordance with Section 3.2),
UniCapital shall be entitled to recover from the Escrow Property pursuant to
Article 4 all or any portion of the amount of the Net Worth Deficiency not paid
by the Stockholders as required by this Article 3.
3.2 DISPUTES. Notwithstanding anything in this Article 3 to the
contrary, if there is any Net Worth Deficiency and the Stockholders dispute any
item contained on the Closing Date Balance Sheet, then the Stockholders'
Representative shall notify UniCapital in writing of each disputed item
(collectively, the "Disputed Amounts") and specify the amount thereof in dispute
within 20 business days after the delivery of the Closing Date Balance Sheet to
the Stockholders. If UniCapital and the Stockholders' Representative cannot
resolve any such dispute relating to the Net Worth Deficiency, then such dispute
shall be resolved by an independent nationally recognized accounting firm which
is reasonably acceptable to UniCapital and the Stockholders' Representative (the
"Independent Accounting Firm"). The determination of the Independent Accounting
Firm shall be made as promptly as practical and shall be final and binding on
the parties, absent manifest error which error may only be corrected by such
Independent Accounting Firm. Any expenses relating to the engagement of the
Independent Accounting Firm shall be allocated between UniCapital and the
Stockholders so that the Stockholders' aggregate
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<PAGE> 13
share of such costs shall bear the same proportion to the total costs that the
Disputed Amounts unsuccessfully contested by the Stockholders' Representative
(as finally determined by the Independent Accounting Firm) bear to the total of
the Disputed Amounts so submitted to the Independent Accounting Firm. Pending
resolution of any such dispute by the Independent Accounting Firm, no such
Disputed Amount shall be due to UniCapital. Once any such Disputed Amount is
finally determined to be due to UniCapital, UniCapital may proceed to recover
such amount in the manner set forth in Section 3.1.
3.3 STOCKHOLDERS' REPRESENTATIVE. (a) Each Stockholder, by signing this
Agreement, designates Michael B. Pandolfelli (or, in the event that Michael B.
Pandolfelli is unable or unwilling to serve or resigns, Gerald P. Ennella) to be
such Stockholders' representative for purposes of this Agreement (the
"Stockholders' Representative"). The Stockholders shall be bound by any and all
actions taken by the Stockholders' Representative on their behalf.
(b) UniCapital and Newco shall be entitled to rely upon any
communication or writing given or executed by the Stockholders' Representative.
All communications or writings to be sent to Stockholders pursuant to this
Agreement may be addressed to the Stockholders' Representative and any
communication or writing so sent shall be deemed notice to all of the
Stockholders hereunder. The Stockholders hereby consent and agree that the
Stockholders' Representative is authorized to accept deliveries, including any
notice, on behalf of the Stockholders pursuant hereto.
(c) The Stockholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Stockholder, with full
power in his or her name and on his or her behalf to act according to the terms
of this Agreement in the absolute discretion of the Stockholders'
Representative, and in general to do all things and to perform all acts
including, without limitation, executing and delivering all agreements,
certificates, receipts, instructions and other instruments contemplated by or
deemed advisable in connection with Article 12 of this Agreement. This power of
attorney and all authority hereby conferred is granted subject to and coupled
with the interest of such Stockholder and the other Stockholders hereunder and
in consideration of the mutual covenants and agreements made herein, and shall
be irrevocable and shall not be terminated by any act of any Stockholder, by
operation of law, whether by such Stockholder's death or any other event.
(d) Notwithstanding the foregoing, the Stockholder
Representative shall inform each Stockholder of all notices received, and of all
actions, decisions, notices and exercises of any rights, power or authority
proposed to be done, given or taken by such Stockholder Representative, and
shall act as directed by the Stockholders holding a majority interest in the
Escrow Property (as defined in Section 4.1(b)).
4. INDEMNITY ESCROW
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4.1 CREATION OF ESCROW.
(a) At the Closing, as collateral security for the payment of
any indemnification obligations of the Stockholders pursuant to Sections 12.1
and 12.2 hereof and for the payment of amounts due pursuant to Article 3 hereof,
the following shall be delivered to American Stock Transfer and Trust Company as
indemnity escrow agent (the "Indemnity Escrow Agent"):
(i) ten percent (10%) of the number of shares of
UniCapital Stock issuable to each Stockholder as part of the Effective Date
Consideration in accordance with the percentages set forth on Annex II, rounded
up to the nearest whole share (the "Escrow Shares");
(ii) X shares of UniCapital Stock issuable to
the Stockholders as part of the Effective Date Consideration in accordance with
the percentages set forth on Annex II, rounded up to the nearest whole share
(the "Additional Escrow Shares"), where X shall be equal to 2,500,000 divided by
the IPO Price of UniCapital Stock; and
(iii) ten percent (10%) of the cash portion of
the Effective Date Consideration payable to each Stockholder in accordance with
percentages set forth on Annex II, rounded up to the nearest whole cent (the
"Escrow Cash").
(b) The Escrow Shares, the Additional Escrow Shares and the
Escrow Cash are referred to together as the "Escrow Property." In addition, (i)
the Additional Escrow Shares shall include all cash and non-cash dividends and
other property at any time received or otherwise distributed in respect of or in
exchange for any or all of the Additional Escrow Shares, all securities
hereafter issued in substitution for any of the foregoing, all certificates and
instruments representing or evidencing such securities, all cash and non-cash
proceeds of all of the foregoing property and except as provided in Section 4.3
all rights, titles, interests, privileges and preferences appertaining or
incident to the foregoing property (the "Additional Escrow Property") and (ii)
the Escrow Property shall include all cash and non-cash dividends and other
property at any time received or otherwise distributed in respect of or in
exchange for any or all of the Escrow Property, all securities hereafter issued
in substitution for any of the foregoing, all certificates and instruments
representing or evidencing such securities, all cash and non-cash proceeds of
all of the foregoing property and except as provided in Section 4.3 all rights,
titles, interests, privileges and preferences appertaining or incident to the
foregoing property.
4.2 DURATION AND TERMS. The Escrow Property shall be held and disbursed
by the Indemnity Escrow Agent in accordance with the terms of an Indemnity
Escrow Agreement substantially in the form attached hereto as Annex III. The
Indemnity Escrow Agent shall hold the Escrow Property pursuant to the Indemnity
Escrow Agreement until the later of: (a) the first anniversary of the Merger
Effective Date; or (b) the resolution of any claim for indemnification or
payment that is pending on the first anniversary of the Merger Effective Date,
but only to the extent of the amount of such pending claim; provided, however,
that the Indemnity Escrow
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<PAGE> 15
Agent shall hold the Additional Escrow Property pursuant to the Indemnity Escrow
Agreement until the earlier of: (a) such time as the limitations period has run
for all tax periods ended on or prior to the Merger Effective Date; or (b) a
final and conclusive Closing Agreement has been entered into with the Internal
Revenue Service with respect to all tax periods ended on or prior to the Merger
Effective Date.
4.3 VOTING AND INVESTMENT. The Stockholders shall be entitled to
exercise all voting powers incident to the Escrow Shares AND THE ADDITIONAL
ESCROW SHARES held by the Indemnity Escrow Agent as their nominee, but shall not
be entitled to exercise any investment or dispositive powers over such Escrow
Shares AND ADDITIONAL ESCROW SHARES. The Escrow Cash shall be invested from time
to time by the Indemnity Escrow Agent as provided in the Indemnity Escrow
Agreement.
5. CLOSING; MERGER EFFECTIVE DATE
5.1 CLOSING. Within two business days following the date on which the
underwriting agreement relating to the offer and sale of shares of UniCapital
Stock in the IPO (the "Underwriting Agreement") shall have been executed, the
parties shall take all actions necessary to effect the Merger (other than the
filing with the appropriate state authorities of the Certificate of Merger,
which shall be filed and become effective on the Merger Effective Date) and to
effect the conversion and delivery of shares referred to in Article 2 hereof
(hereinafter referred to as the "Closing"); provided, that such actions shall
not include the actual completion of the Merger or the actual conversion and
delivery of the shares referred to in Article 2 hereof, which actions shall only
be taken on the Merger Effective Date as herein provided.
5.2 CLOSING DATE; LOCATION. The Closing shall take place at the offices
of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178. The date on
which the Closing shall occur shall be referred to as the "Closing Date."
5.3 EFFECTIVENESS OF MERGER. Concurrently with the consummation of the
sale of the shares of UniCapital Stock pursuant to the Underwriting Agreement,
the Merger shall become effective and all transactions contemplated by this
Agreement, including the conversion and delivery of shares and the delivery of a
check or checks in an amount equal to the cash which the Stockholders shall be
entitled to receive pursuant to the Merger referred to in Article 2 hereof,
shall occur and be deemed to be completed. The date on which the Merger is
effected shall be referred to as the "Merger Effective Date."
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
For purposes of this Article 6, each reference to a "Company" shall be
deemed to refer as well to each and all of its Subsidiaries unless the context
otherwise specifically requires. As of
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the date hereof and as of each of the Closing Date and the Merger Effective Date
each Stockholder, jointly and severally, represents and warrants to UniCapital
and Newco as follows:
6.1 CORPORATE EXISTENCE. The Company, and each subsidiary, if any, of
the Company listed on Schedule 6.8 (each, a "Subsidiary"), is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Company and each Subsidiary is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the conduct of its business requires it to be so
qualified, all of which jurisdictions are listed on Schedule 6.1.
6.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
Company has the corporate power, authority and legal right to execute, deliver
and perform this Agreement. The execution, delivery and performance of this
Agreement by the Company have been duly authorized by its Board of Directors and
no further corporate action on the part of the Company or its stockholders is
necessary to authorize this Agreement and the performance of the transactions
contemplated hereby. This Agreement has been, and the other agreements,
documents and instruments required to be delivered by the Company in accordance
with the provisions hereof (the "Company Documents") will be, duly executed and
delivered on behalf of the Company by its duly authorized officers, and this
Agreement constitutes, and the Company Documents when executed and delivered
will constitute, the legal, valid and binding obligations of the Company,
enforceable against it in accordance with their respective terms.
6.3 AUTHORITY; OWNERSHIP; OTHER ENTITIES. Each Stockholder has the full
legal right, power and legal capacity or authority to enter into this Agreement.
Upon the date of this Agreement and immediately prior to the Closing Date, each
Stockholder owns and will own beneficially and of record all of the shares of
capital stock of the Company identified on Annex II as being owned by such
Stockholder. The conversion of Company Stock into UniCapital Stock and cash
pursuant to the provisions of this Agreement will transfer to UniCapital valid
title in the shares of Company Stock owned by such Stockholder, free and clear
of all liens, security interests, pledges, charges, voting trusts, equities,
restrictions, encumbrances and claims of every kind. Neither Stockholder
currently owns, of record or beneficially, or controls, directly or indirectly,
any capital stock, any securities convertible into capital stock or any other
equity interest in any corporation, association or other business entity engaged
in originating, servicing or securitizing leases or other specialty financing
products or services. The entities listed on Schedule 6.3 own no assets and have
not at any time conducted operations.
6.4 VALIDITY OF CONTEMPLATED TRANSACTIONS. The execution, delivery and
performance of this Agreement by the Company and each Stockholder does not and
will not violate, conflict with or result in the breach of any term, condition
or provision of, or require the consent of any other person under (a) any
existing law, ordinance, or governmental rule or regulation to which the Company
or any Stockholder is subject, (b) any judgment, order, writ, injunction, decree
or award of any Governmental Entity which is applicable to the Company or any
Stockholder, (c) the charter documents of the Company or any securities issued
by the
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Company, or (d) except as set forth on Schedule 6.4, any mortgage, indenture,
agreement, contract, commitment, lease, plan, Authorization, or other
instrument, document or understanding, oral or written, to which the Company or
any Stockholder is a party, by which the Company or any Stockholder may have
rights or by which any of the properties or assets of the Company may be bound
or affected, or give any party with rights thereunder the right to terminate,
modify, accelerate or otherwise change the existing rights or obligations of the
Company thereunder. Except for filing the Certificate of Merger with the
Secretary of State and filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and except as aforesaid, no authorization, approval or
consent of, and no registration or filing with, any Governmental Entity is
required in connection with the execution, delivery or performance of this
Agreement by the Company or any Stockholder.
6.5 CAPITAL STOCK OF COMPANY. The authorized capital stock of the
Company consists solely of the shares shown on Schedule 6.5, of which only the
shares shown on such Schedule 6.5 to be issued and outstanding are issued and
outstanding. All of the issued and outstanding shares of the capital stock of
the Company are owned by the Stockholders as set forth on Annex II, and are free
and clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. Schedule 6.5 attached
hereto sets forth the number and class of the authorized capital stock of each
Company Subsidiary and the number of shares of each Company Subsidiary which are
issued and outstanding, all of which shares are owned by the Company indicated
as owning such shares on Schedule 6.5, free and clear of all liens, security
interests, pledges, charges, voting trusts, equities, restrictions, encumbrances
and claims of every kind. All of the issued and outstanding shares of Company
Stock to be outstanding on the Merger Effective Date will have been duly
authorized and validly issued, fully paid and nonassessable, will be owned of
record and beneficially by the Stockholders and in the amounts set forth in
Annex II, and will have been offered, issued, sold and delivered by the Company
in compliance with all applicable state and federal laws concerning the
offering, sale or issuance of securities. None of such shares will have been,
and none of the shares from which they will have derived were, issued in
violation of the preemptive rights of any past or present stockholder, whether
contractual or statutory.
6.6 TRANSACTIONS IN CAPITAL STOCK. Neither the Company nor any Company
Subsidiary has acquired any treasury stock since December 31, 1995. Except as
set forth on Schedule 6.6, no option, warrant, call, conversion right or
commitment of any kind exists which obligates the Company or any Company
Subsidiary to issue any of its authorized but unissued capital stock. The
Company has no obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof.
6.7 NO BONUS SHARES. None of the shares of capital stock of the Company
was, and none of the shares of Company Stock will be, issued pursuant to awards,
grants or bonuses, whether of stock or of options or other rights.
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6.8 SUBSIDIARIES. Schedule 6.8 lists the name of each of Company
Subsidiary. Except as set forth in Schedule 6.8, neither the Company nor any
Company Subsidiary currently owns, of record or beneficially, or controls,
directly or indirectly, any capital stock, any securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity. Except as set forth on Schedule 6.8, neither the Company
nor any Company Subsidiary is, directly or indirectly, a participant in any
joint venture, partnership or other noncorporate entity.
6.9 PREDECESSOR STATUS; ETC. Schedule 6.9 lists all names of all
predecessor companies of the Company and each Company Subsidiary, including the
names of all entities from whom the Company previously acquired assets
representing all or substantially all of the assets of that entity. Except as
set forth on Schedule 6.9, the Company has never been a subsidi ary or division
of another corporation or been a part of an acquisition which was later
rescinded.
6.10 SPIN-OFFS BY COMPANY. Since December 31, 1995, there has not been
any sale or spin-off of significant assets of the Company or any Company
Subsidiary other than in the ordinary course of business.
6.11 NO THIRD PARTY OPTIONS. Except as set forth on Schedule 6.11,
there are no existing agreements, options, commitments or rights with, of or to
any person to acquire any properties, assets or rights of the Company or any
interest therein.
6.12 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.12 are copies
of the following financial statements of the Company:
(a) the balance sheet of the Company at July 31, 1997 (the
"Audited Balance Sheet Date") and July 31, 1996, and the related statements of
income, cash flows and changes in stockholders' equity for the fiscal years then
ended, certified by KPMG Peat Marwick LLP, the Company's independent public
accountants, together with the report of such independent public accountants
thereon (the "Audited Financial Statements"); and
(b) the unaudited balance sheet of the Company at December 31,
1997 (the date shall be referred to as the "Interim Balance Sheet Date" and the
balance sheet as of that date shall be referred to as the "Interim Balance
Sheet") and December 31, 1996, and the related statements of income and cash
flows for the interim periods then ended, reviewed by KPMG Peat Marwick LLP, the
Company's independent public accountants, together with the report of such
independent public accountants therein (the "Unaudited Financial Statements").
(c) the unaudited balance sheet of the Company at October 31,
1997 and October 31, 1996, and the related statements of income and cash flows
for the interim periods then ended, reviewed by KPMG Peat Marwick LLP, the
Company's independent public accountants, together with the report of such
independent public accountants therein (the
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"October 31, 1997 Financial Statements," and together with the Audited Financial
Statements and the Unaudited Financial Statements (the "Financial Statements").
All of the Financial Statements have been prepared in accordance with GAAP
consistently applied throughout the periods involved. All of the balance sheets
included in the Audited Financial Statements, including the related notes,
fairly present the financial position, assets and liabilities (whether accrued,
absolute, contingent or otherwise) of the Company in accordance with GAAP
consistently applied throughout the periods involved at the dates indicated and
such statements of income, cash flows and changes in stockholders' equity fairly
present the results of operations, cash flows and changes in stockholders'
equity of the Company for the periods indicated. The Unaudited Financial
Statements fairly present the financial position of the Company at the dates
indicated, and such statements of income, cash flows and changes in
stockholders' equity fairly present the results of operations, cash flows and
changes in stockholders' equity for the periods indicated, except for normal
recurring year-end adjustments which are not expected to be material in amount
and except for the addition of required footnotes thereto.
6.13 LIABILITIES AND OBLIGATIONS.
(a) Attached hereto as Schedule 6.13 is an accurate list, as
of a date not more than two days prior to the date of this Agreement, of: (i)
all liabilities of the Company which are reflected on the unaudited balance
sheet as of the Interim Balance Sheet Date included in the Unaudited Financial
Statements; (ii) all liabilities incurred thereafter other than in the ordinary
course of business; (iii) all material liabilities incurred thereafter in the
ordinary course of business, excluding liabilities incurred in connection with
Leases (as defined herein) and Lease Documents (as defined herein) in the
ordinary course of business consistent with past practice and the Company's
credit underwriting standards; and (iv) all liabilities (A) incurred as of the
Interim Balance Sheet Date that are not reflected on the unaudited balance sheet
as of the Interim Balance Sheet Date and (B) all liabilities incurred thereafter
that would not have been so reflected had such liabilities been incurred as of
the Interim Balance Sheet Date, excluding liabilities incurred in connection
with Leases and Lease Documents in the ordinary course of business consistent
with past practice and the Company's credit underwriting standards. Each of the
foregoing liabilities that has not heretofore been paid or discharged is so
noted on Schedule 6.13. For purposes of this Agreement, "liabilities" means
liabilities of any kind, character or description, whether accrued, absolute,
secured or unsecured, contingent or otherwise including, but not limited to,
liabilities of any kind, character or description, whether accrued, absolute,
secured or unsecured or otherwise relating to first loss agreements, ultimate
loss agreements, deficiency agreements, residual value or residuary guarantee
agreements or any similar types of arrangements.
(b) For each such liability for which the amount is not fixed
or is contested, Schedule 6.13 shall include a summary description of the
liability, together with copies of all relevant non-privileged documentation
relating thereto, detail of all amounts claimed and any
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other action or relief sought, the names of the claimant and all other parties
to the claim, suit or proceeding, the name of each court or agency before which
such claim, suit or proceeding is pending, the date such claim, suit or
proceeding was instituted, and a best estimate of the maximum amount, if any,
which is likely to become payable with respect to each such liability. If no
estimate is provided, the best estimate shall for purposes of this Agreement be
deemed to be zero. On the Closing Date, the Company shall deliver, and shall
cause its accountants, outside counsel and other representatives or agents to
deliver, copies of all privileged documents related to liabilities as listed on
Schedule 6.13.
(c) All of the liabilities reflected on the unaudited balance
sheet included in the Interim Balance Sheet Date arose only out of or were
incurred only in connection with the conduct of the business of the Company.
Except as set forth on Schedule 6.13 and except for liabilities not required to
be set forth thereon pursuant to Section 6.13(a), the Company has no liabilities
or obligations with respect to its business, whether direct or indirect, matured
or unmatured, absolute, contingent or otherwise, and there is no condition,
situation or set of circumstances which would reasonably be expected to result
in any such liability.
6.14 ACCOUNTS AND NOTES RECEIVABLE. Attached hereto as Schedule 6.14 is
a complete and accurate list, as of a date not more than two days prior to the
date of this Agreement, of the accounts and notes receivable of the Company
(including, without limitation, receivables from and advances to employees and
Stockholders) other than those arising out of Leases (collectively, the
"Accounts Receivable"). Schedule 6.14 includes an aging of all Accounts
Receivable showing amounts due in 30-day aging categories. On the Closing Date,
the Stockholders will deliver to UniCapital a complete and accurate list, as of
a date not more than two days prior to the Closing Date, of the Accounts
Receivable. All Accounts Receivable represent valid obligations arising from
bona fide business transactions in the ordinary course of business consistent
with past practice. The Accounts Receivable are, and as of the Closing Date and
the Merger Effective Date will be, collectible net of any respective reserves
shown on the Company's books and records (which reserves are adequate and
calculated consistent with past practice). Subject in the case of Accounts
Receivable reflected on the Company's balance sheet to such reserves reflected
on such balance sheet, each of the Accounts Receivable will be collected in full
within ninety (90) days after the day on which it first became due and payable.
There is no contest, claim, counterclaim, defense or right of set-off, other
than rebates and returns in the ordinary course of business, under any contract
with any obligor of any Account Receivable relating to the amount or validity of
such Account Receivable. The allowance for collection losses on the Interim
Balance Sheet has been determined in accordance with GAAP consistent with past
practice.
6.15 PERMITS. Each material Permit, together with the name of the
Governmental Entity issuing such Permit is set forth on Schedule 6.15. Such
Permits are valid and in full force and effect and none of such Permits will be
terminated or impaired or become terminable as a result of the transactions
contemplated by this Agreement. Upon consummation of such
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transactions, each Surviving Corporation will have all of the Company's right,
title and interest in the Permits.
6.16 REAL AND PERSONAL PROPERTY. Attached hereto as Schedule 6.16 is an
accurate list, including substantially complete descriptions as of the Interim
Balance Sheet Date, of all the real and personal property (which in the case of
personal property had an original cost in excess of $25,000) owned or leased by
the Company (including its Company Subsidiaries) where the Company is a lessee
or sublessee, including true and correct copies of leases for equipment and
properties on which are situated buildings, warehouses and other structures used
in the operation of the business of the Company (including its Company
Subsidiaries) and including an indication as to which assets were formerly owned
by any Stockholder or affiliate (which term, as used herein, shall have the
meaning ascribed thereto in Rule 144(a)(1) promulgated under the Securities Act
of 1933, as amended (the "Securities Act")) of the Company. Except as set forth
on Schedule 6.16, all of the Company's buildings, leasehold improvements,
structures, facilities, equipment and other material items of tangible property
and assets are in good operating condition and repair, subject to normal wear
and maintenance, are usable in the regular and ordinary course of business and
conform to all applicable laws, ordinances, codes, rules and regulations, and
Authorizations relating to their construction, use and operation. All leases set
forth on Schedule 6.16 have been duly authorized, executed and delivered and
constitute the legal, valid and binding obligations of the Company (or its
Company Subsidiaries) and, to the knowledge of the Stockholders, no other party
to any such lease is in default thereunder and such leases constitute the legal,
valid and binding obligations of such other parties. All fixed assets used by
the Company (including its Company Subsidiaries) in the operation of its
business are either owned by the Company (or its Company Subsidiaries) or leased
under an agreement set forth on Schedule 6.16. The Company and the Stockholders
have heretofore delivered to UniCapital copies of all title reports and title
insurance policies received or held by each Company (including its Company
Subsidiaries). The Company and the Stockholders have indicated on Schedule 6.16
a summary description of all plans or projects involving the opening of new
operations, expansion of any existing operations or the acquisition of any real
property or existing business to which management of the Company (or its Company
Subsidiaries) has devoted any significant effort or expenditure in the two-year
period prior to the date of this Agreement which, if pursued by the Company (or
its Company Subsidiaries) would require additional expenditures of significant
efforts or capital.
6.17 CONTRACTS AND COMMITMENTS. Schedule 6.17 sets forth an accurate,
correct and complete list of all agreements, contracts, commitments,
arrangements and understandings, written or oral, including all amendments and
supplements thereto, of the Company other than Leases and Lease Documents (the
"Contracts"), to which the Company is a party or is bound, or by which any of
its assets are bound, and which involve any:
(a) agreement, contract, commitment, arrangement or
understanding with any present or former employee or consultant or for the
employment of any person, including any consultant;
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(b) agreement, contract, commitment, arrangement or
understanding for the future purchase of, or payment for, supplies or products,
or for the performance of services by a third party involving in any one case
$25,000 or more;
(c) agreement, contract, commitment, arrangement or
understanding to sell or supply products or to perform services involving in any
one case $25,000 or more;
(d) agreement, contract, commitment, arrangement or
understanding containing minimum requirements or "take or pay" provisions;
(e) agreement, contract, commitment, arrangement or
understanding not otherwise listed on Schedule 6.17 and continuing over a period
of more than six months from the date hereof or exceeding $25,000 in value;
(f) distribution, dealer, representative or sales agency
agreement, contract, commitment, arrangement or understanding;
(g) agreement, contract, commitment, arrangement or
understanding containing a provision to indemnify any person or entity or assume
any tax, environmental or other liability;
(h) agreement, contract, commitment, arrangement or
understanding with federal, state, local, regulatory or other governmental
entities;
(i) note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement or other contract or commitment for the
borrowing or lending of money or agreement or arrangement for a line of credit
or guarantee, pledge or undertaking of the indebtedness of any other person;
(j) agreement, contract, commitment, arrangement or
understanding for any charitable or political contribution;
(k) agreement, contract, commitment, arrangement or
understanding for any capital expenditure or leasehold improvement in excess of
$25,000;
(l) agreement, contract, commitment, arrangement or
understanding limiting or restraining the Company or any successor thereto, or
to the knowledge of the Company and each Stockholder, any employee of the
Company or any successor thereto, from engaging or competing in any manner or in
any business;
(m) license, franchise, distributorship or other agreement
which relates in whole or in part to any software, patent, trademark, trade
name, service mark or copyright or to any ideas, technical assistance or other
know-how of or used by the Company;
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(n) agreement, contract, commitment, arrangement or
understanding to which the Company, on the one hand, and any affiliate, officer,
director or stockholder of the Company, on the other hand, are parties; or
(o) material agreement, contract, commitment, arrangement or
understanding not made in the ordinary course of business.
Each of the Contracts listed on Schedule 6.17, or not required to be listed
therein because of the amount thereof, is valid and enforceable in accordance
with its terms; the Company is, and to the knowledge of the Company and each
Stockholder, all other parties thereto are, in compliance with the provisions
thereof. The Company is not, and to the knowledge of the Company and each
Stockholder, no other party thereto is, in default in the performance,
observance or fulfillment of any material obligation, covenant or condition
contained therein; and no event has occurred which with or without the giving of
notice or lapse of time, or both, would constitute a default thereunder. None of
the rights of the Company under any Contract will be impaired by the
consummation of the transactions contemplated hereby, and all such rights will
be enforceable by the Surviving Corporation after the Merger Effective Date
without the consent or agreement of any other party. The Company has delivered
accurate and complete copies of each Contract to UniCapital. Except as set forth
on Schedule 6.17, no Contract obligates any party to obtain any consent in
connection with the transactions contemplated hereby.
6.18 GOVERNMENT CONTRACTS. The Company is not, and since 1992 has never
been, a party to any contract with any Governmental Entity subject to price
redetermination or renegotiation.
6.19 TITLE TO REAL PROPERTY. The Company has good and insurable title
to all real property owned and used in its business, subject to no mortgage,
pledge, lien, conditional sales agreement, encumbrance or charge, except for:
(a) liens, if any, reflected on Schedules 6.13 and 6.16 as
securing specified liabilities (with respect to which no material default
exists);
(b) liens for current taxes and assessments not yet due or in
default;
(c) easements for utilities serving the property only; and
(d) easements, covenants and restrictions and other exceptions
to title shown of record in the offices of the county clerks in which the
properties, assets and leasehold estates are located which, in UniCapital's sole
judgment, do not adversely affect UniCapital's intended use of such properties.
6.20 INSURANCE. The assets, properties and operations of the Company
are insured under various policies of general liability and other forms of
insurance, all of which are described
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in Schedule 6.20, which discloses for each policy the risks insured against,
coverage limits, deductible amounts, all outstanding claims thereunder, and
whether the terms of such policy provide for retrospective premium adjustments.
All such policies are in full force and effect in accordance with their terms,
no notice of cancellation has been received, and there is no existing default or
event which, with the giving of notice or lapse of time or both, would
constitute a default thereunder. Such policies are in amounts which, in relation
to the business and assets of the Company, are consistent with the normal or
customary industry practice and all premiums due to date have been paid in full.
The Company has not been refused any insurance, nor has the Company's coverage
been limited, by any insurance carrier to which it has applied for insurance or
with which it has carried insurance during the past five years. Schedule 6.20
also contains a true and complete description of all outstanding bonds and other
surety arrangements issued or entered into in connection with the business,
assets and liabilities of the Company.
6.21 EMPLOYEES. Schedule 6.21 contains the following:
(a) a list of all employees of the Company (including name,
title and position);
(b) each such employee's length of service; and
(c) the compensation (including terms of payment, bonuses,
commissions and deferred compensation, as well as any benefits) of each such
employee.
Except as disclosed on Schedule 6.21: (i) there have not been in the past five
years and, to the knowledge of the Company and the Stockholders, there are not
pending, any labor disputes, work stoppages, requests for representation,
pickets or work slow-downs due to labor disagreements; (ii) there are and have
been no unresolved violations of any Laws of any Governmental Entity respecting
the employment of any employees; (iii) there is no unfair labor practice, charge
or complaint pending, unresolved or, to the knowledge of the Company and the
Stockholders, threatened before the National Labor Relations Board or similar
body in any foreign country; (iv) there is no employment handbook, personnel
policy manual, or similar document that creates prospective employment rights or
obligations; (v) the employees of the Company are not covered by any collective
bargaining agreement; (vi) the Company has provided or will timely provide prior
to Closing all notices required by law to be given prior to Closing to all
local, state, federal or national labor, wage-payment, equal employment
opportunity, unemployment insurance and related agencies; (vii) the Company has
paid or properly accrued in the ordinary course of business all wages and
compensation due to employees, including all vacations or vacation pay, holidays
or holiday pay, sick days or sick pay, and bonuses; and (viii) the transactions
contemplated by this Agreement will not create liability under any Laws of any
Governmental Entity respecting reductions in force or the impact on employees on
plant closing or sales of businesses. All employees of the Company are legally
able to work in the United States.
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6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. Schedule 6.22 sets forth
a complete and accurate list of each Benefit Plan covering any present or former
officers, employees or directors of the Company. "Benefit Plan" means each
"employee pension benefit plan" (as defined in Section 3(2) of ERISA,
hereinafter a "Pension Plan"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA, hereinafter a "Welfare Plan") and each other plan or
arrangement (written or oral) relating to deferred compensation, bonus,
performance compensation, stock purchase, stock option, stock appreciation,
severance, vacation, sick leave, holiday pay, fringe benefits, personnel policy,
reimbursement program, incentive, insurance, welfare or similar plan, program,
policy or arrangement, in each case maintained or contributed to, or required to
be maintained or contributed to, by the Company or its affiliates or any other
person or entity that, together with the Company, is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code (each, together with
the Company, a "Commonly Controlled Entity") for the benefit of any present or
former officer, employee or director. The Company has no intent or commitment to
create any additional Benefit Plan or amend any Benefit Plan so as to increase
benefits thereunder. The Company has not created any Benefit Plan or declared or
paid any bonus compensation in contemplation of the transactions contemplated by
this Agreement. A current, accurate and complete copy of each Benefit Plan has
been made available to UniCapital. Except as disclosed on Schedule 6.22:
(a) each Benefit Plan is in substantial compliance with all
reporting, disclosure and other requirements of ERISA applicable to such Benefit
Plan;
(b) each Pension Plan which is intended to be qualified under
Section 401(a) of the Code, has been determined by the Internal Revenue Service
to be so qualified and, to the knowledge of the Company and the Stockholders, no
condition exists that would adversely affect any such determination;
(c) neither any Benefit Plan, nor the Company, nor any
Commonly Controlled Entity, nor any trustee or agent has been or is presently
engaged in any prohibited transactions as defined by Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not applicable which could
subject the Company to the tax or penalty imposed by Section 4975 of the Code or
Section 502 of ERISA;
(d) there is no event or condition existing which could be
deemed a "reportable event" (within the meaning of Section 4043 of ERISA) with
respect to which the thirty-day notice requirement has not been waived; to the
knowledge of the Company and the Stockholders, no condition exists which could
subject the Company to a penalty under Section 4071 of ERISA;
(e) neither the Company nor any Commonly Controlled Entity is
or has ever been party to any "multi-employer plan," as that term is defined in
Section 3(37) of ERISA;
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(f) true and correct copies of the most recent annual report
on Form 5500 and any attached schedules for each Benefit Plan (if any such
report was required by applicable law) and a true and correct copy of the most
recent determination letter issued by the Internal Revenue Service for each
Pension Plan have been provided to UniCapital;
(g) with respect to each Benefit Plan, there are no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
pending or, to the knowledge of the Company and the Stockholders, threatened
against any Benefit Plan, the Company, any Commonly Controlled Entity or any
trustee or agent of any Benefit Plan; and
(h) with respect to each Benefit Plan to which the Company or
any Commonly Controlled Entity is a party which constitutes a group health plan
subject to Section 4980B of the Code, each such Benefit Plan substantially
complies, and in each case has substantially complied, with all applicable
requirements of Section 4980B of the Code.
(i) Except as set forth in Schedule 6.22:
(i) there is no outstanding liability (except
for premiums due) under Title IV of ERISA with respect to any Pension Plan;
(ii) neither the Pension Benefit Guaranty
Corporation nor the Company nor any Commonly Controlled Entity has instituted
proceedings to terminate any Pension Plan and the Pension Benefit Guaranty
Corporation has not informed the Company of its intent to institute proceedings
to terminate any Pension Plan;
(iii) full payment has been made of all amounts
which the Company or any Commonly Controlled Entity was required to have paid as
a contribution to the Pension Plans as of the last day of the most recent fiscal
year of each of the Pension Plans ended prior to the date of this Agreement, and
none of the Pension Plans has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of each such Pension
Plan ended prior to the date of this Agreement;
(iv) to the knowledge of the Company and the
Stockholders, the actuarial assumptions utilized, where appropriate, in
connection with determining the funding of each Pension Plan which is a defined
benefit pension plan (as set forth in the actuarial report for such Pension
Plan) are reasonable. Copies of the most recent actuarial reports have been
furnished to UniCapital. Based on such actuarial assumptions, as of the Interim
Balance Sheet Date, the fair market value of the assets or properties held under
each such Pension Plan exceeds the actuarially determined present value of all
accrued benefits of such Pension Plan (whether or not vested) determined on an
ongoing Pension Plan basis;
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(v) each of the Benefit Plans is, and its
administration is and has been during the six-year period preceding the date of
this Agreement, in substantial compliance with, and the Company has not received
any claim or notice that any such Benefit Plan is not in compliance with, all
applicable laws and orders and prohibited transaction exemptions, including
without limitation, to the extent applicable, the requirements of ERISA;
(vi) neither the Company nor any Commonly
Controlled Entity is in default in performing any of its contractual obligations
under any of the Benefit Plans or any related trust agreement or insurance
contract;
(vii) there are no material outstanding
liabilities of any Benefit Plan other than liabilities for benefits to be paid
to participants in the Benefit Plans and their beneficiaries in accordance with
the terms of the Benefit Plans;
(viii) each Benefit Plan may be amended or
modified by the Company or Commonly Controlled Entity at any time without
liability except under any defined pension benefit plan;
(ix) no Benefit Plan other than a Pension Plan,
retiree medical plan or severance plan provides benefits to any individual after
termination of employment;
(x) the consummation of the transactions
contemplated by this Agreement will not (in and of itself): (A) entitle any
employee of the Company to severance pay, unemployment compensation or any other
payment; (B) accelerate the time of payment or vesting, or increase the amount
of compensation due to any such employee; (C) result in any liability under
Title IV of ERISA; (D) result in any prohibited transaction described in Section
406 of ERISA or Section 4975 of the Code for which an exemption is not
available; or (E) result (either alone or in conjunction with any other event)
in the payment or series of payments by the Company or any of its affiliates to
any person of an "excess parachute payment" within the meaning of Section 280G
of the Code;
(xi) with respect to each Benefit Plan that is
funded wholly or partially through an insurance policy, all premiums required to
have been paid to date under the insurance policy have been paid, all premiums
required to be paid under the insurance policy through the Merger Effective Date
will have been paid on or before the Merger Effective Date and, as of the Merger
Effective Date, there will be no liability of the Company or any Commonly
Controlled Entity under any insurance policy or ancillary agreement with respect
to such insurance policy in the nature of a retroactive rate adjustment, loss
sharing arrangement or other actual or contingent liability arising wholly or
partially out of events occurring prior to the Merger Effective Date;
(xii) (A) each Benefit Plan that constitutes a
Welfare Plan, and for which contributions are claimed by the Company or any
Commonly Controlled Entity as
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deductions under any provision of the Code, is in material compliance with all
applicable requirements pertaining to such deduction;
(B) with respect to any welfare benefit fund
(within the meaning of Section 419 of the Code) related to a welfare benefit
plan, there is no disqualified benefit (within the meaning of Section 4976(b) of
the Code) that would result in the imposition of a tax under Section 4976(a) of
the Code; and
(C) all welfare benefit funds intended to be
exempt from tax under Section 501(a) of the Code have been determined by the
Internal Revenue Service to be so exempt and no event or condition exists which
would adversely affect any such determination; and
(xiii) all benefit plans outside of the United
States, if any (the "Foreign Plans"), are in compliance with all applicable laws
and regulations and have been operated in accordance with the plans' respective
terms. There are no material unfunded liabilities under or in respect of the
Foreign Plans, and all contributions or other payments required to be made to or
in respect of the Foreign Plans prior to the Merger Effective Date have been
made or will be made prior to the Merger Effective Date.
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS. The Company has complied with
each, and is not in violation of any, law, ordinance, or governmental or
regulatory rule or regulation, whether federal, state, local or foreign
("Regulations"), to which such Company's business, operations, assets or
properties is subject. The Company owns, holds, possesses or lawfully uses in
the operation of its business all franchises, licenses, permits, easements,
rights, applications, filings, registrations and other authorizations
("Authorizations") which are in any manner necessary for it to conduct its
business as now or previously conducted or for the ownership and use of the
assets owned or used by it in the conduct of its business, free and clear of all
liens, charges, restrictions and encumbrances and in compliance with all
Regulations. All such Authorizations are listed and described in Schedule 6.23.
The Company is not in default, nor has the Company received any notice of any
claim of default, with respect to any such Authorization. All such
Authorizations are renewable by their terms or in the ordinary course of
business without the need to comply with any special qualification procedures or
to pay any amounts other than routine filing fees. None of such Authorizations
will be adversely affected by consummation of the transactions contemplated
hereby. No Stockholder and no director, officer, employee or former employee of
the Company or any affiliates of the Company, or any other person, firm or
corporation, owns or has any proprietary, financial or other interest (direct or
indirect) in any Authorization which the Company owns, possesses or uses in the
operation of its business as now or previously conducted.
6.24 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
6.24, no Stockholder and no director, officer or employee of the Company, or any
member of his or her immediate family or any other of its, his or her
affiliates, owns or has a 5% or more ownership
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interest in any corporation or other entity that is or was during the last three
years a party to, or in any property which is or was during the last three years
the subject of, any contract, agreement or understanding, business arrangement
or relationship with the Company.
6.25 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of the Company and the Stockholders, threatened against the Company
which relates to the transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 6.25, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of the Company and the Stockholders, threatened
against the Company or which relates to the Company:
(c) Neither the Company nor any Stockholder knows of any
reasonably likely basis for any litigation, arbitration, investigation or
proceeding referred to in Sections 6.25(a) or (b).
(d) Except as set forth on Schedule 6.25, the Company is not a
party to or subject to the provisions of any judgment, order, writ, injunction,
decree or award of any court, arbitrator or governmental or regulatory official,
body or authority.
6.26 RESTRICTIONS. The Company is not a party to any indenture,
agreement, contract, commitment, lease, plan, license, permit, authorization or
other instrument, document or understanding, oral or written, or subject to any
charter or other corporate restriction or any judgment, order, writ, injunction,
decree or award which materially adversely affects or materially restricts or,
so far as the Company or any of the Stockholders can now reasonably foresee, may
in the future materially adversely affect or materially restrict, the business,
operations, assets, properties, prospects or condition (financial or otherwise)
of the Company after consummation of the transactions contemplated hereby.
6.27 TAXES. All federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by the Company (the
"Tax Returns") with respect to any federal, state, local or foreign taxes,
assessments, interest, penalties, deficiencies, fees and other governmental
charges or impositions (including without limitation all income tax,
unemployment compensation, social security, payroll, sales and use, excise,
privilege, property, ad valorem, franchise, license, school and any other tax or
similar governmental charge or imposition under laws of the United States or any
state or municipal or political subdivision thereof or any foreign country or
political subdivision thereof) (singly, a "Tax", and collectively, the "Taxes")
have been timely filed with the appropriate governmental agencies in all
jurisdictions in which such Tax Returns are required to be filed, and all such
Tax Returns properly reflect the liabilities of the Company for Taxes for the
periods, property or events covered thereby. All Taxes, including without
limitation those which are called for by the Tax
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Returns, required to be paid, withheld or accrued by the Company and any
deficiency assessments, penalties and interest have been timely paid, withheld
or accrued. The accruals for Taxes contained in the Interim Balance Sheet are
adequate to cover the Tax liabilities of the Company as of that date and include
adequate provision for all deferred Taxes, and nothing has occurred subsequent
to that date to make any of such accruals inadequate. The Company's Tax basis in
its assets for purposes of determining its future amortization, depreciation and
other federal income tax deductions is accurately reflected on its Tax books and
records. The Company is not, and has not at any time been, a party to a Tax
sharing, Tax indemnity or Tax allocation agreement, and the Company has not
assumed any Tax liability of any other person or entity under contract. Except
as set forth on Schedule 6.27, the Company has not received any notice of
assessment or proposed assessment in connection with any Tax Returns and there
are not pending tax examinations of or tax claims asserted against any Company
or any of its assets or properties. The Company has not extended, or waived the
application of, any statute of limitations of any jurisdiction regarding the
assessment or collection of any Taxes. There are now (and as of immediately
following the Closing there will be) no Liens (other than any Lien for current
Taxes not yet due and payable) on any of the assets or properties of the Company
relating to or attributable to Taxes. To the knowledge of the Company and the
Stockholders, there is no basis for the assertion of any claim relating to or
attributable to Taxes which, if adversely determined, would result in any Lien
on the assets of the Company or otherwise have an adverse effect on any Company
or its business, operations, assets, properties, prospects or condition
(financial or otherwise). Except as set forth on Schedule 6.27, neither the
Company nor the Stockholders have any knowledge of any basis for any additional
assessment of any Taxes. All Tax payments related to employees, including income
tax withholding, FICA, FUTA, unemployment and worker's compensation, required to
be made by the Company have been fully and properly paid, withheld, accrued or
recorded. There are no contracts, agreements, plans or arrangements, including
but not limited to the provisions of this Agreement, covering any employee or
former employee of the Company that, individually or collectively, could give
rise to any payment (or portion thereof) that would not be deductible pursuant
to Sections 280G, 404 or 162 of the Code. Two correct and complete copies of (a)
all Tax examinations, (b) all extensions of statutory limitations and (c) all
federal, state and local income tax returns and franchise tax returns of each
Company (including, if filed separately, its Subsidiaries) for the last five
fiscal years, or such shorter period of time as any of them shall have existed,
have heretofore been delivered by the Company and the Stockholders to
UniCapital. The Company currently utilizes the accrual method of accounting for
income tax purposes and has not changed its method of accounting for income tax
purposes in the past five years.
6.28 INTELLECTUAL PROPERTY MATTERS.
(a) The Company has never utilized nor does it currently
utilize any patent, trademark, trade name, service mark, copyright, software,
trade secret or know-how except for those listed on Schedule 6.28 (the
"Intellectual Property"), all of which are owned by the Company free and clear
of any liens, claims, charges or encumbrances. The Intellectual Property
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constitutes all such assets, properties and rights which are used or held for
use in, or are necessary for, the conduct of the business of the Company.
(b) There are no royalty, commission or similar arrangements,
and no licenses, sublicenses or agreements, pertaining to any of the
Intellectual Property or products or services of the Company.
(c) The Company does not infringe upon or unlawfully or
wrongfully use any patent, trademark, trade name, service mark, copyright or
trade secret owned or claimed by another. No action, suit, proceeding or
investigation has been instituted or, to the knowledge of the Company and the
Stockholders, threatened relating to any, patent, trademark, trade name, service
mark, copyright or trade secret formerly or currently used by the Company. None
of the Intellectual Property is subject to any outstanding order, decree or
judgment. The Company has not agreed to indemnify any person or entity for or
against any infringement of or by the Intellectual Property.
(d) No present or former employee of the Company and no other
person or entity owns or has any proprietary, financial or other interest,
direct or indirect, in whole or in part, in any patent, trademark, trade name,
service mark or copyright, or in any application therefor, or in any trade
secret, which the Company owns, possesses or uses in its operations as now or
heretofore conducted. Schedule 6.28(d) lists all confidentiality or
non-disclosure agreements currently in force and effect to which the Company or
any of its employees is a party.
(e) Schedule 6.28(e) sets forth a complete and accurate list
of all items of Intellectual Property duly registered in, filed in or issued by
the United States Copyright Office or the United States Patent and Trademark
Office, any offices in the various states of the United States and any offices
in other jurisdictions.
(f) All rights of the Company in the Intellectual Property
shall vest in the Surviving Corporation pursuant to the transactions
contemplated hereby without any consent or other approval.
(g) All Intellectual Property in the form of computer software
that is utilized by the Company in the operations of its business is capable of
processing date data between and within the twentieth and twenty-first
centuries, or can be rendered capable of processing such data within six months
by the expenditure of not more than $25,000.
6.29 COMPLETENESS; NO VIOLATIONS. The certified copies of the
Certificate of Incorporation and Bylaws, both as amended to date, of the Company
(and such Company's Subsidiaries), and the copies of all leases, instruments,
agreements, licenses, permits, certificates or other documents which are
included on schedules attached hereto or which have been delivered or which have
been made available to UniCapital in connection with the transactions
contemplated hereby, are complete and correct; neither the Company (including
its Company
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Subsidiaries) nor, to the knowledge of the Stockholders, any other party to any
of the foregoing is in material default thereunder; and, except as set forth in
the schedules and documents attached to this Agreement, the rights and benefits
of the Company (including its Company Subsidiaries) thereunder will not be
materially and adversely affected by the transactions contemplated hereby, and
the execution of this Agreement and the performance of the obligations hereunder
will not result in a material violation or breach or constitute a material
default under any of the terms or provisions thereof. Except as set forth on
Schedule 6.29, none of such leases, instruments, agreements, contracts,
licenses, permits, certificates or other documents requires notice to, or the
consent or approval of, any governmental agency or other third party to any of
the transactions contemplated hereby to remain in full force and effect. The
consummation of the transactions contemplated hereby will not give rise to any
right of termination, cancellation or acceleration or result in the loss of any
right or benefit thereunder.
6.30 EXISTING CONDITION. Except as set forth on Schedule 6.30, since
the Interim Balance Sheet Date, the Company has not:
(a) incurred any liabilities, other than liabilities incurred
in the ordinary course of business consistent with past practice, or discharged
or satisfied any lien or encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice, or failed to pay or
discharge when due any liabilities of which the failure to pay or discharge has
caused or will cause any material damage or risk of material loss to it or the
of its assets or properties;
(b) sold, encumbered, assigned or transferred any assets,
properties or rights or any interest therein, except for the sales in the
ordinary course of business consistent with past practice, or made any agreement
or commitment or granted any option or right with, of or to any person to
acquire any assets, properties or rights of the Company or any interest therein;
(c) created, incurred, assumed or guaranteed any indebtedness
for money borrowed, or mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract or other
encumbrance of any nature whatsoever, except in the ordinary course of business
consistent with past practice;
(d) made or suffered any amendment or termination of any
material agreement, contract, commitment, lease or plan to which it is a party
or by which it is bound, or canceled, modified or waived any substantial debts
or claims held by it or waived any rights of substantial value, except in the
ordinary course of business consistent with past practice.
(e) declared, set aside or paid any dividend or made or agreed
to make any other distribution or payment in respect of its capital shares or
redeemed, purchased or otherwise acquired or agreed to redeem, purchase or
acquire any of its shares of capital stock or other ownership interests;
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(f) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting its business,
operations, assets, properties or prospects or (ii) of any item or items carried
on its books of account individually or in the aggregate at more than $25,000,
or suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;
(g) suffered any material adverse change in its business,
operations, assets, properties, prospects or condition (financial or otherwise),
other than as directly caused by adverse economic conditions not specific to, or
having an extraordinary impact upon, the Company;
(h) received notice or had knowledge of any actual or
threatened labor trouble, strike or other occurrence, event or condition of any
similar character which has had or might have an adverse effect on its business,
operations, assets, properties or prospects;
(i) made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $25,000, except such
as may be involved in ordinary repair, maintenance or replacement of its assets;
(j) increased the salaries or other compensation of, or made
any advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its employees or made any increase in, or any addition to, other
benefits to which any of its employees may be entitled;
(k) changed any of the accounting principles followed by it or
the methods of applying such principles;
(l) entered into any transaction other than in the ordinary
course of business consistent with past practice;
(m) changed its authorized capital or its securities
outstanding or otherwise changed its ownership interests, or granted any
options, warrants, calls, conversion rights or commitments with respect to any
of its capital stock or other ownership interests; or
(n) agreed to take any of the actions referred to above.
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Attached hereto as Schedule
6.31 is an accurate list, as of the date of this Agreement, of:
(a) the name of each financial institution in which the
Company (including its Company Subsidiaries) has accounts or safe deposit boxes;
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(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have
access thereto; and
(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Company and a
description of the terms of such power.
6.32 BOOKS OF ACCOUNT. The books, records and accounts of the Company
accurately and fairly reflect, in reasonable detail, the transactions, assets,
and liabilities of the Company. The Company has not engaged in any transaction,
maintained any bank account or used any of its funds except for transactions,
bank accounts and funds which have been and are reflected in the normally
maintained books and records of the business.
6.33 ENVIRONMENTAL MATTERS. (a) The Company has secured, and is in
compliance with, all Environmental Permits, with respect to any premises on
which its business is operated, all of which Environmental Permits shall vest in
the Surviving Corporation upon consummation of the transactions contemplated
hereby. The Company is in compliance with all Environmental Laws.
(b) Neither the Company nor any Stockholder has received any
communication from any Governmental Entity that alleges that the Company is not
in compliance with any Environmental Laws or Environmental Permits.
(c) The Company has not entered into or agreed to any court
decree or order, and is not subject to any judgment, decree or order, relating
to compliance with any Environmental Law or to investigation or cleanup of a
Hazardous Substance under any Environmental Law.
(d) No lien, charge, interest or encumbrance has been
attached, asserted, or to the knowledge of the Company and the Stockholders,
threatened to or against any of its assets or properties pursuant to any
Environmental Law.
(e) There has been no treatment, storage, disposal or release
of any Hazardous Substance on any property owned, operated or leased by the
Company.
(f) The Company has not received a CERCLA 104(e) information
request, nor has it been named a potentially responsible party for any National
Priorities List site under CERCLA or any site under analogous state law or
received an analogous notice or request from
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any non-U.S. Governmental Entity, which notice, request or any resulting inquiry
or litigation has not been fully and finally resolved without possibility of
reopening.
(g) There are no aboveground tanks or underground storage
tanks on, under or about any property owned, operated or leased by the Company
and any former aboveground or underground tanks on any property owned, operated
or leased by the Company have been removed in accordance with all Environmental
Laws and no residual contamination, if any, remains at such sites in excess of
applicable standards.
(h) There are no polychlorinated biphenyls ("PCBs") leaking
from any article, container or equipment on, under or about any property owned,
operated or leased by the Company and there are no such articles, containers or
equipment containing PCBs, and there is no asbestos containing material in a
condition or location currently constituting a violation of any Environmental
Law at, on, under or within any property owned, operated or leased by the
Company.
(i) The Company and the Stockholders have provided to
UniCapital true and complete copies of, or access to, all written environmental
assessment materials and reports in their possession that have been prepared by
or on behalf of the Company during the past five years.
6.34 NO ILLEGAL PAYMENTS. The Company has not and, to the knowledge of
the Company and the Stockholders, no affiliate, officer, agent or employee
thereof, directly or indirectly, has, during the past five years, on behalf of
or with respect to the Company or any affiliate thereof, (a) made any unlawful
domestic or foreign political contributions, (b) made any payment or provided
services which were not legal to make or provide or which the Company or any
affiliate thereof or any such officer, agent or employee should have known were
not legal for the payee or the recipient of such services to receive, (c)
received any payment or any services which were not legal for the payer or the
provider of such services to make or provide, (d) made any payment to any person
or entity, or agent or employee thereof, in connection with any Lease (as
hereinafter defined) to induce the person or entity to enter into a Lease
transaction, (e) had any transactions or payments related to the Company which
are not recorded in their accounting books and records or (f) had any off-book
bank or cash accounts or "slush funds" related to the Company.
6.35 LEASES. Schedule 6.35 hereto sets forth the Company's financing
arrangements as of the Interim Balance Sheet Date (which, together with all
other financing arrangements entered into by the Company between such date and
the Closing Date, are referred to herein as the "Leases"). The term "Lease
Documents" means the finance arrangements and financing contracts evidencing the
Leases described in Schedule 6.35, together with all related documents and
agreements including, without limitations, master lease agreements, schedules or
other addenda to such Leases, certificates of delivery and acceptance, UCC
financing statements, remarketing agreements, residual guaranty agreements,
insurance policies, guaranty agreements
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and other credit supports. The term "Equipment" means all equipment, inventory
and other property described as being leased or financed pursuant to a Lease, or
in which the Company is granted a security interest pursuant to a Lease. The
term "Obligor" means any lessee party or other party obligated to pay or perform
any obligations under or in respect of a Lease or the Equipment covered by a
Lease (excluding the lessor party thereunder, but otherwise including, without
limitation, any guarantor of a Lease or any vendor, manufacturer or similar
party under a remarketing agreement, residual guaranty or similar agreement).
The term "Scheduled Payments" means the monthly, quarterly or periodic rental
payments or installments of principal and interest under the terms of the
Leases.
(a) There is no restriction or limitation in any of the Lease
Documents or otherwise, restricting the Company from executing this Agreement,
or entering into the transactions contemplated by this Agreement, other than
consents which have been, or prior to the Closing will have been, obtained.
(b) The Company owns the Equipment covered by each Lease or
has a vested and perfected first priority security interest in the Equipment.
All Equipment is located in the United States.
(c) With respect to each Lease, only one chattel paper
original of such Lease exists and is held either by the Company or its secured
lender.
(d) Except as set forth in Schedule 6.35(d), each Lease is in
full force and effect in accordance with its terms, and there has been no
occurrence which would or might permit any Obligor to terminate such Lease or
suspend or reduce any payments or obligations due or to become due in respect of
such Lease or the related Lease Documents by reason of default by the lessor
party under such Lease. None of the Obligors in respect of a Lease or the
related Lease Documents is the subject of a bankruptcy, insolvency or similar
proceeding.
(e) Except as set forth in Schedule 6.35(e) and except for the
delinquency in the payment of any Scheduled Payment that is not more than 90
days past due, there does not exist any default in the payment of any Scheduled
Payments due under any Lease or the related Lease Documents, and there does not
exist any other default, breach, violation or event permitting acceleration,
termination or repossession under any Lease or the related Lease Documents or
any event which, to the knowledge of the Company and the Stockholders, with
notice and the expiration of any applicable grace or cure period, would
constitute such a default, breach, violation or event permitting acceleration,
termination or repossession under such Lease or the related Lease Documents.
(f) The Company has not acted in a manner which (nor has it
failed to act where such failure to act) would alter or reduce any of its rights
or benefits under any manufacturer's or vendors' warranties or guarantees with
respect to any Equipment.
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(g) The Company has complied with all requirements of any
federal, state or local law, including without limitation, usury laws,
applicable to each Lease.
(h) Each Lease has the following characteristics:
(i) such Lease was originated in the United
States and the Scheduled Payments thereunder are payable in U.S. dollars by
Obligors domiciled in the United States;
(ii) Except as set forth on Schedule 6.35(h),
the lessee party under such Lease has unconditionally accepted the Equipment
covered by such Lease;
(iii) Except as set forth on Schedule 6.35(h),
at least one Scheduled Payment has been made by the Obligor under each such
Lease; and
(iv) no Obligor in respect of such Lease is an
affiliate of the Company.
(i) Each Lease and the related Lease Documents are valid,
binding, legally enforceable and non-cancelable obligations of the parties
thereto, enforceable in accordance with their respective terms. Each Lease is a
business obligation of the lessee thereunder and is not a "consumer transaction"
under any applicable federal or state regulation.
(j) To the knowledge of the Stockholders, no Lease or related
Lease Document is the subject of a fraudulent scheme by any Obligor or any
supplier of Equipment.
(k) Each item of Equipment is subject to a Lease.
(l) Each Lease is a fixed rate lease contract.
(m) No Lease or related Lease Document is subject to any
legally enforceable right of rescission, set-off, counterclaim, abatement or
defense, including without limitation any defense of usury, nor will the
operation of any of the terms of any Lease or any related Lease Document or the
exercise of any right or remedy thereunder render such Lease or any related
Lease Document or the obligations thereunder unenforceable, or subject the same
to any legally enforceable right of rescission, set-off, counterclaim, abatement
or defense. No Obligor has asserted any legally enforceable right of rescission,
set-off, counterclaim, abatement or defense to its obligations under a Lease or
any related Lease Document.
(n) As to the Leases and the related Lease Documents, (i) none
has been amended or modified (a) to extend the maturity date for a period of
longer than one year, or (b) to alter the amount or time of payment of any
amount due thereunder, unless as to (a) and (b) such extension or alteration is
reasonably expected to result in no economic loss to the Company; (ii) no
indulgences or waivers have been granted in respect of the obligations of any
Obligor
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under any Lease; and (iii) neither the Company nor its Subsidiaries have
advanced any monies on behalf of any Obligor.
(o) Each Lease requires the Obligor thereunder at its own cost
and expense to maintain the Equipment leased thereunder in good repair,
condition and working order, and, to the knowledge of the Stockholders, each
Obligor under a Lease is currently in compliance with such requirement.
(p) Each Lease requires the Obligor thereunder (i) to pay all
fees, taxes (except income taxes), and other charges or liabilities arising with
respect to the Equipment leased thereunder or the use thereof, (ii) to keep the
Equipment free and clear of any and all liens, security interests and other
encumbrances, other than security interests of the Company, (iii) to hold
harmless the lessor thereunder and its successors and assigns against the
imposition of any fees, charges, liabilities and encumbrances, (iv) to bear all
risk of loss associated with the Equipment covered by or securing the
obligations under such Lease during the term of such Lease and (v) to maintain
at the cost of the Obligor public liability and casualty insurance in respect of
such Equipment covered by such Lease.
(q) Each Lease prohibits without the lessor's prior written
consent any relocation of the Equipment covered by such Lease and requires the
Obligor to execute such agreements and documents as may reasonably be requested
by the lessor in connection with any such relocation.
(r) Each Lease involves either the lease of tangible personal
property owned by the Company or the loan of money secured by a security
interest in tangible personal property owned by the Obligor thereunder.
(s) The Company has not received any notice challenging its
ownership or the priority of its security interest in the Equipment covered by
each Lease, and there are no proceedings pending before any court or
governmental entity or, to the knowledge of the Company and the Stockholders,
threatened by any Obligor or other party, (i) asserting the invalidity of any
Lease or the related Lease Documents, (ii) seeking to prevent payment or
performance by any Obligor of any Lease or any of the terms of the related Lease
Documents, or (iii) seeking any determination or ruling that might adversely
affect the validity or enforceability of any Lease or any of the terms or
provisions of the related Lease Documents.
(t) As to each Lease, there are no agreements or
understandings between the Company and the Obligors in respect of such Lease or
otherwise binding on the Company other than as expressly set forth in the Lease
and the related Lease Documents.
6.36 LEASE FUNDING. The Company is in compliance with all of the terms
and covenants of, and is not in default or breach under, each agreement,
contract, understanding or arrangement with any funding source for the Leases.
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6.37 DISCLOSURE. The Company has delivered, or in the case of the
Leases and Lease Documents, made available, to UniCapital true and complete
copies of each agreement, contract, commitment or other document (or, in the
case of any such document not in the possession of reasonably available to the
Company or a Stockholder, accurate and complete summaries thereof) that is
referred to in the schedules to this Agreement or that has been requested by
UniCapital or its representatives. Without limiting any exclusion, exception or
other limitation contained in any of the representations and warranties made
herein, this Agreement and the schedules hereto and all other documents and
information prepared or certified by the Stockholders to the Company and
provided to UniCapital and its representatives pursuant hereto do not and will
not include any untrue statement of a material fact or omit to state a material
fact necessary to make the statements herein and therein not misleading. If any
Stockholders become aware of any fact or circumstance that would change a
representation or warranty of any Stockholder in this Agreement or any
representation made on behalf of the Company (including its Company
Subsidiaries), then the Stockholders shall immediately give notice of such fact
or circumstance to UniCapital. However, such notification shall not relieve the
Company or any of the Stockholders of their respective obligations under this
Agreement, and at the sole option of UniCapital, the truth and accuracy of any
and all warranties and representations of the Stockholders, at the date of this
Agreement and at the Closing, shall be a precondition to the consummation of
this transaction.
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, UniCapital and Newco, jointly and severally, represent and as
follows:
7.1 CORPORATE EXISTENCE. UniCapital is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Newco is a corporation duly organized, validly existing and in good standing
under the laws of the State of New York. Immediately prior to the effectiveness
of the Merger, each of UniCapital and Newco is duly qualified to do business and
is in good standing as a foreign corporation in each jurisdiction where the
conduct of its business requires it to be so qualified.
7.2 UNICAPITAL STOCK. The shares of UniCapital Stock to be issued and
delivered to the Stockholders on the Merger Effective Date, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable shares, and except for restrictions upon
resale, will be legally equivalent in all respects to the majority of UniCapital
Stock issued and outstanding as of the date hereof. The UniCapital Stock to be
issued upon the conversion of Company Stock pursuant to the terms of this
Agreement will be free and clear of all liens, encumbrances and claims of every
kind, other than restrictions upon transfer contained herein and other than any
liens, encumbrances or claims arising other than by the actions of UniCapital or
Newco.
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7.3 CORPORATE POWER AND AUTHORIZATION. UniCapital and Newco have the
corporate power, authority and legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance of this Agreement and all
related documents and agreements required to be executed and delivered by
UniCapital and Newco in accordance with the provisions hereof (the "UniCapital
Documents") have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by UniCapital and Newco and
constitutes and the UniCapital Documents when executed and delivered will
constitute the legal, valid and binding obligations of UniCapital and Newco
enforceable against UniCapital and Newco in accordance with their terms.
7.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement by UniCapital and Newco will not violate, conflict with or result in
the breach of any term, condition or provision of, or require the consent of any
other person under (a) any existing law, ordinance, or governmental rule or
regulation to which UniCapital or Newco is subject, (b) any judgment, order,
writ, injunction, decree or award of any Governmental Entity that is applicable
to UniCapital or Newco, (c) the charter documents of UniCapital or Newco, or (d)
any mortgage, indenture, agreement, contract, commitment, lease, plan,
Authorization, or other instrument, document or understanding, oral or written,
to which UniCapital or Newco is a party, by which UniCapital or Newco may have
rights or by which any of the properties or assets of UniCapital or Newco may be
bound or affected, or give any party with rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of UniCapital or Newco thereunder. Except for filing the Certificate
of Merger and filings under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and except as aforesaid, no authorization, approval or consent of, and no
registration or filing with, any Governmental Entity is required in connection
with the execution, delivery or performance of this Agreement by UniCapital or
Newco.
7.5 CAPITALIZATION OF UNICAPITAL. The IPO will result in an aggregate
market capitalization of UniCapital that will exceed Three Hundred Million
Dollars ($300,000,000), as determined by multiplying the outstanding shares of
UniCapital immediately following the closing of the IPO by the IPO Price.
7.6 COMPLIANCE WITH LAW; AUTHORIZATIONS. Each of UniCapital and Newco
have complied with each, and is not in violation of Regulations to which
UniCapital's and Newco's respective business, operations, assets or properties
is subject. Each of UniCapital and Newco owns, holds, possesses or lawfully uses
in the operation of its business all Authorizations which are in any manner
necessary for it to conduct its business as now or previously conducted or for
the ownership and use of the assets owned or used by UniCapital and Newco,
respectively, in the conduct of the business of the Company, free and clear of
all liens, charges, restrictions and encumbrances and in compliance with all
Regulations. Neither UniCapital nor Newco is in default, nor has UniCapital or
Newco received any notice of any claim of default, with respect to any such
Authorization. All such Authorizations are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay
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any amounts other than routine filing fees. None of such Authorizations will be
adversely affected by consummation of the transactions contemplated hereby. No
stockholder and no director, officer, employee or former employee of UniCapital
of Newco any of their affiliates, or any other person, firm or corporation, owns
or has any proprietary, financial or other interest (direct or indirect) in any
Authorization which UniCapital or Newco owns, possesses or uses in the operation
of the business of UniCapital and Newco as now or previously conducted.
7.7 TRANSACTIONS WITH AFFILIATES. Except as described in the
Registration Statement, no stockholder and no director, officer or employee of
UniCapital or Newco, or any member of his or her immediate family or any other
of its, his or her affiliates, owns or has a 5% or more ownership interest in
any corporation or other entity that is or was during the last three years a
party to, or in any property which is or was during the last three years the
subject of, any contract, agreement or understanding, business arrangement or
relationship with UniCapital or Newco.
7.8 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of UniCapital and Newco, threatened against UniCapital or Newco which
relates to the transactions contemplated by this Agreement.
(b) No litigation, including any arbitration, investigation or
other proceeding of or before any court, arbitrator or governmental or
regulatory official, body or authority is pending or, to the knowledge of
UniCapital or Newco, threatened against UniCapital or Newco or which relates to
UniCapital or Newco.
(c) Neither UniCapital nor Newco is a party to or subject to
the provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority.
7.9 MISCELLANEOUS. Prior to the consummation of the Merger, UniCapital
and Newco have no material properties or assets and are not party to any
contracts other than this Agreement, the letter of intent among the parties to
this Agreement, certain employment agreements with officers of UniCapital,
certain real property leases relating to the principal executive offices of
UniCapital, and those agreements and letters of intent listed on Schedule 7.9
hereto.
7.10 REGISTRATION RIGHTS. As of the date hereof and as of the Merger
Effective Date, no officer, director or shareholder of UniCapital will have been
granted any registration rights with respect to the registration of any shares
of capital stock of UniCapital.
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8. COVENANTS OF STOCKHOLDERS AND COMPANY
For purposes of this Article 8, each reference to a "Company" shall be
deemed to refer as well to each and all of its Subsidiaries unless the context
otherwise specifically requires. The following covenants shall apply during the
period from and after the date hereof through the Closing Date.
8.1 BUSINESS IN THE ORDINARY COURSE. Except as otherwise contemplated
in Section 8.15, the Company shall, and the Stockholders shall cause the Company
to, conduct its business solely in the ordinary course and consistent with past
practice.
8.2 EXISTING CONDITION. The Company shall not, and no Stockholder shall
cause the Company to, cause or permit to occur any of the events or occurrences
described in Section 6.30 hereof.
8.3 MAINTENANCE OF PROPERTIES AND ASSETS. Except as otherwise
contemplated in Section 8.15, the Company shall, and the Stockholders shall
cause the Company to, maintain and service its properties and assets in order to
preserve their value and usefulness in the conduct of its respective business.
8.4 EMPLOYEES AND BUSINESS RELATIONS. The Company shall, and the
Stockholders shall cause the Company to, use commercially reasonable efforts to
keep available the services of its current employees and agents and to maintain
its relations and goodwill with its suppliers, customers, distributors and any
others with whom or with which it has business relations.
8.5 MAINTENANCE OF INSURANCE. The Company shall, and the Stockholders
shall cause the Company to, notify UniCapital of any material changes in the
terms of the insurance policies and binders referred to on Schedule 6.20 hereto.
8.6 COMPLIANCE WITH LAWS, ETC. The Company shall, and the Stockholders
shall cause the Company to, comply with all laws, ordinances, rules, regulations
and orders applicable to it or its business, operations, properties or assets,
noncompliance with which might materially affect it.
8.7 CONDUCT OF BUSINESS. The Company shall, and the Stockholders shall
cause the Company to, use reasonable commercial efforts to conduct its business
in such a manner that on the Closing Date and on the Merger Effective Date the
representations and warranties of the Stockholders contained in this Agreement
shall be true, as though such representations and warranties were made on and as
of each such date (except to the extent such representations or warranties
expressly speak as of a specific date), and the Company shall, and the
Stockholders shall cause the Company to, use commercially reasonable efforts to
cause all of the conditions to the obligations of UniCapital and the
Stockholders under this Agreement to be satisfied on or prior to the Closing
Date. The Company shall, and the Stockholders shall cause the Company to,
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maintain credit underwriting standards consistent with past practices.
Furthermore, the Company shall, and the Stockholders shall cause the Company to,
maintain a residual value accounting methodology consistent with past practice.
8.8 ACCESS. Upon prior reasonable notice the Company shall, and the
Stockholders shall cause the Company to, give to UniCapital's officers,
employees, counsel, accountants and other representatives free and full access
to and the right to inspect, during normal business hours, all of the premises,
properties, assets, records, contracts and other documents relating to the
Company and shall permit them to consult with its officers, employees,
accountants, counsel and agents for the purpose of making such investigation of
the Company as UniCapital shall desire to make, provided that such investigation
shall not unreasonably interfere with the Company's business operations, and
provided further that UniCapital shall not contract or consult with any
non-officer employees of the Company without the Company's prior consent, which
shall not be unreasonably withheld. Furthermore, the Company shall, and the
Stockholders shall cause the Company to, furnish to UniCapital all such
documents and copies of documents and records and information with respect to
the affairs of the Company and copies of any working papers relating thereto as
UniCapital shall from time to time reasonably request. No information or
knowledge obtained in any investigation pursuant to this Section 8.8 or
otherwise shall affect or be deemed to modify any representation or warranty
contained in this Agreement or the conditions to the obligations of the parties
to consummate the Merger.
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS. The Company and the
Stockholders shall not give notice to third parties or otherwise make any press
release or other public statement concerning this Agreement or the transactions
contemplated hereby. The Company and the Stockholders shall not grant any
interview, publish any article, report or statement, or respond to any press
inquiry or other inquiry of any third party relating to this Agreement, the
business of the Company, the business (current and proposed) of UniCapital, the
Registration Statement (as defined below), the IPO or any other matter connected
with any of the foregoing without the express prior written approval of
UniCapital, and all inquiries and questions with respect to any of the foregoing
shall be coordinated through Robert New, Chief Executive Officer of UniCapital.
The Company and each Stockholder shall coordinate all communications with the
employees and agents of the Company through UniCapital prior to making any such
communication. Notwithstanding the foregoing, this Section 8.9 shall not be
interpreted to prevent the Company or any Stockholder from disclosing
information as compelled by a court order, provided however, that prior to
disclosing any information concerning this Agreement or the transaction
contemplated hereby in response to any such court order, the Company or
Stockholder, as applicable, shall provide UniCapital with prompt notice of the
court order so that UniCapital may take whatever action it deems appropriate to
prohibit such disclosure.
8.10 EXCLUSIVITY. Except with respect to this Agreement and the
transactions contemplated hereby, the Company, the Stockholders and any of their
affiliates shall not, and each of them shall cause its respective employees,
agents and representatives (including, without
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limitation, any investment banking, legal or accounting firm retained by it or
them and any individual member or employee of the foregoing) (each, an "Agent")
not to, (a) initiate, solicit or seek, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its shareholders or any of them) with
respect to a merger, acquisition, consolidation, recapitalization, liquidation,
dissolution or similar transaction involving, or any purchase of all or any
portion of the assets or any equity securities of, the Company (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal"),
or (b) engage in any negotiations concerning, or provide any confidential
information or data to, or have any substantive discussions with, any person
relating to an Acquisition Proposal, (c) otherwise cooperate in any effort or
attempt to make, implement or accept an Acquisition Proposal, or (d) enter into
or consummate any agreement or understanding with any person or entity relating
to an Acquisition Proposal, except for the Merger contemplated hereby. If the
Company or any Stockholder, or any of their respective Agents, have provided any
person or entity (other than UniCapital) with any confidential information or
data relating to an Acquisition Proposal, then they shall request the immediate
return thereof. The Company and the Stockholders shall notify UniCapital
immediately if any inquiries, proposals or offers related to an Acquisition
Proposal are received by, any confidential information or data is requested
from, or any negotiations or discussions related to an Acquisition Proposal are
sought to be initiated or continued with, it or any individual or entity
referred to in the first sentence of this Section 8.10. The covenant contained
in this Section 8.10 shall not survive any termination of this Agreement
pursuant to Sections 13.1, 13.2 or 13.3.
8.11 THIRD PARTY APPROVALS. Prior to the Closing Date, the Company
shall satisfy any requirement for notice and approval of the transactions
contemplated by this Agreement under applicable agreements with third parties,
and shall provide UniCapital with satisfactory evidence of such third party
approvals.
8.12 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
Company shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under any applicable collective bargaining
agreement, and shall provide UniCapital with proof that any required notice has
been provided.
8.13 NOTIFICATION OF CERTAIN MATTERS. (a) The Company and the
Stockholders shall give prompt notice to UniCapital of (i) the occurrence or
non-occurrence of any event known to any Stockholder or to the Company the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty contained in Article 6 to be untrue or inaccurate in
any material respect at or prior to the Closing Date or the Merger Effective
Date and (ii) any material failure of any Stockholder or the Company to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by such person hereunder.
(b) UniCapital shall give prompt notice to each Stockholder of
(i) the occurrence or non-occurrence of any event known to UniCapital the
occurrence of non-occurrence of which would be likely to cause any
representation or warranty contained in Article
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7 to be untrue or inaccurate in any material respect at or prior to the Closing
Date or the Merger Effective Date and (ii) any material failure of UniCapital to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder.
(c) The delivery of any notice pursuant to this Section 8.13
shall not be deemed to (i) modify the representations or warranties hereunder of
the party delivering such notice, which modification may only be made pursuant
to Section 8.14, (ii) modify the conditions set forth in Sections 9 and 10 or
(iii) limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
8.14 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Merger
Effective Date to supplement or amend promptly the schedules hereto with respect
to any matter hereafter arising or discovered which, if existing or known at the
date of this Agreement, would have been required to be set forth or described in
the schedules, provided, that no amendment or supplement to a schedule that
constitutes or reflects a material adverse change in the business, operations,
assets, properties, prospects or condition (financial or otherwise) of the
Company (a "Material Adverse Amendment") may be made unless UniCapital consents
to such Material Adverse Amendment ; provided, further, however, that if the
amendment or supplement relates to changes in facts or circumstances occurring
subsequent to the date of this Agreement and such amendment or supplement
constitutes or reflects a Material Adverse Amendment, then such amendment or
supplement shall be accepted by UniCapital subject to the provisions of Section
12.2 and 12.5 hereof. No amendment of or supplement to a schedule shall be made
later than 48 hours prior to the anticipated effectiveness of the Registration
Statement defined in Section 9.4. Notwithstanding anything to the contrary
contained in this Section 8.14, the Stockholders shall not be required to
supplement or amend the schedules hereto with respect to any matters hereafter
arising or discovered which individually or in the aggregate do not constitute
or reflect a material adverse change in the business, operations, assets,
properties, prospects or condition (financial or otherwise) of the Company (a
"Material Adverse Change"); provided; however, that the Stockholders shall be
required to supplement or amend the schedules no later than 48 hours prior to
the anticipated effectiveness the Registration Statement defined in Section 9.4
with respect to any matters hereafter arising or discovered, which if existing
or known at the date of this Agreement, would have been required to be set forth
or described in the schedules, regardless of whether such matters reflect or
constitute a Material Adverse Change. Only (i) the schedules attached to this
Agreement at the time of its execution and (ii) amended schedules as accepted
under the standards and provisions of this Section 8.14, shall be deemed to be a
part of this Agreement in accordance with Section 19.3 hereof.
8.15 REPAYMENT OF INDEBTEDNESS; CANCELLATION OF CONTRACTS; PRE-CLOSING
DISTRIBUTIONS. Immediately preceding the Merger Effective Date, the Company
shall have distributed to the Stockholders the property identified on Schedule
8.15 or the Stockholders shall purchase from the Company such property for its
book value. Prior to the Merger Effective
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Date, the Company shall, and the Stockholders shall cause the Company to,
terminate the contracts listed on Schedule 8.15. Immediately preceding the
Merger Effective Date, (A) the entities identified on Schedule 8.15 shall have
repaid the Company in full amounts owing by such entities to the Company and (B)
all employees of the Company identified on Schedule 6.14 shall have repaid the
Company in full all amounts owing by such persons to the Company and the
Stockholders shall have repaid to the Company in full all amounts owing by the
Stockholders to the Company.
8.16 DELIVERY OF INFORMATION. The Company shall, and the Stockholders
shall cause the Company to, provide a schedule of the Company's liabilities as
of the Merger Effective Date (or such other date) as may be requested by
UniCapital's lenders.
8.17 RELEASE OF GUARANTEES. Immediately preceding the Merger Effective
Date, the Company shall deliver to UniCapital evidence that the Company shall
have been released from all liability (including any and all guarantees) for the
obligations of the Company and Michael P. Pandolfelli to the FDIC described in
Schedule 10.14.
8.18 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, the Company shall use its reasonable best efforts to (a) file all
information required to be filed by it pursuant to such act and (b) provide
UniCapital with all information reasonably requested and required by it to
satisfy any filing requirements it may have under such act.
9. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY
AND THE STOCKHOLDERS
The obligations of the Company and the Stockholders hereunder are
subject to the satisfaction on or prior to the Closing Date (or such earlier
date specified below) of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representations and warranties of UniCapital and Newco contained in Article 7
shall be accurate as of the Closing Date and as of the Merger Effective Date as
though such representations and warranties had been made as of such times; all
of the terms, covenants and conditions of this Agreement to be complied with and
performed by UniCapital and Newco on or before the Closing Date shall have been
duly complied with and performed; and a certificate to the foregoing effect
dated the Merger Effective Date and signed by a duly authorized agent, the
President or any Vice President of UniCapital shall have been delivered to the
Stockholders.
9.2 EMPLOYMENT AGREEMENTS. The Surviving Corporation shall have
executed and delivered Employment Agreements, in the form of Annex IV attached
hereto, to each of the persons listed on Schedule 9.2 hereto.
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9.3 OPINION OF COUNSEL. The Stockholders shall have received an opinion
from counsel for UniCapital, dated the Merger Effective Date, to the effect
that:
(a) UniCapital and Newco have been duly organized and are
validly existing in good standing under the laws of their respective states of
incorporation;
(b) this Agreement has been duly authorized, executed and
delivered by UniCapital and Newco and constitutes a valid and binding agreement
of UniCapital and Newco enforceable in accordance with its terms, except (i) as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting the
rights of creditors, (ii) as the same may be subject to the effect of general
principles of equity and (iii) that no opinion need be expressed as to the
enforceability of indemnification provisions included herein; and
(c) the execution, delivery and performance of this Agreement
and the consummation of any transactions contemplated hereby will not conflict
with, or result in a breach or violation of, the Certificate of Incorporation OR
Bylaws of UniCapital or Newco;
(d) the shares of UniCapital Stock to be received by the
Stockholders on the Merger Effective Date shall be duly authorized, fully paid
and nonassessable.
9.4 REGISTRATION STATEMENT. UniCapital shall have filed with the
Securities and Exchange Commission ("SEC") a registration statement on Form S-1
covering the offer and sale of shares of UniCapital Stock in the IPO (the
"Registration Statement"). The Registration Statement shall have been declared
effective by the SEC not later than June 30, 1998, UniCapital and the
underwriters named therein shall have executed the Underwriting Agreement and
the underwriters named therein shall have agreed to acquire, subject to the
conditions set forth in the Underwriting Agreement, the shares of UniCapital
Stock covered by the Registration Statement. There shall have been no stop-order
issued (that remains in effect) by the Securities and Exchange Commission with
respect to the Registration Statement.
9.5 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND NEWCO
The obligations of UniCapital and Newco hereunder are subject to the
satisfaction, on or prior to the Closing Date (or such earlier date specified
below), of the following conditions:
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10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
Stockholders shall have delivered to UniCapital a certificate dated the Merger
Effective Date and signed by them to the effect that all of the representations
and warranties of the Stockholders contained in this Agreement shall be true on
and as of the Closing Date and as of the Merger Effective Date with the same
effect as though such representations and warranties had been made on and as of
such dates, except for matters expressly disclosed in the certificate or a
schedule thereto (which shall not serve to modify any representation or warranty
made herein or in any other document or otherwise in information supplied by the
Company or any Stockholder); and each and all of the agreements of the
Stockholders and the Company to be performed on or before the Closing Date
pursuant to the terms hereof shall have been performed.
10.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by UniCapital of the Company Stock and no
governmental agency or body shall have taken any other action or made any
request of UniCapital as a result of which the management of UniCapital deems it
inadvisable to proceed with the transactions hereunder.
10.3 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the Closing Date,
UniCapital shall have had sufficient time to review the unaudited balance sheet
of the Company as of the end of the most recently completed calendar month prior
to the Closing Date, and the unaudited statements of income, cash flows and
stockholders' equity of the Company for the periods then ended, which statements
shall have disclosed no material adverse change in the financial condition of
the Company or the results of its respective operations from the financial
statements originally furnished by the Company as set forth in Schedule 6.12.
10.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, operations, assets, properties, prospects or condition (financial or
otherwise) of the Company shall have occurred, and the Company shall not have
suffered any material loss or damage to any of its properties or assets, whether
or not covered by insurance, since the Interim Balance Sheet Date, which change,
loss or damage materially affects or impairs the ability of the Company to
conduct its business as now conducted or as proposed to be conducted; and
UniCapital shall have received on the Closing Date a certificate signed by the
Stockholders and dated the Merger Effective Date to such effect.
10.5 REGULATORY REVIEW. UniCapital, through its authorized
representatives, shall have completed a satisfactory review of the practices and
procedures of the Company including, but not limited to, environmental and land
use practices, import and export laws, compliance with contracts and federal,
state and local laws and regulations governing the respective operations of the
Company, which review reflects compliance with all applicable laws governing the
Company, disclosing no material actual or probable violations, compliance
problems, required capital expenditures or other substantive environmental, real
estate and land use related concerns and which review is otherwise satisfactory
in all respects to UniCapital, in its sole discretion.
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10.6 STOCKHOLDERS' RELEASE. At the Closing Date, each Stockholder shall
have executed and delivered to UniCapital a Stockholder's Release in the form of
Annex VI attached hereto.
10.7 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.2
shall have executed and delivered an Employment Agreement in the form of Annex
IV attached hereto.
10.8 OPINION OF COUNSEL. UniCapital shall have received an opinion from
Winick & Rich, P.C., counsel to the Stockholders, dated the Merger Effective
Date, in form and substance satisfactory to UniCapital, to the effect that:
(a) the Company has been duly organized and is validly
existing and in good standing under the laws of the state of its incorporation;
(b) to the knowledge of such counsel, the Company is duly
authorized, qualified and licensed under all applicable laws, regulations,
ordinances or orders of public authorities to carry on its business in the
places and in the manner now conducted;
(c) the authorized and outstanding capital stock of the
Company is as represented by the Stockholders in this Agreement and each share
of such stock has been duly and validly authorized and issued, is fully paid and
nonassessable and was not issued in violation of the preemptive rights of any
stockholder;
(d) to the knowledge of such counsel, the Company does not
have any outstanding options, warrants, calls, conversion rights or other
commitments of any kind to issue or sell any of its capital stock;
(e) this Agreement has been duly authorized, executed and
delivered by the Company and the Stockholders and constitutes a valid and
binding agreement of the Company and the Stockholders enforceable in accordance
with its terms, except as such enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement and other similar laws
relating to or affecting the rights of creditors and except (i) as the same may
be subject to the effect of general principles of equity and (ii) that no
opinion need be expressed as to the enforceability of indemnification provisions
included herein;
(f) upon consummation of the Merger contemplated by this
Agreement, UniCapital will receive good title to the Company Stock, free and
clear of all liens, security interests, pledges, charges, voting trusts,
equities, restrictions, encumbrances and claims of every kind;
(g) to the knowledge of such counsel, except to the extent set
forth on Schedule 6.23, the Company is not in violation of or default under any
law or regulation, or under any order of any court, commission, board, bureau,
agency or instrumentality wherever
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located and there are no claims, actions, suits or proceedings pending, or
threatened against or affecting the Company, at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality wherever located;
(h) to the knowledge of such counsel, except to the extent set
forth on Schedule 6.17, the Company is not in default under any of its material
contracts or agreements or has received notice of such default;
(i) no notice to, consent, authorization, approval or order of
any court or governmental agency or body or of any other third party is required
in connection with the execution, delivery or consummation of this Agreement by
any Stockholders or for the transfer to UniCapital of the Company Stock; and
(j) the execution of this Agreement and the performance of the
obligations hereunder will not violate or result in a breach or constitute a
default under any of the terms or provisions of the Company's charter documents
or the bylaws or any Contract or Lease listed on Schedules 6.17 and 6.35.
Such opinion shall include any other matters incident to the matters set forth
herein as agreed to by the parties and their respective counsel.
10.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
10.10 GOOD STANDING CERTIFICATES. Stockholders shall have delivered to
UniCapital certificates, dated as of a date no earlier than five days prior to
the Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by UniCapital, in each state
in which the Company is authorized to do business, showing that the Company is
in good standing and authorized to do business and that all state franchise
and/or income tax returns and taxes for the Company for all periods prior to the
dates of such certificates have been filed and paid.
10.11 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC, and UniCapital and the representatives of
the underwriters named in the Registration Statement shall have executed the
Underwriting Agreement. There shall have been no stop-order issued (that remains
in effect) by the Securities and Exchange Commission with respect to the
Registration Statement.
10.12 REPAYMENT OF INDEBTEDNESS; PRE-CLOSING DISTRIBUTIONS;
CANCELLATION OF CONTRACTS. Immediately preceding the Merger Effective Date (A)
the entities identified on Schedule 8.15 shall have repaid the Company in full
amounts owing by such entities to the
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Company and (B) all employees of the Company identified on Schedule 6.14 shall
have repaid the Company in full all amounts owing by such persons to the Company
and the Stockholders shall have (i) repaid to the Company in full all amounts
owing by the Stockholders to the Company and (ii) completed all transactions
contemplated by Section 8.15.
10.13 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
10.14 RELEASE OF GUARANTEES. UniCapital shall have received evidence
that the Company shall have been released from all liability (including any and
all guarantees) for the obligations of the Company and Michael P. Pandolfelli to
the FDIC described in Schedule 10.14.
11. COVENANTS OF UNICAPITAL
11.1 INTENTIONALLY OMITTED.
11.2 UNICAPITAL STOCK OPTIONS. Upon the effective date of the
Registration Statement (but subject in all events to the consummation of the
Merger), UniCapital shall make available options to purchase that number of
shares of UniCapital Stock having a fair market value on the effective date of
the Registration Statement, based upon the IPO price per share set forth in the
Underwriting Agreement, equal to 6.25% of the Effective Date Consideration
(valuing the UniCapital Stock to be issued as part of the Effective Date
Consideration at the IPO price per share for the purposes of this Section 11.2)
to be granted to those non-Stockholder key employees of the Surviving
Corporation after the Closing as are designated by the principal executive
officer of the Surviving Corporation who is entering into an Employment
Agreement pursuant to Section 9.2 hereof (or such other officer designated by
the Surviving Corporation and acceptable to UniCapital). Not later than seven
days prior to the effective date of the Registration Statement, the officer
designating the recipients of such options shall provide to UniCapital a written
list of the names of those designated recipients who will receive options
exercisable at the IPO price and the relative percentages of the 6.25% option
pool provided under this Section 11.2 to be awarded to each recipient, as well
as the percentage of options, if any, to be reserved for future issuance. Any
options reserved for future issuance shall be granted at an exercise price equal
to the fair market value of UniCapital Stock as of the date of grant. All
options shall be granted in accordance with UniCapital's policies, and
authorized and issued under the terms of UniCapital's principal stock option
plan for the benefit of employees of UniCapital and its subsidiaries.
11.3 INFORMATION FILING. To the extent the Unified Transaction is a
transaction that falls within Section 351 of the Code, UniCapital shall file all
information required to be filed by it pursuant to Treasury Regulation Section
1.351-3(b).
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11.4 INDEBTEDNESS. The failure of the Company to obtain the consent of
its lenders to the change of control of the Company or the substitution of a
UniCapital guaranty or the assumption by UniCapital of the indebtedness set
forth on Schedule 11.4 shall not be deemed a breach hereunder.
11.5 STUB PERIOD TAX RETURN. UniCapital shall cause Buck & Sturmer
Company ("ABuck & Sturmer") to timely prepare federal and state income tax
returns required to be filed by the Company for the tax period ended on the
Merger Effective Date. UniCapital agrees to timely file such returns prepared by
Buck & Sturmer; provided, however, that UniCapital shall not be required to file
such returns as prepared by Buck & Sturmer if it does not believe in its sole
discretion that such returns are true, correct and complete and that such
returns properly reflect the liabilities of the Company for Taxes for the
periods covered thereby.
11.6 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, UniCapital shall use its reasonable best efforts to (a) file all
information required to be filed by it pursuant to such act and (b) provide the
Company with all information reasonably requested and required by it to satisfy
any filing requirements it may have under such act.
12. INDEMNIFICATION; SURVIVAL
12.1 GENERAL INDEMNIFICATION BY STOCKHOLDERS. Subject to the
limitations contained in Section 12.5 hereof, each Stockholder jointly and
severally, covenants and agrees that such Stockholder will indemnify, defend,
protect and hold harmless UniCapital, Newco and the Surviving Corporation and
their respective officers, stockholders, directors, divisions, subdivisions,
affiliates, subsidiaries, parents, agents, employees, successors and assigns at
all times from and after the date of this Agreement until the Expiration Date
(as defined in Section 12.6) from and against all claims, damages, losses,
liabilities, actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) (collectively, "Losses") incurred
by UniCapital, Newco or the Surviving Corporation as a result of or arising from
(a) any breach of the representations and warranties made by the Stockholders
set forth herein or on the schedules or certificates delivered in connection
herewith, (b) any nonfulfillment of any covenant or agreement on the part of the
Stockholders or the Company under this Agreement, (c) the business, operations
or assets of the Company prior to the Merger Effective Date or the actions or
omissions of the Company's directors, officers, stockholders, employees or
agents prior to the Merger Effective Date, other than Losses arising from
matters expressly disclosed in the Financial Statements, this Agreement or the
Schedules to this Agreement, or (d) any liability under the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or other
federal or state law or regulation, at common law or otherwise, arising out of
or based upon (i) any untrue statement or alleged untrue statement of a material
fact relating to the Company (including its Subsidiaries) or the Stockholders
contained in any preliminary
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prospectus, the Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement thereto (including any additional
registration statement filed pursuant to Rule 462(b) under the Securities Act),
which statement was provided or was based upon information or documents provided
to UniCapital or its counsel by the Company (including its Subsidiaries) or the
Stockholders, or (ii) any omission or alleged omission to state therein a
material fact relating to the Company (including its Subsidiaries) or the
Stockholders required to be stated therein or necessary to make the statements
therein not misleading, which information was not provided to UniCapital or its
counsel by the Company (including its Subsidiaries) or the Stockholders;
provided, however, that such indemnity shall not inure to the benefit of
UniCapital, Newco or the Surviving Corporation to the extent that such untrue
statement (or alleged untrue statement) was made in, or such omission (or
alleged omission) occurred in, any preliminary prospectus and the Stockholders
provided, in writing, corrected information to UniCapital for inclusion in the
final prospectus, and such information was not so included.
12.2 SPECIFIC INDEMNIFICATION BY STOCKHOLDERS. Subject to the
limitations contained in Section 12.5 hereof, notwithstanding any disclosure
made in this Agreement or in the schedules or exhibits hereto, and
notwithstanding any investigation by UniCapital or Newco, each Stockholder
jointly and severally, covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless UniCapital, Newco and the Surviving
Corporation and their respective officers, stockholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parents, agents, employees, successors
and assigns at all times from and after the date of this Agreement, from and
against all Losses incurred by UniCapital, Newco or the Surviving Corporation as
a result of or incident to: (a) the existence of liabilities of the Company
(including its Subsidiaries) in excess of the liabilities set forth on Schedule
6.13 (excluding liabilities incurred in connection with Leases and Lease
Documents in the ordinary course of business consistent with past practice and
the Company's credit underwriting standards), to the extent of such excess; (b)
the failure of the Company or the Stockholders to file all required Form 5500's
prior to the Merger Effective Date; (c) the litigation matters listed on
Schedule 6.25; (d) the tax matters listed on Schedule 6.27; (e) those Scheduled
Payments delinquent for more than 90 days as of the Closing Date ("Delinquent
Accounts"), net of applicable reserves reflected on the balance sheet of the
Company immediately prior to the preparation of the Closing Date Balance Sheet;
provided, however, that this Section 12.2(e) shall not apply to any Delinquent
Accounts which at any time during the one year period after the Closing Date are
not more than 90 days past due; (f) those matters listed in Schedule 6.35(d);
and (g) a Material Adverse Amendment pursuant to Section 8.14 hereof.
12.3 INDEMNIFICATION BY UNICAPITAL AND NEWCO. Subject to the
limitations contained in Section 12.5 hereof, UniCapital and Newco, jointly and
severally, covenant and agree that they will indemnify, defend, protect and hold
harmless the Stockholders at all times from and after the date of this Agreement
from and against all Losses incurred by the Stockholders as a result of or
arising from (a) any breach of the representations and warranties made by
UniCapital and Newco set forth herein or on the schedules or certificates
attached hereto, (b) any nonfulfillment of any agreement on the part of
UniCapital under this Agreement, or (c) any
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liability under the Securities Act, the Exchange Act or other federal or state
law or regulation, at common law or otherwise, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact relating to
UniCapital (including all of the companies, other than the Company, acquired by
UniCapital as part of the Unified Transaction, but only to the extent that
UniCapital is actually indemnified by such other companies for such liability)
contained in any preliminary prospectus, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto (including any registration statement filed pursuant to Rule 462(b)
under the Securities Act), or arising out of or based upon any omission or
alleged omission to state therein a material fact relating to UniCapital
(including all of the companies, other than the Company, acquired by UniCapital
as part of the Unified Transaction, but only to the extent that UniCapital is
actually indemnified by such other companies for such liability) required to be
stated therein or necessary to make the statements therein not misleading, which
liability is not the subject of indemnification of UniCapital, Newco and the
Surviving Corporation pursuant to Section 12.1(c) above.
12.4 THIRD PARTY CLAIMS.
(a) In order for a party hereto eligible to be indemnified
hereunder (an "Indemnified Party") to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of or involving a
claim or demand made by any person or entity against the Indemnified Party (a
"Third Party Claim"), such Indemnified Party must notify the parties obligated
to provide indemnification pursuant to Section 12.1, 12.2, or 12.3 hereof (each,
an "Indemnifying Party") in writing, and in reasonable detail, of the Third
Party Claim within 30 business days after receipt by such Indemnified Party of
written notice of the Third Party Claim; provided, however, that failure to give
such notification shall not affect the indemnification provided hereunder except
to the extent the Indemnifying Party shall have been actually prejudiced as a
result of such failure. Such notice shall state the nature and the basis of such
claim and a reasonable estimate of the amount thereof. Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, within five business
days after the Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnified Party relating to
the Third Party Claim. To the extent the Indemnifying Party has actually paid
any amount to the Indemnified Party in respect of any Loss in connection with
such Third Party Claim, the Indemnifying Party shall have a right of subrogation
with respect to such Third Party Claim to the extent of such payment.
(b) The Indemnifying Party shall have right to defend and
settle, at its own expense and by its own counsel (provided that such counsel is
not reasonably objected to by the Indemnified Party and provided further that
selection for these purposes of Winick & Rich, absent any actual or reasonably
likely conflict of interest with respect to parties or defenses, shall not be
objected to by UniCapital), any Third Party Claim as the Indemnifying Party
pursues the same in good faith and diligently and so long as the Third Party
Claim does not relate to an actual or potential Loss to which Section 12.4(e)
applies in which the Indemnified Party is UniCapital, Newco or the Surviving
Corporation. If the Indemnifying Party undertakes to
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defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. Notwithstanding the foregoing, the Indemnified Party
shall have the right to participate in any matter through counsel of its own
choosing at its own expense (unless there is a conflict of interest that
prevents counsel for the Indemnifying Party from representing the Indemnified
Party, in which case the Indemnifying Party will reimburse the Indemnified Party
for the expenses of its counsel). After the Indemnifying Party has notified the
Indemnified Party of its intention to undertake to defend or settle any such
asserted liability, and for so long as the Indemnifying Party diligently pursues
such defense, the Indemnifying Party shall not be liable for any additional
legal expenses incurred by the Indemnified Party in connection with any defense
or settlement of such asserted liability, except to the extent such
participation is requested by the Indemnifying Party, in which event the
Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable
additional legal expenses and out-of-pocket expenses, and except in the case of
a Third Party Claim relating to an actual or potential Loss to which Section
12.4(e) applies in which the Indemnified Party is UniCapital, Newco or the
Surviving Corporation.
(c) No Indemnifying Party shall, in the defense of any Third
Party Claim, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) or enter into any settlement, except with
the written consent of the Indemnified Party, which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim or
matter.
(d) If the Indemnifying Party does not assume the defense of
any Third Party Claim, then the Indemnified Party may defend against such Third
Party Claim in such manner as it deems appropriate at the expense of the
Indemnifying Party.
(e) Notwithstanding anything to the contrary in this Article
12, if at any time, in the reasonable opinion of UniCapital, Newco or the
Surviving Corporation as the Indemnified Party (notice of which opinion shall be
given in writing to the Indemnifying Party), any Third Party Claim seeks
material prospective relief which could have a material adverse effect on any
such Indemnified Party or any subsidiary, then such Indemnified Party shall have
the right to control or assume (as the case may be) the defense of any such
Third Party Claim and the amount of any judgment or settlement and the
reasonable costs and expenses of defense (including, but not limited to, fees
and disbursements of counsel and experts, as well as any sampling, testing,
investigation, removal, treatment or remediation undertaken by UniCapital, Newco
or the Surviving Corporation and all counseling or engineering fees and expenses
related thereto) shall be included as part of the indemnification obligations of
the Indemnifying Party hereunder. If the Indemnified Party elects to exercise
such right, then the Indemnifying Party shall have the right
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to participate in, but not control, the defense of such Third Party Claim at the
sole cost and expense of the Indemnifying Party.
12.5 LIMITATIONS ON INDEMNIFICATION. (a) To the extent of any amount
that UniCapital actually receives as a result of a Net Worth Deficiency that is
directly attributable to an Indemnifiable Decrease, UniCapital shall not be
entitled to any indemnity under Article 12. An "Indemnifiable Decrease" shall be
equal to the amount of any Net Worth Deficiency that consists of a liability for
which UniCapital would otherwise be entitled to indemnity under Article 12 but
that has been (a) accrued or (b) actually paid (so long as it was not previously
accrued on or before December 31, 1997) during the Interim Net Worth Period. The
"Interim Net Worth Period" shall mean the period beginning on January 1, 1998
and ending on the Closing Date. No amounts under (a) or (b) that have not been
reflected on the Company's (or its Subsidiaries') financial statements under
generally accepted accounting principles applied consistently with previous
practice shall be deemed to an Indemnifiable Decrease.
(b) No Indemnified Party shall assert any claim (other than a
Third Party Claim) for indemnification hereunder until such time as the
aggregate of all claims which such Indemnified Party may have against an
Indemnifying Party plus any Indemnifiable Decrease shall exceed $407,000 (the
"Basket Limitation"), at which time an Indemnified Party shall be entitled to
seek indemnification for all claims pursuant to this Article 12, but only to the
extent such claims, in the aggregate, exceed the Basket Limitation. For purposes
of the preceding sentence, UniCapital, Newco and the Surviving Corporation shall
be considered to be a single Indemnifying and Indemnified Party and the
Stockholders shall be considered to be a single Indemnifying and Indemnified
Party. Notwithstanding the foregoing, on each date on which any Earn-Out
Consideration is paid, the Basket Limitation shall be increased by that amount
(the "Basket Adjustment") equal to one percent (1%) of any such Earn-Out
Consideration, without prejudice to UniCapital's receipt of or right to receive
indemnification for claims exceeding the amount of the Basket Limitation in
effect at the time such claims were brought. If the Basket Limitation is
adjusted pursuant to the preceding sentence after such time as any Indemnified
Party, pursuant to this Article 12, has collected an amount in excess (such
excess amount is referred to as the "Excess Indemnity") of the Basket Limitation
(prior to giving effect to the applicable Basket Adjustment), then such
Indemnified Party, within 10 business days after the final determination of such
Earn-Out Consideration, shall pay to the Indemnifying Party an amount equal to
the lesser of applicable Basket Adjustment or the Excess Indemnity. In addition,
notwithstanding any provision of this Agreement to the contrary, for the
purposes of preventing a double recovery the Stockholders shall not be obligated
to indemnify UniCapital or any other indemnified party pursuant to Section 12.1
or 12.2 with respect to any particular act, omission, condition or event if and
to the extent that the loss resulting or arising from such act, omission,
condition or event has, directly or indirectly, been taken into account in the
computation of any Net Worth Deficiency provided for in Section 3.1.
Notwithstanding any other term of this Agreement, in no event shall any
Stockholder be liable under this Article 12 for an amount which exceeds the
aggregate value (determined at the Merger Effective Date) of the Merger
Consideration received by such Stockholder under this Agreement. Notwithstanding
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anything to the contrary contained in this Agreement, the limitations upon
indemnification contained in this Section 12.5 shall not apply to Losses arising
out of any of the following (i) any breach of the representations and warranties
of the Stockholders contained in Sections 6.3, 6.5, 6.14, 6.27 and 6.33 hereof;
(ii) any items identified on Schedule 6.27, (iii) litigation net of applicable
reserves reflected on the balance sheet of the Company at the Interim Balance
Sheet Date; (iv) those matters listed in Schedule 6.35(d) or (v) a Material
Adverse Amendment pursuant to Section 8.14.
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The parties agree that
representations and warranties made by the parties in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive for a period of one year from the Merger Effective Date (which date is
hereinafter called the "Expiration Date"), except that:
(a) the representations and warranties contained in Section
6.27 hereof shall survive until such time as the limitations period has run for
all tax periods ended on or prior to the Merger Effective Date, which shall be
deemed to be the Expiration Date for purposes of this clause (a) and claims
arising from a breach of the representations and warranties contained in such
Section 6.27;
(b) the representations and warranties contained in Section
6.28(g) hereof shall survive until such time as one full fiscal year's cycle of
transactions occurring entirely within the twenty-first century shall have been
processed and UniCapital's consolidated financial statements for the fiscal year
in which the last such transaction to be processed occurred have been audited,
which shall be deemed to be the Expiration Date for purposes of this clause (b)
and claims arising from a breach of the representations and warranties contained
in such Section 6.28(g);
(c) the representations and warranties contained in Section
6.33 hereof shall survive for a period of five years from the Merger Effective
Date, which shall be deemed the Expiration Date for purposes of this clause (c)
and claims arising from a breach of the representations and warranties contained
in such Section 6.33;
(d) solely for purposes of Section 12.1(d) hereof, and solely
to the extent that UniCapital actually incurs liability under the Securities
Act, the Exchange Act, or any other federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for purposes of this clause (d) and claims arising under such
laws;
(e) the representations and warranties of the Stockholders
contained in Section 6.5 hereof shall survive the Merger Effective Date without
time limitation; and
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(f) except as otherwise provided in this Section 12.6, any
representations and warranties which serve as a basis of the indemnity
obligations of the Stockholders under Section 12.2 shall survive the Merger
Effective Date without time limitation.
13. TERMINATION OF AGREEMENT
13.1 TERMINATION BY UNICAPITAL. UniCapital may, by notice in the manner
hereinafter provided on or before the Closing Date, terminate this Agreement (a)
if a material default shall be made by the Stockholders in the observance or due
and timely performance of any of the covenants, agreements or conditions
contained herein, and the curing of such default shall not have been made on or
before the Closing Date and shall not reasonably be expected to occur, (b) if
UniCapital in its sole judgment determines that any condition exists which has
made or could reasonably be expected to make any of the representations or
warranties contained in Article 6 hereof untrue in any material respect or (c)
if UniCapital in its sole judgment determines that information disclosed on the
schedules to the Agreement delivered pursuant to Section 8.14 has or could
reasonably be expected to have a material adverse effect on the business,
operations, assets, properties, prospects or condition (financial or otherwise)
of the Company.
13.2 TERMINATION BY THE STOCKHOLDERS. Prior to the initial filing of
the Registration Statement with the SEC, the Stockholders may, by notice in the
manner hereinafter provided on or before such initial filing, terminate this
Agreement (a) in accordance with Section 17.4(b) or (b) if a material default
shall be made by UniCapital in the observance or due and timely performance of
any of the covenants, agreements or conditions contained herein, and the curing
of such default shall not have been made on or before such initial filing. From
and after the initial filing of the Registration Statement with the SEC, the
Stockholders shall have no right to terminate this Agreement.
13.3 AUTOMATIC TERMINATION. This Agreement shall terminate
automatically:
(a) if the Registration Statement has not been declared
effective by June 30, 1998;
(b) if, between the Closing Date and the Merger Effective
Date, the Underwriting Agreement is terminated pursuant to the terms thereof;
(c) if the Merger Effective Date has not occurred within 10
business days after the Closing Date; or
(d) upon the date that the number of shares of UniCapital
Stock to be issued (other than as Earn-Out Consideration) to the persons who
will transfer property to UniCapital in the Unified Transaction can be
determined as a fixed number of shares, unless those same
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persons shall own immediately after the Unified Transaction eighty percent (80%)
or more of the UniCapital Stock that will be issued and outstanding immediately
after the Unified Transaction.
13.4 LIQUIDATED DAMAGES. If the Merger fails to occur because of the
default of the Company or the Stockholders, then, in addition to the other
remedies available to UniCapital at law for fraud, in equity or pursuant to this
Agreement, the Stockholders shall pay to UniCapital the sum of $500,000 as
liquidated damages. It is hereby agreed that UniCapital's damages in the event
of a termination or default by the Company hereunder are uncertain and
impossible to ascertain and that the foregoing constitutes a reasonable
liquidation of such damages and is intended not as penalty but as liquidated
damages.
14. NONCOMPETITION AND NONSOLICITATION
14.1 NONCOMPETITION.
(a) In order to protect the value and goodwill of the
Companies and their respective businesses, each Stockholder covenants that, for
the period ending two years after the Closing Date, such Stockholder will not,
directly or indirectly, own, manage, operate, join, control, finance or
participate in the ownership, management, operation, control or financing of, or
be connected as a partner, principal, agent, representative, consultant or
otherwise with, or use or permit such Stockholder's name to be used in
connection with, any business or enterprise which is engaged directly or
indirectly in competition anywhere in the United States with the business
conducted by UniCapital, the Surviving Corporation or any of its or their
respective subsidiaries or affiliates or with any business engaged in
originating, servicing or securitizing leases or other specialty financing
products or services (the "Restricted Business"). Each Stockholder recognizes
that the Restricted Business is expected to be conducted throughout the United
States and that more narrow geographical limitations of any nature on this
non-competition covenant (and the non-solicitation covenant set forth in
subsection (b)) are therefore not appropriate. Provided, however, that as to
Gerald P. Ennella, the Restricted Business shall be restricted only as to
include the business of the Company as conducted on the date hereof or within
the two years after the Closing Date. The foregoing restriction shall not be
construed to prohibit the ownership by a Stockholder as a passive investment of
not more than five percent of any class of securities of any corporation which
is engaged in any of the foregoing businesses having a class of securities
registered pursuant to Section 12 of the Exchange Act.
(b) Each Stockholder further covenants that for the period
ending two years after the Closing Date, such Stockholder will not, either
directly or indirectly, (i) call on or solicit any customers or prospective
customers of the Restricted Business, or (ii) solicit the employment of any
person who is employed by UniCapital, the Surviving Corporation or any of its or
their respective subsidiaries or affiliates in the Restricted Business during
such period.
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(c) Each Stockholder recognizes and acknowledges that by
reason of such Stockholder's relationship to the Company, such Stockholder has
had access to confidential information relating to the Restricted Business. Each
Stockholder acknowledges that such confidential information is a valuable and
unique asset and covenants that such Stockholder will not disclose any such
confidential information after the Closing Date to any person for any reason
whatsoever.
14.2 DAMAGES. Each Stockholder acknowledges and agrees that measuring
economic losses to UniCapital and the Surviving Corporation as a result of the
breach of the foregoing covenants in this Article 14 would be impossible, and
that any breach of the foregoing covenants would result in immediate and
irreparable damage to UniCapital and the Surviving Corporation for which they
would have no other adequate remedy. Accordingly, the Stockholders agree that,
in the event of a breach by them of any of the foregoing covenants, such
covenants may be enforced by UniCapital or the Surviving Corporation by, without
limitation, injunctions and restraining orders.
14.3 REASONABLE RESTRAINT. The parties agree that the foregoing
covenants in this Article 14 impose a reasonable restraint upon the Stockholders
in light of the activities and business of UniCapital on the date of the
execution of this Agreement and the current and future plans of UniCapital and
the Surviving Corporation (as successors to the businesses of the Company), and
that any violation will result in irreparable injury to UniCapital.
14.4 SEVERABILITY; REFORMATION. The covenants in this Article 14 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, if any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
14.5 INDEPENDENT COVENANT. All of the covenants in this Article 14
shall be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of any Stockholder
against the Company, the Company's Subsidiaries, the Surviving Corporation or
UniCapital, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement of such covenants. The parties
specifically agree that the period of two years stated above shall be computed
by excluding from such computation any time during which any Stockholder is in
violation of any provision of this Article 14 and any time during which there is
pending in any court of competent jurisdiction any action (including any appeal
from any judgment) brought by any person, whether or not a party to this
Agreement, in which action UniCapital or the Surviving Corporation seek to
enforce the agreements and covenants of the Stockholders or in which any person
contests the validity of such agreements and covenants or their enforceability
or seeks to avoid their performance or enforcement.
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14.6 MATERIALITY. The Stockholders hereby acknowledge and agree that
the covenants contained in this Article 14 are a material and substantial part
of this transaction and are entered into in connection with and as an inducement
to the acquisition by UniCapital and Newco of the business of the Company.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that they
have in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Company and the Company's business. The Stockholders
agree that they will not disclose any confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except to authorized representatives of UniCapital or as may be
required by law or order of a court of competent jurisdiction, unless the
Stockholders can show that such information has become known to the public
generally through no fault of the Stockholders. Prior to disclosing any
confidential information required by law or order of a court of competent
jurisdiction, the Stockholders shall provide UniCapital with prompt notice of
the disclosure requirement so that UniCapital may take whatever action it deems
appropriate to prohibit such disclosure. In the event of a breach or threatened
breach by the Stockholders of the provisions of this Section 15.1, UniCapital
and the Surviving Corporation shall be entitled to an injunction restraining
Stockholders from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting UniCapital and the
Surviving Corporation from pursuing any other available remedy for such breach
or threatened breach, including the recovery of damages.
15.2 UNICAPITAL. UniCapital recognizes and acknowledges that it has in
the past, currently has, and prior to the Closing Date will have, access to
certain confidential information solely of the Company in connection with their
respective businesses. UniCapital agrees that, prior to the Closing Date or if
this Agreement is terminated, it will not disclose any such confidential
information to any person, firm, corporation, association, or other entity for
any purpose or reason whatsoever without prior written consent of the
Stockholders, except to authorized representatives of UniCapital or as may be
required by law or order of a court of competent jurisdiction, unless UniCapital
can show that such information has become known to the public generally through
no fault of UniCapital.
In the event of a breach or threatened breach by UniCapital of the provisions
of this Section 15.2, the Stockholders shall be entitled to an injunction
restraining UniCapital from disclosing, in whole or in part, such confidential
information. Nothing contained herein shall be construed as prohibiting the
Stockholders from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
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15.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, UniCapital, the Surviving Corporation and the Stockholders
agree that, in the event of a breach by any of them of the foregoing covenant,
the covenant may be enforced against them by injunctions and restraining orders.
16. LOCK-UP AGREEMENTS
16.1 AGREEMENT. In connection with the IPO, for good and valuable
consideration, and to induce the underwriters that may participate in the IPO to
continue their efforts in connection with the IPO, each Stockholder hereby
agrees that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of such underwriters, it will not, during the period
commencing on the date of this Agreement and ending 180 days after the date of
the final prospectus contained in the Registration Statement relating to the IPO
(the "Prospectus"), (a) offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of UniCapital Stock or any securities
convertible into or exercisable or exchangeable for UniCapital Stock or (b)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of UniCapital Stock,
whether any such transaction described in clause (a) or (b) above is to be
settled by delivery of UniCapital Stock or such other securities, in cash or
otherwise. In addition, each Stockholder agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters that
may participate in the IPO, it will not, during the period commencing on the
date of this Agreement and ending 180 days after the date of the Prospectus,
make any demand for or exercise any right with respect to, the registration of
any shares of UniCapital Stock or any security convertible into or exercisable
or exchangeable for Common Stock.
16.2 INTENDED THIRD PARTY BENEFICIARIES. Each Stockholder agrees that
the foregoing shall be binding upon their transferees, successors, assigns,
heirs, and personal representatives and shall benefit and be enforceable by the
underwriters in the IPO. Each Stockholder acknowledges and agrees that such
underwriters and Morgan Stanley & Co. Incorporated are intended third party
beneficiaries of the provisions of this Article 16, and that Morgan Stanley &
Co. Incorporated on behalf of such underwriters shall be entitled to enforce the
covenants contained in this Article 16. In furtherance of the foregoing,
UniCapital and its transfer agent are hereby authorized to decline to make any
transfer of securities if such transfer would constitute a violation or breach
of this Article 16. The Stockholders also acknowledge and agree that none of the
companies to be acquired as part of the Unified Transaction shall have any
rights as intended third-party beneficiaries under this Agreement.
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17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK
17.1 INVESTMENT INTENT. The Stockholders acknowledge and agree that the
shares of UniCapital Stock to be delivered to the Stockholders pursuant to this
Agreement have not been and will not be registered under the Securities Act and
therefore may not be resold without compliance with the Securities Act. The
Stockholders represent and warrant that the shares of UniCapital Stock to be
acquired by the Stockholders pursuant to this Agreement are being acquired
solely for their own account, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution.
17.2 COMPLIANCE WITH LAW. The Stockholders covenant, warrant and
represent that none of the shares of UniCapital Stock issued to such
Stockholders will be offered, sold, assigned, pledged, hypothecated, transferred
or otherwise disposed of except after full compliance with all of the applicable
provisions of the Securities Act and the rules and regulations of the SEC
thereunder, and except after full compliance with any applicable state
securities laws.
17.3 ECONOMIC RISK; SOPHISTICATION. The Stockholders represent and
warrant that they are able to bear the economic risk of an investment in
UniCapital Stock acquired pursuant to this Agreement and can afford to sustain a
total loss of such investment. The Stockholders further represent and warrant
that they (a) fully understand the nature, scope and duration of the limitations
on transfer contained in this Agreement and (b) have such knowledge and
experience in financial and business matters that they are capable of evaluating
the merits and risks of the proposed investment and therefore have the capacity
to protect their own interests in connection with the acquisition of the
UniCapital Stock.
17.4 INFORMATION SUPPLIED.
(a) The Stockholders represent and warrant that they have had
an adequate opportunity to ask questions and receive answers from the officers
of UniCapital concerning UniCapital, its business, operations, plans and
strategy, and the background and experience of its officers and directors. The
Stockholders represent and warrant that they have asked any and all questions
that they may have in the nature described in the preceding sentence and that
all such questions have been answered to their satisfaction.
(b) Each Stockholder represents and warrants that such
Stockholder has received the draft Registration Statement, including the draft
preliminary prospectus that forms a part thereof, delivered to such Stockholder
on or about February 14, 1998 that describes, among other things, UniCapital,
the Merger, the other acquisitions proposed to be undertaken by UniCapital
simultaneously with the Merger and the target companies of such other
acquisitions. Each Stockholder represents and warrants that such Stockholder has
reviewed such draft Registration Statement and draft preliminary prospectus and
has had adequate opportunity to ask
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questions of and receive answers to such Stockholder's satisfaction from the
officers of UniCapital concerning the matters described therein.
18. SECURITIES LEGENDS
The certificates evidencing the UniCapital Stock to be received by the
Stockholders hereunder will bear a legend substantially in the form set forth
below and containing such other information as UniCapital may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES OR BLUE SKY LAWS.
SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
SECURITIES ACT AND ANY STATE SECURITIES OR BLUE SKY LAWS,
UNLESS, IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION) OF COUNSEL SATISFACTORY TO
THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
In addition, such certificates shall also bear (a) a legend reflecting the
restrictions contained in Article 16 and (b) such other legends as counsel for
UniCapital reasonably determines are required under the applicable laws of any
state.
19. GENERAL
19.1 COOPERATION. The Stockholders and UniCapital shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement. The
Stockholders will cooperate and use their best efforts to have the officers,
directors and employees of Company prior to the Closing Date cooperate with
UniCapital on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of UniCapital, and the heirs and legal representatives of the
Stockholders.
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19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company, UniCapital and Newco and supersedes any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the Stockholders (subject to the limitations
set forth below), the Company, UniCapital and Newco acting through their
respective officers, duly authorized by their respective Boards of Directors;
provided, that the Stockholder who owns a majority of the outstanding shares of
capital stock of the Company shall have the authority to approve and execute any
amendment to this Agreement on behalf of all of the Stockholders and without the
necessity of such majority Stockholder obtaining consent or authorization from
any other Stockholder, unless such amendment relates to any representation or
warranty made by a Stockholder other than such majority Stockholder which may
only be amended by the written agreement of such person; and provided further,
that no Stockholder shall have any power or authority to modify or amend this
Agreement in any respect from and after the initial filing of the Registration
Statement with the SEC.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
19.5 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with the transactions contemplated
hereby, and each of UniCapital and Newco, on the one hand, and the Stockholders,
on the other hand, agrees to indemnify the other against all loss, liability,
cost damages or expense arising out of or related to claims for fees or
commissions of brokers employed or alleged to have been employed by such
indemnifying party.
19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, UniCapital will pay the fees, expenses and disbursements
of UniCapital and Newco and their respective agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto. Whether or not the transactions herein
contemplated shall be consummated, the Stockholders will pay the fees, expenses
and disbursements of the Stockholders and the Company and their respective
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments hereto and all other costs
and expenses incurred in the performance of this Agreement by the Stockholders
and the Company and in compliance with all conditions to be performed by the
Stockholders and the Company under this Agreement.
19.7 NOTICES. All notices and other communications hereunder shall be
in writing (including wire, telefax or similar writing) and shall be sent,
delivered or mailed, addressed, or telefaxed:
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(a) If to UniCapital or Newco, addressed to them at:
UniCapital Corporation
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Telephone: (305) 861-0603
Telefax: (305) 866-8449
with a copy to:
David A. Gerson
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
301 Grant Street
Pittsburgh, PA 15219
Telephone: (412) 560-3330
Telefax: (412) 560-3399
(b) If to the Stockholders, addressed to them in care of the
Stockholders' Representative at:
Michael B. Pandolfelli
3 Old Quarry Road
Englewood, NJ 07631
with a copy to:
Alan C. Winick
Winick & Rich, P.C.
919 Third Avenue
New York, NY 10022
Telephone: (212) 935-9360
Telefax: (212) 308-5945
Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telefax, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 19.7 (or in accordance with the latest
unrevoked written direction from such party) and (ii) if given by telefax, when
such telefax
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is transmitted to the telefax number specified in this Section 19.7 (or in
accordance with the latest unrevoked written direction from such party), and the
appropriate confirmation is received.
19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York, without giving effect to any of the
provisions thereof that would require the application of the substantive laws of
any other jurisdiction. Each party to this Agreement: (a) agrees that any legal
action or proceeding under this Agreement shall be brought in the courts of the
State of New York or in the United States District Court for the Southern
District of New York; (b) irrevocably submits to the jurisdiction of such
courts; (c) agrees not to assert any claim or defense that it is not personally
subject to the jurisdiction of such courts, that any such forum is not
convenient or the venue thereof is improper, or that this Agreement or the
subject matter hereof may not be enforced in such courts; and (d) agrees to
accept service of process on it by certified or registered mail or by any other
method authorized by law.
19.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.10 TIME. Time is of the essence with respect to this Agreement.
19.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
19.12 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
20. DEFINITIONS
20.1 "Accounts Receivable" is defined in Section 6.14.
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20.2 "Acquisition Proposal" is defined in Section 8.10.
20.3 "Additional Escrow Property" is defined in Section 4.1(b).
20.4 "Additional Escrow Shares" is defined in Section 4.1(a).
20.5 "Adjusted 1997 EBT" is defined in Section 2.5(a).
20.6 "Adjusted 1998 EBT" is defined in Section 2.5(a).
20.7 "Agent" is defined in Section 8.10.
20.8 "Agreement" is defined in the preamble to this Agreement.
20.9 "Audited Balance Sheet Date" is defined in Section 6.12(a).
20.10 "Audited Financial Statements" are defined in Section 6.12(a).
20.11 "Authorizations" are defined in Section 6.23.
20.12 "Basket Adjustment" is defined in Section 12.5.
20.13 "Basket Limitation" is defined in Section 12.5(b)
20.14 "Benefit Plan" is defined in Section 6.22.
20.15 "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq.
20.16 "Certificates" are defined in Section 2.2.
20.17 "Certificate of Merger" is defined in Section 1.1.
20.18 "Closing" is defined in Section 5.1(b).
20.19 "Closing Date" is defined in Section 5.2.
20.20 "Closing Date Balance Sheet" is defined in Section 3.1.
20.21 "Code" is defined in the recitals to this Agreement.
20.22 "Commonly Controlled Entity" is defined in Section 6.22.
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20.23 "Company" is defined in the preamble to this Agreement.
20.24 "Company Documents" are defined in Section 6.2.
20.25 "Company EBT" is defined in Section 2.5(b).
20.26 "Company Stock" is defined in Section 2.1(a).
20.27 "Constituent Corporations" are defined in the recitals to this
Agreement.
20.28 "Contracts" are defined in Section 6.17.
20.29 "Delinquent Accounts" are defined in Section 12.2(e)
20.30 "Disputed Amounts" are defined in Section 3.2.
20.31 "EBT" is defined in Section 2.5(a).
20.32 "Earn-Out Consideration" is defined in Section 2.5(c).
20.33 "Earn-Out Escrow Cash" is defined in Section 4.1(b).
20.34 "Earn-Out Escrow Shares" are defined in Section 4.1(b).
20.35 "Effective Date Consideration" is defined in Section 2.1(a).
20.36 "Environmental Laws" mean any and all applicable treaties, laws,
regulations, ordinances, enforceable requirements, binding determinations,
orders, decrees, judgments, injunctions, permits, approvals, authorizations,
licenses or binding agreements issued, promulgated or entered into by any
Governmental Entity, relating to the environment, preservation or reclamation of
natural resources, or to the management, Release or threatened Release of or
exposure to Hazardous Substances, including CERCLA, the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.,
the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et. seq., the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq., and any similar or implementing state or local law and all amendments or
regulations promulgated thereunder.
20.37 "Environmental Liabilities" mean any and all Losses arising from
or related to any claim, proceeding, investigation, response or removal action,
remediation or other clean-up
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brought, prosecuted or undertaken by UniCapital, Newco, the Surviving
Corporation, any Governmental Entity or any other person or entity on the basis
of any violation of any Environmental Laws or pursuant to any requirement
imposed under any Environmental Laws (including any sampling, testing,
investigation, removal, treatment or remediation undertaken by UniCapital, Newco
or the Surviving Corporation so as to avoid any claim or violation or to comply
with any requirement and all counseling or engineering fees and expenses related
thereto), and arising from pre-Closing operations, events, circumstances or
conditions at, on, under or emanating from, or as a result of any pre-Closing
off-site disposal of Hazardous Substances from, any property currently or
formerly owned, operated or leased by the Company.
20.38 "Environmental Permits" mean all permits, licenses, approvals or
authorizations from any Governmental Entity required under Environmental Laws
for the operation of the business of the Company.
20.39 "Equipment" is defined in Section 6.35.
20.40 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
20.41 "Escrow Cash" is defined in Section 4.1(a).
20.42 "Escrow Property" is defined in Section 4.1(b).
20.43 "Escrow Shares" are defined in Section 4.1(a).
20.44 "Exchange Act" is defined in Section 12.1.
20.45 "Expiration Date" is defined in Section 12.6.
20.46 "Financial Statements" are defined in Section 6.12(b).
20.47 "Foreign Plans" are defined in Section 6.22(i)(xiii).
20.48 "GAAP" is defined in Section 3.1.
20.49 "Governmental Entity" means any court, administrative or
regulatory agency or commission, or other governmental authority or
instrumentality, domestic, foreign or supranational.
20.50 "Hazardous Substances" mean all explosive or regulated
radioactive materials or substances, hazardous or toxic materials, wastes or
chemicals, petroleum and petroleum products (including crude oil or any fraction
thereof), asbestos or asbestos containing materials, and all other materials or
chemicals regulated pursuant to any Environmental Law, including
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materials listed in 49 C.F.R. ss. 172.101 and materials defined as hazardous
pursuant to Section 101(14) of CERCLA.
20.51 "Indemnifiable Decrease" is defined in Section 12.5(a).
20.52 "Indemnified Party" is defined in Section 12.4(a).
20.53 "Indemnifying Party" is defined in Section 12.4(a).
20.54 "Indemnity Escrow Agent" is defined in Section 4.1(a).
20.55 "Independent Accounting Firm" is defined in Section 3.2.
20.56 "Intellectual Property" is defined in Section 6.28(a).
20.57 "Interim Net Worth Period" as defined in Section 12.5(a).
20.58 "Interim Balance Sheet" is defined is Section 6.12(b).
20.59 "Interim Balance Sheet Date" is defined in Section 6.12(b).
20.60 "IPO" is defined in the recitals to this Agreement.
20.61 "IPO Price" means the per share price that the UniCapital Stock
is sold to the underwriters in the IPO prior to the deduction of any discounts
or expenses.
20.62 "Lease Documents" are defined in Section 6.35.
20.63 "Leases" are defined in Section 6.35.
20.64 "Liabilities" are defined in Section 6.13(a).
20.65 "Losses" are defined in Section 12.1.
20.66 "Material Adverse Amendment" is defined in Section 8.4.
20.67 "Merger" is defined in the recitals to this Agreement.
20.68 "Merger Consideration" is defined in Section 2.1(c).
20.69 "Merger Effective Date" is defined in Section 5.3.
20.70 "Net Worth Deficiency" is defined in Section 3.1.
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20.71 "Newco" is defined in the preamble to this Agreement.
20.72 "1999 EBT" is defined in Section 2.5(b).
20.73 "Obligor" is defined in Section 6.35.
20.74 "Ordinary course" or "ordinary course of business" means the
conduct of business as conducted by the Company prior to the date of this
Agreement consistent in nature and, where relevant, amount with past practices.
20.75 "PCBs" are defined in Section 6.33(h).
20.76 "Permits" mean all permits, licenses, franchises, approvals and
authorizations from any Governmental Entity that are owned or held by the
Company, or held by any Stockholder that relate to the operations of the
Company.
20.77 "Pension Plan" is defined in Section 6.22.
20.78 "Prospectus" is defined in Section 16.1.
20.79 "Registration Statement" is defined in Section 9.4.
20.80 "Regulations" are defined in Section 6.23.
20.81 "Release" means any spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, emanation or migration of any
Hazardous Substance in, into, onto or through the environment (including ambient
air, surface water, ground water, soils, land surface, subsurface strata,
workplace or structure).
20.82 "Restricted Business" is defined in Section 14.1(a).
20.83 "Scheduled Payments" are defined in Section 6.35.
20.84 "SEC" is defined in Section 9.4.
20.85 "Securities Act" is defined in Section 6.16.
20.86 "Stockholders" are defined in the preamble to this Agreement.
20.87 "Stockholders' Representative" is defined in Section 3.3.
20.88 "Subsidiary" is defined in Section 6.1.
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20.89 "Surviving Corporation" is defined in Section 1.2.
20.90 "Tax Returns" are defined in Section 6.27.
20.91 "Taxes" are defined in Section 6.27.
20.92 "Third Party Claim" is defined in Section 12.4(a).
20.93 "Unaudited Financial Statements" are defined in Section 6.12(b).
20.94 "Underwriting Agreement" is defined in Section 5.1(a).
20.95 "UniCapital" is defined in the preamble to this Agreement.
20.96 "UniCapital Documents" are defined in Section 7.3.
20.97 "UniCapital Stock" is defined in Section 2.1(a).
20.98 "Unified Transaction" is defined in the recitals to this
Agreement
20.99 "Welfare Plan" is defined in Section 6.22.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNICAPITAL CORPORATION
By: /s/ ROBERT NEW
------------------------------
Name: Robert New
Title: Chairman and Chief Executive Officer
ACR ACQUISITION CORP.
By: /s/ ROBERT NEW
------------------------------
Name: Robert New
Title: President and Chief Executive Officer
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
AMERICAN CAPITAL RESOURCES, INC.
By: /s/ MICHAEL B. PANDOLFELLI
--------------------------------
Name: Michael B. Pandolfelli
Title: President
THE STOCKHOLDERS
/s/ MICHAEL B. PANDOLFELLI
---------------------------------------
Michael B. Pandolfelli
/s/ GERALD P. ENNELLA
---------------------------------------
Gerald P. Ennella
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ANNEXES
ANNEX I [Form of Certificate of Merger]
ANNEX II [Composition of Consideration]
ANNEX III [Form of Indemnity Escrow Agreement]
ANNEX IV [Form of Employment Agreement]
ANNEX V [INTENTIONALLY OMITTED]
ANNEX VI [Form of Stockholder's Release]
SCHEDULES
SCHEDULE 2.5 [Add-Backs]
SCHEDULE 6.1 [Jurisdictions in which Company and Subsidiaries Are Qualified
to do Business]
SCHEDULE 6.3 [Other Entities]
SCHEDULE 6.4 [Consents]
SCHEDULE 6.5 [Issued and Outstanding Stock of the Company and Subsidiaries]
SCHEDULE 6.6 [Transactions in Capital Stock]
SCHEDULE 6.8 [Subsidiaries]
SCHEDULE 6.9 [Predecessor Companies]
SCHEDULE 6.11 [Third Party Options]
SCHEDULE 6.12 [Company Financial Statements]
SCHEDULE 6.13 [Liabilities and Obligations]
SCHEDULE 6.14 [Accounts and Notes Receivable Aging]
SCHEDULE 6.15 [Permits]
SCHEDULE 6.16 [Real and Personal Property]
SCHEDULE 6.17 [Contracts]
SCHEDULE 6.20 [Insurance]
SCHEDULE 6.21 [Employee Information]
SCHEDULE 6.22 [Employee Benefit Plans]
SCHEDULE 6.23 [Authorizations]
SCHEDULE 6.24 [Transactions with Affiliates]
SCHEDULE 6.25 [Litigation]
SCHEDULE 6.27 [Taxes]
SCHEDULE 6.28 [Intellectual Property]
SCHEDULE 6.28(d) [Confidentiality and Non-Disclosure Agreements]
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SCHEDULE 6.28(e) [Registered Intellectual Property]
SCHEDULE 6.29 [Notice and Consents]
SCHEDULE 6.30 [Absence of Changes]
SCHEDULE 6.31 [Deposit Accounts; Powers of Attorney]
SCHEDULE 6.35 [Leases]
SCHEDULE 7.9 [UniCapital and Newco Agreements]
SCHEDULE 8.15 [Business in the Ordinary Course]
SCHEDULE 9.2 [Employment Agreements]
SCHEDULE 10.14 [Release of Guarantees]
SCHEDULE 11.4 [Personal Guarantees of the Indebtedness of the Company]
The registrant agrees to furnish a copy of each omitted schedule, exhibit or
annex to this Exhibit 2.01 to the Commission supplementally upon request
therefor.
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Exhibit 2.02
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
UNICAPITAL CORPORATION
(a Delaware corporation),
BCG ACQUISITION CORP.
(a Delaware corporation),
BOULDER CAPITAL GROUP, INC.
(a Colorado corporation)
and
ROY L. BURGER and CARL M. WILLIAMS
Dated as of February 14, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
Table Of Contents
<TABLE>
<CAPTION>
Page
<C> <S> <C>
1. THE MERGER...............................................................................................2
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER.......................................................2
1.2 MERGER EFFECTIVE DATE...........................................................................2
1.3 CERTIFICATE OF INCORPORATION, BYLAWS, BOARD OF DIRECTORS AND OFFICERS OF THE
SURVIVING CORPORATION...........................................................................2
2. MERGER CONSIDERATION.....................................................................................3
2.1 CONVERSION OF CAPITAL STOCK; MERGER CONSIDERATION...............................................3
2.2 EXCHANGE PROCEDURES.............................................................................3
2.3 NO FRACTIONAL SHARES............................................................................4
2.4 ALLOCATION OF MERGER CONSIDERATION..............................................................4
2.5 EARN-OUT CONSIDERATION..........................................................................4
3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS' REPRESENTATIVE....................................................6
3.1 COMPUTATION.....................................................................................6
3.2 DISPUTES........................................................................................7
3.3 STOCKHOLDERS' REPRESENTATIVE....................................................................7
4. INDEMNITY ESCROW AND 1998 SHORTFALL ESCROW...............................................................8
4.1 CREATION OF INDEMNITY ESCROW....................................................................8
4.2 DURATION AND TERMS OF THE INDEMNITY ESCROW......................................................9
4.3 INDEMNITY ESCROW VOTING AND INVESTMENT..........................................................9
4.4 1998 SHORTFALL ESCROW...........................................................................9
4.5 DURATION AND TERMS OF THE 1998 SHORTFALL ESCROW.................................................9
4.6 1998 SHORTFALL ESCROW VOTING AND INVESTMENT.....................................................9
5. CLOSING; MERGER EFFECTIVE DATE..........................................................................10
5.1 CLOSING........................................................................................10
5.2 CLOSING DATE; LOCATION.........................................................................10
5.3 EFFECTIVENESS OF MERGER........................................................................10
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS..........................................................10
6.1 CORPORATE EXISTENCE............................................................................10
6.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS........................................10
6.3 AUTHORITY; OWNERSHIP...........................................................................11
6.4 VALIDITY OF CONTEMPLATED TRANSACTIONS..........................................................11
6.5 CAPITAL STOCK OF EACH COMPANY..................................................................11
6.6 TRANSACTIONS IN CAPITAL STOCK..................................................................12
6.7 NO BONUS SHARES................................................................................12
</TABLE>
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<TABLE>
<C> <S> <C>
6.8 SUBSIDIARIES...................................................................................12
6.9 PREDECESSOR STATUS; ETC........................................................................13
6.10 SPIN-OFFS......................................................................................13
6.11 NO THIRD PARTY OPTIONS.........................................................................13
6.12 FINANCIAL STATEMENTS...........................................................................13
6.13 LIABILITIES AND OBLIGATIONS....................................................................14
6.14 ACCOUNTS AND NOTES RECEIVABLE..................................................................14
6.15 PERMITS........................................................................................15
6.16 REAL AND PERSONAL PROPERTY.....................................................................15
6.17 CONTRACTS AND COMMITMENTS......................................................................16
6.18 GOVERNMENT CONTRACTS...........................................................................18
6.19 TITLE TO REAL PROPERTY.........................................................................18
6.20 INSURANCE......................................................................................18
6.21 EMPLOYEES......................................................................................18
6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS........................................................19
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS............................................................22
6.24 TRANSACTIONS WITH AFFILIATES...................................................................23
6.25 LITIGATION.....................................................................................23
6.26 RESTRICTIONS...................................................................................24
6.27 TAXES..........................................................................................24
6.28 INTELLECTUAL PROPERTY MATTERS..................................................................25
6.29 COMPLETENESS; NO VIOLATIONS....................................................................26
6.30 EXISTING CONDITIONS............................................................................26
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY...........................................................28
6.32 BOOKS OF ACCOUNT...............................................................................28
6.33 ENVIRONMENTAL MATTERS..........................................................................29
6.34 NO ILLEGAL PAYMENTS............................................................................30
6.35 LEASES.........................................................................................30
6.36 LEASE FUNDING..................................................................................33
6.37 DISCLOSURE.....................................................................................33
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO.................................................................34
7.1 CORPORATE EXISTENCE............................................................................34
7.2 UNICAPITAL STOCK...............................................................................34
7.3 CORPORATE POWER AND AUTHORIZATION..............................................................34
7.4 NO CONFLICTS...................................................................................34
7.5 CAPITALIZATION OF UNICAPITAL...................................................................35
7.6 COMPLIANCE WITH LAW; AUTHORIZATIONS............................................................35
7.7 TRANSACTIONS WITH AFFILIATES...................................................................35
7.8 LITIGATION.....................................................................................35
7.9 MISCELLANEOUS..................................................................................36
7.10 REGISTRATION RIGHTS............................................................................36
</TABLE>
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<TABLE>
<C> <S> <C>
8. COVENANTS OF STOCKHOLDERS AND COMPANIES.................................................................36
8.1 BUSINESS IN THE ORDINARY COURSE................................................................36
8.2 EXISTING CONDITIONS............................................................................36
8.3 MAINTENANCE OF PROPERTIES AND ASSETS...........................................................36
8.4 EMPLOYEES AND BUSINESS RELATIONS...............................................................36
8.5 MAINTENANCE OF INSURANCE.......................................................................37
8.6 COMPLIANCE WITH LAWS, ETC......................................................................37
8.7 CONDUCT OF BUSINESS............................................................................37
8.8 ACCESS.........................................................................................37
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS........................................................38
8.10 EXCLUSIVITY....................................................................................38
8.11 THIRD PARTY APPROVALS..........................................................................39
8.12 NOTICE TO BARGAINING AGENTS....................................................................39
8.13 NOTIFICATION OF CERTAIN MATTERS................................................................39
8.14 DELIVERY AND AMENDMENT OF SCHEDULES............................................................39
8.15 HSR FILING.....................................................................................40
8.16 THE REAL ESTATE VENTURE........................................................................40
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND
STOCKHOLDERS............................................................................................40
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.....................................40
9.2 EMPLOYMENT AGREEMENTS..........................................................................41
9.3 OPINION OF COUNSEL.............................................................................41
9.4 REGISTRATION STATEMENT.........................................................................41
9.5 HSR ACT........................................................................................42
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND
NEWCO
42
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.....................................42
10.2 NO LITIGATION..................................................................................42
10.3 EXAMINATION OF FINANCIAL STATEMENTS............................................................42
10.4 NO MATERIAL ADVERSE CHANGE.....................................................................42
10.5 REGULATORY REVIEW..............................................................................43
10.6 STOCKHOLDERS' RELEASE..........................................................................43
10.7 EMPLOYMENT AGREEMENTS..........................................................................43
10.8 OPINION OF COUNSEL.............................................................................43
10.9 CONSENTS AND APPROVALS.........................................................................45
10.10 GOOD STANDING CERTIFICATES.....................................................................45
10.11 REGISTRATION STATEMENT.........................................................................45
10.12 REPAYMENT OF INDEBTEDNESS; PRE-CLOSING DISTRIBUTIONS...........................................45
10.13 NET INCOME.....................................................................................45
10.14 HSR ACT........................................................................................45
</TABLE>
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<TABLE>
<C> <S> <C>
10.15 RELEASE OF SECURITY INTERESTS..................................................................45
11. COVENANTS OF UNICAPITAL.................................................................................45
11.1 LEASES.........................................................................................45
11.2 UNICAPITAL STOCK OPTIONS.......................................................................46
11.3 INFORMATION FILING.............................................................................46
11.4 RELEASE FROM GUARANTEES; INDEBTEDNESS..........................................................46
11.5 HSR FILING.....................................................................................46
12. INDEMNIFICATION; SURVIVAL...............................................................................47
12.1 GENERAL INDEMNIFICATION BY STOCKHOLDERS........................................................47
12.2 SPECIFIC INDEMNIFICATION BY STOCKHOLDERS.......................................................48
12.3 INDEMNIFICATION BY UNICAPITAL AND NEWCO........................................................48
12.4 THIRD PARTY CLAIMS.............................................................................48
12.5 LIMITATIONS ON INDEMNIFICATION.................................................................50
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.....................................................51
13. TERMINATION OF AGREEMENT................................................................................52
13.1 TERMINATION BY UNICAPITAL......................................................................52
13.2 TERMINATION BY THE STOCKHOLDERS................................................................53
13.3 AUTOMATIC TERMINATION..........................................................................53
13.4 LIQUIDATED DAMAGES.............................................................................53
14. NONCOMPETITION AND NONSOLICITATION......................................................................54
14.1 NONCOMPETITION.................................................................................54
14.2 DAMAGES........................................................................................54
14.3 REASONABLE RESTRAINT...........................................................................55
14.4 SEVERABILITY; REFORMATION......................................................................55
14.5 INDEPENDENT COVENANT...........................................................................55
14.6 MATERIALITY....................................................................................55
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................55
15.1 STOCKHOLDERS...................................................................................55
15.2 UNICAPITAL.....................................................................................56
15.3 DAMAGES........................................................................................56
16. LOCK-UP AGREEMENTS......................................................................................56
16.1 AGREEMENT......................................................................................56
16.2 INTENDED THIRD PARTY BENEFICIARIES.............................................................57
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK........................................................................................57
17.1 INVESTMENT INTENT..............................................................................57
</TABLE>
iv
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<TABLE>
<C> <S> <C>
17.2 COMPLIANCE WITH LAW............................................................................57
17.3 ECONOMIC RISK; SOPHISTICATION..................................................................58
17.4 INFORMATION SUPPLIED...........................................................................58
18. SECURITIES LEGENDS......................................................................................58
19. GENERAL.................................................................................................59
19.1 COOPERATION....................................................................................59
19.2 SUCCESSORS AND ASSIGNS.........................................................................59
19.3 ENTIRE AGREEMENT...............................................................................59
19.4 COUNTERPARTS...................................................................................60
19.5 BROKERS AND AGENTS.............................................................................60
19.6 EXPENSES.......................................................................................60
19.7 NOTICES........................................................................................60
19.8 GOVERNING LAW..................................................................................61
19.9 EXERCISE OF RIGHTS AND REMEDIES................................................................62
19.10 TIME...........................................................................................62
19.11 REFORMATION AND SEVERABILITY...................................................................62
19.12 REMEDIES CUMULATIVE............................................................................62
19.13 CAPTIONS.......................................................................................62
20. DEFINITIONS.............................................................................................62
</TABLE>
v
<PAGE> 7
AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION (the
"Agreement") is made as of the 14th day of February, 1998, between UNICAPITAL
CORPORATION, a Delaware corporation ("UniCapital"); BCG ACQUISITION CORP., a
Delaware corporation ("Newco"); Boulder Capital Group, Inc., a Colorado
corporation (the "Company") and Roy L. Burger and Carl M. Williams (collectively
referred to as the "Stockholders"), who are all of the stockholders of the
Company. Certain capitalized terms used herein are defined in Article 20 hereof.
WHEREAS, UniCapital was incorporated on October 9, 1997 under the laws
of the State of Delaware for the purpose of acquiring a number of equipment
leasing businesses in different locations; and
WHEREAS, UniCapital intends to undertake an initial public offering of
its Common Stock (the "IPO") and in connection therewith intends to file a
Registration Statement on Form S-1 with the Securities and Exchange Commission
within 90 days of the execution and delivery of this Agreement;
WHEREAS, Newco was duly incorporated on January 26, 1998 under the laws
of the State of Delaware solely for the purpose of completing this transaction,
and is a wholly-owned subsidiary of UniCapital; and
WHEREAS, the Company is a corporation organized and existing under the
laws of its respective state of incorporation; and
WHEREAS, the respective Boards of Directors of UniCapital, Newco and
the Company deem it advisable and in the best interests of such corporations and
their respective stockholders that Newco merge with and into the Company
pursuant to this Agreement and the applicable pro visions of the laws of the
respective states of incorporation of Newco and the Company and such transaction
being herein called the "Merger" and the Company, Newco and UniCapital being
hereinafter collectively referred to as the "Constituent Corporations"); and
WHEREAS, the parties hereto intend that the transactions contemplated
in this Agreement constitute part of a single transaction involving the
simultaneous consummation of a number of similar agreements between UniCapital
and certain other corporations and partnerships and the IPO and that such single
transaction (the "Unified Transaction") shall fall within the provisions of
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
<PAGE> 8
1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent
Corporations will cause Articles of Merger, in substantially the form of Annex I
attached hereto with such changes therein as may be required by applicable state
laws (the "Articles of Merger"), to be executed and delivered to the Secretary
of State of the state of incorporation of Newco and the Company on or before the
Merger Effective Date.
1.2 MERGER EFFECTIVE DATE. The "Merger Effective Date" shall be the
date specified in Section 5.3. At the Merger Effective Date, the Articles of
Merger shall either be filed for immediate effectiveness with the Secretary of
State of the applicable state of incorporation of Newco and the Company or
become effective if filed with such Secretary of State prior to such date. On
the Merger Effective Date upon the effectiveness of the Merger, Newco shall be
merged with the Company, in accordance with the Articles of Merger, and the
separate existence of Newco shall cease. The Company, as the entity surviving
the Merger, is hereinafter sometimes referred to as the "Surviving Corporation."
The Merger shall have the effects specified in the laws of the state of
incorporation of the Surviving Corporation.
1.3 CERTIFICATE OF INCORPORATION, BYLAWS, BOARD OF DIRECTORS AND
OFFICERS OF THE SURVIVING CORPORATION. Upon the effectiveness of the Merger:
(a) the Certificate of Incorporation of the Company, as
amended and restated in the Articles of Merger, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law;
(b) the Bylaws of the Company shall be the Bylaws of the
Surviving Corporation and shall remain so until thereafter duly amended;
(c) the Surviving Corporation shall have a Board of
Directors consisting of one member, who shall be Robert New commencing upon the
effectiveness of the Merger and who shall hold office subject to the laws of the
state of incorporation and the Certificate of Incorporation and Bylaws of the
Surviving Corporation; and
(d) the officers of the Company immediately prior to the
Merger Effective Date shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, each of such officers to serve,
subject to the provisions of the Certificate of Incorporation and Bylaws of the
Surviving Corporation, until such officer's successor is elected and qualified;
provided, that the Chairman of the Board (if any), the Treasurer and the
Secretary of the Company shall not succeed to the corresponding offices of the
Surviving Corporation, but instead (i) the sole director of the Surviving
Corporation shall be the Chairman of the Board of the Surviving Corporation,
(ii) the Treasurer of Newco shall be the Treasurer of the Surviving Corporation
and (iii) the Secretary of Newco shall remain the Secretary of the Surviving
Corporation.
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<PAGE> 9
2. MERGER CONSIDERATION
2.1 CONVERSION OF CAPITAL STOCK; MERGER CONSIDERATION.
(a) Upon the effectiveness of the Merger, all of the shares
of capital stock of the Company issued and outstanding immediately prior to the
effectiveness of the Merger ("Company Stock") shall, by virtue of the Merger and
without any action on the part of the holder thereof but subject to the
effectiveness of the Merger, automatically be converted into the right to
receive, without interest,
(i) an aggregate of $7,050,000 in cash,
(ii) an aggregate of 371,053 shares of common
stock, par value $.001 per share, of UniCapital ("UniCapital Stock") (the
consideration referred to in clauses (i) and (ii), all of which is to be
distributed to the Stockholders on the Merger Effective Date in the percentages
set forth on Annex II, subject to Article 4 hereof, is referred to in this
Agreement as the "Effective Date Consideration"); provided, however, in the
event that the aggregate value (based on the IPO Price of the UniCapital Stock)
of the 371,053 shares of UniCapital Stock is less than $5,565,795 then the
Company shall issue additional shares to the Stockholders so that the aggregate
value of the shares of UniCapital Stock equals $5,565,795 (with appropriate
adjustment to the cash and stock components of the Effective Date Consideration
so as to eliminate fractional shares), and
(iii) the Earn-Out Consideration as described in
Section 2.5, to be distributed to the Stockholders within five business days
after the date the portion of the Earn-Out Consideration with respect to a given
calendar year (if any) is finally determined pursuant to Section 2.5 in the
percentages set forth on Annex II.
(b) Upon the effectiveness of the Merger, each share of
capital stock of Newco issued and outstanding immediately prior to the
effectiveness of the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, automatically be converted into one
fully paid and non-assessable share of common stock of the Surviving
Corporation, all of which converted common stock shall constitute all of the
outstanding shares of capital stock of the Surviving Corporation immediately
after the effectiveness of the Merger.
(c) The Effective Date Consideration and the Earn-Out
Consideration are referred to together in this Agreement as the "Merger
Consideration."
2.2 EXCHANGE PROCEDURES. On the Merger Effective Date, upon surrender
to UniCapital of certificates representing all of the outstanding shares of
Company Stock ("Certificates"), each Stockholder shall, subject to Article 4, be
entitled to receive, in exchange therefor, such Stockholder's pro rata share of
the cash portion of the Effective Date
3
<PAGE> 10
Consideration, calculated in accordance with Annex II, and a certificate
representing that number of whole shares of UniCapital Stock which such holder
has the right to receive in respect of the Certificates surrendered, calculated
in accordance with Annex II, and each Certificate so surrendered shall forthwith
be canceled. On the Merger Effective Date or as promptly thereafter as is
practicable, and subject to and in accordance with the provisions of Article 4,
UniCapital shall cause to be distributed to the Indemnity Escrow Agent (as
defined in Article 4) a certificate or certificates representing the Escrow
Shares (as defined in Article 4), which shall be registered in the name of the
Indemnity Escrow Agent as nominee for the Stockholders and shall be held in
accordance with the provisions of Article 4 and the Indemnity Escrow Agreement
referred to therein.
2.3 NO FRACTIONAL SHARES. Notwithstanding any other provision of this
Article 2, no fractional shares of UniCapital Stock will be issued and any
holder of Company Stock entitled hereunder to receive a fractional share of
UniCapital Stock but for this Section 2.3 will be entitled hereunder to receive
no such fractional share but a cash payment in lieu thereof in an amount equal
to such fraction multiplied by $19.00.
2.4 ALLOCATION OF MERGER CONSIDERATION. The parties agree that they
will not take a position on any income tax return, before any governmental
agency charged with the collection of any income tax, or in any judicial
proceeding that is in any way inconsistent with the allocation (if any) of the
Merger Consideration to the Company made by UniCapital following the Closing.
2.5 EARN-OUT CONSIDERATION.
(a)
(i) If the consolidated earnings before taxes
(the "EBT") of the Company for the twelve months ending December 31, 1998,
increased by amounts in respect of those items set forth on Schedule 2.5 that
affected net income during the period from January 1, 1998 through the Closing
Date, decreased by the amount of UniCapital corporate overhead allocated to the
Company and the amount earned from New Programs for the period from the Closing
Date through December 31, 1998 (the "Adjusted 1998 EBT"), exceeds the
consolidated EBT of the Company for the twelve months ending December 31, 1997,
increased by the add-backs set forth on Schedule 2.5 and inclusive of the amount
earned from New Programs in 1997 (the "Adjusted 1997 EBT"), then the
Stockholders shall be entitled to receive one-half of the difference between the
Adjusted 1998 EBT and the Adjusted 1997 EBT. Notwithstanding the foregoing, the
Stockholders shall be entitled to receive that portion of the Adjusted 1998 EBT
attributable to New Programs.
(ii) For each $1.00 by which the Adjusted 1998
EBT falls short of Adjusted 1997 EBT, the Stockholders shall remit to UniCapital
from the 1998 Shortfall Escrow, within 10 days after notice of such
determination, $6.00 in shares of UniCapital Stock, valued at the IPO Price (the
"1998 Shortfall"), but not to exceed $3,600,000.
4
<PAGE> 11
(b) If the consolidated EBT of the Company for the year
ending December 31, 1999, decreased by the amount of UniCapital corporate
overhead allocated to the Company and the amount earned from New Programs (the
"Adjusted 1999 EBT", and together with the Adjusted 1997 EBT and the Adjusted
1998 EBT, the "Company EBT"), exceeds the greater of Adjusted 1998 EBT and
Adjusted 1997 EBT, then the Stockholders shall be entitled to receive one-half
of the difference between (i) the Adjusted 1999 EBT and (ii) the greater of the
Adjusted 1998 EBT and the Adjusted 1997 EBT. Notwithstanding the foregoing, the
Stockholders shall be entitled to receive 100% of the Adjusted 1999 EBT
attributable to New Programs.
(c) The Stockholders shall be entitled to receive the (x)
EBT of the Company for the year ending December 31, 2000 attributable to New
Programs adjusted for the amount of UniCapital corporate overhead allocated to
the Company and (y) three (3) times the Company's share of the average EBT of
the Real Estate Venture for the fiscal years ending December 31, 1998, 1999 and
2000.
(d) The EBT of the Company for the years ending December 31,
1998, December 31, 1999 and December 31, 2000 shall be computed using generally
accepted accounting principles and practices as applied in the audited financial
statements of the Company included in the Registration Statement. The allocation
of UniCapital overhead shall be made on a pro rata basis applied consistently
among UniCapital subsidiaries. To the extent gain-on-sale treatment was accorded
any Lease, whether in the add-backs set forth on Schedule 2.5 or in any year,
income from the payment stream on such Lease shall not be included in the EBT of
the Company for any subsequent year.
In calculating EBT in any year for the New Programs and
the Real Estate Venture, income attributable to the New Programs and the Real
Estate Venture shall be reduced by all expenses attributable to the New Programs
and the Real Estate Venture and that portion of the Company overhead and the
allocated UniCapital overhead that bears the same relationship to the New
Programs and the Real Estate Venture as the total amount of Company overhead and
allocated UniCapital overhead bears to the total EBT for the year in question.
(e) The amounts (if any) that the Stockholders become
entitled to receive pursuant to Sections 2.5(a), 2.5(b) and/or 2.5(c) are
referred to herein as the "Earn-Out Consideration." The Earn-Out Consideration
shall be paid one-half in cash and one-half in shares of UniCapital Stock.
(f) Company EBT shall be determined within forty-five days
following December 31 of such year.
(g) Notwithstanding anything in this Section 2.5 to the
contrary, if the Stockholders dispute the determination of Company EBT, then the
Stockholders' Representative shall notify UniCapital in writing of such dispute
and specify the amount thereof within 20
5
<PAGE> 12
business days after notification of the determination of Company EBT. If
UniCapital and the Stockholders' Representative cannot resolve any such dispute
which would affect the Earn-Out Consideration, then such dispute shall be
resolved by an Independent Accounting Firm (as defined in Section 3.2). The
Independent Accounting Firm shall be directed to consider only those agreements,
contracts, commitments or other documents (or summaries thereof) that were
either (i) delivered or made available to Price Waterhouse LLP in connection
with the transactions contemplated hereby, or (ii) reviewed by Price Waterhouse
LLP during the course of determining Company EBT. The determination of the
Independent Accounting Firm shall be made as promptly as practicable and shall
be final and binding upon the parties, absent manifest error which error may
only be corrected by such Independent Accounting Firm. The costs of the
Independent Accounting Firm shall be borne by the party (either UniCapital or
the Stockholders as a group) whose determination of Company EBT was further from
the determination of the Independent Accounting Firm. Pending resolution of any
such dispute by the Independent Accounting Firm, only the amount of the Earn-Out
Consideration as determined by Price Waterhouse LLP shall be paid by UniCapital.
Once Company EBT is finally determined, the Earn-Out Consideration attendant
thereto not previously paid, if any, shall be paid in accordance with this
Section 2.5; provided that in the event the Stockholders' determination of EBT
was closer to the determination of the Independent Accounting Firm than
UniCapital's determination of EBT, the Stockholders shall receive such Earn-Out
Consideration plus interest which shall accrue at the rate of 10% per annum on
any such Earn-Out Consideration that is resolved in the Stockholders favor from
the date the Earn-Out Consideration was first payable to the date on which the
Earn-Out Consideration is received by the Stockholders.
(h) Any Earn-Out Consideration paid by UniCapital shall be
treated as additional consideration paid by UniCapital for the shares of Company
Stock.
.
3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS' REPRESENTATIVE
3.1 COMPUTATION. As soon as practicable, but in any event within 30
days after the Closing, UniCapital shall engage Price Waterhouse LLP to prepare,
in accordance with generally accepted accounting principles ("GAAP") and
consistent with previous practice, a consolidated balance sheet of the Company
(the "Closing Date Balance Sheet") as of the end of business on the day prior to
the Closing Date (as defined in Section 5). If the aggregate stockholders'
equity of the Company as shown on the Closing Date Balance Sheet is less than
the aggregate stockholders' equity as shown on the consolidated balance sheet of
the Company as at December 31, 1997 as audited by Price Waterhouse LLP, then,
subject to Section 3.2, commencing 10 business days after delivery of the
Closing Date Balance Sheet to UniCapital, the aggregate Merger Consideration
shall be adjusted downward dollar-for-dollar in the amount of any such
deficiency (the "Net Worth Deficiency"). Upon determination of the Net Worth
Deficiency, UniCapital shall be entitled to recover from the Indemnity Escrow
Property pursuant to Article 4 that portion of the Net Worth Deficiency which
does not exceed one-half of the Indemnity Escrow Property. For any amount by
which the Net Worth Deficiency exceeds one-half of the
6
<PAGE> 13
balance of the Indemnity Escrow Property, the Stockholders shall pay such amount
to UniCapital by wire transfer of immediately available funds an amount equal to
the Net Worth Deficiency. At its option, and at any time or from time to time
after the determination of any Net Worth Deficiency, UniCapital shall be
entitled to recover from the Indemnity Escrow Property pursuant to Article 4 all
or any portion of the amount of the Net Worth Deficiency not theretofore paid by
the Stockholders. For any amount by which any Net Worth Deficiency exceeds
one-half of the initial balance of the Indemnity Escrow Property, such portion
of the Net Worth Deficiency shall be paid by the Stockholders not later than the
25th business day after the delivery of the Closing Date Balance Sheet (or if
applicable, not later than the 5th business day after the final determination of
any Disputed Amount in accordance with Section 3.2). At its sole and exclusive
option, and at any time after such 25th business day (or if applicable, not
later than the fifth business day after the final determination of any Disputed
Amount in accordance with Section 3.2), UniCapital shall be entitled to recover
from the Indemnity Escrow Property pursuant to Article 4 all or any portion of
the amount of the Net Worth Deficiency not paid by the Stockholders as required
by this Article 3.
3.2 DISPUTES. Notwithstanding anything in this Article 3 to the
contrary, if there is any Net Worth Deficiency and the Stockholders dispute any
item contained on the Closing Date Balance Sheet, then the Stockholders'
Representative shall notify UniCapital in writing of each disputed item
(collectively, the "Disputed Amounts") and specify the amount thereof in dispute
within 20 business days after the delivery of the Closing Date Balance Sheet to
the Stockholders. If UniCapital and the Stockholders' Representative cannot
resolve any such dispute relating to the Net Worth Deficiency, then such dispute
shall be resolved by an independent nationally recognized accounting firm which
is reasonably acceptable to UniCapital and the Stockholders' Representative (the
"Independent Accounting Firm"). The determination of the Independent Accounting
Firm shall be made as promptly as practical and shall be final and binding on
the parties, absent manifest error which error may only be corrected by such
Independent Accounting Firm. Any expenses relating to the engagement of the
Independent Accounting Firm shall be allocated between UniCapital and the
Stockholders so that the Stockholders' aggregate share of such costs shall bear
the same proportion to the total costs that the Disputed Amounts unsuccessfully
contested by the Stockholders' Representative (as finally determined by the
Independent Accounting Firm) bear to the total of the Disputed Amounts so
submitted to the Independent Accounting Firm. Pending resolution of any such
dispute by the Independent Accounting Firm, no such Disputed Amount shall be due
to UniCapital. Once any such Disputed Amount is finally determined to be due to
UniCapital, UniCapital may proceed to recover such amount in the manner set
forth in Section 3.1.
3.3 STOCKHOLDERS' REPRESENTATIVE. (a) Each Stockholder, by signing this
Agreement, designates Roy L. Burger to be such Stockholders' representative for
purposes of this Agreement (the "Stockholders' Representative"). The
Stockholders shall be bound by any and all actions taken by the Stockholders'
Representative on their behalf.
7
<PAGE> 14
(b) UniCapital and Newco shall be entitled to rely upon any
communication or writing given or executed by the Stockholders' Representative.
All communications or writings to be sent to Stockholders pursuant to this
Agreement may be addressed to the Stockholders' Representative and any
communication or writing so sent shall be deemed notice to all of the
Stockholders hereunder. The Stockholders hereby consent and agree that the
Stockholders' Representative is authorized to accept deliveries, including any
notice, on behalf of the Stockholders pursuant hereto.
(c) The Stockholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Stockholder, with full
power in his or her name and on his or her behalf to act according to the terms
of this Agreement in the absolute discretion of the Stockholders'
Representative, and in general to do all things and to perform all acts
including, without limitation, executing and delivering all agreements,
certificates, receipts, instructions and other instruments contemplated by or
deemed advisable in connection with Article 12 of this Agreement. This power of
attorney and all authority hereby conferred is granted subject to and coupled
with the interest of such Stockholder and the other Stockholders hereunder and
in consideration of the mutual covenants and agreements made herein, and shall
be irrevocable and shall not be terminated by any act of any Stockholder, by
operation of law, whether by such Stockholder's death or any other event.
(d) Notwithstanding the foregoing, the Stockholders'
Representative shall inform each Stockholder of all notices received, and of all
actions, decisions, notices and exercises of any rights, power or authority
proposed to be done, given or taken by such Stockholders' Representative, and
shall act as directed by the Stockholders holding a majority interest in the
Indemnity Escrow Property (as defined in Section 4.1(b)).
4. INDEMNITY ESCROW AND 1998 SHORTFALL ESCROW
4.1 CREATION OF INDEMNITY ESCROW.
(a) At the Closing, as collateral security for the payment of
any indemnification obligations of the Stockholders pursuant to Sections 12.1
and 12.2 hereof and for the payment of amounts due pursuant to Article 3 hereof,
the following shall be delivered to UniCapital's Transfer Agent as indemnity
escrow agent (the "Indemnity Escrow Agent"):
(i) ten percent (10%) of the number of shares of
UniCapital Stock issuable to each Stockholder as part of the Effective Date
Consideration in accordance with Annex II, rounded up to the nearest whole share
(the "Indemnity Escrow Shares"); and
(ii) ten percent (10%) of the cash portion of
the Effective Date Consideration payable to each Stockholder in accordance with
Annex II, rounded up to the nearest whole cent (the "Indemnity Escrow Cash").
8
<PAGE> 15
(b) The Escrow Shares and the Escrow Cash are referred to
together as the "Indemnity Escrow Property." In addition, the Escrow Property
shall include all cash and non-cash dividends and other property at any time
received or otherwise distributed in respect of or in exchange for any or all of
the Escrow Property, all securities hereafter issued in substitution for any of
the foregoing, all certificates and instruments representing or evidencing such
securities, all cash and non-cash proceeds of all of the foregoing property
except as provided in Section 4.3 and all rights, titles, interests, privileges
and preferences appertaining or incident to the foregoing property.
4.2 DURATION AND TERMS OF THE INDEMNITY ESCROW. The Indemnity Escrow
Property shall be held and disbursed by the Indemnity Escrow Agent in accordance
with the terms of an Indemnity Escrow Agreement substantially in the form
attached hereto as Annex III. The Indemnity Escrow Agent shall hold the Escrow
Property pursuant to the Indemnity Escrow Agreement until the later of: (a) the
first anniversary of the Merger Effective Date; and (b) the resolution of any
claim for indemnification or payment that is pending on the first anniversary of
the Merger Effective Date, but only to the extent of the amount of such pending
claim.
4.3 INDEMNITY ESCROW VOTING AND INVESTMENT. The Stockholders shall be
entitled to exercise all voting powers incident to the Indemnity Escrow Shares
held by the Indemnity Escrow Agent as their nominee, but shall not be entitled
to exercise any investment or dispositive powers over such Indemnity Escrow
Shares. The Indemnity Escrow Cash shall be invested from time to time by the
Indemnity Escrow Agent as provided in the Indemnity Escrow Agreement.
4.4 1998 SHORTFALL ESCROW.
(a) At the Closing, as collateral security for the payment of
the 1998 Shortfall obligations of the Stockholders pursuant to Section
2.5(a)(ii), there shall be delivered to UniCapital's Transfer Agent as the 1998
Shortfall escrow agent (the "1998 Shortfall Escrow Agent") the number of shares
of UniCapital Stock equal to the result of dividing $3,600,000 by the IPO Price
(the "1998 Shortfall Escrow Shares"); of which each Stockholder shall contribute
a portion of the amount of UniCapital Stock such Stockholder receives as part of
the Effective Date Consideration equal to the product of the 1998 Shortfall
Escrow Shares multiplied by the percentage of Effective Date Consideration each
such Stockholder is to receive as set forth in Annex II of this Agreement.
(b) In addition, the 1998 Shortfall Escrow Shares shall
include all cash and non-cash dividends and other property at any time received
or otherwise distributed in respect of or in exchange for any or all of the 1998
Shortfall Escrow Shares, all securities hereafter issued in substitution for any
of the foregoing, all certificates and instruments representing or evidencing
such securities, all cash and non-cash proceeds of all of the foregoing property
except as provided in Section 4.7 and all rights, titles, interests, privileges
and preferences appertaining or incident to the foregoing shares.
9
<PAGE> 16
4.5 DURATION AND TERMS OF THE 1998 SHORTFALL ESCROW. The 1998 Shortfall
Escrow Shares shall be held and disbursed by the 1998 Shortfall Escrow Agent in
accordance with the terms of a 1998 Shortfall Escrow Agreement substantially in
the form attached hereto as Annex VI. The 1998 Shortfall Escrow Agent shall hold
the 1998 Shortfall Escrow Shares pursuant to the 1998 Shortfall Escrow Agreement
until the resolution of any claim against the 1998 Shortfall Escrow Shares by
UniCapital resulting from a 1998 Shortfall.
4.6 1998 SHORTFALL ESCROW VOTING AND INVESTMENT. The Stockholders shall
be entitled to exercise all voting powers incident to the 1998 Shortfall Escrow
Shares held by the 1998 Shortfall Escrow Agent as their nominee, but shall not
be entitled to exercise any investment or dispositive powers over the 1998
Shortfall Escrow Shares.
5. CLOSING; MERGER EFFECTIVE DATE
5.1 CLOSING. Within two business days following the date on which the
underwriting agreement relating to the offer and sale of shares of UniCapital
Stock in the IPO (the "Underwriting Agreement") shall have been executed, the
parties shall take all actions necessary to effect the Merger (other than the
filing with the appropriate state authorities of the Articles of Merger, which
shall be filed and become effective on the Merger Effective Date) and to effect
the conversion and delivery of shares referred to in Article 2 hereof
(hereinafter referred to as the "Closing"); provided, that such actions shall
not include the actual completion of the Merger or the actual conversion and
delivery of the shares referred to in Article 2 hereof, which actions shall only
be taken on the Merger Effective Date as herein provided.
5.2 CLOSING DATE; LOCATION. The Closing shall take place at the offices
of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178. The date on
which the Closing shall occur shall be referred to as the "Closing Date."
5.3 EFFECTIVENESS OF MERGER. Concurrently with the consummation of the
sale of the shares of UniCapital Stock pursuant to the Underwriting Agreement,
the Merger shall become effective and all transactions contemplated by this
Agreement, including the conversion and delivery of shares and the delivery of a
check or checks or a wire transfer in an amount equal to the cash which the
Stockholders shall be entitled to receive pursuant to the Merger referred to in
Article 2 hereof, shall occur and be deemed to be completed. The date on which
the Merger is effected shall be referred to as the "Merger Effective Date."
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, each Stockholder jointly and severally represents and warrants
to UniCapital and Newco as follows:
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6.1 CORPORATE EXISTENCE. Each of the Company, and the subsidiary of the
Company listed on Schedule 6.8 (the "Subsidiary"), is an entity duly organized,
validly existing and in good standing under the laws of its state of formation.
Each of the Company and its Subsidiary is duly qualified to do business and is
in good standing as a foreign entity in each jurisdiction where the conduct of
its business requires it to be so qualified, all of which jurisdictions are
listed on Schedule 6.1.
6.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
Company has the corporate power, authority and legal right to execute, deliver
and perform this Agreement. The execution, delivery and performance of this
Agreement by the Company has been duly authorized by the Board of Directors and
Shareholders of the Company and no further corporate action on the part of the
Company or its stockholders is necessary to authorize this Agreement and the
performance of the transactions contemplated hereby. This Agreement has been,
and the other agreements, documents and instruments required to be delivered by
the Company in accordance with the provisions hereof (the "Company Documents")
will be, duly executed and delivered on behalf of the Company by duly authorized
officers of the Company, and this Agreement constitutes, and the Company
Documents when executed and delivered will constitute, the legal, valid and
binding obligations of the Company, enforceable against it in accordance with
their respective terms.
6.3 AUTHORITY; OWNERSHIP. Each Stockholder has the full legal right,
power and legal capacity to enter into this Agreement. Upon the date of this
Agreement and immediately prior to the Closing Date, the Stockholder owns and
will own beneficially and of record all of the shares of capital stock of each
Company identified on Annex II as being owned by such Stockholder. The
conversion of Company Stock into UniCapital Stock and cash pursuant to the
provisions of this Agreement will transfer to UniCapital valid title in the
shares of Company Stock owned by such Stockholder, free and clear of all liens,
security interests, pledges, charges, voting trusts, equities, restrictions,
encumbrances and claims of every kind.
6.4 VALIDITY OF CONTEMPLATED TRANSACTIONS. The execution, delivery and
performance of this Agreement by the Company and each Stockholder does not and
will not violate, conflict with or result in the breach of any term, condition
or provision of, or require the consent of any other person under (a) any
existing law, ordinance, or governmental rule or regulation to which the
Company, its Subsidiary or any Stockholder is subject, (b) any judgment, order,
writ, injunction, decree or award of any Governmental Entity which is applicable
to the Company, its Subsidiary or any Stockholder, (c) the charter documents of
the Company or its Subsidiary or any securities issued by the Company or its
Subsidiary, or (d) except as otherwise set forth in Schedule 6.4, any mortgage,
indenture, agreement, contract, commitment, lease, plan, Authorization, or any
other instrument, document or understanding, oral or written, to which the
Company, its Subsidiary or any Stockholder is a party, by which the Company, its
Subsidiary or any Stockholder may have rights or by which any of the properties
or assets of the Company or its Subsidiary may be bound or affected, or give any
party with rights thereunder the right to terminate, modify, accelerate or
otherwise change the existing rights or obligations of the
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Company or its Subsidiary thereunder. Except for filing the Articles of Merger
with the Secretary of State and filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and except as aforesaid, no authorization, approval or
consent of, and no registration or filing with any Governmental Entity is
required in connection with the execution, delivery or performance of this
Agreement by any Company or any Stockholder.
6.5 CAPITAL STOCK OF EACH COMPANY.
(a) The authorized capital stock of the Company consists
solely of the shares shown on Schedule 6.5, of which only the shares shown on
such Schedule 6.5 to be issued and outstanding are issued and outstanding. All
of the issued and outstanding shares of the capital stock of the Company are
owned by the Stockholders and are free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind. All of the issued and outstanding shares of Company Stock
to be outstanding on the Merger Effective Date will have been duly authorized
and validly issued, fully paid and nonassessable, will be owned of record and
beneficially by the Stockholders and in the amounts set forth in Annex II, and
will have been offered, issued, sold and delivered by the Company in compliance
with all applicable state and federal laws concerning the offering, sale or
issuance of securities. None of such shares will have been, and none of the
shares from which they will have derived were, issued in violation of the
preemptive rights of any past or present stockholder, whether contractual or
statutory.
(b) Schedule 6.5 attached hereto also sets forth (i) as to
corporate Subsidiaries, the number and class of the authorized capital stock of
each Subsidiary and the number of shares of each Subsidiary which are issued and
outstanding, which are the only shares issued and outstanding, and (ii) as to
partnership Subsidiaries, the capital and profits percentage interest owned and
whether such partnership interest is owned as a general partner or limited
partner, all of which shares or partnership interests identified under (i) and
(ii) are owned by the persons indicated as owning such shares on Schedule 6.5,
free and clear of all liens, security interests, pledges, charges, voting
trusts, equities, restrictions, encumbrances and claims of every kind. All of
the issued and outstanding shares of Subsidiary stock or partnership interests
to be outstanding on the Merger Effective Date will have been duly authorized
and validly issued, fully paid and nonassessable (or, in the case of partnership
interests, all mandatory capital contributions will have been paid in full),
will be owned of record and beneficially by the person indicated owning such
shares or partnership interest and will have been offered, issued, sold and
delivered by each Subsidiary in compliance with all applicable state and federal
laws concerning the offering, sale or issuance of securities. None of the shares
or partnership interests of the Subsidiaries will have been, and none of the
shares or partnership interests from which they will have derived were, issued
in violation of the preemptive rights of any past or present stockholder or
partner, whether contractual or statutory.
6.6 TRANSACTIONS IN CAPITAL STOCK. Neither the Company nor any
corporate Subsidiary has acquired any treasury stock since December 31, 1995.
Except as set forth on
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Schedule 6.6, no option, warrant, call, conversion right or commitment of any
kind exists which obligates the Company or any Subsidiary to issue any of its
authorized but unissued capital stock (if a corporation) or to sell, transfer or
otherwise dispose of or alter its partnership interests (if a partnership).
Neither the Company nor any of its Subsidiary have an obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of their equity
securities or any interests therein or to pay any dividend or make any
distribution in respect thereof.
6.7 NO BONUS SHARES. None of the shares of capital stock of the Company
or its Subsidiary was, and none of the shares of Company Stock will be, issued
pursuant to awards, grants or bonuses, whether of stock or of options or other
rights.
6.8 SUBSIDIARIES. Schedule 6.8 lists the name and type of entity of the
Subsidiary. Except as set forth in Schedule 6.8, neither the Company nor its
Subsidiary currently owns, of record or beneficially, or controls, directly or
indirectly, any capital stock, any securities convertible into capital stock or
any other equity interest in any corporation, association or other business
entity. Except as set forth on Schedule 6.8, neither the Company nor its
Subsidiary is, directly or indirectly, a participant in any joint venture,
partnership or other noncorporate entity.
6.9 PREDECESSOR STATUS; ETC. Schedule 6.9 lists all names of all
predecessor companies of the Company and its Subsidiary, including the names of
all entities from whom the Company or its Subsidiary previously acquired assets
representing all or substantially all of the assets of that entity. Except as
set forth on Schedule 6.9, neither the Company nor its Subsidiary has ever been
a subsidiary or division of another corporation or other entity or been a part
of an acquisition which was later rescinded.
6.10 SPIN-OFFS. Since December 31, 1995, there has not been any sale or
spin-off of significant assets of the Company or its Subsidiary other than in
the ordinary course of business.
6.11 NO THIRD PARTY OPTIONS. Except as set forth on Schedule 6.11,
there are no existing agreements, options, commitments or rights with, of or to
any person to acquire any properties, assets or rights of the Company or its
Subsidiary or any interest therein.
6.12 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.12 are copies
of the following audited financial statements of the Company:
(a) the consolidated balance sheets of the Company at December
31, 1997 (the "Audited Balance Sheet Date"), December 31, 1996 and December 31,
1995, and the related statements of income, cash flows and changes in
stockholders' equity for the fiscal years then ended, audited by Price
Waterhouse LLP and KPMG Peat Marwick LLP and Grabau & Co., respectively, the
Company's independent public accountants, together with the report of such
independent public accountants thereon (the "Audited Financial Statements"); and
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(b) the unaudited consolidated balance sheets of the Company
at September 30, 1997 and September 30, 1996, and the related statements of
income and cash flows for the interim periods then ended (the "Unaudited
Financial Statements," and together with the Audited Financial Statements, the
"Financial Statements").
All of the Financial Statements have been prepared in accordance with GAAP
consistently applied throughout the periods involved. All of the balance sheets
included in the Financial Statements, including the related notes, fairly
present the financial position, assets and liabilities (whether accrued,
absolute, contingent or otherwise) of the Company at the dates indicated and
such statements of income, cash flows and changes in stockholders' equity fairly
present the results of operations, cash flows and changes in stockholders'
equity of the Company for the periods indicated. The Unaudited Financial
Statements fairly present the financial position of the Company at the dates
indicated, and such statements of income, cash flows and changes in
stockholders' equity fairly present the results of operations, cash flows and
changes in stockholders' equity for the periods indicated, except for normal
recurring year-end adjustments which are not expected to be material in amount
and except for the addition of required footnotes thereto."
6.13 LIABILITIES AND OBLIGATIONS.
(a) Attached hereto as Schedule 6.13 is an accurate list, as
of a date not more than two days prior to the date of this Agreement, of: (i)
all liabilities of the Company and its Subsidiary which are reflected on the
audited consolidated balance sheet as of the Audited Balance Sheet Date included
in the Audited Financial Statements; (ii) all liabilities incurred thereafter
other than in the ordinary course of business; (iii) all material liabilities
incurred thereafter in the ordinary course of business; and (iv) all liabilities
(A) incurred as of the Audited Balance Sheet Date that are not reflected on the
Audited Financial Statements as of the Audited Balance Sheet Date and (B) all
liabilities incurred thereafter that would not have been so reflected had such
liabilities been incurred as of the Audited Balance Sheet Date. Each of the
foregoing liabilities that has not heretofore been paid or discharged is so
noted on Schedule 6.13. For purposes of this Agreement, "liabilities" means
liabilities of any kind, character or description, whether accrued, absolute,
secured or unsecured, contingent or otherwise.
(b) For each such liability for which the amount is not fixed
or is contested, Schedule 6.13 shall include a summary description of the
liability, together with copies of all relevant non-privileged documentation
relating thereto, detail of all amounts claimed and any other action or relief
sought, the names of the claimant and all other parties to the claim, suit or
proceeding, the name of each court or agency before which such claim, suit or
proceeding is pending, the date such claim, suit or proceeding was instituted,
and a best estimate of the maximum amount, if any, which is likely to become
payable with respect to each such liability. If no estimate is provided, the
best estimate shall for purposes of this Agreement be deemed to be zero. On the
Closing Date, the Company shall deliver, and shall cause its accountants,
outside
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counsel and other representatives or agents to deliver, copies of all privileged
documents related to liabilities as listed on Schedule 6.13.
(c) All of the liabilities reflected on the unaudited
consolidated balance sheet included in the audited consolidated balance sheet as
of the Audited Balance Sheet Date included in the Audited Financial Statements
only out of or were incurred only in connection with the conduct of the
respective businesses of the Company or its Subsidiary. Except as set forth on
Schedule 6.13 and except for liabilities not required to be set forth thereon
pursuant to Section 6.13(a), the Company or its Subsidiary have no liabilities
or obligations with respect to their respective businesses, whether direct or
indirect, matured or unmatured, absolute contingent or otherwise, and there is
no condition, situation or set of circumstances which would reasonably be
expected to result in any such liability.
6.14 ACCOUNTS AND NOTES RECEIVABLE. Attached hereto as Schedule 6.14 is
a complete and accurate list, as of a date not more than two days prior to the
date of this Agreement, of the accounts and notes receivable of the Company and
its Subsidiary (including, without limitation, receivables from and advances to
employees and Stockholders) other than those arising out of Leases
(collectively, the "Accounts Receivable"). Schedule 6.14 includes an aging of
all Accounts Receivable showing amounts due in 30-day aging categories. On the
Closing Date, the Stockholders will deliver to UniCapital a complete and
accurate list, as of a date not more than two days prior to the Closing Date, of
the Accounts Receivable. All Accounts Receivable represent valid obligations
arising from bona fide business transactions in the ordinary course of business
consistent with past practice. The Accounts Receivable are, and as of the
Closing Date and the Merger Effective Date will be, collectible net of any
respective reserves shown on the Company's and its Subsidiary's books and
records (which reserves are adequate and calculated consistent with past
practice). Subject in the case of Accounts Receivable reflected on the Company's
or its Subsidiary's balance sheet to such reserves reflected on such balance
sheet, each of the Accounts Receivable will be collected in full within ninety
(90) days after the day on which it first became due and payable. There is no
contest, claim, counterclaim, defense or right of set-off, other than rebates
and returns in the ordinary course of business, under any contract with any
obligor of any Account Receivable relating to the amount or validity of such
Account Receivable. The allowance for collection losses on the audited
consolidated balance sheet as of the Audited Balance Sheet Date included in the
Audited Financial Statements has been determined in accordance with GAAP
consistent with past practice.
6.15 PERMITS. Each material Permit, together with the name of the
Governmental Entity issuing such Permit is set forth on Schedule 6.15. Such
Permits are valid and in full force and effect and none of such Permits will be
terminated or impaired or become terminable as a result of the transactions
contemplated by this Agreement. Upon consummation of such transactions, the
Surviving Corporation will have all of the Company's right, title and interest
in the Permits.
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6.16 REAL AND PERSONAL PROPERTY. Attached hereto as Schedule 6.16 is an
accurate list, including substantially complete descriptions as of the Audited
Balance Sheet Date, of all the real and personal property (which in the case of
personal property had an original cost in excess of $25,000) owned or leased by
the Company (including its Subsidiary) where the Company or its Subsidiary is a
lessee or sublessee, including true and correct copies of leases for equipment
and properties on which are situated buildings, warehouses and other structures
used in the operation of the business of the Company (including its Subsidiary)
and including an indication as to which assets were formerly owned by any
Stockholder or affiliate (which term, as used herein, shall have the meaning
ascribed thereto in Rule 144(a)(1) promulgated under the Securities Act of 1933,
as amended (the "Securities Act")) of the Company and its Subsidiary. Except as
set forth on Schedule 6.16, all of the Company's and its Subsidiary's buildings,
leasehold improvements, structures, facilities, equipment and other material
items of tangible property and assets are in good operating condition and
repair, subject to normal wear and maintenance, are usable in the regular and
ordinary course of business and conform to all applicable laws, ordinances,
codes, rules and regulations, and Authorizations relating to their construction,
use and operation. All leases set forth on Schedule 6.16 have been duly
authorized, executed and delivered and constitute the legal, valid and binding
obligations of the Company (or its Subsidiary) and, to the knowledge of the
Stockholders, no other party to any such lease is in default thereunder and such
leases constitute the legal, valid and binding obligations of such other
parties. All fixed assets used by the Company (including its Subsidiary) in the
operation of its business are either owned by the Company (or its Subsidiary) or
leased under an agreement set forth on Schedule 6.16. The Company and the
Stockholders have heretofore delivered to UniCapital copies of all title reports
and title insurance policies received or held by the Company (including its
Subsidiary). The Company and the Stockholders have indicated on Schedule 6.16 a
summary description of all plans or projects involving the opening of new
operations, expansion of any existing operations or the acquisition of any real
property or existing business to which management of the Company (or its
Subsidiary) has devoted any significant effort or expenditure in the two-year
period prior to the date of this Agreement which, if pursued by the Company (or
its Subsidiary) would require additional expenditures of significant efforts or
capital.
6.17 CONTRACTS AND COMMITMENTS. Schedule 6.17 sets forth an accurate,
correct and complete list of all agreements, contracts, commitments,
arrangements and understandings, written or oral, including all amendments and
supplements thereto, of the Company and its Subsidiary other than Leases (the
"Contracts"), to which the Company or its Subsidiary is a party or is bound, or
by which any of their respective assets are bound, and which involve any:
(a) agreement, contract, commitment, arrangement or
understanding with any present or former employee or consultant or for the
employment of any person, including any consultant;
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(b) agreement, contract, commitment, arrangement or
understanding for the future purchase of, or payment for, supplies or products,
or for the performance of services by a third party involving in any one case
$25,000 or more;
(c) agreement, contract, commitment, arrangement or
understanding to sell or supply products or to perform services involving in any
one case $25,000 or more;
(d) agreement, contract, commitment, arrangement or
understanding containing requirements or "take or pay" provisions;
(e) agreement, contract, commitment, arrangement or
understanding not otherwise listed on Schedule 6.17 and continuing over a period
of more than six months from the date hereof or exceeding $25,000 in value;
(f) distribution, dealer, representative or sales agency
agreement, contract, commitment, arrangement or understanding;
(g) agreement, contract, commitment, arrangement or
understanding containing a provision to indemnify any person or entity or assume
any tax, environmental or other liability;
(h) agreement, contract, commitment, arrangement or
understanding with federal, state, local, regulatory or other governmental
entities;
(i) note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement or other contract or commitment for the
borrowing or lending of money or agreement or arrangement for a line of credit
or guarantee, pledge or undertaking of the indebtedness of any other person;
(j) agreement, contract, commitment, arrangement or
understanding for any charitable or political contribution;
(k) agreement, contract, commitment, arrangement or
understanding for any capital expenditure or leasehold improvement in excess of
$25,000;
(l) agreement, contract, commitment, arrangement or
understanding limiting or restraining the Company, or its Subsidiary, or any
successor thereto, or to the knowledge of the Company and each Stockholder, any
employee of the Company, or its Subsidiary, or any successor thereto, from
engaging or competing in any manner or in any business;
(m) license, franchise, distributorship or other agreement
which relates in whole or in part to any software, patent, trademark, trade
name, service mark or copyright or to any ideas, technical assistance or other
know-how of or used by the Company and its Subsidiary;
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(n) agreement, contract, commitment, arrangement or
understanding to which the Company or its Subsidiary, on the one hand, and any
affiliate, officer, director or stockholder of the Company or its Subsidiary, on
the other hand, are parties; or
(o) material agreement, contract, commitment, arrangement or
understanding not made in the ordinary course of business.
Each of the Contracts listed on Schedule 6.17, or not required to be listed
therein because of the amount thereof, is valid and enforceable in accordance
with its terms; the Company and its Subsidiary are, and to the knowledge of the
Company and each Stockholder, all other parties thereto are, in compliance with
the provisions thereof. Neither the Company nor its Subsidiary is, and to the
knowledge of the Company and each Stockholder, no other party thereto is, in
default in the performance, observance or fulfillment of any material
obligation, covenant or condition contained therein; and no event has occurred
which with or without the giving of notice or lapse of time, or both, would
constitute a default thereunder. Except as disclosed on Schedule 6.4, none of
the rights of the Company or its Subsidiary under any Contract will be impaired
by the consummation of the transactions contemplated hereby, and all such rights
will be enforceable by the applicable Surviving Corporation after the Merger
Effective Date without the consent or agreement of any other party. The Company
has delivered accurate and complete copies of each Contract to UniCapital, other
than non-recourse debt instruments of the Company or its Subsidiary, which have
been made available to UniCapital. No Contract obligates any party to obtain any
consent in connection with the transactions contemplated hereby.
6.18 GOVERNMENT CONTRACTS. Neither the Company nor its Subsidiary is
now or has ever been a party to any contract with any Governmental Entity
subject to price redetermination or renegotiation.
6.19 TITLE TO REAL PROPERTY. The Company and its Subsidiary have good
and insurable title to all real property owned and used in their business,
subject to no mortgage, pledge, lien, conditional sales agreement, encumbrance
or charge, except for:
(a) liens, if any, reflected on Schedules 6.13 and 6.16 as
securing specified liabilities (with respect to which no material default
exists);
(b) liens for current taxes and assessments not yet due or in
default;
(c) easements for utilities serving the property only; and
(d) easements, covenants and restrictions and other exceptions
to title shown of record in the offices of the county clerks in which the
properties, assets and leasehold estates are located which, in UniCapital's sole
judgment, do not adversely affect UniCapital's intended use of such properties.
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6.20 INSURANCE. The assets, properties and operations of the Company
and its Subsidiary are insured under various policies of general liability and
other forms of insurance, all of which are described in Schedule 6.20, which
discloses for each policy the risks insured against, coverage limits, deductible
amounts, all outstanding claims thereunder, and whether the terms of such policy
provide for retrospective premium adjustments. All such policies are in full
force and effect in accordance with their terms, no notice of cancellation has
been received, and there is no existing default or event which, with the giving
of notice or lapse of time or both, would constitute a default thereunder. Such
policies are in amounts which, in relation to the business and assets of the
Company and its Subsidiary, are consistent with the normal or customary industry
practice and all premiums due and all premiums to date have been paid in full.
Neither the Company nor its Subsidiary have been refused any insurance, nor has
the Company's or its Subsidiary's coverage been limited, by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the past five years. Schedule 6.20 also contains a true and
complete description of all outstanding bonds and other surety arrangements
issued or entered into in connection with the business, assets and liabilities
of the Company or its Subsidiary.
6.21 EMPLOYEES. Schedule 6.21 contains the following with respect to
the Company and its Subsidiary:
(a) a list of all employees of the Company and its Subsidiary
(including name, title and position);
(b) each such employee's length of service; and
(c) the compensation (including terms of payment, bonuses,
commissions and deferred compensation, as well as any benefits) of each such
employee.
Except as disclosed on Schedule 6.21: (i) there have not been in the past five
years and, to the knowledge of the Company and the Stockholders, there are not
pending, any labor disputes, work stoppages, requests for representation,
pickets or work slow-downs due to labor disagreements; (ii) there are and have
been no unresolved violations of any Laws of any Governmental Entity respecting
the employment of any employees; (iii) there is no unfair labor practice, charge
or complaint pending, unresolved or, to the knowledge of the Company and the
Stockholders, threatened before the National Labor Relations Board or similar
body in any foreign country; (iv) there is no employment handbook, personnel
policy manual, or similar document that creates prospective employment rights or
obligations; (v) the employees of the Company or its Subsidiary are not covered
by any collective bargaining agreement; (vi) the Company and its Subsidiary have
provided or will timely provide prior to Closing all notices required by law to
be given prior to Closing to all local, state, federal or national labor,
wage-payment, equal employment opportunity, unemployment insurance and related
agencies; (vii) the Company and its Subsidiary have paid or properly accrued in
the ordinary course of business all wages and compensation due to employees,
including all vacations or vacation pay, holidays or holiday pay,
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sick days or sick pay, and bonuses; and (viii) the transactions contemplated by
this Agreement will not create liability under any Laws of any Governmental
Entity respecting reductions in force or the impact on employees on plant
closing or sales of businesses. All employees of the Company and its Subsidiary
are legally able to work in the United States.
6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. Schedule 6.22 sets forth
a complete and accurate list of each Benefit Plan covering any present or former
officers, employees or directors of the Company or its Subsidiary. "Benefit
Plan" means each "employee pension benefit plan" (as defined in Section 3(2) of
ERISA, hereinafter a "Pension Plan"), "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA, hereinafter a "Welfare Plan") and each other
plan or arrangement (written or oral) relating to deferred compensation, bonus,
performance compensation, stock purchase, stock option, stock appreciation,
severance, vacation, sick leave, holiday pay, fringe benefits, personnel policy,
reimbursement program, incentive, insurance, welfare or similar plan, program,
policy or arrangement, in each case maintained or contributed to, or required to
be maintained or contributed to, by the Company or its Subsidiary or their
respective affiliates or any other person or entity that, together with the
Company or its Subsidiary, is treated as a single employer under Section 414(b),
(c), (m) or (o) of the Code (each, together with the Company or its Subsidiary,
a "Commonly Controlled Entity") for the benefit of any present or former
officer, employee or director. The Company and its Subsidiary have no intent or
commitment to create any additional Benefit Plan or amend any Benefit Plan so as
to increase benefits thereunder. The Company and its Subsidiary have not created
any Benefit Plan or declared or paid any bonus compensation in contemplation of
the transactions contemplated by this Agreement. A current, accurate and
complete copy of each Benefit Plan has been made available to UniCapital. Except
as disclosed on Schedule 6.22:
(a) each Benefit Plan is in substantial compliance with all
reporting, disclosure and other requirements of ERISA applicable to such Benefit
Plan;
(b) each Pension Plan which is intended to be qualified under
Section 401(a) of the Code, has been determined by the Internal Revenue Service
to be so qualified and, to the knowledge of the Company and the Stockholders, no
condition exists that would adversely affect any such determination;
(c) neither any Benefit Plan, nor the Company, nor its
Subsidiary, nor any Commonly Controlled Entity, nor any trustee or agent has
been or is presently engaged in any prohibited transactions as defined by
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
applicable which could subject the Company or its Subsidiary to the tax or
penalty imposed by Section 4975 of the Code or Section 502 of ERISA;
(d) there is no event or condition existing which could be
deemed a "reportable event" (within the meaning of Section 4043 of ERISA) with
respect to which the thirty-day notice requirement has not been waived; to the
knowledge of the Company and the
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Stockholders, no condition exists which could subject the Company or its
Subsidiary to a penalty under Section 4071 of ERISA;
(e) neither the Company, its Subsidiary nor any Commonly
Controlled Entity is or has ever been party to any "multi-employer plan," as
that term is defined in Section 3(37) of ERISA;
(f) true and correct copies of the most recent annual report
on Form 5500 and any attached schedules for each Benefit Plan (if any such
report was required by applicable law) and a true and correct copy of the most
recent determination letter issued by the Internal Revenue Service for each
Pension Plan have been provided to UniCapital;
(g) with respect to each Benefit Plan, there are no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
pending or, to the knowledge of the Company and the Stockholders, threatened
against any Benefit Plan, the Company, its Subsidiary, any Commonly Controlled
Entity or any trustee or agent of any Benefit Plan; and
(h) with respect to each Benefit Plan to which the Company,
its Subsidiary or any Commonly Controlled Entity is a party which constitutes a
group health plan subject to Section 4980B of the Code, each such Benefit Plan
substantially complies, and in each case has substantially complied, with all
applicable requirements of Section 4980B of the Code.
(i) Except as set forth in Schedule 6.22:
(i) there is no outstanding liability (except for
premiums due) under Title IV of ERISA with respect to any Pension Plan;
(ii) neither the Pension Benefit Guaranty Corporation
nor the Company, nor its Subsidiary, nor any Commonly Controlled Entity has
instituted proceedings to terminate any Pension Plan and the Pension Benefit
Guaranty Corporation has not informed the Company or its Subsidiary of its
intent to institute proceedings to terminate any Pension Plan;
(iii) full payment has been made of all amounts which
the Company, its Subsidiary or any Commonly Controlled Entity was required to
have paid as a contribution to the Pension Plans as of the last day of the most
recent fiscal year of each of the Pension Plans ended prior to the date of this
Agreement, and none of the Pension Plans has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of each
such Pension Plan ended prior to the date of this Agreement;
(iv) to the knowledge of the Company and the
Stockholders, the actuarial assumptions utilized, where appropriate, in
connection with determining the funding of each Pension Plan which is a defined
benefit pension plan (as set forth in the actuarial report for
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such Pension Plan) are reasonable. Copies of the most recent actuarial reports
have been furnished to UniCapital. Based on such actuarial assumptions, as of
the Audited Balance Sheet Date, the fair market value of the assets or
properties held under each such Pension Plan exceeds the actuarially determined
present value of all accrued benefits of such Pension Plan (whether or not
vested) determined on an ongoing Pension Plan basis;
(v) each of the Benefit Plans is, and its
administration is and has been during the six-year period preceding the date of
this Agreement, in substantial compliance with, and neither the Company nor its
Subsidiary has received any claim or notice that any such Benefit Plan is not in
compliance with, all applicable laws and orders and prohibited transaction
exemptions, including without limitation, to the extent applicable, the
requirements of ERISA;
(vi) neither the Company, nor its Subsidiary nor any
Commonly Controlled Entity is in default in performing any of its contractual
obligations under any of the Benefit Plans or any related trust agreement or
insurance contract;
(vii) there are no material outstanding liabilities
of any Benefit Plan other than liabilities for benefits to be paid to
participants in the Benefit Plans and their beneficiaries in accordance with the
terms of the Benefit Plans;
(viii) each Benefit Plan may be amended or modified
by the Company or, its Subsidiary or any Commonly Controlled Entity at any time
without liability except under any defined pension benefit plan;
(ix) no Benefit Plan other than a Pension Plan,
retiree medical plan or severance plan provides benefits to any individual after
termination of employment;
(x) the consummation of the transactions contemplated
by this Agreement will not (in and of itself): (A) entitle any employee of the
Company or its Subsidiary to severance pay, unemployment compensation or any
other payment; (B) accelerate the time of payment or vesting, or increase the
amount of compensation due to any such employee; (C) result in any liability
under Title IV of ERISA; (D) result in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
available; or (E) result (either alone or in conjunction with any other event)
in the payment or series of payments by the Company, its Subsidiary or any of
their affiliates to any person of an "excess parachute payment" within the
meaning of Section 280G of the Code;
(xi) with respect to each Benefit Plan that is funded
wholly or partially through an insurance policy, all premiums required to have
been paid to date under the insurance policy have been paid, all premiums
required to be paid under the insurance policy through the Merger Effective Date
will have been paid on or before the Merger Effective Date and, as of the Merger
Effective Date, there will be no liability of the Company, its Subsidiary or any
Commonly Controlled Entity under any insurance policy or ancillary agreement
with respect to
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such insurance policy in the nature of a retroactive rate adjustment, loss
sharing arrangement or other actual or contingent liability arising wholly or
partially out of events occurring prior to the Merger Effective Date;
(xii) (A) each Benefit Plan that constitutes a
"Welfare Plan", and for which contributions are claimed by the Company, its
Subsidiary or any Commonly Controlled Entity as deductions under any provision
of the Code, is in material compliance with all applicable requirements
pertaining to such deduction;
(B) with respect to any welfare benefit fund
(within the meaning of Section 419 of the Code) related to a welfare benefit
plan, there is no disqualified benefit (within the meaning of Section 4976(b) of
the Code) that would result in the imposition of a tax under Section 4976(a) of
the Code; and
(C) all welfare benefit funds intended to be
exempt from tax under Section 501(a) of the Code have been determined by the
Internal Revenue Service to be so exempt and no event or condition exists which
would adversely affect any such determination; and
(xiii) all benefit plans outside of the United
States, if any (the "Foreign Plans"), are in compliance with all applicable laws
and regulations and have been operated in accordance with the plans' respective
terms. There are no material unfunded liabilities under or in respect of the
Foreign Plans, and all contributions or other payments required to be made to or
in respect of the Foreign Plans prior to the Merger Effective Date have been
made or will be made prior to the Merger Effective Date.
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS. The Company and its
Subsidiary have complied with each, and are not in violation of any, law,
ordinance, or governmental or regulatory rule or regulation, whether federal,
state, local or foreign ("Regulations"), to which the Company's or its
Subsidiary's business, operations, assets or properties is subject. The Company
and its Subsidiary own, hold, possess or lawfully use in the operation of their
respective business all franchises, licenses, permits, easements, rights,
applications, filings, registrations and other authorizations ("Authorizations")
which are in any manner necessary for them to conduct their respective business
as now or previously conducted or for the ownership and use of the assets owned
or used by such company in the conduct of the business of such company, free and
clear of all liens, charges, restrictions and encumbrances and in compliance
with all Regulations. All such Authorizations are listed and described in
Schedule 6.23. Neither the Company nor its Subsidiary is in default, nor has the
Company or its Subsidiary received any notice of any claim of default, with
respect to any such Authorization. All such Authorizations are renewable by
their terms or in the ordinary course of business without the need to comply
with any special qualification procedures or to pay any amounts other than
routine filing fees. None of such Authorizations will be adversely affected by
consummation of the transactions contemplated hereby. No Stockholder and no
director, officer, employee or former employee of
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the Company, its Subsidiary or any affiliates of any such company, or any other
person, firm or corporation, owns or has any proprietary, financial or other
interest (direct or indirect) in any Authorization which such company owns,
possesses or uses in the operation of the business of such company as now or
previously conducted.
6.24 TRANSACTIONS WITH AFFILIATES. Except as disclosed on Schedule
6.24, no Stockholder and no director, officer or employee of the Company or its
Subsidiary, or any member of his or her immediate family or any other of its,
his or her affiliates, owns or has a 5% or more ownership interest in any
corporation or other entity that is or was during the last three years a party
to, or in any property which is or was during the last three years the subject
of, any contract, agreement or understanding, business arrangement or
relationship with the Company or its Subsidiary.
6.25 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of the Company and the Stockholders, threatened against the Company or
its Subsidiary or which relates to the transactions contemplated by this
Agreement.
(b) Except as set forth on Schedule 6.25, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of the Company and the Stockholders, threatened
against the Company or its Subsidiary or which relates to such company.
(c) Neither the Company nor the Stockholders know of any
reasonably likely basis for any litigation, arbitration, investigation or
proceeding referred to in Sections 6.25(a) or (b).
(d) Except as set forth on Schedule 6.25, neither the Company
nor its Subsidiary is a party to or subject to the provisions of any judgment,
order, writ, injunction, decree or award of any court, arbitrator or
governmental or regulatory official, body or authority.
6.26 RESTRICTIONS. Neither the Company nor its Subsidiary is a party to
any indenture, agreement, contract, commitment, lease, plan, license, permit,
authorization or other instrument, document or understanding, oral or written,
or subject to any charter or other corporate restriction or any judgment, order,
writ, injunction, decree or award which materially adversely affects or
materially restricts or, so far as the Company or any of the Stockholders can
now reasonably foresee, may in the future materially adversely affect or
materially restrict, the business, operations, assets, properties, prospects or
condition (financial or otherwise) of the Company and its Subsidiary after
consummation of the transactions contemplated hereby.
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6.27 TAXES. All federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by the Company and its
Subsidiary (the "Tax Returns") with respect to any federal, state, local or
foreign taxes, assessments, interest, penalties, deficiencies, fees and other
governmental charges or impositions (including without limitation all income
tax, unemployment compensation, social security, payroll, sales and use, excise,
privilege, property, ad valorem, franchise, license, school and any other tax or
similar governmental charge or imposition under laws of the United States or any
state or municipal or political subdivision thereof or any foreign country or
political subdivision thereof) (the "Taxes") have been timely filed with the
appropriate governmental agencies in all jurisdictions in which such Tax Returns
are required to be filed, and all such Tax Returns properly reflect the
liabilities of the Company and its Subsidiary for Taxes for the periods,
property or events covered thereby. All Taxes, including without limitation
those which are called for by the Tax Returns, required to be paid, withheld or
accrued by the Company and its Subsidiary and any deficiency assessments,
penalties and interest have been timely paid, withheld or accrued. The accruals
for Taxes contained in the audited consolidated balance sheet as of the Audited
Balance Sheet Date included in the Audited Financial Statements are adequate to
cover the Tax liabilities of the Company and its Subsidiary as of that date and
include adequate provision for all deferred Taxes, and nothing has occurred
subsequent to that date to make any of such accruals inadequate. The Company's
and its Subsidiary's Tax basis in their assets for purposes of determining their
future amortization, depreciation and other federal income tax deductions are
accurately reflected on such Company's or Subsidiary's Tax books and records.
Neither the Company nor its Subsidiary is or has at any time ever been a party
to a Tax sharing, Tax indemnity or Tax allocation agreement, and neither the
Company nor its Subsidiary has assumed any Tax liability of any other person or
entity under contract. Neither the Company nor its Subsidiary has received any
notice of assessment or proposed assessment in connection with any Tax Returns
and there are not pending tax examinations of or tax claims asserted against the
Company or its Subsidiary or any of their assets or properties. The Company and
its Subsidiary have not extended, or waived the application of, any statute of
limitations of any jurisdiction regarding the assessment or collection of any
Taxes. There are now (and as of immediately following the Closing there will be)
no Liens (other than any Lien for current Taxes not yet due and payable) on any
of the assets or properties of the Company or its Subsidiary relating to or
attributable to Taxes. To the knowledge of the Company and the Stockholders,
there is no basis for the assertion of any claim relating to or attributable to
Taxes which, if adversely determined, would result in any Lien on the assets of
the Company or its Subsidiary or otherwise have an adverse effect on the Company
or its Subsidiary or their respective business, operations, assets, properties,
prospects or condition (financial or otherwise). Neither the Company nor the
Stockholders have any knowledge of any basis for any additional assessment of
any Taxes. All Tax payments related to employees, including income tax
withholding, FICA, FUTA, unemployment and worker's compensation, required to be
made by the Company and its Subsidiary have been fully and properly paid,
withheld, accrued or recorded. There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Company or its Subsidiary that,
individually or collectively, could give rise to any payment (or portion
thereof) that would not be deductible pursuant to
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Sections 280G, 404 or 162 of the Code. Two correct and complete copies of (a)
all Tax examinations, (b) all extensions of statutory limitations and (c) all
federal, state and local income tax returns and franchise tax returns of the
Company (including, if filed separately, its Subsidiary) for the last five
fiscal years, or such shorter period of time as any of them shall have existed,
have heretofore been delivered by the Company and the Stockholders to
UniCapital. The Company and its Subsidiary currently utilize the accrual method
of accounting for income tax purposes and, except as set forth on Schedule 6.27,
have not changed its method of accounting for income tax purposes in the past
five years.
6.28 INTELLECTUAL PROPERTY MATTERS.
(a) Neither the Company nor its Subsidiary have utilized or
currently utilize any patent, trademark, trade name, service mark, copyright,
software, trade secret or know-how except for those listed on Schedule 6.28 (the
"Intellectual Property"), all of which are owned by the Company and its
Subsidiary free and clear of any liens, claims, charges or encumbrances. The
Intellectual Property constitutes all such assets, properties and rights which
are used or held for use in, or are necessary for, the conduct of the business
of the Company and its Subsidiary.
(b) There are no royalty, commission or similar arrangements,
and no licenses, sublicenses or agreements, pertaining to any of the
Intellectual Property or products or services of the Company and its Subsidiary.
(c) Neither the Company nor its Subsidiary infringe upon or
unlawfully or wrongfully use any patent, trademark, trade name, service mark,
copyright or trade secret owned or claimed by another. No action, suit,
proceeding or investigation has been instituted or, to the knowledge of the
Company and the Stockholders, threatened relating to any, patent, trademark,
trade name, service mark, copyright or trade secret formerly or currently used
by the Company or its Subsidiary. None of the Intellectual Property is subject
to any outstanding order, decree or judgment. Neither the Company nor its
Subsidiary have agreed to indemnify any person or entity for or against any
infringement of or by the Intellectual Property.
(d) No present or former employee of the Company or its
Subsidiary and no other person or entity owns or has any proprietary, financial
or other interest, direct or indirect, in whole or in part, in any patent,
trademark, trade name, service mark or copyright, or in any application
therefor, or in any trade secret, which the Company or its Subsidiary owns,
possesses or uses in its operations as now or heretofore conducted. Schedule
6.28(d) lists all confidentiality or non-disclosure agreements currently in
force and effect to which the Company and its Subsidiary or any of their
employees is a party.
(e) Schedule 6.28 sets forth a complete and accurate list of
all items of Intellectual Property, including, without limitation, unregistered
and duly registered in, filed in or issued by the United States Copyright Office
or the United States Patent and Trademark Office,
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any offices in the various states of the United States and any offices in other
jurisdictions and information related to such registration.
(f) All rights of the Company in the Intellectual Property
shall vest in the applicable Surviving Corporation pursuant to the transactions
contemplated hereby without any consent or other approval.
(g) All Intellectual Property in the form of computer software
that is utilized by the Company or its Subsidiary in the operation of their
respective business is capable of processing date data between and within the
twentieth and twenty-first centuries, or can be rendered capable of processing
such data within six months by the expenditure of no more than $250,000.
6.29 COMPLETENESS; NO VIOLATIONS. The certified copies of the
Certificate of Incorporation and Bylaws, both as amended to date, of the Company
(and corporate Subsidiary), as well as the certificate of limited partnership
and partnership agreement of any partnership Subsidiary and the copies of all
leases, instruments, agreements, licenses, permits, certificates or other
documents which are included on schedules attached hereto or which have been
delivered or which have been made available to UniCapital in connection with the
transactions contemplated hereby, all as amended to date, are complete and
correct; neither the Company (including its Subsidiary) nor, to the knowledge of
the Stockholders, any other party to any of the foregoing is in material default
thereunder; and, except as set forth in the schedules and docu ments attached to
this Agreement, the rights and benefits of the Company (including its
Subsidiary) thereunder will not be materially and adversely affected by the
transactions contemplated hereby, and the execution of this Agreement and the
performance of the obligations hereunder will not result in a material violation
or breach or constitute a material default under any of the terms or provisions
thereof. Except as set forth on Schedule 6.29, none of such leases, instruments,
agreements, contracts, licenses, permits, certificates or other documents
requires notice to, or the consent or approval of, any governmental agency or
other third party to any of the transactions contemplated hereby to remain in
full force and effect. The consummation of the transactions contemplated hereby
will not give rise to any right of termination, cancellation or acceleration or
result in the loss of any right or benefit thereunder.
6.30 EXISTING CONDITIONS. Since the Audited Balance Sheet Date, neither
the Company nor its Subsidiary have:
(a) incurred any liabilities, other than liabilities incurred
in the ordinary course of business consistent with past practice, or discharged
or satisfied any lien or encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice, or failed to pay or
discharge when due any liabilities of which the failure to pay or discharge has
caused or will cause any material damage or risk of material loss to it or any
of its assets or properties;
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(b) sold, encumbered, assigned or transferred any assets,
properties or rights or any interest therein, except for the sales in the
ordinary course of business consistent with past practice, or made any agreement
or commitment or granted any option or right with, of or to any person to
acquire any assets, properties or rights of the Company, its Subsidiary or any
interest therein;
(c) created, incurred, assumed or guaranteed any indebtedness
for money borrowed, or mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract or other
encumbrance of any nature whatsoever, except in the ordinary course of business
consistent with past practice;
(d) made or suffered any amendment or termination of any
material agreement, contract, commitment, lease or plan to which it is a party
or by which it is bound, or canceled, modified or waived any substantial debts
or claims held by it or waived any rights of substantial value, except in the
ordinary course of business consistent with past practice;
(e) declared, set aside or paid any dividend or made or agreed
to make any other distribution or payment in respect of its capital shares or
redeemed, purchased or otherwise acquired or agreed to redeem, purchase or
acquire any of its shares of capital stock or other ownership interests;
(f) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting its business,
operations, assets, properties or prospects or (ii) of any item or items carried
on its books of account individually or in the aggregate at more than $25,000,
or suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;
(g) suffered any material adverse change in its business,
operations, assets, properties, prospects or condition (financial or otherwise),
other than as directly caused by adverse economic conditions not specific to, or
having an extraordinary impact upon, the Company;
(h) received notice or had knowledge of any actual or
threatened labor trouble, strike or other occurrence, event or condition of any
similar character which has had or might have an adverse effect on its business,
operations, assets, properties or prospects;
(i) made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $25,000, except such
as may be involved in ordinary repair, maintenance or replacement of its assets;
(j) made any advance (excluding advances for ordinary and
necessary business expenses) or loan to any of its employees, or, except in the
ordinary course of business,
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consistent with past practices, increased the salaries or other compensation of
any of its employees, or made any increase in, or any addition to, other
benefits to which any of its employees may be entitled;
(k) changed any of the accounting principles followed by it or
the methods of applying such principles;
(l) except for the establishment of the Real Estate Venture,
as disclosed on Schedule 6.30(l), entered into any transaction other than in the
ordinary course of business consistent with past practice;
(m) changed its authorized capital or its securities
outstanding or otherwise changed its ownership interests, or granted any
options, warrants, calls, conversion rights or commitments with respect to any
of its capital stock or other ownership interests; or
(n) agreed to take any of the actions referred to above.
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Attached hereto as Schedule
6.31 is an accurate list, as of the date of this Agreement, of:
(a) the name of each financial institution in which the
Company (including its Subsidiary) has accounts or safe deposit boxes;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have
access thereto; and
(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Company and its
Subsidiary and a description of the terms of such power.
6.32 BOOKS OF ACCOUNT. The books, records and accounts of the Company
and its Subsidiary accurately and fairly reflect, in reasonable detail, the
transactions and the assets and liabilities of such company. Neither the Company
nor its Subsidiary have engaged in any transaction, maintained any bank account
or used any of the funds of such company except for transactions, bank accounts
and funds which have been and are reflected in the normally maintained books and
records of the business.
6.33 ENVIRONMENTAL MATTERS. (a) The Company and its Subsidiary have
secured, and are in compliance with, all Environmental Permits, with respect to
any premises on which their
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respective business is operated, all of which Environmental Permits shall vest
in the Surviving Corporation upon consummation of the transactions contemplated
hereby. The Company and its Subsidiary are in compliance with all Environmental
Laws.
(b) Neither the Company nor its Subsidiary have received any
communication from any Governmental Entity that alleges that the Company or its
Subsidiary is not in compliance with any Environmental Laws or Environmental
Permits.
(c) Neither the Company nor its Subsidiary have entered into
or agreed to any court decree or order, and neither the Company not its
Subsidiary is subject to any judgment, decree or order, relating to compliance
with any Environmental Law or to investigation or cleanup of a Hazardous
Substance under any Environmental Law.
(d) No lien, charge, interest or encumbrance has been
attached, asserted, or to the knowledge of the Company and the Stockholders,
threatened to or against any assets or properties of the Company or its
Subsidiary pursuant to any Environmental Law.
(e) There has been no treatment, storage, disposal or release
of any Hazardous Substance on any property owned, operated or leased by the
Company or its Subsidiary.
(f) Neither the Company nor its Subsidiary have received a
CERCLA 104(e) information request or have been named a potentially responsible
party for any National Priorities List site under CERCLA or any site under
analogous state law or received an analogous notice or request from any non-U.S.
Governmental Entity, which notice, request or any resulting inquiry or
litigation has not been fully and finally resolved without possibility of
reopening.
(g) There are no aboveground tanks or underground storage
tanks on, under or about any property owned, operated or leased by the Company
or its Subsidiary and any former aboveground or underground tanks on any
property owned, operated or leased by the Company or its Subsidiary have been
removed in accordance with all Environmental Laws and no residual contamination,
if any, remains at such sites in excess of applicable standards.
(h) There are no polychlorinated biphenyls ("PCBs") leaking
from any article, container or equipment on, under or about any property owned,
operated or leased by the Company or its Subsidiary and there are no such
articles, containers or equipment containing PCBs, and there is no asbestos
containing material in a condition or location currently constituting a
violation of any Environmental Law at, on, under or within any property owned,
operated or leased by the Company or its Subsidiary.
(i) The Company and the Stockholders have provided to
UniCapital true and complete copies of, or access to, all written environmental
assessment materials and reports in
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their possession that have been prepared by or on behalf of the Company or its
Subsidiary during the past five years.
6.34 NO ILLEGAL PAYMENTS. Neither the Company nor its Subsidiary and,
to the knowledge of the Company and the Stockholders, nor any affiliate,
officer, agent or employee thereof, directly or indirectly, has, during the past
five years, on behalf of or with respect to the Company, its Subsidiary or any
affiliate thereof, (a) made any unlawful domestic or foreign political
contributions, (b) made any payment or provided services which were not legal to
make or provide or which the Company, its Subsidiary or any affiliate thereof or
any such officer, agent or employee should have known were not legal for the
payee or the recipient of such services to receive, (c) received any payment or
any services which were not legal for the payer or the provider of such services
to make or provide, (d) made any payment to any person or entity, or agent or
employee thereof, in connection with any Lease (as hereinafter defined) to
induce such person or entity to enter into a Lease transaction, (e) had any
transactions or payments related to the Company or its Subsidiary which are not
recorded in their accounting books and records or (f) had any off-book bank or
cash accounts or "slush funds" related to the Company or its Subsidiary.
6.35 LEASES. Schedule 6.35 hereto sets forth the Company's and its
Subsidiary's lease financing arrangements as of the Audited Balance Sheet Date
(which, together with all other lease/financing arrangements entered into by the
Company or its Subsidiary between such date and the Closing Date, are referred
to herein as the "Leases"). The term "Lease Documents" means the lease
arrangements and financing contracts evidencing the Leases described in Schedule
6.35, together with all related documents and agreements including, without
limitations, master lease agreements, schedules or other addenda to such Leases,
certificates of delivery and acceptance, UCC financing statements, remarketing
agreements, residual guaranty agreements, insurance policies, guaranty
agreements and other credit supports. The term "Equipment" means all equipment,
inventory and other property described as being leased or financed pursuant to a
Lease, or in which the Company or its Subsidiary is granted a security interest
pursuant to a Lease. The term "Obligor" means any lessee party or other party
obligated to pay or perform any obligations under or in respect of a Lease or
the Equipment covered by a Lease (excluding the lessor party thereunder, but
otherwise including, without limitation, any guarantor of a Lease or any vendor,
manufacturer or similar party under a remarketing agreement, residual guaranty
or similar agreement). The term "Scheduled Payments" means the monthly or
periodic rental payments or installments of principal and interest under the
terms of the Leases.
(a) There is no restriction or limitation in any of the Lease
Documents or otherwise, restricting the Company from executing this Agreement,
terminating the Lease Documents, or entering into the transactions contemplated
by this Agreement, other than consents which have been, or prior to the Closing
will have been, obtained.
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(b) The Company or its Subsidiary own the Equipment covered by
each Lease or has a vested and perfected first priority security interest in the
Equipment. All Equipment is located in the United States.
(c) With respect to each Lease, only one chattel paper
original of such Lease exists and is held by the Company or its Subsidiary or
the secured lenders of the Company or its Subsidiary.
(d) Each Lease is in full force and effect in accordance with
its terms, and there has been no occurrence which would or might permit any
Obligor to terminate such Lease or suspend or reduce any payments or obligations
due or to become due in respect of such Lease or the related Lease Documents by
reason of default by the lessor party under such Lease. None of the Obligors in
respect of a Lease or the related Lease Documents is the subject of a
bankruptcy, insolvency or similar proceeding.
(e) Except for the delinquency in the payment of any Scheduled
Payment that is not more than 90 days past due and except as set forth in
Schedule 6.35(e), there does not exist any default in the payment of any
Scheduled Payments due under any Lease or the related Lease Documents, and there
does not exist any other default, breach, violation or event permitting
acceleration, termination or repossession under any Lease or the related Lease
Documents or any event which, to the knowledge of the Company and the
Stockholders, with notice and the expiration of any applicable grace or cure
period, would constitute such a default, breach, violation or event permitting
acceleration, termination or repossession under such Lease or the related Lease
Documents.
(f) Neither the Company nor its Subsidiary have acted in a
manner which (nor has any such company failed to act where such failure to act)
would alter or reduce any of such company's rights or benefits under any
manufacturer's or vendors' warranties or guarantees with respect to any
Equipment.
(g) The Company has complied with all requirements of any
federal, state or local law, including without limitation, usury laws,
applicable to each Lease.
(h) Each Lease has the following characteristics:
(i) such Lease was originated in the United States
and the Scheduled Payments thereunder are payable in U.S. dollars by Obligors
domiciled in the United States;
(ii) the lessee party under such Lease has
unconditionally accepted the Equipment covered by such Lease;
(iii) at least one Scheduled Payment has been made by
the Obligor under each such Lease; and
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(iv) no Obligor in respect of such Lease is an
affiliate of the Company or its Subsidiary.
(i) Each Lease and the related Lease Documents are valid,
binding, legally enforceable and non-cancelable obligations of the parties
thereto, enforceable in accordance with their respective terms, except as such
enforceability may be subject to the effect of general principles of equity.
Each Lease is a business obligation of the lessee thereunder and is not a
"consumer transaction" under any applicable federal or state regulation.
(j) To the knowledge of the Stockholders, no Lease or related
Lease Document is the subject of a fraudulent scheme by any Obligor or any
supplier of Equipment.
(k) Each item of Equipment is subject to a Lease.
(l) Each Lease is a fixed rate lease contract.
(m) No Lease or related Lease Document is subject to any right
of rescission, set-off, counterclaim, abatement or defense, including without
limitation any defense of usury, nor will the operation of any of the terms of
any Lease or any related Lease Document or the exercise of any right or remedy
thereunder render such Lease or any related Lease Document or the obligations
thereunder unenforceable, or subject the same to any right of rescission,
set-off, counterclaim, abatement or defense. No Obligor has asserted any legally
enforceable right of rescission, set-off, counterclaim, abatement or defense to
its obligations under a Lease or any related Lease Document.
(n) As to the Leases and the related Lease Documents, (i) none
has been amended or modified (a) to extend the maturity date for a period of
longer than one year, or (b) to alter the amount or time of payment of any
amount due thereunder, unless as to (a) and (b) such extension or alteration is
reasonably expected to result in a net economic benefit to the Company or any
Subsidiary; (ii) no indulgences or waivers have been granted in respect of the
obligations of any Obligor under any Lease; and (iii) neither the Company nor
its Subsidiary have advanced any monies on behalf of any Obligor.
(o) Each Lease requires the Obligor thereunder at its own cost
and expense to maintain the Equipment leased thereunder in good repair,
condition and working order, and, to the knowledge of the Stockholders, each
Obligor under a Lease is currently in compliance with such requirement.
(p) Each Lease requires the Obligor thereunder (i) to pay all
fees, taxes (except income taxes), and other charges or liabilities arising with
respect to the Equipment leased thereunder or the use thereof, (ii) to keep the
Equipment free and clear of any and all liens, security interests and other
encumbrances, other than security interests of the Company or its Subsidiary,
(iii) to hold harmless the lessor thereunder and its successors and assigns
against the
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imposition of any fees, charges, liabilities and encumbrances, (iv) to bear all
risk of loss associated with the Equipment covered by or securing the
obligations under such Lease during the term of such Lease and (v) to maintain
at the cost of the Obligor public liability and casualty insurance in respect of
such Equipment covered by such Lease.
(q) Each Lease prohibits without the lessor's prior written
consent any relocation of the Equipment covered by such Lease and requires the
Obligor to execute such agreements and documents as may reasonably be requested
by the lessor in connection with any such relocation.
(r) Each Lease involves either the lease of tangible personal
property owned by the Company or its Subsidiary or the loan of money secured by
a security interest in tangible personal property owned by the Obligor
thereunder.
(s) Neither the Company nor its Subsidiary have received any
notice challenging its ownership or the priority of its security interest in the
Equipment covered by each Lease, and there are no proceedings pending before any
court or governmental entity or, to the knowledge of the Company and the
Stockholders, threatened by any Obligor or other party, (i) asserting the
invalidity of any Lease or the related Lease Documents, (ii) seeking to prevent
payment or performance by any Obligor of any Lease or any of the terms of the
related Lease Documents, or (iii) seeking any determination or ruling that might
adversely affect the validity or enforceability of any Lease or any of the terms
or provisions of the related Lease Documents.
(t) As to each Lease, there are no agreements or
understandings between the Company or its Subsidiary and the Obligors in respect
of such Lease or otherwise binding on any such company other than as expressly
set forth in the Lease and the related Lease Documents.
6.36 LEASE FUNDING. The Company and its Subsidiary are in compliance
with all of the terms and covenants of, and are not in default or breach under,
each agreement, contract, understanding or arrangement with any funding source
for the Leases.
6.37 DISCLOSURE. The Company has delivered, or in the case of the
Leases and Lease Documents, made available to UniCapital true and complete
copies of each agreement, contract, commitment or other document (or, in the
case of any such document not in the possession of reasonably available to the
Company or a Stockholder, accurate and complete summaries thereof) that is
referred to in the schedules to this Agreement or that has been requested by
UniCapital or its representatives. Without limiting any exclusion, exception or
other limitation contained in any of the representations and warranties made
herein, this Agreement and the schedules hereto and all other documents and
information prepared or certified by the Stockholders to the Company and
provided to UniCapital and its representatives pursuant hereto do not and will
not include any untrue statement of a material fact or omit to state a material
fact necessary to make the statements herein and therein not misleading. If any
Stockholders become aware of any fact or circumstance that would change a
representation or warranty of any
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Stockholder in this Agreement or any representation made on behalf of the
Company (including its Subsidiary), then the Stockholders shall immediately give
notice of such fact or circumstance to UniCapital. However, such notification
shall not relieve the Company or any of the Stockholders of their respective
obligations under this Agreement, and at the sole option of UniCapital, the
truth and accuracy of any and all warranties and representations of the
Stockholders, at the date of this Agreement and at the Closing, shall be a
precondition to the consummation of this transaction.
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, UniCapital and Newco, jointly and severally, represent and as
follows:
7.1 CORPORATE EXISTENCE. UniCapital is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Newco is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. Immediately prior to the
effectiveness of the Merger, each of UniCapital and Newco is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction where the conduct of its business requires it to be so qualified.
7.2 UNICAPITAL STOCK. The shares of UniCapital Stock to be issued and
delivered to the Stockholders on the Merger Effective Date, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable shares, and except for restrictions upon
resale, will be legally equivalent in all respects to the majority of UniCapital
Stock issued and outstanding as of the date hereof. The UniCapital Stock to be
issued upon the conversion of Company Stock pursuant to the terms of this
Agreement will be free and clear of all liens, encumbrances and claims of every
kind, other than restrictions upon transfer contained herein and other than any
liens, encumbrances or claims arising other than by the actions of UniCapital or
Newco.
7.3 CORPORATE POWER AND AUTHORIZATION. UniCapital and Newco have the
corporate power, authority and legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance of this Agreement and all
related documents and agreements required to be executed and delivered by
UniCapital and Newco in accordance with the provisions hereof (the "UniCapital
Documents") have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by UniCapital and Newco and
constitutes, and the UniCapital Documents when executed and delivered will
constitute, the legal, valid and binding obligations of UniCapital and Newco
enforceable against UniCapital and Newco in accordance with their terms.
7.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement by UniCapital and Newco will not violate, conflict with or result in
the breach of any term,
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condition or provision of, or require the consent of any other person under (a)
any existing law, ordinance, or governmental rule or regulation to which
UniCapital or Newco is subject, (b) any judgment, order, writ, injunction,
decree or award of any Governmental Entity that is applicable to UniCapital or
Newco, (c) the charter documents of UniCapital or Newco, or (d) any mortgage,
indenture, agreement, contract, commitment, lease, plan, Authorization, or other
instrument, document or understanding, oral or written, to which UniCapital or
Newco is a party, by which UniCapital or Newco may have rights or by which any
of the properties or assets of UniCapital or Newco may be bound or affected, or
give any party with rights thereunder the right to terminate, modify, accelerate
or otherwise change the existing rights or obligations of UniCapital or Newco
thereunder. Except for filing the Articles of Merger, filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and except as aforesaid, no
authorization, approval or consent of, and no registration or filing with, any
Governmental Entity is required in connection with the execution, delivery or
performance of this Agreement by UniCapital or Newco.
7.5 CAPITALIZATION OF UNICAPITAL. The IPO will result in an aggregate
market capitalization of UniCapital that will exceed Three Hundred Million
Dollars ($300,000,000), as determined by multiplying the outstanding shares of
UniCapital immediately following the closing of the IPO by the offering price.
7.6 COMPLIANCE WITH LAW; AUTHORIZATIONS. Each of UniCapital and Newco
have complied with each, and is not in violation of Regulations to which
UniCapital's and Newco's respective business, operations, assets or properties
is subject. Each of UniCapital and Newco owns, holds, possesses or lawfully uses
in the operation of its business all Authorizations which are in any manner
necessary for it to conduct its business as now or previously conducted or for
the ownership and use of the assets owned or used by UniCapital and Newco,
respectively, in the conduct of the business of such company, free and clear of
all liens, charges, restrictions and encumbrances and in compliance with all
Regulations. Neither UniCapital nor Newco is in default, nor has UniCapital or
Newco received any notice of any claim of default, with respect to any such
Authorization. All such Authorizations are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
None of such Authorizations will be adversely affected by consummation of the
transactions contemplated hereby. No stockholder and no director, officer,
employee or former employee of UniCapital of Newco any of their affiliates, or
any other person, firm or corporation, owns or has any proprietary, financial or
other interest (direct or indirect) in any Authorization which UniCapital or
Newco owns, possesses or uses in the operation of the business of UniCapital and
Newco as now or previously conducted.
7.7 TRANSACTIONS WITH AFFILIATES. Except as described in the
Registration Statement, no stockholder and no director, officer or employee of
UniCapital or Newco, or any member of his or her immediate family or any other
of its, his or her affiliates, owns or has a 5% or more ownership interest in
any corporation or other entity that is or was during the last three years a
party to, or in any property which is or was during the last three years the
subject of, any
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contract, agreement or understanding, business arrangement or relationship with
UniCapital or Newco.
7.8 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of UniCapital and Newco, threatened against UniCapital or Newco which
relates to the transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 7.8, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of UniCapital or Newco, threatened against
UniCapital or Newco or which relates to UniCapital or Newco.
(c) Neither UniCapital nor Newco is a party to or subject to
the provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority."
7.9 MISCELLANEOUS. Prior to the consummation of the Merger, UniCapital
and Newco have no material properties or assets and are not party to any
contracts other than this Agreement, the letter of intent among the parties to
this Agreement, certain employment agreements with officers of UniCapital,
certain real property leases relating to the principal executive offices of
UniCapital, and those agreements and letters of intent listed on Schedule 7.9
hereto.
7.10 REGISTRATION RIGHTS. As of the date hereof and as of the Merger
Effective Date, no officer, director or shareholder of UniCapital will have been
granted any registration rights with respect to the registration of any shares
of capital stock of UniCapital.
8. COVENANTS OF STOCKHOLDERS AND COMPANIES
The following covenants shall apply during the period from and after
the date hereof through the Closing Date:
8.1 BUSINESS IN THE ORDINARY COURSE. Except as otherwise contemplated
in Section 8.15, the Company shall, and the Stockholders shall cause the Company
to, conduct its business and the business of its Subsidiary solely in the
ordinary course and consistent with past practice.
8.2 EXISTING CONDITIONS. The Company shall not, and the Stockholders
shall not suffer the Company or its Subsidiary to, cause or permit to occur any
of the events or occurrences described in Section 6.30 hereof.
8.3 MAINTENANCE OF PROPERTIES AND ASSETS. Except as otherwise
contemplated in Section 8.15, the Company shall, and the Stockholders shall
cause the Company and its
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Subsidiary to, maintain and service their properties and assets in order to
preserve their value and usefulness in the conduct of their respective business.
8.4 EMPLOYEES AND BUSINESS RELATIONS. The Company shall, and the
Stockholders shall cause the Company and its Subsidiary to, use commercially
reasonable efforts to keep available the services of their current employees and
agents and to maintain their relations and goodwill with their suppliers,
customers, distributors and any others with whom or with which they have
business relations.
8.5 MAINTENANCE OF INSURANCE. The Company shall, and the Stockholders
shall cause the Company and its Subsidiary to, notify UniCapital of any material
changes in the terms of the insurance policies and binders referred to on
Schedule 6.20 hereto.
8.6 COMPLIANCE WITH LAWS, ETC. The Company shall, and the Stockholders
shall cause the Company and its Subsidiary to, comply with all laws, ordinances,
rules, regulations and orders applicable to such company or its business,
operations, properties or assets, noncompliance with which might materially
affect such company.
8.7 CONDUCT OF BUSINESS. The Company shall, and the Stockholders shall
cause the Company and its Subsidiary to, use its reasonable commercial efforts
to conduct their business in such a manner that on the Closing Date and on the
Merger Effective Date the representations and warranties of the Stockholders
contained in this Agreement shall be true, as though such representations and
warranties were made on and as of each such date (except to the extent such
representations or warranties expressly speak as of a specific date), and the
Company shall, and the Stockholders shall cause the Company and its Subsidiary
to, use reasonable commercial efforts to cause all of the conditions to the
obligations of UniCapital and the Stockholders under this Agreement to be
satisfied on or prior to the Closing Date. The Company shall and the
Stockholders shall cause the Company and its Subsidiary to, maintain credit
underwriting standards consistent with past practice. The Company shall, and the
Stockholders shall cause the Company and its Subsidiary to, maintain residual
value accounting methodology consistent with past practice.
8.8 ACCESS. Upon reasonable prior notice, the Company shall, and the
Stockholders shall cause the Company and its Subsidiary to, give to UniCapital's
officers, employees, counsel, accountants and other representatives free and
full access to and the right to inspect, during normal business hours, all of
the premises, properties, assets, records, contracts and other documents
relating to such company and shall permit them to consult with the officers,
employees, accountants, counsel and agents of such company for the purpose of
making such investigation of such company as UniCapital shall desire to make,
provided that such investigation shall not unreasonably interfere with such
company's business operations, and provided further that UniCapital shall not
contact or consult with any non-officer employees of the Company or its
Subsidiary without the Company's or its Subsidiary's prior consent, which shall
not be unreasonably withheld. Furthermore, the Company shall, and the
Stockholders shall
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cause the Company and its Subsidiary to, furnish to UniCapital all such
documents and copies of documents and records and information with respect to
the affairs of such company and copies of any working papers relating thereto as
UniCapital shall from time to time reasonably request. No information or
knowledge obtained in any investigation pursuant to this Section 8.8 or
otherwise shall affect or be deemed to modify any representation or warranty
contained in this Agreement or the conditions to the obligations of the parties
to consummate the Merger.
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS. Neither the Company, nor
its Subsidiary and no Stockholder shall give notice to third parties or
otherwise make any press release or other public statement concerning this
Agreement or the transactions contemplated hereby. Neither the Company nor its
Subsidiary and no Stockholders shall grant any interview, publish any article,
report or statement, or respond to any press inquiry or other inquiry of any
third party relating to this Agreement, the business of the Company and its
Subsidiary, the business (current and proposed) of UniCapital, the Registration
Statement (as defined below), the IPO or any other matter connected with any of
the foregoing without the express prior written approval of UniCapital, and all
inquiries and questions with respect to any of the foregoing shall be
coordinated through Robert New, Chief Executive Officer of UniCapital. The
Company, its Subsidiary and each Stockholder shall coordinate all communications
with the employees and agents of any such company through UniCapital prior to
making any such communication. Notwithstanding the foregoing, (i) the Company,
any Subsidiary or any Stockholder may communicate, whether orally or in writing,
with any parties from whom any consents, approvals or waivers are necessary or
advisable, or to whom notice is necessary or advisable, and (ii) this Section
8.9 shall not be interpreted to prevent the Company, its Subsidiary or any
Stockholder from disclosing information as compelled by a court order, provided
however, that prior to disclosing any information concerning this Agreement or
the transaction contemplated hereby in response to any such court order, the
Company or Stockholder as applicable, shall provide UniCapital with prompt
notice of the court order so that UniCapital may take whatever action it deems
appropriate to prohibit such disclosure.
8.10 EXCLUSIVITY. Except with respect to this Agreement and the
transactions contemplated hereby, neither the Company, nor its Subsidiary nor
the Stockholders and none of their affiliates shall, and each of them shall
cause its respective employees, agents and representatives (including, without
limitation, any investment banking, legal or accounting firm retained by it or
them and any individual member or employee of the foregoing) (each, an "Agent")
not to, (a) initiate, solicit or seek, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its shareholders or any of them) with
respect to a merger, acquisition, consolidation, recapitalization, liquidation,
dissolution or similar transaction involving, or any purchase of all or any
portion of the assets or any equity securities of, the Company or its Subsidiary
(any such proposal or offer being hereinafter referred to as an "Acquisition
Proposal"), or (b) engage in any negotiations concerning, or provide any
confidential information or data to, or have any substantive discussions with,
any person relating to an Acquisition Proposal, (c) otherwise cooperate in any
effort or attempt to make, implement or accept an Acquisition Proposal, or (d)
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enter into or consummate any agreement or understanding with any person or
entity relating to an Acquisition Proposal, except for the Merger contemplated
hereby. If the Company, its Subsidiary or Stockholder, or any of their
respective Agents, have provided any person or entity (other than UniCapital)
with any confidential information or data relating to an Acquisition Proposal,
then they shall request the immediate return thereof. The Company, its
Subsidiary and the Stockholders shall notify UniCapital immediately if any
inquiries, proposals or offers related to an Acquisition Proposal are received
by, any confidential information or data is requested from, or any negotiations
or discussions related to an Acquisition Proposal are sought to be initiated or
continued with, it or any individual or entity referred to in the first sentence
of this Section 8.10. The covenant contained in this Section 8.10 shall not
survive any termination of this Agreement pursuant to Sections 13.1, 13.2 or
13.3.
8.11 THIRD PARTY APPROVALS. Prior to the Closing Date, the Company and
its Subsidiary shall satisfy any requirement for notice and approval of the
transactions contemplated by this Agreement under applicable agreements with
third parties, and shall provide UniCapital with satisfactory evidence of such
third party approvals.
8.12 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
Company and its Subsidiary shall satisfy any requirement for notice of the
transactions contemplated by this Agreement under any applicable collective
bargaining agreement, and shall provide UniCapital with proof that any required
notice has been provided.
8.13 NOTIFICATION OF CERTAIN MATTERS. (a) The Company and the
Stockholders shall give prompt notice to UniCapital of (i) the occurrence or
non-occurrence of any event known to any Stockholder or the Company the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty contained in Article 6 to be untrue or inaccurate in
any material respect at or prior to the Closing Date or the Merger Effective
Date and (ii) any material failure of any Stockholder or the Company to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by such person hereunder.
(b) UniCapital shall give prompt notice to each Stockholder of
(i) the occurrence or non-occurrence of any event known to UniCapital the
occurrence of non-occurrence of which would be likely to cause any
representation or warranty contained in Article 7 to be untrue or inaccurate in
any material respect at or prior to the Closing Date or the Merger Effective
Date and (ii) any material failure of UniCapital to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
(c) The delivery of any notice pursuant to this Section 8.13
shall not be deemed to (i) modify the representations or warranties hereunder of
the party delivering such notice, which modification may only be made pursuant
to Section 8.14, (ii) modify the conditions set forth in Sections 9 and 10 or
(iii) limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
8.14 DELIVERY AND AMENDMENT OF SCHEDULES.
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(a) The Stockholders covenant and agree that they shall
deliver final and binding copies of all schedules to this Agreement not later
than four business days after execution of this Agreement. From the date of
delivery of such schedules until and including the Closing Date, UniCapital
shall have the right to review such schedules and to accept or reject any of
them, in whole or in part, in its reasonable discretion. In the event that
UniCapital rejects a schedule or any part thereof, the Stockholders shall have
the right to revise and resubmit such schedule. Notwithstanding anything to the
contrary herein contained, only schedules accepted by UniCapital in its
reasonable discretion on or prior to the Closing Date shall be deemed to be a
part of this Agreement in accordance with Section 19.3 hereof.
(b) Each party hereto agrees that, with respect to the
representations and warranties of such party contained in this Agreement, such
party shall have the continuing obligation until the Merger Effective Date to
supplement or amend promptly the schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
schedules, provided, that no amendment or supplement to a schedule that
constitutes or reflects a material adverse change in the business, operations,
assets, properties, prospects or condition (financial or otherwise) of the
Company or the Subsidiary (a "Material Adverse Amendment") may be made unless
UniCapital consents to such Material Adverse Amendment; provided, further,
however, that if the amendment or supplement relates to changes in facts or
circumstances occurring subsequent to the date of this Agreement, then such
amendment shall be accepted by UniCapital subject to the provisions of Sections
12.2 and 12.5 hereof. No amendment of or supplement to a schedule shall be made
later than 48 hours prior to the anticipated effectiveness of the Registration
Statement defined in Section 9.4. Only (i) the schedules attached to this
Agreement at the time of its execution and (ii) amended schedules as accepted
under the standards and provisions of this Section 8.14, shall be deemed to be a
part of this Agreement in accordance with Section 19.3 hereof.
8.15 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, the Company shall use its reasonable best efforts to (a) file all
information required to be filed by it pursuant to such act and (b) provide
UniCapital with all information reasonably requested and required by it to
satisfy any filing requirements it may have under such act.
8.16 THE REAL ESTATE VENTURE. Neither the Company nor the Subsidiary
shall extend the Letter of Intent (which expired on or about January 26, 1998)
or enter into a new letter of intent, or enter into any definitive binding
agreement, concerning the Real Estate Venture without the prior written consent
of UniCapital, which consent shall not be unreasonably withheld. Notwithstanding
the foregoing, UniCapital acknowledges that it is aware of the business terms in
the letter of intent (which expired on or about January 26, 1998) and it
authorizes the Company to continue its efforts in developing a definitive
agreement that encompasses, and preparing to launch the Real Estate Venture
along, such business terms.
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9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND STOCKHOLDERS
The obligations of the Company and the Stockholders hereunder are
subject to the satisfaction on or prior to the Closing Date (or such earlier
date specified below) of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representations and warranties of UniCapital and Newco contained in Article 7
shall be accurate as
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of the Closing Date and as of the Merger Effective Date as though such
representations and warranties had been made as of such times; all of the terms,
covenants and conditions of this Agreement to be complied with and performed by
UniCapital and Newco on or before the Closing Date shall have been duly complied
with and performed; and a certificate to the foregoing effect dated the Merger
Effective Date and signed by a duly authorized agent, the President or any Vice
President of UniCapital shall have been delivered to the Stockholders.
9.2 EMPLOYMENT AGREEMENTS. The Surviving Corporation shall have
executed and delivered Employment Agreements, in the form of Annex IV attached
hereto, to each of the persons listed on Schedule 9.2 hereto.
9.3 OPINION OF COUNSEL. The Stockholders shall have received an opinion
from counsel for UniCapital, dated the Merger Effective Date, to the effect
that:
(a) UniCapital and Newco have been duly organized and are
validly existing in good standing under the laws of their respective states of
incorporation;
(b) this Agreement has been duly authorized, executed and
delivered by UniCapital and Newco and constitutes a valid and binding agreement
of UniCapital and Newco enforceable in accordance with its terms, except (i) as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting the
rights of creditors, (ii) as the same may be subject to the effect of general
principles of equity and (iii) that no opinion need be expressed as to the
enforceability of indemnification provisions included herein;
(c) the shares of UniCapital Stock to be received by the
Stockholders on the Merger Effective Date shall be duly and validly authorized
and issued, fully paid and nonassessable; and
(d) the execution, delivery and performance of this Agreement
and the consummation of any transactions contemplated hereby will not conflict
with, or result in a breach or violation of, the Certificate of Incorporation of
Bylaws of UniCapital or Newco.
9.4 REGISTRATION STATEMENT. UniCapital shall have filed with the
Securities and Exchange Commission ("SEC") a registration statement on Form S-1
covering the offer and sale of shares of UniCapital Stock in the IPO (the
"Registration Statement"). The Registration Statement shall have been declared
effective by the SEC not later than June 30, 1998, UniCapital and the
underwriters named therein shall have executed the Underwriting Agreement and
the underwriters named therein shall have agreed to acquire, subject to the
conditions set forth in the Underwriting Agreement, the shares of UniCapital
Stock covered by the Registration Statement. There shall have been no stop-order
issued (that remains in effect) by the SEC with respect to the Registration
Statement.
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9.5 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND NEWCO
The obligations of UniCapital and Newco hereunder are subject to the
satisfaction, on or prior to the Closing Date (or such earlier date specified
below), of the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
Stockholders shall have delivered to UniCapital a certificate dated the Merger
Effective Date and signed by them to the effect that all of the representations
and warranties of the Stockholders contained in this Agreement shall be true on
and as of the Closing Date and as of the Merger Effective Date with the same
effect as though such representations and warranties had been made on and as of
such dates, except for matters expressly disclosed in the certificate or a
schedule thereto (which shall not serve to modify any representation or warranty
made herein or in any other document or otherwise in information supplied by the
Company or any Stockholder); and each and all of the agreements of the
Stockholders and the Company to be performed on or before the Closing Date
pursuant to the terms hereof shall have been performed.
10.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by UniCapital of the Company Stock and no
governmental agency or body shall have taken any other action or made any
request of UniCapital as a result of which the management of UniCapital deems it
inadvisable to proceed with the transactions hereunder.
10.3 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the Closing Date,
UniCapital shall have had sufficient time to review the unaudited consolidated
balance sheet of the Company and its Subsidiary as of the end of the calendar
month most recently completed prior to the Closing Date, and the unaudited
consolidated statements of income, cash flows and stockholders' equity of the
Company for the periods then ended, which statements shall have disclosed no
material adverse change in the financial condition of the Company or its
Subsidiary or the results of their respective operations from the financial
statements originally furnished by the Company as set forth in Schedule 6.12.
10.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, operations, assets, properties, prospects or condition (financial or
otherwise) of the Company or its Subsidiary shall have occurred, and neither the
Company nor its Subsidiary shall have suffered any material loss or damage to
any of its properties or assets, whether or not covered by insurance, since the
Audited Balance Sheet Date, which change, loss or damage materially affects or
impairs the ability of such company to conduct its business as now conducted or
as
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proposed to be conducted; and UniCapital shall have received on the Closing Date
a certificate signed by the Stockholders and dated the Merger Effective Date to
such effect.
10.5 REGULATORY REVIEW. UniCapital, through its authorized
representatives, shall have completed a satisfactory review of the practices and
procedures of the Company and its Subsidiary including, but not limited to,
environmental and land use practices, import and export laws, compliance with
contracts and federal, state and local laws and regulations governing the
respective operations of such companies, which review reflects compliance with
all applicable laws governing each company, disclosing no material actual or
probable violations, compliance problems, required capital expenditures or other
substantive environmental, real estate and land use related concerns and which
review is otherwise satisfactory in all respects to UniCapital, in its sole
discretion.
10.6 STOCKHOLDERS' RELEASE. At the Closing Date, the Stockholders shall
have delivered to UniCapital an instrument dated the Merger Effective Date
releasing the Company and its Subsidiary from any and all claims of Stockholders
against the Company or its Subsidiary, except for claims for benefits accrued by
the Stockholders pursuant to any Benefit Plan.
10.7 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.2
shall have executed and delivered an Employment Agreement in the form of Annex
IV attached hereto.
10.8 OPINION OF COUNSEL. UniCapital shall have received an opinion from
Chrisman Bynum & Johnson, P.C., counsel to the Company and the Stockholders,
dated the Merger Effective Date, in form and substance satisfactory to
UniCapital, to the effect that, with respect to the Company and its Subsidiary
(including, without limitation, the Company):
(a) the Company and its Subsidiary has been duly organized and
is validly existing and in good standing under the laws of the state of its
incorporation or formation;
(b) to the knowledge of such counsel, the Company and its
Subsidiary is duly authorized, qualified and licensed under all applicable laws,
regulations, ordinances or orders of public authorities to carry on its business
in the places and in the manner now conducted;
(c) the authorized and outstanding capital stock of the
Company and any corporate Subsidiary is as represented by the Stockholders in
this Agreement and each share of such stock has been duly and validly authorized
and issued, is fully paid and nonassessable and was not issued in violation of
the preemptive rights of any stockholder;
(d) to the knowledge of such counsel, all of the partnership
interests of each partnership Subsidiary have been duly and validly authorized
and issued, all mandatory capital contributions will have been paid in full, and
the interests were not issued in violations of the preemptive rights of any
partner;
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(e) neither the Company nor any Subsidiary has any outstanding
options, warrants, calls, conversion rights or other commitments of any kind to
issue or sell any of its capital stock, if a corporation, or partnership
interests, if a partnership;
(f) to the knowledge of such counsel, this Agreement has been
duly authorized, executed and delivered by the Company and the Stockholders and
constitutes a valid and binding agreement of the Company and the Stockholders
enforceable in accordance with its terms, except as such enforceability may be
subject to bankruptcy, moratorium, insolvency, reorganization, arrangement and
other similar laws relating to or affecting the rights of creditors and except
(i) as the same may be subject to the effect of general principles of equity and
(ii) that no opinion need be expressed as to the enforceability of
indemnification provisions included herein;
(g) upon consummation of the Merger contemplated by this
Agreement, UniCapital will receive good title to the Company Stock, free and
clear of all liens, security interests, pledges, charges, voting trusts,
equities, restrictions, encumbrances and claims of every kind;
(h) to the knowledge of such counsel, except to the extent set
forth on Schedule 6.23, neither the Company nor its Subsidiary is in violation
of or default under any law or regulation, or under any order of any court,
commission, board, bureau, agency or instrumentality wherever located and there
are no claims, actions, suits or proceedings pending, or threatened against or
affecting any such company, at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality wherever located;
(i) to the knowledge of such counsel, except to the extent set
forth on Schedule 6.17, neither the Company nor its Subsidiary is in default
under any of its material contracts or agreements or has received notice of such
default;
(j) no notice to, consent, authorization, approval or order of
any court or governmental agency or body or of any other third party is required
(which has not been obtained) in connection with the execution, delivery or
consummation of this Agreement by the Company or any Stockholders or for the
transfer to UniCapital of the Company Stock; and
(k) the execution of this Agreement and the performance of the
obligations hereunder will not violate or result in a breach or constitute a
default under any of the terms or provisions of the Company's or any corporate
Subsidiary's charter documents or the bylaws or any Contract or Lease listed on
Schedules 6.17 and 6.35.
Such opinion shall include any other matters incident to the matters set forth
herein as agreed to by the parties and their respective counsel.
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10.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
10.10 GOOD STANDING CERTIFICATES. Stockholders shall have delivered to
UniCapital certificates, dated as of a date no earlier than five days prior to
the Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and the Subsidiary's state of incorporation or
formation, unless waived by UniCapital, in each state in which the Company is
authorized to do business, showing that the Company and its Subsidiary is in
good standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for such company for all periods prior to the dates
of such certificates have been filed and paid.
10.11 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC, and UniCapital and the representatives of
the underwriters named in the Registration Statement shall have executed the
Underwriting Agreement. There shall have been no stop-order issued (that remains
in effect) by the SEC with respect to the Registration Statement.
10.12 REPAYMENT OF INDEBTEDNESS; PRE-CLOSING DISTRIBUTIONS. Prior to
the Closing Date, the Stockholders shall have repaid to the Company (including
its Subsidiary) in full all amounts owing by the Stockholders to such entities.
10.13 NET INCOME. The Company (including its Subsidiary) shall have
consolidated after tax net income for the twelve months ended December 31, 1997
as included in UniCapital's unaudited pro forma combined (prior to pro forma and
offering adjustments) income statement for the twelve months ended December 31,
1997 included in the Registration Statement.
10.14 HSR ACT. The waiting period applicable to the consummation of the
unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
10.15 RELEASE OF SECURITY INTERESTS. The Stockholders shall have duly
released their security interests in the assets of the Company and the
Subsidiary, and each Stockholder shall have delivered to UniCapital a properly
completed and fully executed UCC-3 filing statement for the release of each such
security interest for filing immediately following the Closing.
11. COVENANTS OF UNICAPITAL
11.1 LEASES. At the Merger Effective Date, the Surviving Corporation
shall enter into lease arrangements with each of the persons or entities listed
in Schedule 11.1 with respect to the corresponding properties or assets listed
on Schedule 11.1 in accordance with the terms and
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conditions of the form of lease agreement attached hereto as Annex V.
11.2 UNICAPITAL STOCK OPTIONS. Upon the effective date of the
Registration Statement (but subject in all events to the consummation of the
Merger), UniCapital shall make available options to purchase that number of
shares of UniCapital Stock having a fair market value on the effective date of
the Registration Statement, based upon the IPO price per share set forth in the
Underwriting Agreement ("IPO Price"), equal to 6.25% of the Effective Date
Consideration (valuing the UniCapital Stock to be issued as part of the
Effective Date Consideration at the IPO Price to be granted to those
non-Stockholder employees of the Surviving Corporation after the Closing as are
designated by the principal executive officer of the Surviving Corporation who
is entering into an Employment Agreement pursuant to Section 9.2 hereof (or such
other officer designated by the Surviving Corporation and acceptable to
UniCapital). Not later than seven days prior to the effective date of the
Registration Statement, the officer designating the recipients of such options
shall provide to UniCapital a written list of the names of those designated
recipients who will receive options exercisable at the IPO Price and the
relative percentages of the 6.25% option pool provided under this Section 11.2
to be awarded to each recipient, as well as the percentage of options, if any,
to be reserved for future issuance. Any options reserved for future issuance
shall be granted at an exercise price equal to the fair market value of
UniCapital Stock as of the date of grant. All options shall be granted in
accordance with UniCapital's policies, and authorized and issued under the terms
of UniCapital's principal stock option plan for the benefit of employees of
UniCapital and its subsidiaries.
11.3 INFORMATION FILING. To the extent the Unified Transaction is a
transaction that falls within Section 351 of the Code, UniCapital shall file all
information required to be filed by it pursuant to Treasury Regulation
Section 1.351-3(b).
11.4 RELEASE FROM GUARANTEES; INDEBTEDNESS. Not later than 120 days
following the Merger Effective Date, UniCapital shall cause the Stockholders to
be released from any and all personal guarantees of the indebtedness or other
obligations of the Company at the Closing Date set forth on Schedule 11.4 that
they personally guaranteed for the benefit of the Company with all such
guarantees of indebtedness being assumed by UniCapital; provided, that, in the
event that the beneficiary of any such guarantee is unwilling to permit the
substitution of UniCapital's guarantee for the Stockholder's guarantee or the
assumption by UniCapital of the indebtedness, or in the event that the lender
with respect to the indebtedness to which such guarantee relates accelerates
such indebtedness whether or not prior to such 120 day period because of the
consummation of the transactions contemplated hereby, UniCapital shall repay up
to that amount of recourse indebtedness set forth on Schedule 11.4. The failure
of the Company to obtain the consent of its lenders to the change of control of
the Company or the substitution of a UniCapital guaranty or the assumption by
UniCapital of the indebtedness set forth on Schedule 11.4 shall not be deemed a
breach hereunder.
11.5 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, UniCapital shall use
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its reasonable best efforts to (a) file all information required to be filed by
it pursuant to such act and (b) provide the Company with all information
reasonably requested and required by it to satisfy any filing requirements it
may have under such act.
12. INDEMNIFICATION; SURVIVAL
12.1 GENERAL INDEMNIFICATION BY STOCKHOLDERS. Subject to the
limitations contained in Section 12.5 hereof, each Stockholder jointly and
severally covenants and agrees that such Stockholder will indemnify, defend,
protect and hold harmless UniCapital, Newco and the Surviving Corporation and
their respective officers, stockholders, directors, divisions, subdivisions,
affiliates, subsidiaries, parents, agents, employees, successors and assigns at
all times from and after the date of this Agreement until the Expiration Date
(as defined in Section 12.6) from and against all claims, damages, losses,
liabilities, actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) (collectively, "Losses") incurred
by UniCapital, Newco or the Surviving Corporation as a result of or arising from
(a) any breach of the representations and warranties made by the Stockholders
set forth herein or on the schedules or certificates delivered in connection
herewith, (b) any nonfulfillment of any covenant or agreement on the part of the
Stockholders or the Company under this Agreement, (c) the business, operations
or assets of the Company and its Subsidiary prior to the Merger Effective Date
or the actions or omissions of the Company's or its Subsidiary's directors,
officers, stockholders, employees, agents or partners prior to the Merger
Effective Date, other than Losses arising from matters expressly disclosed in
the Financial Statements, this Agreement or the Schedules to this Agreement, or
(d) any liability under the Securities Act, the Securities Exchange Act of 1934,
as amended (the "Exchange Act") or other federal or state law or regulation, at
common law or otherwise, arising out of or based upon (i) any untrue statement
or alleged untrue statement of a material fact relating to the Company
(including its Subsidiary) or the Stockholders contained in any preliminary
prospectus, the Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement thereto (including any additional
registration statement filed pursuant to Rule 462(b) under the Securities Act),
which statement was provided or was based upon information or documents provided
to UniCapital or its counsel by the Company (including its Subsidiary) or the
Stockholders, or (ii) any omission or alleged omission to state therein a
material fact relating to the Company (including its Subsidiary) or the
Stockholders required to be stated therein or necessary to make the statements
therein not misleading, which information was not provided to UniCapital or its
counsel by the Company (including its Subsidiary) or the Stockholders; provided,
however, that such indemnity shall not inure to the benefit of UniCapital, Newco
or the Surviving Corporation to the extent that such untrue statement (or
alleged untrue statement) was made in, or such omission (or alleged omission)
occurred in, any preliminary prospectus and the Stockholders provided, in
writing, corrected information to UniCapital for inclusion in the final
prospectus, and such information was not so included.
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12.2 SPECIFIC INDEMNIFICATION BY STOCKHOLDERS. Subject to the
limitations contained in Section 12.5 hereof, notwithstanding any disclosure
made in this Agreement or in the schedules or exhibits hereto, and
notwithstanding any investigation by UniCapital or Newco, each Stockholder
jointly and severally covenants and agrees that such Stockholder will indemnify,
defend, protect and hold harmless UniCapital, Newco and the Surviving
Corporation and their respective officers, stockholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parents, agents, employees, successors
and assigns at all times from and after the date of this Agreement, from and
against all Losses incurred by UniCapital, Newco or the Surviving Corporation as
a result of or incident to: (a) the existence of liabilities of the Company
(including its Subsidiary) in excess of the liabilities set forth on Schedule
6.13, to the extent of such excess; (b) the failure of the Company, its
Subsidiary or the Stockholders to file all required Form 5500's prior to the
Merger Effective Date; (c) the litigation matters listed on Schedule 6.25; (d)
the tax matters listed on Schedule 6.27; (e) the delinquent accounts identified
on Schedule 6.35(e); (f) any Material Adverse Amendments pursuant to Section
8.14 hereof; (g) the Company's role as a general partner in the Limited
Partnership that arose on or before the Closing Date or that relates to events
that occurred on or before the Closing Date; and (h) those Scheduled Payments
delinquent for 90 days or longer as of the Closing Date net of applicable
reserves reflected on the balance sheet of the Company immediately prior to the
preparation of the Closing Date Balance Sheet.
12.3 INDEMNIFICATION BY UNICAPITAL AND NEWCO. Subject to the
limitations contained in Section 12.5 hereof, UniCapital and Newco, jointly and
severally, covenant and agree that they will indemnify, defend, protect and hold
harmless the Stockholders and their respective heirs, personal representatives
and successors at all times from and after the date of this Agreement from and
against all Losses incurred by the Stockholders as a result of or arising from
(a) any breach of the representations and warranties made by UniCapital and
Newco set forth herein or on the schedules or certificates attached hereto, (b)
any nonfulfillment of any agreement on the part of UniCapital under this
Agreement, or (c) any liability under the Securities Act, the Exchange Act or
other federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to UniCapital (including all of the companies, other than
the Company, acquired by UniCapital as part of the Unified Transaction, but only
to the extent that UniCapital is actually indemnified by such other companies
for such liability) contained in any preliminary prospectus, the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto (including any registration statement filed pursuant to Rule
462(b) under the Securities Act), or arising out of or based upon any omission
or alleged omission to state therein a material fact relating to UniCapital
(including all of the companies, other than the Company, acquired by UniCapital
as part of the Unified Transaction, but only to the extent that UniCapital is
actually indemnified by such other companies for such liability) required to be
stated therein or necessary to make the statements therein not misleading, which
liability is not the subject of indemnification of UniCapital, Newco and the
Surviving Corporation pursuant to Section 12.1(c) above.
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12.4 THIRD PARTY CLAIMS.
(a) In order for a party hereto eligible to be indemnified
hereunder (an "Indemnified Party") to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of or involving a
claim or demand made by any person or entity against the Indemnified Party (a
"Third Party Claim"), such Indemnified Party must notify the parties obligated
to provide indemnification pursuant to Section 12.1, 12.2, or 12.3 hereof (each,
an "Indemnifying Party") in writing, and in reasonable detail, of the Third
Party Claim within 30 business days after receipt by such Indemnified Party of
written notice of the Third Party Claim; provided, however, that failure to give
such notification shall not affect the indemnification provided hereunder except
to the extent the Indemnifying Party shall have been actually prejudiced as a
result of such failure. Such notice shall state the nature and the basis of such
claim and a reasonable estimate of the amount thereof. Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, within five business
days after the Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnified Party relating to
the Third Party Claim. To the extent the Indemnifying Party has actually paid
any amount to the Indemnified Party in respect of any Loss in connection with
such Third Party Claim, the Indemnifying Party shall have a right of subrogation
with respect to such Third Party Claim to the extent of such payment.
(b) The Indemnifying Party shall have right to defend and
settle, at its own expense and by its own counsel (provided that such counsel is
not reasonably objected to by the Indemnified Party and provided further that
selection for these purposes of Chrisman Bynum & Johnson, P.C., absent any
actual or reasonably likely conflict of interest with respect to parties or
defenses, shall not be objected to by UniCapital), any Third Party Claim as the
Indemnifying Party pursues the same in good faith and diligently and so long as
the Third Party Claim does not relate to an actual or potential Loss to which
Section 12.4(e) applies in which the Indemnified Party is UniCapital, Newco or
the Surviving Corporation. If the Indemnifying Party undertakes to defend or
settle, it shall promptly notify the Indemnified Party of its intention to do
so, and the Indemnified Party shall cooperate with the Indemnifying Party and
its counsel in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnifying Party with any books, records or information reasonably requested
by the Indemnifying Party that are in the Indemnified Party's possession or
control. Notwithstanding the foregoing, the Indemnified Party shall have the
right to participate in any matter through counsel of its own choosing at its
own expense (unless there is a conflict of interest that prevents counsel for
the Indemnifying Party from representing the Indemnified Party, in which case
the Indemnifying Party will reimburse the Indemnified Party for the expenses of
its counsel). After the Indemnifying Party has notified the Indemnified Party of
its intention to undertake to defend or settle any such asserted liability, and
for so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except to the extent such participation is requested
by the Indemnifying Party, in which event the Indemnified Party shall be
reimbursed
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by the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses, and except in the case of a Third Party Claim relating
to an actual or potential Loss to which Section 12.4(e) applies in which the
Indemnified Party is UniCapital, Newco or the Surviving Corporation.
(c) No Indemnifying Party shall, in the defense of any Third
Party Claim, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or the
plaintiff to the Indemnified Party of a release from all liability in respect of
such claim or matter, except with the written consent of the Indemnified Party.
(d) If the Indemnifying Party does not assume the defense of
any Third Party Claim, then the Indemnified Party may defend against such Third
Party Claim in such manner as it deems appropriate at the expense of the
Indemnifying Party.
(e) Notwithstanding anything to the contrary in this Article
12, if at any time, in the reasonable opinion of UniCapital, Newco or the
Surviving Corporation as the Indemnified Party (notice of which opinion shall be
given in writing to the Indemnifying Party), any Third Party Claim seeks
material prospective relief which could have a material adverse effect on any
such Indemnified Party or any subsidiary, then such Indemnified Party shall have
the right to control or assume (as the case may be) the defense of any such
Third Party Claim and the amount of any judgment or settlement and the
reasonable costs and expenses of defense (including, but not limited to, fees
and disbursements of counsel and experts, as well as any sampling, testing,
investigation, removal, treatment or remediation undertaken by UniCapital, Newco
or the Surviving Corporation and all counseling or engineering fees and expenses
related thereto) shall be included as part of the indemnification obligations of
the Indemnifying Party hereunder. If the Indemnified Party elects to exercise
such right, then the Indemnifying Party shall have the right to participate in,
but not control, the defense of such Third Party Claim at the sole cost and
expense of the Indemnifying Party.
12.5 LIMITATIONS ON INDEMNIFICATION.
(a) To the extent of any amount that UniCapital actually
receives as a result of a Net Worth Deficiency that is directly attributable to
an Indemnifiable Decrease, UniCapital shall not be entitled to any indemnity
under Article 12. An "Indemnifiable Decrease" shall be equal to the amount of
any Net Worth Deficiency that consists of a liability for which UniCapital would
otherwise be entitled to indemnity under Article 12 but that has been (a)
accrued or (b) actually paid (so long as it was not previously accrued on or
before December 31, 1997) during the Interim Net Worth Period. The "Interim Net
Worth Period" shall mean the period beginning on January 1, 1998 and ending on
the Closing Date. No amounts under (a) or (b) that have not been reflected on
the Company's (or its Subsidiary's) financial statements under generally
accepted accounting principles applied consistently with previous practice shall
be deemed to be an Indemnifiable Decrease.
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(b) No Indemnified Party shall assert any claim (other than a
Third Party Claim) for indemnification hereunder until such time as the
aggregate of all claims which such Indemnified Party may have against an
Indemnifying Party plus any Indemnifiable Decrease shall exceed $141,000, (the
"Basket Limitation") at which time an Indemnified Party shall be entitled to
seek indemnification for all claims pursuant to this Article 12, but only to the
extent such claims, in the aggregate, exceed the Basket Limitation. For purposes
of the preceding sentence, UniCapital, Newco and the Surviving Corporation shall
be considered to be a Single Indemnifying and Indemnified Party and the
Stockholders shall be considered as a single Indemnifying and Indemnified Party.
Notwithstanding the foregoing, on each date on which any Earn-Out Consideration
is paid, the Basket Limitation shall be increased by that amount (the "Basket
Adjustment") equal to one percent (1%) of any such Earn-Out Consideration,
without prejudice to UniCapital's receipt of or right to received
indemnification for claims exceeding the amount of the Basket Limitation in
effect at the time of such claims were brought. If the Basket Limitation is
adjusted pursuant to the preceding sentence after such time as any Indemnified
Party, pursuant to this Article 12, has collected an amount in excess (such
excess amount is referred to as the "Excess Indemnity") of the Basket Limitation
(prior to giving effect to the applicable Basket Adjustment), then such
Indemnified Party, within 10 business days after the final determination of such
Earn-Out Consideration, shall pay to the Indemnifying Party an amount equal to
the lesser of applicable Basket Adjustment or the Excess Indemnity. In addition,
notwithstanding any provision of this Agreement to the contrary, for the
purposes of preventing a double recovery the Stockholders shall not be obligated
to indemnify UniCapital or any other indemnified party pursuant to Section 12.1
or 12.2 with respect to any particular act, omission, condition or event if and
to the extent that the loss resulting or arising from such act, omission,
condition or event has, directly or indirectly, been taken into account in the
computation of any Net Worth Deficiency provided for in Section 3.1.
Notwithstanding any other term of this Agreement, in no event shall any
Stockholder be liable under this Article 12 for an amount which exceeds the
aggregate value (determined at the Merger Effective Date) of the Merger
Consideration received by such Stockholder under this Agreement. Notwithstanding
anything to the contrary contained in this Agreement, the limitations upon
indemnification contained in this Section 12.5 shall not apply to Losses arising
out of any of the following: (i) any breach of the representations and
warranties of the Stockholders contained in Sections 6.3, 6.5, 6.14, 6.27 and
6.33 hereof, (ii) litigation net of applicable reserves reflected on the
consolidated balance sheet of the Company at the Audited Balance Sheet Date;
(iii) any Material Adverse Amendment pursuant to Section 8.14 hereof; or (iv)
the Company's role as a general partner in the Limited Partnership that arose on
or before the Closing Date or that relates to events that occurred on or before
the Closing Date. Notwithstanding any other provision of this Article 12, the
total liability for Losses incurred by UniCapital, Newco or the Surviving
Corporation for which Carl Williams shall indemnify, defend, protect and hold
harmless UniCapital, Newco or the Surviving Corporation shall not exceed the
Merger Consideration paid or to be paid to Mr. Williams.
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The parties agree that
representations and warranties made by the parties in this Agreement, or in any
certificate or
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other instrument delivered pursuant to this Agreement, shall survive for a
period of one year from the Merger Effective Date (which date is hereinafter
called the "Expiration Date"), except that:
(a) the representations and warranties contained in Section
6.27 hereof shall survive until such time as the limitations period has run for
all tax periods ended on or prior to the Merger Effective Date, which shall be
deemed to be the Expiration Date for purposes of this clause (a) and claims
arising from a breach of the representations and warranties contained in such
Section 6.27;
(b) the representations and warranties contained in Section
6.28(g) hereof shall survive until such time as one full fiscal year's cycle of
transactions occurring entirely within the twenty-first century shall have been
processed and UniCapital's consolidated financial statements for the fiscal year
in which the last such transaction to be processed occurred have been audited,
which shall be deemed to be the Expiration Date for purposes of this clause (b)
and claims arising from a breach of the representations and warranties contained
in such Section 6.28(g);
(c) the representations and warranties contained in Section
6.33 hereof shall survive for a period of five years from the Merger Effective
Date, which shall be deemed the Expiration Date for purposes of this clause (c)
and claims arising from a breach of the representations and warranties contained
in such Section 6.33;
(d) solely for purposes of Section 12.1(d) hereof, and solely
to the extent that UniCapital actually incurs liability under the Securities
Act, the Exchange Act, or any other federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for purposes of this clause (d) and claims arising under such
laws;
(e) the representations and warranties of the Stockholders
contained in Section 6.5 hereof shall survive the Merger Effective Date without
time limitation; and
(f) any representations and warranties which serve as a basis
of the indemnity obligations of the Stockholders under Section 12.2 shall
survive the Merger Effective Date without time limitation; provided, however,
that the representations and warranties contained in Section 6.35(e) regarding
delinquent accounts identified on Schedule 6.35(e) shall survive until the final
resolution of such delinquent accounts.
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13. TERMINATION OF AGREEMENT
13.1 TERMINATION BY UNICAPITAL. UniCapital may, by notice in the manner
hereinafter provided on or before the Closing Date, terminate this Agreement (a)
if a material default shall be made by the Stockholders in the observance or due
and timely performance of any of the covenants, agreements or conditions
contained herein, and the curing of such default shall not have been made on or
before the Closing Date and shall not reasonably be expected to occur or (b) if
UniCapital in its sole judgment determines that any condition exists which has
made or could reasonably be expected to make any of the representations or
warranties contained in Article 6 hereof untrue in any material respect or (c)
if UniCapital in its sole judgment determines that information disclosed on the
schedules to the Agreement delivered pursuant to Section 8.14 has or could
reasonably be expected to have a material adverse effect on the business,
operations, assets, properties, prospects or condition (financial or otherwise)
of the Company or its Subsidiary.
13.2 TERMINATION BY THE STOCKHOLDERS. Prior to the initial filing of
the Registration Statement with the SEC, the Stockholders may, by notice in the
manner hereinafter provided on or before such initial filing, terminate this
Agreement (i) in accordance with Section 17.4(b) or (ii) if a material default
shall be made by UniCapital in the observance or due and timely performance of
any of the covenants, agreements or conditions contained herein, and the curing
of such default shall not have been made on or before such initial filing. From
and after the initial filing of the Registration Statement with the SEC, the
Stockholders shall have no right to terminate this Agreement.
13.3 AUTOMATIC TERMINATION. This Agreement shall terminate
automatically:
(a) if the Registration Statement has not been declared
effective by June 30, 1998;
(b) if, between the Closing Date and the Merger Effective
Date, the Underwriting Agreement is terminated pursuant to the terms thereof; or
(c) if the Merger Effective Date has not occurred within 10
business days after the Closing Date.
(d) upon the date that the number of shares of UniCapital
Stock to be issued (other than as Earn-Out Consideration) to the persons who
will transfer property to UniCapital in the Unified Transaction can be
determined as a fixed number of shares, unless those same persons shall own
immediately after the Unified Transaction eighty percent (80%) or more of the
UniCapital Stock that will be issued and outstanding immediately after the
Unified Transaction.
13.4 LIQUIDATED DAMAGES. If the Merger fails to occur because of the
default of the Company or the Stockholders, then, in addition to the other
remedies available to UniCapital at
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law for fraud, in equity or pursuant to this Agreement, the Stockholders shall
pay to UniCapital the sum of $500,000 as liquidated damages. It is hereby agreed
that UniCapital's damages in the event of a termination or default by the
Company hereunder are uncertain and impossible to ascertain and that the
foregoing constitutes a reasonable liquidation of such damages and is intended
not as penalty but as liquidated damages.
14. NONCOMPETITION AND NONSOLICITATION
14.1 NONCOMPETITION.
(a) In order to protect the value and goodwill of the Company,
its Subsidiary and their respective businesses, each Stockholder covenants that,
for the period ending two years after the Closing Date, such Stockholder will
not, directly or indirectly, own, manage, operate, join, control, finance or
participate in the ownership, management, operation, control or financing of, or
be connected as a partner, principal, agent, representative, consultant or
otherwise with, or use or permit such Stockholder's name to be used in
connection with, any business or enterprise which is engaged directly or
indirectly in competition anywhere in the United States with the business
conducted by UniCapital, the Surviving Corporation or any of its or their
respective subsidiaries or affiliates or with any business engaged in
originating, servicing or securitizing leases or other specialty financing
products or services (the "Restricted Business"). Each Stockholder recognizes
that the Restricted Business is expected to be conducted throughout the United
States and that more narrow geographical limitations of any nature on this
non-competition covenant (and the non-solicitation covenant set forth in
subsection (b)) are therefore not appropriate. The foregoing restriction shall
not be construed to prohibit the ownership by a Stockholder as a passive
investment of not more than five percent of any class of securities of any
corporation which is engaged in any of the foregoing businesses having a class
of securities registered pursuant to Section 12 of the Exchange Act.
(b) Each Stockholder further covenants that for the period
ending two years after the Closing Date, such Stockholder will not, either
directly or indirectly, (i) call on or solicit any customers or prospective
customers of the Restricted Business, or (ii) solicit the employment of any
person who is employed by UniCapital, the Surviving Corporation or any of its or
their respective subsidiaries or affiliates in the Restricted Business during
such period.
(c) Each Stockholder recognizes and acknowledges that by
reason of such Stockholder's relationship to the Company, such Stockholder has
had access to confidential information relating to the Restricted Business. Each
Stockholder acknowledges that such confidential information is a valuable and
unique asset and covenants that such Stockholder will not disclose any such
confidential information after the Closing Date to any person for any reason
whatsoever.
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14.2 DAMAGES. Each Stockholder acknowledges and agrees that measuring
economic losses to UniCapital and the Surviving Corporation as a result of the
breach of the foregoing covenants in this Article 14 would be impossible, and
that any breach of the foregoing covenants would result in immediate and
irreparable damage to UniCapital and the Surviving Corporation for which they
would have no other adequate remedy. Accordingly, the Stockholders agree that,
in the event of a breach by them of any of the foregoing covenants, such
covenants may be enforced by UniCapital or the Surviving Corporation by, without
limitation, injunctions and restraining orders.
14.3 REASONABLE RESTRAINT. The Parties agree that the foregoing
covenants in this Article 14 impose a reasonable restraint upon the Stockholders
in light of the activities and business of UniCapital on the date of the
execution of this Agreement and the current and future plans of UniCapital and
the Surviving Corporation (as successors to the businesses of the Company), and
that any violation will result in irreparable injury to UniCapital.
14.4 SEVERABILITY; REFORMATION. The covenants in this Article 14 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, if any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
14.5 INDEPENDENT COVENANT. All of the covenants in this Article 14
shall be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of any Stockholder
against the Company, the Company's Subsidiary, the Surviving Corporation or
UniCapital, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement of such covenants. The parties
specifically agree that the period of two years stated above shall be computed
by excluding from such computation any time during which any Stockholder is in
violation of any provision of this Article 14 and any time during which there is
pending in any court of competent jurisdiction any action (including any appeal
from any judgment) brought by any person, whether or not a party to this
Agreement, in which action UniCapital or the Surviving Corporation seek to
enforce the agreements and covenants of the Stockholders or in which any person
contests the validity of such agreements and covenants or their enforceability
or seeks to avoid their performance or enforcement.
14.6 MATERIALITY. The Stockholders hereby acknowledge and agree that
the covenants contained in this Article 14 are a material and substantial part
of this transaction and are entered into in connection with and as an inducement
to the acquisition by UniCapital and Newco of the businesses of the Company and
its Subsidiary.
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15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that they
have in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company and its Subsidiary, such as
lists of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the Company's and its Subsidiary's
respective businesses. The Stockholders agree that they will not disclose any
confidential information to any person, firm, corporation, association or other
entity for any purpose or reason whatsoever, except to authorized
representatives of UniCapital or as may be required by law or order of a court
of competent jurisdiction unless the Stockholders can show that such information
has become known to the public generally through no fault of the Stockholders.
Prior to disclosing any confidential information required by law or order of a
court of competent jurisdiction, the Stockholders shall provide UniCapital with
prompt notice of the disclosure requirement so that UniCapital may take whatever
action it deems appropriate to prohibit such disclosure. In the event of a
breach or threatened breach by the Stockholders of the provisions of this
Section 15.1, UniCapital and the Surviving Corporation shall be entitled to an
injunction restraining Stockholders from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting
UniCapital and the Surviving Corporation from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
15.2 UNICAPITAL. UniCapital recognizes and acknowledges that it has in
the past, currently has, and prior to the Closing Date will have, access to
certain confidential information solely of the Company and its Subsidiary in
connection with their respective businesses. UniCapital agrees that, prior to
the Closing Date, it will not disclose any such confidential information to any
person, firm, corporation, association, or other entity for any purpose or
reason whatsoever without prior written consent of the Stockholders except as
may be required by law or order of a court of competent jurisdiction unless the
UniCapital can show that such information has become known to the public
generally through no fault of UniCapital. Prior to disclosing any confidential
information required by law or order of a court of competent jurisdiction,
UniCapital shall provide the Stockholders with prompt notice of the disclosure
requirement so that the Stockholders may take whatever action they deem
appropriate to prohibit such disclosure. In the event of a breach or threatened
breach by UniCapital of the provisions of this Section 15.2, the Stockholders
shall be entitled to an injunction restraining UniCapital from disclosing, in
whole or in part, such confidential information. Nothing contained herein shall
be construed as prohibiting the Stockholders from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
15.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, UniCapital, the Surviving Corporation and the Stockholders
agree that, in the event of a breach by any of them of the
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foregoing covenant, the covenant may be enforced against them by injunctions and
restraining orders.
16. LOCK-UP AGREEMENTS
16.1 AGREEMENT. In connection with the IPO, for good and valuable
consideration, and to induce the underwriters that may participate in the IPO to
continue their efforts in connection with the IPO, each Stockholder hereby
agrees that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of such underwriters, it will not, during the period
commencing on the date of this Agreement and ending 180 days after the date of
the final prospectus contained in the Registration Statement relating to the IPO
(the "Prospectus"), (a) offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of UniCapital Stock or any securities
convertible into or exercisable or exchangeable for UniCapital Stock or (b)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of UniCapital Stock,
whether any such transaction described in clause (a) or (b) above is to be
settled by delivery of UniCapital Stock or such other securities, in cash or
otherwise. In addition, each Stockholder agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters that
may participate in the IPO, it will not, during the period commencing on the
date of this Agreement and ending 180 days after the date of the Prospectus,
make any demand for or exercise any right with respect to, the registration of
any shares of UniCapital Stock or any security convertible into or exercisable
or exchangeable for Common Stock.
16.2 INTENDED THIRD PARTY BENEFICIARIES. Each Stockholder agrees that
the foregoing shall be binding upon their transferees, successors, assigns,
heirs, and personal representatives and shall benefit and be enforceable by the
underwriters in the IPO. Each Stockholder acknowledges and agrees that such
underwriters and Morgan Stanley & Co. Incorporated are intended third party
beneficiaries of the provisions of this Article 16, and that Morgan Stanley &
Co. Incorporated on behalf of such underwriters shall be entitled to enforce the
covenants contained in this Article 16. In furtherance of the foregoing,
UniCapital and its transfer agent are hereby authorized to decline to make any
transfer of securities if such transfer would constitute a violation or breach
of this Article 16. The Stockholders also acknowledge and agree that none of the
companies to be acquired as part of the Unified Transaction shall have any
rights as intended third-party beneficiaries under this Agreement.
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK
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17.1 INVESTMENT INTENT. The Stockholders acknowledge and agree that the
shares of UniCapital Stock to be delivered to the Stockholders pursuant to this
Agreement have not been and will not be registered under the Securities Act and
therefore may not be resold without compliance with the Securities Act. The
Stockholders represent and warrant that the shares of UniCapital Stock to be
acquired by the Stockholders pursuant to this Agreement are being acquired
solely for their own account, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution.
17.2 COMPLIANCE WITH LAW. The Stockholders covenant, warrant and
represent that none of the shares of UniCapital Stock issued to such
Stockholders will be offered, sold, assigned, pledged, hypothecated, transferred
or otherwise disposed of except after full compliance with all of the applicable
provisions of the Securities Act and the rules and regulations of the SEC
thereunder, and except after full compliance with any applicable state
securities laws.
17.3 ECONOMIC RISK; SOPHISTICATION. The Stockholders represent and
warrant that they are able to bear the economic risk of an investment in
UniCapital Stock acquired pursuant to this Agreement and can afford to sustain a
total loss of such investment. The Stockholders further represent and warrant
that they (a) fully understand the nature, scope and duration of the limitations
on transfer contained in this Agreement and (b) have such knowledge and
experience in financial and business matters that they are capable of evaluating
the merits and risks of the proposed investment and therefore have the capacity
to protect their own interests in connection with the acquisition of the
UniCapital Stock.
17.4 INFORMATION SUPPLIED.
(a) The Stockholders represent and warrant that they have had
an adequate opportunity to ask questions and receive answers from the officers
of UniCapital concerning UniCapital, its business, operations, plans and
strategy, and the background and experience of its officers and directors. The
Stockholders represent and warrant that they have asked any and all questions
that they may have in the nature described in the preceding sentence and that
all such questions have been answered to their satisfaction.
(b) Each Stockholder represents and warrants that he has
received the draft Registration Statement, including the draft preliminary
prospectus that forms a part thereof, delivered to him on or about February 14,
1998 that describes, among other things, UniCapital, the Merger, the other
acquisitions proposed to be undertaken by UniCapital simultaneously with the
Merger and the target companies of such other acquisitions. Each Stockholder
represents and warrants that he has reviewed such draft Registration Statement
and draft preliminary prospectus and has had adequate opportunity to ask
questions of and receive answers to his satisfaction from the officers of
UniCapital concerning the matters described therein.
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18. SECURITIES LEGENDS
The certificates evidencing the UniCapital Stock to be received by the
Stockholders hereunder will bear a legend substantially in the form set forth
below and containing such other information as UniCapital may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES OR BLUE SKY LAWS.
SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
SECURITIES ACT AND ANY STATE SECURITIES OR BLUE SKY LAWS,
UNLESS, IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION) OF COUNSEL SATISFACTORY TO
THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
In addition, such certificates shall also bear (a) a legend reflecting the
restrictions contained in Article 16 and (b) such other legends as counsel for
UniCapital reasonably determines are required under the applicable laws of any
state.
19. GENERAL
19.1 COOPERATION. The Stockholders and UniCapital shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement. The
Stockholders will cooperate and use their best efforts to have the officers,
directors and employees of Company prior to the Closing Date cooperate with
UniCapital on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the Company,
the successors of UniCapital, and the heirs and legal representatives of the
Stockholders.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company, UniCapital and Newco and
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supersedes any prior agreement and understanding relating to the subject matter
of this Agreement. This Agreement, upon execution, constitutes a valid and
binding agreement of the parties hereto, enforceable in accordance with its
terms, and may be modified or amended only by a written instrument executed by
the Stockholders (subject to the limitations set forth below), the Company,
UniCapital and Newco acting through their respective officers, duly authorized
by their respective Boards of Directors; provided, that the Stockholder who owns
a majority of the outstanding shares of capital stock of the Company shall have
the authority to approve and execute any amendment to this Agreement on behalf
of all of the Stockholders and without the necessity of such majority
Stockholder obtaining consent or authorization from any other Stockholder,
unless such amendment relates to any representation or warranty made by a
Stockholder other than such majority Stockholder which may only be amended by
the written agreement of such person; and provided further, that no Stockholder
shall have any power or authority to modify or amend this Agreement in any
respect from and after the initial filing of the Registration Statement with the
SEC.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
19.5 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with the transactions contemplated
hereby, and each of UniCapital and Newco, on the one hand, and the Stockholders,
on the other hand, agrees to indemnify the other against all loss, liability,
cost damages or expense arising out of or related to claims for fees or
commissions of brokers employed or alleged to have been employed by such
indemnifying party.
19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, UniCapital will pay the fees, expenses and disbursements
of UniCapital and Newco and their respective agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto. Whether or not the transactions herein
contemplated shall be consummated, the Stockholders will pay the fees, expenses
and disbursements of the Stockholders and the Company and their respective
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments hereto and all other costs
and expenses incurred in the performance of this Agreement by the Stockholders
and the Company and in compliance with all conditions to be performed by the
Stockholders and the Company under this Agreement.
19.7 NOTICES. All notices and other communications hereunder shall be
in writing (including wire, telefax or similar writing) and shall be sent,
delivered or mailed, addressed, or telefaxed:
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(a) If to UniCapital or Newco, addressed to them at:
UniCapital Corporation
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Telephone: (305) 861-0603
Telefax: (305) 866-8449
with a copy to:
David A. Gerson, Esq.
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
301 Grant Street
Pittsburgh, PA 15219
Telephone: (412) 560-3330
Telefax: (412) 560-3399
(b) If to the Stockholders, addressed to them in care
of the Stockholders' Representative at:
Roy L. Burger
Boulder Capital Group, Inc.
4999 Pearl East Circle
Suite 300
P.O. Box 19587
Boulder, CO 80308-2587
Telephone: (303) 440-5006
Facsimile: (303) 440-5009
with a copy to:
David J. Cook, Esquire
Chrisman Bynum & Johnson, P.C.
1900 15th Street
Boulder, CO 80302
Telephone: (303) 546-1300
Facsimile: (303) 444-5426
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Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telefax, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 19.7 (or in accordance with the latest
unrevoked written direction from such party) and (ii) if given by telefax, when
such telefax is transmitted to the telefax number specified in this Section 19.7
(or in accordance with the latest unrevoked written direction from such party),
and the appropriate confirmation is received.
19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York, without giving effect to any of the
provisions thereof that would require the application of the substantive laws of
any other jurisdiction. Each party to this Agreement: (a) agrees that any legal
action or proceeding under this Agreement shall be brought in the courts of the
State of New York or in the United States District Court for the Southern
District of New York; (b) irrevocably submits to the jurisdiction of such
courts; (c) agrees not to assert any claim or defense that it is not personally
subject to the jurisdiction of such courts, that any such forum is not
convenient or the venue thereof is improper, or that this Agreement or the
subject matter hereof may not be enforced in such courts; and (d) agrees to
accept service of process on it by certified or registered mail or by any other
method authorized by law.
19.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.10 TIME. Time is of the essence with respect to this Agreement.
19.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
19.12 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
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20. DEFINITIONS
20.1 "1998 Shortfall" is defined in Section 2.5(a)(ii).
20.2 "1998 Shortfall Escrow Agent" is defined in Section 4.4(a).
20.3 "1998 Shortfall Escrow Shares" is defined in Section 4.4(a).
20.4 "1999 EBT" is defined in Section 2.5(b).
20.5 "Accounts Receivable" is defined in Section 6.14.
20.6 "Acquisition Proposal" is defined in Section 8.10.
20.7 "Adjusted 1997 EBT" is defined in Section 2.5(a).
20.8 "Adjusted 1998 EBT" is defined in Section 2.5(a).
20.9 "Agent" is defined in Section 8.10.
20.10 "Agreement" is defined in the preamble to this Agreement.
20.11 "Articles of Merger" is defined in Section 1.1.
20.12 "Audited Balance Sheet Date" is defined in Section 6.12(a).
20.13 "Audited Financial Statements" are defined in Section 6.12(a).
20.14 "Authorizations" are defined in Section 6.23.
20.15 "Basket Adjustment" is defined in Section 12.5(b).
20.16 "Basket Limitation" is defined in Section 12.5(b).
20.17 "Benefit Plan" is defined in Section 6.22.
20.18 "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq.
20.19 "Certificates" are defined in Section 2.2.
20.20 "Closing" is defined in Section 5.1(b).
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20.21 "Closing Date" is defined in Section 5.2.
20.22 "Closing Date Balance Sheet" are defined in Section 3.1.
20.23 "Code" is defined in the recitals to this Agreement.
20.24 "Commonly Controlled Entity" is defined in Section 6.22.
20.25 "Company" is defined in the preamble to this Agreement.
20.26 "Company Documents" are defined in Section 6.2.
20.27 "Company EBT" is defined in Section 2.5(b).
20.28 "Company Stock" is defined in Section 2.1(a).
20.29 "Constituent Corporations" are defined in the recitals to
this Agreement.
20.30 "Contracts" are defined in Section 6.17.
20.31 "Disputed Amounts" are defined in Section 3.2.
20.32 "EBT" is defined in Section 2.5(a).
20.33 "Earn-Out Consideration" is defined in Section 2.5(c).
20.34 "Earn-Out Escrow Cash" is defined in Section 4.1(b).
20.35 "Earn-Out Escrow Shares" are defined in Section 4.1(b).
20.36 "Effective Date Consideration" is defined in Section 2.1(a).
20.37 "Environmental Laws" mean any and all applicable treaties,
laws, regulations, ordinances, enforceable requirements, binding determinations,
orders, decrees, judgments, injunctions, permits, approvals, authorizations,
licenses or binding agreements issued, promulgated or entered into by any
Governmental Entity, relating to the environment, preservation or reclamation of
natural resources, or to the management, Release or threatened Release of or
exposure to Hazardous Substances, including CERCLA, the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.,
the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et. seq., the Safe Drinking Water Act, 42 U.S.C.
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Section 300(f) et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 et seq., and any similar or implementing state or local law and all
amendments or regulations promulgated thereunder.
20.38 "Environmental Liabilities" mean any and all Losses arising from
or related to any claim, proceeding, investigation, response or removal action,
remediation or other clean-up brought, prosecuted or undertaken by UniCapital,
Newco, the Surviving Corporation, any Governmental Entity or any other person or
entity on the basis of any violation of any Environmental Laws or pursuant to
any requirement imposed under any Environmental Laws (including any sampling,
testing, investigation, removal, treatment or remediation undertaken by
UniCapital, Newco or the Surviving Corporation so as to avoid any claim or
violation or to comply with any requirement and all counseling or engineering
fees and expenses related thereto), and arising from pre-Closing operations,
events, circumstances or conditions at, on, under or emanating from, or as a
result of any pre-Closing off-site disposal of Hazardous Substances from, any
property currently or formerly owned, operated or leased by the Company or its
Subsidiary.
20.39 "Environmental Permits" mean all permits, licenses, approvals or
authorizations from any Governmental Entity required under Environmental Laws
for the operation of the business of the Company or its Subsidiary.
20.40 "Equipment" is defined in Section 6.35.
20.41 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
20.42 "Exchange Act" is defined in Section 12.1.
20.43 "Expiration Date" is defined in Section 12.6.
20.44 "Financial Statements" are defined in Section 6.12(b).
20.45 "Foreign Plans" are defined in Section 6.22(i)(xiii).
20.46 "GAAP" is defined in Section 3.1.
20.47 "Governmental Entity" means any court, administrative or
regulatory agency or commission, or other governmental authority or
instrumentality, domestic, foreign or supranational.
20.48 "Hazardous Substances" mean all explosive or regulated
radioactive materials or substances, hazardous or toxic materials, wastes or
chemicals, petroleum and petroleum products (including crude oil or any fraction
thereof), asbestos or asbestos containing materials,
67
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and all other materials or chemicals regulated pursuant to any Environmental
Law, including materials listed in 49 C.F.R. ss. 172.101 and materials defined
as hazardous pursuant to Section 101(14) of CERCLA.
20.49 "Indemnifiable Decrease" is defined in Section 12.5(a).
20.50 "Indemnified Party" is defined in Section 12.4(a).
20.51 "Indemnifying Party" is defined in Section 12.4(a).
20.52 "Indemnity Escrow Agent" is defined in Section 4.1(a).
20.53 "Indemnity Escrow Cash" is defined in Section 4.1(a)(ii).
20.54 "Indemnity Escrow Property" is defined in Section 4.1(b).
20.55 "Indemnity Escrow Shares" are defined in Section 4.1(a)(i).
20.56 "Independent Accounting Firm" is defined in Section 3.2.
20.57 "Intellectual Property" is defined in Section 6.28(a).
20.58 "Interim Net Worth Period" is defined in Section 12.5(a).
20.59 "IPO" is defined in the recitals to this Agreement.
20.60 "IPO Price" is defined in Section 11.2.
20.61 "Lease Documents" are defined in Section 6.35.
20.62 "Leases" are defined in Section 6.35.
20.63 "liabilities" are defined in Section 6.13(a).
20.64 "Limited Partnership" means the Boulder Capital Partners I, L.P.
20.65 "Losses" are defined in Section 12.1.
20.66 "Material Adverse Amendment" is defined in Section 8.14.
20.67 "Merger Consideration" is defined in Section 2.1(c).
20.68 "Merger Effective Date" is defined in Section 5.3.
68
<PAGE> 75
20.69 "Merger" is defined in the recitals to this Agreement.
20.70 "Net Worth Deficiency" is defined in Section 3.1.
20.71 "Newco" is defined in the preamble to this Agreement.
20.72 "New Programs" means the Company's:
(a) Conoco Enhanced Equipment Lease Program,
(b) Tokheim/CITGO Guarantee Program,
(c) Gilbarco Equipment Lease Program,
(d) New vendor programs entered into between December 8, 1997
and the Closing Date, and
(e) Real estate/franchise finance company to be formed
between the Company and other investors prior to the
Closing Date, as further described on Schedule 6.30(l)
hereto (the "Real Estate Venture").
20.73 "Obligor" is defined in Section 6.35.
20.74 "Ordinary course" or "ordinary course of business" means the
conduct of business as conducted by the Company prior to the date of this
Agreement consistent in nature and, where relevant, amount with past practices.
20.75 "PCBs" are defined in Section 6.33(h).
20.76 "Pension Plan" is defined in Section 6.22.
20.77 "Permits" mean all permits, licenses, franchises, approvals and
authorizations from any Governmental Entity that are owned or held by the
Company or its Subsidiary, or held by any Stockholder that relate to the
operations of the Company or its Subsidiary.
20.78 "Prospectus" is defined in Section 16.1.
20.79 "Real Estate Venture" is defined in Section 20.72.
20.80 "Registration Statement" is defined in Section 9.4.
20.81 "Regulations" are defined in Section 6.23.
20.82 "Release" means any spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, emanation or migration of any
Hazardous Substance in, into, onto or through the environment (including ambient
air, surface water, ground water, soils, land surface, subsurface strata,
workplace or structure).
69
<PAGE> 76
20.83 "Restricted Business" is defined in Section 14.1(a).
20.84 "Scheduled Payments" are defined in Section 6.35.
20.85 "SEC" is defined in Section 9.4.
20.86 "Securities Act" is defined in Section 6.16.
20.87 "Stockholders" are defined in the preamble to this Agreement.
20.88 "Stockholders' Representative" is defined in Section 3.3.
20.89 "Subsidiary" is defined in Section 6.1.
20.90 "Surviving Corporation" is defined in Section 1.2.
20.91 "Tax Returns" are defined in Section 6.27.
20.92 "Taxes" are defined in Section 6.27.
20.93 "Third Party Claim" is defined in Section 12.4(a).
20.94 "Unaudited Financial Statements" are defined in Section 6.12(b).
20.95 "Underwriting Agreement" is defined in Section 5.1(a).
20.96 "UniCapital" is defined in the preamble to this Agreement.
20.97 "UniCapital Documents" are defined in Section 7.3.
20.98 "UniCapital Stock" is defined in Section 2.1(a).
20.99 "Unified Transactions" is defined in the recitals to this
Agreement.
20.100 "Welfare Plan" is defined in Section 6.22.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
70
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNICAPITAL CORPORATION
By: /s/ ROBERT NEW
----------------------------
Name: Robert New
Title: Chairman and Chief Executive Officer
BCG ACQUISITION CORP.
By: /s/ ROBERT NEW
------------------------------
Name: Robert New
Title: President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
71
<PAGE> 78
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
BOULDER CAPITAL GROUP, INC.
By: /s/ ROY L. BURGER
----------------------------
Name: Roy L. Burger
Title: President
/s/ ROY L. BURGER
-----------------------------------
Roy L. Burger
/s/ CARL M. WILLIAMS
-----------------------------------
Carl M. Williams
72
<PAGE> 79
ANNEXES
ANNEX I [Form of Certificate of Merger]
ANNEX II [Calculation and Composition of Consideration]
ANNEX III [Form of Indemnity Escrow Agreement]
ANNEX IV [Form of Employment Agreement]
ANNEX V [Form of Stockholder's Release]
ANNEX VI [Form of 1998 Shortfall Escrow Agreement]
SCHEDULES
SCHEDULE 2.5 [Add-Backs]
SCHEDULE 6.1 [Jurisdictions in which Company and Subsidiaries Are Qualified
to do Business]
SCHEDULE 6.4 [Violations or Conflicts]
SCHEDULE 6.5 [Issued and Outstanding Stock of the Company and Subsidiaries]
SCHEDULE 6.6 [Transactions in Capital Stock]
SCHEDULE 6.8 [Subsidiaries]
SCHEDULE 6.9 [Predecessor Companies]
SCHEDULE 6.11 [Third-Party Options]
SCHEDULE 6.12 [Company Financial Statements]
SCHEDULE 6.13 [Liabilities and Obligations]
SCHEDULE 6.14 [Accounts and Notes Receivable Aging]
SCHEDULE 6.15 [Permits]
SCHEDULE 6.16 [Real and Personal Property]
SCHEDULE 6.17 [Contracts and Commitments]
SCHEDULE 6.20 [Insurance Policies and Surety Arrangements]
SCHEDULE 6.21 [Employee Information]
SCHEDULE 6.22 [Employee Benefit Plans]
SCHEDULE 6.23 [Authorizations]
SCHEDULE 6.24 [Transactions with Affiliates]
SCHEDULE 6.25 [Litigation]
SCHEDULE 6.27 [Taxes]
SCHEDULE 6.28 [Intellectual Property]
SCHEDULE 6.28(d) [Confidentiality and Non-Disclosure Agreements]
SCHEDULE 6.29 [Notice and Consents]
SCHEDULE 6.30 [Absence of Changes]
SCHEDULE 6.30(l) [Real Estate Venture]
SCHEDULE 6.31 [Deposit Accounts; Powers of Attorney]
SCHEDULE 6.35 [Leases]
73
<PAGE> 80
SCHEDULE 6.35(e) [Delinquency in Scheduled Payments]
SCHEDULE 7.8 [UniCapital and Newco Litigation]
SCHEDULE 7.9 [UniCapital and Newco Agreements]
SCHEDULE 9.2 [Employment Agreement for Roy L. Burger]
SCHEDULE 11.1 [Lease Arrangements with Certain Persons]
SCHEDULE 11.4 [Personal Guarantees of the Indebtedness of the Company]
The registrant agrees to furnish a copy of each omitted schedule, exhibit or
annex to this Exhibit 2.02 to the Commission supplementally upon request
therefor.
74
<PAGE> 1
Exhibit 2.03
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
UNICAPITAL CORPORATION,
(a Delaware corporation)
CLA ACQUISITION CORP.
(a Delaware corporation),
and
Stuart L. Cauff, The 1998 Cauff Family Trust,
Wayne D. Lippman and The 1998 Lippman Family Trust
Dated as of February 14, 1998.
- --------------------------------------------------------------------------------
<PAGE> 2
Table Of Contents
<TABLE>
<CAPTION>
Page
<C> <S> <C>
1. THE MERGER...............................................................................................2
1.1 STOCK OF THE CLA COMPANIES......................................................................2
1.2 DELIVERY AND FILING OF CERTIFICATE OF MERGER....................................................2
1.3 MERGER EFFECTIVE DATE...........................................................................2
1.4 CERTIFICATE OF INCORPORATION, BYLAWS, BOARD OF DIRECTORS AND OFFICERS OF THE
SURVIVING CORPORATION...........................................................................2
2. MERGER CONSIDERATION.....................................................................................3
2.1 CONVERSION OF CAPITAL STOCK; MERGER CONSIDERATION...............................................3
2.2 EXCHANGE PROCEDURES.............................................................................4
2.3 NO FRACTIONAL SHARES............................................................................4
3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS' REPRESENTATIVE....................................................7
3.1 COMPUTATION.....................................................................................7
3.2 DISPUTES........................................................................................8
3.3 STOCKHOLDERS' REPRESENTATIVE....................................................................8
4. INDEMNITY ESCROW.........................................................................................9
4.1 CREATION OF ESCROW..............................................................................9
4.2 DURATION AND TERMS.............................................................................10
4.3 VOTING AND INVESTMENT..........................................................................10
5. CLOSING; MERGER EFFECTIVE DATE..........................................................................10
5.1 CLOSING........................................................................................10
5.2 CLOSING DATE; LOCATION.........................................................................10
5.3 EFFECTIVENESS OF MERGER........................................................................10
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS..........................................................11
6.1 CORPORATE EXISTENCE............................................................................11
6.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS........................................11
6.3 AUTHORITY; VALIDITY OF CONTEMPLATED TRANSACTIONS...............................................11
6.4 CAPITAL STOCK AND OWNERSHIP AS OF THE DATE OF THIS AGREEMENT...................................12
6.5 CAPITAL STOCK AND OWNERSHIP AS OF THE EFFECTIVE TIME...........................................12
6.6 TRANSACTIONS IN CAPITAL STOCK..................................................................12
6.7 NO BONUS SHARES................................................................................13
6.8 SUBSIDIARIES...................................................................................13
6.9 PREDECESSOR STATUS; ETC........................................................................13
6.10 SPIN-OFFS BY COMPANIES.........................................................................13
6.11 NO THIRD PARTY OPTIONS.........................................................................13
</TABLE>
i
<PAGE> 3
<TABLE>
<C> <S> <C>
6.12 FINANCIAL STATEMENTS...........................................................................13
6.13 LIABILITIES AND OBLIGATIONS....................................................................14
6.14 ACCOUNTS AND NOTES RECEIVABLE..................................................................15
6.15 PERMITS........................................................................................15
6.16 REAL AND PERSONAL PROPERTY.....................................................................15
6.17 CONTRACTS AND COMMITMENTS......................................................................16
6.18 GOVERNMENT CONTRACTS...........................................................................18
6.19 REAL PROPERTY..................................................................................18
6.20 INSURANCE......................................................................................18
6.21 EMPLOYEES......................................................................................18
6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS........................................................19
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS............................................................23
6.24 TRANSACTIONS WITH AFFILIATES...................................................................23
6.25 LITIGATION.....................................................................................23
6.26 RESTRICTIONS...................................................................................24
6.27 TAXES..........................................................................................24
6.28 INTELLECTUAL PROPERTY MATTERS..................................................................25
6.29 COMPLETENESS...................................................................................26
6.30 EXISTING CONDITION.............................................................................27
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY...........................................................28
6.32 BOOKS OF ACCOUNT...............................................................................28
6.33 ENVIRONMENTAL MATTERS..........................................................................29
6.34 NO ILLEGAL PAYMENTS............................................................................30
6.35 LEASES.........................................................................................30
6.36 LEASE FUNDING..................................................................................33
6.37 DISCLOSURE.....................................................................................33
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO.................................................................34
7.1 CORPORATE EXISTENCE............................................................................34
7.2 UNICAPITAL STOCK...............................................................................34
7.3 CORPORATE POWER AND AUTHORIZATION..............................................................34
7.4 NO CONFLICTS...................................................................................34
7.6 COMPLIANCE WITH LAW; AUTHORIZATIONS............................................................35
7.7 TRANSACTIONS WITH AFFILIATES...................................................................35
7.8 LITIGATION.....................................................................................35
7.9 REGISTRATION RIGHTS............................................................................36
7.10 MISCELLANEOUS..................................................................................36
8. COVENANTS...............................................................................................36
8.1 BUSINESS IN THE ORDINARY COURSE................................................................36
8.2 EXISTING CONDITION.............................................................................36
8.3 MAINTENANCE OF PROPERTIES AND ASSETS...........................................................36
8.4 EMPLOYEES AND BUSINESS RELATIONS...............................................................37
</TABLE>
ii
<PAGE> 4
<TABLE>
<C> <S> <C>
8.5 MAINTENANCE OF INSURANCE.......................................................................37
8.6 COMPLIANCE WITH LAWS, ETC......................................................................37
8.7 CONDUCT OF BUSINESS............................................................................37
8.8 ACCESS.........................................................................................37
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS........................................................38
8.10 EXCLUSIVITY....................................................................................38
8.11 SUPPLIER.......................................................................................39
8.12 NOTICE TO BARGAINING AGENTS....................................................................39
8.13 NOTIFICATION OF CERTAIN MATTERS................................................................39
8.14 AMENDMENT OF SCHEDULES.........................................................................39
8.15 LITIGATION MATTERS.............................................................................40
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS.....................................................41
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.....................................41
9.2 EMPLOYMENT AGREEMENTS..........................................................................41
9.3 OPINION OF COUNSEL.............................................................................41
9.4 REGISTRATION STATEMENT.........................................................................41
9.5 HSR ACT........................................................................................42
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF
UNICAPITAL AND NEWCO....................................................................................42
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.....................................42
10.2 NO LITIGATION..................................................................................42
10.3 EXAMINATION OF FINANCIAL STATEMENTS............................................................42
10.4 NO MATERIAL ADVERSE CHANGE.....................................................................43
10.5 REGULATORY REVIEW..............................................................................43
10.6 STOCKHOLDERS' RELEASE..........................................................................43
10.7 EMPLOYMENT AGREEMENTS..........................................................................43
10.8 OPINION OF COUNSEL.............................................................................43
10.9 CONSENTS AND APPROVALS.........................................................................45
10.10 GOOD STANDING CERTIFICATES.....................................................................45
10.11 REGISTRATION STATEMENT.........................................................................45
10.12 HSR ACT........................................................................................45
11. COVENANTS OF UNICAPITAL.................................................................................45
11.1 UNICAPITAL STOCK OPTIONS.......................................................................45
11.2 INFORMATION FILING.............................................................................46
11.3 HSR FILING.....................................................................................46
11.4 RELEASE FROM GUARANTEES; INDEBTEDNESS..........................................................46
12. INDEMNIFICATION; SURVIVAL...............................................................................46
12.1 GENERAL INDEMNIFICATION BY STOCKHOLDERS........................................................46
12.2 SPECIFIC INDEMNIFICATION BY STOCKHOLDERS.......................................................47
</TABLE>
iii
<PAGE> 5
<TABLE>
<C> <S> <C>
12.3 INDEMNIFICATION BY UNICAPITAL AND NEWCO........................................................47
12.4 THIRD PARTY CLAIMS.............................................................................48
12.5 LIMITATIONS ON INDEMNIFICATION.................................................................49
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.....................................................50
13. TERMINATION OF AGREEMENT................................................................................51
13.1 TERMINATION BY UNICAPITAL......................................................................51
13.2 TERMINATION BY THE STOCKHOLDERS................................................................51
13.3 AUTOMATIC TERMINATION..........................................................................52
13.4 LIQUIDATED DAMAGES.............................................................................52
14. NONCOMPETITION AND NONSOLICITATION......................................................................52
14.1 NONCOMPETITION.................................................................................52
14.2 DAMAGES........................................................................................53
14.3 REASONABLE RESTRAINT...........................................................................53
14.4 SEVERABILITY; REFORMATION......................................................................53
14.5 INDEPENDENT COVENANT...........................................................................54
14.6 MATERIALITY....................................................................................54
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................54
15.1 STOCKHOLDERS...................................................................................54
15.2 UNICAPITAL.....................................................................................54
15.3 DAMAGES........................................................................................55
16. LOCK-UP AGREEMENTS......................................................................................55
16.1 AGREEMENT......................................................................................55
16.2 INTENDED THIRD PARTY BENEFICIARIES.............................................................55
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK........................................................................................56
17.1 INVESTMENT INTENT..............................................................................56
17.2 COMPLIANCE WITH LAW............................................................................56
17.3 ECONOMIC RISK; SOPHISTICATION..................................................................56
17.4 INFORMATION SUPPLIED...........................................................................56
18. SECURITIES LEGENDS......................................................................................57
19. UNICAPITAL OPTION.......................................................................................57
19.1 PURCHASE OPTIONS...............................................................................57
19.2 OPTION EXERCISE PRICE..........................................................................58
19.3 REPRESENTATIONS AND WARRANTIES REGARDING THE OPTION COMPANIES..................................58
19.4 NEGATIVE COVENANTS.............................................................................58
19.5 ACCESS.........................................................................................60
</TABLE>
iv
<PAGE> 6
<TABLE>
<C> <S> <C>
19.8 TERMINATION OF OPTION..........................................................................61
20. GENERAL.................................................................................................61
20.1 COOPERATION....................................................................................61
20.2 SUCCESSORS AND ASSIGNS.........................................................................61
20.3 ENTIRE AGREEMENT...............................................................................61
20.4 COUNTERPARTS...................................................................................61
20.5 BROKERS AND AGENTS.............................................................................62
20.6 EXPENSES.......................................................................................62
20.7 NOTICES........................................................................................62
20.8 GOVERNING LAW..................................................................................63
20.9 EXERCISE OF RIGHTS AND REMEDIES................................................................63
20.10 TIME...........................................................................................64
20.11 REFORMATION AND SEVERABILITY...................................................................64
20.12 REMEDIES CUMULATIVE............................................................................64
20.13 CAPTIONS, INTERPRETATION.......................................................................64
21. DEFINITIONS.............................................................................................64
</TABLE>
v
<PAGE> 7
AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION (this
"Agreement") is made as of the 14th day of February, 1998, among UNICAPITAL
CORPORATION, a Delaware corporation ("UniCapital"); CLA ACQUISITION CORP., a
Florida corporation ("Newco"); and Stuart L. Cauff, The 1998 Cauff Family Trust
(the "Cauff Trust"), Wayne D. Lippman and The 1998 Lippman Family Trust (the
"Lippman Trust"). Messrs. Cauff and Lippman are sometimes collectively referred
to herein as the "Individual Stockholders," the Cauff Trust and the Lippman
Trust are sometimes collectively referred herein to as the "Trust Stockholders"
and the Individual Stockholders and the Trust Stockholders are sometimes
collectively referred to herein as the "Stockholders." Certain other capitalized
terms used herein are defined in Article 20 hereof.
WHEREAS, UniCapital was incorporated on October 9, 1997 under the laws
of the State of Delaware for the purpose of acquiring a number of equipment
leasing businesses in different locations;
WHEREAS, UniCapital intends to undertake an initial public offering of
its Common Stock (the "IPO") and in connection therewith intends to file a
Registration Statement on Form S-1 with the U.S. Securities and Exchange
Commission within 90 days of the execution and delivery of this Agreement;
WHEREAS, the Stockholders intend immediately prior to the Closing Date
to transfer, or cause the transfer of, all of the capital stock of each of
organizations listed on Exhibit A hereto (collectively, the "CLA Companies") to
CLA HOLDINGS, Inc., a Delaware corporation (the "Company") (the "Companies Stock
Transfer"), whereby the Company will become a holding company as to all of the
CLA Companies and each CLA Company will become a wholly-owned subsidiary of the
Company;
WHEREAS, the Stockholders own 100 shares of common stock, par value
$1.00 per share, of the Company, constituting all issued and outstanding shares
of capital stock of the Company; and
WHEREAS, Newco was incorporated on January 26, 1998 under the laws of
the State of Delaware solely for the purpose of completing this transaction, and
is a wholly-owned subsidiary of UniCapital;
WHEREAS, the respective Boards of Directors of UniCapital, Newco and
the Company deem it advisable and in the best interests of each such
corporations and their respective stockholders that the Company merge with and
into Newco pursuant to this Agreement and the applicable provisions of the laws
of the State of Delaware; and
<PAGE> 8
WHEREAS, the parties hereto intend that the transactions contemplated
in this Agreement constitute part of a single transaction involving the
simultaneous consummation of a number of similar agreements between UniCapital
and certain other corporations and partnerships and the IPO and that such single
transaction (the "Unified Transaction") shall fall within the provisions of
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 STOCK OF THE CLA COMPANIES. Subsequent to the date hereof and prior
to the Closing, the Stockholders shall take such action, or cause the Company to
take such action, as is necessary or appropriate to cause the Companies Stock
Transfer to occur, such that the Company acquires all of the capital stock of
each CLA Company, and in connection therewith the Company shall issue to the
Stockholder the promissory notes in substantially the forms attached as Annex I
hereto (collectively, the "Company Notes") and UniCapital shall guaranty the
payment of the amounts due under the Company Notes.
1.2 DELIVERY AND FILING OF CERTIFICATE OF MERGER. Newco and the Company
(sometimes collectively referred to herein as the "Constituent Corporations")
shall cause a Certificate of Merger, in substantially the form of Annex II
attached hereto, with such changes therein as may be required by Delaware law
(the "Certificate of Merger"), to be executed and delivered to the Secretary of
State of the State of Delaware on or before the "Merger Effective Date" (as
specified in Section 5.3).
1.3 MERGER EFFECTIVE DATE. At the Merger Effective Date, the
Certificate of Merger shall either be filed for immediate effectiveness with the
Secretary of State of the State of Delaware or become effective if filed with
such Secretary of State prior to such date. On the Merger Effective Date upon
the effectiveness of the merger of Newco and the Company (the "Merger"), the
Company shall be merged with and into Newco, in accordance with the Certificate
of Merger, and the separate existence of Newco shall cease. The Company, as the
entity surviving the Merger, is hereinafter sometimes referred to as the
"Surviving Corporation." The Merger shall have the effects specified in the laws
of the State of Delaware.
1.4 CERTIFICATE OF INCORPORATION, BYLAWS, BOARD OF DIRECTORS AND
OFFICERS OF THE SURVIVING CORPORATION. Upon the effectiveness of the Merger:
(a) the Certificate of Incorporation of the Company, as
amended and restated as set forth in the Certificate of Merger, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law;
2
<PAGE> 9
(b) the Bylaws of Newco, as amended and restated in
substantially the form attached as Annex III hereto, shall become the Bylaws of
the Surviving Corporation and shall remain so until thereafter duly amended, and
the bylaws of each CLA Company shall be amended and restated in substantially
the form attached as Annex III hereto, subject to any exceptions imposed by the
laws of the respective states of incorporation of the CLA Companies;
(c) in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation, the Surviving Corporation and each CLA
Company shall have a Board of Directors consisting of one member, who shall be
Robert New commencing upon the effectiveness of the Merger and who shall hold
office subject to the laws of the State of Delaware and the Certificate of
Incorporation and Bylaws of the Surviving Corporation; and
(d) the officers of the Company immediately prior to the
Merger Effective Date shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, each of such officers to serve,
subject to the provisions of the Certificate of Incorporation and Bylaws of the
Surviving Corporation, until his successor is elected and qualified; provided,
that the Chairman of the Board (if any), the Treasurer and the Secretary of the
Company and each CLA Company shall not succeed to the corresponding offices of
the Surviving Corporation and each CLA Company, but instead (i) the sole
director of the Surviving Corporation and each CLA Company shall be the Chairman
of the Board of the Surviving Corporation and each CLA Company, (ii) the
Treasurer of Newco shall remain the Treasurer of the Surviving Corporation and
each CLA Company and (iii) the Secretary of Newco shall remain the Secretary of
the Surviving Corporation and each CLA Company.
2. MERGER CONSIDERATION
2.1 CONVERSION OF CAPITAL STOCK; MERGER CONSIDERATION.
(a) Upon the effectiveness of the Merger, all of the shares
of capital stock of the Company which are issued and outstanding immediately
prior to the effectiveness of the Merger ("Company Stock") shall, by virtue of
the Merger and without any action on the part of the holder thereof but subject
to the effectiveness of the Merger, automatically be converted into the right to
receive in the aggregate, without interest,
(i) $48,000,000 in cash,
(ii) 1,684,210 shares of the common stock, par
value $.001 per share, of UniCapital ("UniCapital Stock") (the consideration
referred to in clauses (i) and (ii) of this Section 2.1(a), is referred to in
this Agreement as the "Effective Date Consideration"); provided, however, in the
event that the aggregate value (based on the IPO Price) of the 1,684,210 shares
of UniCapital Stock is less than $25,263,158, then the Company shall issue
additional shares to the Stockholders so that the aggregate value of the shares
of the UniCapital
3
<PAGE> 10
Stock included in the Effective Date Consideration equals $25,263,158, with
appropriate adjustment to the cash and stock components of the Effective Date
Consideration so as to eliminate fractional shares (the shares of UniCapital
Stock which is to be distributed to the Stockholders on the Merger Effective
Date, subject to Article 4 hereof, are referred to in this Agreement as the
"Merger Consideration Shares"), and
(iii) any Earn-Out Consideration as described in
Section 2.5 to be distributed to the Stockholders within five business days
after each date of determination of a portion of the Earn-Out Consideration with
respect to a given calendar year (if any), all as finally determined in
accordance with Section 2.5, in the percentages set forth on Annex IV.
(b) The Effective Date Consideration and the Earn-Out
Consideration are sometimes collectively referred to in this Agreement as the
"Merger Consideration."
2.2 EXCHANGE PROCEDURES. On the Merger Effective Date, upon surrender
to UniCapital of certificates representing all of the issued and outstanding
shares of Company Stock (the "Certificates"), the Stockholders shall, subject to
Article 4 and in such proportion as is set forth on Annex IV, be entitled to
receive, in exchange therefor, $43,200,000 (which shall be paid via wire
transfers or the delivery of certified bank checks pursuant to the instructions
received by UniCapital from such Stockholders), and certificates representing
90% of that number of whole Merger Consideration Shares in respect of the
Certificates surrendered and each Certificate so surrendered shall forthwith be
canceled. On the Merger Effective Date, and subject to and in accordance with
the provisions of Article 4, UniCapital shall cause to be distributed to the
Indemnity Escrow Agent (as defined in Article 4(a) (a) a certificate or
certificates representing the Escrow Shares (as defined in Article 4), which
shall be registered in the name of the Indemnity Escrow Agent as nominee for the
Stockholders and shall be held in accordance with the provisions of Article 4
and the Indemnity Escrow Agreement referred to therein and (b) cash representing
the Escrow Cash (as defined in Article 4).
2.3 NO FRACTIONAL SHARES. Notwithstanding any other provision of this
Article 2, no fractional shares of UniCapital Stock will be issued and the
Stockholders shall instead each receive in lieu of any such fractional share a
cash payment equal to such fraction multiplied by the IPO Price.
2.4 ALLOCATION OF MERGER CONSIDERATION. The parties hereto shall not
take a position on any income tax return, before any governmental agency charged
with the collection of any income tax, or in any judicial proceeding that is in
any way inconsistent with the allocation (if any) of the Merger Consideration
among the Companies as set forth on Annex V, as such Annex shall be amended by
mutual agreement among the parties hereto prior to the Closing Date.
2.5 EARN-OUT CONSIDERATION.
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(a) If the earnings before taxes (the "EBT") of the
"Big-Ticket Leasing Division" (defined below) for the twelve months ending
December 31, 1998 equals or exceeds $18,981,700, the Stockholders collectively
shall be entitled to receive an aggregate amount equal to 13,333,333.
(b) If the EBT of the Big-Ticket Leasing Division for the
year ending December 31, 1999, plus the amount by which the EBT of the
Big-Ticket Leasing Division for the twelve months ending December 31, 1998
exceeded $26,669,288 (such sum is referred to as the "Adjusted 1999 EBT"),
equals or exceeds $18,981,700, then the Stockholders collectively shall be
entitled to receive an aggregate amount equal to 13,333,333.
(c) If the EBT of the Big-Ticket Leasing Division for the
year ending December 31, 2000, plus the amount by which the EBT of the
Big-Ticket Leasing Division for the twelve months ending December 31, 1999
exceeded $26,669,288 (such sum is referred to as the "Adjusted 2000 EBT"),
equals or exceeds $18,981,700, then the Stockholders collectively shall be
entitled to receive an aggregate amount equal to $13,333,333; provided, however,
that in lieu of the foregoing, if the amount paid to the Stockholders pursuant
to Sections 2.5(a) and (b) was less than $26,666,000 and the aggregate EBT of
the Big-Ticket Leasing Division for the thirty-six months ending December 31,
2000 equals or exceeds $56,945,100, then the Stockholders collectively shall
instead be entitled to receive an aggregate amount equal to the difference
between $40,000,000 and the aggregate amounts paid to the Stockholders pursuant
to Sections 2.5(a) and (b). Notwithstanding anything to the contrary set forth
herein, the maximum aggregate amount which the Stockholders collectively shall
be entitled to receive pursuant to Sections 2.5 (a), (b) and (c) shall be
limited to $40,000,000.
(d) The amounts (if any) that the Stockholders become
entitled to receive pursuant to Sections 2.5(a), (b) and (c) are referred to
herein as the "Earn-Out Consideration." The Earn-Out Consideration shall be paid
60% in cash and 40% in fully paid and non-assessable shares of UniCapital Stock,
valued at the average of the closing prices per share of UniCapital Stock for
the 20 trading days preceding December 31 of the year to which the portion of
Earn-Out Consideration in questions applies. The allocation of any Earn-Out
Consideration among the Stockholders shall be in such proportion as set forth on
Annex IV.
(e) Subject to Section 2.5(g), the EBT of the Big-Ticket
Leasing Division for each of the years ending December 31, 1998, 1999 and 2000
shall be computed within 45 days following December 31 of the applicable year
and by Price Waterhouse LLP in accordance with GAAP applied on a basis
consistent in all material respects with the Audited Financial Statements.
(f) For purposes hereof, the "Big Ticket Leasing Division"
means (i) after the Closing Date, the operating subsidiaries and other business
units of UniCapital that conduct businesses conducted by the CLA Companies and
The NSJ Group, Inc. ("NSJ") prior to the Closing Date and (ii) for the period
beginning on January 1, 1998 through the Closing Date, the Company, the CLA
Companies and NSJ.
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(g) Except as set forth in Schedule 2.5(g), the EBT of the
Big-Ticket Leasing Division shall be calculated in accordance with GAAP,
consistently applied as it relates to each of the Company, each CLA Company and
NSJ.
(h) Notwithstanding anything in this Section 2.5 to the
contrary, if the Stockholders dispute the determination of EBT, then the
Stockholders' Representative shall notify UniCapital in writing of such dispute
and specify the amount thereof within 20 business days after notification of the
determination of EBT for any year. If UniCapital and the Stockholders'
Representative cannot resolve any such dispute which would affect the Earn-Out
Consideration, then such dispute shall be resolved by an Independent Accounting
Firm (as defined in Section 3.2). The determination of the Independent
Accounting Firm shall be made as promptly as practicable and shall be final and
binding upon the parties, absent manifest error which error may only be
corrected by such Independent Accounting Firm. The costs of the Independent
Accounting Firm shall be borne by the party (either UniCapital or the
Stockholders as a group) whose determination of EBT was further from the
determination of the Independent Accounting Firm. Once EBT is finally
determined, the Earn-Out Consideration attendant thereto shall be paid in
accordance with this Section 2.5; provided that in the event the Stockholders'
determination of EBT was closer to the determination of the Independent
Accounting Firm than UniCapital's determination of EBT, the Stockholders shall
receive such Earn-Out Consideration plus interest which shall accrue at the rate
of 10% per annum on any such Earn-Out Consideration that is resolved in the
Stockholders favor from the date the Earn-Out Consideration was first payable
and to the date on which the Earn-Out Consideration is received by the
Stockholders. Pending resolution of any such dispute by the Independent
Accounting Firm, only the amount of the Earn-Out Consideration as determined by
Price Waterhouse LLP shall be paid by UniCapital. Once EBT is finally
determined, the Earn-Out Consideration attendant thereto not previously paid, if
any, shall be paid in accordance with this Section 2.5.
(i) Any Earn-Out Consideration paid by UniCapital shall be
treated as additional consideration paid by UniCapital for the shares of Company
Stock.
(j) In the event that the employment of any Individual
Stockholder with UniCapital and its subsidiaries is terminated by UniCapital
without "cause"(as defined in the Employment Agreements) at any time on or prior
to December 31, 2000, UniCapital shall pay such terminated Stockholder and his
related Trust Stockholder an aggregate amount equal to $20,000,000, representing
an amount equal to the maximum Earn-Out Consideration such Stockholders would be
owed pursuant to Sections 2.5(a), (b) and (c) less any amount theretofore paid
or to become payable to such Stockholders pursuant to Sections 2.5(a), (b) and
(c), whereupon all further obligations of UniCapital to such Stockholders under
this Section 2.5 shall cease.
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3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS' REPRESENTATIVE
3.1 COMPUTATION. As soon as practicable, but in any event within 30
days after the Closing, UniCapital shall engage Price Waterhouse LLP to prepare,
in accordance with generally accepted accounting principles ("GAAP") in a manner
consistent in all material respects with the preparation of the combined audited
balance sheets of the Companies at December 31, 1997 that was certified by Ernst
& Young LLP and reviewed by Price Waterhouse LLP, a balance sheet of the Company
(the "Closing Date Balance Sheet") as of the end of business on the day prior to
the Closing Date (as defined in Section 5). If the combined stockholders' equity
of the Company and the CLA Companies as shown on the Closing Date Balance Sheet
is less than $1,500,000, then, subject to Section 3.2, commencing 20 business
days after delivery of the Closing Date Balance Sheets to UniCapital, the
aggregate Merger Consideration shall be adjusted downward, dollar-for-dollar in
the amount of any such deficiency (the "Net Worth Deficiency"). After the 20th
business day after the delivery of the Closing Date Balance Sheets to UniCapital
(or if applicable, after the final determination of any Disputed Amount in
accordance with Section 3.2), UniCapital shall be entitled to recover from the
Indemnity Escrow pursuant to Article 4 that portion of any Net Worth Deficiency
which does not exceed one-half of the initial balance of the Indemnity Escrow.
For any amount by which any Net Worth Deficiency exceeds one-half of the initial
balance of the Indemnity Escrow, such portion of the Net Worth Deficiency shall
be paid by the Stockholders not later than the 25th business day after the
delivery of the Closing Date Balance Sheet (or if applicable, not later than the
fifth business day after the final determination of any Disputed Amount in
accordance with Section 3.2). At its sole and exclusive option, and at any time
after such 25th business day (or if applicable, not later than the 5th business
day after the final determination of any Disputed Amount in accordance with
Section 3.2), UniCapital shall be entitled to recover from the Indemnity Escrow
pursuant to Article 4 all or any portion of the amount of the Net Worth
Deficiency not paid by the Stockholders as required by this Article 3.
Notwithstanding any provision of this Agreement to the contrary, it is
understood that the Company or any of the CLA Companies may make distributions
of cash or promissory notes to the Stockholders or otherwise in respect of the
capital stock of the Company or such CLA Companies at any time prior to the
close of business on the day prior to the Closing Date, provided that the
foregoing shall not be deemed to modify or constitute a waiver of UniCapital's
rights under this Section 3.
3.2 DISPUTES. Notwithstanding anything in this Article 3 to the
contrary, if there is any Net Worth Deficiency and the Stockholders dispute any
item contained on the Closing Date Balance Sheets, then the Stockholders'
Representative shall notify UniCapital in writing of each disputed item
(collectively, the "Disputed Amounts") and specify the amount thereof in dispute
within 20 business days after the delivery of the Closing Date Balance Sheets.
If UniCapital and the Stockholders' Representative cannot resolve any such
dispute which would eliminate or otherwise mutually resolve the calculation of
the Net Worth Deficiency, then such dispute shall be resolved by an independent
nationally recognized accounting firm which is reasonably acceptable to
UniCapital and the Stockholders' Representative (the "Independent Accounting
Firm"). The determination of the Independent Accounting Firm shall be made as
promptly as
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practical and shall be final and binding on the parties, absent manifest error
which error may only be corrected by such Independent Accounting Firm. Any
expenses relating to the engagement of the Independent Accounting Firm shall be
allocated between UniCapital and the Stockholders so that the Stockholders'
aggregate share of such costs shall bear the same proportion to the total costs
that the Disputed Amounts unsuccessfully contested by the Stockholders'
Representative (as finally determined by the Independent Accounting Firm) bear
to the total of the Disputed Amounts so submitted to the Independent Accounting
Firm. Pending resolution of any such dispute by the Independent Accounting Firm,
no such Disputed Amount shall be due to or by UniCapital. Once any such Disputed
Amount is finally determined to be due to or by UniCapital, UniCapital may
proceed to recover such amount in the manner set forth in Section 3.1.
3.3 STOCKHOLDERS' REPRESENTATIVE. (a) Each Stockholder, by signing this
Agreement, designates Wayne Lippman (or, in the event that Wayne Lippman is
unable or unwilling to serve or resigns, Stuart Cauff) to be such Stockholders'
representative for purposes of this Agreement (the "Stockholders'
Representative"). The Stockholders shall be bound by any and all actions taken
by the Stockholders' Representative on their behalf.
(b) UniCapital and Newco shall be entitled to rely upon any
communication or writing given or executed by the Stockholders' Representative.
All communications or writings to be sent to Stockholders pursuant to this
Agreement may be addressed to the Stockholders' Representative and any
communication or writing so sent shall be deemed notice to all of the
Stockholders hereunder. The Stockholders hereby consent and agree that the
Stockholders' Representative is authorized to accept deliveries, including any
notice, on behalf of the Stockholders pursuant hereto.
(c) The Stockholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Stockholder, with full
power in his or her name and on his or her behalf to act according to the terms
of this Agreement in the absolute discretion of the Stockholders'
Representative, and in general to do all things and to perform all acts
including, executing and delivering all agreements, certificates, receipts,
instructions and other instruments contemplated by or deemed advisable in
connection with Article 12 of this Agreement. This power of attorney and all
authority hereby conferred is granted subject to and coupled with the interest
of such Stockholder and the other Stockholders hereunder and in consideration of
the mutual covenants and agreements made herein, and shall be irrevocable and
shall not be terminated by any act of any Stockholder, by operation of law,
whether by such Stockholder's death or any other event.
(d) Notwithstanding the foregoing, the Stockholder
Representative shall inform the other Stockholder of all notices received, and
of all actions, decisions, notices and exercises of any rights, power or
authority proposed to be done, given or taken by such Stockholder Representative
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4. INDEMNITY ESCROW
4.1 CREATION OF ESCROW.
(a) At the Closing, as collateral security for the payment of
any indemnification obligations of the Stockholders pursuant to Sections 12.1
and 12.2 hereof and for the payment of amounts due pursuant to Article 3 hereof,
the following shall be delivered to American Stock Transfer as indemnity escrow
agent (the "Indemnity Escrow Agent"):
(i) ten percent (10%) of the number of shares of
UniCapital Stock issuable to each Stockholder as part of the Effective Date
Consideration in accordance with Annex IV, rounded up to the nearest whole share
(the "Escrow Shares"); and
(ii) ten percent (10%) of the cash portion of the
Effective Date Consideration payable to each Stockholder in accordance with
Annex IV, rounded up to the nearest whole cent (the "Escrow Cash").
(b) The Escrow Shares and the Escrow Cash are referred to
together as the "Escrow Property." In addition, the Escrow Property shall
include all interest, cash and non-cash dividends and other property at any time
received or otherwise distributed on, in respect of or in exchange for any or
all of the Escrow Property, all securities hereafter issued in substitution for
any of the foregoing, all certificates and instruments representing or
evidencing such securities, all cash and non-cash proceeds of all of the
foregoing property and all rights, titles, interests, privileges and preferences
appertaining or incident to the foregoing property, except as provided in
Section 4.3.
4.2 DURATION AND TERMS. The Escrow Property shall be held and disbursed
by the Indemnity Escrow Agent in accordance with the terms of an Indemnity
Escrow Agreement substantially in the form attached hereto as Annex VI. The
Indemnity Escrow Agent shall hold the Escrow Property pursuant to the Indemnity
Escrow Agreement until the later of: (a) the first anniversary of the Merger
Effective Date; and (b) the resolution of any claim for indemnification or
payment that is pending on the first anniversary of the Merger Effective Date,
but only to the extent of the amount of such pending claim.
4.3 VOTING AND INVESTMENT. The Stockholders shall be entitled to
exercise all voting powers incident to the Escrow Shares held by the Indemnity
Escrow Agent as their nominee, but shall not be entitled to exercise any
investment or dispositive powers over such Escrow Shares. The Escrow Cash shall
be invested from time to time by the Indemnity Escrow Agent as provided in the
Indemnity Escrow Agreement.
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5. CLOSING; MERGER EFFECTIVE DATE
5.1 CLOSING. Within two business days following the date on which the
Underwriting Agreement shall have been executed, the parties shall take all
actions necessary to effect the Merger (other than the filing with the
appropriate state authorities of the Certificate of Merger, which shall be filed
and become effective on the Merger Effective Date) and to effect the conversion
and delivery of shares and cash referred to in Article 2 hereof (hereinafter
referred to as the "Closing"); provided, that such actions shall not include the
actual completion of the Merger or the actual conversion and delivery of the
shares referred to in Article 2 hereof, which actions shall only be taken on the
Merger Effective Date as herein provided.
5.2 CLOSING DATE; LOCATION. The Closing shall take place at the offices
of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178. The date on
which the Closing shall occur shall be referred to as the "Closing Date."
5.3 EFFECTIVENESS OF MERGER. Concurrently with the consummation of the
sale of the shares of UniCapital Stock pursuant to the Underwriting Agreement,
the Merger shall become effective and all transactions contemplated by this
Agreement, including the conversion and delivery of shares and by the delivery
by checks or via wire transfers of an aggregate amount equal to the cash which
the Stockholders shall be entitled to receive pursuant to the Merger referred to
in Article 2 hereof, shall occur and be deemed to be completed. The date on
which the Merger is effected shall be referred to as the "Merger Effective Date"
and the time on which the Merger is effected shall be referred to as the
"Effective Time"
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
As of the date hereof and as of the Merger Effective Date, each
Individual Stockholder jointly and severally represents and warrants to
UniCapital as follows:
6.1 CORPORATE EXISTENCE. The Company and each CLA Company is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. The Company and each CLA Company is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction where the conduct of its business requires it to be so
qualified, all of which jurisdictions are listed on Schedule 6.1.
6.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
agreements, documents and instruments required to be delivered by the Company or
any CLA Company in accordance with the provisions hereof (collectively, the
"Company Documents") will be duly executed and delivered on behalf of the
Company and such CLA Company, as applicable, in each case by duly authorized
officers of such corporation. The Company Documents, when executed and delivered
by the Company and the CLA Companies, will constitute, the legal, valid
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and binding obligations of the Company and such CLA Company, as applicable,
enforceable against it in accordance with their respective terms.
6.3 AUTHORITY; VALIDITY OF CONTEMPLATED TRANSACTIONS. Each Stockholder
has the full legal right, capacity and authority to enter into this Agreement.
Except as set forth in Schedule 6.3, the execution, delivery and performance of
this Agreement by each Stockholder does not and will not violate, conflict with
or result in the breach of any term, condition or provision of, or require the
consent of any other person under (a) any existing law, ordinance, or
governmental rule or regulation to which the Company, any CLA Company or any
Stockholder is subject, (b) any judgment, order, writ, injunction, decree or
award of any Governmental Entity which is applicable to the Company, any CLA
Company or any Stockholder, (c) the charter documents of the Company or any CLA
Company or any securities issued by the Company or any CLA Company, or (d) any
mortgage, indenture, agreement, contract, commitment, lease, plan,
Authorization, or other instrument, document or understanding, oral or written,
to which the Company, any CLA Company or any Stockholder is a party, by which
the Company, any CLA Company or any Stockholder may have rights or by which any
of the properties or assets of the Company or any CLA Company may be bound or
affected, or give any party with rights thereunder the right to terminate,
modify, accelerate or otherwise change the existing rights or obligations of the
Company or any CLA Company thereunder. Except for the filing of the Certificate
of Merger with the Secretary of the State of Delaware, filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and as
aforesaid, no authorization, approval or consent of, and no registration or
filing with, any Governmental Entity is required in connection with the
execution, delivery or performance of this Agreement by any Stockholder.
6.4 CAPITAL STOCK AND OWNERSHIP AS OF THE DATE OF THIS AGREEMENT. As of
the date of this Agreement (i) the Stockholders own beneficially and of record
all of the outstanding capital stock of the Company and (ii) the Stockholders
each own beneficially and of record that portion of the outstanding capital
stock of each CLA Company as is identified as so owned on Exhibit A, in each
case, free and clear of all liens, security interests, pledges, charges, voting
trusts, equities, restrictions, encumbrances and claims of every kind except as
otherwise set forth such Annex. As of the date of this Agreement, the record
ownership of the capital stock of each CLA Company is as set forth on Exhibit A.
All of the issued and outstanding capital stock of the Company and each CLA
Company as of the date of this Agreement has been duly authorized and validly
issued, fully paid and nonassessable and have been offered, issued, sold and
delivered by the Company or the applicable CLA Company in compliance with all
applicable state and federal laws concerning the offering, sale or issuance of
securities. None of such shares have been issued in violation of the preemptive
rights of any past or present stockholder, whether contractual or statutory.
6.5 CAPITAL STOCK AND OWNERSHIP AS OF THE EFFECTIVE TIME. The
authorized capital stock of the Company and each CLA Company immediately prior
to the Effective Time shall consist solely of the shares shown on Schedule 6.5.
Immediately prior to the Effective Time, the Stockholders shall own beneficially
and of record all of the issued and outstanding shares of
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capital stock of the Company, in each case, free and clear of all liens,
security interests, pledges, charges, voting trusts, equities, restrictions,
encumbrances and claims of every kind. Immediately prior to the Effective Time,
the Companies Stock Transfer shall have been consummated and the Company shall
own beneficially and of record all of the issued and outstanding capital stock
of each CLA Company, in each case, free and clear of all liens, security
interests, pledges, charges, voting trusts, equities, restrictions, encumbrances
and claims of every kind, except as set forth in Schedule 6.5. All of the issued
and outstanding shares of the Company and each CLA Company to be outstanding
immediately prior to the Effective Time will have been duly authorized and
validly issued, fully paid and nonassessable and will have been offered, issued,
sold and delivered by the Company and each CLA Company in compliance with all
applicable state and federal laws concerning the offering, sale or issuance of
securities. As of the Effective Time, none of such shares will have been, and
none of the shares of the Company or any of the CLA Companies shall have been,
issued in violation of the preemptive rights of any past or present stockholder,
whether contractual or statutory. As of the Effective Time, UniCapital shall
have acquired valid title to all of the issued and outstanding capital stock of
the Company, free and clear of all liens, security interests, pledges, charges,
voting trusts, equities, restrictions, encumbrances and claims of every kind.
6.6 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 6.6,
neither the Company nor any CLA Company has acquired any treasury stock since
December 31, 1995. Except as set forth on Schedule 6.6, as of the date of this
Agreement there is no, and immediately prior to the Effective Time there shall
be no, existing option, warrant, call, conversion right or commitment of any
kind which obligates the Company or any CLA Company to issue any of its
authorized but unissued capital stock. Except as set forth on Schedule 6.6,
neither the Company nor any CLA Company has any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof.
6.7 NO BONUS SHARES. As of the date of this Agreement, none of the
shares of capital stock of the Company or any CLA Company were, and immediately
prior to the Effective Time, none of the shares of capital stock of the Company
stock will be, issued pursuant to any awards, grants or bonuses, whether of
stock or of options or other rights.
6.8 SUBSIDIARIES. As of the date hereof, neither the Company nor any
CLA Company has any subsidiaries. Except as set forth in Schedule 6.8, neither
the Company nor any CLA Company owns, of record or beneficially, or controls,
directly or indirectly, any capital stock, any securities convertible into
capital stock or any other equity interest in any corporation, association or
other business entity. Except as set forth on Schedule 6.8, neither the Company
nor any CLA Company is, directly or indirectly, a participant in any joint
venture, partnership or other noncorporate entity.
6.9 PREDECESSOR STATUS; ETC. Schedule 6.9 lists all of the names of all
entities from whom the Company or any CLA Company previously acquired assets
representing all or
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substantially all of the assets of such entity. Except as set forth on Schedule
6.9, neither the Company nor any CLA Company has ever been a subsidiary of
another corporation or been a part of an acquisition which was later rescinded.
6.10 SPIN-OFFS BY COMPANIES. Except as set forth on Schedule 6.10,
since December 31, 1995 through the date of this Agreement, neither the Company
nor any CLA Company has effected a sale or distribution of all or substantially
all of its assets.
6.11 NO THIRD PARTY OPTIONS. Except as set forth in Schedule 6.11,
there are no existing agreements, options, commitments or rights with, of or to
any person to acquire any material assets or rights of the Company or any CLA
Company or any interest therein.
6.12 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.12 are copies
of the audited combined balance sheet of the CLA Companies at December 31, 1997
and related combined statements of income, cash flows and stockholders' equity
for the fiscal year then ended, certified by Ernst & Young LLP and reviewed by
Price Waterhouse LLP, together with the reports of such independent public
accountants thereon (collectively the "Audited Financial Statements").
The Audited Financial Statements have been prepared in accordance with GAAP
consistently applied throughout the periods involved. The Audited Financial
Statements, including the related notes, fairly presents the combined financial
position, assets and liabilities (whether accrued, absolute, contingent or
otherwise) of the CLA Companies as of the date indicated and the statements of
income, cash flows and changes in stockholders' equity included in the Audited
Financial Statements fairly present in all material respects the combined
results of operations, cash flows and changes in stockholders' equity of the CLA
Companies for the period indicated, in each case in accordance with GAAP
consistently applied.
6.13 LIABILITIES AND OBLIGATIONS.
(a) Except as reflected or reserved against in the balance
sheet as at December 31, 1997 (the "Audited Balance Sheet Date") included in the
Audited Financial Statements or in the notes to the Audited Financial
Statements, there are no liabilities against, relating to or affecting any CLA
Company as of such date that would otherwise have been required to be reflected
or reserved against on such Audited Financial Statements. As promptly as is
practicable after the date of this Agreement, the Company and the Stockholders
shall cause Ernst & Young LLP to prepare and deliver to the Company and the
Stockholders, who shall in turn deliver to UniCapital, a schedule detailing each
and every liability reflected on the balance sheet included in the Audited
Financial Statements, which schedule shall be true, correct and complete in all
material respects. Attached hereto as Schedule 6.13(a) is an accurate list, as
of a date not more than two days prior to the date of this Agreement and as
amended as of a date not more than two days prior to the Closing Date, of all
liabilities incurred by the Company or any CLA Company after the Audited Balance
Sheet Date (i) not in the ordinary course of business
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and (ii) in the ordinary course of business that exceeds $10,000. Each of the
foregoing liabilities that has not heretofore been paid or discharged is so
noted on Schedule 6.13(a). For purposes of this Agreement, "liabilities" means
liabilities of any kind, character or description, whether accrued, absolute,
secured or unsecured, contingent or otherwise. For purposes of determining
whether any contingent or other liability exceeds $10,000 for the purposes of
being included on Schedule 6.13(a) as required by this Section 6.13, such amount
shall be determined on a basis that assumes the ultimate assessment against the
Company or the applicable CLA Company of the full amount of such contingent or
other liability.
(b) For each such liability for which, to the knowledge of the
Individual Stockholders, the amount is contested, Schedule 6.13(b) includes a
summary description of the liability, together with copies of all relevant
documentation relating thereto, detail of all amounts claimed and any other
action or relief sought, the names of the claimant and all other parties to the
claim, suit or proceeding, the name of each court or agency before which such
claim, suit or proceeding is pending, the date such claim, suit or proceeding
was instituted, and a best estimate of the maximum amount, if any, which is
likely to become payable with respect to each such liability. If no estimate is
provided, the best estimate shall for purposes of this Agreement be deemed to be
zero.
(c) As of the date of this Agreement and as of a date not more
than two days prior to the Closing Date, except as set forth on Schedules 6.13
(a) or (b) and except for liabilities not required to be set forth thereon
pursuant to Section 6.13(a) or liabilities reflected on the Audited Financial
Statements, the Company and the CLA Companies have no material liabilities or
obligations, whether direct or indirect, matured or unmatured, absolute
contingent or otherwise, and there is no condition, situation or set of
circumstances which are reasonably be expected to result in any such material
liability.
6.14 ACCOUNTS AND NOTES RECEIVABLE. Attached hereto as Schedule 6.14 is
a complete and accurate list, as of a date not more than two days prior to the
date of this Agreement, of the accounts and notes receivable of the Company and
each CLA Company with an amount due that exceeds $1,000, (including receivables
from and advances to any employees or any Stockholder (including the spouses of
any Individual Stockholder)) excluding those arising out of Leases
(collectively, the "Accounts Receivable"). Schedule 6.14 includes an aging of
all Accounts Receivable showing amounts due in 30-day aging categories. On the
Closing Date, the Stockholders will deliver to UniCapital a complete and
accurate list, as of a date not more than two days prior to the Closing Date, of
the Accounts Receivable. Except as set forth on Schedule 6.14 (as such Schedule
shall be updated and delivered with the aging of Accounts Receivable not more
than two days prior to the Closing Date), all Accounts Receivable represent
valid obligations arising from bona fide business transactions in the ordinary
course of business. The Accounts Receivable are, and as of the Merger Effective
Date will be, collectible or actually collected, in each case net of any
respective reserves shown on the Company's or any CLA Company's books and
records as of their respective dates (which reserves are adequate and calculated
in accordance with GAAP, consistent with past practice). Subject in the case of
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Accounts Receivable reflected on the combined balance sheet of the CLA Companies
to such reserves reflected on such balance sheet and except as set forth in
Schedule 6.14, each of the Accounts Receivable included in Schedule 6.14 as of
the date this Agreement will be collected in full within ninety (90) days after
the day on which it first became due and payable. Except as set forth on
Schedule 6.14, there is no contest, claim, counterclaim, defense or right of
set-off, other than rebates and returns in the ordinary course of business,
under any contract with any obligor of any Account Receivable relating to the
amount or validity of such Account Receivable. The allowance for collection
losses on the balance sheet included in the Audited Financial Statement has been
determined in accordance with GAAP, consistent with past practice.
6.15 PERMITS. Each material Permit held by the Company and any CLA
Company, together with the name of the Governmental Entity issuing such Permit,
is set forth on Schedule 6.15. Except as set forth on Schedule 6.15, such
Permits are valid and in full force and effect and none of such Permits will be
terminated or impaired or become terminable as a result of the transactions
contemplated by this Agreement. Upon consummation of such transactions, the
Surviving Corporation will have all of the Company's right, title and interest
in its Permits.
6.16 REAL AND PERSONAL PROPERTY. Attached hereto as Schedule 6.16 is an
accurate list, including substantially complete descriptions as of the Audited
Balance Sheet Date, of all the real and personal property excluding aircrafts or
aircraft parts (which in the case of personal property had an original cost in
excess of $25,000) owned or where the Company or any CLA Company is a lessee,
including true and correct copies of leases for equipment and properties on
which are situated buildings, warehouses and other structures used in the
operation of the busi ness of the Company or any CLA Company and including an
indication as to which assets were formerly owned by any Stockholder or
affiliate (which term, as used herein, shall have the meaning ascribed thereto
in Rule 144(a)(1) promulgated under the Securities Act of 1933, as amended (the
"Securities Act")), of the Company or any CLA Company. Except as set forth on
Schedule 6.16, all of the Company's and each CLA Company's leasehold
improvements, facilities, equipment and other material items of tangible
property and assets are in good operating condition and repair, subject to
normal wear and maintenance, are usable in the regular and ordinary course of
business and conform to all applicable laws, ordinances, codes, rules and
regulations, and Authorizations relating to their construction, use and
operation. All leases set forth on Schedule 6.16 have been duly authorized,
executed and delivered and constitute the legal, valid and binding obligations
of the Company and each CLA Company, as applicable, and, to the knowledge of
either Individual Stockholder, no other party to any such lease is in default
thereunder and such leases constitute the legal, valid and binding obligations
of such other parties. All fixed assets used by the Company or any CLA Company
in the operation of its business are either owned by the Company or such CLA
Company or leased under an agreement set forth on Schedule 6.16. The Company,
the CLA Companies or the Stockholders have heretofore delivered to UniCapital
copies of any title reports and title insurance policies received or held by the
Company or any CLA Company. The Individual Stockholders have indicated on
Schedule 6.16 a summary description of all plans or projects involving the
opening of new
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operations, expansion of any existing operations or the acquisition of any real
property or existing business to which management of the Company or any CLA
Company has devoted any significant effort or expenditure in the two-year period
prior to the date of this Agreement which have not been terminated or abandoned
and which, if pursued by the Company or such CLA Company, would require
additional expenditures of significant efforts or capital, other than with
respect to the acquisition of aircraft or aircraft parts.
6.17 CONTRACTS AND COMMITMENTS. Schedule 6.17 sets forth an accurate,
correct and complete list of all agreements, contracts, commitments,
arrangements and understandings, written or oral, including all amendments and
supplements thereto, of the Company or any CLA Company other than Leases (the
"Contracts"), to which the Company or any CLA Company is a party or is bound, or
by which any of their respective assets are bound, and which involve any:
(a) agreement, contract, commitment, arrangement or
understanding with any present or former employee or consultant or for the
employment of any person, including any consultant;
(b) agreement, contract, commitment, arrangement or
understanding for the future purchase of, or payment for, supplies or products,
or for the performance of services by a third party involving in any one case
$25,000 or more;
(c) agreement, contract, commitment, arrangement or
understanding to sell or supply products or to perform services involving in any
one case $25,000 or more;
(d) agreement, contract, commitment, arrangement or
understanding containing minimum requirements or "take or pay" provisions;
(e) agreement, contract, commitment, arrangement or
understanding not otherwise listed on Schedule 6.17 and continuing over a period
of more than six months from the date hereof and exceeding $25,000 in value;
(f) distribution, dealer, representative or sales agency
agreement, contract, commitment, arrangement or understanding exceeding $10,000
in value;
(g) agreement, contract, commitment, arrangement or
understanding containing a provision to indemnify any person or entity with
respect to, or to assume, any tax or environmental liability;
(h) agreement, contract, commitment, arrangement or
understanding with federal, state, local, regulatory or other governmental
entities;
(i) note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement or other contract or commitment for the
borrowing or lending of
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money or agreement or arrangement for a line of credit or guarantee, pledge or
undertaking of the indebtedness for money borrowed of any other person;
(j) agreement, contract, commitment, arrangement or
understanding for any charitable or political contribution;
(k) agreement, contract, commitment, arrangement or
understanding for any capital expenditure or leasehold improvement in excess of
$25,000;
(l) agreement, contract, commitment, arrangement or
understanding limiting or restraining the Company or any CLA Company or any
successor thereto, or to the knowledge of either Individual Stockholder, any
employee of the Company or any CLA Company or any successor thereto, from
engaging or competing in any manner or in any business;
(m) license, franchise, distributorship or other agreement
which relates in whole or in part to any software, patent, trademark, trade
name, service mark or copyright or to any ideas, technical assistance or other
know-how of or used by, and material to, the Company or any CLA Company;
(n) agreement, contract, commitment, arrangement or
understanding to which the Company or any CLA Company, on the one hand, and any
affiliate, officer, director or stockholder of the Company or any CLA Company,
on the other hand, are parties.
Each of the Contracts listed on Schedule 6.17, except as set forth on Schedule
6.17, is valid and enforceable in accordance with its terms; the Company and
each applicable CLA Company is, and to the knowledge of either Individual
Stockholder, all other parties thereto are, in compliance with the provisions
thereof. Except as set forth on Schedule 6.17, neither the Company nor any CLA
Company is, and to the knowledge of either Individual Stockholder, no other
party thereto is, in default in the performance, observance or fulfillment of
any material obligation, covenant or condition contained therein; and no event
has occurred which with or without the giving of notice or lapse of time, or
both, would constitute a default thereunder. Except as set forth on Schedule
6.17, none of the rights of the Company or any CLA Company under any Contract
will be impaired by the consummation of the transactions contemplated hereby,
and all such rights will be enforceable by the applicable Surviving Corporation
after the Merger Effective Date without the consent or agreement of any other
party. The Company, the CLA Companies or the Individual Stockholders have
delivered accurate and complete copies or provided direct access to each
Contract to UniCapital.
6.18 GOVERNMENT CONTRACTS. Except as set forth on Schedule 6.18,
neither the Company nor any CLA Company is now or has ever been a party to any
contract with any Governmental Entity subject to price redetermination or
renegotiation.
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6.19 REAL PROPERTY. Neither the Company nor any of the CLA Companies
own any real property.
6.20 INSURANCE. The assets, properties and operations of the Company
and each CLA Company are insured under various policies of general liability and
other forms of insurance as listed on Schedule 6.20, all of which are described
in the insurance policies attached to the Disclosure Schedules, which discloses
for each policy the risks insured against, coverage limits, deductible amounts,
all outstanding claims thereunder, and whether the terms of such policy provide
for retrospective premium adjustments. All such policies are in full force and
effect in accordance with their terms, no notice of cancellation has been
received, and there is no existing default or event which, with the giving of
notice or lapse of time or both, would constitute a default thereunder. Such
policies are in amounts which, in relation to the business and assets of the
Company and the CLA Companies, are consistent with the normal or customary
industry practice and all premiums due to date have been paid in full. Neither
the Company nor any CLA Company has been refused any insurance, nor has the
Company's nor any CLA Company's coverage been limited, by any insurance carrier
to which it has applied for insurance or with which it has carried insurance
during the past five years. Schedule 6.20 also contains a true and complete
description of all outstanding bonds and other surety arrangements issued or
entered into in connection with the business, assets and liabilities of the
Company and the CLA Companies.
6.21 EMPLOYEES. Schedule 6.21 contains the following with respect to
the Company and each CLA Company:
(a) a list of all employees of the Company and each CLA
Company (including organization, name, title and position);
(b) each such employee's length of service; and
(c) the compensation (including terms of payment, bonuses,
commissions and deferred compensation, as well as any benefits) of each such
employee.
Except as disclosed on Schedule 6.21: (i) there have not been in the past five
years and, to the knowledge of either Individual Stockholder, there are not
pending, any labor disputes, work stoppages, requests for representation,
pickets or work slow-downs due to labor disagreements; (ii) there are and have
been no unresolved violations of any Laws of any Governmental Entity respecting
the employment of any employees; (iii) there is no unfair labor practice, charge
or complaint pending, unresolved or, to the knowledge of either Individual
Stockholder, threatened before the National Labor Relations Board or similar
body in any foreign country; (iv) there is no employment handbook, personnel
policy manual, or similar document that creates prospective employment rights or
obligations; (v) the employees of the Company and the CLA Companies are not
covered by any collective bargaining agreement; (vi) the Company and each CLA
Company has provided or will timely provide prior to Closing all notices
required by law to be
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given prior to Closing to all local, state, federal or national labor,
wage-payment, equal employment opportunity, unemployment insurance and related
agencies; (vii) the Company and each CLA Company has paid or properly accrued in
the ordinary course of business all wages and compensation due to employees,
including all vacations or vacation pay, holidays or holiday pay, sick days or
sick pay, and bonuses; and (viii) the transactions contemplated by this
Agreement will not create liability under any Laws of any Governmental Entity
respecting reductions in force or the impact on employees on plant closing or
sales of businesses. All employees of the Company and each CLA Company are
legally able to work in the United States.
6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. Schedule 6.22 sets forth
a complete and accurate list of each Benefit Plan covering any present or former
officers, employees or directors of the Company or any CLA Company. "Benefit
Plan" means each "employee pension benefit plan" (as defined in Section 3(3) of
ERISA, hereinafter a "Pension Plan"), "employee welfare benefit plan" (as
defined in Section 3(2) of ERISA, hereinafter a "Welfare Plan") and each other
plan or arrangement (written or oral) relating to deferred compensation, bonus,
performance compensation, stock purchase, stock option, stock appreciation,
severance, vacation, sick leave, holiday pay, fringe benefits, personnel policy,
reimbursement program, incentive, insurance, welfare or similar plan, program,
policy or arrangement, in each case maintained or contributed to, or required to
be maintained or contributed to, by the Company or any CLA Company or their
respective affiliates or any other person or entity that, together with the
Company and the CLA Companies, is treated as a single employer under Section
414(b), (c), (m) or (o) of the Code (each, together with the Company and the CLA
Companies, a "Commonly Controlled Entity") for the benefit of any present or
former officer, employee or director. Neither the Company nor any CLA Company
has any intent or commitment to create any additional Benefit Plan or amend any
Benefit Plan so as to increase benefits thereunder. Neither the Company nor any
CLA Company has created any Benefit Plan or declared or paid any bonus
compensation in contemplation of the transactions contemplated by this
Agreement. A current, accurate and complete copy of each Benefit Plan has been
made available to UniCapital. Except as disclosed on Schedule 6.22:
(a) each Benefit Plan is in substantial compliance with all
reporting, disclosure and other requirements of ERISA applicable to such Benefit
Plan;
(b) each Pension Plan which is intended to be qualified under
Section 401(a) of the Code, has been determined by the Internal Revenue Service
to be so qualified and, to the knowledge of either Individual Stockholder, no
condition exists that would adversely affect any such determination;
(c) neither any Benefit Plan, the Company, any CLA Company,
nor any Commonly Controlled Entity, nor any trustee or agent has been or is
presently engaged in any prohibited transactions as defined by Section 406 of
ERISA or Section 4975 of the Code for
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which an exemption is not applicable which could subject the Company or any CLA
Company to the tax or penalty imposed by Section 4975 of the Code or Section 502
of ERISA;
(d) there is no event or condition existing which could be
deemed a "reportable event" (within the meaning of Section 4043 of ERISA) with
respect to which the thirty-day notice requirement has not been waived; to the
knowledge of either Individual Stockholder, no condition exists which could
subject the Company or any CLA Company to a penalty under Section 4071 of ERISA;
(e) neither the Company, any CLA Company nor any Commonly
Controlled Entity is or has ever been party to any "multi-employer plan," as
that term is defined in Section 3(37) of ERISA;
(f) true and correct copies of the most recent annual report
on Form 5500 and any attached schedules for each Benefit Plan (if any such
report was required by applicable law) and a true and correct copy of the most
recent determination letter issued by the Internal Revenue Service for each
Pension Plan have been provided to UniCapital;
(g) with respect to each Benefit Plan, there are no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
pending or, to the knowledge of either Individual Stockholder, threatened
against any Benefit Plan, the Company or any CLA Company, any Commonly
Controlled Entity or any trustee or agent of any Benefit Plan; and
(h) with respect to each Benefit Plan to which the Company or
any CLA Company or any Commonly Controlled Entity is a party which constitutes a
group health plan subject to Section 4980B of the Code, each such Benefit Plan
substantially complies, and in each case has substantially complied, with all
applicable requirements of Section 4980B of the Code.
(i) Except as set forth in Schedule 6.22:
(i) there is no outstanding liability (except for
premiums due) under Title IV of ERISA with respect to any Pension Plan;
(ii) neither the Pension Benefit Guaranty
Corporation, the Company nor any CLA Company nor any Commonly Controlled Entity
has instituted proceedings to terminate any Pension Plan and the Pension Benefit
Guaranty Corporation has not informed the Company or any CLA Company of its
intent to institute proceedings to terminate any Pension Plan;
(iii) full payment has been made of all amounts which
the Company or any CLA Company or any Commonly Controlled Entity was required to
have paid as a contribution to the Pension Plans as of the last day of the most
recent fiscal year of each of the Pension Plans ended prior to the date of this
Agreement, and none of the Pension Plans has
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incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, as of the last day of
the most recent fiscal year of each such Pension Plan ended prior to the date of
this Agreement;
(iv) to the knowledge of either Individual
Stockholder, the actuarial assumptions utilized, where appropriate, in
connection with determining the funding of each Pension Plan which is a defined
benefit pension plan (as set forth in the actuarial report for such Pension
Plan) are reasonable. Copies of the most recent actuarial reports have been
furnished to UniCapital. Based on such actuarial assumptions, as of the Interim
Balance Sheet Date, the fair market value of the assets or properties held under
each such Pension Plan exceeds the actuarially determined present value of all
accrued benefits of such Pension Plan (whether or not vested) determined on an
ongoing Pension Plan basis;
(v) each of the Benefit Plans is, and its
administration is and has been during the six-year period preceding the date of
this Agreement, in substantial compliance with, and neither the Company nor any
CLA Company has received any claim or notice that any such Benefit Plan is not
in compliance with, all applicable laws and orders and prohibited transaction
exemptions, including to the extent applicable, the requirements of ERISA;
(vi) neither the Company, any CLA Company nor any
Commonly Controlled Entity is in default in performing any of its contractual
obligations under any of the Benefit Plans or any related trust agreement or
insurance contract;
(vii) there are no material outstanding liabilities
of any Benefit Plan other than liabilities for benefits to be paid to
participants in Benefit Plan and their beneficiaries in accordance with the
terms of Benefit Plan;
(viii) each Benefit Plan may be amended or modified
by the Company, each CLA Company or Commonly Controlled Entity, as applicable,
at any time without liability except under any defined pension benefit plan;
(ix) no Benefit Plan other than a Pension Plan,
retiree medical plan or severance plan provides benefits to any individual after
termination of employment;
(x) the consummation of the transactions contemplated
by this Agreement will not (in and of itself): (A) entitle any employee of the
Company or any CLA Company to severance pay, unemployment compensation or any
other payment; (B) accelerate the time of payment or vesting, or increase the
amount of compensation due to any such employee; (C) result in any liability
under Title IV of ERISA; (D) result in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
available; or (E) result (either alone or in conjunction with any other event)
in the payment or series of payments by the Company, any CLA Company or any of
their
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respective affiliates to any person of an "excess parachute payment" within the
meaning of Section 280G of the Code;
(xi) with respect to each Benefit Plan that is funded
wholly or partially through an insurance policy, all premiums required to have
been paid to date under the insurance policy have been paid, all premiums
required to be paid under the insurance policy through the Merger Effective Date
will have been paid on or before the Merger Effective Date and, as of the Merger
Effective Date, there will be no liability of the Company or any CLA Company or
any Commonly Controlled Entity under any insurance policy or ancillary agreement
with respect to such insurance policy in the nature of a retroactive rate
adjustment, loss sharing arrangement or other actual or contingent liability
arising wholly or partially out of events occurring prior to the Merger
Effective Date;
(xii) (A) each Benefit Plan that constitutes a
"welfare benefit plan," within the meaning of Section 3(1) of ERISA, and for
which contributions are claimed by the Company, any CLA Company or any Commonly
Controlled Entity as deductions under any provision of the Code, is in material
compliance with all applicable requirements pertaining to such deduction;
(B) with respect to any welfare benefit fund
(within the meaning of Section 419 of the Code) related to a welfare benefit
plan, there is no disqualified benefit (within the meaning of Section 4976(b) of
the Code) that would result in the imposition of a tax under Section 4976(a) of
the Code; and
(C) all welfare benefit funds intended to be
exempt from tax under Section 501(a) of the Code have been determined by the
Internal Revenue Service to be so exempt and no event or condition exists which
would adversely affect any such determination; and
(xiii) all benefit plans outside of the United
States, if any (the "Foreign Plans"), are in compliance with all applicable laws
and regulations and have been operated in accordance with the plans' respective
terms. There are no material unfunded liabilities under or in respect of the
Foreign Plans, and all contributions or other payments required to be made to or
in respect of the Foreign Plans prior to the Merger Effective Date have been
made or will be made prior to the Merger Effective Date.
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS. The Company and each CLA
Company has complied with each, and is not in violation in any material respect
of any, law, ordinance, or governmental or regulatory rule or regulation,
whether federal, state, local or foreign ("Regulations"), to which such
Company's business, operations, assets or properties is subject, except for
immaterial failures to comply of which neither Individual Stockholder has any
knowledge. The Company and each CLA Company owns, holds, possesses or lawfully
uses in the operation of its business all franchises, licenses, permits,
easements, rights, applications,
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filings, registrations and other authorizations ("Authorizations") which are in
any manner necessary for it to conduct its business as now or previously
conducted or for the ownership and use of the assets owned or used by such
Company in the conduct of the business of such Company, free and clear of all
liens, charges, restrictions and encumbrances and in compliance with all
Regulations. All such Authorizations are listed and described in Schedule 6.23.
Neither the Company nor any CLA Company is in default, except for immaterial
defaults of which neither Individual Stockholder has no knowledge, nor has any
such Company received any notice of any claim of such a default, with respect to
any such Authorization. All such Authorizations are renewable by their terms or
in the ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
None of such Authorizations will be adversely affected by consummation of the
transactions contemplated hereby. No Stockholder and no director, officer,
employee or former employee of the Company, any CLA Company or any affiliates of
the Company or any CLA Company, or any other person, firm or corporation, owns
or has any proprietary, financial or other interest (direct or indirect) in any
Authorization which such Company owns, possesses or uses in the operation of the
business of the Company or any CLA Company as now or previously conducted.
6.24 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
6.24, no Stockholder and no director, officer or employee of the Company or any
CLA Company, or any member of his or her immediate family or any other of its,
his or her affiliates, owns or has a 5% or more ownership interest in any
corporation or other entity (other than another CLA Company) that is or was
during the last three years a party to, or in any property which is or was
during the last three years the subject of, any contract, agreement or
understanding, business arrangement or relationship with such Company.
6.25 LITIGATION. (a) Except as set forth on Schedule 6.25, no
litigation, including any arbitration, investigation or other proceeding of or
before any court, arbitrator or governmental or regulatory official, body or
authority is pending or, to the knowledge of either Individual Stockholder,
threatened against the Company or any CLA Company or which relates to the
transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 6.25, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of either Individual Stockholder, threatened
against the Company or any CLA Company or which relates to such Company.
(c) No Individual Stockholder knows of any reasonably likely
basis for any litigation, arbitration, investigation or proceeding referred to
in Sections 6.25(a) or (b).
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(d) Except as set forth on Schedule 6.25, neither the Company
nor any CLA Company is a party to or subject to the provisions of any judgment,
order, writ, injunction, decree or award of any court, arbitrator or
governmental or regulatory official, body or authority.
6.26 RESTRICTIONS. Except as set forth on Schedule 6.26, neither the
Company nor any CLA Company is a party to any indenture, agreement, contract,
commitment, lease, plan, license, permit, authorization or other instrument,
document or understanding, oral or written, or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree or award
which materially adversely affects or materially restricts or, so far as the
Company or any Individual Stockholder can now reasonably foresee, may in the
future materially adversely affect or materially restrict, the consolidated
business, operations, assets, properties, prospects or condition (financial or
otherwise) of the Company after consummation of the transactions contemplated
hereby.
6.27 TAXES. All federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by the Company, or any
CLA Company (the "Tax Returns") with respect to any federal, state, local or
foreign taxes, assessments, interest, penalties, deficiencies, fees and other
governmental charges or impositions (including all income tax, unemployment
compensation, social security, payroll, sales and use, excise, privilege,
property, ad valorem, franchise, license, school and any other tax or similar
governmental charge or imposition under laws of the United States or any state
or municipal or political subdivision thereof or any foreign country or
political subdivision thereof) (the "Taxes") have been timely filed with the
appropriate governmental agencies in all jurisdictions in which such Tax Returns
are required to be filed, and all such Tax Returns properly reflect the
liabilities of the Company and the CLA Companies for Taxes for the periods,
property or events covered thereby. All Taxes, including those which are called
for by the Tax Returns, required to be paid, withheld or accrued by the Company
and the CLA Companies and any deficiency assessments, penalties and interest
have been timely paid, withheld or accrued. The accruals for Taxes contained in
the Audited Balance Sheet are adequate to cover the Tax liabilities of the
Company and the CLA Companies as of that date and include adequate provision for
all deferred Taxes, and nothing has occurred subsequent to that date to make any
of such accruals inadequate. The Company's and each CLA Company's tax basis in
its assets for purposes of determining its future amortization, depreciation and
other federal income tax deductions is accurately reflected on such Company's
Tax books and records. Neither the Company nor any CLA Company is or has at any
time ever been a party to a Tax sharing, Tax indemnity or Tax allocation
agreement, and no such Company has assumed any Tax liability of any other person
or entity under contract. Neither the Company nor any CLA Company has received
any notice of assessment or proposed assessment in connection with any Tax
Returns and there are not pending tax examinations of or tax claims asserted
against the Company or any CLA Company or any of its assets or properties.
Neither the Company nor any CLA Company has extended, or waived the application
of, any statute of limitations of any jurisdiction regarding the assessment or
collection of any Taxes. There are now (and as of immediately following the
Closing there will be) no Liens (other than any Lien for current Taxes not yet
due and payable) on any of the assets or properties of the Company or
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any CLA Company relating to or attributable to Taxes. To the knowledge of either
Individual Stockholder, there is no basis for the assertion of any claim
relating to or attributable to Taxes which, if adversely determined, would
result in any Lien on the assets of the Company or any CLA Company or otherwise
have an adverse effect on the Company or any CLA Company or its business,
operations, assets, properties, prospects or condition (financial or otherwise).
No Stockholder has any knowledge of any basis for any additional assessment of
any Taxes. All Tax payments related to employees, including income tax
withholding, FICA, FUTA, unemployment and worker's compensation, required to be
made by the Company and the CLA Companies have been fully and properly paid,
withheld, accrued or recorded. There are no contracts, agreements, plans or
arrangements, including the provisions of this Agreement, covering any employee
or former employee of the Company or any CLA Company that, individually or
collectively, could give rise to any payment (or portion thereof) that would not
be deductible pursuant to Sections 280G, 404 or 162 of the Code. Two correct and
complete copies of (a) all Tax examinations, (b) all extensions of statutory
limitations and (c) all federal, state and local income tax returns and
franchise tax returns of the Company and each CLA Company for the last five
fiscal years, or such shorter period of time as any of them shall have existed,
will be delivered by the Company and the Stockholders to UniCapital within 5
days after the date of this Agreement. Except as set forth on Schedule 6.27, the
Company and each CLA Company made an election to be taxed under the provisions
of Subchapter S of the Code within 75 days of its original organization and has
at no time been taxed under the provisions of Subchapter C of the Code. Each of
the Company and each CLA Company has a taxable year ended December 31 and no
such Company has made an election to retain a fiscal year other than December 31
under Section 444 of the Code. Neither the Company nor any CLA Company has any
net recognized built-in gain within the meaning of Section 1374 of the Code.
Except as set forth on Schedule 6.27, the Company and each CLA Company currently
utilizes the accrual method of accounting for income tax purposes and has not
changed its method of accounting for income tax purposes in the past five years.
6.28 INTELLECTUAL PROPERTY MATTERS.
(a) Neither the Company nor any CLA Company has utilized or
currently utilizes any patent, trademark, trade name, service mark, copyright,
software, trade secret or know-how material to the business of such Company,
except for those listed on Schedule 6.28 (the "Intellectual Property"), all of
which are owned by such Company free and clear of any liens, claims, charges or
encumbrances. The Intellectual Property constitutes all such assets, properties
and rights which are used or held for use in, or are necessary for, the conduct
of the business of the Company and the CLA Companies.
(b) Except as set forth in Schedule 6.28, there are no
royalty, commission or similar arrangements, and no licenses, sublicenses or
agreements, pertaining to any of the Intellectual Property.
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(c) Except as set forth in Schedule 6.28, neither the Company
nor any CLA Company infringes upon or unlawfully or wrongfully uses any patent,
trademark, trade name, service mark, copyright or trade secret owned or claimed
by another. No action, suit, proceeding or investigation has been instituted or
threatened relating to any, patent, trademark, trade name, service mark,
copyright or trade secret formerly or currently used by the Company or any CLA
Company. Except as set forth in Schedule 6.28, none of the Intellectual Property
is subject to any outstanding order, decree or judgment. Neither the Company nor
any CLA Company has agreed to indemnify any person or entity for or against any
infringement of or by the Intellectual Property.
(d) Except as set forth in Schedule 6.28, no present or former
employee of the Company or any CLA Company and no other person or entity owns or
has any proprietary, financial or other interest, direct or indirect, in whole
or in part, in any of the Intellectual Property. Schedule 6.28(d) lists all
confidentiality or non-disclosure agreements currently in force and effect in
connection with the Intellectual Property to which the Company, any CLA Company
or any of their respective employees is a party.
(e) Schedule 6.28(e) sets forth a complete and accurate list
of all items of Intellectual Property duly registered in, filed in or issued by
the United States Copyright Office or the United States Patent and Trademark
Office, any offices in the various states of the United States and any offices
in other jurisdictions.
(f) Except as set forth in Schedule 6.28, all Intellectual
Property in the form of computer software that is utilized by the Company or any
CLA Company in the operations of its business is capable of processing date data
between and within the twentieth and twenty-first centuries.
(g) All Intellectual Property in the form of computer software
that is utilized by the Company or any CLA Company in the operations of its
respective business is capable of processing date data between and within the
twentieth and twenty-first centuries, or can be rendered capable of processing
such data within 30 days by the expenditure of no more than $10,000 in the
aggregate.
6.29 COMPLETENESS. The certified copies of the Certificate of
Incorporation and Bylaws, both as amended to date, of the Company and each CLA
Company, and the copies of all material leases, instruments, agreements,
licenses, permits, certificates or other documents which are included on
schedules attached hereto or which have been delivered or have been made
available to UniCapital to the extent required by the terms of this Agreement,
are complete and correct; neither the Company nor any CLA Company nor, to the
knowledge of either Individual Stockholder, any other party to any of the
foregoing is in material default thereunder; and, except as set forth in the
schedules and documents attached to this Agreement, the rights and benefits of
the Company and each the CLA Companies thereunder will not be materially and
adversely affected by the transactions contemplated hereby, and the execution of
this Agreement and the
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performance of the obligations hereunder will not result in a material violation
or breach or constitute a material default under any of the terms or provisions
thereof. Except as set forth on Schedule 6.29, none of such leases, instruments,
agreements, contracts, licenses, permits, certificates or other documents
requires notice to, or the consent or approval of, any governmental agency or
other third party to any of the transactions contemplated hereby to remain in
full force and effect. The consummation of the transactions contemplated hereby
will not give rise to any right of termination, cancellation or acceleration or
result in the loss of any right or benefit thereunder.
6.30 EXISTING CONDITION. Except as set forth in Schedule 6.30, between
the Audited Balance Sheet Date and the date of this Agreement, neither the
Company nor any CLA Company has:
(a) incurred any liabilities, other than liabilities incurred
in the ordinary course of business consistent with past practice, or discharged
or satisfied any lien or encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice, or failed to pay or
discharge when due any liabilities of which the failure to pay or discharge has
caused or will cause any material damage or risk of material loss to it or any
of its assets or properties;
(b) sold, encumbered, assigned or transferred any assets,
properties or rights or any interest therein, except for the sales in the
ordinary course of business consistent with past practice, or made any agreement
or commitment or granted any option or right with, of or to any person to
acquire any assets, properties or rights of the Company or any CLA Company or
any interest therein (other than as contemplated by Section 10.13 hereof);
(c) created, incurred, assumed or guaranteed any indebtedness
for money borrowed, or mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract or other
encumbrance other than in the ordinary course of business consistent with past
practice.
(d) except in the ordinary course of business consistent with
past practice, made or suffered any amendment or termination of any material
agreement, contract, commitment, lease or plan to which it is a party or by
which it is bound, or canceled, modified or waived any substantial debts or
claims held by it or waived any rights of substantial value, where such
amendments, terminations, cancellations, modifications and waivers in the
aggregate do not or could not reasonably be expected to have a material adverse
effect on the business, operations, assets, properties, prospects or condition
(financial or otherwise) of the Company or the CLA Company, taken as a whole;
(e) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting its business,
operations, assets, properties or prospects or (ii) of any item or items carried
on its books of account individually or in the
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aggregate at more than $25,000, or suffered any repeated, recurring or prolonged
shortage, cessation or interruption of supplies or utility or other services
required to conduct its business and operations;
(f) suffered any material adverse change in its business,
operations, assets, properties, prospects or condition (financial or otherwise),
other than as directly caused by adverse economic conditions not specific to, or
having an extraordinary impact upon, the Company and the CLA Companies;
(g) received notice or had knowledge of any actual or
threatened labor trouble, strike or other occurrence, event or condition of any
similar character which has had or might have an adverse effect on its business,
operations, assets, properties or prospects;
(h) made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $25,000, except in
the ordinary course of business consistent with past practice or such as may be
involved in ordinary repair, maintenance or replacement of its assets;
(i) increased the salaries or other compensation of, or made
any advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its non-Stockholder employees or made any increase in, or any
addition to, other benefits to which any of its non-Stockholder employees may be
entitled;
(j) changed any of the accounting principles followed by it or
the methods of applying such principles;
(k) changed its authorized capital or its securities
outstanding or otherwise changed its ownership interests, or granted any
options, warrants, calls, conversion rights or commitments with respect to any
of its capital stock or other ownership interests; or
(l) agreed to take any of the actions referred to above.
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Attached hereto as Schedule
6.31 is an accurate list, as of the date of this Agreement, of:
(a) the name of each financial institution in which the
Company or any CLA Company has accounts or safe deposit boxes;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
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(d) the name of each person authorized to draw thereon or have
access thereto; and
(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Company or any CLA
Company and a description of the terms of such power.
6.32 BOOKS OF ACCOUNT. The books, records and accounts of the Company
and each CLA Company accurately and fairly reflect, in reasonable detail, the
transactions and the assets and liabilities of such Company. Neither the Company
nor any CLA Company has engaged in any transaction, maintained any bank account
or used any material funds of such entity except for transactions, bank accounts
and funds which have been and are reflected in the normally maintained books and
records of the business, except as set forth on Schedule 6.32.
6.33 ENVIRONMENTAL MATTERS. (a) The Company and each CLA Company has
secured, and is in compliance with, all Environmental Permits, with respect to
any premises on which its business is operated, all of which Environmental
Permits shall vest in the applicable Surviving Corporation upon consummation of
the transactions contemplated hereby. The Company and each CLA Company is in
compliance with all Environmental Laws.
(b) Neither the Company, any CLA Company nor Individual
Stockholder has received any communication from any Governmental Entity that
alleges that the Company or any CLA Company is not in compliance with any
Environmental Laws or Environmental Permits.
(c) Neither the Company nor any CLA Company has entered into
or agreed to any court decree or order, and no such entity is subject to any
judgment, decree or order, relating to compliance with any Environmental Law or
to investigation or cleanup of a Hazardous Substance under any Environmental
Law.
(d) No lien, charge, interest or encumbrance has been
attached, asserted, or to the knowledge of either Individual Stockholder,
threatened to or against any assets or properties of the Company or any CLA
Company pursuant to any Environmental Law.
(e) There has been no treatment, storage, disposal or release
of any Hazardous Substance on any property owned, operated or leased by the
Company or any CLA Company.
(f) Neither the Company nor any CLA Company has received a
CERCLA 104(e) information request or has been named a potentially responsible
party for any National Priorities List site under CERCLA or any site under
analogous state law or received an analogous notice or request from any non-U.S.
Governmental Entity, which notice, request or any resulting inquiry or
litigation has not been fully and finally resolved without possibility of
reopening.
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(g) There are no aboveground tanks or underground storage
tanks on, under or about any property owned, operated or leased by the Company
or any CLA Company and any former aboveground or underground tanks on any
property owned, operated or leased by the Company or any CLA Company have been
removed in accordance with all Environmental Laws and no residual contamination,
if any, remains at such sites in excess of applicable standards.
(h) There are no polychlorinated biphenyls ("PCBs") leaking
from any article, container or equipment on, under or about any property owned,
operated or leased by the Company or any CLA Company and there are no such
articles, containers or equipment containing PCBs, and there is no asbestos
containing material in a condition or location currently constituting a
violation of any Environmental Law at, on, under or within any property owned,
operated or leased by the Company or any CLA Company.
(i) The Company. the CLA Companies and the Individual
Stockholders collectively have provided to UniCapital true and complete copies
of, or access to, all written environmental assessment materials and reports in
their possession that have been prepared by or on behalf of the Company or any
CLA Company during the past five years.
6.34 NO ILLEGAL PAYMENTS. Neither the Company nor any CLA Company and,
to the knowledge of either Individual Stockholder, no affiliate, officer, agent
or employee thereof, directly or indirectly, has, during the past five years, on
behalf of or with respect to the Company or any CLA Company or any affiliate
thereof, (a) made any unlawful domestic or foreign political contributions, (b)
made any payment or provided any services which were not legal to make or
provide or which the Company or any CLA Company or any affiliate thereof or any
such officer, agent or employee should have known were not legal for the payee
or the recipient of such services to receive, (c) received any payment or any
services which were not legal for the payer or the provider of such services to
make or provide, (d) made any payment to any person or entity, or agent or
employee thereof, in connection with any Lease (as hereinafter defined) to
induce such person or entity to enter into a Lease transaction, (e) had any
material transactions or material payments related to the Company or any CLA
Company which are not recorded in their accounting books and records or (f) had
any off-book bank or cash accounts or "slush funds" related to the Company or
any CLA Company.
6.35 LEASES. Schedule 6.35 hereto sets forth the Company's and each CLA
Company's lease/financing arrangements as of the Audited Balance Sheet Date
(which, together with all other lease/financing arrangements entered into by the
Company or any CLA Company between such date and the Closing Date, are referred
to herein as the "Leases"). The term "Lease Documents" means the lease
arrangements and financing contracts evidencing the Leases described on Schedule
6.35, together with all related documents and agreements including master lease
agreements, schedules or other addenda to such Leases, certificates of delivery
and acceptance, UCC financing statements, remarketing agreements, residual
guaranty agreements, insurance policies, guaranty agreements and other credit
supports. The term "Equipment" means all equipment, inventory and other property
described as being leased pursuant to a Lease, or in
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which the Company or any CLA Company is granted a security interest pursuant to
a Lease. The term "Obligor" means any lessee party or other party obligated to
pay or perform any obligations under or in respect of a Lease or the Equipment
covered by a Lease (excluding the lessor party thereunder, but otherwise
including any guarantor of a Lease or any vendor, manufacturer or similar party
under a remarketing agreement, residual guaranty or similar agreement). The term
"Scheduled Payments" means the monthly or periodic rental payments or
installments of principal and interest under the terms of the Leases. Except as
set forth in Schedule 6.35:
(a) There is no restriction or limitation in any of the Lease
Documents or otherwise, restricting the Company or any CLA Company from
executing this Agreement or entering into the transactions contemplated by this
Agreement, other than consents which have been, or prior to the Closing will
have been, obtained.
(b) The Company or applicable CLA Company owns or validly
leases the Equipment covered by each Lease or has a vested and perfected first
priority security interest in the Equipment.
(c) Each Lease is in full force and effect in accordance with
its terms, and, to the knowledge of either Individual Stockholder, there has
been no occurrence which would or might permit any Obligor to terminate such
Lease or suspend or reduce any payments or obligations due or to become due in
respect of such Lease or the related Lease Documents by reason of default by the
lessor party under such Lease. To the knowledge of either Individual
Stockholder, none of the Obligors in respect of a Lease or the related Lease
Documents is the subject of a bankruptcy, insolvency or similar proceeding.
(d) Except for the delinquency in the payment of any Scheduled
Payment that is not more than 90 days past due, there does not exist any default
in the payment of any Scheduled Payments due under any Lease or the related
Lease Documents, and there does not exist any other default, breach, violation
or event permitting acceleration, termination or repossession under any Lease or
the related Lease Documents or any event which, to the knowledge of any
Stockholder, with notice and the expiration of any applicable grace or cure
period, would constitute such a default, breach, violation or event permitting
acceleration, termination or repossession under such Lease or the related Lease
Documents.
(e) Neither the Company nor any CLA Company has acted in a
manner which (nor has the Company nor any CLA Company failed to act where such
failure to act) would alter or reduce any of such entity's rights or benefits
under any manufacturer's or vendors' warranties or guarantees with respect to
any Equipment.
(f) The Company and each CLA Company has complied with all
requirements of any federal, state or local law, including usury laws,
applicable to each Lease.
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(g) Except as set forth in Schedule 6.35, each Lease has the
following characteristics:
(i) such Lease was originated in the United States
and the Scheduled Payments thereunder are payable in U.S. dollars by Obligors
domiciled in the United States;
(ii) the lessee party under such Lease has
unconditionally accepted the Equipment covered by such Lease;
(iii) at least one Scheduled Payment has been made by
the Obligor under each such Lease; and
(iv) no Obligor in respect of such Lease is an
affiliate of the Company or any CLA Company.
(h) Each Lease and the related Lease Documents are valid,
binding, legally enforceable and non-cancelable obligations of the applicable
Company, and to the knowledge of either Individual Stockholder, the other
parties thereto, enforceable in accordance with their respective terms. Each
Lease is a business obligation of the lessee thereunder and is not a "consumer
transaction" under any applicable federal or state regulation.
(i) To the knowledge of either Individual Stockholder, no
Lease or related Lease Document is the subject of a fraudulent scheme by any
Obligor or any supplier of Equipment.
(j) Each item of Equipment is subject to a Lease.
(k) Each Lease is a fixed rate lease contract.
(l) No Lease or related Lease Document is subject to any right
of rescission, set-off, counterclaim, abatement or defense, including any
defense of usury, nor will the operation of any of the terms of any Lease or any
related Lease Document or the exercise of any right or remedy thereunder render
such Lease or any related Lease Document or the obligations thereunder
unenforceable, or subject the same to any right of rescission, set-off,
counterclaim, abatement or defense. No Obligor has asserted any right of
rescission, set-off, counterclaim, abatement or defense to its obligations under
a Lease or any related Lease Document.
(m) As to the Leases and the related Lease Documents, (i) none
has been amended or modified (a) to extend the maturity date for a period of
more than one year, or (b) to alter the amount or time of payment of any amount
due thereunder; unless as to (a) and (b) such extension or alteration is
reasonably expected to result in a net economic benefit to the Company and the
CLA Companies, (ii) no indulgences or waivers have been granted in respect of
the
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obligations of any Obligor under any Lease, and (iv) neither the Company nor any
CLA Company has advanced any monies on behalf of any Obligor.
(n) Each Lease requires the Obligor thereunder at its own cost
and expense to maintain the Equipment leased thereunder in good repair,
condition and working order, and to the knowledge of either Individual
Stockholder, each Obligor under a Lease is currently in compliance with such
requirement.
(o) Each Lease requires the Obligor thereunder (i) to pay all
fees, taxes (except income taxes), and other charges or liabilities arising with
respect to the Equipment leased thereunder or the use thereof, (ii) to keep the
Equipment free and clear of any and all liens, security interests and other
encumbrances, other than security interests of the applicable Company, (iii) to
hold harmless the lessor thereunder and its successors and assigns against the
imposition of any fees, charges, liabilities and encumbrances, (iv) to bear all
risk of loss associated with the Equipment covered by or securing the
obligations under such Lease during the term of such Lease and (v) to maintain
at the cost of the Obligor public liability and casualty insurance in respect of
such Equipment covered by such Lease.
(p) Except as set forth on Schedule 6.35, each Lease involves
either the lease of tangible personal property owned, either beneficially or
legally, or leased by the Company or the applicable CLA Company or the loan of
money secured by a security interest in tangible personal property owned by the
Obligor thereunder.
(q) Neither the Company nor any CLA Company has received any
notice challenging its ownership or the priority of its security interest in the
Equipment covered by each Lease, and there are no proceedings pending before any
court or governmental entity or, to the knowledge of the Stockholders,
threatened by any Obligor or other party, (i) asserting the invalidity of any
Lease or the related Lease Documents, (ii) seeking to prevent payment or
performance by any Obligor of any Lease or any of the terms of the related Lease
Documents, or (iii) seeking any determination or ruling that might adversely
affect the validity or enforceability of any Lease or any of the terms or
provisions of the related Lease Documents.
(r) As to each Lease, there are no material agreements or
understandings between the Company or any CLA Company and the Obligors in
respect of such Lease or otherwise binding on the Company or any CLA Company
other than as expressly set forth in the Lease and the related Lease Documents.
6.36 LEASE FUNDING. The Company and each CLA Company is in compliance
with all of the material terms and covenants of, and is not in material default
or breach under, each agreement, contract, understanding or arrangement with any
funding source for the Leases.
6.37 DISCLOSURE. The Company and each CLA Company has delivered, or in
the case of the Leases, Lease Documents and loan documents made available to,
UniCapital true and
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complete copies of each agreement, contract, commitment or other document (or,
in the case of any such document not in the possession of reasonably available
to the Company or a CLA Company or an Individual Stockholder, accurate and
complete summaries thereof) that is referred to in the schedules to this
Agreement that have been requested by UniCapital or its representatives. Without
limiting any exclusion, exception or other limitation contained in any of the
representations and warranties made herein, this Agreement and the schedules
hereto do not and will not include any untrue statement of a material fact or
omit to state a material fact necessary to make the statements herein and
therein not misleading. If either Individual Stockholder become aware of any
fact or circumstance that would materially change a representation or warranty
of the Individual Stockholders in this Agreement or any representation made on
behalf of the Company or any CLA Company, then such Stockholder shall as
promptly as practical give notice of such fact or circumstance to UniCapital.
However, such notification shall not relieve any of the Stockholders of their
respective obligations under this Agreement, and at the sole option of
UniCapital, the truth and accuracy of any and all warranties and representations
of the Individual Stockholders, at the date of this Agreement and at the
Closing, shall be a precondition to the consummation of this transaction.
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, UniCapital and Newco, jointly and severally, represent and
warrant as follows:
7.1 CORPORATE EXISTENCE. UniCapital is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Newco is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. Immediately prior to the
Effective Time, each of UniCapital and Newco will be duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction
where the conduct of its business requires it to be so qualified.
7.2 UNICAPITAL STOCK. The shares of UniCapital Stock to be issued and
delivered to the Stockholders on the Merger Effective Date, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable shares, and except for restrictions upon
resale, will be legally equivalent in all respects to the majority of UniCapital
Stock issued and outstanding as of the date hereof. The UniCapital Stock to be
issued upon the conversion of Company Stock pursuant to the terms of this
Agreement will be free and clear of all liens, encumbrances and claims of every
kind, other than restrictions upon transfer contained herein and other than any
liens, encumbrances or claims arising other than by the actions of UniCapital or
Newco.
7.3 CORPORATE POWER AND AUTHORIZATION. UniCapital and Newco have the
corporate power, authority and legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance of this Agreement and all
related documents and
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agreements required to be executed and delivered by UniCapital and Newco in
accordance with the provisions hereof (the "UniCapital Documents") have been
duly authorized by all necessary corporate action. This Agreement has been duly
executed and delivered by UniCapital and Newco and constitutes, and the
UniCapital Documents when executed and delivered will constitute, the legal,
valid and binding obligations of UniCapital and Newco enforceable against
UniCapital and Newco in accordance with its terms.
7.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement by UniCapital and Newco will not violate, conflict with or result in
the breach of any term, condition or provision of, or require the consent of any
other person under (a) any existing law, ordinance, or governmental rule or
regulation to which UniCapital or Newco is subject, (b) any judgment, order,
writ, injunction, decree or award of any Governmental Entity which is applicable
to UniCapital or Newco, (c) the charter documents of UniCapital or Newco, or (d)
any mortgage, indenture, agreement, contract, commitment, lease, plan,
Authorization, or other instrument, document or understanding, oral or written,
to which UniCapital or Newco is a party, by which UniCapital or Newco may have
rights or by which any of the properties or assets of UniCapital or Newco may be
bound or affected, or give any party with rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of UniCapital or Newco thereunder. Except for filing the Articles of
Merger, filings under the HSR Act and except as aforesaid, no authorization,
approval or consent of, and no registration or filing, provided that with
respect to such Act the representation set forth in this sentence shall be
limited to those facts of which UniCapital or Newco has knowledge) with, any
Governmental Entity is required in connection with the execution, delivery or
performance of this Agreement by UniCapital or Newco.
7.5 CAPITALIZATION OF UNICAPITAL. The IPO will result in an aggregate
market capitalization of UniCapital that will exceed Three Hundred Million
Dollars ($300,000,000), as determined by multiplying the outstanding shares of
UniCapital immediately following the closing by the IPO Price.
7.6 COMPLIANCE WITH LAW; AUTHORIZATIONS. Each of UniCapital and Newco
has complied with each, and is not in violation of Regulations to which
UniCapital's and Newco's respective business, operations, assets or properties
is subject. Each of UniCapital and Newco owns, holds, possesses or lawfully uses
in the operation of its business all Authorizations which are in any manner
necessary for it to conduct its business as now or previously conducted or for
the ownership and use of the assets owned or used by UniCapital and Newco,
respectively, in the conduct of the business of such company, free and clear of
all liens, charges, restrictions and encumbrances and in compliance with all
Regulations. Neither UniCapital nor Newco is in default, nor has UniCapital or
Newco received any notice of any claim of default, with respect to any such
Authorization. All such Authorizations are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
None of such Authorizations will be adversely affected by consummation of the
transactions contemplated hereby. No stockholder and no
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director, officer, employee or former employee of UniCapital of Newco any of
their affiliates, or any other person, firm or corporation, owns or has any
proprietary, financial or other interest (direct or indirect) in any
Authorization which UniCapital or Newco owns, possesses or uses in the operation
of the business of UniCapital and Newco as now or previously conducted.
7.7 TRANSACTIONS WITH AFFILIATES. Except as described in the
Registration Statement, no stockholder and no director, officer or employee of
UniCapital or Newco, or any member of his or her immediate family or any other
of its, his or her affiliates, owns or has a 5% or more ownership interest in
any corporation or other entity that is or was during the last three years a
party to, or in any property which is or was during the last three years the
subject of, any contract, agreement or understanding, business arrangement or
relationship with UniCapital or Newco.
7.8 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of UniCapital and Newco, threatened against UniCapital or Newco which
relates to the transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 7.8, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of UniCapital or Newco, threatened against
UniCapital or Newco or which relates to UniCapital or Newco.
(c) Neither UniCapital nor Newco is a party to or subject to
the provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority."
7.9 REGISTRATION RIGHTS As of the date hereof and as of the Merger
Effective Date, no officer, director or shareholder of UniCapital will have been
granted any registration rights with respect to the registration of any shares
of capital stock of UniCapital.
7.10 MISCELLANEOUS. Prior to the consummation of the Merger, UniCapital
and Newco will have no material properties or assets and are not party to any
contracts other than this Agreement, the letter of intent among the parties to
this Agreement, certain employment agreements with officers of UniCapital,
certain real property leases relating to the principal executive offices of
UniCapital, and those agreements and letters of intent listed on Schedule 7.9
hereto.
8. COVENANTS
The following covenants shall apply during the period from and after
the date hereof through the Closing Date.
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8.1 BUSINESS IN THE ORDINARY COURSE. Except as otherwise expressly
contemplated by this Agreement, the Stockholders shall cause the Company and
each CLA Company to conduct its respective business solely in the ordinary
course and consistent with past practice.
8.2 EXISTING CONDITION. To the extent within the reasonable control of
the Stockholders, the Stockholders shall not suffer the Company or any CLA
Company to cause or permit to occur any of the events or occurrences described
in Section 6.30 hereof; provided that Aircraft 46941, Inc. or the Stockholders
shall be permitted to transfer title of a Varig leased DC10-30 to NIB, the
lender, in exchange for a complete release of any remaining obligations with
respect to such aircraft. In addition, the Company and the CLA Companies shall
not make any distributions to the Stockholders after the end of business on the
day prior to the Closing Date.
8.3 MAINTENANCE OF PROPERTIES AND ASSETS. Except as otherwise expressly
contemplated by this Agreement, the Stockholders shall cause the Company and
each CLA Company to use its reasonable commercial efforts to, maintain and
service its properties and assets in order to preserve their value and
usefulness in the conduct of their respective businesses.
8.4 EMPLOYEES AND BUSINESS RELATIONS. The Stockholders shall cause the
Company and each CLA Company to use its reasonable commercial efforts to keep
available the services of its current employees and agents and to maintain its
relations and goodwill with its suppliers, customers, distributors and any
others with whom or with which it has business relations.
8.5 MAINTENANCE OF INSURANCE. The Stockholders shall cause the Company
and each CLA Company to notify UniCapital of any material changes in the terms
of the insurance policies and binders referred to on Schedule 6.20 hereto.
8.6 COMPLIANCE WITH LAWS, ETC. The Stockholders shall cause the Company
and each CLA Company to comply with all laws, ordinances, rules, regulations and
orders applicable to the Company and each CLA Company or its business,
operations, properties or assets, except where the noncompliance with which
could not reasonable be expected to materially adversely affect the Company or
such CLA Company.
8.7 CONDUCT OF BUSINESS. The Stockholders shall cause the Company and
each CLA Company to use its reasonable commercial efforts to conduct its
business in such a manner that on the Closing Date and on the Merger Effective
Date the representations and warranties of the Stockholders contained in this
Agreement shall be true as though such representations and warranties were made
on and as of each such date (except to the extent such representations or
warranties expressly speak as of a specific date), and the Stockholders shall
cause the Company and each CLA Company to use its reasonable commercial efforts
to cause all of the conditions to the obligations of UniCapital and the
Stockholders under this Agreement to be satisfied on or
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prior to the Closing Date. The Stockholders shall cause the Company and each CLA
Company to, maintain credit underwriting standards consistent with past
practices.
8.8 ACCESS. Upon prior reasonable notice, the Stockholders shall cause
the Company and each CLA Company to give to UniCapital's officers, employees,
counsel, accountants and other representatives free and full access to and the
right to inspect, during normal business hours, all of the premises, properties,
assets, records, contracts and other documents relating to the Company and the
CLA Companies and shall permit them to consult with the officers, employees,
accountants, counsel and agents of the Company and the CLA Companies for the
purpose of making such investigation of such entities as UniCapital shall
reasonably request; provided that such investigation shall not unreasonably
interfere with such entities business operations, and provided, further, that
UniCapital shall not contact or consult with any non-officer employees of the
Company without the Company's prior consent, which consent shall not be
unreasonably withheld. Furthermore, the Stockholders shall cause the Company and
each CLA Company to furnish to UniCapital all such documents and copies of
documents and records and information with respect to the affairs of such entity
and copies of any working papers relating thereto as UniCapital shall from time
to time reasonably request. No information or knowledge obtained in any
investigation pursuant to this Section 8.8 or otherwise shall affect or be
deemed to modify any representation or warranty contained in this Agreement or
the conditions to the obligations of the parties to consummate the Merger.
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS. The Stockholders shall
cause the Company and each CLA Company to refrain from giving notice to third
parties or otherwise make any press release or other public statement concerning
this Agreement or the transactions contemplated hereby. No Stockholder shall,
and the Stockholders shall cause the Company and each CLA Company not to, grant
any interview, publish any article, report or statement, or respond to any press
inquiry or other inquiry of any third party relating to this Agreement, the
business of the Company or the CLA Companies, the business (current and
proposed) of UniCapital, the Registration Statement (as defined below), the IPO
or any other matter connected with any of the foregoing without the express
prior written approval of UniCapital, and all inquiries and questions with
respect to any of the foregoing shall be coordinated through Robert New, Chief
Executive Officer of UniCapital. Each Stockholder shall, and shall cause the
Company and the CLA Companies to, coordinate all communications with the
employees and agents of the Company or any CLA Company concerning this Agreement
or the transactions contemplated hereby through UniCapital prior to making any
such communication. Notwithstanding the above, the Stockholders may communicate,
whether oral or in writing, with any lenders, lessors, customers, suppliers or
any other parties from whom any consents, approvals or waivers are necessary or
advisable, or to whom notice is necessary or advisable, as well as with any
professional advisors with respect to the transactions contemplated by this
Agreement and related matters. Notwithstanding the foregoing, this Section 8.9
shall not be interpreted to prevent the Company, any CLA Company or any
Stockholder from disclosing information as compelled by a court order, provided,
however, that prior to disclosing any information concerning this Agreement or
the transaction contemplated hereby in response to
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any such court order, the Stockholders shall, or shall cause the Company or the
applicable CLA Company to, provide UniCapital with prompt notice of the court
order so that UniCapital may take whatever action it deems appropriate to
prohibit such disclosure.
8.10 EXCLUSIVITY. Except with respect to this Agreement and the
transactions contemplated hereby, no Stockholder and none of their affiliates
shall, and each of them shall cause the Company and each CLA Company and their
respective employees, agents and representatives (including any investment
banking, legal or accounting firm retained by it or them and any individual
member or employee of the foregoing) (each, an "Agent") not to, (a) initiate,
solicit or seek, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including any proposal or offer to its
Stockholders or any of them) with respect to a merger, acquisition,
consolidation, recapitalization, liquidation, dissolution or similar transaction
involving, or any purchase of all or any portion of the assets or any equity
securities of, the Company or any CLA Company other than any such transaction
effected or to be effected in the ordinary course of business (any such proposal
or offer being hereinafter referred to as an "Acquisition Proposal"), or (b)
engage in any negotiations concerning, or provide any confidential information
or data to, or have any substantive discussions with, any person relating to an
Acquisition Proposal, (c) otherwise cooperate in any effort or attempt to make,
implement or accept an Acquisition Proposal, or (d) enter into or consummate any
agreement or understanding with any person or entity relating to an Acquisition
Proposal, and the Merger contemplated hereby. If the Company, any CLA Company or
any Stockholder, or any of their respective Agents, have provided any person or
entity (other than UniCapital) with any confidential information or data
relating to an Acquisition Proposal, then the Stockholders shall request the
immediate return thereof. The Stockholders shall notify UniCapital immediately
if any inquiries, proposals or offers related to an Acquisition Proposal are
received by, any confidential information or data is requested from, or any
negotiations or discussions related to an Acquisition Proposal are sought to be
initiated or continued with, it or any individual or entity referred to in the
first sentence of this Section 8.10. The covenant contained in this Section 8.10
shall not survive any termination of this Agreement pursuant to Sections 13.1,
13.2 or 13.3.
8.11 SUPPLIER APPROVAL. Prior to the Closing Date, the Stockholders
will cause the Company and each CLA Company to satisfy any requirement for
notice and approval of the transactions contemplated by this Agreement under
applicable supplier agreements, and shall provide UniCapital with satisfactory
evidence of such approvals.
8.12 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
Stockholders will cause the Company and each CLA Company to satisfy any
requirement for notice of the transactions contemplated by this Agreement under
any applicable collective bargaining agreement, and shall provide UniCapital
with proof that any required notice has been provided.
8.13 NOTIFICATION OF CERTAIN MATTERS. (a) The Stockholders shall give
prompt notice to UniCapital of (i) the occurrence or non-occurrence of any event
known to any Stockholder the occurrence or non-occurrence of which would be
likely to cause any representation or warranty
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contained in Article 6 to be untrue or inaccurate in any material respect at or
prior to the Closing Date and (ii) any material failure of any Stockholder to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by such person hereunder.
(b) UniCapital shall give prompt notice to each Stockholder of
(i) the occurrence or non-occurrence of any event known to UniCapital the
occurrence of non-occurrence of which would be likely to cause any
representation or warranty contained in Article 7 to be untrue or inaccurate in
any material respect at or prior to the Closing Date and (ii) any material
failure of UniCapital to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
(c) The delivery of any notice pursuant to this Section 8.13
shall not be deemed to (i) modify the representations or warranties hereunder of
the party delivering such notice, which modification may only be made pursuant
to Section 8.14, (ii) modify the conditions set forth in Sections 9 and 10 or
(iii) limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
8.14 AMENDMENT OF SCHEDULES. Each party shall have, with respect to the
representations and warranties of such party contained in this Agreement, an
obligation until the Merger Effective Date to supplement or amend the schedules
hereto within two days of each filing with the SEC of an amendment to the
Registration Statement with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the schedules, provided that no
amendment or supplement to a Schedule that constitutes or reflects a material
adverse change in the business, operations, assets, properties, prospects or
condition (financial or otherwise) of the Company or the CLA Companies, taken as
a whole (a "Material Adverse Amendment"), may be made unless UniCapital consents
to such amendment or supplement; and provided further, however, that UniCapital
may not withhold consent to such Material Adverse Amendment if the same relates
to (i) changes in facts or circumstances occurring subsequent to the date
hereof, or (ii) facts and circumstances existing as of the date hereof that were
not disclosed by the Stockholders because they did not have knowledge of them
(but, with respect to facts and circumstances described in (ii) only to the
extent that the omission thereof from Schedules attached hereto as of the date
hereof was not the result of a lack of good faith diligence on the part of the
Stockholders). Notwithstanding the foregoing, (i) if any such amendment or
supplement relates to changes in facts or circumstances occurring subsequent to
the date of this Agreement and such amendment or supplement constitutes or
reflects a Material Adverse Amendment, then such amendment or supplement shall
be accepted by UniCapital subject to the provisions of Section 12.2 hereof and
(ii) no amendment of or supplement to a schedule shall be made later than 48
hours prior to the anticipated effectiveness of the Registration Statement
defined in Section 9.4. Only (i) the schedules attached to this Agreement at the
time of its execution and (ii) amended schedules as accepted under the standards
and provisions of this Section 8.14, shall be deemed to be part of this
Agreement in accordance with Section 19.3 hereof. UniCapital shall provide the
Individual Stockholders with no less than five days notice of the filing of any
amendment of the
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Registration Statement for the purposes of the first sentence of this Section
8.14, and in the absence of the provision of such notice, UniCapital will be
deemed to have waived the requirement of the Individual Stockholders to have
updated the Schedules to this Agreement with respect to that specific filing
with the SEC.
8.15 LITIGATION MATTERS. The parties hereby agree that all expenses,
benefits, awards or ultimate liability associated with the litigation as listed
on Schedule 6.25 shall remain solely with the Stockholders. The Stockholders
shall be entitled to control the conduct, settlement or resolution of such
litigation; provided, however, if the existence of any such litigation is having
a materially adverse effect on the business of the Company or is reasonably
likely to have a material adverse impact on the business of the Company, then
UniCapital shall have the right to participate in the conduct of such
litigation. UniCapital shall not under this Agreement or any other agreement be
entitled to, or subjected to, any expenses, benefits, awards or ultimate
liability associated with such litigation. Following the Closing, UniCapital and
the Company will take such action as may be necessary or desirable to effectuate
the foregoing.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND
THE STOCKHOLDERS
The obligations of the Stockholders hereunder are subject to the
satisfaction on or prior to the Closing Date (or such earlier date specified
below) of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representations and warranties of UniCapital and Newco contained in Article 7
shall be accurate as of the Closing Date and (except to the extent
representations and warranties expressly speak as of an earlier date) as of the
Merger Effective Date as though such representations and warranties had been
made as of such times; all of the terms, covenants and conditions of this
Agreement to be complied with and performed by UniCapital and Newco on or before
the Closing Date shall have been duly complied with and performed; and a
certificate to the foregoing effect dated the Merger Effective Date and signed
by a duly authorized agent, the President or any Vice President of UniCapital
shall have been delivered to the Stockholders.
9.2 EMPLOYMENT AGREEMENTS. The Surviving Corporation shall have
executed and delivered Employment Agreements, in the form of Annex VII attached
hereto, to each of the persons listed on Schedule 9.2 hereto.
9.3 OPINION OF COUNSEL. The Stockholders shall have received an opinion
from counsel for UniCapital, dated the Merger Effective Date, to the effect
that:
(a) UniCapital and Newco have been duly organized and are
validly existing in good standing under the laws of their respective states of
incorporation;
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(b) this Agreement has been duly authorized, executed and
delivered by UniCapital and Newco and constitutes a valid and binding agreement
of UniCapital and Newco enforceable in accordance with its terms, except (i) as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting the
rights of creditors, (ii) as the same may be subject to the effect of general
principles of equity and (iii) that no opinion need be expressed as to the
enforceability of indemnification provisions included herein;
(c) the shares of UniCapital Stock to be received by the
Stockholders on the Merger Effective Date shall be duly authorized, fully paid
and nonassessable; and
(d) the execution, delivery and performance of this Agreement
and the consummation of any transactions contemplated hereby will not conflict
with, or result in a breach or violation of, the Certificate of Incorporation or
Bylaws of UniCapital or Newco.
9.4 REGISTRATION STATEMENT. UniCapital shall have filed with the
Securities and Exchange Commission ("SEC") a registration statement on Form S-1
covering the offer and sale of shares of UniCapital Stock in the IPO (the
"Registration Statement"). The Registration Statement shall have been declared
effective by the SEC not later than June 30, 1998, UniCapital and the
underwriters named therein shall have executed the Underwriting Agreement and
the underwriters named therein shall have agreed to acquire, subject to the
conditions set forth in the Underwriting Agreement, the shares of UniCapital
Stock covered by the Registration Statement. There shall have been no stop-order
issued (that remains in effect) by the Securities and Exchange Commission with
respect to the Registration Statement.
9.5 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the HSR Act shall have expired or been terminated.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND
NEWCO
The obligations of UniCapital and Newco hereunder are subject to the
satisfaction, on or prior to the Closing Date (or such earlier date specified
below), of the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
Individual Stockholders shall have delivered to UniCapital a certificate dated
the Merger Effective Date and signed by them to the effect that all of the
representations and warranties of the Stockholders contained in this Agreement
shall be true on and as of the Closing Date and (except to the extent the
representations and warranties expressly speak as of an earlier date) as of the
Merger Effective Date with the same effect as though such representations and
warranties had been made on and as of such dates, except for matters expressly
disclosed in the certificate or a schedule thereto (which shall not serve to
modify any representation or warranty made herein or in any other document or
otherwise in information supplied by the Company, any CLA Company or
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any Stockholder); and each and all of the agreements of the Stockholders, the
Company or any CLA Company to be performed on or before the Closing Date
pursuant to the terms hereof shall have been performed.
10.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by UniCapital of the Company Stock and no
governmental agency or body shall have taken any other action or made any
request of UniCapital as a result of which the management of UniCapital deems it
inadvisable to proceed with the transactions hereunder.
10.3 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the Closing Date,
UniCapital shall have had sufficient time to review the unaudited combined
balance sheets of the Company and the CLA Companies as of the end of the most
recently completed calendar month, and the unaudited combined statements of
income, cash flows and stockholders' equity of the Company and the CLA Companies
for the periods then ended, which statements shall have disclosed no material
adverse change in the financial condition of the Company and the CLA Companies
taken as a whole or the results of their combined operations from the financial
statements originally furnished as set forth in Schedule 6.12.
10.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, operations, assets, properties, prospects or condition (financial or
otherwise) of the Company and the CLA Companies, taken as a whole, shall have
occurred, and neither the Company nor any CLA Company shall have suffered any
material loss or damage to any of its properties or assets, whether or not
covered by insurance, since the Audited Balance Sheet Date, which change, loss
or damage materially affects or impairs the ability of such entity to conduct
its business as now conducted or as proposed to be conducted; and UniCapital
shall have received on the Closing Date a certificate signed by the Stockholders
and dated the Merger Effective Date to such effect. Notwithstanding the
foregoing, it shall not be considered a material adverse change or a material
loss or damage in the event Aircraft 46941, Inc. transfers title of a Varig
leased DC10-30 to NIB, the lender, in exchange for a complete release of any
remaining obligations with respect to such aircraft.
10.5 REGULATORY REVIEW. UniCapital, through its authorized
representatives, shall have completed a satisfactory review of the practices and
procedures of the Company and each CLA Company including environmental and land
use practices, import and export laws, compliance with contracts and federal,
state and local laws and regulations governing the respective operations of the
Company and the CLA Companies, which review reflects compliance with all
applicable laws governing the Company and each CLA Company, disclosing no
material actual or probable violations, compliance problems, required capital
expenditures or other substantive environmental, real estate and land use
related concerns and which review is otherwise satisfactory in all respects to
UniCapital, in its sole discretion.
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10.6 STOCKHOLDERS' RELEASE. Except as set forth on Schedule 10.6, at
the Closing Date, the Stockholders shall have delivered to UniCapital an
instrument dated the Merger Effective Date releasing the Company and each CLA
Company from any and all claims of the Stockholders against the Company and each
CLA Company.
10.7 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.2
shall have executed and delivered an Employment Agreement in the form of Annex
VII attached hereto.
10.8 OPINION OF COUNSEL. UniCapital shall have received an opinion from
Milbank, Tweed, Hadley & McCloy, counsel to the Stockholders, dated the Merger
Effective Date, in form and substance reasonably satisfactory to UniCapital, to
the effect that the Merger is effective under all applicable state laws and
that, with respect to the Company and the CLA Companies (including the Resulting
Company):
(a) the Company has been duly incorporated and the Company and
each CLA Company is validly existing and in good standing under the laws of the
state of its incorporation;
(b) to the knowledge of such counsel, the Company and each CLA
Company is duly authorized, qualified and licensed under all applicable laws,
regulations, ordinances or orders of public authorities to carry on its business
in the places and in the manner now conducted;
(c) the authorized and outstanding capital stock of the
Company and each CLA Company is as represented by the Stockholders in this
Agreement and each share of such stock has been duly and validly authorized and
issued, is fully paid and nonassessable and was not issued in violation of any
statutory, or such counsel's knowledge, contractual, preemptive rights of any
stockholder;
(d) to the knowledge of such counsel, neither the Company or
any CLA Company has any outstanding options, warrants, calls, conversion rights
or other commitments of any kind to issue or sell any of its capital stock;
(e) this Agreement has been duly executed and delivered by
each Stockholder and constitutes a valid and binding agreement of such
Stockholder, enforceable in accordance with its terms, except as such
enforceability may be subject to bankruptcy, moratorium, insolvency and other
similar laws relating to or affecting the rights of creditors and except (i) as
the same may be subject to the effect of general principles of equity and (ii)
that no opinion need be expressed as to the enforceability of indemnification
provisions included herein;
(f) each Transaction Document contemplated by this Agreement
to be executed by the Company or any CLA Company has been duly authorized,
executed and delivered by each such entity and constitutes a valid and binding
agreement of such entity, enforceable in accordance with its terms, except as
such enforceability may be subject to
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bankruptcy, moratorium, insolvency, reorganization, arrangement and other
similar laws relating to or affecting the rights of creditors and except as the
same may be subject to the effect of general principles of equity;
(g) upon consummation of the Merger contemplated by this
Agreement, UniCapital will receive valid title to the Company Stock, free and
clear of all "adverse claims" (as defined in the Uniform Commercial Code
applicable in the state of New York) known to such counsel;
(h) no notice to, consent, authorization, approval or order of
any court or governmental agency or body is required in connection with the
execution, delivery or consummation of this Agreement by any Stockholders or for
the transfer to UniCapital of the Company Stock; and
(i) the execution of this Agreement and the performance of the
obligations hereunder will not violate or result in a breach or constitute a
default under any of the terms or provisions of the Company's or any CLA
Company's charter documents or the bylaws or any Contract or Lease listed on
Schedule 6.17 and 6.35.
Such opinion shall include any other matters incident to the matters set forth
herein as agreed to by the parties and their respective counsel.
10.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
10.10 GOOD STANDING CERTIFICATES. Stockholders shall have delivered to
UniCapital certificates, dated as of a date no earlier than five days prior to
the Closing Date, duly issued by the appropriate governmental authority in the
Company's and each CLA Company's state of incorporation and, unless waived by
UniCapital, in each state in which the Company and or any CLA Company is
authorized to do business, showing that each such entity is in good standing and
authorized to do business and that all state franchise and/or income tax returns
and taxes for such entity for all periods prior to the dates of such
certificates have been filed and paid.
10.11 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC, and UniCapital and the representatives of
the underwriters named in the Registration Statement shall have executed the
Underwriting Agreement. There shall have been no stop-order issued (that remains
in effect) by the Securities and Exchange Commission with respect to the
Registration Statement.
10.12 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the HSR Act shall have expired or been terminated.
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10.13 AIRCRAFT 46941. Either (a) the DC-10-30 aircraft held by Aircraft
46941, Inc. shall have been returned to the lender whose indebtedness is secured
by such aircraft in full satisfaction of such indebtedness prior to Closing and
with a release of Aircraft 46941, Inc. of all liability and obligation with
respect to such DC-10-30 aircraft, or (b) all of the equity interests in
Aircraft 46941, Inc. shall be retained by the Stockholders and therefore not
contributed to the Company prior to the Merger Effective Time and therefore not
acquired by UniCapital or Newco, either directly or indirectly, as part of the
Merger.
11. COVENANTS OF UNICAPITAL
11.1 UNICAPITAL STOCK OPTIONS. Upon the effective date of the
Registration Statement (but subject in all events to the consummation of the
Merger), UniCapital shall make available options to purchase that number of
shares of UniCapital Stock having a fair market value on the effective date of
the Registration Statement, based upon the IPO price per share set forth in the
Underwriting Agreement, equal to 6.25% of the Effective Date Consideration
(valuing the UniCapital Stock to be issued as part of the Effective Date
Consideration at the IPO price per share for the purposes of this Section 11.1)
to be granted to those non-Stockholder key employees of the Surviving
Corporation after the Closing as are designated by the principal executive
officer of the Surviving Corporation who is entering into an Employment
Agreement pursuant to Section 9.2 hereof (or such other officer designated by
the Surviving Corporation and acceptable to UniCapital). Not later than seven
days prior to the effective date of the Registration Statement, the officer
designating the recipients of such options shall provide to UniCapital a written
list of the names of those designated recipients who will receive options
exercisable at the IPO price and the relative percentages of the 6.25% option
pool provided under this Section 11.1 to be awarded to each recipient, as well
as the percentage of options, if any, to be reserved for future issuance. Any
options reserved for future issuance shall be granted at an exercise price equal
to the fair market value of UniCapital Stock as of the date of grant. All
options shall be granted in accordance with UniCapital's policies, and
authorized and issued under the terms of UniCapital's principal stock option
plan for the benefit of employees of UniCapital and its subsidiaries.
11.2 INFORMATION FILING. To the extent the Unified Transaction is a
transaction that falls within Section 351 of the Code, UniCapital shall file all
information required to be filed by it pursuant to Treasury Regulation Section
1.351-3(b).
11.3 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the HSR Act, UniCapital shall use its reasonable best
efforts to (a) file all information required to be filed by it pursuant to such
act and (b) provide the Stockholders with all information reasonably requested
and required by it to satisfy any filing requirements it may have under such
Act.
11.4 RELEASE FROM GUARANTEES; INDEBTEDNESS.. Not later than 120 days
following the Merger Effective Date, UniCapital shall cause the Stockholders to
be released from any and
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all personal guarantees of the indebtedness of the Company at the Closing Date
set forth on Schedule 11.4; provided, that, in the event that the beneficiary of
any such guarantee is unwilling to permit the substitution of UniCapital's
guarantee for the Stockholder's guarantee or the assumption by UniCapital of the
indebtedness, or in the event that the lender with respect to the indebtedness
to which such guarantee relates accelerates such indebtedness whether or not
prior to such 120 day period because of the consummation of the transactions
contemplated hereby, UniCapital shall repay up to that amount of recourse
indebtedness set forth on Schedule 11.4. The failure of the Company to obtain
the consent of its lenders to the change of control of the Company or the CLA
Companies or the substitution of a UniCapital guaranty or the assumption by
UniCapital of the indebtedness set forth on Schedule 11.4 shall not be deemed a
breach hereunder.
12. INDEMNIFICATION; SURVIVAL
12.1 GENERAL INDEMNIFICATION BY STOCKHOLDERS. After the Effective Time,
subject to the limitations contained in Section 12.5 hereof, each Stockholder
shall indemnify, defend, protect and hold harmless UniCapital and its officers,
stockholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parents, agents, employees, successors and assigns at all times from and after
the date of this Agreement until the Expiration Date (as defined in Section
12.6) from and against all claims, damages, losses, liabilities, actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses (including
reasonable attorneys' fees and expenses of investigation) (collectively,
"Losses") incurred by UniCapital as a result of or arising from (a) any breach
of the representations and warranties made by the Individual Stockholders set
forth herein or on the schedules or certificates delivered in connection
herewith, (b) any nonfulfillment of any covenant or agreement on the part of any
Stockholder under this Agreement, or (c) any liability under the Securities Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act") or other
federal or state law or regulation, at common law or otherwise, arising out of
or based upon (i) any untrue statement or alleged untrue statement of a material
fact relating to the Company, any CLA Company or any Stockholder contained under
the "Identified Disclosure" (as defined below) or (ii) any omission or alleged
omission to state in the Identified Disclosure of a material fact relating to
the Company, any CLA Company or any Stockholder required to be stated therein or
necessary to make the statements therein not misleading, which information was
provided to UniCapital or its counsel by the Company, any CLA Company or any
Stockholder; provided, however, that such indemnity shall not inure to the
benefit of UniCapital or any other indemnified person, Newco or the Surviving
Corporation to the extent that such untrue statement (or alleged untrue
statement) was made in, or such omission (or alleged omission) occurred in, any
preliminary prospectus and the Company, any CLA Company or the Stockholders
provided, in writing, corrected information to UniCapital for inclusion in the
final prospectus, and such information was not so included. For purposes hereof,
the term "Identified Disclosure" means (i) the disclosure contained under the
captions "PROSPECTUS SUMMARY--The Founding Companies--Cauff, Lippman Aviation,
Inc. ("Cauff Lippman")," MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL
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CONDITION AND OPERATION RESULTS--The Founding Companies--Cauff, Lippman
Aviation, Inc." and BUSINESS--The Founding Companies--Cauff, Lippman Aviation,
Inc." or (ii) under any other caption identified in writing by UniCapital to the
Stockholders as being included in the Identified Captions in any preliminary
prospectus or the final prospectus forming a part the Registration Statement, or
any amendment thereof or supplement thereto (including any additional
registration statement filed pursuant to Rule 462(b) under the Securities Act),
which disclosure was provided or was based upon information or documents
provided to UniCapital or its counsel by the Company, any CLA Company or any
Stockholder.
12.2 SPECIFIC INDEMNIFICATION BY STOCKHOLDERS. Subject to the
limitations contained in Section 12.5 hereof, notwithstanding any disclosure
made in this Agreement or in the schedules or exhibits hereto, and
notwithstanding any investigation by UniCapital or Newco, each Stockholder,
jointly and severally, shall indemnify, defend, protect and hold harmless
UniCapital and its respective officers, stockholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parents, agents, employees, successors
and assigns at all times from and after the date of this Agreement, from and
against all Losses as a result of or incident to: (a) the existence of
liabilities of the Company or any CLA Company (i) that are required to be set
forth on Schedules 6.13(a) or (b) that have not been so set forth or (ii) the
ultimate assessment of any liability in excess of any amount set forth on
Schedule 6.13(b), to the extent of such excess; (b) the failure of the Company,
any CLA Company or any Stockholder to file all required Form 5500's prior to the
Merger Effective Date; (c) the litigation matters listed on Schedule 6.20; (d)
any liabilities that are incurred by UniCapital, the Company or any CLA Company
as a result of any tax matters identified on Schedule 12.2 hereto; and (e) any
Material Adverse Amendments.
12.3 INDEMNIFICATION BY UNICAPITAL AND NEWCO. Subject to the
limitations contained in Section 12.5 hereof, UniCapital and Newco, jointly and
severally, shall indemnify, defend, protect and hold harmless the Stockholders
at all times from and after the date of this Agreement from and against all
Losses incurred by the Stockholders as a result of or arising from (a) any
breach of the representations and warranties made by UniCapital and Newco set
forth herein or on the schedules or certificates attached hereto, (b) any
nonfulfillment of any covenant or agreement on the part of UniCapital under this
Agreement, or (c) any liability under the Securities Act, the Exchange Act or
other federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to UniCapital (including all of the companies (other than
the Company or any CLA Company) acquired by UniCapital as part of the Unified
Transaction, but with respect to such untrue statement or alleged untrue
statements made by any such other company, only to the extent that UniCapital is
actually indemnified by such other company) contained in any preliminary
prospectus, the Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement thereto (including any registration
statement filed pursuant to Rule 462(b) under the Securities Act), or arising
out of or based upon any omission or alleged omission to state therein a
material fact relating to UniCapital (including all of the companies (other than
the Company or any CLA Company) acquired by UniCapital as part of the Unified
Transaction, but with respect to such omission or alleged omission of any such
other
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company, only to the extent that UniCapital is actually indemnified by such
other company) required to be stated therein or necessary to make the statements
therein not misleading, which liability is not the subject of indemnification of
UniCapital pursuant to Section 12.1(c) above, or any personal liability imposed
on or asserted against any Stockholder (exclusively in their capacity as a
former stockholder of the Company or any CLA Company) as a result of any act or
omission that occurs after the Effective Time by UniCapital or any of its
officers, directors, affiliates, subsidiaries, agents or employees.
12.4 THIRD PARTY CLAIMS.
(a) In order for a party hereto eligible to be indemnified
hereunder (an "Indemnified Party") to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of or involving a
claim or demand made by any person or entity against the Indemnified Party (a
"Third Party Claim"), such Indemnified Party must notify the parties obligated
to provide indemnification pursuant to Section 12.1, 12.2, or 12.3 hereof (each,
an "Indemnifying Party") in writing, and in reasonable detail, of the Third
Party Claim within 30 business days after receipt by such Indemnified Party of
written notice of the Third Party Claim; provided, however, that failure to give
such notification shall not affect the indemnification provided hereunder except
to the extent the Indemnifying Party shall have been actually prejudiced as a
result of such failure. Such notice shall state the nature and the basis of such
claim and a reasonable estimate of the amount thereof. Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, within five business
days after the Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnified Party relating to
the Third Party Claim. To the extent the Indemnifying Party has actually paid
any amount to the Indemnified Party in respect of any Loss in connection with
such Third Party Claim, the Indemnifying Party shall have a right of subrogation
with respect to such Third Party Claim to the extent of such payment.
(b) The Indemnifying Party shall have right to defend and
settle, at its own expense and by its own counsel (provided that such counsel is
not reasonably objected to by the Indemnified Party and provided further that
selection for these purposes of Milbank, Tweed, Hadley & McCloy, absent any
actual or reasonably likely conflict of interest with respect to parties or
defenses, shall not be objected to by UniCapital), any Third Party Claim as the
Indemnifying Party pursues the same in good faith and diligently and so long as
the Third Party Claim does not relate to an actual or potential Loss to which
Section 12.4(e) applies in which the Indemnified Party is UniCapital, Newco or
the Surviving Corporation. If the Indemnifying Party undertakes to defend or
settle, it shall promptly notify the Indemnified Party of its intention to do
so, and the Indemnified Party shall cooperate with the Indemnifying Party and
its counsel in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnifying Party with any books, records or information reasonably requested
by the Indemnifying Party that are in the Indemnified Party's possession or
control. Notwithstanding the foregoing, the Indemnified Party shall have the
right to participate in any matter through counsel of its own choosing at its
own expense (unless there is a conflict of
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interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, in which case the Indemnifying Party will reimburse the
Indemnified Party for the expenses of its counsel). After the Indemnifying Party
has notified the Indemnified Party of its intention to undertake to defend or
settle any such asserted liability, and for so long as the Indemnifying Party
diligently pursues such defense, the Indemnifying Party shall not be liable for
any additional legal expenses incurred by the Indemnified Party in connection
with any defense or settlement of such asserted liability, except to the extent
such participation is requested by the Indemnifying Party, in which event the
Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable
additional legal expenses and out-of-pocket expenses, and except in the case of
a Third Party Claim relating to an actual or potential Loss to which Section
12.4(e) applies in which the Indemnified Party is UniCapital, Newco or the
Surviving Corporation.
(c) No Indemnifying Party shall, in the defense of any Third
Party Claim, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) or enter into any settlement, except with
the written consent of the Indemnified Party, which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim or
matter.
(d) If the Indemnifying Party does not assume the defense of
any Third Party Claim, then the Indemnified Party may defend against such Third
Party Claim in such manner as it deems appropriate at the expense of the
Indemnifying Party.
(e) Notwithstanding anything to the contrary in this Article
12, if at any time, in the reasonable opinion of UniCapital, as the Indemnified
Party (notice of which opinion shall be given in writing to the Indemnifying
Party), any Third Party Claim seeks material prospective relief which could have
a material adverse effect on any such Indemnified Party or any subsidiary, then
such Indemnified Party shall have the right to control or assume (as the case
may be) the defense of any such Third Party Claim and the amount of any judgment
or settlement and the reasonable costs and expenses of defense (including fees
and disbursements of counsel and experts, as well as any sampling, testing,
investigation, removal, treatment or remediation undertaken by UniCapital and
all counseling or engineering fees and expenses related thereto) shall be
included as part of the indemnification obligations of the Indemnifying Party
hereunder. If the Indemnified Party elects to exercise such right, then the
Indemnifying Party shall have the right to participate in, but not control, the
defense of such Third Party Claim at the sole cost and expense of the
Indemnifying Party.
12.5 LIMITATIONS ON INDEMNIFICATION. No Indemnified Party shall assert
any claim (other than a Third Party Claim) for indemnification hereunder until
such time as the aggregate of all claims which such Indemnified Party may have
against an Indemnifying Party shall exceed $800,000 (the "Basket Amount"), at
which time an Indemnified Party shall be entitled to seek indemnification
pursuant to this Article 12, but only to the extent that such claims, in the
aggregate, exceed the Basket Amount. For purposes of this Section 12.5, the
Stockholders shall
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be considered to be a single Indemnifying and Indemnified Party and UniCapital
and Newco shall be considered to be a single Indemnifying and Indemnified Party.
Notwithstanding any other term of this Agreement, in no event shall any
Stockholder be liable under this Article 12 for an amount which exceeds the
aggregate value (determined at the Merger Effective Date) of the Merger
Consideration received by such Stockholder under this Agreement. Notwithstanding
anything to the contrary contained in this Agreement, the limitations upon
indemnification contained in this Section 12.5 shall not apply to Losses arising
out of (i) any breach of the representations and warranties of the Individual
Stockholders contained in Sections 6.4, 6.5, 6.14, 6.25, 6.27 and 6.33 hereof or
(ii) any breach by UniCapital of any of its covenants under this Agreement.
Notwithstanding the foregoing, the Basket Amount shall automatically increase by
an amount (such amount is referred to as the "Basket Adjustment") equal to one
percent of any Earn-Out Consideration that is finally determined to be due to
the Stockholders pursuant to Section 2.5 hereof. If the Basket Amount is
adjusted pursuant to the preceding sentence after such time as any Indemnified
Party, pursuant to this Article 12, has collected an amount in excess (such
excess amount is referred to as the "Excess Indemnity") of the Basket Amount
(prior to giving effect to the applicable Basket Adjustment), then such
Indemnified Party, within 10 business days after the final determination of such
Earn-Out Consideration, shall pay to the Indemnifying Party an amount equal to
the lesser of applicable Basket Adjustment or the Excess Indemnity. In addition,
notwithstanding any provision of this Agreement to the contrary, for the
purposes of preventing a double recovery the Stockholders shall not be obligated
to indemnify UniCapital or any other indemnified party pursuant to Section 12.1
or 12.2 with respect to any particular act, omission, condition or event if and
to the extent that the loss resulting or arising from such act, omission,
condition or event has, directly or indirectly, been taken into account in the
computation of any Net Worth Deficiency provided for in Section 3.1.
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warran ties made by the parties in this Agreement, or in any certificate or
other instrument delivered pursuant to this Agreement, shall survive for a
period of one year from the Merger Effective Date (which date is hereinafter
called the "Expiration Date"), except that:
(a) the representations and warranties contained in Section
6.27 hereof shall survive until such time as the limitations period has run for
all tax periods ended prior to the Merger Effective Date, which shall be deemed
to be the Expiration Date for purposes of this clause (a) and claims arising
from a breach of the representations and warranties contained in such Section
6.27;
(b) the representations and warranties contained in Section
6.28(g) hereof shall survive until such time as one full fiscal year's cycle of
transactions occurring entirely within the twenty-first century shall have been
processed and UniCapital's consolidated financial statements for the fiscal year
in which the last such transaction to be processed occurred have been audited,
which shall be deemed to be the Expiration Date for purposes of this clause (b)
and claims arising from a breach of the representations and warranties contained
in such Section 6.28(g);
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(c) the representations and warranties contained in Section
6.33 hereof shall survive for a period of five years from the Merger Effective
Date, which shall be deemed the Expiration Date for purposes of this clause (c)
and claims arising from a breach of the representations and warranties contained
in such Section 6.33;
(d) solely for purposes of Section 12.1(c) hereof, and solely
to the extent that UniCapital actually incurs liability under the Securities
Act, the Exchange Act, or any other federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for purposes of this clause (d) and claims arising under such
laws;
(e) the representations and warranties of the Stockholders
contained in Sections 6.4 and 6.5 hereof shall survive the Merger Effective Date
without time limitation; and
(f) any representations and warranties which serve as a basis
of the indemnity obligations of the Stockholders under Section 12.2 shall
survive the Merger Effective Date without time limitation; provided, however,
that the representations and warranties contained in Section 6.35(d) regarding
delinquent accounts identified on Schedule 6.35(d) shall survive until the final
resolution of such delinquent accounts.
13. TERMINATION OF AGREEMENT
13.1 TERMINATION BY UNICAPITAL. UniCapital may, by notice in the manner
hereinafter provided on or before the Closing Date, terminate this Agreement if
a material default shall be made by the Stockholders in the observance or due
and timely performance of any of the covenants, agreements or conditions
contained herein, and the curing of such default shall not have been made on or
before the Closing Date and shall not reasonably be expected to occur, (b) if
UniCapital in its sole judgment determines that any condition exists which has
made or could reasonably be expected to make any of the representations or
warranties contained in Article 6 hereof untrue in any material respect or (c)
if UniCapital in its sole judgment determines that information disclosed on the
schedules to the Agreement delivered pursuant to Section 8.14 has or could
reasonably be expected to have a material adverse effect on the business,
operations, assets, properties, prospects or condition (financial or otherwise)
of the Company or any material CLA Company.
13.2 TERMINATION BY THE STOCKHOLDERS. Prior to the initial filing of
the Registration Statement with the SEC, the Stockholders may, by notice in the
manner hereinafter provided on or before such initial filing, terminate this
Agreement in accordance with Sections 17.4(a) or (b) if a material default shall
be made by UniCapital in the observance or due and timely performance of any of
the material covenants, agreements or conditions contained herein, and the
curing of such default shall not have been substantially made on or before such
initial filing.
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From and after the initial filing of the Registration Statement with the SEC,
the Stockholders shall have no right to terminate this Agreement.
13.3 AUTOMATIC TERMINATION. This Agreement shall terminate
automatically:
(a) if the Registration Statement has not been declared
effective by June 30, 1998;
(b) if, after its execution and delivery by the parties
thereto and prior to the Effective Time, the Underwriting Agreement is
terminated pursuant to the terms thereof;
(c) if the Effective Time has not occurred within 10 business
days after the Closing Date; or
(d) upon the date that the number of shares of UniCapital
Stock (other than shares included in any Earn-Out Consideration) to be issued to
the persons who will transfer property to UniCapital in the Unified Transaction
can be determined as a fixed number of shares, unless those same persons shall
own immediately after the Unified Transaction 80% or more of the UniCapital
Stock that will be issued and outstanding immediately after the Unified
Transaction.
13.4 LIQUIDATED DAMAGES. If the Merger fails to occur because of the
default of any Stockholder, then, in addition to the other remedies available to
UniCapital at law for fraud, in equity or pursuant to this Agreement, the
Individual Stockholders shall pay to UniCapital an aggregate amount of $500,000
as liquidated damages. It is hereby agreed that UniCapital's damages in the
event of a termination or default by any Stockholder hereunder are uncertain and
impossible to ascertain and that the foregoing constitutes a reasonable
liquidation of such damages and is intended not as penalty but as liquidated
damages.
14. NONCOMPETITION AND NONSOLICITATION
14.1 NONCOMPETITION.
(a) In order to protect the value and goodwill of UniCapital,
the Company, the CLA Companies and their respective businesses, each Stockholder
covenants that, for the period ending two years after the Closing Date, such
Stockholder will not, directly or indirectly, own, manage, operate, join,
control, finance or participate in the ownership, management, operation, control
or financing of, or be connected as a partner, principal, agent, representative,
consultant or otherwise with, or use or permit such Stockholder's name to be
used in connection with, any business or enterprise which is engaged directly or
indirectly in competition anywhere in the United States with the business
conducted by UniCapital, the Surviving Corporation or any of its or their
respective subsidiaries or affiliates (the "Restricted Business"). Each
Stockholder
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recognizes that the Restricted Business is expected to be conducted throughout
the United States and that more narrow geographical limitations of any nature on
this non-competition covenant (and the non-solicitation covenant set forth in
subsection (b)) are therefore not appropriate. The foregoing restrictions shall
not be construed to prohibit the ownership by a Stockholder as a passive
investment (i) of not more than five percent of any class of securities of any
corporation which is engaged in any of the foregoing businesses having a class
of securities registered pursuant to Section 12 of the Exchange Act, (ii) with
respect to those activities identified on Schedule 14.1 hereto, or (iii) in any
business or enterprise that is not so directly or indirectly in competition with
the Restricted Business as it exists on the date of this Agreement.
(b) Each Stockholder further covenants that for the period
ending two years after the Closing Date, such Stockholder will not, either
directly or indirectly, (i) call on or solicit any customers or prospective
customers who were actually solicited by the Company or any CLA Company prior to
the Effective Time of the Restricted Business, or (ii) solicit the employment of
any person who is employed by UniCapital, the Surviving Corporation or any of
its or their respective subsidiaries or affiliates in the Restricted Business
during such period.
(c) Each Stockholder recognizes and acknowledges that by
reason of such Stockholder's relationship to the Company and the CLA Companies,
such Stockholder has had access to confidential information relating to the
Restricted Business. Each Stockholder acknowledges that such confidential
information is a valuable and unique asset and covenants that such Stockholder
will not disclose any such confidential information after the Closing Date to
any person for any reason whatsoever.
14.2 DAMAGES. Each Stockholder acknowledges and agrees that measuring
economic losses to UniCapital and the Surviving Corporation as a result of the
breach of the foregoing covenants in this Article 14 would be impossible, and
that any breach of the foregoing covenants would result in immediate and
irreparable damage to UniCapital and the Surviving Corporation for which they
would have no other adequate remedy. Accordingly, the Stockholders agree that,
in the event of a breach by a Stockholder of the foregoing covenants, such
covenants may be enforced by UniCapital or the Surviving Corporation by, without
limitation, injunctions and restraining orders against such Stockholder.
14.3 REASONABLE RESTRAINT. The Parties agree that the foregoing
covenants in this Article 14 impose a reasonable restraint upon the Stockholders
in light of the activities and business of UniCapital on the date of the
execution of this Agreement and the current and future plans of UniCapital and
the Surviving Corporation (as successors to the businesses of the Company and
the CLA Companies), and that any violation will result in irreparable injury to
UniCapital.
14.4 SEVERABILITY; REFORMATION. The covenants in this Article 14 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, if any court of
competent jurisdiction shall determine that the scope,
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time or territorial restrictions set forth are unreasonable, then it is the
intention of the parties that such restrictions be enforced to the fullest
extent which the court deems reasonable, and the Agreement shall thereby be
reformed.
14.5 INDEPENDENT COVENANT. All of the covenants in this Article 14
shall be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of any Stockholder
against the Company, any CLA Company or UniCapital, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement of
such covenants. The parties specifically agree that the period of two years
stated above shall be computed by excluding from such computation any time
during which any Stockholder is in violation of any provision of this Article
14.
14.6 MATERIALITY. The Stockholders hereby acknowledge and agree that
the covenants contained in this Article 14 are a material and substantial part
of this transaction and are entered into in connection with and as an inducement
to the acquisition by UniCapital of the Company and the CLA Companies.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that they
have in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company and the CLA Companies, such as
lists of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of such corporations and their respective
businesses. Neither the Company nor any Stockholder shall disclose, and they
shall cause each CLA Company from disclosing, any confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except to authorized representatives of UniCapital, unless
the Stockholders can show that such information has become known to the public
generally through no fault of the Stockholders. In the event of a breach or
threatened breach by the Stockholders of the provisions of this Section 15.1,
UniCapital and the Surviving Corporation shall be entitled to an injunction
restraining Stockholders from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting UniCapital and the
Surviving Corporation from pursuing any other available remedy for such breach
or threatened breach, including the recovery of damages.
15.2 UNICAPITAL. UniCapital recognizes and acknowledges that it has in
the past, currently has, and prior to the Closing Date will have, access to (i)
certain confidential information solely of the Company and the CLA Companies in
connection with their respective businesses ("Company Information") and (ii)
certain confidential information concerning the Stockholders and certain
business and activities of the Stockholders that are not a part of the
transactions contemplated by this Agreement ("Stockholder Information"). Prior
to the Closing Date with respect to Company Information and at any time with
respect to Stockholder
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Information, UniCapital shall not disclose any such confidential information to
any person, firm, corporation, association, or other entity for any purpose or
reason whatsoever without prior written consent of the Stockholders. In the
event of a breach or threatened breach by UniCapital of the provisions of this
Section 15.2, the Stockholders shall be entitled to an injunction restraining
UniCapital from disclosing, in whole or in part, such confidential information.
Nothing contained herein shall be construed as prohibiting the Stockholders from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
15.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, UniCapital, the Surviving Corporation and the Stockholders
agree that, in the event of a breach by any of them of the foregoing covenant,
the covenant may be enforced against them by injunctions and restraining orders.
16. LOCK-UP AGREEMENTS
16.1 AGREEMENT. In connection with the IPO, for good and valuable
consideration, and to induce the underwriters that may participate in the IPO to
continue their efforts in connection with the IPO, each Stockholder hereby
agrees that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of such underwriters, it will not, during the period
commencing on the date of this Agreement and ending 180 days after the date of
the final prospectus contained in the Registration Statement relating to the IPO
(the "Prospectus"), (a) offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of UniCapital Stock or any securities
convertible into or exercisable or exchangeable for UniCapital Stock or (b)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of UniCapital Stock,
whether any such transaction described in clause (a) or (b) above is to be
settled by delivery of UniCapital Stock or such other securities, in cash or
otherwise. In addition, each Stockholder agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters that
may participate in the IPO, it will not, during the period commencing on the
date of this Agreement and ending 180 days after the date of the Prospectus,
make any demand for or exercise any right with respect to, the registration of
any shares of UniCapital Stock or any security convertible into or exercisable
or exchangeable for Common Stock.
16.2 INTENDED THIRD PARTY BENEFICIARIES. Each Stockholder agrees that
the foregoing shall be binding upon their transferees, successors, assigns,
heirs, and personal representatives and shall benefit and be enforceable by the
underwriters in the IPO. Each Stockholder acknowledges and agrees that such
underwriters and Morgan Stanley & Co. Incorporated are intended third party
beneficiaries of the provisions of this Article 16, and that Morgan Stanley &
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Co. Incorporated on behalf of such underwriters shall be entitled to enforce the
covenants contained in this Article 16. In furtherance of the foregoing,
UniCapital and its transfer agent are hereby authorized to decline to make any
transfer of securities if such transfer would constitute a violation or breach
of this Article 16. The Stockholders also acknowledge and agree that neither the
Company nor any CLA Company shall have any rights as intended third-party
beneficiaries under this Agreement.
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK
17.1 INVESTMENT INTENT. The Stockholders acknowledge and agree that the
shares of UniCapital Stock to be delivered to the Stockholders pursuant to this
Agreement have not been and will not be registered under the Securities Act and
therefore may not be resold without compliance with the Securities Act. The
Stockholders represent and warrant that the shares of UniCapital Stock to be
acquired by the Stockholders pursuant to this Agreement are being acquired
solely for their own account, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution.
17.2 COMPLIANCE WITH LAW. The Stockholders covenant, warrant and
represent that none of the shares of UniCapital Stock issued to such
Stockholders will be offered, sold, assigned, pledged, hypothecated, transferred
or otherwise disposed of except after full compliance with all of the applicable
provisions of the Securities Act and the rules and regulations of the SEC
thereunder, and except after full compliance with any applicable state
securities laws.
17.3 ECONOMIC RISK; SOPHISTICATION. The Stockholders represent and
warrant that they are able to bear the economic risk of an investment in
UniCapital Stock acquired pursuant to this Agreement and can afford to sustain a
total loss of such investment. The Stockholders further represent and warrant
that they (a) fully understand the nature, scope and duration of the limitations
on transfer contained in this Agreement and (b) have such knowledge and
experience in financial and business matters that they are capable of evaluating
the merits and risks of the proposed investment and therefore have the capacity
to protect their own interests in connection with the acquisition of the
UniCapital Stock.
17.4 INFORMATION SUPPLIED.
(a) The Stockholders represent and warrant that, as of the
date of this Agreement, they have had an adequate opportunity to ask questions
and receive answers from the officers of UniCapital concerning UniCapital, its
business, operations, plans and strategy, and the background and experience of
its officers (other than the Chief Operating Officer of UniCapital, which office
had not been filled as of the date of this Agreement) and directors. The
Stockholders represent and warrant that they have asked any and all questions
that they may have
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in the nature described in the preceding sentence and that all such questions
have been answered to their satisfaction.
(b) Each Stockholder represents and warrants that he has
received the draft Registration Statement, including the draft preliminary
prospectus that forms a part thereof, delivered to him on or about February 14,
1998 that describes, among other things, UniCapital, the Merger, the other
acquisitions proposed to be undertaken by UniCapital simultaneously with the
Merger and the target companies of such other acquisitions. Each Stockholder
represents and warrants that he has reviewed such draft Registration Statement
and draft preliminary prospectus and has had adequate opportunity to ask
questions of and receive answers to his satisfaction from the officers of
UniCapital concerning the matters described therein.
18. SECURITIES LEGENDS
The certificates evidencing the UniCapital Stock to be received by the
Stockholders hereunder will bear a legend substantially in the form set forth
below and containing such other information as UniCapital may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES OR BLUE SKY LAWS.
SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
SECURITIES ACT AND ANY STATE SECURITIES OR BLUE SKY LAWS,
UNLESS, IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION) OF COUNSEL SATISFACTORY TO
THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
In addition, such certificates shall also bear (a) a legend reflecting the
restrictions contained in Article 16 and (b) such other legends as counsel for
UniCapital reasonably determines are required under the applicable laws of any
state.
19. UNICAPITAL OPTION
19.1 PURCHASE OPTIONS. The Individual Stockholders hereby grant to
UniCapital the options (the "Purchase Options"), each of which shall be
exercisable at any time within 12 months following the date of the IPO, to
purchase all or part of the Individual Stockholders' equity interests in any of:
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(a) Jumbo Jet Leasing LP and Jumbo Jet, Inc. (the "Jumbo Jet
Option");
(b) CL Aircraft Marketing LP and CL Aircraft Marketing, Inc.
(the "CL Option");
(c) Twin Jet Leasing, Inc. and Aircraft 49402, Inc. (the "Twin
Option");
(d) CL Aircraft XXV, Inc. (the "CL XXV Option"); or
(e) Aircraft 46941, Inc. (the "46941 Option").
Notwithstanding the foregoing, (i) if UniCapital determines to exercise either
the Jumbo Jet Option or CL Option, it must simultaneously exercise each of the
Jumbo Jet Option and CL Option, (ii) the obligations of the Stockholders with
respect to any Purchase Option is subject the receipt of any necessary consents,
including those from Chase Securities and Finova Capital Corporation, and as and
when required to obtain any such consent, UniCapital and the Stockholders will
use their reasonable commercial efforts to obtain such consents, and (iii) the
46941Option shall be null and void if Aircraft 46941 was contributed to the
Company prior to the Merger Effective Time under the circumstances contemplated
by Section 10.13(a) hereof. Upon the exercise, from time to time, by UniCapital
of any Purchase Option, UniCapital and the Stockholders will prepare and
negotiate in good faith a mutually satisfactory definitive agreement (each a
"Definitive Option Purchase Agreement") providing for the sale of such
Individual Stockholders' equity interests, in whole or in part, to UniCapital,
which Agreement shall contain those representations and warranties substantially
as contained in Exhibit 19.1 hereto and indemnification provisions that are
consistent with the indemnification provisions set forth in Section 12 hereof.
19.2 OPTION EXERCISE PRICE. The purchase price to be paid by UniCapital
upon the exercise of the Purchase Options shall be as follows:
(a) $1,000,000 to exercise the Jumbo Jet Option;
(b) $4,000,000 to exercise the CL Option;
(c) $100,000 to exercise the Twin Option;
(d) $100,000 to exercise the CL XXV Option;
(e) $10.00 to exercise the 46941 Option.
19.3 REPRESENTATIONS AND WARRANTIES REGARDING THE OPTION COMPANIES.
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(a) The Stockholders own beneficially and of record all of the
issued and outstanding shares of each Option Company, in each case, except as
set forth on Schedule 19.3 (which Schedule shall be delivered within 10 business
days after the execution of this Agreement) free and clear of all liens,
security interests, pledges, charges, voting trusts, equities, restrictions,
encumbrances and claims of every kind. All of the issued and outstanding shares
of the Option Company have been duly authorized and validly issued, fully paid
and nonassessable and will have been offered, issued, sold and delivered by the
Option Company in compliance with all applicable state and federal laws
concerning the offering, sale or issuance of securities. Except as set forth on
Schedule 19.3, there are no existing agreements, options, commitments or rights
with, of or to any person to acquire any material assets or rights of the Option
Company or any interest therein.
(b) The aggregate cash investment made by the Stockholders in
the Option Companies subject to the Jumbo Jet Option is greater than or equal to
$1,000,000 and the aggregate cash investment made by the Stockholders in the
Option Companies subject to the CL Option is greater than or equal to
$4,000,000.
19.4 NEGATIVE COVENANTS.
To the extent within the reasonable control of the
Stockholders, the Stockholders shall not suffer the companies subject to the
Purchase Option (the "Option Companies") to cause or permit to cause any of the
following between the date hereof and the period ending 12 months after the date
of the IPO, without the consent of UniCapital, which such consent will not
unreasonably be withheld, or unless as required by existing contractual
obligations:
(a) incur any liabilities, other than liabilities incurred in
the ordinary course of business consistent with past practice, or discharge or
satisfy any lien or encumbrance, or pay any liabilities, other than in the
ordinary course of business consistent with past practice, or fail to pay or
discharge when due any liabilities of which the failure to pay or discharge has
caused or will cause any material damage or risk of material loss to it or any
of its assets or properties;
(b) sell, encumber, assign or transfer any assets, properties
or rights or any interest therein, except for the sales in the ordinary course
of business consistent with past practice, or make any agreement or commitment
or grant any option or right with, of or to any person to acquire any assets,
properties or rights of any Option Company or any interest therein, other than
in the ordinary course of business;
(c) create, incur, assume or guarantee any indebtedness for
money borrowed, or mortgage, pledge or subject any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract or other
encumbrance other than in the ordinary course of business consistent with past
practice.
(d) except in the ordinary course of business consistent with
past practice,
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make or suffer any material amendment or termination of any material agreement,
contract, commitment, lease or plan to which it is a party or by which it is
bound, or canceled, materially modify or waive any substantial debts or claims
held by it or waive any rights of substantial value, where such amendments,
terminations, cancellations, modifications and waivers in the aggregate do not
or could not reasonably be expected to have a material adverse effect on the
business, operations, assets, properties, prospects or condition (financial or
otherwise) of the Option Company.
(e) except for any dividends in such amounts necessary to pay
taxes on account of any income of the Option Company and pursuant to existing
contractual obligations, declare, set aside or pay any dividend or make or agree
to make any other distribution or payment in respect of its capital shares or
redeem, purchase or otherwise acquire or agree to redeem, purchase or acquire
any of its shares of capital stock or other ownership interests;
(f) make commitments or agreements for capital expenditures or
capital additions or betterments, except in the ordinary course of business
consistent with past practice or such as may be involved in ordinary repair,
maintenance or replacement of its assets;
(g) increase the salaries or other compensation of, or make
any advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its employees or make any increase in, or any addition to, other
benefits to which any of its employees may be entitled other than in the
ordinary course of business;
(h) materially change any of the accounting principles
followed by it or the methods of applying such principles;
(i) change its authorized capital or its securities
outstanding or otherwise changed its ownership interests, or grant any options,
warrants, calls, conversion rights or commitments with respect to any of its
capital stock or other ownership interests; or
(j) agree to take any of the actions referred to above.
19.5 ACCESS. Until 12 months after the date of the IPO, upon prior
reasonable notice, the Stockholders shall cause the Option Companies to
UniCapital's officers, employees, counsel, accountants and other representatives
free and full access to and the right to inspect, during normal business hours,
all of the premises, properties, assets, records, contracts and other documents
relating to the Option Company and shall permit them to consult with the
officers, employees, accountants, counsel and agents of the Option Companies for
the purpose of making such investigation of such entities as UniCapital shall
reasonably request; provided that such investigation shall not unreasonably
interfere with such entities business operations, and provided, further, that
UniCapital shall not contact or consult with any non-officer employees of any
Option Company without its prior consent, which consent shall not be
unreasonably withheld. Furthermore, the Stockholders shall cause each Option
Company to furnish to
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UniCapital all such documents and copies of documents and records and
information with respect to the affairs of such entity and copies of any working
papers relating thereto as UniCapital shall from time to time reasonably
request. No information or knowledge obtained in any investigation pursuant to
this Section 19.5 or otherwise shall affect or be deemed to modify any
representation or warranty contained in this Agreement or the conditions to the
obligations of the parties to consummate the Merger.
19.6 CLOSINGS. UniCapital may exercise the Purchase Option from time to
time and at any time prior to the first anniversary of the IPO. The closing of
any such exercise shall occur on the 10th business day after the date of
exercise at the offices of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New
York, NY 10178
19.7 DELIVERIES AT THE CLOSINGS At any Option Closing, each Stockholder
shall deliver:
(i) certificates representing his respective equity
interest in applicable Option Company, in each case either
duly endorsed for transfer to UniCapital or accompanied by
appropriate stock powers;
(ii) payment instructions regarding the payment of
the applicable Option Purchase Price; and
(iii) an executed copy of the applicable Definitive
Agreement; and,
UniCapital shall deliver:
(i) payment of the applicable Option Exercise Price;
and
(iii) an executed copy of the applicable Definitive
Agreement.
19.8 TERMINATION OF OPTION. Notwithstanding the foregoing, no Purchase
Option shall be exercisable until after the Effective Time and each Purchase
Option shall automatically terminate in the event of a termination of this
Agreement.
20. GENERAL
20.1 COOPERATION. The Stockholders and UniCapital shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement. The
Stockholders will cooperate and use their reasonable commercial efforts to have
the officers, directors and employees of Company prior to the Closing Date
cooperate with UniCapital on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
actions,
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proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Closing Date.
20.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the Resulting
Company, the successors of UniCapital, and the heirs and legal representatives
of the Stockholders.
20.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company, UniCapital and Newco and supersedes any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the Stockholders (subject to the limitations
set forth below), and the Company, UniCapital and Newco acting through their
respective officers, duly authorized by their respective Boards of Directors.
20.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
20.5 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with the transactions contemplated
hereby, and each of UniCapital and Newco, on the one hand, and the Stockholders,
on the other hand, agrees to indemnify the other against all loss, liability,
cost damages or expense arising out of or related to claims for fees or
commissions of brokers employed or alleged to have been employed by such
indemnifying party.
20.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, UniCapital will pay the fees, expenses and disbursements
of UniCapital and Newco and their respective agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto. Whether or not the transactions herein
contemplated shall be consummated, the Stockholders will pay the fees, expenses
and disbursements of the Stockholders, the Company and the CLA Companies and
their respective agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments hereto
and all other costs and expenses incurred in the performance of this Agreement
by the Stockholders and the Company and in compliance with all conditions to be
performed by the Stockholders and the Company under this Agreement.
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20.7 NOTICES. All notices and other communications hereunder shall be
in writing (including wire, telefax or similar writing) and shall be sent,
delivered or mailed, addressed, or telefaxed:
(a) If to UniCapital or Newco, addressed to them at:
UniCapital Corporation
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Telephone: (305) 861-0603
Telefax: (305) 866-8449
with a copy to:
David A. Gerson
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
301 Grant Street
Pittsburgh, PA 15219
Telephone: (412) 560-3330
Telefax: (412) 560-3399
(b) If to the Stockholders, addressed to them in care
of the Stockholders' Representative at:
Cauff, Lippman Aviation, Inc.
9420 S.W. 77th Avenue
Miami, FL 33156-9903
Telephone: (305) 274-7277
Telefax: (305) 271-1339
with a copy to:
Michael W. Goroff
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, NY 10005
Telephone: (212) 530-5690
Telefax: (212) 530-5219
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Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telefax, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 19.7 (or in accordance with the latest
unrevoked written direction from such party) and (ii) if given by telefax, when
such telefax is transmitted to the telefax number specified in this Section 19.7
(or in accordance with the latest unrevoked written direction from such party),
and the appropriate confirmation is received.
20.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York, without giving effect to any of the
provisions thereof that would require the application of the substantive laws of
any other jurisdiction. Each party to this Agreement: (a) agrees that any legal
action or proceeding under this Agreement shall be brought in the courts of the
State of New York or in the United States District Court for the Southern
District of New York; (b) irrevocably submits to the jurisdiction of such
courts; (c) agrees not to assert any claim or defense that it is not personally
subject to the jurisdiction of such courts, that any such forum is not
convenient or the venue thereof is improper, or that this Agreement or the
subject matter hereof may not be enforced in such courts; and (d) agrees to
accept service of process on it by certified or registered mail or by any other
method authorized by law.
20.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
20.10 TIME. At all times after the execution of the Underwriting
Agreement, time shall be of the essence with respect to all matters under this
Agreement.
20.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
20.12 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
20.13 CAPTIONS, INTERPRETATION.. The headings of this Agreement are
inserted for convenience only and shall not constitute a part of this Agreement
or be used to construe or
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interpret any provision hereof. Section, subsection, schedule and exhibit
references are to this Agreement unless otherwise specified. Unless the context
of this Agreement clearly requires otherwise, (a) references to the plural
include the singular, the singular the plural, and the part the whole, (b) "or"
has the inclusive meaning frequently identified with the phrase "and/or" and (c)
"including" has the inclusive meaning frequently identified with the phrase "but
not limited to."Each accounting term used herein that is not specifically
defined herein shall have the meaning given to it under GAAP.
21. DEFINITIONS
21.1 "Accounts Receivable" is defined in Section 6.14.
21.2 "Acquisition Proposal" is defined in Section 8.10.
21.3 "Adjusted EBT" is defined in Section 2.5(a).
21.4 "Agent" is defined in Section 8.10.
21.5 "Agreement" is defined in the preamble to this Agreement.
21.6 "Audited Balance Sheet Date" is defined in Section 6.13(a).
21.7 "Audited Financial Statements" are defined in Section 6.13(a).
21.8 "Authorizations" are defined in Section 6.23.
21.9 "Benefit Plan" is defined in Section 6.22.
21.10 "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq.
21.11 "CLA Companies" is defined in the recitals to this Agreement.
21.12 "Cauff Trust" is defined in the preamble to this Agreement.
21.13 "Certificates" are defined in Section 2.2.
21.14 "Certificate of Merger" is defined in Section 1.2.
21.15 "Closing" is defined in Section 5.1(b).
21.16 "Closing Date" is defined in Section 5.2.
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21.17 "Closing Date Balance Sheets" are defined in Section 3.1.
21.18 "Code" is defined in the recitals to this Agreement.
21.19 "Commonly Controlled Entity" is defined in Section 6.22.
21.20 "Company" is defined in the preamble to this Agreement.
21.21 "Company Documents" are defined in Section 6.2.
21.22 "Company Stock" is defined in Section 2.1(a).
21.23 "Constituent Corporations" are defined in Section 1.2.
21.24 "Contracts" are defined in Section 6.17.
21.25 "Disputed Amounts" are defined in Section 3.2.
21.26 "EBT" is defined in Section 2.5(a).
21.27 "Earn-Out Consideration" is defined in Section 2.5(c).
21.28 "Earn-Out Escrow Cash" is defined in Section 4.1(b).
21.29 "Earn-Out Escrow Shares" are defined in Section 4.1(b).
21.30 "Effective Date Consideration" is defined in Section 2.1(a).
21.31 "Effective Time" is defined in Section 5.3.
21.32 "Environmental Laws" mean any and all applicable treaties, laws,
regulations, ordinances, enforceable requirements, binding determinations,
orders, decrees, judgments, injunctions, permits, approvals, authorizations,
licenses or binding agreements issued, promulgated or entered into by any
Governmental Entity, relating to the environment, preservation or reclamation of
natural resources, or to the management, Release or threatened Release of or
exposure to Hazardous Substances, including CERCLA, the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.,
the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et. seq., the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
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seq., and any similar or implementing state or local law and all amendments or
regulations promulgated thereunder.
21.33 "Environmental Liabilities" mean any and all Losses arising from
or related to any claim, proceeding, investigation, response or removal action,
remediation or other clean-up brought, prosecuted or undertaken by UniCapital,
Newco, the Surviving Corporation, any Governmental Entity or any other person or
entity on the basis of any violation of any Environmental Laws or pursuant to
any requirement imposed under any Environmental Laws (including any sampling,
testing, investigation, removal, treatment or remediation undertaken by
UniCapital, Newco or the Surviving Corporation so as to avoid any claim or
violation or to comply with any requirement and all counseling or engineering
fees and expenses related thereto), and arising from pre-Closing operations,
events, circumstances or conditions at, on, under or emanating from, or as a
result of any pre-Closing off-site disposal of Hazardous Substances from, any
property currently or formerly owned, operated or leased by the Companies.
21.34 "Environmental Permits" mean all permits, licenses, approvals or
authorizations from any Governmental Entity required under Environmental Laws
for the operation of the business of the applicable Company.
21.35 "Equipment" is defined in Section 6.35.
21.36 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
21.37 "Escrow Cash" is defined in Section 4.1(a).
21.38 "Escrow Property" is defined in Section 4.1(b).
21.39 "Escrow Shares" are defined in Section 4.1(a).
21.40 "Exchange Act" is defined in Section 12.1.
21.41 "Expiration Date" is defined in Section 12.6.
21.42 "Financial Statements" are defined in Section 6.12(b).
21.43 "Foreign Plans" are defined in Section 6.22(i)(xiii).
21.44 "GAAP" is defined in Section 3.1.
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21.45 "Governmental Entity" means any court, administrative or
regulatory agency or commission, or other governmental authority or
instrumentality, domestic, foreign or supranational.
21.46 "HSR Act" is defined in Section 6.3.
21.47 "Indemnified Party" is defined in Section 12.4(a).
21.48 "Indemnifying Party" is defined in Section 12.4(a).
21.49 "Indemnity Escrow Agent" is defined in Section 4.1(a).
21.50 "Independent Accounting Firm" is defined in Section 3.2.
21.51 "Individual Stockholders" are defined in the preamble to this
Agreement.
21.52 "Intellectual Property" is defined in Section 6.28(a).
21.53 "Interim Balance Sheet Date" is defined in Section 6.12(b).
21.54 "IPO" is defined in the recitals to this Agreement.
21.55 "IPO Price" means the per share price that the Company Stock is
sold to the Underwriters in the IPO prior to the deduction of any discounts or
expenses.
21.56 "Lease Documents" are defined in Section 6.35.
21.57 "Leases" are defined in Section 6.35.
21.58 "liabilities" are defined in Section 6.13(a).
21.59 "Lippman Trust" is defined in the preamble to this Agreement.
21.60 "Losses" are defined in Section 12.1.
21.61 "Material Adverse Amendment" is defined in Section 8.14.
21.62 "Merger Consideration" is defined in Section 2.1(b).
21.63 "Merger Effective Date" is defined in Section 5.3.
21.64 "Merger Consideration Shares" are defined in Section 2.1(a).
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21.65 "Merger Effective Date" is defined in Section 5.3.
21.66 "Merger" is defined in the Section 1.3.
21.67 "Net Worth Deficiency" is defined in Section 3.1.
21.68 "Newco" is defined in the preamble to this Agreement.
21.69 "Obligor" is defined in Section 6.35.
21.70 "Ordinary course" or "ordinary course of business" means the
leasing, acquisition, sale and/or trading of commercial jet aircraft and
aircraft parts, providing financial structures and similar products or services
relating to the aircraft and/or aviation industry, and providing consulting
and/or advisory services with respect to any of the foregoing.
21.71 "PCBs" are defined in Section 6.33(h).
21.72 "Pension Plan" is defined in Section 6.22.
21.73 "Prospectus" is defined in Section 16.1.
21.74 "Registration Statement" is defined in Section 9.4.
21.75 "Regulations" are defined in Section 6.23.
21.76 "Release" means any spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, emanation or migration of any
Hazardous Substance in, into, onto or through the environment (including ambient
air, surface water, ground water, soils, land surface, subsurface strata,
workplace or structure).
21.77 "Restricted Business" is defined in Section 14.1(a).
21.78 "Scheduled Payments" are defined in Section 6.35.
21.79 "SEC" is defined in Section 9.4.
21.80 "Securities Act" is defined in Section 6.16.
21.81 "Stockholders" are defined in the preamble to this Agreement.
21.82 "Stockholders' Representative" is defined in Section 3.3.
21.83 "Subsidiary" is defined in Section 6.1.
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21.84 "Surviving Corporation" is defined in Section 1.2.
21.85 "Tax Returns" are defined in Section 6.27.
21.86 "Taxes" are defined in Section 6.27.
21.87 "Third Party Claim" is defined in Section 12.4(a).
21.88 "Transaction Documents" means the Employment Agreements and the
Certificate of Merger.
21.89 "Trust Stockholders" are defined in the preamble to this
Agreement.
21.90 "Unaudited Financial Statements" are defined in Section 6.12(b).
21.91 "Underwriting Agreement" is defined in Section 5.1(a).
21.92 "UniCapital" is defined in the preamble to this Agreement.
21.93 "UniCapital Documents" are defined in Section 7.3.
21.94 "UniCapital Stock" is defined in Section 2.1(a).
21.95 "Unified Transaction" is defined in the recitals to this
Agreement.
21.96 "Welfare Plan" is defined in Section 6.22.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNICAPITAL CORPORATION
By: /s/ ROBERT NEW
---------------------------------
Name: Robert New
Title: Chairman and Chief Executive Officer
CLA ACQUISITION CORP.
By: /s/ ROBERT NEW
---------------------------------
Name: Robert New
Title: President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
/s/ STUART L. CAUFF
--------------------------------
Stuart L. Cauff
/s/ WAYNE D. LIPPMAN
--------------------------------
Wayne D. Lippman
/s/ SANDRA E.CAUFF
--------------------------------
The 1998 Cauff Family Trust
By: Sandra E. Cauff, Trustee
/s/ PENNY S. LIPPMAN
--------------------------------
The 1998 Lippman Family Trust
By: Penny S. Lippman, Trustee
<PAGE> 80
EXHIBITS
EXHIBIT A CLA Companies -- Ownership of CLA Companies
ANNEXES
ANNEX I [Form of Company Notes]
ANNEX II [Form of Certificate of Merger]
ANNEX III [Form of Bylaws]
ANNEX IV [Allocation of Merger Consideration and Earn-Out Consideration]
ANNEX V [Allocation of Purchase Price]
ANNEX VI [Form of Indemnity Escrow Agreement]
ANNEX VII [Form of Employment Agreement]
SCHEDULES
SCHEDULE 2.5 [Add-Backs]
SCHEDULE 6.1 [Jurisdictions in which Company and Subsidiaries Are Qualified
to do Business]
SCHEDULE 6.3 [Violations or Conflicts]
SCHEDULE 6.5 [Issued and Outstanding Stock of the Company and Subsidiaries]
SCHEDULE 6.6 [Transactions in Capital Stock]
SCHEDULE 6.8 [Subsidiaries]
SCHEDULE 6.9 [Predecessor Companies]
SCHEDULE 6.10 [Spin-Offs by Companies]
SCHEDULE 6.11 [Third Party Options]
SCHEDULE 6.12 [Company Financial Statements]
SCHEDULE 6.13 [Liabilities and Obligations]
SCHEDULE 6.14 [Accounts and Notes Receivable Aging]
SCHEDULE 6.15 [Permits]
SCHEDULE 6.16 [Real and Personal Property]
SCHEDULE 6.17 [Contracts and Commitments]
SCHEDULE 6.18 [Government Contracts]
SCHEDULE 6.20 [Insurance]
SCHEDULE 6.21 [Employee Information]
SCHEDULE 6.22 [Employee Benefit Plans]
SCHEDULE 6.23 [Authorizations]
<PAGE> 81
SCHEDULE 6.24 [Transactions with Affiliates]
SCHEDULE 6.25 [Litigation]
SCHEDULE 6.26 [Restrictions]
SCHEDULE 6.27 [Taxes]
SCHEDULE 6.28 [Intellectual Property]
SCHEDULE 6.28(d) [Confidentiality and Non-Disclosure Agreements]
SCHEDULE 6.28(e) [Registered Intellectual Property]
SCHEDULE 6.29 [Notice and Consents]
SCHEDULE 6.30 [Absence of Changes]
SCHEDULE 6.31 [Deposit Accounts; Powers of Attorney]
SCHEDULE 6.32 [Books of Account]
SCHEDULE 6.35 [Leases]
SCHEDULE 6.36 [Lease Funding]
SCHEDULE 7.8 [UniCapital and Newco Litigation]
SCHEDULE 7.9 [UniCapital and Newco Agreements]
SCHEDULE 9.2 [Employment Agreements]
SCHEDULE 10.6 [Stockholders' Release]
SCHEDULE 11.4 [Personal Guarantees of the Indebtedness of the Company]
SCHEDULE 12.2 [Tax Matters]
SCHEDULE 19.3 [Option Company Stockholders]
The registrant agrees to furnish a copy of each omitted schedule, exhibit or
annex to this Exhibit 2.03 to the Commission supplementally upon request
therefor.
<PAGE> 1
Exhibit 2.04
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
UNICAPITAL CORPORATION
(a Delaware corporation),
JCS ACQUISITION CORP.
(a New York corporation),
JACOM COMPUTER SERVICES, INC.
and
JOHN L. ALFANO
Dated as of February 14, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
PAGE
<C> <S> <C>
1. THE MERGER.............................................................................................. 2
1.1 Delivery and Filing of Certificate of Merger................................................... 2
1.2 Merger Effective Date.......................................................................... 2
1.3 Certificate of Incorporation, Bylaws, Board of Directors and Officers ..........................2
2. MERGER CONSIDERATION.................................................................................... 3
2.1 Conversion of Capital Stock; Merger Consideration.............................................. 3
2.2 Exchange Procedures............................................................................ 3
2.3 No Fractional Shares........................................................................... 4
2.4 Allocation of Merger Consideration..............................................................4
2.5 Earn-Out Consideration..........................................................................4
3. POST-CLOSING ADJUSTMENT; STOCKHOLDER'S REPRESENTATIVE................................................... 5
3.1 Computation.................................................................................... 5
3.2 Disputes....................................................................................... 6
3.3 Stockholder's Representative................................................................... 7
4. INDEMNITY ESCROW........................................................................................ 7
4.1 Creation of Escrow............................................................................. 7
4.2 Duration and Terms............................................................................. 8
4.3 Voting and Investment.......................................................................... 8
5. CLOSING; MERGER EFFECTIVE DATE.......................................................................... 8
5.1 Closing........................................................................................ 8
5.2 Closing Date; Location......................................................................... 8
5.3 Effectiveness of Merger........................................................................ 9
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER........................................................... 9
6.1 Corporate Existence............................................................................ 9
6.2 Corporate Power; Authorization; Enforceable Obligations........................................ 9
6.3 Authority; Ownership........................................................................... 9
6.4 Validity of Contemplated Transactions.......................................................... 9
6.5 Capital Stock of the Company.................................................................. 10
6.6 Transactions in Capital Stock..................................................................10
6.7 No Bonus Shares................................................................................10
6.8 Subsidiaries...................................................................................10
6.9 Predecessor Status; etc........................................................................11
6.10 Spin-offs by Company...........................................................................11
6.11 No Third Party Options.........................................................................11
</TABLE>
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<TABLE>
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6.12 Financial Statements...........................................................................11
6.13 Liabilities and Obligations....................................................................11
6.14 Accounts and Notes Receivable..................................................................12
6.15 Permits........................................................................................13
6.16 Real and Personal Property.....................................................................13
6.17 Contracts and Commitments......................................................................13
6.18 Government Contracts...........................................................................15
6.19 Real Property..................................................................................15
6.20 Insurance......................................................................................15
6.21 Employees......................................................................................16
6.22 Employee Benefit Plans and Arrangements........................................................16
6.23 Compliance with Law; Authorizations............................................................20
6.24 Transactions With Affiliates...................................................................20
6.25 Litigation.....................................................................................20
6.26 Restrictions...................................................................................21
6.27 Taxes..........................................................................................21
6.28 Intellectual Property Matters..................................................................22
6.29 Completeness; No Violations....................................................................23
6.30 Existing Condition.............................................................................23
6.31 Deposit Accounts; Powers of Attorney...........................................................25
6.32 Books of Account...............................................................................25
6.33 Environmental Matters..........................................................................26
6.34 No Illegal Payments............................................................................27
6.35 Leases.........................................................................................27
6.36 Lease Funding..................................................................................30
6.37 Disclosure.....................................................................................30
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO.................................................................31
7.1 Corporate Existence............................................................................31
7.2 UniCapital Stock...............................................................................31
7.3 Corporate Power and Authorization..............................................................31
7.4 No Conflicts...................................................................................31
7.5 Capitalization of UniCapital...................................................................32
7.6 Compliance With Law; Authorizations............................................................32
7.7 Transactions With Affiliates...................................................................32
7.8 Litigation.....................................................................................32
7.9 Registration Rights............................................................................33
7.9 Miscellaneous..................................................................................33
8. COVENANTS OF STOCKHOLDER AND COMPANY....................................................................33
8.1 Business in the Ordinary Course................................................................34
8.2 Existing Condition.............................................................................34
8.3 Maintenance of Properties and Assets...........................................................34
</TABLE>
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<TABLE>
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8.4 Employees and Business Relations...............................................................34
8.5 Maintenance of Insurance.......................................................................34
8.6 Compliance with Laws, etc......................................................................34
8.7 Conduct of Business............................................................................34
8.8 Access.........................................................................................34
8.9 Press Releases and Other Communications........................................................35
8.10 Exclusivity....................................................................................35
8.11 Third Party Approvals .........................................................................36
8.12 Notice to Bargaining Agents ...................................................................36
8.13 Notification of Certain Matters................................................................36
8.14 Amendment of Schedules ........................................................................37
8.15 HSR Filing.....................................................................................37
8.16 Delivery of Information........................................................................37
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDER .....................................................38
9.1 Representations and Warranties; Performance of Obligations ................................... 38
9.2 Employment and Consulting Agreements ......................................................... 38
9.3 Opinion of Counsel ........................................................................... 38
9.4 Registration Statement ....................................................................... 38
9.5 HSR Act........................................................................................39
10. CONDITIONS PRECEDENT TO OBLIGATIONS
OF UNICAPITAL AND NEWCO ................................................................................39
10.1 Representations and Warranties; Performance of Obligations.....................................39
10.2 No Litigation .................................................................................39
10.3 Examination of Financial Statements ...........................................................39
10.4 No Material Adverse Change.....................................................................40
10.5 Regulatory Review .............................................................................40
10.6 Stockholder's Release .........................................................................40
10.7 Employment and Consulting Agreements ..........................................................40
10.8 Opinion of Counsel ............................................................................40
10.9 Consents and Approvals ........................................................................41
10.10 Good Standing Certificates ....................................................................41
10.11 Registration Statement ........................................................................41
10.12 Repayment of Indebtedness; Pre-Closing Distributions ..........................................41
10.13 Net Income.....................................................................................41
10.14 HSR Act........................................................................................41
11. COVENANTS OF UniCapital ................................................................................42
11.1 Leases ........................................................................................42
11.2 UniCapital Stock Options ......................................................................42
11.3 Information Filing.............................................................................42
</TABLE>
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<TABLE>
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11.4 HSR Filing.....................................................................................42
11.5 Employee Benefit Plan of UniCapital............................................................42
11.6 Release From Guarantees; Indebtedness..........................................................42
11.7 Dividend Financing.............................................................................43
12. INDEMNIFICATION; SURVIVAL ..............................................................................43
12.1 General Indemnification by Stockholder ........................................................43
12.2 Specific Indemnification by Stockholder .......................................................44
12.3 Indemnification by UniCapital and Newco .......................................................44
12.4 Third Party Claims ............................................................................44
12.5 Limitations on Indemnification.................................................................46
12.6 Survival of Representations and Warranties ....................................................47
13. TERMINATION OF AGREEMENT ...............................................................................47
13.1 Termination by UniCapital .....................................................................47
13.2 Termination by the Stockholder ................................................................48
13.3 Automatic Termination .........................................................................48
13.4 Liquidated Damages ............................................................................48
14. NONCOMPETITION AND NONSOLICITATION......................................................................49
14.1 Noncompetition ................................................................................49
14.2 Damages .......................................................................................49
14.3 Reasonable Restraint ..........................................................................50
14.4 Severability; Reformation .....................................................................50
14.5 Independent Covenant...........................................................................50
14.6 Materiality ...................................................................................50
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION ..............................................................50
15.1 Stockholder....................................................................................50
15.2 UniCapital ....................................................................................51
15.3 Damages .......................................................................................51
16. LOCK-UP AGREEMENTS .....................................................................................51
16.1 Agreement .....................................................................................51
16.2 Intended Third Party Beneficiaries ............................................................52
17. FEDERAL SECURITIES ACT AND CONTRACTUAL
RESTRICTIONS ON UNICAPITAL STOCK........................................................................52
17.1 Investment Intent .............................................................................52
17.2 Compliance with Law ...........................................................................53
17.3 Economic Risk; Sophistication .................................................................53
17.4 Information Supplied ..........................................................................53
</TABLE>
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<TABLE>
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18. SECURITIES LEGENDS .....................................................................................54
19. GENERAL ................................................................................................54
19.1 Cooperation ...................................................................................54
19.2 Successors and Assigns ........................................................................54
19.3 Entire Agreement...............................................................................55
19.4 Counterparts ..................................................................................55
19.5 Brokers and Agents ............................................................................55
19.6 Expenses ......................................................................................55
19.7 Notices .......................................................................................55
19.8 Governing Law .................................................................................57
19.9 Exercise of Rights and Remedies ...............................................................57
19.10 Time ..........................................................................................57
19.11 Reformation and Severability ..................................................................57
19.12 Remedies Cumulative............................................................................57
19.13 Captions ......................................................................................57
20. DEFINITIONS.............................................................................................57
</TABLE>
<PAGE> 7
AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION (the
"Agreement") is made as of the 14th day of February, 1998 between UNICAPITAL
CORPORATION, a Delaware corporation ("UniCapital"); JCS ACQUISITION CORP., a New
York corporation ("Newco"); Jacom Computer Services, Inc., which is to be
acquired pursuant to this Agreement (the "Company") and John L. Alfano
(the"Stockholder"), who is the only stockholder of the Company. Certain
capitalized terms used herein are defined in Article 20 hereof.
WHEREAS, UniCapital was incorporated on October 9, 1997 under the laws
of the State of Delaware for the purpose of acquiring a number of equipment
leasing businesses in different locations; and
WHEREAS, UniCapital intends to undertake an initial public offering of
its Common Stock (the "IPO") and in connection therewith intends to file a
Registration Statement on Form S-1 with the Securities and Exchange Commission
within 90 days of the execution and delivery of this Agreement;
WHEREAS, Newco was duly incorporated on January 29, 1998 under the laws
of the State of New York solely for the purpose of completing this transaction,
and is a wholly-owned subsidiary of UniCapital;
WHEREAS, the Company is a corporation organized and existing under the
laws of New York;
WHEREAS, the respective Boards of Directors of UniCapital, Newco and
the Company deem it advisable and in the best interests of such corporation and
their respective stockholders that Newco merge with and into the Company
pursuant to this Agreement and the applicable provisions of the laws of the
State of New York (such transaction being herein called the "Merger" and the
Company, Newco and UniCapital being hereinafter collectively referred to as the
"Constituent Corporations");
WHEREAS, the parties hereto intend that the transactions contemplated
in this Agreement constitute part of a single transaction involving the
simultaneous consummation of a number of similar agreements between UniCapital
and certain other corporations and partnerships and the IPO and that such single
transaction (the "Unified Transaction") shall fall within the provisions of
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1
<PAGE> 8
1. THE MERGER
1.1 DELIVERY AND FILING OF CERTIFICATE OF MERGER. The Constituent
Corporations will cause a Certificate of Merger, in substantially the form of
Annex I attached hereto with such changes therein as may be required by
applicable state laws (the "Certificate of Merger"), to be executed and
delivered to the Secretary of State of the state of New York on or before the
Merger Effective Date.
1.2 MERGER EFFECTIVE DATE. The "Merger Effective Date" shall be the
date specified in Section 5.3. At the Merger Effective Date, the Certificate of
Merger shall be filed in accordance with Section 1.1 either for immediate
effectiveness or to become effective if filed with such Secretary of State prior
to such date. On the Merger Effective Date upon the effectiveness of the Merger,
Newco shall be merged with and into the Company, in accordance with the
Certificate of Merger, and the separate existence of Newco shall cease. The
Company, as the entity surviving the Merger, is hereinafter sometimes referred
to as the "Surviving Corporation." The Merger shall have the effects specified
in the laws of the State of New York.
1.3 CERTIFICATE OF INCORPORATION, BYLAWS, BOARD OF DIRECTORS AND
OFFICERS OF THE SURVIVING CORPORATION. Upon the effectiveness of the Merger:
(a) the Certificate of Incorporation of the Company, as
amended and restated in the Certificate of Merger, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law;
(b) the Bylaws of the Company shall be the Bylaws of the
Surviving Corporation and shall remain so until thereafter duly amended;
(c) the Surviving Corporation shall have a Board of Directors
consisting of one member, who shall be Robert New commencing upon the
effectiveness of the Merger and who shall hold office subject to the laws of the
State of New York and the Certificate of Incorporation and Bylaws of the
Surviving Corporation; and
(d) the officers of the Company immediately prior to the
Merger Effective Date shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, each of such officers to serve,
subject to the provisions of the Certificate of Incorporation and Bylaws of the
Surviving Corporation, until such officer's successor is elected and qualified;
provided, that the Chairman of the Board (if any), the Treasurer and the
Secretary of the Company shall not succeed to the corresponding offices of the
Surviving Corporation, but instead (i) the sole director of the Surviving
Corporation shall be the Chairman of the Board of the Surviving Corporation,
(ii) the Treasurer of Newco shall be the Treasurer of the Surviving Corporation
and (iii) the Secretary of Newco shall be the Secretary of the Surviving
Corporation.
2
<PAGE> 9
2. MERGER CONSIDERATION
2.1 CONVERSION OF CAPITAL STOCK; MERGER CONSIDERATION.
(a) Upon the effectiveness of the Merger, all of the shares of
capital stock of the Company issued and outstanding immediately prior to the
effectiveness of the Merger ("Company Stock") shall, by virtue of the Merger and
without any action on the part of the holder thereof but subject to the
effectiveness of the Merger, automatically be converted into the right to
receive, without interest,
(i) an aggregate of $128,001,000 in cash,
(ii) an aggregate of 3,368,368 shares of common
stock, par value $.001 per share, of UniCapital ("UniCapital Stock") (the
consideration referred to in clauses (i) and (ii), all of which is to be
distributed to the Stockholder on the Merger Effective Date in the percentages
set forth on Annex II, subject to Article 4 hereof, is referred to in this
Agreement as the "Effective Date Consideration"); provided, however, in the
event that the aggregate value (based on the IPO price of the UniCapital Stock)
of the 3,368,368 shares of UniCapital Stock is less than $50,525,520 then
UniCapital shall issue additional shares to the Stockholder so that the
aggregate value of the shares of UniCapital Stock equals $50,525,520 (with
appropriate adjustment to the cash and stock components of the Effective Date
Consideration so as to eliminate fractional shares) and
(iii) the Earn-Out Consideration as described in
Section 2.5, to be distributed to the Stockholder within five business days
after the date the portion of the Earn-Out Consideration with respect to a given
calendar year (if any) is finally determined pursuant to Section 2.5 in the
percentages set forth on Annex II.
(b) Upon the effectiveness of the Merger, each share of
capital stock of Newco issued and outstanding immediately prior to the
effectiveness of the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, automatically be converted into one
fully paid and non-assessable share of common stock of the Surviving
Corporation, all of which converted common stock shall constitute all of the
outstanding shares of capital stock of the Surviving Corporation immediately
after the effectiveness of the Merger.
(c) The Effective Date Consideration and the Earn-Out
Consideration are referred to together in this Agreement as the "Merger
Consideration."
2.2 EXCHANGE PROCEDURES. On the Merger Effective Date, upon surrender
to UniCapital of certificates representing all of the outstanding shares of
Company Stock ("Certificates"), the Stockholder shall, subject to Article 4, be
entitled to receive, in exchange therefor, (i) the Stockholder's cash portion of
the Effective Date Consideration by wire transfer, calculated in accordance with
Annex II, and (ii) a certificate representing that number of whole shares of
UniCapital Stock which such holder has the right to receive in respect of the
Certificates
3
<PAGE> 10
surrendered, calculated in accordance with Annex II, and each Certificate so
surrendered shall forthwith be canceled. On the Merger Effective Date or as
promptly thereafter as is practicable, and subject to and in accordance with the
provisions of Article 4, UniCapital shall cause to be distributed to the
Indemnity Escrow Agent (as defined in Article 4) a certificate or certificates
representing the Escrow Shares (as defined in Article 4), which shall be
registered in the name of the Indemnity Escrow Agent as nominee for the
Stockholder and shall be held in accordance with the provisions of Article 4 and
the Indemnity Escrow Agreement referred to therein.
2.3 NO FRACTIONAL SHARES. Notwithstanding any other provision of this
Article 2, no fractional shares of UniCapital Stock will be issued and the
Stockholder shall instead receive in lieu of any such fractional share a cash
payment equal to such fraction multiplied by the IPO price.
2.4 ALLOCATION OF MERGER CONSIDERATION. The parties agree that they
will not take a position on any income tax return, before any governmental
agency charged with the collection of any income tax, or in any judicial
proceeding that is in any way inconsistent with the allocation (if any) of the
Merger Consideration to the Company made by UniCapital following the Closing.
2.5 EARN-OUT CONSIDERATION.
(a) If the earnings before taxes (the "EBT") of the Company
for the twelve months ending December 31, 1998 increased by amounts in respect
of those items set forth on Schedule 2.5 that affected net income during the
period from January 1, 1998 through the Closing Date and decreased by the sum of
(i) amount of UniCapital corporate overhead allocated to the Company for the
period from the Closing Date through December 31, 1998 and (ii) $1,000,000 (the
"Adjusted 1998 EBT"), exceeds the EBT of the Company for the twelve months
ending December 31, 1997, inclusive of the add-backs set forth on Schedule 2.5
("Adjusted 1997 EBT"), then the Stockholder shall be entitled to receive
one-half of the difference between the Adjusted 1998 EBT and the Adjusted 1997
EBT;
(b) If the EBT of the Company for the year ending December 31,
1999, decreased by the sum of (i) the amount of UniCapital corporate overhead
allocated to the Company and (ii) $1,000,000 ("Adjusted 1999 EBT" and together
with Adjusted 1997 EBT and Adjusted 1998 EBT, the "Company EBT") exceeds the
greater of Adjusted 1998 EBT and Adjusted 1997 EBT, then the Stockholder shall
be entitled to receive one-half of the difference between (i) the Adjusted 1999
EBT and (ii) the greater of the Adjusted 1998 EBT and the Adjusted 1997 EBT.
(c) The EBT of the Company for the years ending December 31,
1998 and December 31, 1999 shall be computed using generally accepted accounting
principles and practices as applied in the audited financial statements of the
Company included in the Registration Statement. The allocation of UniCapital
overhead shall be made on a pro rata basis applied consistently among UniCapital
subsidiaries. To the extent gain-on-sale treatment was accorded any Lease,
whether in the add-backs set forth on Schedule 2.5 or in any year, income from
the payment stream on such Lease shall not be included in the EBT of the Company
for any subsequent year.
4
<PAGE> 11
(d) The amounts (if any) that the Stockholder becomes entitled
to receive pursuant to Sections 2.5(a) and/or 2.5(b) are referred to herein as
the "Earn-Out Consideration." The Earn-Out Consideration shall be paid one-half
in cash and one-half in shares of UniCapital Stock, valued at the average of the
closing prices per share of UniCapital Stock for the [20] trading days preceding
December 31 of the year to which the portion of Earn-Out Consideration in
question applies.
(e) Company EBT shall be determined within forty-five days
following December 31 of such year.
(f) Any revenues and expenses associated with the acquisition
of any assets, business or entities by the Company which are consummated after
the Merger Effective Date shall be included in EBT for the applicable time
periods on the terms and conditions agreed to by the Company and UniCapital
prior to the consummation of any such acquisition.
(g) Notwithstanding anything in this Section 2.5 to the
contrary, if the Stockholder disputes the determination of Company EBT, then the
Stockholder's Representative shall notify UniCapital in writing of such dispute
and specify the amount thereof within 20 business days after notification of the
determination of Company EBT for any year. If UniCapital and the Stockholder's
Representative cannot resolve any such dispute which would affect the Earn-Out
Consideration, then such dispute shall be resolved by an Independent Accounting
Firm (as defined in Section 3.2). The Independent Accounting Firm shall be
directed to consider only those agreements, contracts, commitments or other
documents (or summaries thereof) that were either (i) delivered or made
available to Price Waterhouse LLP in connection with the transactions
contemplated hereby, or (ii) reviewed by Price Waterhouse LLP during the course
of determining Company EBT. The determination of the Independent Accounting Firm
shall be made as promptly as practicable and shall be final and binding upon the
parties, absent manifest error which error may only be corrected by such
Independent Accounting Firm. The costs of the Independent Accounting Firm shall
be borne by the party (either UniCapital or the Stockholder) whose determination
of Company EBT was further from the determination of the Independent Accounting
Firm. Pending resolution of any such dispute by the Independent Accounting Firm,
only the amount of the Earn-Out Consideration as determined by Price Waterhouse
LLP shall be paid by UniCapital. Once Company EBT is finally determined, the
Earn-Out Consideration attendant thereto not previously paid, if any, shall be
paid in accordance with this Section 2.5; provided that in the event the
Stockholder's determination of EBT was closer to the determination of the
Independent Accounting Firm than UniCapital's determination of EBT, the
Stockholder shall receive such Earn-Out Consideration plus interest which shall
accrue at the rate of 10% per annum on any such Earn-Out Consideration that is
resolved in the Stockholder's favor from the date the Earn-Out Consideration was
first payable to the date on which the Earn-Out Consideration is received by the
Stockholder.
(h) Any Earn-Out Consideration paid by UniCapital shall be
treated as additional consideration paid by UniCapital for the shares of Company
Stock.
5
<PAGE> 12
3. POST-CLOSING ADJUSTMENT; STOCKHOLDER'S REPRESENTATIVE
3.1 COMPUTATION. As soon as practicable, but in any event within 30
days after the Closing, UniCapital shall engage Price Waterhouse LLP to prepare,
in accordance with generally accepted accounting principles ("GAAP"), and
consistent with previous practice, a balance sheet of the Company (the "Closing
Date Balance Sheet") as of the end of business on the day prior to the Closing
Date (as defined in Section 5). If the aggregate stockholders' equity of the
Company as shown on the Closing Date Balance Sheet is less than the aggregate
stockholders' equity as shown on the balance sheet of the Company as at December
31, 1997 (not taking into account any dividends distributed pursuant to this
Agreement) as audited by Price Waterhouse LLP, then, subject to Section 3.2,
commencing 20 business days after delivery of the Closing Date Balance Sheet to
UniCapital, the aggregate Merger Consideration shall be adjusted downward
dollar-for-dollar by the amount of such deficiency (the "Net Worth Deficiency").
After the 20th business day after the delivery of the Closing Date Balance Sheet
to UniCapital (or if applicable, after the final determination of any Disputed
Amount in accordance with Section 3.2), UniCapital shall be entitled to recover
from the Escrow Property pursuant to Article 4 that portion of any Net Worth
Deficiency which does not exceed one-half of the initial balance of the Escrow
Property. For any amount by which any Net Worth Deficiency exceeds one-half of
the initial balance of the Escrow Property, such portion of the Net Worth
Deficiency shall be paid by the Stockholder not later than the 25th business day
after the delivery of the Closing Date Balance Sheet (or if applicable, not
later than the 5th business day after the final determination of any Disputed
Amount in accordance with Section 3.2). At its sole and exclusive option, and at
any time after such 25th business day (or if applicable, not later than the
fifth business day after the final determination of any Disputed Amount in
accordance with Section 3.2), UniCapital shall be entitled to recover from the
Escrow Property pursuant to Article 4 all or any portion of the amount of the
Net Worth Deficiency not paid by the Stockholder as required by this Article 3.
3.2 DISPUTES. Notwithstanding anything in this Article 3 to the
contrary, if there is any Net Worth Deficiency and the Stockholder disputes any
item contained on the Closing Date Balance Sheet, then the Stockholder's
Representative shall notify UniCapital in writing of each disputed item
(collectively, the "Disputed Amounts") and specify the amount thereof in dispute
within 20 business days after the delivery of the Closing Date Balance Sheet to
the Stockholder. If UniCapital and the Stockholder's Representative cannot
resolve any such dispute relating to the Net Worth Deficiency, then such dispute
shall be resolved by an independent nationally recognized accounting firm which
is reasonably acceptable to UniCapital and the Stockholder's Representative (the
"Independent Accounting Firm"). The determination of the Independent Accounting
Firm shall be made as promptly as practical and shall be final and binding on
the parties, absent manifest error which error may only be corrected by such
Independent Accounting Firm. Any expenses relating to the engagement of the
Independent Accounting Firm shall be allocated between UniCapital and the
Stockholder so that the Stockholder's aggregate share of such costs shall bear
the same proportion to the total costs that the Disputed Amounts unsuccessfully
contested by the Stockholder's Representative (as finally determined by the
Independent Accounting Firm) bear to the total of the Disputed Amounts so
submitted to the Independent Accounting Firm. Pending resolution of any
6
<PAGE> 13
such dispute by the Independent Accounting Firm, no such Disputed Amount shall
be due to UniCapital. Once any such Disputed Amount is finally determined to be
due to UniCapital, UniCapital may proceed to recover such amount in the manner
set forth in Section 3.1.
3.3 STOCKHOLDER'S REPRESENTATIVE.
(a) The Stockholder, by signing this Agreement, designates
John L. Alfano, (or, in the event that John L. Alfano is unable or unwilling to
serve, or resigns, Robert E. Seaman III) to be such Stockholder's Representative
for purposes of this Agreement (the "Stockholder's Representative"). The
Stockholder shall be bound by any and all actions taken by the Stockholder's
Representative on his behalf.
(b) UniCapital and Newco shall be entitled to rely upon any
communication or writing given or executed by the Stockholder's Representative.
All communications or writings to be sent to the Stockholder pursuant to this
Agreement may be addressed to the Stockholder's Representative and any
communication or writing so sent shall be deemed notice to the Stockholder
hereunder. The Stockholder hereby consents and agrees that the Stockholder's
Representative is authorized to accept deliveries, including any notice, on
behalf of the Stockholder pursuant hereto.
(c) The Stockholder's Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of the Stockholder, with full
power in his name and on his behalf to act according to the terms of this
Agreement in the absolute discretion of the Stockholder's Representative, and in
general to do all things and to perform all acts including, without limitation,
executing and delivering all agreements, certificates, receipts, instructions
and other instruments contemplated by or deemed advisable in connection with
Article 12 of this Agreement. This power of attorney and all authority hereby
conferred is granted subject to and coupled with the interest of the Stockholder
hereunder and in consideration of the mutual covenants and agreements made
herein, and shall be irrevocable and shall not be terminated by any act of the
Stockholder, by operation of law, whether by such Stockholder's death or any
other event.
(d) Notwithstanding the foregoing, the Stockholder's
Representative shall inform the Stockholder of all notices received, and of all
actions, decisions, notices and exercises of any rights, power or authority
proposed to be done, given or taken by such Stockholder's Representative, and
shall act as directed by the Stockholder.
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4. INDEMNITY ESCROW
4.1 CREATION OF ESCROW.
(a) At the Closing, as collateral security for the payment of
any indemnification obligations of the Stockholder pursuant to Sections 12.1 and
12.2 hereof and for the payment of amounts due pursuant to Article 3 hereof, the
following shall be delivered to an indemnity escrow agent agreed to by the
parties (the "Indemnity Escrow Agent"):
(i) ten percent (10%) of the number of shares of
UniCapital Stock issuable to the Stockholder as part of the Effective Date
Consideration in accordance with Annex II, rounded up to the nearest whole share
(the "Escrow Shares"); and
(ii) ten percent (10%) of the cash portion of the
Effective Date Consideration payable to the Stockholder in accordance with Annex
II, rounded up to the nearest whole cent (the "Escrow Cash").
(b) The Escrow Shares and the Escrow Cash are referred to
together as the "Escrow Property." In addition, the Escrow Property shall
include all cash and non-cash dividends and other property at any time received
or otherwise distributed in respect of or in exchange for any or all of the
Escrow Property, all securities hereafter issued in substitution for any of the
foregoing, all certificates and instruments representing or evidencing such
securities, all cash and non-cash proceeds of all of the foregoing property
except as provided in Section 4.3, all rights, titles, interests, privileges and
preferences appertaining or incident to the foregoing property.
4.2 DURATION AND TERMS. The Escrow Property shall be held and disbursed
by the Indemnity Escrow Agent in accordance with the terms of an Indemnity
Escrow Agreement substantially in the form attached hereto as Annex III. The
Indemnity Escrow Agent shall hold the Escrow Property pursuant to the Indemnity
Escrow Agreement until the later of: (a) the first anniversary of the Merger
Effective Date; and (b) the resolution of any claim for indemnification or
payment that is pending on the first anniversary of the Merger Effective Date,
but only to the extent of the amount of such pending claim.
4.3 VOTING AND INVESTMENT. The Stockholder shall be entitled to
exercise all voting powers incident to the Escrow Shares held by the Indemnity
Escrow Agent as their nominee, but shall not be entitled to exercise any
investment or dispositive powers over such Escrow Shares. The Escrow Cash shall
be invested from time to time by the Indemnity Escrow Agent as provided in the
Indemnity Escrow Agreement.
5. CLOSING; MERGER EFFECTIVE DATE
5.1 CLOSING. Within two business days following the date on which the
underwriting agreement relating to the offer and sale of shares of UniCapital
Stock in the IPO (the "Underwriting
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Agreement") shall have been executed, the parties shall take all actions
necessary to effect the Merger (other than the filing with the appropriate state
authorities of the Certificate of Merger, which shall be filed and become
effective on the Merger Effective Date) and to effect the conversion and
delivery of shares referred to in Article 2 hereof (hereinafter referred to as
the "Closing"); provided, that such actions shall not include the actual
completion of the Merger or the actual conversion and delivery of the shares
referred to in Article 2 hereof, which actions shall only be taken on the Merger
Effective Date as herein provided.
5.2 CLOSING DATE; LOCATION. The Closing shall take place at the offices
of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178. The date on
which the Closing shall occur shall be referred to as the "Closing Date."
5.3 EFFECTIVENESS OF MERGER. Concurrently with the consummation of the
sale of the shares of UniCapital Stock pursuant to the Underwriting Agreement,
the Merger shall become effective and all transactions contemplated by this
Agreement, including the conversion and delivery of shares and the delivery by
wire transfer of an amount equal to the cash which the Stockholder shall be
entitled to receive pursuant to the Merger referred to in Article 2 hereof,
shall occur and be deemed to be completed. The date on which the Merger is
effected shall be referred to as the "Merger Effective Date."
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, the Stockholder represents and warrants to UniCapital and Newco,
as follows:
6.1 CORPORATE EXISTENCE. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York.
The Company is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the conduct of its business
requires it to be so qualified, all of which jurisdictions are listed on
Schedule 6.1.
6.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
Company has the corporate power, authority and legal right to execute, deliver
and perform this Agreement. The execution, delivery and performance of this
Agreement by the Company have been duly authorized by the Board of Directors of
the Company and no further corporate action on the part of the Company or the
Stockholder is necessary to authorize this Agreement and the performance of the
transactions contemplated hereby. This Agreement has been, and the other
agreements, documents and instruments required to be delivered by the Company in
accordance with the provisions hereof (the "Company Documents") will be, duly
executed and delivered on behalf of the Company by duly authorized officers of
the Company, and this Agreement constitutes, and the Company Documents when
executed and delivered will constitute, the legal, valid and binding obligations
of the Company, enforceable against it in accordance with their respective
terms.
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6.3 AUTHORITY; OWNERSHIP. The Stockholder has the full legal right,
power and capacity or authority to enter into this Agreement. Upon the date of
this Agreement and immediately prior to the Closing Date, the Stockholder owns
and will own beneficially and of record all of the shares of capital stock of
the Company identified on Annex II as being owned by such Stockholder. The
conversion of Company Stock into UniCapital Stock and cash pursuant to the
provisions of this Agreement will transfer to UniCapital valid title in the
shares of Company Stock owned by the Stockholder, free and clear of all liens,
security interests, pledges, charges, voting trusts, equities, restrictions,
encumbrances and claims of every kind.
6.4 VALIDITY OF CONTEMPLATED TRANSACTIONS. The execution, delivery and
performance of this Agreement by the Company and the Stockholder does not and
will not violate, conflict with or result in the breach of any term, condition
or provision of, or require the consent of any other person under (a) any
existing law, ordinance, or governmental rule or regulation to which the Company
or the Stockholder is subject, (b) any judgment, order, writ, injunction, decree
or award of any Governmental Entity which is applicable to the Company or the
Stockholder, (c) the charter documents of the Company or any securities issued
by the Company, or (d) any mortgage, indenture, agreement, contract, commitment,
lease, plan, Authorization, or other instrument, document or understanding, oral
or written, to which the Company or the Stockholder is a party, by which the
Company or the Stockholder may have rights or by which any of the properties or
assets of the Company may be bound or affected, or give any party with rights
thereunder the right to terminate, modify, accelerate or otherwise change the
existing rights or obligations of the Company thereunder. Except for filing the
Certificate of Merger with the Secretary of State and filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 except as aforesaid, no
authorization, approval or consent of, and no registration or filing with, any
Governmental Entity is required in connection with the execution, delivery or
performance of this Agreement by the Company or the Stockholder.
6.5 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of the shares shown on Schedule 6.5, of which only the
shares shown on such Schedule 6.5 to be issued and outstanding are issued and
outstanding. All of the issued and outstanding shares of the capital stock of
the Company are owned by the Stockholder as set forth on Annex II, and are free
and clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. All of the issued and
outstanding shares of Company Stock to be outstanding on the Merger Effective
Date will have been duly authorized and validly issued, fully paid and
nonassessable, will be owned of record and beneficially by the Stockholder and
in the amounts set forth in Annex II, and will have been offered, issued, sold
and delivered by the Company in compliance with all applicable state and federal
laws concerning the offering, sale or issuance of securities. None of such
shares will have been, and none of the shares from which they will have derived
were, issued in violation of the preemptive rights of any past or present
stockholder, whether contractual or statutory.
6.6 TRANSACTIONS IN CAPITAL STOCK. The Company has not acquired any
treasury stock since December 31, 1995. No option, warrant, call, conversion
right or commitment of any kind exists which obligates the Company to issue any
of its authorized but unissued capital stock. The
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Company does not have any obligation (contingent or otherwise) to purchase,
redeem or otherwise acquire any of its equity securities or any interests
therein or to pay any dividend or make any distribution in respect thereof.
6.7 NO BONUS SHARES. None of the shares of capital stock of the Company
was, and none of the shares of Company Stock will be, issued pursuant to awards,
grants or bonuses, whether of stock or of options or other rights.
6.8 SUBSIDIARIES. Schedule 6.8 lists the name of each subsidiary of the
Company (a "Subsidiary"), if any. Except as set forth in Schedule 6.8, neither
the Company nor Subsidiary currently owns, of record or beneficially, or
controls, directly or indirectly, any capital stock, any securities convertible
into capital stock or any other equity interest in any corporation, association
or other business entity. Except as set forth on Schedule 6.8, neither the
Company nor any Subsidiary of the Company is, directly or indirectly, a
participant in any joint venture, partnership or other noncorporate entity.
6.9 PREDECESSOR STATUS; ETC. Schedule 6.9 lists all names of all
predecessor companies of the Company and each Subsidiary, if any, including the
names of all entities from whom the Company and each Subsidiary previously
acquired assets representing all or substantially all of the assets of that
entity. Except as set forth on Schedule 6.9, the Company has never been a
subsidiary or division of another corporation or been a part of an acquisition
which was later rescinded.
6.10 SPIN-OFFS BY COMPANY. Since December 31, 1995, there has not been
any sale or spin-off of significant assets of the Company or any Subsidiary
other than in the ordinary course of business.
6.11 NO THIRD-PARTY OPTIONS. There are no existing agreements, options,
commitments or rights with, of or to any person to acquire any properties,
assets or rights of the Company or any interest therein.
6.12 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.12 are copies
of the balance sheet of the Company (the "Balance Sheet") at December 31, 1997
(the "Balance Sheet Date") and December 31, 1996, and the related statements of
income, cash flows and changes in stockholders' equity for the fiscal years then
ended, certified by BDO Seidman, LLP, the Company's independent public
accountants, together with the report of such independent public accountants
thereon (the "Financial Statements");
All of the Financial Statements have been prepared in accordance with GAAP
consistently applied throughout the periods involved. The Financial Statements,
including the related notes, fairly presents the financial position, assets and
liabilities (whether accrued, absolute, contingent or otherwise) of the Company
as of the date indicated and the statements of income, cash flows and changes in
stockholders' equity fairly present the results of operations, cash flows and
changes in
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stockholders' equity of the Company for the periods indicated in accordance with
GAAP consistently applied.
6.13 LIABILITIES AND OBLIGATIONS.
(a) Except as reflected or reserved against in the balance
sheet as at the "Balance Sheet Date" included in the Financial Statements or in
the notes thereto, there are no liabilities against, relating to or affecting
the Company that would otherwise have been required to be reflected or reserved
against in the Financial Statements. Attached hereto as Schedule 6.13 is an
accurate list, as of a date not more than two days prior to the date of this
Agreement, of: (i) all liabilities of the Company which are reflected on the
unaudited balance sheet as of the Balance Sheet Date included in the Financial
Statements; (ii) all liabilities incurred thereafter other than in the ordinary
course of business; (iii) all material liabilities incurred after the Balance
Sheet thereafter in the ordinary course of business; and (iv) all liabilities
(A) incurred as of the Balance Sheet Date that are not reflected on the
unaudited balance sheet as of the Balance Sheet Date and (B) all liabilities
incurred thereafter that would not have been so reflected had such liabilities
been incurred as of the Balance Sheet Date. Each of the foregoing liabilities
that has not heretofore been paid or discharged is so noted on Schedule 6.13.
For purposes of this Agreement, "liabilities" means liabilities of any kind,
character or description, whether accrued, absolute, secured or unsecured,
contingent or otherwise.
(b) For each such liability for which the amount is not fixed
or is contested, Schedule 6.13 shall include a summary description of the
liability, together with copies of all relevant non-privileged documentation
relating thereto, detail of all amounts claimed and any other action or relief
sought, the names of the claimant and all other parties to the claim, suit or
proceeding, the name of each court or agency before which such claim, suit or
proceeding is pending, the date such claim, suit or proceeding was instituted,
and a best estimate of the maximum amount, if any, which is likely to become
payable with respect to each such liability. If no estimate is provided, the
best estimate shall for purposes of this Agreement be deemed to be zero. On the
Closing Date, the Company shall deliver, and shall cause its accountants,
outside counsel and other representatives or agents to deliver, copies of all
privileged documents related to liabilities as listed on Schedule 6.13.
(c) All of the liabilities reflected on the unaudited balance
sheet included in the Financial Statements arose only out of or were incurred
only in connection with the conduct of the business of the Company. Except as
set forth on Schedule 6.13 and except for liabilities not required to be set
forth thereon pursuant to Section 6.13(a), the Company has no liabilities or
obligations with respect to its business, whether direct or indirect, matured or
unmatured, absolute contingent or otherwise, and there is no condition,
situation or set of circumstances which would reasonably be expected to result
in any such liability.
6.14 ACCOUNTS AND NOTES RECEIVABLE. Attached hereto as Schedule 6.14 is
a complete and accurate list, as of a date not more than two days prior to the
date of this Agreement, of the accounts and notes receivable of the Company
(including, without limitation, receivables from and
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advances to employees and Stockholder) other than those arising out of Leases
(collectively, the "Accounts Receivable"). Schedule 6.14 includes an aging of
all Accounts Receivable showing amounts due in 30-day aging categories. On the
Closing Date, the Stockholder will deliver to UniCapital a complete and accurate
list, as of a date not more than two days prior to the Closing Date, of the
Accounts Receivable. All Accounts Receivable represent valid obligations arising
from bona fide business transactions in the ordinary course of business
consistent with past practice. The Accounts Receivable are, and as of the
Closing Date and the Merger Effective Date will be, collectible net of any
respective reserves shown on the Company's books and records (which reserves are
adequate and calculated consistent with past practice). Subject in the case of
Accounts Receivable reflected on the Company's balance sheet to such reserves
reflected on such balance sheet, each of the Accounts Receivable will be
collected in full within ninety (90) days after the day on which it first became
due and payable. There is no contest, claim, counterclaim, defense or right of
set-off, other than rebates and returns in the ordinary course of business,
under any contract with any obligor of any Account Receivable relating to the
amount or validity of such Account Receivable. The allowance for collection
losses on the Balance Sheet has been determined in accordance with GAAP
consistent with past practice.
6.15 PERMITS. Each material Permit, together with the name of the
Governmental Entity issuing such Permit is set forth on Schedule 6.15. Such
Permits are valid and in full force and effect and none of such Permits will be
terminated or impaired or become terminable as a result of the transactions
contemplated by this Agreement. Upon consummation of such transactions, the
Surviving Corporation will have all of the Company's right, title and interest
in the Permits.
6.16 REAL AND PERSONAL PROPERTY. Attached hereto as Schedule 6.16 is an
accurate list, including substantially complete descriptions as of the Balance
Sheet Date, of all the real and personal property (which in the case of personal
property had an original cost in excess of $25,000) owned or where the Company
is a lessee or a sublessee, including true and correct copies of leases for
equipment and properties on which are situated buildings, warehouses and other
structures used in the operation of the business of the Company and including an
indication as to which assets were formerly owned by any Stockholder or
affiliate (which term, as used herein, shall have the meaning ascribed thereto
in Rule 144(a)(1) promulgated under the Securities Act of 1933, as amended (the
"Securities Act")) of the Company. Except as set forth on Schedule 6.16, all of
the Company's buildings, leasehold improvements, structures, facilities,
equipment and other material items of tangible property and assets owned or
leased by the Company are in good operating condition and repair, subject to
normal wear and maintenance, are usable in the regular and ordinary course of
business and conform to all applicable laws, ordinances, codes, rules and
regulations, and Authorizations relating to their construction, use and
operation. All leases set forth on Schedule 6.16 have been duly authorized,
executed and delivered and constitute the legal, valid and binding obligations
of the Company and, to the knowledge of the Stockholder, no other party to any
such lease is in default thereunder and such leases constitute the legal, valid
and binding obligations of such other parties. All fixed assets used by the
Company in the operation of its business are either owned by the Company or
leased under an agreement set forth on Schedule 6.16. The Company and the
Stockholder have heretofore delivered to UniCapital copies of all title reports
and title insurance
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policies received or held by the Company. The Company and the Stockholder have
indicated on Schedule 6.16 a summary description of all plans or projects
involving the opening of new operations, expansion of any existing operations or
the acquisition of any real property or existing business to which management of
the Company has devoted any significant effort or expenditure in the two-year
period prior to the date of this Agreement which, if pursued by the Company
would require additional expenditures of significant efforts or capital.
6.17 CONTRACTS AND COMMITMENTS. Schedule 6.17 sets forth an accurate,
correct and complete list of all agreements, contracts, commitments,
arrangements and understandings, written or oral, including all amendments and
supplements thereto, of the Company other than Leases (the "Contracts"), to
which the Company is a party or is bound, or by which any of their respective
assets are bound, and which involve any:
(a) agreement, contract, commitment, arrangement or
understanding with any present or former employee or consultant or for the
employment of any person, including any consultant;
(b) agreement, contract, commitment, arrangement or
understanding for the future purchase of, or payment for, supplies or products,
or for the performance of services by a third party involving in any one case
$35,000 or more;
(c) agreement, contract, commitment, arrangement or
understanding to sell or supply products or to perform services involving in any
one case $35,000 or more;
(d) agreement, contract, commitment, arrangement or
understanding containing minimum requirements or "take or pay" provisions;
(e) agreement, contract, commitment, arrangement or
understanding not otherwise listed on Schedule 6.17 and continuing over a period
of more than six months from the date hereof or exceeding $35,000 in value;
(f) distribution, dealer, representative or sales agency
agreement, contract, commitment, arrangement or understanding;
(g) agreement, contract, commitment, arrangement or
understanding containing a provision to indemnify any person or entity or assume
any tax, environmental or other liability;
(h) agreement, contract, commitment, arrangement or
understanding with federal, state, local, regulatory or other governmental
entities;
(i) note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement or other contract or commitment for the
borrowing or lending of money or agreement
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or arrangement for a line of credit or guarantee, pledge or undertaking of the
indebtedness of any other person;
(j) agreement, contract, commitment, arrangement or
understanding for any charitable or political contribution;
(k) agreement, contract, commitment, arrangement or
understanding for any capital expenditure or leasehold improvement in excess of
$35,000;
(l) agreement, contract, commitment, arrangement or
understanding limiting or restraining the Company or any successor thereto, or
to the knowledge of the Company and the Stockholder, any employee of the Company
or any successor thereto, from engaging or competing in any manner or in any
business;
(m) license, franchise, distributorship or other agreement
which relates in whole or in part to any software, patent, trademark, trade
name, service mark or copyright or to any ideas, technical assistance or other
know-how of or used by the Company;
(n) agreement, contract, commitment, arrangement or
understanding to which the Company, on the one hand, and any affiliate, officer,
director or stockholder of the Company, on the other hand, are parties; or
(o) material agreement, contract, commitment, arrangement or
understanding not made in the ordinary course of business.
Each of the Contracts listed on Schedule 6.17, or not required to be listed
therein because of the amount thereof, is valid and enforceable in accordance
with its terms; the Company is, and to the knowledge of the Company and the
Stockholder, all other parties thereto are, in compliance with the provisions
thereof. The Company is not, and to the knowledge of the Company and the
Stockholder, no other party thereto is, in default in the performance,
observance or fulfillment of any material obligation, covenant or condition
contained therein; and no event has occurred which with or without the giving of
notice or lapse of time, or both, would constitute a default thereunder. None of
the rights of the Company under any Contract will be impaired by the
consummation of the transactions contemplated hereby, and all such rights will
be enforceable by the applicable Surviving Corporation after the Merger
Effective Date without the consent or agreement of any other party. The Company
has delivered accurate and complete copies of each Contract to UniCapital. No
Contract obligates any party to obtain any consent in connection with the
transactions contemplated hereby.
6.18 GOVERNMENT CONTRACTS. The Company is not now or never has been a
party to any contract with any Governmental Entity subject to price
redetermination or renegotiation.
6.19 REAL PROPERTY. The Company does not own any real property.
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6.20 INSURANCE. The assets, properties and operations of the Company
are insured under various policies of general liability and other forms of
insurance, all of which are described in Schedule 6.20, which discloses for each
policy the risks insured against, coverage limits, deductible amounts, all
outstanding claims thereunder, and whether the terms of such policy provide for
retrospective premium adjustments. All such policies are in full force and
effect in accordance with their terms, no notice of cancellation has been
received, and there is no existing default or event which, with the giving of
notice or lapse of time or both, would constitute a default thereunder. Such
policies are in amounts which, in relation to the business and assets of the
Company, are consistent with the normal or customary industry practice and all
premiums due to date have been paid in full. The Company has not been refused
any insurance, nor has the Company's coverage been limited, by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the past five years. Schedule 6.20 also contains a true and
complete description of all outstanding bonds and other surety arrangements
issued or entered into in connection with the business, assets and liabilities
of the Company.
6.21 EMPLOYEES. Schedule 6.21 contains the following with respect to
the Company:
(a) a list of all employees of the Company (including name,
title and position);
(b) each such employee's length of service; and
(c) the compensation (including terms of payment, bonuses,
commissions and deferred compensation, as well as any benefits) of each such
employee.
Except as disclosed on Schedule 6.21: (i) there have not been in the past five
years and, to the knowledge of the Company and the Stockholder, there are not
pending, any labor disputes, work stoppages, requests for representation,
pickets or work slow-downs due to labor disagreements; (ii) there are and have
been no unresolved violations of any Laws of any Governmental Entity respecting
the employment of any employees; (iii) there is no unfair labor practice, charge
or complaint pending, unresolved or, to the knowledge of the Company and the
Stockholder, threatened before the National Labor Relations Board or similar
body in any foreign country; (iv) there is no employment handbook, personnel
policy manual, or similar document that creates prospective employment rights or
obligations; (v) the employees of the Company are not covered by any collective
bargaining agreement; (vi) the Company has provided or will timely provide prior
to Closing all notices required by law to be given prior to Closing to all
local, state, federal or national labor, wage-payment, equal employment
opportunity, unemployment insurance and related agencies; (vii) the Company has
paid or properly accrued in the ordinary course of business all wages and
compensation due to employees, including all vacations or vacation pay, holidays
or holiday pay, sick days or sick pay, and bonuses; and (viii) the transactions
contemplated by this Agreement will not create liability under any Laws of any
Governmental Entity respecting reductions in force or the impact on employees on
plant closing or sales of businesses. All employees of the Company are legally
able to work in the United States.
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6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. Schedule 6.22 sets forth
a complete and accurate list of each Benefit Plan covering any present or former
officers, employees or directors of the Company. "Benefit Plan" means each
"employee pension benefit plan" (as defined in Section 3(2) of ERISA,
hereinafter a "Pension Plan"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA, hereinafter a "Welfare Plan") and each other plan or
arrangement (written or oral) relating to deferred compensation, bonus,
performance compensation, stock purchase, stock option, stock appreciation,
severance, vacation, sick leave, holiday pay, fringe benefits, personnel policy,
reimbursement program, incentive, insurance, welfare or similar plan, program,
policy or arrangement, in each case maintained or contributed to, or required to
be maintained or contributed to, by the Company or its affiliates or any other
person or entity that, together with the Company, is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code (each, together with
the Company, a "Commonly Controlled Entity") for the benefit of any present or
former officer, employee or director. The Company have no intent or commitment
to create any additional Benefit Plan or amend any Benefit Plan so as to
increase benefits thereunder. The Company have not created any Benefit Plan or
declared or paid any bonus compensation in contemplation of the transactions
contemplated by this Agreement. A current, accurate and complete copy of each
Benefit Plan has been made available to UniCapital. Except as disclosed on
Schedule 6.22:
(a) each Benefit Plan is in substantial compliance with all
reporting, disclosure and other requirements of ERISA applicable to such Benefit
Plan;
(b) each Pension Plan which is intended to be qualified under
Section 401(a) of the Code, has been determined by the Internal Revenue Service
to be so qualified and, to the knowledge of the Company and the Stockholder, no
condition exists that would adversely affect any such determination;
(c) neither any Benefit Plan, nor the Company, nor any
Commonly Controlled Entity, nor any trustee or agent has been or is presently
engaged in any prohibited transactions as defined by Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not applicable which could
subject the Company to the tax or penalty imposed by Section 4975 of the Code or
Section 502 of ERISA;
(d) there is no event or condition existing which could be
deemed a "reportable event" (within the meaning of Section 4043 of ERISA) with
respect to which the thirty-day notice requirement has not been waived; to the
knowledge of the Company and the Stockholder, no condition exists which could
subject the Company to a penalty under Section 4071 of ERISA;
(e) neither the Company nor any Commonly Controlled Entity is
or has ever been party to any "multi-employer plan," as that term is defined in
Section 3(37) of ERISA;
(f) true and correct copies of the most recent annual report
on Form 5500 and any attached schedules for each Benefit Plan (if any such
report was required by applicable law) and a
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true and correct copy of the most recent determination letter issued by the
Internal Revenue Service for each Pension Plan have been provided to UniCapital;
(g) with respect to each Benefit Plan, there are no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
pending or, to the knowledge of the Company and the Stockholder, threatened
against any Benefit Plan, the Company, any Commonly Controlled Entity or any
trustee or agent of any Benefit Plan; and
(h) with respect to each Benefit Plan to which the Company or
any Commonly Controlled Entity is a party which constitutes a group health plan
subject to Section 4980B of the Code, each such Benefit Plan substantially
complies, and in each case has substantially complied, with all applicable
requirements of Section 4980B of the Code.
(i) Except as set forth in Schedule 6.22:
(i) there is no outstanding liability (except for
premiums due) under Title IV of ERISA with respect to any Pension Plan;
(ii) neither the Pension Benefit Guaranty Corporation
nor the Company nor any Commonly Controlled Entity has instituted proceedings to
terminate any Pension Plan and the Pension Benefit Guaranty Corporation has not
informed the Company of its intent to institute proceedings to terminate any
Pension Plan;
(iii) full payment has been made of all amounts which
the Company or any Commonly Controlled Entity was required to have paid as a
contribution to the Pension Plans as of the last day of the most recent fiscal
year of each of the Pension Plans ended prior to the date of this Agreement, and
none of the Pension Plans has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of each such Pension
Plan ended prior to the date of this Agreement;
(iv) to the knowledge of the Company and the
Stockholder, the actuarial assumptions utilized, where appropriate, in
connection with determining the funding of each Pension Plan which is a defined
benefit pension plan (as set forth in the actuarial report for such Pension
Plan) are reasonable. Copies of the most recent actuarial reports have been
furnished to UniCapital. Based on such actuarial assumptions, as of the Balance
Sheet Date, the fair market value of the assets or properties held under each
such Pension Plan exceeds the actuarially determined present value of all
accrued benefits of such Pension Plan (whether or not vested) determined on an
ongoing Pension Plan basis;
(v) each of the Benefit Plans is, and its
administration is and has been during the six-year period preceding the date of
this Agreement, in substantial compliance with, and the Company has not received
any claim or notice that any such Benefit Plan is not in compliance
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with, all applicable laws and orders and prohibited transaction exemptions,
including without limitation, to the extent applicable, the requirements of
ERISA;
(vi) Neither the Company nor any Commonly Controlled
Entity is in default in performing any of its contractual obligations under any
of the Benefit Plans or any related trust agreement or insurance contract;
(vii) there are no material outstanding liabilities
of any Benefit Plan other than liabilities for benefits to be paid to
participants in the Benefit Plans and their beneficiaries in accordance with the
terms of the Benefit Plans;
(viii) each Benefit Plan may be amended or modified
by the Company or Commonly Controlled Entity at any time without liability
except under any defined pension benefit plan;
(ix) no Benefit Plan other than a Pension Plan,
retiree medical plan or severance plan provides benefits to any individual after
termination of employment;
(x) the consummation of the transactions contemplated
by this Agreement will not (in and of itself): (A) entitle any employee of the
Company to severance pay, unemployment compensation or any other payment; (B)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee; (C) result in any liability under Title
IV of ERISA; (D) result in any prohibited transaction described in Section 406
of ERISA or Section 4975 of the Code for which an exemption is not available; or
(E) result (either alone or in conjunction with any other event) in the payment
or series of payments by the Company or any of its affiliates to any person of
an "excess parachute payment@ within the meaning of Section 280G of the Code;
(xi) with respect to each Benefit Plan that is funded
wholly or partially through an insurance policy, all premiums required to have
been paid to date under the insurance policy have been paid, all premiums
required to be paid under the insurance policy through the Merger Effective Date
will have been paid on or before the Merger Effective Date and, as of the Merger
Effective Date, there will be no liability of the Company or any Commonly
Controlled Entity under any insurance policy or ancillary agreement with respect
to such insurance policy in the nature of a retroactive rate adjustment, loss
sharing arrangement or other actual or contingent liability arising wholly or
partially out of events occurring prior to the Merger Effective Date;
(xii) (A) each Benefit Plan that constitutes a
Welfare Plan, and for which contributions are claimed by the Company or any
Commonly Controlled Entity as deductions under any provision of the Code, is in
material compliance with all applicable requirements pertaining to such
deduction;
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(B) with respect to any welfare benefit fund
(within the meaning of Section 419 of the Code) related to a welfare benefit
plan, there is no disqualified benefit (within the meaning of Section 4976(b) of
the Code) that would result in the imposition of a tax under Section 4976(a) of
the Code; and
(C) all welfare benefit funds intended to be
exempt from tax under Section 501(a) of the Code have been determined by the
Internal Revenue Service to be so exempt and no event or condition exists which
would adversely affect any such determination; and
(xiii) all benefit plans outside of the United
States, if any (the "Foreign Plans"), are in compliance with all applicable laws
and regulations and have been operated in accordance with the plans' respective
terms. There are no material unfunded liabilities under or in respect of the
Foreign Plans, and all contributions or other payments required to be made to or
in respect of the Foreign Plans prior to the Merger Effective Date have been
made or will be made prior to the Merger Effective Date.
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS. The Company has complied with
each, and is not in violation of any, law, ordinance, or governmental or
regulatory rule or regulation, whether federal, state, local or foreign, to
which the Company's business, operations, assets or properties is subject. The
Company owns, holds, possesses or lawfully uses in the operation of its business
all franchises, licenses, permits, easements, rights, applications, filings,
registrations and other authorizations ("Authorizations") which are in any
manner necessary for it to conduct its business as now or previously conducted
or for the ownership and use of the assets owned or used by it in the conduct of
its business, free and clear of all liens, charges, restrictions and
encumbrances and in compliance with all Regulations. All such Authorizations are
listed and described in Schedule 6.23. The Company is not in default, nor has
the Company received any notice of any claim of default, with respect to any
such Authorization. All such Authorizations are renewable by their terms or in
the ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
None of such Authorizations will be adversely affected by consummation of the
transactions contemplated hereby. No Stockholder and no director, officer,
employee or former employee of the Company or any affiliates of the Company, or
any other person, firm or corporation, owns or has any proprietary, financial or
other interest (direct or indirect) in any Authorization which the Company owns,
possesses or uses in the operation of the business of the Company as now or
previously conducted.
6.24 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
6.24, no Stockholder and no director, officer or employee of the Company, or any
member of his or her immediate family or any other of its, his or her
affiliates, owns or has a 5% or more ownership interest in any corporation or
other entity that is or was during the last three years a party to, or in any
property which is or was during the last three years the subject of, any
contract, agreement or understanding, business arrangement or relationship with
the Company.
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6.25 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of the Company and the Stockholder, threatened against the Company or
which relates to the transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 6.25, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of the Company and the Stockholder, threatened
against the Company or which relates to the Company.
(c) Neither the Company nor the Stockholder knows of any
reasonably likely basis for any litigation, arbitration, investigation or
proceeding referred to in Sections 6.25(a) or (b).
(d) Except as set forth on Schedule 6.25, the Company is not a
party to or subject to the provisions of any judgment, order, writ, injunction,
decree or award of any court, arbitrator or governmental or regulatory official,
body or authority.
6.26 RESTRICTIONS. The Company is not a party to any indenture,
agreement, contract, commitment, lease, plan, license, permit, authorization or
other instrument, document or understanding, oral or written, or subject to any
charter or other corporate restriction or any judgment, order, writ, injunction,
decree or award which materially adversely affects or materially restricts or,
so far as the Company or any of the Stockholder can now reasonably foresee, may
in the future materially adversely affect or materially restrict, the business,
operations, assets, properties, prospects or condition (financial or otherwise)
of the Company after consummation of the transactions contemplated hereby.
6.27 TAXES. All federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by the Company (the
"Tax Returns") with respect to any federal, state, local or foreign taxes,
assessments, interest, penalties, deficiencies, fees and other governmental
charges or impositions (including without limitation all income tax,
unemployment compensation, social security, payroll, sales and use, excise,
privilege, property, ad valorem, franchise, license, school and any other tax or
similar governmental charge or imposition under laws of the United States or any
state or municipal or political subdivision thereof or any foreign country or
political subdivision thereof) ((singly, a "Tax," and collectively, the "Taxes")
have been timely filed with the appropriate governmental agencies in all
jurisdictions in which such Tax Returns are required to be filed, and all such
Tax Returns properly reflect the liabilities of the Company for Taxes for the
periods, property or events covered thereby. All Taxes, including without
limitation those which are called for by the Tax Returns, required to be paid,
withheld or accrued by the Company and any deficiency assessments, penalties and
interest have been timely paid, withheld or accrued except for any local
personal property taxes (i) not in excess $1,000 in the aggregate for any
jurisdiction or (ii) not in excess of $7,500 for all such jurisdictions in the
aggregate, which are the obligations of third parties pursuant to an agreement
with the Company. The accruals for Taxes contained in the Balance Sheet are
adequate to cover the Tax liabilities of the Company as of that
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date and include adequate provision for all deferred Taxes, and nothing has
occurred subsequent to that date to make any of such accruals inadequate. The
Company's Tax basis in its assets for purposes of determining its future
amortization, depreciation and other federal income tax deductions is accurately
reflected on the Company's Tax books and records. The Company is not or has
never at any time been a party to a Tax sharing, Tax indemnity or Tax allocation
agreement, and the Company has not assumed any Tax liability of any other person
or entity under contract. The Company has not received any notice of assessment
or proposed assessment in connection with any Tax Returns and there are not
pending tax examinations of or tax claims asserted against the Company or any of
its assets or properties. The Company has not extended, or waived the
application of, any statute of limitations of any jurisdiction regarding the
assessment or collection of any Taxes. There are now (and as of immediately
following the Closing there will be) no Liens (other than any Lien for current
Taxes not yet due and payable) on any of the assets or properties of the Company
relating to or attributable to Taxes. To the knowledge of the Company and the
Stockholder, there is no basis for the assertion of any claim relating to or
attributable to Taxes which, if adversely determined, would result in any Lien
on the assets of the Company or otherwise have an adverse effect on the Company
or its business, operations, assets, properties, prospects or condition
(financial or otherwise). Neither the Company nor the Stockholder have any
knowledge of any basis for any additional assessment of any Taxes. All Tax
payments related to employees, including income tax withholding, FICA, FUTA,
unemployment and worker's compensation, required to be made by the Company have
been fully and properly paid, withheld, accrued or recorded. There are no
contracts, agreements, plans or arrangements, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company that, individually or collectively, could give rise to any payment (or
portion thereof) that would not be deductible pursuant to Sections 280G, 404 or
162 of the Code. Two correct and complete copies of (a) all Tax examinations,
(b) all extensions of statutory limitations and (c) all federal, state and local
income tax returns and franchise tax returns of the Company for the last five
fiscal years, or such shorter period of time as any of them shall have existed,
have heretofore been delivered by the Company and the Stockholder to UniCapital.
The Company made an election to be taxed under the provisions of Subchapter S of
the Code and has at no time in the past five years been taxed under the
provisions of Subchapter C of the Code. The Company has a taxable year ended
December 31 and the Company has not made an election to retain a fiscal year
other than December 31 under Section 444 of the Code. The Company does not have
any net recognized built-in gain within the meaning of Section 1374 of the Code.
The Company currently utilizes the accrual method of accounting for income tax
purposes and has not changed its method of accounting for income tax purposes in
the past five years.
6.28 INTELLECTUAL PROPERTY MATTERS.
(a) The Company has never utilized or does not currently
utilize any patent, trademark, trade name, service mark, copyright, software,
trade secret or know-how material to the business of such Company except for
those listed on Schedule 6.28 (the "Intellectual Property"), all of which are
owned by the Company free and clear of any liens, claims, charges or
encumbrances, or are licensed by the Company or are in the public domain. The
Intellectual Property constitutes
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all such assets, properties and rights which are used or held for use in, or are
necessary for, the conduct of the business of the Company.
(b) There are no royalty, commission or similar arrangements,
and no licenses, sublicenses or agreements, pertaining to any of the
Intellectual Property or products or services of the Company.
(c) The Company does not infringe upon or unlawfully or
wrongfully use any patent, trademark, trade name, service mark, copyright or
trade secret owned or claimed by another. No action, suit, proceeding or
investigation has been instituted or, to the knowledge of the Company and the
Stockholder, threatened relating to any, patent, trademark, trade name, service
mark, copyright or trade secret formerly or currently used by the Company. None
of the Intellectual Property is subject to any outstanding order, decree or
judgment. The Company has never agreed to indemnify any person or entity for or
against any infringement of or by the Intellectual Property.
(d) No present or former employee of the Company and no other
person or entity owns or has any proprietary, financial or other interest,
direct or indirect, in whole or in part, in any patent, trademark, trade name,
service mark or copyright, or in any application therefor, or in any trade
secret, which the Company owns, possesses or uses in its operations as now or
heretofore conducted. Schedule 6.28(d) lists all confidentiality or
non-disclosure agreements currently in force and effect to which the Company or
any of its employees is a party.
(e) Schedule 6.28(e) sets forth a complete and accurate list
of all items of Intellectual Property duly registered in, filed in or issued by
the United States Copyright Office or the United States Patent and Trademark
Office, any offices in the various states of the United States and any offices
in other jurisdictions.
(f) All rights of the Company in the Intellectual Property
shall vest in the applicable Surviving Corporation pursuant to the transactions
contemplated hereby without any consent or other approval.
(g) All Intellectual Property in the form of computer software
that is utilized by the Company in the operations of its business is capable of
processing date data between and within the twentieth and twenty-first centuries
or can be rendered capable of processing such data within six (6) months by the
expenditure of more than $40,000.
6.29 COMPLETENESS; NO VIOLATIONS. The certified copies of the
Certificate of Incorporation and Bylaws, both as amended to date, of the
Company, and the copies of all material leases, instruments, agreements,
licenses, permits, certificates or other documents which are included on
Schedules attached hereto or which have been delivered or which have been made
available to UniCapital in connection with the transactions contemplated hereby,
are complete and correct; neither the Company nor, to the knowledge of the
Stockholder, any other party to any of the foregoing is in material default
thereunder; and, except as set forth in the schedules and documents
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<PAGE> 30
attached to this Agreement, the rights and benefits of the Company thereunder
will not be materially and adversely affected by the transactions contemplated
hereby, and the execution of this Agreement and the performance of the
obligations hereunder will not result in a material violation or breach or
constitute a material default under any of the terms or provisions thereof.
Except as set forth on Schedule 6.29, none of such leases, instruments,
agreements, contracts, licenses, permits, certificates or other documents
requires notice to, or the consent or approval of, any governmental agency or
other third party to any of the transactions contemplated hereby to remain in
full force and effect. The consummation of the transactions contemplated hereby
will not give rise to any right of termination, cancellation or acceleration or
result in the loss of any right or benefit thereunder.
6.30 EXISTING CONDITION. Since the Balance Sheet Date, except as set
forth on Schedule 6.30, the Company has not:
(a) incurred any liabilities, other than liabilities incurred
in the ordinary course of business consistent with past practice, or discharged
or satisfied any lien or encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice, or failed to pay or
discharge when due any liabilities of which the failure to pay or discharge has
caused or will cause any material damage or risk of material loss to it or any
of its assets or properties;
(b) sold, encumbered, assigned or transferred any assets,
properties or rights or any interest therein, except for the sales in the
ordinary course of business consistent with past practice, or made any agreement
or commitment or granted any option or right with, of or to any person to
acquire any assets, properties or rights of the Company or any interest therein;
(c) created, incurred, assumed or guaranteed any indebtedness
for money borrowed, or mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract or other
encumbrance of any nature whatsoever, except in the ordinary course of business
consistent with past practice;
(d) made or suffered any material amendment or termination of
any material agreement, contract, commitment, lease or plan to which it is a
party or by which it is bound, or canceled, materially modified or waived any
substantial debts or claims held by it or waived any rights of substantial
value, whether or not in the ordinary course of business;
(e) declared, set aside or paid any dividend or made or agreed
to make any other distribution or payment in respect of its capital shares or
redeemed, purchased or otherwise acquired or agreed to redeem, purchase or
acquire any of its shares of capital stock or other ownership interests, other
than a dividend consistent with past practice of up to $32.3 million (pursuant
as well to Section 11.7), which shall have been declared and paid prior to the
Closing;
(f) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting its business,
operations, assets, properties or prospects or (ii) of any item or items carried
on its books of account individually or in the aggregate at more than
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$35,000, or suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;
(g) suffered any material adverse change in its business,
operations, assets, properties, prospects or condition (financial or otherwise),
other than as directly caused by adverse economic conditions not specific to, or
having an extraordinary impact upon, the Company;
(h) received notice or had knowledge of any actual or
threatened labor trouble, strike or other occurrence, event or condition of any
similar character which has had or might have an adverse effect on its business,
operations, assets, properties or prospects;
(i) made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $25,000, except (i)
in the ordinary course of business consistent with past practice, (ii) such as
may be involved in ordinary repair, maintenance or replacement of its assets;
and (iii) for the implementation of a new computerized accounting system which
shall not exceed $100,000 in total cost.
(j) increased the salaries or other compensation of, or made
any advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its employees or made any increase in, or any addition to, other
benefits to which any of its employees may be entitled, except in the ordinary
course of business consistent with past practice and not to exceed 5% for any
individual unless otherwise agreed by UniCapital; John Alfano's compensation (i)
for the year ended December 31, 1997 did not exceed $8.5 million and (ii) for
the period from January 1, 1998 through the Closing Date will not exceed an
amount which is equal to the a pro rata portion of $5.12 million on an annual
basis;
(k) changed any of the accounting principles followed by it or
the methods of applying such principles;
(l) entered into any transaction other than in the ordinary
course of business consistent with past practice;
(m) changed its authorized capital or its securities
outstanding or otherwise changed its ownership interests, or granted any
options, warrants, calls, conversion rights or commitments with respect to any
of its capital stock or other ownership interests; or
(n) agreed to take any of the actions referred to above.
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Attached hereto as Schedule
6.31 is an accurate list, as of the date of this Agreement, of:
(a) the name of each financial institution in which the
Company has accounts or safe deposit boxes;
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(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have
access thereto; and
(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Company and a
description of the terms of such power.
6.32 BOOKS OF ACCOUNT. The books, records and accounts of the Company
accurately and fairly reflect, in reasonable detail, the transactions and the
assets and liabilities of the Company. The Company has never engaged in any
transaction, maintained any bank account or used any of the funds of the Company
except for transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of the business.
6.33 ENVIRONMENTAL MATTERS. (a) The Company has secured, and is in
compliance with, all Environmental Permits, with respect to any premises on
which its business is operated, all of which Environmental Permits shall vest in
the applicable Surviving Corporation upon consummation of the transactions
contemplated hereby. The Company is in compliance with all Environmental Laws.
(b) Neither the Company nor the Stockholder has received any
communication from any Governmental Entity that alleges that the Company is not
in compliance with any Environmental Laws or Environmental Permits.
(c) The Company has not entered into or agreed to any court
decree or order, and the Company is not subject to any judgment, decree or
order, relating to compliance with any Environmental Law or to investigation or
cleanup of a Hazardous Substance under any Environmental Law.
(d) No lien, charge, interest or encumbrance has been
attached, asserted, or to the knowledge of the Company and the Stockholder,
threatened to or against any assets or properties of the Company pursuant to any
Environmental Law.
(e) There has been no treatment, storage, disposal or release
of any Hazardous Substance on any property owned, operated or leased by the
Company other than common household and office products in de minimis
quantities.
(f) The Company has not received a CERCLA 104(e) information
request or been named a potentially responsible party for any National
Priorities List site under CERCLA or any site under analogous state law or
received an analogous notice or request from any non-U.S.
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Governmental Entity, which notice, request or any inquiry or litigation has not
been fully and finally resolved without possibility of reopening.
(g) There are no aboveground tanks or underground storage
tanks on, under or about any property owned, operated or leased by the Company
and any former aboveground or underground tanks on any property owned, operated
or leased by the Company have been removed in accordance with all Environmental
Laws and no residual contamination, if any, remains at such sites in excess of
applicable standards.
(h) There are no polychlorinated biphenyls ("PCBs") leaking
from any article, container or equipment on, under or about any property owned,
operated or leased by the Company and there are no such articles, containers or
equipment containing PCBs, and there is no asbestos containing material in a
condition or location currently constituting a violation of any Environmental
Law at, on, under or within any property owned, operated or leased by the
Company.
(i) The Company and the Stockholder have provided to
UniCapital true and complete copies of, or access to, all written environmental
assessment materials and reports in their possession that have been prepared by
or on behalf of the Company during the past five years.
6.34 NO ILLEGAL PAYMENTS. Neither the Company nor, to the knowledge of
the Company and the Stockholder, any affiliate, officer, agent or employee
thereof, directly or indirectly, has, during the past five years, on behalf of
or with respect to the Company or any affiliate thereof, (a) made any unlawful
domestic or foreign political contributions, (b) made any payment or provided
services which were not legal to make or provide or which the Company or any
affiliate thereof or any such officer, agent or employee should have known were
not legal for the payee or the recipient of such services to receive, (c)
received any payment or any services which were not legal for the payer or the
provider of such services to make or provide, (d) made any payment to any person
or entity, or agent or employee thereof, in connection with any Lease (as
hereinafter defined) to induce such person or entity to enter into a Lease
transaction, (e) had any transactions or payments related to the Company which
are not recorded in their accounting books and records or (f) had any off-book
bank or cash accounts or "slush funds" related to the Company.
6.35 LEASES. Schedule 6.35 hereto sets forth the Company's
leases/financing arrangements as of the Balance Sheet Date (which, together with
all other lease/financing arrangements entered into by the Company between such
date and the Closing Date, are referred to herein as the "Leases"). The term
"Lease Documents" means the lease arrangements and financing contracts
evidencing the leases/financing arrangements described in Schedule 6.35,
together with all related documents and agreements including, without
limitations, master lease agreements, schedules or other addenda to such Leases,
certificates of delivery and acceptance, UCC financing statements, remarketing
agreements, residual guaranty agreements, insurance policies, guaranty
agreements and other credit supports. The term "Equipment" means all equipment,
inventory and other property described as being leased or financed pursuant to a
Lease, or in which the Company is granted a security interest pursuant to a
Lease. The term "Obligor" means any lessee party or other party obligated to pay
or
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perform any obligations under or in respect of a Lease or the Equipment covered
by a Lease (excluding the lessor party thereunder, but otherwise including,
without limitation, any guarantor of a Lease or any vendor, manufacturer or
similar party under a remarketing agreement, residual guaranty or similar
agreement). The term "Scheduled Payments" means the monthly or periodic rental
payments or installments of principal and interest under the terms of the Leases
except as set forth in Schedule 6.35.
(a) There is no restriction or limitation in any of the Lease
Documents or otherwise, restricting the Company from executing this Agreement,
terminating the Lease Documents, or entering into the transactions contemplated
by this Agreement, other than consents which have been, or prior to the Closing
will have been, obtained.
(b) The Company owns or validly leases the Equipment covered
by each Lease or has a vested and perfected first priority security interest in
the Equipment. Except as set forth on Schedule 6.35(b), all Equipment is located
in the United States.
(c) Except as set forth on Schedule 6.35(c), with respect to
each Lease, only one chattel paper original of such Lease exists and is held by
the Company.
(d) Each Lease is in full force and effect in accordance with
its terms, and there has been no occurrence which would or might permit any
Obligor to terminate such Lease or suspend or reduce any payments or obligations
due or to become due in respect of such Lease or the related Lease Documents by
reason of default by the lessor party under such Lease. To the knowledge of the
Stockholder, none of the Obligors in respect of a Lease or the related Lease
Documents is the subject of a bankruptcy, insolvency or similar proceeding.
(e) Except for the delinquency in the payment of any Scheduled
Payment that is not more than 60 days past due, there does not exist any default
in the payment of any Scheduled Payments due under any Lease or the related
Lease Documents, and there does not exist any other default, breach, violation
or event permitting acceleration, termination or repossession under any Lease or
the related Lease Documents or any event which, to the knowledge of the Company
and the Stockholder, with notice and the expiration of any applicable grace or
cure period, would constitute such a default, breach, violation or event
permitting acceleration, termination or repossession under such Lease or the
related Lease Documents.
(f) The Company has not acted in a manner which (nor has the
Company failed to act where such failure to act) would alter or reduce any of
the Company's rights or benefits under any manufacturer's or vendors' warranties
or guarantees with respect to any Equipment.
(g) The Company has complied with all requirements of any
federal, state or local law, including without limitation, usury laws,
applicable to each Lease.
(h) Each Lease has the following characteristics:
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(i) except as set forth on Schedule 6.35(h), such
Lease was originated in the United States and the Scheduled Payments thereunder
are payable in U.S. dollars by Obligors domiciled in the United States;
(ii) the lessee party under such Lease has
unconditionally accepted the Equipment covered by such Lease ;
(iii) except as set forth on Schedule 6.35(h), at
least one Scheduled Payment has been made by the Obligor under each such Lease;
and
(iv) no Obligor in respect of such Lease is an
affiliate of the Company.
(i) Each Lease and the related Lease Documents are valid,
binding, legally enforceable and non-cancelable obligations of the Company, and
to the knowledge of the Stockholder, the other parties thereto, enforceable in
accordance with their respective terms, except (i) as such enforceability may be
subject to bankruptcy, moratorium, insolvency, reorganization, arrangement and
other similar laws relating to or affecting the rights of creditors, and (ii) as
the same may be subject to the effect of general principles of equity. Each
Lease is a business obligation of the lessee thereunder and is not a "consumer
transaction" under any applicable federal or state regulation.
(j) To the knowledge of the Stockholder, no Lease or related
Lease Document is the subject of a fraudulent scheme by any Obligor or any
supplier of Equipment.
(k) Each item of Equipment is subject to a Lease.
(l) Each Lease is a fixed rate lease contract.
(m) No Lease or related Lease Document is subject to any
legally enforceable right of rescission, set-off, counterclaim, abatement or
defense, including without limitation any defense of usury, nor will the
operation of any of the terms of any Lease or any related Lease Document or the
exercise of any right or remedy thereunder render such Lease or any related
Lease Document or the obligations thereunder unenforceable, or subject the same
to any right of rescission, set-off, counterclaim, abatement or defense. No
Obligor has asserted any legally enforceable right of rescission, set-off,
counterclaim, abatement or defense to its obligations under a Lease or any
related Lease Document.
(n) As to the Leases and the related Lease Documents, (i) none
has been amended or modified (a) to extend the maturity date for a period of
longer than one year, or (b) to alter the amount or time of payment of any
amount due thereunder, unless as to (a) and (b) such extension or alteration is
reasonably expected to result in a net economic benefit to the Company; (ii) no
indulgences or waivers have been granted in respect of the obligations of any
Obligor under any
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Lease; and (iii) neither the Company nor its Subsidiaries have advanced any
monies on behalf of any Obligor.
(o) Each Lease requires the Obligor thereunder at its own cost
and expense to maintain the Equipment leased thereunder in good repair,
condition and working order, and each Obligor under a Lease is currently in
compliance with such requirement.
(p) Each Lease requires the Obligor thereunder (i) to pay all
fees, taxes (except income taxes), and other charges or liabilities arising with
respect to the Equipment leased thereunder or the use thereof, (ii) to keep the
Equipment free and clear of any and all liens, security interests and other
encumbrances, other than security interests of the Company, (iii) to hold
harmless the lessor thereunder and its successors and assigns against the
imposition of any fees, charges, liabilities and encumbrances, (iv) to bear all
risk of loss associated with the Equipment covered by or securing the
obligations under such Lease during the term of such Lease and (v) to maintain
at the cost of the Obligor public liability and casualty insurance in respect of
such Equipment covered by such Lease.
(q) Each Lease prohibits without the lessor's prior written
consent any relocation of the Equipment covered by such Lease and requires the
Obligor to execute such agreements and documents as may reasonably be requested
by the lessor in connection with any such relocation.
(r) Each Lease involves either the lease of tangible personal
property owned by the Company or the loan of money secured by a security
interest in tangible personal property owned by the Obligor thereunder.
(s) The Company has not received any notice challenging its
ownership or the priority of its security interest in the Equipment covered by
each Lease, and there are no proceedings pending before any court or
governmental entity or, to the knowledge of the Company and the Stockholder,
threatened by any Obligor or other party, (i) asserting the invalidity of any
Lease or the related Lease Documents, (ii) seeking to prevent payment or
performance by any Obligor of any Lease or any of the terms of the related Lease
Documents, or (iii) seeking any determination or ruling that might adversely
affect the validity or enforceability of any Lease or any of the terms or
provisions of the related Lease Documents.
(t) As to each Lease, there are no agreements or
understandings between the Company and the Obligors in respect of such Lease or
otherwise binding on the Company other than as expressly set forth in the Lease
and the related Lease Documents.
6.36 LEASE FUNDING. The Company is in compliance with all of the
material terms and covenants of, and is not in default or breach under, each
agreement, contract, understanding or arrangement with any funding source for
the Leases.
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6.37 DISCLOSURE. The Company has delivered, or in the case of Leases
and Lease Documents made available to UniCapital true and complete copies of
each agreement, contract, commitment or other document (or, in the case of any
such document not in the possession or reasonably available to the Company or
Stockholder, accurate and complete summaries thereof) that is referred to in the
schedules to this Agreement or that has been requested by UniCapital or its
representatives. Without limiting any exclusion, exception or other limitation
contained in any of the representations and warranties made herein, this
Agreement and the schedules hereto and all other documents and information
prepared or certified by the Stockholder to the Company and provided to
UniCapital and its representatives pursuant hereto do not and will not include
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements herein and therein not misleading. If any
Stockholder becomes aware of any fact or circumstance that would change a
representation or warranty of any Stockholder in this Agreement or any
representation made on behalf of the Company, then the Stockholder shall
immediately give notice of such fact or circumstance to UniCapital. However,
such notification shall not relieve the Company or any of the Stockholder of
their respective obligations under this Agreement, and at the sole option of
UniCapital, the truth and accuracy of any and all warranties and representations
of the Stockholder, at the date of this Agreement and at the Closing, shall be a
precondition to the consummation of this transaction.
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, UniCapital and Newco, jointly and severally, represent and
warrant to the Stockholder as follows:
7.1 CORPORATE EXISTENCE. UniCapital is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Newco is a corporation duly organized, validly existing and in good standing
under the laws of the State of New York. Immediately prior to the effectiveness
of the Merger, each of UniCapital and Newco is duly qualified to do business and
is in good standing as a foreign corporation in each jurisdiction where the
conduct of its business requires it to be so qualified.
7.2 UNICAPITAL STOCK. The shares of UniCapital Stock to be issued and
delivered to the Stockholder on the Merger Effective Date, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable shares, and except for restrictions upon
resale will be legally equivalent in all respects to the majority of UniCapital
Stock issued and outstanding as of the date hereof. The UniCapital Stock to be
issued upon the conversion of Company Stock pursuant to the terms of this
Agreement will be free and clear of all liens, encumbrances and claims of every
kind, other than restrictions upon transfer contained herein and other than any
liens, encumbrances or claims arising other than by the actions of UniCapital or
Newco.
7.3 CORPORATE POWER AND AUTHORIZATION. UniCapital and Newco have the
corporate power, authority and legal right to execute, deliver and perform this
Agreement. The execution,
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delivery and performance of this Agreement by UniCapital and Newco and all
related documents and agreements required to be executed and delivered by
UniCapital and Newco in accordance with the provisions hereof (the "UniCapital
Documents") have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by UniCapital and Newco and
constitutes, and the UniCapital Documents when executed and delivered will
constitute, the legal, valid and binding obligations of UniCapital and Newco
enforceable against UniCapital and Newco in accordance with their terms.
7.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement by UniCapital and Newco will not violate, conflict with or result in
the breach of any term, condition or provision of, or require the consent of any
other person under (a) any existing law, ordinance, or governmental rule or
regulation to which UniCapital or Newco is subject, (b) any judgment, order,
writ, injunction, decree or award of any Governmental Entity which is applicable
to UniCapital or Newco, (c) the charter documents of UniCapital or Newco, or (d)
any mortgage, indenture, agreement, contract, commitment, lease, plan,
Authorization, or other instrument, document or understanding, oral or written,
to which UniCapital or Newco is a party, by which UniCapital or Newco may have
rights or by which any of the properties or assets of UniCapital or Newco may be
bound or affected, or give any party with rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of UniCapital or Newco thereunder. Except for filing the Certificate
of Merger and filings under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and approval or consent of, and no registration or filing with, any
Governmental Entity is required in connection with the execution, delivery or
performance of this Agreement by UniCapital or Newco.
7.5 CAPITALIZATION OF UNICAPITAL. The IPO will result in an aggregate
market capitalization of UniCapital that will exceed Three Hundred Million
Dollars ($300,000,000), as determined by multiplying the outstanding shares of
UniCapital immediately following the closing of the IPO by the offering price.
7.6 COMPLIANCE WITH LAW; AUTHORIZATIONS. Each of UniCapital and Newco
has complied with each, and is not in violation of Regulations to which
UniCapital's and Newco's respective business, operations, assets or properties
is subject. Each of UniCapital and Newco owns, holds, possesses or lawfully uses
in the operation of its business all Authorizations which are in any manner
necessary for it to conduct its business as now or previously conducted or for
the ownership and use of the assets owned or used by UniCapital and Newco,
respectively, in the conduct of the business of the Company, free and clear of
all liens, charges, restrictions and encumbrances and in compliance with all
Regulations. Neither UniCapital nor Newco is in default, nor has UniCapital or
Newco received any notice of any claim of default, with respect to any such
Authorization. All such Authorizations are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
None of such Authorizations will be adversely affected by consummation of the
transactions contemplated hereby. No stockholder and no director, officer,
employee or former employee of UniCapital of Newco any of their affiliates, or
any other person, firm or corporation,
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owns or has any proprietary, financial or other interest (direct or indirect) in
any Authorization which UniCapital or Newco owns, possesses or uses in the
operation of the business of UniCapital and Newco as now or previously
conducted.
7.7 TRANSACTIONS WITH AFFILIATES. Except as described in the
Registration Statement, no stockholder and no director, officer or employee of
UniCapital or Newco, or any member of his or her immediate family or any other
of its, his or her affiliates, owns or has a 5% or more ownership interest in
any corporation or other entity that is or was during the last three years a
party to, or in any property which is or was during the last three years the
subject of, any contract, agreement or understanding, business arrangement or
relationship with UniCapital or Newco.
7.8 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of UniCapital and Newco, threatened against UniCapital or Newco which
relates to the transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 7.8, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of UniCapital or Newco, threatened against
UniCapital or Newco or which relates to UniCapital or Newco.
(c) Neither UniCapital nor Newco knows of any reasonably
likely basis for any litigation, arbitration, investigation or proceeding
referred to in Sections 7.8(a) or (b).
(d) Neither UniCapital nor Newco is a party to or subject to
the provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority."
7.9 REGISTRATION RIGHTS. As of the date hereof and as of the Merger
Effective Date, no officer, director or shareholder of UniCapital will have been
granted any registration rights with respect to the registration of any shares
of capital stock of UniCapital.
7.10 MISCELLANEOUS. Prior to the consummation of the Merger, UniCapital
and Newco have no material properties or assets and are not party to any
contracts other than this Agreement, the letter of intent among the parties to
this Agreement, certain employment agreements with officers of UniCapital,
certain real property leases relating to the principal executive offices of
UniCapital, and those agreements and letters of intent listed on Schedule 7.10
hereto.
8. COVENANTS OF STOCKHOLDER AND COMPANY
The following covenants shall apply during the period from and after the date
hereof through the Closing Date.
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8.1 BUSINESS IN THE ORDINARY COURSE. Except as otherwise contemplated
by this Agreement, the Company shall, and the Stockholder shall cause the
Company to, conduct its business solely in the ordinary course and consistent
with past practice.
8.2 EXISTING CONDITION. The Company shall not, and the Stockholder
shall not suffer the Company to, cause or permit to occur any of the events or
occurrences described in Section 6.30 hereof.
8.3 MAINTENANCE OF PROPERTIES AND ASSETS. Except as otherwise
contemplated in Section 8.15, the Company shall, and the Stockholder shall cause
the Company to use its reasonable commercial efforts to, maintain and service
its properties and assets in order to preserve their value and usefulness in the
conduct of its business.
8.4 EMPLOYEES AND BUSINESS RELATIONS. The Company shall, and the
Stockholder shall cause the Company to, use its reasonable commercial efforts to
keep available the services of its current employees and agents and to maintain
its relations and goodwill with its suppliers, customers, distributors and any
others with whom or with which it has business relations.
8.5 MAINTENANCE OF INSURANCE. The Stockholder shall cause the Company
to notify UniCapital of any material changes in the terms of the insurance
policies and binders referred to on Schedule 6.20 hereto.
8.6 COMPLIANCE WITH LAWS, ETC. The Company shall, and the Stockholder
shall cause the Company to, comply with all laws, ordinances, rules, regulations
and orders applicable to the Company or its business, operations, properties or
assets, noncompliance with which might materially affect the Company.
8.7 CONDUCT OF BUSINESS. The Company shall, and the Stockholder shall
cause the Company to, use its reasonable commercial efforts to conduct its
business in such a manner that on the Closing Date and on the Merger Effective
Date the representations and warranties of the Stockholder contained in this
Agreement shall be true as though such representations and warranties were made
on and as of each such date (except to the extent such representations or
warranties expressly speak as of a specific date), and the Company shall, and
the Stockholder shall cause the Company to, use its reasonable commercial
efforts to cause all of the conditions to the obligations of UniCapital and the
Stockholder under this Agreement to be satisfied on or prior to the Closing
Date. The Company shall, and the Stockholder shall cause the Company to,
maintain credit underwriting standards consistent with past practice.
Furthermore, the Company shall, and the Stockholder shall cause the Company to,
maintain a residual value accounting methodology consistent with past practice.
8.8 ACCESS. Upon prior reasonable notice, the Company shall, and the
Stockholder shall cause the Company to, give to UniCapital's officers,
employees, counsel, accountants and other representatives free and full access
to and the right to inspect, during normal business hours, all of
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the premises, properties, assets, records, contracts and other documents
relating to the Company and shall permit them to consult with the officers,
employees, accountants, counsel and agents of the Company for the purpose of
making such investigation of the Company as UniCapital shall reasonably request,
provided that such investigation shall not unreasonably interfere with the
Company's business operations, and provided further that UniCapital shall not
contact or consult with any non-officer employees of the Company without the
Company's prior consent, which shall not be unreasonably withheld. Furthermore,
the Company shall, and the Stockholder shall cause the Company to, furnish to
UniCapital all such documents and copies of documents and records and
information with respect to the affairs of the Company and copies of any working
papers relating thereto as UniCapital shall from time to time reasonably
request. No information or knowledge obtained in any investigation pursuant to
this Section 8.8 or otherwise shall affect or be deemed to modify any
representation or warranty contained in this Agreement or the conditions to the
obligations of the parties to consummate the Merger.
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS. Neither the Company nor
the Stockholder shall give notice to third parties or otherwise make any press
release or other public statement concerning this Agreement or the transactions
contemplated hereby. Neither the Company nor the Stockholder shall grant any
interview, publish any article, report or statement, or respond to any press
inquiry or other inquiry of any third party relating to this Agreement, the
business of the Company, the business (current and proposed) of UniCapital, the
Registration Statement (as defined below), the IPO or any other matter connected
with any of the foregoing without the express prior written approval of
UniCapital, and all inquiries and questions with respect to any of the foregoing
shall be coordinated through Robert New, Chief Executive Officer of UniCapital.
The Company and the Stockholder shall coordinate all communications with the
employees and agents of the Company through UniCapital prior to making any such
communication. Notwithstanding the above, (i) the Stockholder may communicate,
whether oral or in writing, with any lenders, lessors, customers, suppliers or
any other parties from whom any consents, approvals or waivers are necessary or
advisable, or to whom notice is necessary or advisable, as well as with any
professional advisors with respect to the transactions contemplated by this
Agreement and related matters, (ii) this Section 8.9 shall not be interpreted to
prevent the Company or the Stockholder from disclosing information as compelled
by a court order, provided however, that prior to disclosing any information
concerning this Agreement or the transaction contemplated hereby in response to
any such court order, the Company or Stockholder, as applicable, shall provide
UniCapital with prompt notice of the court order so that UniCapital may take
whatever action it deems appropriate to prohibit such disclosure.
8.10 EXCLUSIVITY. Except with respect to this Agreement and the
transactions contemplated hereby, none of the Company, the Stockholder nor any
of their affiliates shall, and each of them shall cause its respective
employees, agents and representatives (including, without limitation, any
investment banking, legal or accounting firm retained by it or them and any
individual member or employee of the foregoing) (each, an "Agent") not to, (a)
initiate, solicit or seek, directly or indirectly, any inquiries or the making
or implementation of any proposal or offer (including, without limitation, any
proposal or offer to its shareholders or any of them) with respect to a merger,
acquisition, consolidation, recapitalization, liquidation, dissolution or
similar transaction
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involving, or any purchase of all or any portion of the assets or any equity
securities of, the Company (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal"), or (b) engage in any negotiations
concerning, or provide any confidential information or data to, or have any
substantive discussions with, any person relating to an Acquisition Proposal,
(c) otherwise cooperate in any effort or attempt to make, implement or accept an
Acquisition Proposal, or (d) enter into or consummate any agreement or
understanding with any person or entity relating to an Acquisition Proposal,
except for the Merger contemplated hereby. If Company or Stockholder, or any of
their respective Agents, have provided any person or entity (other than
UniCapital) with any confidential information or data relating to an Acquisition
Proposal, then they shall request the immediate return thereof. The Company and
the Stockholder shall notify UniCapital immediately if any inquiries, proposals
or offers related to an Acquisition Proposal are received by, any confidential
information or data is requested from, or any negotiations or discussions
related to an Acquisition Proposal are sought to be initiated or continued with,
it or any individual or entity referred to in the first sentence of this Section
8.10. The covenant contained in this Section 8.10 shall not survive any
termination of this Agreement pursuant to Sections 13.1, 13.2 or 13.3.
8.11 THIRD PARTY APPROVALS. Prior to the Closing Date, the Company
shall satisfy any requirement for notice and approval of the transactions
contemplated by this Agreement under applicable agreements with third parties,
and shall provide UniCapital with satisfactory evidence of such third party
approvals.
8.12 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
Company shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under any applicable collective bargaining
agreement, and shall provide UniCapital with proof that any required notice has
been provided.
8.13 NOTIFICATION OF CERTAIN MATTERS. (a) The Company and the
Stockholder shall give prompt notice to UniCapital of (i) the occurrence or
non-occurrence of any event known to any Stockholder or Company the occurrence
or non-occurrence of which would be likely to cause any representation or
warranty contained in Article 6 to be untrue or inaccurate in any material
respect at or prior to the Closing Date or the Merger Effective Date and (ii)
any material failure of any Stockholder or Company to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such person
hereunder.
(b) UniCapital shall give prompt notice to the Stockholder of
(i) the occurrence or non-occurrence of any event known to UniCapital or Newco
the occurrence of non-occurrence of which would be likely to cause any
representation or warranty contained in Article 7 to be untrue or inaccurate in
any material respect at or prior to the Closing Date or the Merger Effective
Date and (ii) any material failure of UniCapital or Newco to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder.
(c) The delivery of any notice pursuant to this Section 8.13
shall not be deemed to (i) modify the representations or warranties hereunder of
the party delivering such notice, which
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modification may only be made pursuant to Section 8.14, (ii) modify the
conditions set forth in Sections 9 and 10 or (iii) limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
8.14 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Merger
Effective Date to supplement or amend promptly the schedules hereto with respect
to any matter hereafter arising or discovered which, if existing or known at the
date of this Agreement, would have been required to be set forth or described in
the schedules, provided, that no amendment or supplement to a schedule that
constitutes or reflects a material adverse change in the business, operations,
assets, properties, prospects or condition (financial or otherwise) of the
Company (a "Material Adverse Amendment"), may by made unless UniCapital consents
to such Material Adverse Amendment; provided, further, however, that if the
amendment or supplement relates to changes in facts or circumstances occurring
subsequent to the date of this Agreement and such amendment or supplement
constitutes or reflects a Material Adverse Amendment, then such amendment or
supplement shall be accepted by UniCapital subject to the provisions of Section
12.2 and 12.5 hereof. No amendment of or supplement to a Schedule shall be made
later than 48 hours prior to the anticipated effectiveness of the Registration
Statement defined in Section 9.4. Only (i) the schedules attached to this
Agreement at the time of its execution and (ii) amended schedules as accepted
under the standards and provisions of the Section 8.14, shall be deemed to be a
part of this Agreement in accordance with Section 19.3 hereof.
8.15 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, the Company shall use its reasonable best efforts to (a) file all
information required to be filed by it pursuant to such act and (b) provide
UniCapital with all information reasonably requested and required by it to
satisfy any filing requirements it may have under such act.
8.16 DELIVERY OF INFORMATION. The Company shall, and the Stockholder
shall cause the Company to, deliver to UniCapital on or prior to February 6,
1998 (i) the Company's audited Financial Statements for the year ended December
31, 1997, (ii) projections for the full years 1998 and 1999 acceptable to
UniCapital and its auditors, Price Waterhouse LLP, in their sole discretion,
(iii) all documents requested by UniCapital, its counsel, accountants, advisors
and/or investment bankers on or prior to such date and (iv) all responses to
inquires and supporting documentation with respect to any of the foregoing or
the due diligence investigation being conducted by UniCapital, its counsel,
accountants, advisors and/or investment bankers.
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9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDER
The obligations of the Company and the Stockholder hereunder are
subject to the satisfaction on or prior to the Closing Date (or such earlier
date specified below) of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representations and warranties of UniCapital and Newco contained in Article 7
shall be accurate as of the Closing Date and as of the Merger Effective Date as
though such representations and warranties had been made as of such times; all
of the terms, covenants and conditions of this Agreement to be complied with and
performed by UniCapital and Newco on or before the Closing Date shall have been
duly complied with and performed; and a certificate to the foregoing effect
dated the Merger Effective Date and signed by a duly authorized agent, the
President or any Vice President of UniCapital shall have been delivered to the
Stockholder.
9.2 EMPLOYMENT AND CONSULTING AGREEMENTS. The Surviving Corporation
shall have executed and delivered an Employment Agreement and Consulting
Agreement, in the forms of Annex IV and Annex V attached hereto, to the
respective persons listed on Schedule 9.2 hereto.
9.3 OPINION OF COUNSEL. The Stockholder shall have received an opinion
from counsel for UniCapital, dated the Merger Effective Date, to the effect
that:
(a) UniCapital and Newco have been duly organized and are
validly existing in good standing under the laws of their respective states of
incorporation;
(b) this Agreement has been duly authorized, executed and
delivered by UniCapital and Newco and constitutes a valid and binding agreement
of UniCapital and Newco enforceable in accordance with its terms, except (i) as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting the
rights of creditors, (ii) as the same may be subject to the effect of general
principles of equity and (iii) that no opinion need be expressed as to the
enforceability of indemnification provisions included herein; and
(c) the execution, delivery and performance of this Agreement
and the consummation of any transactions contemplated hereby will not conflict
with, or result in a breach or violation of, the Certificate of Incorporation or
Bylaws of UniCapital or Newco;
(d) the shares of UniCapital Stock to be received by the
Stockholder on the Merger Effective Date shall be duly authorized, validly
issued, fully paid and nonassessable.
9.4 REGISTRATION STATEMENT. UniCapital shall have filed with the
Securities and Exchange Commission ("SEC") a registration statement on Form S-1
covering the offer and sale of shares of UniCapital Stock in the IPO (the
"Registration Statement"). The Registration Statement
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shall have been declared effective by the SEC not later than June 30, 1998,
UniCapital and the underwriters named therein shall have executed the
Underwriting Agreement and the underwriters named therein shall have agreed to
acquire, subject to the conditions set forth in the Underwriting Agreement, the
shares of UniCapital Stock covered by the Registration Statement. There shall
have been no stop-order issued (that remains in effect) by the SEC with respect
to the Registration Statement.
9.5 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND NEWCO
The obligations of UniCapital and Newco hereunder are subject to the
satisfaction, on or prior to the Closing Date (or such earlier date specified
below), of the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
Stockholder shall have delivered to UniCapital a certificate dated the Merger
Effective Date and signed by them to the effect that all of the representations
and warranties of the Stockholder contained in this Agreement shall be true on
and as of the Closing Date and as of the Merger Effective Date with the same
effect as though such representations and warranties had been made on and as of
such dates, except for matters expressly disclosed in the certificate or a
Schedule thereto (which shall not serve to modify any representation or warranty
made herein or in any other document or otherwise in information supplied by the
Company or any Stockholder); and each and all of the agreements of the
Stockholder and the Company to be performed on or before the Closing Date
pursuant to the terms hereof shall have been performed.
10.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by UniCapital of the Company Stock and no
governmental agency or body shall have taken any other action or made any
request of UniCapital as a result of which the management of UniCapital deems it
inadvisable to proceed with the transactions hereunder.
10.3 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the Closing Date,
UniCapital shall have had sufficient time to review the unaudited balance sheet
of the Company as of the end of the most recently completed calendar month, and
the unaudited statements of income, cash flows and stockholders' equity of the
Company and its Subsidiaries for the periods then ended, which statements shall
have disclosed no material adverse change in the financial condition of the
Company or the results of its respective operations from the financial
statements originally furnished by the Company as set forth in Schedule 6.12.
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10.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, operations, assets, properties, prospects or condition (financial or
otherwise) of the Company shall have occurred, and neither the Company shall
have suffered any material loss or damage to any of its properties or assets,
whether or not covered by insurance, since the Balance Sheet Date, which change,
loss or damage materially affects or impairs the ability of the Company or any
Subsidiary to conduct its business as now conducted or as proposed to be
conducted; and UniCapital shall have received on the Closing Date a certificate
signed by the Stockholder and dated the Merger Effective Date to such effect.
10.5 REGULATORY REVIEW. UniCapital, through its authorized
representatives, shall have completed a satisfactory review of the practices and
procedures of the Company including, but not limited to, environmental and land
use practices, import and export laws, compliance with contracts and federal,
state and local laws and regulations governing the operations of the Company,
which review reflects compliance with all applicable laws governing the Company,
disclosing no material actual or probable violations, compliance problems,
required capital expenditures or other substantive environmental, real estate
and land use related concerns and which review is otherwise satisfactory in all
respects to UniCapital, in its sole discretion.
10.6 STOCKHOLDER'S RELEASE. At the Closing Date, the Stockholder shall
have delivered to UniCapital an instrument in the form of Annex VI dated the
Merger Effective Date releasing the Company from any and all claims of
Stockholder against the Company, except claims for benefits accrued by the
Stockholder pursuant to any Benefit Plan.
10.7 EMPLOYMENT AND CONSULTING AGREEMENTS. Each of the persons listed
on Schedule 9.2 shall have executed and delivered an Employment Agreement and
Consulting Agreement in the form of Annex IV and Annex V, as appropriate,
attached hereto.
10.8 OPINION OF COUNSEL. UniCapital shall have received an opinion from
a counsel to the Stockholder agreed to by the parties, dated the Merger
Effective Date, in form and substance satisfactory to UniCapital, to the effect
that, with respect to the Company is effective under all applicable state laws,
UniCapital, to the effect that the Merger of Newco with and into the Company
(including, without limitation, the Company);
(a) the Company has been duly organized and is validly
existing and in good standing under the laws of the state of New York;
(b) to the knowledge of such counsel, the Company is duly
authorized, qualified and licensed under all applicable laws, regulations,
ordinances or orders of public authorities to carry on its business in the
places and in the manner now conducted, except to the extent that the failure to
be in good standing would not have a material adverse effect on the Company;
(c) the authorized and outstanding capital stock of the
Company is as represented by the Stockholder in this Agreement and each share of
such stock has been duly and validly
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authorized and issued, is fully paid and nonassessable and was not issued in
violation of the preemptive rights of any stockholder;
(d) to the knowledge of such counsel, the Company does not
have any outstanding options, warrants, calls, conversion rights or other
commitments of any kind to issue or sell any of its capital stock;
(e) this Agreement has been duly authorized, executed and
delivered by the Company and the Stockholder and constitutes a valid and binding
agreement of the Company and the Stockholder enforceable in accordance with its
terms, except as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement and other similar laws relating to or
affecting the rights of creditors and except (i) as the same may be subject to
the effect of general principles of equity and (ii) that no opinion need be
expressed as to the enforceability of indemnification provisions included
herein;
(f) upon consummation of the Merger contemplated by this
Agreement, UniCapital will receive good title to the Company Stock, free and
clear of all liens, security interests, pledges, charges, voting trusts,
equities, restrictions, encumbrances and claims of every kind;
(g) to the knowledge of such counsel, except to the extent set
forth on Schedule 6.23, the Company is not in violation of or default under any
law or regulation, or under any order of any court, commission, board, bureau,
agency or instrumentality wherever located and there are no claims, actions,
suits or proceedings pending, or threatened against or affecting the Company, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
wherever located;
(h) to the knowledge of such counsel, except to the extent set
forth on Schedule 6.17, the Company is not in default under any of its material
contracts or agreements or has received notice of such default;
(i) no notice to, consent, authorization, approval or order of
any court or governmental agency or body or of any other third party is required
in connection with the execution, delivery or consummation of this Agreement by
the Stockholder or for the transfer to UniCapital of the Company Stock; and
(j) the execution of this Agreement and the performance of the
obligations hereunder will not violate or result in a breach or constitute a
default under any of the terms or provisions of the Company's charter documents
or the bylaws or any Contract or Lease listed on Schedules 6.17 and 6.35.
Such opinion shall include any other matters incident to the matters set forth
herein as agreed to by the parties and their respective counsel.
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10.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
10.10 GOOD STANDING CERTIFICATES. Stockholder shall have delivered to
UniCapital certificates, dated as of a date no earlier than five days prior to
the Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by UniCapital, in each state
in which the Company is authorized to do business, showing that the Company is
in good standing and authorized to do business and that all state franchise
and/or income tax returns and taxes for the Company for all periods prior to the
dates of such certificates have been filed and paid.
10.11 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC, and UniCapital and the representatives of
the underwriters named in the Registration Statement shall have executed the
Underwriting Agreement. There shall have been no stop-order issued (that remains
in effect) by the SEC with respect to the Registration Statement.
10.12 REPAYMENT OF INDEBTEDNESS; PRE-CLOSING DISTRIBUTIONS. Prior to
the Closing Date, the Stockholder shall have repaid to the Company in full all
amounts owing by the Stockholder to such entities and (ii) completed all
transactions contemplated by Section 8.16.
10.13 NET INCOME. The Company shall have aggregate after tax net income
for the twelve months ended December 31, 1997 as is included in UniCapital's
unaudited pro forma combined (prior to the pro forma and offering adjustments)
income statement for the twelve months ended December 31, 1997 included in the
Registration Statement.
10.14 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
11. COVENANTS OF UNICAPITAL
11.1 LEASES. At the Merger Effective Date, the Surviving Corporation
shall enter into lease arrangements with each of the persons or entities listed
in Schedule 11.1 with respect to the corresponding properties or assets listed
on Schedule 11.1.
11.2 UNICAPITAL STOCK OPTIONS. Effective upon the effective date of the
Registration Statement (but subject in all events to the consummation of the
Merger), UniCapital shall cause options to purchase that number of shares of
UniCapital Stock having a fair market value on the effective date of the
Registration Statement, based upon the IPO price per share set forth in the
Underwriting Agreement, equal to 6.25% of the Effective Date Consideration
(valuing the UniCapital Stock to be issued as part of the Effective Date
Consideration at the IPO price per share for the purposes of this Section 11.2)
to be granted to those non-Stockholder key employees,
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consultants and other third parties providing actual services of value to the
Company, which are important to the business of the Surviving Corporation
(provided such individuals meet the eligibility requirements under UniCapital's
stock option plan) after the Closing as are designated by the principal
executive officer of the Surviving Corporation who is entering into an
Employment Agreement pursuant to Section 9.2 hereof (or such other officer
designated by the Surviving Corporation and acceptable to UniCapital). Not later
than seven days prior to the effective date of the Registration Statement, the
officer designating the recipients of such options shall provide to UniCapital a
written list of the names of those designated recipients who will receive
options exercisable at the IPO price and the relative percentages of the 6.25%
option pool provided under this Section 11.2 to be awarded to each recipient, as
well as the percentage of options, if any, to be reserved for future issuance.
Any options reserved for future issuance shall be granted at an exercise price
equal to the fair market value of UniCapital Stock as of the date of grant. All
options shall be granted in accordance with UniCapital's policies, and
authorized and issued under the terms of UniCapital's principal stock option
plan for the benefit of employees of UniCapital and its subsidiaries.
11.3 INFORMATION FILING. To the extent the Unified Transaction is a
transaction that falls within Section 351 of the Code, UniCapital shall file all
information required to be filed by it pursuant to Treasury Regulation Section
1.351-3(b).
11.4 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, UniCapital shall use its reasonable best efforts to (a) file all
information required to be filed by it pursuant to such act and (b) provide the
Company with all information reasonably requested and required by it to satisfy
any filing requirements it may have under such act.
11.5 EMPLOYEE BENEFIT PLANS OF UNICAPITAL. During the two year period
after the Merger Effective Date and upon the termination of any of the Company's
major health insurance plans, retirement savings plans and/or disability plans
(each a "Terminated Plan"), UniCapital shall use its best efforts to promptly
make available a replacement for such terminated plan with a reasonably
comparable plan offering substantially similar benefits on substantially similar
terms to all current employees of the surviving corporation who were employees
of the Company at the time of the Merger.
11.6 RELEASE FROM GUARANTEES; INDEBTEDNESS. Not later than 120 days
following the Merger Effective Date, UniCapital shall cause the Stockholder to
be released from any and all personal guarantees of the indebtedness of the
Company at the Closing Date set forth on Schedule 11.6; provided, that, in the
event that the beneficiary of any such guarantee is unwilling to permit the
substitution of UniCapital's guarantee for the Stockholder's guarantee or the
assumption by UniCapital of the indebtedness, or in the event that the lender
with respect to the indebtedness to which such guarantee relates accelerates
such indebtedness whether or not prior to such 120 day period because of the
consummation of the transactions contemplated hereby, UniCapital shall repay up
to that amount of recourse indebtedness set forth on Schedule 11.6. The failure
of the Company
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to obtain the consent of its lenders to the change of control of the Company or
the substitution of a UniCapital guaranty or the assumption by UniCapital of the
indebtedness set forth on Schedule 11.6 shall not be deemed a breach hereunder.
11.7 DIVIDEND FINANCING. If the dividend set forth in Section 6.30 has
not been paid prior to the Closing Date, UniCapital shall provide, immediately
prior to the Closing, the financing arrangements necessary for the Company to
pay such dividends.
12. INDEMNIFICATION; SURVIVAL
12.1 GENERAL INDEMNIFICATION BY STOCKHOLDER. Subject to the limitations
contained in Section 12.5 hereof, the Stockholder covenants and agrees that the
Stockholder will indemnify, defend, protect and hold harmless UniCapital, Newco
and the Surviving Corporation and their respective officers, stockholders,
directors, divisions, subdivisions, affiliates, subsidiaries, parents, agents,
employees, successors and assigns at all times from and after the date of this
Agreement until the Expiration Date (as defined in Section 12.6) from and
against all claims, damages, losses, liabilities, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees and expenses of
investigation) (collectively, "Losses") incurred by UniCapital, Newco or the
Surviving Corporation as a result of or arising from (a) any breach of the
representations and warranties made by the Stockholder set forth herein or on
the schedules or certificates delivered in connection herewith, (b) any
nonfulfillment of any covenant or agreement on the part of the Stockholder or
the Company under this Agreement, (c) the business, operations or assets of the
Company prior to the Merger Effective Date or the actions or omissions of the
Company's directors, officers, employees or agents prior to the Merger Effective
Date, other than Losses arising from matters expressly disclosed in the
Financial Statements, this Agreement or the Schedules to this Agreement, or (d)
any liability under the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or other federal or state law or regulation, at
common law or otherwise, arising out of or based upon (i) any untrue statement
or alleged untrue statement of a material fact relating to the Company or the
Stockholder contained in any preliminary prospectus, the Registration Statement
or any prospectus forming a part thereof, or any amendment thereof or supplement
thereto (including any additional registration statement filed pursuant to Rule
462(b) under the Securities Act), which statement was provided or was based upon
information or documents provided to UniCapital or its counsel by the Company or
the Stockholder, or (ii) any omission or alleged omission to state therein a
material fact relating to the Company or the Stockholder required to be stated
therein or necessary to make the statements therein not misleading, which
information was not provided to UniCapital or its counsel by the Company or the
Stockholder; provided, however, that such indemnity shall not inure to the
benefit of UniCapital, or any other indemnified person Newco or the Surviving
Corporation to the extent that such untrue statement (or alleged untrue
statement) was made in, or such omission (or alleged omission) occurred in, any
preliminary prospectus and the Stockholder provided, in writing, corrected
information to UniCapital for inclusion in the final prospectus, and such
information was not so included.
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12.2 SPECIFIC INDEMNIFICATION BY STOCKHOLDER. Subject to the
limitations contained in Section 12.5 hereof, notwithstanding any disclosure
made in this Agreement or in the Schedules or exhibits hereto, and
notwithstanding any investigation by UniCapital or Newco, the Stockholder
covenants and agrees that the Stockholder will indemnify, defend, protect and
hold harmless UniCapital, Newco and the Surviving Corporation and their
respective officers, stockholders, directors, divisions, subdivisions,
affiliates, subsidiaries, parents, agents, employees, successors and assigns at
all times from and after the date of this Agreement, from and against all Losses
incurred by UniCapital, Newco or the Surviving Corporation as a result of or
incident to: (a) the existence of liabilities of the Company in excess of the
liabilities set forth on Schedule 6.13, to the extent of such excess; (b) the
failure of the Company or the Stockholder to file all required Form 5500's prior
to the Merger Effective Date; (c) the litigation matters listed on Schedule
6.20; (d) any Material Adverse Amendments pursuant to Section 8.14(b) hereof;
(e) the matters listed on Schedules 6.35 (b), 6.35 (c) and 6.35 (h); and (f)
those Scheduled Payments delinquent for 90 days or longer as of the Closing Date
net of applicable reserves reflected on the balance sheet of the Company
immediately prior to the preparation of the Closing Date Balance Sheet.
12.3 INDEMNIFICATION BY UNICAPITAL AND NEWCO. Subject to the
limitations contained in Section 12.5 hereof, UniCapital and Newco, jointly and
severally, covenant and agree that they will indemnify, defend, protect and hold
harmless the Stockholder at all times from and after the date of this Agreement
from and against all Losses incurred by the Stockholder as a result of or
arising from (a) any breach of the representations and warranties made by
UniCapital and Newco set forth herein or on the schedules or certificates
attached hereto, (b) any nonfulfillment of any covenant or agreement on the part
of UniCapital under this Agreement, or (c) any liability under the Securities
Act, the Exchange Act or other federal or state law or regulation, at common law
or otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to UniCapital (including all of the
companies, other than the Company, acquired by UniCapital as part of the Unified
Transaction, but only to the extent that UniCapital is actually indemnified by
such other companies for such liability) contained in any preliminary
prospectus, the Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement thereto (including any registration
statement filed pursuant to Rule 462(b) under the Securities Act), or arising
out of or based upon any omission or alleged omission to state therein a
material fact relating to UniCapital (including all of the companies, other than
the Company, acquired by UniCapital as part of the Unified Transaction but only
to the extent that UniCapital is actually indemnified by such other companies
for such liability), required to be stated therein or necessary to make the
statements therein not misleading, which liability is not the subject of
indemnification of UniCapital, Newco and the Surviving Corporation pursuant to
Section 12.1(c) above.
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12.4 THIRD PARTY CLAIMS.
(a) In order for a party hereto eligible to be indemnified
hereunder (an "Indemnified Party") to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of or involving a
claim or demand made by any person or entity against the Indemnified Party (a
"Third Party Claim"), such Indemnified Party must notify the parties obligated
to provide indemnification pursuant to Section 12.1, 12.2, or 12.3 hereof (each,
an "Indemnifying Party") in writing, and in reasonable detail, of the Third
Party Claim within 30 business days after receipt by such Indemnified Party of
written notice of the Third Party Claim; provided, however, that failure to give
such notification shall not affect the indemnification provided hereunder except
to the extent the Indemnifying Party shall have been actually prejudiced as a
result of such failure. Such notice shall state the nature and the basis of such
claim and a reasonable estimate of the amount thereof. Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, within five business
days after the Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnified Party relating to
the Third Party Claim. To the extent the Indemnifying Party has actually paid
any amount to the Indemnified Party in respect of any Loss in connection with
such Third Party Claim, the Indemnifying Party shall have a right of subrogation
with respect to such Third Party Claim to the extent of such payment.
(b) The Indemnifying Party shall have right to defend and
settle, at its own expense and by its own counsel (provided that such counsel is
not reasonably objected to by the Indemnified Party and provided further that
selection for these purposes of Company's choice for counsel, absent any actual
or reasonably likely conflict of interest with respect to parties or defenses,
shall not be objected to by UniCapital), any Third Party Claim as the
Indemnifying Party pursues the same in good faith and diligently and so long as
the Third Party Claim does not relate to an actual or potential Loss to which
Section 12.4(e) applies in which the Indemnified Party is UniCapital, Newco or
the Surviving Corporation. If the Indemnifying Party undertakes to defend or
settle, it shall promptly notify the Indemnified Party of its intention to do
so, and the Indemnified Party shall cooperate with the Indemnifying Party and
its counsel in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnifying Party with any books, records or information reasonably requested
by the Indemnifying Party that are in the Indemnified Party's possession or
control. Notwithstanding the foregoing, the Indemnified Party shall have the
right to participate in any matter through counsel of its own choosing at its
own expense (unless there is a conflict of interest that prevents counsel for
the Indemnifying Party from representing the Indemnified Party, in which case
the Indemnifying Party will reimburse the Indemnified Party for the expenses of
its counsel). After the Indemnifying Party has notified the Indemnified Party of
its intention to undertake to defend or settle any such asserted liability, and
for so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except to the extent such participation is requested
by the Indemnifying Party, in which event the Indemnified Party shall be
reimbursed by the Indemnifying Party for reasonable additional legal expenses
and out-of-pocket expenses, and except
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in the case of a Third Party Claim relating to an actual or potential Loss to
which Section 12.4(e) applies in which the Indemnified Party is UniCapital,
Newco or the Surviving Corporation.
(c) No Indemnifying Party shall, in the defense of any Third
Party Claim, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) or enter into any settlement, except with
the written consent of the Indemnified Party, which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim or
matter.
(d) If the Indemnifying Party does not assume the defense of
any Third Party Claim, then the Indemnified Party may defend against such Third
Party Claim in such manner as it deems appropriate at the expense of the
Indemnifying Party.
(e) Notwithstanding anything to the contrary in this Article
12, if at any time, in the reasonable opinion of UniCapital, Newco or the
Surviving Corporation as the Indemnified Party (notice of which opinion shall be
given in writing to the Indemnifying Party), any Third Party Claim seeks
material prospective relief which could have a material adverse effect on any
such Indemnified Party or any subsidiary, then such Indemnified Party shall have
the right to control or assume (as the case may be) the defense of any such
Third Party Claim and the amount of any judgment or settlement and the
reasonable costs and expenses of defense (including, but not limited to, fees
and disbursements of counsel and experts, as well as any sampling, testing,
investigation, removal, treatment or remediation undertaken by UniCapital, Newco
or the Surviving Corporation and all counseling or engineering fees and expenses
related thereto) shall be included as part of the indemnification obligations of
the Indemnifying Party hereunder. If the Indemnified Party elects to exercise
such right, then the Indemnifying Party shall have the right to participate in,
but not control, the defense of such Third Party Claim at the sole cost and
expense of the Indemnifying Party.
12.5 LIMITATIONS ON INDEMNIFICATION.
(a) To the extent of any amount that UniCapital actually receives as a
result of a Net Worth Deficiency that is directly attributable to an
Indemnifiable Decrease, UniCapital shall not be entitled to any indemnity under
Article 12. An "Indemnifiable Decrease" shall be equal to the amount of any Net
Worth Deficiency that consists of a liability for which UniCapital would
otherwise be entitled to indemnity under Article 12 but that has been (a)
accrued or (b) actually paid (so long as it was not previously accrued on or
before December 31, 1997) during the Interim Net Worth Period. The "Interim Net
Worth Period" shall mean the period beginning on January 1, 1998 and ending on
the Closing Date. No amounts under (a) or (b) that have not been reflected on
the Company's (or its Subsidiaries') financial statements under generally
accepted accounting principles applied consistently with previous practice shall
be deemed to be an Indemnifiable Decrease.
(b) No Indemnified Party shall assert any claim (other than a Third
Party Claim) for indemnification hereunder until such time as the aggregate of
all claims which such Indemnified Party may have against an Indemnifying Party
plus any Indemnifiable Decrease shall exceed
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$1,920,000 (the "Basket Limitation") at which time an Indemnified Party shall be
entitled to seek indemnification for all claims not previously asserted pursuant
to this Article 12, but only to the extent that such claims, in the aggregate,
exceed the Basket Limitation. For purposes of the preceding sentence,
UniCapital, Newco and the Surviving Corporation shall be considered to be a
single Indemnifying and Indemnified Party and Stockholder shall be considered to
be a single Indemnifying and Indemnified Party. Notwithstanding the foregoing,
on each date on which any Earn-Out Consideration is paid, the Basket Limitation
shall be increased by that amount (the "Basket Adjustment") equal to 1% of any
such Earn-Out Consideration, without prejudice to UniCapital's receipt of or
right to receive indemnification for claims exceeding the amount of the Basket
Limitation in effect at the time such claims were brought. If the Basket
Limitation is adjusted pursuant to the preceding sentence after such time as any
Indemnified Party, pursuant to this Article 12, has collected an amount in
excess (such excess amount is referred to as the "Excess Indemnity") of the
Basket Limitation (prior to giving effect to the applicable Basket Adjustment),
then such Indemnified Party, within 10 business days after the final
determination of such Earn-Out Consideration, shall pay to the Indemnifying
Party an amount equal to the lesser of applicable Basket Adjustment or the
Excess Indemnity. In addition, notwithstanding any provision of this Agreement
to the contrary, for the purposes of preventing a double recovery the
Stockholder shall not be obligated to indemnify UniCapital or any other
indemnified party pursuant to Section 12.1 or 12.2 with respect to any
particular act, omission, condition or event if and to the extent that the loss
resulting or arising from such act, omission, condition or event has, directly
or indirectly, been taken into account in the computation of any Net Worth
Deficiency provided for in Section 3.1. Notwithstanding any other term of this
Agreement, in no event shall any Stockholder be liable under this Article 12 for
an amount which exceeds the aggregate value (determined at the Merger Effective
Date) of the Merger Consideration received by the Stockholder under this
Agreement. Notwithstanding anything to the contrary contained in this Agreement,
the limitations upon indemnification contained in this Section 12.5 shall not
apply to Losses arising out of (i) any breach of the representations and
warranties of the Stockholder contained in Sections 6.3, 6.5, 6.14, 6.27 and
6.33 hereof, (ii) litigation net of applicable reserves reflected on balance
sheet of the Company at the Balance Sheet Date and (iii) a Material Adverse
Amendment pursuant to Section 8.14(b) hereof.
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The parties agree that
representations and warranties made by the parties in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive for a period of one year from the Merger Effective Date (which date is
hereinafter called the "Expiration Date"), except that:
(a) the representations and warranties contained in Section
6.27 hereof shall survive until such time as the limitations period has run for
all tax periods ended prior to the Merger Effective Date, which shall be deemed
to be the Expiration Date for purposes of this clause (a) and claims arising
from a breach of the representations and warranties contained in such Section
6.27;
(b) the representations and warranties contained in Section
6.28(g) hereof shall survive until such time as one full fiscal year's cycle of
transactions occurring entirely within the
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twenty-first century shall have been processed and UniCapital's consolidated
financial statements for the fiscal year in which the last such transaction to
be processed occurred have been audited, which shall be deemed to be the
Expiration Date for purposes of this clause (b) and claims arising from a breach
of the representations and warranties contained in such Section 6.28(g);
(c) the representations and warranties contained in Section
6.33 hereof shall survive for a period of five years from the Merger Effective
Date, which shall be deemed the Expiration Date for purposes of this clause (c)
and claims arising from a breach of the representations and warranties contained
in such Section 6.33;
(d) solely for purposes of Section 12.1(d) hereof, and solely
to the extent that UniCapital actually incurs liability under the Securities
Act, the Exchange Act, or any other federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for purposes of this clause (d) and claims arising under such
laws;
(e) the representations and warranties of the Stockholder
contained in Section 6.5 hereof shall survive the Merger Effective Date without
time limitation; and
(f) any representations and warranties which serve as a basis
of the indemnity obligations of the Stockholder under Section 12.2 shall survive
the Merger Effective Date without time limitation.
13. TERMINATION OF AGREEMENT
13.1 TERMINATION BY UNICAPITAL. UniCapital may, by notice in the manner
hereinafter provided on or before the Closing Date, terminate this Agreement (a)
if a material default shall be made by the Stockholder in the observance or due
and timely performance of any of the covenants, agreements or conditions
contained herein, and the curing of such default shall not have been made on or
before the Closing Date and shall not reasonably be expected to occur; (b) if
UniCapital in its sole judgment determines that any condition exists which has
made or could reasonably be expected to make any of the representations or
warranties contained in Article 6 hereof untrue in any material respect or (c)
if UniCapital in its sole judgment determines that information disclosed on the
Schedules to the Agreement delivered pursuant to Section 8.14 has or could
reasonably be expected to have a material adverse effect on the business,
operations, assets, properties, prospects or condition (financial or otherwise)
of the Company.
13.2 TERMINATION BY THE STOCKHOLDER. Prior to the initial filing of the
Registration Statement with the SEC, the Stockholder may, by notice in the
manner hereinafter provided on or before such initial filing, terminate this
Agreement (a) in accordance with Section 17.4(b) or (b) if a material default
shall be made by UniCapital in the observance or due and timely performance of
any of the covenants, agreements or conditions contained herein, and the curing
of such default shall not have been made on or before such initial filing. From
and after the initial filing of the
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Registration Statement with the SEC, the Stockholder shall have no right to
terminate this Agreement.
13.3 AUTOMATIC TERMINATION. This Agreement shall terminate
automatically:
(a) if the Registration Statement has not been declared
effective by June 30, 1998;
(b) if, between the Closing Date and the Merger Effective
Date, the Underwriting Agreement is terminated pursuant to the terms thereof;
(c) if the Merger Effective Date has not occurred within 10
business days after the Closing Date; or
(d) (d) upon the date that the number of shares of UniCapital
Stock to be issued (other than as Earn-Out Consideration) to the persons who
will transfer property to UniCapital in the Unified Transaction can be
determined as a fixed number of shares, unless those same persons shall own
immediately after the Unified Transaction eighty percent (80%) or more of the
UniCapital Stock that will be issued and outstanding immediately after the
Unified Transaction.
13.4 LIQUIDATED DAMAGES. If the Merger fails to occur because of the
default of the Company or the Stockholder, then, in addition to the other
remedies available to UniCapital at law for fraud, in equity or pursuant to this
Agreement, the Stockholder shall pay to UniCapital the sum of $500,000 as
liquidated damages. It is hereby agreed that UniCapital's damages in the event
of a termination or default by Company hereunder are uncertain and impossible to
ascertain and that the foregoing constitutes a reasonable liquidation of such
damages and is intended not as penalty but as liquidated damages.
14. NONCOMPETITION AND NONSOLICITATION
14.1 NONCOMPETITION.
(a) In order to protect the value and goodwill of the Company
and their respective businesses, the Stockholder covenants that, for the period
ending two years after the Closing Date, such Stockholder will not, directly or
indirectly, own, manage, operate, join, control, finance or participate in the
ownership, management, operation, control or financing of, or be connected as a
partner, principal, agent, representative, consultant or otherwise with, or use
or permit such Stockholder's name to be used in connection with, any business or
enterprise which is engaged directly or indirectly in competition anywhere in
the United States with the business conducted by UniCapital, the Surviving
Corporation or any of its or their respective subsidiaries or affiliates or with
any business engaged in originating, servicing or securitizing leases or other
specialty financing products or services (the "Restricted Business"). The
Stockholder recognizes that the Restricted Business is expected to be conducted
throughout the United States and that more narrow
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geographical limitations of any nature on this non-competition covenant (and the
non-solicitation covenant set forth in subsection (b)) are therefore not
appropriate. The foregoing restriction shall not be construed to prohibit the
ownership by a Stockholder as a passive investment of not more than five percent
of any class of securities of any corporation which is engaged in any of the
foregoing businesses having a class of securities registered pursuant to Section
12 of the Exchange Act or with respect to those activities identified on
Schedule 14.1 hereto.
(b) The Stockholder further covenants that for the period
ending two years after the Closing Date, such Stockholder will not, either
directly or indirectly, (i) call on or solicit any customers or prospective
customers who were actually solicited by the Company prior to the Effective Time
of the Restricted Business, or (ii) solicit the employment of any person who is
employed by UniCapital, the Surviving Corporation or any of its or their
respective subsidiaries or affiliates in the Restricted Business during such
period.
(c) The Stockholder recognizes and acknowledges that by reason
of such Stockholder's relationship to the Company, the Stockholder has had
access to confidential information relating to the Restricted Business. The
Stockholder acknowledges that such confidential information is a valuable and
unique asset and covenants that such Stockholder will not disclose any such
confidential information after the Closing Date to any person for any reason
whatsoever.
14.2 DAMAGES. The Stockholder acknowledges and agrees that measuring
economic losses to UniCapital and the Surviving Corporation as a result of the
breach of the foregoing covenants in this Article 14 would be impossible, and
that any breach of the foregoing covenants would result in immediate and
irreparable damage to UniCapital and the Surviving Corporation for which they
would have no other adequate remedy. Accordingly, the Stockholder agrees that,
in the event of a breach by him of any of the foregoing covenants, such
covenants may be enforced by UniCapital or the Surviving Corporation by, without
limitation, injunctions and restraining orders.
14.3 REASONABLE RESTRAINT. The parties agree that the foregoing
covenants in this Article 14 impose a reasonable restraint upon the Stockholder
in light of the activities and business of UniCapital on the date of the
execution of this Agreement and the current and future plans of UniCapital and
the Surviving Corporation (as successors to the businesses of the Company), and
that any violation will result in irreparable injury to UniCapital.
14.4 SEVERABILITY; REFORMATION. The covenants in this Article 14 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, if any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
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14.5 INDEPENDENT COVENANT. All of the covenants in this Article 14
shall be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of the Stockholder
against the Company, the Surviving Corporation or UniCapital, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement of such covenants. The parties specifically agree that the period of
two years stated above shall be computed by excluding from such computation any
time during which the Stockholder is in violation of any provision of this
Article 14 and any time during which there is pending in any court of competent
jurisdiction any action (including any appeal from any judgment) brought by any
person, whether or not a party to this Agreement, in which action UniCapital or
the Surviving Corporation seek to enforce the agreements and covenants of the
Stockholder or in which any person contests the validity of such agreements and
covenants or their enforceability or seeks to avoid their performance or
enforcement.
14.6 MATERIALITY. The Stockholder hereby acknowledges and agrees that
the covenants contained in this Article 14 are a material and substantial part
of this transaction and are entered into in connection with and as an inducement
to the acquisition by UniCapital and Newco of the business of the Company.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 STOCKHOLDER. The Stockholder recognizes and acknowledges that he
has in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Company and the Company's businesses. The Stockholder
agrees that they he will not disclose any confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except to authorized representatives of UniCapital or as may be
required by law or order of a court of competent jurisdiction, unless the
Stockholder can show that such information has become known to the public
generally through no fault of the Stockholder. Prior to disclosing any
confidential information required by law or order of a court of competent
jurisdiction, the Stockholder shall provide UniCapital with prompt notice of the
disclosure requirement so that UniCapital may take whatever action it deems
appropriate to prohibit such disclosure. In the event of a breach or threatened
breach by the Stockholder of the provisions of this Section 15.1, UniCapital and
the Surviving Corporation shall be entitled to an injunction restraining
Stockholder from disclosing, in whole or in part, such confidential information.
Nothing herein shall be construed as prohibiting UniCapital and the Surviving
Corporation from pursuing any other available remedy for such breach or
threatened breach, including the recovery of damages.
15.2 UNICAPITAL. UniCapital recognizes and acknowledges that it has in
the past, currently has, and prior to the Closing Date will have, access to
certain confidential information solely of the Company in connection with its
respective business ("Company Information") and (ii) certain confidential
information concerning the Stockholder and certain business and activities of
the Stockholder that are not a part of the transactions contemplated by this
Agreement ("Stockholder
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Information"). Prior to the Closing Date with respect to Company Information and
at any time with respect to Stockholder Information, UniCapital shall not
disclose any such confidential information to any person, firm, corporation,
association, or other entity for any purpose or reason whatsoever without prior
written consent of the Stockholder, except as may be required by law or order of
a court of competent jurisdiction, unless UniCapital can show that such
information has become known to the public generally through no fault of the
UniCapital. Prior to disclosing any confidential information required by law or
order of a court of competent jurisdiction, UniCapital shall provide Stockholder
with prompt notice of the disclosure requirement so that Stockholder may take
whatever action it deems appropriate to prohibit such disclosure. In the event
of a breach or threatened breach by UniCapital of the provisions of this Section
15.2, the Stockholder shall be entitled to an injunction restraining UniCapital
from disclosing, in whole or in part, such confidential information. Nothing
contained herein shall be construed as prohibiting the Stockholder from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
15.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, UniCapital, the Surviving Corporation and the Stockholder agree
that, in the event of a breach by any of them of the foregoing covenant, the
covenant may be enforced against them by injunctions and restraining orders.
16. LOCK-UP AGREEMENTS
16.1 AGREEMENT. In connection with the IPO, for good and valuable
consideration, and to induce the underwriters that may participate in the IPO to
continue their efforts in connection with the IPO, the Stockholder hereby agrees
that, without the prior written consent of Morgan Stanley & Co. Incorporated on
behalf of such underwriters, it will not, during the period commencing on the
date of this Agreement and ending 180 days after the date of the final
prospectus contained in the Registration Statement relating to the IPO (the
"Prospectus"), (a) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of UniCapital Stock or any securities
convertible into or exercisable or exchangeable for UniCapital Stock or (b)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of UniCapital Stock,
whether any such transaction described in clause (a) or (b) above is to be
settled by delivery of UniCapital Stock or such other securities, in cash or
otherwise. In addition, the Stockholder agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters that
may participate in the IPO, it will not, during the period commencing on the
date of this Agreement and ending 180 days after the date of the Prospectus,
make any demand for or exercise any right with respect to, the registration of
any shares of UniCapital Stock or any security convertible into or exercisable
or exchangeable for Common Stock.
16.2 INTENDED THIRD PARTY BENEFICIARIES. The Stockholder agrees that
the foregoing shall be binding upon his transferees, successors, assigns, heirs,
and personal representatives and
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shall benefit and be enforceable by the underwriters in the IPO. The Stockholder
acknowledges and agrees that such underwriters and Morgan Stanley & Co.
Incorporated are intended third party beneficiaries of the provisions of this
Article 16, and that Morgan Stanley & Co. Incorporated on behalf of such
underwriters shall be entitled to enforce the covenants contained in this
Article 16. In furtherance of the foregoing, UniCapital and its transfer agent
are hereby authorized to decline to make any transfer of securities if such
transfer would constitute a violation or breach of this Article 16. The
Stockholder also acknowledges and agrees that none of the companies to be
acquired as part of the Unified Transaction shall have any rights as intended
third-party beneficiaries under this Agreement.
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK
17.1 INVESTMENT INTENT. The Stockholder acknowledges and agrees that
the shares of UniCapital Stock to be delivered to the Stockholder pursuant to
this Agreement have not been and will not be registered under the Securities Act
and therefore may not be resold without compliance with the Securities Act. The
Stockholder represents and warrants that the shares of UniCapital Stock to be
acquired by the Stockholder pursuant to this Agreement are being acquired solely
for their own account, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution.
17.2 COMPLIANCE WITH LAW. The Stockholder covenants, warrants and
represents that none of the shares of UniCapital Stock issued to the Stockholder
will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Securities Act and the rules and regulations of the SEC thereunder, and
except after full compliance with any applicable state securities laws.
17.3 ECONOMIC RISK; SOPHISTICATION. The Stockholder represents and
warrants that he is able to bear the economic risk of an investment in
UniCapital Stock acquired pursuant to this Agreement and can afford to sustain a
total loss of such investment. The Stockholder further represents and warrants
that he (a) fully understands the nature, scope and duration of the limitations
on transfer contained in this Agreement and (b) have such knowledge and
experience in financial and business matters that he is capable of evaluating
the merits and risks of the proposed investment and therefore have the capacity
to protect their own interests in connection with the acquisition of the
UniCapital Stock.
17.4 INFORMATION SUPPLIED.
(a) The Stockholder represents and warrants that he has had an
adequate opportunity to ask questions and receive answers from the officers of
UniCapital concerning UniCapital, its business, operations, plans and strategy,
and the background and experience of its officers (other than the Chief
Operating Officer of UniCapital, which office had not been filled as of the date
of this Agreement) and directors. The Stockholder represents and warrants that
he has
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asked any and all questions that they he may have in the nature described in the
preceding sentence and that all such questions have been answered to their
satisfaction.
(b) The Stockholder represents and warrants that the
Stockholder has received the draft Registration Statement, including the draft
preliminary prospectus that forms a part thereof, delivered to the Stockholder
on or about February 14, 1998 that describes, among other things, UniCapital,
the Merger, the other acquisitions proposed to be undertaken by UniCapital
simultaneously with the Merger and the target companies of such other
acquisitions. The Stockholder represents and warrants that the Stockholder has
reviewed such draft Registration Statement and draft preliminary prospectus and
has had adequate opportunity to ask questions of and receive answers to the
Stockholder's satisfaction from the officers of UniCapital concerning the
matters described therein.
18. SECURITIES LEGENDS
The certificates evidencing the UniCapital Stock to be received by the
Stockholder hereunder will bear a legend substantially in the form set forth
below and containing such other information as UniCapital may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES OR BLUE SKY LAWS.
SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
SECURITIES ACT AND ANY STATE SECURITIES OR BLUE SKY LAWS,
UNLESS, IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION) OF COUNSEL SATISFACTORY TO
THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
In addition, such certificates shall also bear (a) a legend reflecting the
restrictions contained in Article 16 and (b) such other legends as counsel for
UniCapital reasonably determines are required under the applicable laws of any
state.
19. GENERAL
19.1 COOPERATION. The Stockholder and UniCapital shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement. The
Stockholder will cooperate and use their reasonable commercial efforts to have
the officers, directors and employees of Company prior to the Closing Date
cooperate
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with UniCapital on and after the Closing Date in furnishing information,
evidence, testimony and other assistance in connection with any actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Closing Date.
19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the Company,
the successors of UniCapital, and the heirs and legal representatives of the
Stockholder.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholder,
the Company, UniCapital and Newco and supersedes any prior agreement and
understanding relating to the subject matter of this Agreement. This Agree ment,
upon execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the Stockholder (subject to the limitations set
forth below), the Company, UniCapital and Newco acting through their respective
officers, duly authorized by their respective Boards of Directors; provided
further, that the Stockholder shall have no power or authority to modify or
amend this Agreement in any respect from and after the initial filing of the
Registration Statement with the SEC.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
19.5 BROKERS AND AGENTS. Except for any fees paid by the Stockholder
related to the Merger as set forth on Schedule 19.5, each party represents and
warrants that it employed no broker or agent in connection with the transactions
contemplated hereby, and each of UniCapital and Newco, on the one hand, and the
Stockholder, on the other hand, agrees to indemnify the other against all loss,
liability, cost damages or expense arising out of or related to claims for fees
or commissions of brokers employed or alleged to have been employed by such
indemnifying party. Prior to the Closing Date, the Stockholder hereby agrees
that such Stockholder shall cause the Company to terminate all of the Company's
obligations, responsibilities and payments due under the agreement listed on
Schedule 19.5.
19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, UniCapital will pay the fees, expenses and disbursements
of UniCapital and Newco and their respective agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto. Whether or not the transactions herein
contemplated shall be consummated, the Stockholder will pay the fees, expenses
and disbursements of the Stockholder and the Company and their respective
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments hereto and all other costs
and expenses incurred in the performance of this Agreement
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by the Stockholder and the Company and in compliance with all conditions to be
performed by the Stockholder and the Company under this Agreement.
19.7 NOTICES. All notices and other communications hereunder shall be
in writing (including wire, telefax or similar writing) and shall be sent,
delivered or mailed, addressed, or telefaxed:
(a) If to UniCapital or Newco, addressed to them at:
UniCapital Corporation
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Telephone: (305) 861-0603
Telefax: (305) 866-8449
with a copy to:
David A. Gerson
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
301 Grant Street
Pittsburgh, PA 15219
Telephone: (412) 560-3330
Telefax: (412) 560-3399
(b) If to the Stockholder, addressed to them in care
of the Stockholder's Representative at:
John L. Alfano
207 Washington
Northvale, New Jersey 07647
with a copy to:
Robert E. Seaman III
207 Washington
Northvale, New Jersey 07647
Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telefax, receipt
confirmed. Each such notice, request or
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communication shall be effective (i) if delivered by hand or by nationally
recognized courier service, when delivered at the address specified in this
Section 19.7 (or in accordance with the latest unrevoked written direction from
such party) and (ii) if given by telefax, when such telefax is transmitted to
the telefax number specified in this Section 19.7 (or in accordance with the
latest unrevoked written direction from such party), and the appropriate
confirmation is received.
19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York, without giving effect to any of the
provisions thereof that would require the application of the substantive laws of
any other jurisdiction. Each party to this Agreement: (a) agrees that any legal
action or proceeding under this Agreement shall be brought in the courts of the
State of New York or in the United States District Court for the Southern
District of New York; (b) irrevocably submits to the jurisdiction of such
courts; (c) agrees not to assert any claim or defense that it is not personally
subject to the jurisdiction of such courts, that any such forum is not
convenient or the venue thereof is improper, or that this Agreement or the
subject matter hereof may not be enforced in such courts; and (d) agrees to
accept service of process on it by certified or registered mail or by any other
method authorized by law.
19.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.10 TIME. Time is of the essence with respect to this Agreement.
19.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
19.12 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof. Section, subsection, Schedule and
exhibit references are to this Agreement unless otherwise specified. Unless the
context of this Agreement clearly requires otherwise, (a) references to the
plural include the singular, the singular the plural, and the part the whole,
(b) "or" has the inclusive meaning frequently identified with the phrase
"and/or" and (c) "including" has the inclusive meaning
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frequently identified with the phrase "but not limited to."Each accounting term
used herein that is not specifically defined herein shall have the meaning given
to it under GAAP.
20. DEFINITIONS
20.1 "Accounts Receivable" is defined in Section 6.14.
20.2 "Acquisition Proposal" is defined in Section 8.10.
20.3 "Adjusted 1997 EBT" is defined in Section 2.5(a).
20.4 "Adjusted 1998 EBT" is defined in Section 25(a).
20.5 "Adjusted 1999 EBT" is defined in Section 25.(a).
20.6 "Agent" is defined in Section 8.10.
20.7 "Agreement" is defined in the preamble to this Agreement.
20.8 "Authorizations" are defined in Section 6.23.
20.9 "Balance Sheet Date" is defined in Section 6.12.
20.10 "Basket Limitation" is defined in Section 12.5(b).
20.11 "Benefit Plan" is defined in Section 6.22.
20.12 "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq.
20.13 "Certificate of Merger" is defined in Section 1.1.
20.14 "Certificates" are defined in Section 2.2.
20.15 "Closing" is defined in Section 5.1(b).
20.16 "Closing Date" is defined in Section 5.2.
20.17 "Closing Date Balance Sheet" are defined in Section 3.1.
20.18 "Code" is defined in the recitals to this Agreement.
20.19 "Commonly Controlled Entity" is defined in Section 6.22.
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20.20 "Company" is defined in the preamble to this Agreement.
20.21 "Company Documents" are defined in Section 6.2.
20.22 "Company EBT" is defined in Section 2.5(b).
20.23 "Company Stock" is defined in Section 2.1(a).
20.24 "Constituent Corporations" are defined in the recitals to this
Agreement.
20.25 "Contracts" are defined in Section 6.17.
20.26 "Disputed Amounts" are defined in Section 3.2.
20.27 "EBT" is defined in Section 2.5(a).
20.28 "Earn-Out Escrow Shares" are defined in Section 4.1(b).
20.29 "Effective Date Consideration" is defined in Section 2.1(a).
20.30 "Environmental Laws" mean any and all applicable treaties, laws,
regulations, ordinances, enforceable requirements, binding determinations,
orders, decrees, judgments, injunctions, permits, approvals, authorizations,
licenses or binding agreements issued, promulgated or entered into by any
Governmental Entity, relating to the environment, preservation or reclamation of
natural resources, or to the management, Release or threatened Release of or
exposure to Hazardous Substances, including CERCLA, the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.,
the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et. seq., the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq., and any similar or implementing state or local law and all amendments or
regulations promulgated thereunder.
20.31 "Environmental Liabilities" mean any and all Losses arising from
or related to any claim, proceeding, investigation, response or removal action,
remediation or other clean-up brought, prosecuted or undertaken by UniCapital,
Newco, the Surviving Corporation, any Governmental Entity or any other person or
entity on the basis of any violation of any Environmental Laws or pursuant to
any requirement imposed under any Environmental Laws (including any sampling,
testing, investigation, removal, treatment or remediation undertaken by
UniCapital, Newco or the Surviving Corporation so as to avoid any claim or
violation or to comply with any requirement and all counseling or engineering
fees and expenses related thereto), and arising from pre-Closing operations,
events, circumstances or conditions at, on, under or emanating from, or as a
result of any
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pre-Closing off-site disposal of Hazardous Substances from, any property
currently or formerly owned, operated or leased by the Company.
20.32 "Environmental Permits" mean all permits, licenses, approvals or
authorizations from any Governmental Entity required under Environmental Laws
for the operation of the business of the applicable Company.
20.33 "Equipment" is defined in Section 6.35.
20.34 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
20.35 "Escrow Cash" is defined in Section 4.1(a).
20.36 "Escrow Property" is defined in Section 4.1(b).
20.37 "Escrow Shares" are defined in Section 4.1(a).
20.38 "Exchange Act" is defined in Section 12.1.
20.39 "Expiration Date" is defined in Section 12.6.
20.40 "Financial Statements" are defined in Section 6.12.
20.41 "Foreign Plans" are defined in Section 6.22(i)(xiii).
20.42 "GAAP" is defined in Section 3.1.
20.43 "Governmental Entity" means any court, administrative or
regulatory agency or commission, or other governmental authority or
instrumentality, domestic, foreign or supranational.
20.44 "Hazardous Substances" mean all explosive or regulated
radioactive materials or substances, hazardous or toxic materials, wastes or
chemicals, petroleum and petroleum products (including crude oil or any fraction
thereof), asbestos or asbestos containing materials, and all other materials or
chemicals regulated pursuant to any Environmental Law, including materials
listed in 49 C.F.R. ss.172.101 and materials defined as hazardous pursuant to
Section 101(4) of CERCLA.
20.45 "Indemnifiable Decrease" is defined in Section 12.5(a).
20.46 "Indemnified Party" is defined in Section 12.4(a).
20.47 "Indemnifying Party" is defined in Section 12.4(a).
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20.48 "Indemnity Escrow Agent" is defined in Section 4.1(a).
20.49 "Independent Accounting Firm" is defined in Section 3.2.
20.50 "Intellectual Property" is defined in Section 6.28(a).
20.51 "Interim Net Worth Period" is defined in Section 12.5(a).
20.53 "IPO" is defined in the recitals to this Agreement.
20.54 "IPO Price" means the per share price that the Company Stock is
sold to the Underwriters in the IPO prior to the deduction of any discounts or
expenses.
20.55 "Lease Documents" are defined in Section 6.35.
20.56 "Leases" are defined in Section 6.35.
20.57 "Liabilities" are defined in Section 6.13(a).
20.58 "Losses" are defined in Section 12.1.
20.59 "Material Adverse Amendment" is defined in Section 8.14.
20.60 "Merger" is defined in the recitals to this Agreement.
20.61 "Merger Consideration" is defined in Section 2.1(c).
20.62 "Merger Effective Date" is defined in Section 5.3.
20.63 "Net Worth Deficiency" is defined in Section 3.1.
20.64 "Newco" is defined in the preamble to this Agreement.
20.65 "Obligor" is defined in Section 6.35.
20.66 "Ordinary Course" or "ordinary course of business" means the
conduct of the business of as conducted by the Company prior to the date of this
Agreement consistent in nature and, where relevant, amount with past practices.
20.67 "PCBs" are defined in Section 6.33(h).
20.68 "Pension Plan" is defined in Section 6.22.
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20.69 "Permits" mean all permits, licenses, franchises, approvals and
authorizations from any Governmental Entity that are owned or held by any
Company, or held by any Stockholder that relate to the operations of any
Company.
20.70 "Prospectus" is defined in Section 16.1.
20.71 "Registration Statement" is defined in Section 9.4.
20.72 "Regulations" are defined in Section 6.23.
20.73 "Release" means any spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, emanation or migration of any
Hazardous Substance in, into, onto or through the environment (including ambient
air, surface water, ground water, soils, land surface, subsurface strata,
workplace or structure).
20.74 "Restricted Business" is defined in Section 14.1(a).
20.75 "Scheduled Payments" are defined in Section 6.35.
20.76 "SEC" is defined in Section 9.4.
20.77 "Securities Act" is defined in Section 6.16.
20.78 "Stockholder" is defined in the preamble to this Agreement.
20.79 "Stockholder's Representative" is defined in Section 3.3.
20.80 "Subsidiary" is defined in Section 6.8.
20.81 "Surviving Corporation" is defined in Section 1.2.
20.82 "Tax Returns" are defined in Section 6.27.
20.83 "Taxes" are defined in Section 6.27.
20.84 "Third Party Claim" is defined in Section 12.4(a).
20.85 "Unaudited Financial Statements" are defined in Section 6.12(b).
20.86 "Underwriting Agreement" is defined in Section 5.1(a).
20.87 "UniCapital" is defined in the preamble to this Agreement.
63
<PAGE> 70
20.88 "UniCapital Documents" are defined in Section 7.3
20.89 "UniCapital Stock" is defined in Section 2.1(a).
20.90 "Welfare Plan" is defined in Section 6.22.
64
<PAGE> 71
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNICAPITAL CORPORATION
By: /s/ ROBERT NEW
---------------------------------
Robert New
Chairman and Chief Executive Officer
JCS ACQUISITION CORP.
By: /s/ ROBERT NEW
---------------------------------
Robert New, President
JACOM COMPUTER SERVICES, INC.
By: /s/ JOHN L.ALFANO
---------------------------------
John L. Alfano, President
/s/ JOHN L. ALFANO
---------------------------------
John L. Alfano
65
<PAGE> 72
ANNEXES
ANNEX I [Form of Certificate of Merger]
ANNEX II [Calculation and Composition of Consideration]
ANNEX III [Form of Indemnity Escrow Agreement]
ANNEX IV [Form of Employment Agreement]
ANNEX V [Form of Consulting Agreement]
ANNEX VI [Form of Stockholder Release]
SCHEDULES
SCHEDULE 2.5 [Add-Backs]
SCHEDULE 6.1 [Jurisdictions in which Company and Subsidiaries Are Qualified
to do Business]
SCHEDULE 6.5 [Issued and Outstanding Stock of the Company and Subsidiaries]
SCHEDULE 6.8 [Subsidiaries]
SCHEDULE 6.9 [Predecessor Companies]
SCHEDULE 6.11 [Third Party Options]
SCHEDULE 6.12 [Company Financial Statements]
SCHEDULE 6.13 [Liabilities and Obligations]
SCHEDULE 6.14 [Accounts and Notes Receivable Aging]
SCHEDULE 6.15 [Permits]
SCHEDULE 6.16 [Real and Personal Property]
SCHEDULE 6.17 [Contracts and Commitments]
SCHEDULE 6.20 [Insurance]
SCHEDULE 6.21 [Employee Information]
SCHEDULE 6.22 [Employee Benefit Plans]
SCHEDULE 6.23 [Authorizations]
SCHEDULE 6.24 [Transactions with Affiliates]
SCHEDULE 6.25 [Litigation]
SCHEDULE 6.27 [Taxes]
SCHEDULE 6.28 [Intellectual Property]
SCHEDULE 6.28(d) [Confidentiality and Non-Disclosure Agreements]
SCHEDULE 6.28(e) [Registered Intellectual Property]
SCHEDULE 6.29 [Notice and Consents]
SCHEDULE 6.30 [Absence of Changes]
SCHEDULE 6.31 [Deposit Accounts; Powers of Attorney]
SCHEDULE 6.35 [Leases]
<PAGE> 73
SCHEDULE 7.8 [UniCapital and Newco Litigation]
SCHEDULE 7.10 [UniCapital and Newco Agreements]
SCHEDULE 9.2 [Employment Agreements]
SCHEDULE 11.1 [Lease Arrangements with Certain Persons]
SCHEDULE 11.6 [Personal Guarantees of the Indebtedness of the Company]
SCHEDULE 14.1 [Non-Competition]
SCHEDULE 19.5 [Brokers and Agents]
The registrant agrees to furnish a copy of each omitted schedule, exhibit or
annex to this Exhibit 2.04 to the Commission supplementally upon request
therefor.
<PAGE> 1
Exhibit 2.05
AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
UNICAPITAL CORPORATION
(a Delaware corporation),
KSTN ACQUISITION CORP.
(a Delaware corporation),
K.L.C., INC.
(a Connecticut corporation)
and
ALAN H. KAUFMAN AND EDGAR W. LEE
Dated as of February 14, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
1. THE MERGER...............................................................................................3
1.1 Delivery and Filing of Articles of Merger.......................................................3
1.2 Merger Effective Date...........................................................................3
1.3 Certificate of Incorporation, Bylaws, Board of Directors and Officers
of the Surviving Corporation....................................................................3
2. MERGER CONSIDERATION.....................................................................................5
2.1 Conversion of Capital Stock; Merger Consideration...............................................5
2.2 Exchange Procedures.............................................................................5
2.3 No Fractional Shares............................................................................6
2.4 Allocation of Merger Consideration..............................................................6
2.5 Earn-Out Consideration..........................................................................6
3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS' REPRESENTATIVE....................................................8
3.1 Computation.....................................................................................8
3.2 Disputes........................................................................................8
3.3 Stockholders' Representative....................................................................9
4. INDEMNITY ESCROW.........................................................................................9
4.1 Creation of Escrow..............................................................................9
4.2 Duration and Terms.............................................................................10
4.3 Voting and Investment..........................................................................10
5. CLOSING; MERGER EFFECTIVE DATE..........................................................................10
5.1 Closing........................................................................................10
5.2 Closing Date; Location.........................................................................11
5.3 Effectiveness of Merger........................................................................11
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS..........................................................11
6.1 Corporate Existence............................................................................11
6.2 Corporate Power; Authorization; Enforceable Obligations........................................11
6.3 Authority; Ownership...........................................................................11
6.4 Validity of Contemplated Transactions..........................................................12
6.5 Capital Stock of the Company...................................................................12
6.6 Transactions in Capital Stock..................................................................12
6.7 No Bonus Shares................................................................................13
6.8 Subsidiaries...................................................................................13
6.9 Predecessor Status; etc........................................................................13
6.10 Spin-offs......................................................................................13
</TABLE>
i
<PAGE> 3
<TABLE>
<C> <S> <C>
6.11 No Third-Party Options.........................................................................13
6.12 Financial Statements...........................................................................13
6.13 Liabilities and Obligations....................................................................14
6.14 Accounts and Notes Receivable..................................................................14
6.15 Permits........................................................................................15
6.16 Real and Personal Property.....................................................................15
6.17 Contracts and Commitments......................................................................16
6.18 Government Contracts...........................................................................17
6.19 Title to Real Property.........................................................................17
6.20 Insurance......................................................................................17
6.21 Employees......................................................................................18
6.22 Employee Benefit Plans and Arrangements........................................................18
6.23 Compliance with Law; Authorizations............................................................22
6.24 Transactions With Affiliates...................................................................22
6.25 Litigation.....................................................................................22
6.26 Restrictions...................................................................................23
6.27 Taxes..........................................................................................23
6.28 Intellectual Property Matters..................................................................24
6.29 Completeness; No Violations....................................................................25
6.30 Existing Condition.............................................................................25
6.31 Deposit Accounts; Powers of Attorney...........................................................27
6.32 Books of Account...............................................................................27
6.33 Environmental Matters..........................................................................27
6.34 No Illegal Payments............................................................................28
6.35 Leases.........................................................................................29
6.36 Lease Funding..................................................................................33
6.37 Disclosure.....................................................................................33
7. REPRESENTATIONS AND WARRANTIES OF UNICAPITAL
AND NEWCO...............................................................................................33
7.1 Corporate Existence............................................................................33
7.2 UniCapital Stock...............................................................................34
7.3 Corporate Power and Authorization..............................................................34
7.4 No Conflicts...................................................................................34
7.5 Capitalization of UniCapital...................................................................34
7.6 Compliance with Law; Authorizations............................................................34
7.7 Transactions With Affiliates...................................................................35
7.8 Litigation.....................................................................................35
7.9 Registration Rights............................................................................35
7.10 Miscellaneous..................................................................................35
</TABLE>
ii
<PAGE> 4
<TABLE>
<C> <S> <C>
8. COVENANTS OF STOCKHOLDERS AND THE COMPANY...............................................................36
8.1 Business in the Ordinary Course................................................................36
8.2 Existing Condition.............................................................................36
8.3 Maintenance of Properties and Assets...........................................................36
8.4 Employees and Business Relations...............................................................36
8.5 Maintenance of Insurance.......................................................................36
8.6 Compliance with Laws, etc......................................................................36
8.7 Conduct of Business............................................................................36
8.8 Access.........................................................................................37
8.9 Press Releases and Other Communications........................................................37
8.10 Exclusivity....................................................................................37
8.11 Third-Party Approvals..........................................................................38
8.12 Notice to Bargaining Agents....................................................................38
8.13 Notification of Certain Matters................................................................38
8.14 Amendment of Schedules.........................................................................39
8.15 HSR Filing.....................................................................................39
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDERS............................................................................................39
9.1 Representations and Warranties; Performance of Obligations.....................................40
9.2 Employment Agreements..........................................................................40
9.3 Opinion of Counsel.............................................................................40
9.4 Registration Statement.........................................................................40
9.5 HSR Act........................................................................................41
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND NEWCO.............................................41
10.1 Representations and Warranties; Performance of Obligations.....................................41
10.2 No Litigation..................................................................................41
10.3 Examination of Financial Statements............................................................41
10.4 No Material Adverse Change.....................................................................41
10.5 Regulatory Review..............................................................................42
10.6 Stockholders' Release..........................................................................42
10.7 Employment Agreements..........................................................................42
10.8 Opinion of Counsel.............................................................................42
10.9 Consents and Approvals.........................................................................44
10.10 Good Standing Certificates.....................................................................44
10.11 Registration Statement.........................................................................44
10.12 Repayment of Indebtedness; Pre-Closing Distributions...........................................44
10.13 HSR Act........................................................................................44
10.14 Termination of Stockholders' Agreement.........................................................44
11. COVENANTS OF UNICAPITAL.................................................................................44
11.1 UniCapital Stock Options.......................................................................44
</TABLE>
iii
<PAGE> 5
<TABLE>
<C> <S> <C>
11.2 Information Filing.............................................................................45
11.3 Release From Guarantees; Indebtedness..........................................................45
11.4 HSR Filing.....................................................................................45
11.5 Employee Benefit Plans of UniCapital...........................................................46
12. INDEMNIFICATION; SURVIVAL...............................................................................46
12.1 General Indemnification by Stockholders........................................................46
12.2 Specific Indemnification by Stockholders.......................................................47
12.3 Indemnification by UniCapital and Newco........................................................47
12.4 Third-Party Claims.............................................................................48
12.5 Limitations on Indemnification.................................................................49
12.6 Survival of Representations and Warranties.....................................................50
13. TERMINATION OF AGREEMENT................................................................................51
13.1 Termination by UniCapital......................................................................51
13.2 Termination by the Stockholders................................................................51
13.3 Automatic Termination..........................................................................52
13.4 Liquidated Damages.............................................................................52
14. NONCOMPETITION AND NONSOLICITATION......................................................................52
14.1 Noncompetition.................................................................................52
14.2 Damages........................................................................................53
14.3 Reasonable Restraint...........................................................................53
14.4 Severability; Reformation......................................................................53
14.5 Independent Covenant...........................................................................53
14.6 Materiality....................................................................................54
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................54
15.1 Stockholders...................................................................................54
15.2 UniCapital.....................................................................................54
15.3 Damages........................................................................................55
16. LOCK-UP AGREEMENTS......................................................................................55
16.1 Agreement......................................................................................55
16.2 Intended Third-Party Beneficiaries.............................................................55
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK........................................................................................56
17.1 Investment Intent..............................................................................56
17.2 Compliance with Law............................................................................56
17.3 Economic Risk; Sophistication..................................................................56
17.4 Information Supplied...........................................................................56
</TABLE>
iv
<PAGE> 6
<TABLE>
<C> <S> <C>
18. SECURITIES LEGENDS......................................................................................57
19. GENERAL.................................................................................................57
19.1 Cooperation....................................................................................57
19.2 Successors and Assigns.........................................................................58
19.3 Entire Agreement...............................................................................58
19.4 Counterparts...................................................................................58
19.5 Brokers and Agents.............................................................................58
19.6 Expenses.......................................................................................59
19.7 Notices........................................................................................59
19.8 Governing Law..................................................................................60
19.9 Exercise of Rights and Remedies................................................................60
19.10 Time...........................................................................................61
19.11 Reformation and Severability...................................................................61
19.12 Remedies Cumulative............................................................................61
19.13 Captions.......................................................................................61
20. DEFINITIONS.............................................................................................61
</TABLE>
v
<PAGE> 7
AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION (the
"Agreement") is made as of the 14th day of February, 1998, between UNICAPITAL
CORPORATION, a Delaware corporation ("UniCapital"); KSTN ACQUISITION CORP., a
Delaware corporation ("Newco"); K.L.C., INC., a Connecticut corporation (the
"Company"), and Alan H. Kaufman and Edgar W. Lee (collectively referred to as
the "Stockholders"), who are all of the stockholders of the Company. Certain
capitalized terms used herein are defined in Article 20 hereof.
WHEREAS, UniCapital was incorporated on October 9, 1997 under the laws
of the State of Delaware for the purpose of acquiring a number of equipment
leasing businesses in different locations; and
WHEREAS, UniCapital intends to undertake an initial public offering of
its Common Stock (the "IPO") and in connection therewith intends to file a
Registration Statement on Form S-1 with the Securities and Exchange Commission
within 90 days of the execution and delivery of this Agreement;
WHEREAS, Newco was duly incorporated on February 4, 1998 under the laws
of the State of Delaware solely for the purpose of completing this transaction,
and is a wholly-owned subsidiary of UniCapital; and
WHEREAS, the Company is a corporation organized and existing under the
laws of Connecticut; and
WHEREAS, the respective Boards of Directors of UniCapital, Newco and
the Company deem it advisable and in the best interests of such corporations and
their respective stockholders that Newco merge with and into the Company
pursuant to this Agreement and the applicable provisions of the laws of the
respective states of incorporation of Newco and the Company (such transaction
being herein called the "Merger" and the Company, Newco and UniCapital being
hereinafter collectively referred to as the "Constituent Corporations"); and
WHEREAS, the parties hereto intend that the transactions contemplated
in this Agreement constitute part of a single transaction involving the
simultaneous consummation of a number of similar agreements between UniCapital
and certain other corporations and partnerships and the IPO and that such single
transaction (the "Unified Transaction") shall fall within the provisions of
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code");
1
<PAGE> 8
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent
Corporations will cause Articles of Merger, in substantially the form of Annex I
attached hereto with such changes therein as may be required by applicable state
laws (the "Certificate of Merger"), to be executed and delivered to the
Secretary of State of the state of incorporation of Newco and the Company on or
before the Merger Effective Date.
1.2 MERGER EFFECTIVE DATE. The "Merger Effective Date" shall be the
date specified in Section 5.3. At the Merger Effective Date, the Certificate of
Merger shall either be filed for immediate effectiveness with the Secretary of
State of the applicable state of incorporation of Newco and the Company or
become effective if filed with such Secretary of State prior to such date. On
the Merger Effective Date upon the effectiveness of the Merger, Newco shall be
merged with and into the Company, in accordance with the Certificate of Merger,
and the separate existence of Newco shall cease. The Company, as the entity
surviving the Merger, is hereinafter sometimes referred to as the "Surviving
Corporation." The Merger shall have the effects specified in the laws of the
state of incorporation of the Surviving Corporation.
1.3 CERTIFICATE OF INCORPORATION, BYLAWS, BOARD OF DIRECTORS AND
OFFICERS OF THE SURVIVING CORPORATION. Upon the effectiveness of the Merger:
(a) the Certificate of Incorporation of the Company, as
amended and restated in the Articles of Merger, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law;
(b) the Bylaws of the Company shall be the Bylaws of the
Surviving Corporation and shall remain so until thereafter duly amended;
(c) the Surviving Corporation shall have a Board of Directors
consisting of one member, who shall be Robert New commencing upon the
effectiveness of the Merger and who shall hold office subject to the laws of the
state of incorporation and the Certificate of Incorporation and Bylaws of the
Surviving Corporation; and
(d) the officers of the Company immediately prior to the
Merger Effective Date shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, each of such officers to serve,
subject to the provisions of the Certificate of Incorporation and Bylaws of the
Surviving Corporation, until such officer's successor is elected and qualified;
provided, that the Chairman of the Board (if any), the Treasurer and the
Secretary of the Company shall not succeed to the corresponding offices of the
Surviving Corporation, but instead (i) the sole director of the
2
<PAGE> 9
Surviving Corporation shall be the Chairman of the Board of the Surviving
Corporation, (ii) the Treasurer of Newco shall be the Treasurer of the Surviving
Corporation and (iii) the Secretary of Newco shall be the Secretary of the
Surviving Corporation.
2. MERGER CONSIDERATION
2.1 CONVERSION OF CAPITAL STOCK; MERGER CONSIDERATION. (a) Upon the
effectiveness of the Merger, all of the shares of capital stock of the Company
issued and outstanding immediately prior to the effectiveness of the Merger
("Company Stock") shall, by virtue of the Merger and without any action on the
part of the holder thereof but subject to the effectiveness of the Merger,
automatically be converted into the right to receive, without interest,
(i) an aggregate of $27,900,000 in cash,
(ii) an aggregate of 1,468,421 shares of common
stock, par value $.001 per share, of UniCapital ("UniCapital Stock") (the
consideration referred to in clauses (i) and (ii), all of which is to be
distributed to the Stockholders on the Merger Effective Date in the percentages
set forth on Annex II, subject to Article 4 hereof, is referred to in this
Agreement as the "Effective Date Consideration"); provided, however, in the
event that the aggregate value (based on the IPO Price of the UniCapital Stock)
of the 1,468,421 shares of UniCapital Stock is less than $22,026,316, then the
Company shall issue additional shares to the Stockholders so that the aggregate
value of the shares of UniCapital Stock equals $22,026,316 (with appropriate
adjustment to the cash and stock components of the Effective Date Consideration
so as to eliminate fractional shares), and
(iii) the Earn-Out Consideration as described in
Section 2.5, to be distributed to the Stockholders within five business days
after the date the portion of the Earn-Out Consideration with respect to a given
calendar year (if any) is finally determined pursuant to Section 2.5 in the same
relative percentages of cash and stock set forth on Annex II.
(b) Upon the effectiveness of the Merger, each share of
capital stock of Newco issued and outstanding immediately prior to the
effectiveness of the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, automatically be converted into one
fully paid and non-assessable share of common stock of the Surviving
Corporation, all of which converted common stock shall constitute all of the
outstanding shares of capital stock of the Surviving Corporation immediately
after the effectiveness of the Merger.
(c) The Effective Date Consideration and the Earn-Out
Consideration are referred to together in this Agreement as the "Merger
Consideration."
2.2 EXCHANGE PROCEDURES. On the Merger Effective Date, upon surrender
to UniCapital of certificates representing all of the outstanding shares of
Company Stock ("Certificates"), each Stockholder shall, subject to Article 4, be
entitled to receive, in exchange therefor, such Stockholder's pro rata share of
the cash portion of the Effective Date Consideration, calculated in
3
<PAGE> 10
accordance with Annex II, and a certificate representing that number of whole
shares of UniCapital Stock which such holder has the right to receive in respect
of the Certificates surrendered, as set forth on Annex II, and each Certificate
so surrendered shall forthwith be canceled. On the Merger Effective Date or as
promptly thereafter as is practicable, and subject to and in accordance with the
provisions of Article 4, UniCapital shall cause to be distributed to the
Indemnity Escrow Agent (as defined in Article 4) a certificate or certificates
representing the Escrow Shares (as defined in Article 4), which shall be
registered in the name of the Indemnity Escrow Agent as nominee for the
Stockholders and shall be held in accordance with the provisions of Article 4
and the Indemnity Escrow Agreement referred to therein.
2.3 NO FRACTIONAL SHARES. Notwithstanding any other provision of this
Article 2, no fractional shares of UniCapital Stock will be issued and the
Stockholders shall instead each receive in lieu of any such fractional share but
a cash payment in lieu thereof in an amount equal to such fraction multiplied by
the IPO Price.
2.4 ALLOCATION OF MERGER CONSIDERATION. The parties agree that they
will not take a position on any income tax return, before any governmental
agency charged with the collection of any income tax, or in any judicial
proceeding that is in any way inconsistent with the allocation (if any) of the
Merger Consideration to the Company made by UniCapital following the Closing.
The parties agree that no amount of the Merger Consideration shall be allocated
to the covenants of the Stockholders set forth in Section 14.1 hereof.
2.5 EARN-OUT CONSIDERATION. (a) If the earnings before taxes (the
"EBT") of the Company for the twelve months ending December 31, 1998, increased
by amounts in respect of those items set forth on Schedule 2.5 that affected net
income during the period from January 1, 1998 through the Closing Date, and
decreased by the amount of UniCapital corporate overhead allocated to the
Company for the period from the Closing Date through December 31, 1998 and
increased by that amount reflecting gain-on-sale treatment as if securitized for
each Lease originated in the year ending December 31, 1998 if such Lease has not
been securitized on or before December 31, 1998 (the "Adjusted 1998 EBT"),
exceeds the EBT of the Company for the twelve months ending December 31, 1997,
inclusive of the add-backs set forth on Schedule 2.5 (the "Adjusted 1997 EBT"),
then the Stockholders shall be entitled to receive one-half of the difference
between the Adjusted 1998 EBT and the Adjusted 1997 EBT.
(b) If the EBT of the Company for the year ending December 31,
1999, decreased by the amount of UniCapital corporate overhead allocated to the
Company and increased by that amount reflecting gain-on-sale treatment as if
securitized for each Lease originated in the year ending December 31, 1999 if
such Lease has not been securitized on or before December 31, 1999 (the
"Adjusted 1999 EBT", and together with the Adjusted 1997 EBT and the Adjusted
1998 EBT, the "Company EBT"), exceeds the greater of the Adjusted 1998 EBT and
the Adjusted 1997 EBT, then the Stockholders shall be entitled to receive
one-half of the difference between (i) the Adjusted 1999 EBT and (ii) the
greater of the Adjusted 1998 EBT and the Adjusted 1997 EBT.
4
<PAGE> 11
(c) The EBT of the Company for the years ending December 31,
1998 and December 31, 1999 shall be computed using generally accepted accounting
principles and practices as applied in the audited financial statements of the
Company prepared by Coopers & Lybrand L.L.P. included in the Registration
Statement. The allocation of UniCapital overhead shall be made on a pro rata
basis applied consistently among UniCapital subsidiaries. To the extent
gain-on-sale treatment was accorded any Lease, whether in the add-backs set
forth on Schedule 2.5 or in any year, pursuant to Section 2.5 or pursuant to an
actual transaction qualifying for gain-on-sale treatment, income from the
payment stream on such Lease shall not be included in the EBT of the Company for
any subsequent year. Price Waterhouse LLP shall calculate Adjusted 1998 EBT and
Adjusted 1999 EBT by, with respect to the gain-on-sale treatment accorded Leases
pursuant to Section 2.5, deeming the securitizations of each Lease originated in
the applicable year to have occurred (i) at prevailing market rates on the 15th
day of January of the following year, and (ii) in a structure consistent with
securitization conducted by UniCapital.
(d) The amounts (if any) that the Stockholders become entitled
to receive pursuant to Sections 2.5(a) and/or 2.5(b) are referred to herein as
the "Earn-Out Consideration." The Earn-Out Consideration shall be paid one-half
in cash and one-half in shares of UniCapital Stock, valued at the average of the
closing prices per share of UniCapital Stock for the 20 trading days preceding
December 31 of the year to which the portion of Earn-Out Consideration in
question applies.
(e) Company EBT shall be determined within forty-five days
following December 31 of such year.
(f) Notwithstanding anything in this Section 2.5 to the
contrary, if the Stockholders dispute the determination of Company EBT, then the
Stockholders' Representative shall notify UniCapital in writing of such dispute
and specify the amount thereof within 20 business days after notification of the
determination of Company EBT. If UniCapital and the Stockholders' Representative
cannot resolve any such dispute which would affect the Earn-Out Consideration,
then such dispute shall be resolved by an Independent Accounting Firm (as
defined in Section 3.2). The Independent Accounting Firm shall be directed to
consider only those agreements, contracts, commitments or other documents (or
summaries thereof) that were either (i) delivered or made available to Price
Waterhouse LLP in connection with the transactions contemplated hereby, or (ii)
reviewed by Price Waterhouse LLP during the course of determining Company EBT.
The determination of the Independent Accounting Firm shall be made as promptly
as practicable and shall be final and binding upon the parties, absent manifest
error which error may only be corrected by such Independent Accounting Firm. The
costs of the Independent Accounting Firm shall be borne by the party (either
UniCapital or the Stockholders as a group) whose determination of Company EBT
was further from the determination of the Independent Accounting Firm. Pending
resolution of any such dispute by the Independent Accounting Firm, only the
amount of the Earn-Out Consideration as determined by Price Waterhouse LLP shall
be paid by UniCapital. Once Company EBT is finally determined, the Earn-Out
Consideration attendant thereto not previously paid, if any, shall be paid in
accordance with this Section 2.5; provided that in the event the Stockholders'
5
<PAGE> 12
determination of EBT was closer to the determination of the Independent
Accounting Firm than UniCapital's determination of EBT, the Stockholders shall
receive such Earn-Out Consideration plus interest which shall accrue at the rate
of 10% per annum on any such Earn-Out Consideration that is resolved in the
Stockholders' favor from the date the Earn-Out Consideration was first payable
to the date on which the Earn-Out Consideration is received by the Stockholders.
(g) Any Earn-Out Consideration paid by UniCapital shall be
treated as additional consideration paid by UniCapital for the shares of Company
Stock.
3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS' REPRESENTATIVE
3.1 COMPUTATION. As soon as practicable, but in any event within 30
days after the Closing, UniCapital shall engage Price Waterhouse LLP to prepare,
in accordance with generally accepted accounting principles ("GAAP") and
consistent with previous practice of the independent auditors of the Company (to
the extent such practices were in accordance with GAAP), a balance sheet of the
Company (the "Closing Date Balance Sheet") as of the end of business on the day
prior to the Closing Date (as defined in Section 5). If the aggregate
stockholders' equity of the Company as shown on the Closing Date Balance Sheet
is less than the aggregate stockholders' equity as shown on the balance sheet of
the Company as at December 31, 1997 as audited by Coopers & Lybrand L.L.P.,
then, subject to Section 3.2, commencing 10 business days after delivery of the
Closing Date Balance Sheet to UniCapital, the aggregate Merger Consideration
shall be adjusted downward dollar-for-dollar in the amount of any such
deficiency (the "Net Worth Deficiency"). After the 10th business day after the
delivery of the Closing Date Balance Sheet to UniCapital (or if applicable,
after the final determination of any Disputed Amount in accordance with Section
3.2), UniCapital shall be entitled to recover from the Escrow Property pursuant
to Article 4 that portion of any Net Worth Deficiency which does not exceed
one-half of the initial balance of the Escrow Property. For any amount by which
any Net Worth Deficiency exceeds one-half of the initial balance of the Escrow
Property, such portion of the Net Worth Deficiency shall be paid by the
Stockholders not later than the 25th business day after the delivery of the
Closing Date Balance Sheet (or if applicable, not later than the 5th business
day after the final determination of any Disputed Amount in accordance with
Section 3.2). At its sole and exclusive option, and at any time after such 25th
business day (or if applicable, not later than the fifth business day after the
final determination of any Disputed Amount in accordance with Section 3.2),
UniCapital shall be entitled to recover from the Escrow Property pursuant to
Article 4 all or any portion of the amount of the Net Worth Deficiency not paid
by the Stockholders as required by this Article 3.
3.2 DISPUTES. Notwithstanding anything in this Article 3 to the
contrary, if there is any Net Worth Deficiency and the Stockholders dispute any
item contained on the Closing Date Balance Sheet, then the Stockholders'
Representative shall notify UniCapital in writing of each disputed item
(collectively, the "Disputed Amounts") and specify the amount thereof in dispute
within 10 business days after the delivery of the Closing Date Balance Sheet to
the Stockholders. If UniCapital and the Stockholders' Representative cannot
resolve any such dispute relating to the amount of the Net Worth Deficiency,
then such dispute shall be resolved by an independent nationally recognized
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accounting firm which is reasonably acceptable to UniCapital and the
Stockholders' Representative (the "Independent Accounting Firm"). The
determination of the Independent Accounting Firm shall be made as promptly as
practical and shall be final and binding on the parties, absent manifest error
which error may only be corrected by such Independent Accounting Firm. Any
expenses relating to the engagement of the Independent Accounting Firm shall be
allocated between UniCapital and the Stockholders so that the Stockholders'
aggregate share of such costs shall bear the same proportion to the total costs
that the Disputed Amounts unsuccessfully contested by the Stockholders'
Representative (as finally determined by the Independent Accounting Firm) bear
to the total of the Disputed Amounts so submitted to the Independent Accounting
Firm. Pending resolution of any such dispute by the Independent Accounting Firm,
no such Disputed Amount shall be due to UniCapital. Once any such Disputed
Amount is finally determined to be due to UniCapital, UniCapital may proceed to
recover such amount in the manner set forth in Section 3.1.
3.3 STOCKHOLDERS' REPRESENTATIVE. (a) Each Stockholder, by signing this
Agreement, designates Edgar W. Lee (or, in the event that Edgar W. Lee is unable
or unwilling to serve or resigns, Alan H. Kaufman) to be such Stockholders'
representative for purposes of this Agreement (the "Stockholders'
Representative"). The Stockholders shall be bound by any and all actions taken
by the Stockholders' Representative on their behalf.
(b) UniCapital and Newco shall be entitled to rely upon any
communication or writing given or executed by the Stockholders' Representative.
All communications or writings to be sent to Stockholders pursuant to this
Agreement may be addressed to the Stockholders' Representative and any
communication or writing so sent shall be deemed notice to all of the
Stockholders hereunder. The Stockholders hereby consent and agree that the
Stockholders' Representative is authorized to accept deliveries, including any
notice, on behalf of the Stockholders pursuant hereto.
(c) The Stockholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Stockholder, with full
power in his or her name and on his or her behalf to act according to the terms
of this Agreement in the absolute discretion of the Stockholders'
Representative, and in general to do all things and to perform all acts
including, without limitation, executing and delivering all agreements,
certificates, receipts, instructions and other instruments contemplated by or
deemed advisable in connection with Article 12 of this Agreement. This power of
attorney and all authority hereby conferred is granted subject to and coupled
with the interest of such Stockholder and the other Stockholders hereunder and
in consideration of the mutual covenants and agreements made herein, and shall
be irrevocable and shall not be terminated by any act of any Stockholder, by
operation of law, whether by such Stockholder's death or any other event.
(d) Notwithstanding the foregoing, the Stockholders'
Representative shall inform each Stockholder of all notices received, and of all
actions, decisions, notices and exercises of any rights, power or authority
proposed to be done, given or taken by such Stockholders' Representative, and,
except as provided in Section 19.3, shall act as directed by the Stockholders
holding a majority interest in the Escrow Property (as defined in Section
4.1(b)).
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4. INDEMNITY ESCROW
4.1 CREATION OF ESCROW. (a) At the Closing, as collateral security for
the payment of any indemnification obligations of the Stockholders pursuant to
Sections 12.1 and 12.2 hereof and for the payment of amounts due pursuant to
Article 3 hereof, the following shall be delivered to UniCapital's Transfer
Agent as indemnity escrow agent (the "Indemnity Escrow Agent"):
(i) ten percent (10%) of the number of shares of
UniCapital Stock issuable to each Stockholder as part of the Effective Date
Consideration in accordance with the percentages set forth on Annex II, rounded
up to the nearest whole share (the "Escrow Shares"); and
(ii) ten percent (10%) of the cash portion of the
Effective Date Consideration payable to each Stockholder in accordance with the
percentages set forth on Annex II, rounded up to the nearest whole cent (the
"Escrow Cash").
(b) The Escrow Shares and the Escrow Cash are referred to
together as the "Escrow Property." In addition, the Escrow Property shall
include all cash and non-cash dividends and other property at any time received
or otherwise distributed in respect of or in exchange for any or all of the
Escrow Property, all securities hereafter issued in substitution for any of the
foregoing, all certificates and instruments representing or evidencing such
securities, all cash and non-cash proceeds of all of the foregoing property
except as provided in Section 4.3 and all rights, titles, interests, privileges
and preferences appertaining or incident to the foregoing property.
4.2 DURATION AND TERMS. The Escrow Property shall be held and disbursed
by the Indemnity Escrow Agent in accordance with the terms of an Indemnity
Escrow Agreement substantially in the form attached hereto as Annex III. The
Indemnity Escrow Agent shall hold the Escrow Property pursuant to the Indemnity
Escrow Agreement until the later of: (a) the first anniversary of the Merger
Effective Date; or (b) the resolution of any claim for indemnification or
payment that is pending on the first anniversary of the Merger Effective Date,
but only to the extent of the amount of such pending claim.
4.3 VOTING AND INVESTMENT. The Stockholders shall be entitled to
exercise all voting powers incident to the Escrow Shares held by the Indemnity
Escrow Agent as their nominee, but shall not be entitled to exercise any
investment or dispositive powers over such Escrow Shares. The Escrow Cash shall
be invested from time to time by the Indemnity Escrow Agent as provided in the
Indemnity Escrow Agreement.
5. CLOSING; MERGER EFFECTIVE DATE
5.1 CLOSING. Within two business days following the date on which the
underwriting agreement relating to the offer and sale of shares of UniCapital
Stock in the IPO (the "Underwriting Agreement") shall have been executed, the
parties shall take all actions necessary to effect the Merger (other than the
filing with the appropriate state authorities of the Certificate of Merger,
which
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shall be filed and become effective on the Merger Effective Date) and to effect
the conversion and delivery of shares referred to in Article 2 hereof
(hereinafter referred to as the "Closing"); provided, that such actions shall
not include the actual completion of the Merger or the actual conversion and
delivery of the shares referred to in Article 2 hereof, which actions shall only
be taken on the Merger Effective Date as herein provided.
5.2 CLOSING DATE; LOCATION. The Closing shall take place at the offices
of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178. The date on
which the Closing shall occur shall be referred to as the "Closing Date."
5.3 EFFECTIVENESS OF MERGER. Concurrently with the consummation of the
sale of the shares of UniCapital Stock pursuant to the Underwriting Agreement,
the Merger shall become effective and all transactions contemplated by this
Agreement, including the conversion and delivery of shares and the delivery of a
check or checks in an amount equal to the cash which the Stockholders shall be
entitled to receive pursuant to the Merger referred to in Article 2 hereof,
shall occur and be deemed to be completed. The date on which the Merger is
effected shall be referred to as the "Merger Effective Date."
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, each Stockholder jointly and severally represents and warrants
to UniCapital and Newco as follows:
6.1 CORPORATE EXISTENCE. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation. The Company is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the conduct of its
business requires it to be so qualified, all of which jurisdictions are listed
on Schedule 6.1.
6.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
Company has the corporate power, authority and legal right to execute, deliver
and perform this Agreement. The execution, delivery and performance of this
Agreement by the Company has been duly authorized by the Board of Directors and
the Stockholders and no further corporate action on the part of the Company or
the Stockholders is necessary to authorize this Agreement and the performance of
the transactions contemplated hereby. This Agreement has been, and the other
agreements, documents and instruments required to be delivered by the Company in
accordance with the provisions hereof (the "Company Documents") will be, duly
executed and delivered on behalf of the Company by duly authorized officers of
the Company, and this Agreement constitutes, and the Company Documents when
executed and delivered will constitute, the legal, valid and binding obligations
of the Company, enforceable against it in accordance with their respective
terms.
6.3 AUTHORITY; OWNERSHIP. Each Stockholder has the full legal right,
power and legal capacity or authority to enter into this Agreement. Upon the
date of this Agreement and immediately
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prior to the Closing Date, each Stockholder owns and will own beneficially and
of record all of the shares of capital stock of the Company identified on Annex
II as being owned by such Stockholder. The conversion of Company Stock into
UniCapital Stock and cash pursuant to the provisions of this Agreement will
transfer to UniCapital valid title in the shares of Company Stock owned by such
Stockholder, free and clear of all liens, security interests, pledges, charges,
voting trusts, equities, restrictions, encumbrances and claims of every kind.
6.4 VALIDITY OF CONTEMPLATED TRANSACTIONS. The execution, delivery and
performance of this Agreement by the Company and each Stockholder does not and
will not violate, conflict with or result in the breach of any term, condition
or provision of, or require the consent of any other person under (a) any
existing law, ordinance, or governmental rule or regulation to which the Company
or any Stockholder is subject, (b) any judgment, order, writ, injunction, decree
or award of any Governmental Entity which is applicable to the Company, or
Stockholder, (c) the charter documents of the Company or any securities issued
by the Company, or (d) except as otherwise set forth in Schedule 6.4, any
mortgage, indenture, agreement, contract, commitment, lease, plan,
Authorization, or other instrument, document or understanding, oral or written,
to which the Company or any Stockholder is a party, by which the Company, or any
Stockholder may have rights or by which any of the properties or assets of the
Company may be bound or affected, or give any party with rights thereunder the
right to terminate, modify, accelerate or otherwise change the existing rights
or obligations of the Company thereunder. Except for filing the Articles of
Merger with the Secretary of State and filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and except as aforesaid, no authorization,
approval or consent of, and no registration or filing with any Governmental
Entity is required in connection with the execution, delivery or performance of
this Agreement by any Company or any Stockholder.
6.5 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of the shares shown on Schedule 6.5, of which only the
shares shown on such Schedule 6.5 to be issued and outstanding are issued and
outstanding. Except as set forth on Schedule 6.5, all of the issued and
outstanding shares of the capital stock of the Company are owned by the
Stockholders as set forth on Annex II and are free and clear of all liens,
security interests, pledges, charges, voting trusts, restrictions, encumbrances
and claims of every kind. All of the issued and outstanding shares of Company
Stock to be outstanding on the Merger Effective Date will have been duly
authorized and validly issued, fully paid and nonassessable, will be owned of
record and beneficially by the Stockholders and in the amounts set forth in
Annex II, and will have been offered, issued, sold and delivered by the Company
in compliance with all applicable state and federal laws concerning the
offering, sale or issuance of securities. None of such shares will have been,
and none of the shares from which they will have derived were, issued in
violation of the preemptive rights of any past or present stockholder, whether
contractual or statutory.
6.6 TRANSACTIONS IN CAPITAL STOCK. The Company has not acquired any
treasury stock since December 31, 1995. Except as set forth on Schedule 6.6, no
option, warrant, call, conversion right or commitment of any kind exists which
obligates the Company to issue any of its authorized but unissued capital stock.
The Company does not have any obligation (contingent or otherwise)
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to purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof.
6.7 NO BONUS SHARES. None of the shares of capital stock of the Company
was, and none of the shares of Company Stock will be, issued pursuant to awards,
grants or bonuses, whether of stock or of options or other rights.
6.8 SUBSIDIARIES. Except as set forth in Schedule 6.8, the Company does
not own, of record or beneficially, or control, directly or indirectly, any
capital stock, any securities convertible into capital stock or any other equity
interest in any corporation, association or other business entity. Except as set
forth on Schedule 6.8, the Company is not, directly or indirectly, a participant
in any joint venture, partnership or other noncorporate entity.
6.9 PREDECESSOR STATUS; ETC. Schedule 6.9 lists all names of all
predecessor companies of the Company including the names of all entities from
whom the Company previously acquired assets representing all or substantially
all of the assets of that entity. Except as set forth on Schedule 6.9, the
Company has never been a subsidiary or division of another corporation or been a
part of an acquisition which was later rescinded.
6.10 SPIN-OFFS. Except as set forth on Schedule 6.10, since December
31, 1995, there has not been any sale or spin-off of significant assets of the
Company other than in the ordinary course of business.
6.11 NO THIRD-PARTY OPTIONS. Except as set forth on Schedule 6.11 and
except for the rights of Obligors under the Leases (as such terms are defined
herein), there are no existing agreements, options, commitments or rights with,
of or to any person to acquire any properties, assets or rights of the Company
or any interest therein. Neither the Company nor any of the Stockholders has
entered into any written agreement with any party containing any "no-shop" or
"lock-up" provision or any other similar provision limiting the right of any of
the Stockholders or the Company to negotiate with UniCapital with respect to the
transactions contemplated hereunder or to enter into this Agreement.
6.12 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.12 are copies
of the balance sheet of the Company at December 31, 1997 (the "Balance Sheet
Date") and December 31, 1996, and the related statements of income, cash flows
and changes in stockholders' equity for the fiscal years then ended, audited by
Coopers & Lybrand L.L.P., the Company's independent public accountants, together
with the report of such independent public accountants thereon (the "Financial
Statements").
All of the Financial Statements have been prepared in accordance with GAAP
consistently applied throughout the periods involved (except as indicated in the
notes to the Financial Statements). All of the balance sheets included in the
Financial Statements, including the related notes, fairly present the financial
position, assets and liabilities (whether accrued, absolute or otherwise) of the
Company
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at the dates indicated and such statements of income, cash flows and changes in
stockholders' equity fairly present the results of operations, cash flows and
changes in stockholders' equity of the Company for the periods indicated.
6.13 LIABILITIES AND OBLIGATIONS. (a) Attached hereto as Schedule 6.13
is an accurate list, as of a date not more than two days prior to the date of
this Agreement, of: (i) all liabilities of the Company which are reflected on
the audited balance sheet as of the Balance Sheet Date included in the Financial
Statements; (ii) all liabilities incurred thereafter other than in the ordinary
course of business; (iii) all material liabilities incurred thereafter in the
ordinary course of business; and (iv) all liabilities (A) incurred as of the
Balance Sheet Date that are not reflected on the audited balance sheet as of the
Balance Sheet Date and (B) all liabilities incurred thereafter that would not
have been so reflected had such liabilities been incurred as of the Balance
Sheet Date. Each of the foregoing liabilities that has not heretofore been paid
or discharged is so noted on Schedule 6.13. For purposes of this Agreement,
"liabilities" means liabilities of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise.
(b) For each such liability for which the amount is not fixed
or is contested, Schedule 6.13 shall include a summary description of the
liability, together with copies of all relevant non-privileged documentation
relating thereto, detail of all amounts claimed and any other action or relief
sought, the names of the claimant and all other parties to the claim, suit or
proceeding, the name of each court or agency before which such claim, suit or
proceeding is pending, the date such claim, suit or proceeding was instituted,
and a best estimate of the maximum amount, if any, which is likely to become
payable with respect to each such liability. If no estimate is provided, the
best estimate shall for purposes of this Agreement be deemed to be zero. On the
Closing Date, the Company shall deliver, and shall cause its accountants,
outside counsel and other representatives or agents to deliver, copies of all
privileged documents related to liabilities as listed on Schedule 6.13.
(c) All of the liabilities reflected on the audited balance
sheet as of the Balance Sheet Date included in the Financial Statements arose
only out of or were incurred only in connection with the conduct of the business
of the Company. Except as set forth on Schedule 6.13 and except for liabilities
not required to be set forth thereon pursuant to Section 6.13(a), the Company
has no liabilities or obligations with respect to its business, whether direct
or indirect, matured or unmatured, absolute contingent or otherwise, and there
is no condition, situation or set of circumstances which would reasonably be
expected to result in any such liability.
6.14 ACCOUNTS AND NOTES RECEIVABLE. Attached hereto as Schedule 6.14 is
a complete and accurate list, as of a date not more than two days prior to the
date of this Agreement, of the accounts and notes receivable of the Company
(including, without limitation, receivables from and advances to employees and
Stockholders) other than those arising out of Leases (collectively, the
"Accounts Receivable"). Schedule 6.14 includes an aging of all Accounts
Receivable showing amounts due in 30-day aging categories. On the Closing Date,
the Stockholders will deliver to UniCapital a complete and accurate list, as of
a date not more than two days prior to the Closing
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Date, of the Accounts Receivable. All Accounts Receivable represent valid
obligations arising from bona fide business transactions in the ordinary course
of business consistent with past practice. The Accounts Receivable are, and as
of the Closing Date and the Merger Effective Date will be, collectible net of
any respective reserves shown on the Company's books and records (which reserves
are adequate and calculated consistent with past practice). Subject in the case
of Accounts Receivable reflected on the Company's balance sheet to such reserves
reflected on such balance sheet, each of the Accounts Receivable will be
collected in full within ninety (90) days after the day on which it first became
due and payable. There is no contest, claim, counterclaim, defense or right of
set-off, other than rebates and returns in the ordinary course of business,
under any contract with any obligor of any Account Receivable relating to the
amount or validity of such Account Receivable.
6.15 PERMITS. Each material Permit, together with the name of the
Governmental Entity issuing such Permit is set forth on Schedule 6.15. Such
Permits are valid and in full force and effect and none of such Permits will be
terminated or impaired or become terminable as a result of the transactions
contemplated by this Agreement. Upon consummation of such transactions, the
Surviving Corporation will have all of the Company's right, title and interest
in the Permits.
6.16 REAL AND PERSONAL PROPERTY. Attached hereto as Schedule 6.16 is an
accurate list, including substantially complete descriptions as of the Balance
Sheet Date, of all the real and tangible personal property (which in the case of
personal property had an original cost in excess of $25,000) owned or leased by
the Company where the Company is a lessee or sublessee, including true and
correct copies of leases for equipment and properties on which are situated
buildings, warehouses and other structures used in the operation of the business
of the Company and including an indication as to which assets were formerly
owned by any Stockholder or affiliate (which term, as used herein, shall have
the meaning ascribed thereto in Rule 144(a)(1) promulgated under the Securities
Act of 1933, as amended (the "Securities Act")) of the Company. Except as set
forth on Schedule 6.16, all of the Company's buildings, leasehold improvements,
structures, facilities, equipment and other material items of tangible property
and assets owned or leased by the Company are in good operating condition and
repair, subject to normal wear and maintenance, are usable in the regular and
ordinary course of business and conform to all applicable laws, ordinances,
codes, rules and regulations, and Authorizations relating to their construction,
use and operation. All leases set forth on Schedule 6.16 have been duly
authorized, executed and delivered and constitute the legal, valid and binding
obligations of the Company and, to the knowledge of the Stockholders, no other
party to any such lease is in default thereunder and such leases constitute the
legal, valid and binding obligations of such other parties. The terms of the
lease for the premises located at 433 New Park Avenue as in effect prior to the
Balance Sheet Date and the terms of the lease for such premises to be pending
thereafter as described in Exhibit 6.16 to Schedule 6.16 attached hereto, are no
less favorable than those the Company would obtain from an unaffiliated third
party. All fixed assets used by the Company in the operation of its business are
either owned by the Company or leased under an agreement set forth on Schedule
6.16. The Company and the Stockholders have heretofore delivered to UniCapital
copies of all title reports and title insurance policies received or held by the
Company. The Company and the Stockholders have indicated on Schedule 6.16 a
summary
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description of all plans or projects involving the opening of new operations,
expansion of any existing operations or the acquisition of any real property or
existing business to which management of the Company has devoted any significant
effort or expenditure in the two-year period prior to the date of this Agreement
which, if pursued by the Company would require additional expenditures of
significant efforts or capital.
6.17 CONTRACTS AND COMMITMENTS. Schedule 6.17 sets forth an accurate,
correct and complete list of all agreements, contracts, commitments,
arrangements and understandings, written or oral, including all amendments and
supplements thereto, of the Company other than Leases (the "Contracts"), to
which the Company is a party or is bound, or by which any of their respective
assets are bound, and which involve any:
(a) agreement, contract, commitment, arrangement or
understanding with any present or former employee or consultant or for the
employment of any person, including any consultant;
(b) agreement, contract, commitment, arrangement or
understanding for the future purchase of, or payment for, supplies or products,
or for the performance of services by a third party involving in any one case
$25,000 or more;
(c) agreement, contract, commitment, arrangement or
understanding to sell or supply products or to perform services involving in any
one case $25,000 or more;
(d) agreement, contract, commitment, arrangement or
understanding containing requirements or "take or pay" provisions;
(e) agreement, contract, commitment, arrangement or
understanding not otherwise listed on Schedule 6.17 and continuing over a period
of more than six months from the date hereof or exceeding $25,000 in value;
(f) distribution, dealer, representative or sales agency
agreement, contract, commitment, arrangement or understanding;
(g) agreement, contract, commitment, arrangement or
understanding containing a provision to indemnify any person or entity or assume
any tax, environmental or other liability;
(h) agreement, contract, commitment, arrangement or
understanding with federal, state, local, regulatory or other governmental
entities;
(i) note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement or other contract or commitment for the
borrowing or lending of money or agreement or arrangement for a line of credit
or guarantee, pledge or undertaking of the indebtedness of any other person;
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(j) agreement, contract, commitment, arrangement or
understanding for any charitable or political contribution;
(k) agreement, contract, commitment, arrangement or
understanding for any capital expenditure or leasehold improvement in excess of
$25,000;
(l) agreement, contract, commitment, arrangement or
understanding limiting or restraining the Company, or any successor thereto, or
to the knowledge of the Company and each Stockholder, any employee of the
Company, or any successor thereto, from engaging or competing in any manner or
in any business;
(m) license, franchise, distributorship or other agreement
which relates in whole or in part to any software, patent, trademark, trade
name, service mark or copyright or to any ideas, technical assistance or other
know-how of or used by the Company;
(n) agreement, contract, commitment, arrangement or
understanding to which the Company on the one hand, and any affiliate, officer,
director or stockholder of the Company on the other hand, are parties; or
(o) material agreement, contract, commitment, arrangement or
understanding not made in the ordinary course of business.
Each of the Contracts listed on Schedule 6.17, or not required to be listed
therein because of the amount thereof, is valid and enforceable in accordance
with its terms; the Company is, and to the knowledge of the Company and each
Stockholder, all other parties thereto are, in compliance with the provisions
thereof. The Company is not, and to the knowledge of the Company and each
Stockholder, no other party thereto is, in default in the performance,
observance or fulfillment of any material obligation, covenant or condition
contained therein; and no event has occurred which with or without the giving of
notice or lapse of time, or both, would constitute a default thereunder. None of
the rights of the Company under any Contract will be impaired by the
consummation of the transactions contemplated hereby, and all such rights will
be enforceable by the applicable Surviving Corporation after the Merger
Effective Date without the consent or agreement of any other party. The Company
has delivered accurate and complete copies of each Contract to UniCapital. No
Contract obligates any party to obtain any consent in connection with the
transactions contemplated hereby.
6.18 GOVERNMENT CONTRACTS. The Company is not now or has ever been a
party to any contract with any Governmental Entity subject to price
redetermination or renegotiation.
6.19 TITLE TO REAL PROPERTY. The Company does not own any real
property.
6.20 INSURANCE. The assets, properties and operations of the Company
are insured under various policies of general liability and other forms of
insurance, all of which are described on
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Schedule 6.20, which discloses for each policy the risks insured against,
coverage limits, deductible amounts, all outstanding claims thereunder, and
whether the terms of such policy provide for retrospective premium adjustments.
All such policies are in full force and effect in accordance with their terms,
no notice of cancellation has been received, and there is no existing default or
event which, with the giving of notice or lapse of time or both, would
constitute a default thereunder. Such policies are in amounts which, in relation
to the business and assets of the Company, are consistent with the normal or
customary industry practice and all premiums due to date have been paid in full.
The Company has not been refused any insurance, nor has the Company's coverage
been limited, by any insurance carrier to which it has applied for insurance or
with which it has carried insurance during the past five years. Schedule 6.20
also contains a true and complete description of all outstanding bonds and other
surety arrangements issued or entered into in connection with the business,
assets and liabilities of the Company.
6.21 EMPLOYEES. Schedule 6.21 contains the following with respect to
the Company:
(a) a list of all employees of the Company (including name,
title and position);
(b) each such employee's length of service; and
(c) the compensation (including terms of payment, bonuses,
commissions and deferred compensation, as well as any benefits) of each such
employee.
Except as disclosed on Schedule 6.21: (i) there have not been in the past five
years and, to the knowledge of the Company and the Stockholders, there are not
pending, any labor disputes, work stoppages, requests for representation,
pickets or work slow-downs due to labor disagreements; (ii) there are and have
been no unresolved violations of any Laws of any Governmental Entity respecting
the employment of any employees; (iii) there is no unfair labor practice, charge
or complaint pending, unresolved or, to the knowledge of the Company and the
Stockholders, threatened before the National Labor Relations Board or similar
body in any foreign country; (iv) there is no employment handbook, personnel
policy manual, or similar document that creates prospective employment rights or
obligations; (v) the employees of the Company are not covered by any collective
bargaining agreement; (vi) the Company has provided or will timely provide prior
to Closing all notices required by law to be given prior to Closing to all
local, state, federal or national labor, wage-payment, equal employment
opportunity, unemployment insurance and related agencies; (vii) the Company has
paid or properly accrued in the ordinary course of business all wages and
compensation due to employees, including all vacations or vacation pay, holidays
or holiday pay, sick days or sick pay, and bonuses; and (viii) the transactions
contemplated by this Agreement will not create liability under any Laws of any
Governmental Entity respecting reductions in force or the impact on employees on
plant closing or sales of businesses. All employees of the Company are legally
able to work in the United States.
6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. Schedule 6.22 sets forth
a complete and accurate list of each Benefit Plan covering any present or former
officers, employees or directors
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of the Company. "Benefit Plan" means each "employee pension benefit plan" (as
defined in Section 3(2) of ERISA, hereinafter a "Pension Plan"), "employee
welfare benefit plan" (as defined in Section 3(1) of ERISA, hereinafter a
"Welfare Plan") and each other plan or arrangement (written or oral) relating to
deferred compensation, bonus, performance compensation, stock purchase, stock
option, stock appreciation, severance, vacation, sick leave, holiday pay, fringe
benefits, personnel policy, reimbursement program, incentive, insurance, welfare
or similar plan, program, policy or arrangement, in each case maintained or
contributed to, or required to be maintained or contributed to, by the Company
or its affiliates or any other person or entity that, together with the Company,
is treated as a single employer under Section 414(b), (c), (m) or (o) of the
Code (each, together with the Company, a "Commonly Controlled Entity") for the
benefit of any present or former officer, employee or director. The Company has
no intent or commitment to create any additional Benefit Plan or amend any
Benefit Plan so as to increase benefits thereunder. The Company has not created
any Benefit Plan or declared or paid any bonus compensation in contemplation of
the transactions contemplated by this Agreement. A current, accurate and
complete copy of each Benefit Plan has been made available to UniCapital. Except
as disclosed on Schedule 6.22:
(a) each Benefit Plan is in substantial compliance with all
reporting, disclosure and other requirements of ERISA applicable to such Benefit
Plan;
(b) each Pension Plan which is intended to be qualified under
Section 401(a) of the Code, has been determined by the Internal Revenue Service
to be so qualified and, to the knowledge of the Company and the Stockholders, no
condition exists that would adversely affect any such determination;
(c) neither any Benefit Plan, nor the Company, nor any
Commonly Controlled Entity, nor any trustee or agent has been or is presently
engaged in any prohibited transactions as defined by Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not applicable which could
subject the Company to the tax or penalty imposed by Section 4975 of the Code or
Section 502 of ERISA;
(d) there is no event or condition existing which could be
deemed a "reportable event" (within the meaning of Section 4043 of ERISA) with
respect to which the thirty-day notice requirement has not been waived; to the
knowledge of the Company and the Stockholders, no condition exists which could
subject the Company to a penalty under Section 4071 of ERISA;
(e) neither the Company, nor any Commonly Controlled Entity is
or has ever been party to any "multi-employer plan," as that term is defined in
Section 3(37) of ERISA;
(f) true and correct copies of the most recent annual report
on Form 5500 and any attached schedules for each Benefit Plan (if any such
report was required by applicable law) and a true and correct copy of the most
recent determination letter issued by the Internal Revenue Service for each
Pension Plan have been provided to UniCapital;
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(g) with respect to each Benefit Plan, there are no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
pending or, to the knowledge of the Company and the Stockholders, threatened
against any Benefit Plan, the Company, any Commonly Controlled Entity or any
trustee or agent of any Benefit Plan; and
(h) with respect to each Benefit Plan to which the Company, or
any Commonly Controlled Entity is a party which constitutes a group health plan
subject to Section 4980B of the Code, each such Benefit Plan substantially
complies, and in each case has substantially complied, with all applicable
requirements of Section 4980B of the Code.
(i) Except as set forth in Schedule 6.22:
(i) there is no outstanding liability (except for
premiums due) under Title IV of ERISA with respect to any Pension Plan;
(ii) neither the Pension Benefit Guaranty Corporation
nor the Company nor any Commonly Controlled Entity has instituted proceedings to
terminate any Pension Plan and the Pension Benefit Guaranty Corporation has not
informed the Company of its intent to institute proceedings to terminate any
Pension Plan;
(iii) full payment has been made of all amounts which
the Company or any Commonly Controlled Entity was required to have paid as a
contribution to the Pension Plans as of the last day of the most recent fiscal
year of each of the Pension Plans ended prior to the date of this Agreement, and
none of the Pension Plans has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of each such Pension
Plan ended prior to the date of this Agreement;
(iv) to the knowledge of the Company and the
Stockholders, the actuarial assumptions utilized, where appropriate, in
connection with determining the funding of each Pension Plan which is a defined
benefit pension plan (as set forth in the actuarial report for such Pension
Plan) are reasonable. Copies of the most recent actuarial reports have been
furnished to UniCapital. Based on such actuarial assumptions, as of the Balance
Sheet Date, the fair market value of the assets or properties held under each
such Pension Plan exceeds the actuarially determined present value of all
accrued benefits of such Pension Plan (whether or not vested) determined on an
ongoing Pension Plan basis;
(v) each of the Benefit Plans is, and its
administration is and has been during the six-year period preceding the date of
this Agreement, in substantial compliance with, and the Company has not received
any claim or notice that any such Benefit Plan is not in compliance with, all
applicable laws and orders and prohibited transaction exemptions, including
without limitation, to the extent applicable, the requirements of ERISA;
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(vi) neither the Company nor any Commonly Controlled
Entity is in default in performing any of its contractual obligations under any
of the Benefit Plans or any related trust agreement or insurance contract;
(vii) there are no material outstanding liabilities
of any Benefit Plan other than liabilities for benefits to be paid to
participants in the Benefit Plans and their beneficiaries in accordance with the
terms of the Benefit Plans;
(viii) each Benefit Plan may be amended or modified
by the Company or any Commonly Controlled Entity at any time without liability
except under any defined pension benefit plan;
(ix) no Benefit Plan other than a Pension Plan,
retiree medical plan or severance plan provides benefits to any individual after
termination of employment;
(x) the consummation of the transactions contemplated
by this Agreement will not (in and of itself): (A) entitle any employee of the
Company to severance pay, unemployment compensation or any other payment; (B)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee; (C) result in any liability under Title
IV of ERISA; (D) result in any prohibited transaction described in Section 406
of ERISA or Section 4975 of the Code for which an exemption is not available; or
(E) result (either alone or in conjunction with any other event) in the payment
or series of payments by the Company or any of its affiliates to any person of
an "excess parachute payment@ within the meaning of Section 280G of the Code;
(xi) with respect to each Benefit Plan that is funded
wholly or partially through an insurance policy, all premiums required to have
been paid to date under the insurance policy have been paid, all premiums
required to be paid under the insurance policy through the Merger Effective Date
will have been paid on or before the Merger Effective Date and, as of the Merger
Effective Date, there will be no liability of the Company, or any Commonly
Controlled Entity under any insurance policy or ancillary agreement with respect
to such insurance policy in the nature of a retroactive rate adjustment, loss
sharing arrangement or other actual or contingent liability arising wholly or
partially out of events occurring prior to the Merger Effective Date;
(xii) (A) each Benefit Plan that constitutes a
"Welfare Plan," and for which contributions are claimed by the Company or any
Commonly Controlled Entity as deductions under any provision of the Code, is in
material compliance with all applicable requirements pertaining to such
deduction;
(B) with respect to any welfare benefit fund
(within the meaning of Section 419 of the Code) related to a welfare benefit
plan, there is no disqualified benefit (within the meaning of Section 4976(b) of
the Code) that would result in the imposition of a tax under Section 4976(a) of
the Code; and
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(C) all welfare benefit funds intended to be
exempt from tax under Section 501(a) of the Code have been determined by the
Internal Revenue Service to be so exempt and no event or condition exists which
would adversely affect any such determination; and
(xiii) all benefit plans outside of the United
States, if any (the "Foreign Plans"), are in compliance with all applicable laws
and regulations and have been operated in accordance with the plans' respective
terms. There are no material unfunded liabilities under or in respect of the
Foreign Plans, and all contributions or other payments required to be made to or
in respect of the Foreign Plans prior to the Merger Effective Date have been
made or will be made prior to the Merger Effective Date.
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS. The Company has complied with
each, and is not in violation of any, law, ordinance, or governmental or
regulatory rule or regulation, whether federal, state, local or foreign
("Regulations"), to which the Company's business, operations, assets or
properties is subject. The Company owns, holds, possesses or lawfully uses in
the operation of its business all franchises, licenses, permits, easements,
rights, applications, filings, registrations and other authorizations
("Authorizations") which are in any manner necessary for them to conduct their
respective business as now or previously conducted or for the ownership and use
of the assets owned or used by such company in the conduct of the business of
such company, free and clear of all liens, charges, restrictions and
encumbrances and in compliance with all Regulations. All such Authorizations are
listed and described in Schedule 6.23. The Company is not in default, nor has
the Company received any notice of any claim of default, with respect to any
such Authorization. All such Authorizations are renewable by their terms or in
the ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
None of such Authorizations will be adversely affected by consummation of the
transactions contemplated hereby. No Stockholder and no director, officer,
employee or former employee of the Company, or any affiliates of any such
company, or any other person, firm or corporation, owns or has any proprietary,
financial or other interest (direct or indirect) in any Authorization which such
company owns, possesses or uses in the operation of the business of such company
as now or previously conducted.
6.24 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
6.24, no Stockholder and no director, officer or employee of the Company or any
member of his or her immediate family or any other of its, his or her
affiliates, owns or has a 5% or more ownership interest in any corporation or
other entity that is or was during the last three years a party to, or in any
property which is or was during the last three years the subject of, any
contract, agreement or understanding, business arrangement or relationship with
the Company.
6.25 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of the Company and the Stockholders, threatened against the Company
which relates to the transactions contemplated by this Agreement.
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(b) Except as set forth on Schedule 6.25, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of the Company and the Stockholders, threatened
against the Company or which relates to the Company.
(c) Neither the Company nor the Stockholders know of any
reasonably likely basis for any litigation, arbitration, investigation or
proceeding referred to in Sections 6.25(a) or (b).
(d) Except as set forth on Schedule 6.25, the Company is a not
party to or subject to the provisions of any judgment, order, writ, injunction,
decree or award of any court, arbitrator or governmental or regulatory official,
body or authority.
6.26 RESTRICTIONS. The Company is not a party to any indenture,
agreement, contract, commitment, lease, plan, license, permit, authorization or
other instrument, document or understanding, oral or written, or subject to any
charter or other corporate restriction or any judgment, order, writ, injunction,
decree or award which materially adversely affects or materially restricts or,
so far as the Company or any of the Stockholders can now reasonably foresee, may
in the future materially adversely affect or materially restrict, the business,
operations, assets, properties, prospects or condition (financial or otherwise)
of the Company after consummation of the transactions contemplated hereby.
6.27 TAXES. Except as set forth on Schedule 6.27, all federal, state,
local and foreign tax returns, reports, statements and other similar filings
required to be filed by the Company (the "Tax Returns") with respect to any
federal, state, local or foreign taxes, assessments, interest, penalties,
deficiencies, fees and other governmental charges or impositions (including
without limitation all income tax, unemployment compensation, social security,
payroll, sales and use, excise, privilege, property, ad valorem, franchise,
license, school and any other tax or similar governmental charge or imposition
under laws of the United States or any state or municipal or political
subdivision thereof or any foreign country or political subdivision thereof)
(the "Taxes") have been timely filed with the appropriate governmental agencies
in all jurisdictions in which such Tax Returns are required to be filed, and all
such Tax Returns properly reflect the liabilities of the Company for Taxes for
the periods, property or events covered thereby. All Taxes, including without
limitation those which are called for by the Tax Returns, required to be paid,
withheld or accrued by the Company and any deficiency assessments, penalties and
interest have been timely paid, withheld or accrued. The accruals for Taxes
contained in the audited balance sheet of the Company as of the Balance Sheet
Date are adequate to cover the Tax liabilities of the Company as of that date
and include adequate provision for all deferred Taxes, and nothing has occurred
subsequent to that date to make any of such accruals inadequate. The Company's
Tax basis in its assets for purposes of determining its future amortization,
depreciation and other federal income tax deductions is accurately reflected on
the Company's Tax books and records. The Company is not and has not at any time
ever been a party to a Tax sharing, Tax indemnity or Tax allocation agreement,
and the Company has not assumed any Tax liability of any other person or entity
under contract. The Company has not received any notice of assessment or
proposed assessment in connection with any
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Tax Returns and there are not pending tax examinations of or tax claims asserted
against the Company or any of its assets or properties. The Company has not
extended, or waived the application of, any statute of limitations of any
jurisdiction regarding the assessment or collection of any Taxes. There are now
(and as of immediately following the Closing there will be) no Liens (other than
any Lien for current Taxes not yet due and payable) on any of the assets or
properties of the Company relating to or attributable to Taxes. To the knowledge
of the Company and the Stockholders, there is no basis for the assertion of any
claim relating to or attributable to Taxes which, if adversely determined, would
result in any Lien on the assets of the Company or otherwise have an adverse
effect on the Company or its business, operations, assets, properties, prospects
or condition (financial or otherwise). Neither the Company nor the Stockholders
have any knowledge of any basis for any additional assessment of any Taxes. All
Tax payments related to employees, including income tax withholding, FICA, FUTA,
unemployment and worker's compensation, required to be made by the Company has
been fully and properly paid, withheld, accrued or recorded. There are no
contracts, agreements, plans or arrangements, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company that, individually or collectively, could give rise to any payment (or
portion thereof) that would not be deductible pursuant to Sections 280G, 404 or
162 of the Code. Two correct and complete copies of (a) all Tax examinations,
(b) all extensions of statutory limitations and (c) all federal, state and local
income tax returns and franchise tax returns of the Company for the last five
fiscal years, or such shorter period of time as any of them shall have existed,
have heretofore been delivered by the Company and the Stockholders to
UniCapital. The Company currently utilizes the accrual method of accounting for
income tax purposes and has not changed its method of accounting for income tax
purposes in the past five years.
6.28 INTELLECTUAL PROPERTY MATTERS. (a) The Company has not utilized or
currently does not utilize any patent, trademark, trade name, service mark,
copyright, software, trade secret or know-how except for those listed on
Schedule 6.28 (the "Intellectual Property"), all of which are owned by the
Company (other than those for which the Company has a valid license) free and
clear of any liens, claims, charges or encumbrances. The Intellectual Property
constitutes all such assets, properties and rights which are used or held for
use in, or are necessary for, the conduct of the business of the Company.
(b) There are no royalty, commission or similar arrangements,
and no licenses, sublicenses or agreements, pertaining to any of the
Intellectual Property or products or services of the Company.
(c) The Company does not infringe upon or unlawfully or
wrongfully use any patent, trademark, trade name, service mark, copyright or
trade secret owned or claimed by another. No action, suit, proceeding or
investigation has been instituted or, to the knowledge of the Company and the
Stockholders, threatened relating to any, patent, trademark, trade name, service
mark, copyright or trade secret formerly or currently used by the Company. None
of the Intellectual Property is subject to any outstanding order, decree or
judgment. The Company has not indemnify any person or entity for or against any
infringement of or by the Intellectual Property.
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(d) No present or former employee of the Company and no other
person or entity owns or has any proprietary, financial or other interest,
direct or indirect, in whole or in part, in any patent, trademark, trade name,
service mark or copyright, or in any application therefor, or in any trade
secret, which the Company owns, possesses or uses in its operations as now or
heretofore conducted. Schedule 6.28(d) lists all confidentiality or
non-disclosure agreements currently in force and effect to which the Company or
any of their employees is a party.
(e) Schedule 6.28 includes a complete and accurate list of all
items of Intellectual Property registered in, filed in or issued by the United
States Copyright Office or the United States Patent and Trademark Office, any
offices in the various states of the United States and any offices in other
jurisdictions and information related to such registration.
(f) All rights of the Company in the Intellectual Property
shall vest in the applicable Surviving Corporation pursuant to the transactions
contemplated hereby without any consent or other approval.
(g) All Intellectual Property in the form of computer software
that is utilized by the Company in the operation of its business is capable of
processing date data between and within the twentieth and twenty-first centuries
or can be rendered capable or will be replaced with software which will be
capable of processing such data within 6 months by the expenditure of not more
than $250,000.
6.29 COMPLETENESS; NO VIOLATIONS. The certified copies of the
Certificate of Incorpora tion and Bylaws, both as amended to date, of the
Company, and the copies of all leases, instruments, agreements, licenses,
permits, certificates or other documents which are included on schedules
attached hereto or which have been delivered or which have been made available
to UniCapital in connection with the transactions contemplated hereby, are
complete and correct; neither the Company nor, to the knowledge of the
Stockholders, any other party to any of the foregoing is in material default
thereunder; and, except as set forth in the schedules and documents attached to
this Agreement, the rights and benefits of the Company thereunder will not be
materially and adversely affected by the transactions contemplated hereby, and
the execution of this Agreement and the performance of the obligations hereunder
will not result in a material violation or breach or constitute a material
default under any of the terms or provisions thereof. Except as set forth on
Schedule 6.29, none of such leases, instruments, agreements, contracts,
licenses, permits, certificates or other documents requires notice to, or the
consent or approval of, any governmental agency or other third party to any of
the transactions contemplated hereby to remain in full force and effect. The
consummation of the transactions contemplated hereby will not give rise to any
right of termination, cancellation or acceleration or result in the loss of any
right or benefit thereunder.
6.30 EXISTING CONDITION. Except as set forth in Schedule 6.30, since
the Balance Sheet Date, the Company has not:
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(a) incurred any liabilities, other than liabilities incurred
in the ordinary course of business consistent with past practice, or discharged
or satisfied any lien or encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice, or failed to pay or
discharge when due any liabilities of which the failure to pay or discharge has
caused or will cause any material damage or risk of material loss to it or any
of its assets or properties;
(b) sold, encumbered, assigned or transferred any assets,
properties or rights or any interest therein, or made any agreement or
commitment or granted any option or right with, of or to any person to acquire
any assets, properties or rights of the Company or any interest therein, except
in the ordinary course of business consistent with past practice;
(c) created, incurred, assumed or guaranteed any indebtedness
for money borrowed, or mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract or other
encumbrance of any nature whatsoever, except in the ordinary course of business
consistent with past practice;
(d) made or suffered any amendment or termination of any
material agreement, contract, commitment, lease or plan to which it is a party
or by which it is bound, or canceled, modified or waived any substantial debts
or claims held by it or waived any rights of substantial value, except in the
ordinary course of business consistent with past practice;
(e) declared, set aside or paid any dividend or made or agreed
to make any other distribution or payment in respect of its capital shares or
redeemed, purchased or otherwise acquired or agreed to redeem, purchase or
acquire any of its shares of capital stock or other ownership interests;
(f) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting its business,
operations, assets, properties or prospects or (ii) of any item or items carried
on its books of account individually or in the aggregate at more than $25,000,
or suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;
(g) suffered any material adverse change in its business,
operations, assets, properties, prospects or condition (financial or otherwise)
other than as directly caused by adverse economic conditions not specific to, or
having an extraordinary impact upon, the Company;
(h) received notice or had knowledge of any actual or
threatened labor trouble, strike or other occurrence, event or condition of any
similar character which has had or might have an adverse effect on its business,
operations, assets, properties or prospects;
(i) made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $25,000, except in
the ordinary course of business or as may be involved in ordinary repair,
maintenance or replacement of its assets;
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(j) increased the salaries or other compensation of, or made
any advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its employees or made any increase in, or any addition to, other
benefits to which any of its employees may be entitled except for scheduled
increases in the ordinary course of business and consistent with past practices
or increases required by any existing plan;
(k) changed any of the accounting principles followed by it or
the methods of applying such principles;
(l) entered into any transaction other than in the ordinary
course of business consistent with past practice, except (i) the transactions
contemplated by this Agreement, (ii) those transactions identified on schedules
attached hereto and (iii) as otherwise permitted pursuant to this Section 6.30;
(m) changed its authorized capital or its securities
outstanding or otherwise changed its ownership interests, or granted any
options, warrants, calls, conversion rights or commitments with respect to any
of its capital stock or other ownership interests; or
(n) agreed to take any of the actions referred to above.
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Attached hereto as Schedule
6.31 is an accurate list, as of the date of this Agreement, of:
(a) the name of each financial institution in which the
Company has accounts or safe deposit boxes;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have
access thereto; and
(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Company and a
description of the terms of such power.
6.32 BOOKS OF ACCOUNT. Except as set forth on Schedule 6.32, the books,
records and accounts of the Company accurately and fairly reflect, in reasonable
detail, the transactions and the assets and liabilities of the Company. The
Company has not engaged in any transaction, maintained any bank account or used
any of the funds of the Company except for transactions, bank accounts and funds
which have been and are reflected in the normally maintained books and records
of the business.
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6.33 ENVIRONMENTAL MATTERS. (a) The Company has secured, and is in
compliance with, all Environmental Permits, with respect to any premises on
which their respective business is operated, all of which Environmental Permits
shall vest in the Surviving Corporation upon consummation of the transactions
contemplated hereby. The Company is in compliance with all Environmental Laws.
(b) The Company has not received any communication from any
Governmental Entity that alleges that the Company is not in compliance with any
Environmental Laws or Environmental Permits.
(c) The Company has not entered into or agreed to any court
decree or order, and the Company is not subject to any judgment, decree or
order, relating to compliance with any Environmental Law or to investigation or
cleanup of a Hazardous Substance under any Environmental Law.
(d) No lien, charge, interest or encumbrance has been
attached, asserted, or to the knowledge of the Company and the Stockholders,
threatened to or against any assets or properties of the Company pursuant to any
Environmental Law.
(e) There has been no treatment, storage, disposal or release
of any Hazardous Substance on any property owned, operated or leased by the
Company other than common household and office products in de minimis amounts.
(f) The Company has not received a CERCLA 104(e) information
request or have been named a potentially responsible party for any National
Priorities List site under CERCLA or any site under analogous state law or
received an analogous notice or request from any non-U.S. Governmental Entity,
which notice, request or any resulting inquiry or litigation has not been fully
and finally resolved without possibility of reopening.
(g) There are no aboveground tanks or underground storage
tanks on, under or about any property owned, operated or leased by the Company
and any former aboveground or underground tanks on any property owned, operated
or leased by the Company have been removed in accordance with all Environmental
Laws and no residual contamination, if any, remains at such sites in excess of
applicable standards.
(h) There are no polychlorinated biphenyls ("PCBs") leaking
from any article, container or equipment on, under or about any property owned,
operated or leased by the Company and there are no such articles, containers or
equipment containing PCBs, and there is no asbestos containing material in a
condition or location currently constituting a violation of any Environmental
Law at, on, under or within any property owned, operated or leased by the
Company.
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(i) The Company and the Stockholders have provided to
UniCapital true and complete copies of, or access to, all written environmental
assessment materials and reports in their possession that have been prepared by
or on behalf of the Company during the past five years.
6.34 NO ILLEGAL PAYMENTS. The Company has not and, to the knowledge of
the Company and the Stockholders, no affiliate, officer, agent or employee
thereof, directly or indirectly, has, during the past five years, on behalf of
or with respect to the Company or any affiliate thereof, (a) made any unlawful
domestic or foreign political contributions, (b) made any payment or provided
services which were not legal to make or provide or which the Company or any
affiliate thereof or any such officer, agent or employee should have known were
not legal for the payee or the recipient of such services to receive, (c)
received any payment or any services which were not legal for the payer or the
provider of such services to make or provide, (d) made any payment to any person
or entity, or agent or employee thereof, in connection with any Lease (as
hereinafter defined) to induce such person or entity to enter into a Lease
transaction, (e) had any transactions or payments related to the Company which
are not recorded in their accounting books and records or (f) had any off-book
bank or cash accounts or "slush funds" related to the Company.
6.35 LEASES. Schedule 6.35 hereto sets forth the Company's
lease/financing arrangements (whether documented as Leases or other forms of
financing contracts) as of the Balance Sheet Date (which, together with all
other lease/financing arrangements entered into by the Company between such date
and the Closing Date, are referred to herein as the "Leases"). The term "Lease
Documents" means the lease arrangements and financing contracts evidencing the
Leases described in Schedule 6.35, together with all related documents and
agreements including, without limitations, master lease agreements, schedules or
other addenda to such Leases, certificates of delivery and acceptance, UCC
financing statements, remarketing agreements, residual guaranty agreements,
insurance policies, guaranty agreements and other credit supports. The term
"Equipment" means all equipment, inventory and other property described as being
leased or financed pursuant to a Lease, or in which the Company is granted a
security interest pursuant to a Lease. The term "Obligor" means any lessee party
or other party obligated to pay or perform any obligations under or in respect
of a Lease or the Equipment covered by a Lease (excluding the lessor party
thereunder, but otherwise including, without limitation, any guarantor of a
Lease or any vendor, manufacturer or similar party under a remarketing
agreement, residual guaranty or similar agreement). The term "Scheduled
Payments" means the monthly or periodic rental payments or installments of
principal and interest under the terms of the Leases.
(a) Except as set forth on Schedule 6.35(a), there is no
restriction or limitation in any of the Lease Documents or otherwise,
restricting the Company from executing this Agreement or entering into the
transactions contemplated by this Agreement, other than consents which have
been, or prior to the Closing will have been, obtained.
(b) The Company owns the Equipment covered by each Lease or
has a vested and perfected first priority security interest in the Equipment.
Except as set forth on Schedule 6.35(b), all Equipment is located in the United
States.
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(c) With respect to each Lease, only one chattel paper
original of such Lease exists. Such chattel paper original of each such Lease is
held by the Company.
(d) Except as set forth on Schedule 6.35(d), each Lease is in
full force and effect in accordance with its terms, and there has been no
occurrence which would or might permit any Obligor to terminate such Lease or
suspend or reduce any payments or obligations due or to become due in respect of
such Lease or the related Lease Documents by reason of default by the lessor
party under such Lease. None of the Obligors in respect of a Lease or the
related Lease Documents is the subject of a bankruptcy, insolvency or similar
proceeding.
(e) Except as set forth on Schedule 6.35(e) and except for the
delinquency in the payment of any Scheduled Payment that is not more than 90
days past due, there does not exist any default in the payment of any Scheduled
Payments due under any Lease or the related Lease Documents, and there does not
exist any other default, breach, violation or event permitting acceleration,
termination or repossession under any Lease or the related Lease Documents or
any event which, to the knowledge of the Company and the Stockholders, with
notice and the expiration of any applicable grace or cure period, would
constitute such a default, breach, violation or event permitting acceleration,
termination or repossession under such Lease or the related Lease Documents. The
allowance for collection losses on the Balance Sheet has been determined in
accordance with GAAP consistent with past practice.
(f) The Company has not acted in a manner which (nor has the
Company failed to act where such failure to act) would alter or reduce any of
the Company's rights or benefits under any manufacturer's or vendor's warranties
or guarantees with respect to any Equipment.
(g) Except as set forth on Schedule 6.35(g), the Company has
complied with all requirements of any federal, state or local law, including
without limitation, usury laws, applicable to each Lease.
(h) Each Lease has the following characteristics:
(i) such Lease was originated in the United States
and the Scheduled Payments thereunder are payable in U.S. dollars, and except as
set forth on Schedule 6.35(h)(i), by Obligors domiciled in the United States;
(ii) except for cases where the lessee party has not
yet accepted the Equipment covered by the Lease, and except as set forth on
Schedule 6.35(h)(ii), the lessee party under such Lease has unconditionally
accepted the Equipment covered by such Lease;
(iii) except for Leases less than thirty (30) days
old, at least one Scheduled Payment has been made by the Obligor under each such
Lease; and
(iv) no Obligor in respect of such Lease is an
affiliate of the Company.
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(i) Each Lease and the related Lease Documents are valid,
binding, legally enforceable and non-cancelable obligations of the parties
thereto, enforceable in accordance with their respective terms, except as such
enforceability may be subject to the effect of general principles of bankruptcy
and equity. Each Lease is a business obligation of the lessee thereunder and is
not a "consumer transaction" under any applicable federal or state regulation.
(j) To the knowledge of the Stockholders, no Lease or related
Lease Document is the subject of a fraudulent scheme by any Obligor or any
supplier of Equipment.
(k) Each item of Equipment is subject to a Lease.
(l) Each Lease is a fixed rate lease contract.
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(m) Except as set forth on Schedule 6.35(m), no Lease or
related Lease Document is subject to any right of rescission, set-off,
counterclaim, abatement or defense, including without limitation any defense of
usury, nor will the operation of any of the terms of any Lease or any related
Lease Document or the exercise of any right or remedy thereunder render such
Lease or any related Lease Document or the obligations thereunder unenforceable,
or subject the same to any right of rescission, set-off, counterclaim, abatement
or defense. No Obligor has asserted any legally enforceable right of rescission,
set-off, counterclaim, abatement or defense to its obligations under a Lease or
any related Lease Document.
(n) Except as set forth on Schedule 6.35(n), as to the Leases
and the related Lease Documents, (i) none has been amended or modified (a) to
extend the maturity date for a period of longer than one year, or (b) to alter
the amount or time of payment of any amount due thereunder, unless as to (a) and
(b) such extension or alteration is reasonably expected to result in a net
economic benefit to the Company; (ii) except in the ordinary course of business
and consistent with past practice, no indulgences or waivers have been granted
in respect of the obligations of any Obligor under any Lease; and (iii) the
Company has not advanced any monies on behalf of any Obligor.
(o) Each Lease requires the Obligor thereunder at its own cost
and expense to maintain the Equipment leased thereunder in good repair,
condition and working order, and, to the knowledge of the Stockholders, each
Obligor under a Lease is currently in compliance with such requirement.
(p) Each Lease requires the Obligor thereunder (i) to pay all
fees, taxes (except income taxes), and other charges or liabilities arising with
respect to the Equipment leased thereunder or the use thereof, (ii) to keep the
Equipment free and clear of any and all liens, security interests and other
encumbrances, other than security interests of the Company; (iii) to hold
harmless the lessor thereunder and its successors and assigns against the
imposition of any fees, charges, liabilities and encumbrances, (iv) to bear all
risk of loss associated with the Equipment covered by or securing the
obligations under such Lease during the term of such Lease and (v) to maintain
at the cost of the Obligor public liability and casualty insurance in respect of
such Equipment covered by such Lease.
(q) Each Lease prohibits without the lessor's prior written
consent any relocation of the Equipment covered by such Lease and requires the
Obligor to execute such agreements and documents as may reasonably be requested
by the lessor in connection with any such relocation.
(r) Each Lease involves either the lease of tangible personal
property owned by the Company or the loan of money secured by a security
interest in tangible personal property owned by the Obligor thereunder.
(s) The Company has not received any notice challenging its
ownership or the priority of its security interest in the Equipment covered by
each Lease, and there are no proceedings pending before any court or
governmental entity or, to the knowledge of the Company and the
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Stockholders, threatened by any Obligor or other party, (i) asserting the
invalidity of any Lease or the related Lease Documents, (ii) seeking to prevent
payment or performance by any Obligor of any Lease or any of the terms of the
related Lease Documents, or (iii) seeking any determination or ruling that might
adversely affect the validity or enforceability of any Lease or any of the terms
or provisions of the related Lease Documents.
(t) As to each Lease, there are no agreements or
understandings between the Company and the Obligors in respect of such Lease or
otherwise binding on any such company other than as expressly set forth in the
Lease and the related Lease Documents.
6.36 LEASE FUNDING. Except as set forth in Schedule 6.36, the Company
is in compliance with all of the terms and covenants of, and are not in default
or breach under, each agreement, contract, understanding or arrangement with any
funding source for the Leases.
6.37 DISCLOSURE. The Company has delivered, or in the case of the
Leases and Lease Documents, made available to UniCapital true and complete
copies of each agreement, contract, commitment or other document (or, in the
case of any such document not in the possession of reasonably available to a
Company or a Stockholder, accurate and complete summaries thereof) that is
referred to in the schedules to this Agreement or that has been requested by
UniCapital or its representatives. Without limiting any exclusion, exception or
other limitation contained in any of the representations and warranties made
herein, the representations and warranties contained in this Agreement and the
schedules hereto and all other documents and information prepared or certified
by the Stockholders to the Company and provided to UniCapital and its
representatives pursuant hereto do not and will not include any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements herein and therein not misleading. If any Stockholders become aware
of any fact or circumstance that would change a representation or warranty of
any Stockholder in this Agreement or any representation made on behalf of the
Company, then the Stockholders shall immediately give notice of such fact or
circumstance to UniCapital. However, such notification shall not relieve the
Company or any of the Stockholders of their respective rights and obligations
under this Agreement, including without limitation, Sections 10.1 and 13.1
hereof.
7. REPRESENTATIONS AND WARRANTIES OF UNICAPITAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, UniCapital and Newco, jointly and severally, represent and
warrant to the Stockholders as follows:
7.1 CORPORATE EXISTENCE. UniCapital is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Newco is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. Immediately prior to the
effectiveness of the Merger, each of UniCapital and Newco is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction where the conduct of its business requires it to be so qualified.
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7.2 UNICAPITAL STOCK. The shares of UniCapital Stock to be issued and
delivered to the Stockholders on the Merger Effective Date, when issued and
delivered in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable shares, and except for
restrictions upon resale will be legally equivalent in all respects to the
majority of UniCapital Stock issued and outstanding as of the date hereof. The
UniCapital Stock to be issued upon the conversion of Company Stock pursuant to
the terms of this Agreement will be voting common shares free and clear of all
liens, encumbrances and claims of every kind, other than restrictions upon
transfer contained herein and other than any liens, encumbrances or claims
arising other than by the actions of UniCapital or Newco.
7.3 CORPORATE POWER AND AUTHORIZATION. UniCapital and Newco have the
corporate power, authority and legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance of this Agreement by
UniCapital and Newco and all related documents and agreements required to be
executed and delivered by UniCapital and Newco in accordance with the provisions
hereof (the "UniCapital Documents") have been duly authorized by all necessary
corporate action. This Agreement has been duly executed and delivered by
UniCapital and Newco and constitutes, and the UniCapital Documents when executed
and delivered will constitute, the legal, valid and binding obligations of
UniCapital and Newco enforceable against UniCapital and Newco in accordance with
their terms.
7.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement by UniCapital and Newco will not violate, conflict with or result in
the breach of any term, condition or provision of, or require the consent of any
other person under (a) any existing law, ordinance, or governmental rule or
regulation to which UniCapital or Newco is subject, (b) any judgment, order,
writ, injunction, decree or award of any Governmental Entity that is applicable
to UniCapital or Newco, (c) the charter documents of UniCapital or Newco, or (d)
any mortgage, indenture, agreement, contract, commitment, lease, plan,
Authorization, or other instrument, document or understanding, oral or written,
to which UniCapital or Newco is a party, by which UniCapital or Newco may have
rights or by which any of the properties or assets of UniCapital or Newco may be
bound or affected, or give any party with rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of UniCapital or Newco thereunder. Except for filing the Articles of
Merger and filings under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and except as aforesaid, no authorization, approval or consent of, and no
registration or filing with, any Governmental Entity is required in connection
with the execution, delivery or performance of this Agreement by UniCapital or
Newco.
7.5 CAPITALIZATION OF UNICAPITAL. The IPO will result in an aggregate
market capitalization of UniCapital that will exceed Three Hundred Million
Dollars ($300,000,000), as determined by multiplying the outstanding shares of
UniCapital immediately following the closing of the IPO by the IPO Price.
7.6 COMPLIANCE WITH LAW; AUTHORIZATIONS. Each of UniCapital and Newco
has complied with each, and is not in violation of Regulations to which
UniCapital's and Newco's
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respective business, operations, assets or properties is subject. Each of
UniCapital and Newco owns, holds, possesses or lawfully uses in the operation of
its business all Authorizations which are in any manner necessary for it to
conduct its business as now or previously conducted or for the ownership and use
of the assets owned or used by UniCapital and Newco, respectively, in the
conduct of the business of the Company, free and clear of all liens, charges,
restrictions and encumbrances and in compliance with all Regulations. Neither
UniCapital nor Newco is in default, nor has UniCapital or Newco received any
notice of any claim of default, with respect to any such Authorization. All such
Authorizations are renewable by their terms or in the ordinary course of
business without the need to comply with any special qualification procedures or
to pay any amounts other than routine filing fees. None of such Authorizations
will be adversely affected by consummation of the transactions contemplated
hereby. No stockholder and no director, officer, employee or former employee of
UniCapital or Newco or any of their affiliates, or any other person, firm or
corporation, owns or has any proprietary, financial or other interest (direct or
indirect) in any Authorization which UniCapital or Newco owns, possesses or uses
in the operation of the business of UniCapital and Newco as now or previously
conducted.
7.7 TRANSACTIONS WITH AFFILIATES. Except as described in the
Registration Statement, no stockholder and no director, officer or employee of
UniCapital or Newco, or any member of his or her immediate family or any other
of its, his or her affiliates, owns or has a 5% or more ownership interest in
any corporation or other entity that is or was during the last three years a
party to, or in any property which is or was during the last three years the
subject of, any contract, agreement or understanding, business arrangement or
relationship with UniCapital or Newco.
7.8 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of UniCapital and Newco, threatened against UniCapital or Newco which
relates to the transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 7.8, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of UniCapital or Newco, threatened against
UniCapital or Newco or which relates to UniCapital or Newco.
(c) Neither UniCapital nor Newco is a party to or subject to
the provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority.
7.9 REGISTRATION RIGHTS. As of the date hereof and as of the Merger
Effective Date, no officer, director or shareholder of UniCapital will have been
granted any registration rights with respect to the registration of any shares
of capital stock of UniCapital.
7.10 MISCELLANEOUS. Prior to the consummation of the Merger, UniCapital
and Newco have no material properties or assets and are not party to any
contracts other than this Agreement,
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certain employment agreements with officers of UniCapital, certain real property
leases relating to the principal executive offices of UniCapital, and those
agreements and letters of intent listed on Schedule 7.10 hereto.
8. COVENANTS OF STOCKHOLDERS AND THE COMPANY
The following covenants shall apply during the period from and after
the date hereof through the Closing Date.
8.1 BUSINESS IN THE ORDINARY COURSE. The Company shall, and the
Stockholders shall cause the Company to, conduct its business solely in the
ordinary course and consistent with past practice.
8.2 EXISTING CONDITION. The Company shall not, and the Stockholders
shall not suffer the Company to, cause or permit to occur any of the events or
occurrences described in Section 6.30 hereof.
8.3 MAINTENANCE OF PROPERTIES AND ASSETS. The Company shall, and the
Stockholders shall cause the Company to, maintain and service its properties and
assets in order to preserve its value and usefulness in the conduct of its
business.
8.4 EMPLOYEES AND BUSINESS RELATIONS. The Company shall, and the
Stockholders shall cause the Company to, use commercially reasonable efforts to
keep available the services of its current employees and agents and to maintain
its relations and goodwill with its suppliers, customers, distributors and any
others with whom or with which it has business relations.
8.5 MAINTENANCE OF INSURANCE. The Company shall, and the Stockholders
shall cause the Company to, notify UniCapital of any material changes in the
terms of the insurance policies and binders referred to on Schedule 6.20 hereto.
8.6 COMPLIANCE WITH LAWS, ETC. The Company shall, and the Stockholders
shall cause the Company to, comply with all laws, ordinances, rules, regulations
and orders applicable to the Company or its business, operations, properties or
assets, noncompliance with which might materially affect the Company.
8.7 CONDUCT OF BUSINESS. The Company shall, and the Stockholders shall
cause the Company to, use its reasonable commercial efforts to conduct its
business in such a manner that on the Closing Date and on the Merger Effective
Date the representations and warranties of the Stockholders contained in this
Agreement shall be true as though such representations and warranties were made
on and as of each such date (except to the extent such representations or
warranties expressly speak as of a specific date), and the Company shall, and
the Stockholders shall cause the Company to use commercially reasonable efforts
to cause all of the conditions to the obligations of UniCapital and the
Stockholders under this Agreement to be satisfied on or prior to the Closing
Date.
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The Company shall, and the Stockholder shall cause the Company to, maintain
credit underwriting standards consistent with past practice. Furthermore, the
Company shall, and the Stockholder shall cause the Company to, maintain a
residual value accounting methodology consistent with past practice.
8.8 ACCESS. Upon prior reasonable notice, the Company shall, and the
Stockholders shall cause the Company to, give to UniCapital's officers,
employees, counsel, accountants and other representatives free and full access
to and the right to inspect, during normal business hours, all of the premises,
properties, assets, records, contracts and other documents relating to the
Company and shall permit them to consult with the officers, employees,
accountants, counsel and agents of the Company for the purpose of making such
investigation of the Company as UniCapital shall desire to make, provided that
such investigation shall not unreasonably interfere with the Company's business
operations. Furthermore, the Company shall, and the Stockholders shall cause the
Company to, furnish to UniCapital all such documents and copies of documents and
records and information with respect to the affairs of the Company and copies of
any working papers relating thereto as UniCapital shall from time to time
reasonably request. No information or knowledge obtained in any investigation
pursuant to this Section 8.8 or otherwise shall affect or be deemed to modify
any representation or warranty contained in this Agreement or the conditions to
the obligations of the parties to consummate the Merger.
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS. Neither the Company nor
the Stockholders shall give notice to third parties or otherwise make any press
release or other public statement concerning this Agreement or the transactions
contemplated hereby. Neither the Company nor the Stockholders shall grant any
interview, publish any article, report or statement, or respond to any press
inquiry or other inquiry of any third party relating to this Agreement, the
business of the Company, the business (current and proposed) of UniCapital, the
Registration Statement (as defined below), the IPO or any other matter connected
with any of the foregoing without the express prior written approval of
UniCapital, and all inquiries and questions with respect to any of the foregoing
shall be coordinated through Robert New, Chief Executive Officer of UniCapital.
The Company and each Stockholder shall coordinate all communications with the
employees and agents of any such company through UniCapital prior to making any
such communication. Notwithstanding the foregoing (i) the Stockholders may
communicate, whether orally or in writing, with any lessors, customers,
suppliers or any other parties from whom any consents, approvals or waivers are
necessary or advisable, or to whom notice is necessary or advisable, as well as
with any professional advisors or employees of the Company with respect to
transactions contemplated by this Agreement and related matters, (ii) this
Section 8.9 shall not be interpreted to prevent the Company, or any Stockholder
from disclosing information as compelled by a court order, provided however,
that prior to disclosing any information concerning this Agreement or the
transaction contemplated hereby in response to any such court order, the Company
or Stockholder, as applicable, shall provide UniCapital with prompt notice of
the court order so that UniCapital may take whatever action it deems appropriate
to prohibit such disclosure.
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8.10 EXCLUSIVITY. Except with respect to this Agreement and the
transactions contemplated hereby, neither the Company nor the Stockholders and
none of their affiliates shall, and each of them shall cause its respective
employees, agents and representatives (including, without limitation, any
investment banking, legal or accounting firm retained by it or them and any
individual member or employee of the foregoing) (each, an "Agent") not to, (a)
initiate, solicit or seek, directly or indirectly, any inquiries or the making
or implementation of any proposal or offer (including, without limitation, any
proposal or offer to its shareholders or any of them) with respect to a merger,
acquisition, consolidation, recapitalization, liquidation, dissolution or
similar transaction involving, or any purchase of all or any portion of the
assets or any equity securities of, the Company (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal"), or (b) engage in
any negotiations concerning, or provide any confidential information or data to,
or have any substantive discussions with, any person relating to an Acquisition
Proposal, (c) otherwise cooperate in any effort or attempt to make, implement or
accept an Acquisition Proposal, or (d) enter into or consummate any agreement or
understanding with any person or entity relating to an Acquisition Proposal,
except for the Merger contemplated hereby. If the Company or any Stockholder, or
any of their respective Agents, has provided any person or entity (other than
UniCapital) with any confidential information or data relating to an Acquisition
Proposal, then they shall request the immediate return or destruction thereof.
The Company and the Stockholders shall notify UniCapital immediately if any
inquiries, proposals or offers related to an Acquisition Proposal are received
by, any confidential information or data is requested from, or any negotiations
or discussions related to an Acquisition Proposal are sought to be initiated or
continued with, it or any individual or entity referred to in the first sentence
of this Section 8.10. The covenant contained in this Section 8.10 shall not
survive any termination of this Agreement pursuant to Sections 13.1, 13.2 or
13.3.
8.11 THIRD-PARTY APPROVALS. Prior to the Closing Date, the Company
shall satisfy any requirement for notice and approval of the transactions
contemplated by this Agreement under applicable agreements with third parties,
and shall provide UniCapital with satisfactory evidence of such third-party
approvals. The Stockholders shall cooperate with UniCapital from the date hereof
through the Merger Effective Date and shall use their best efforts to cause the
release of the personal guaranties of the Stockholders with respect to the
indebtedness of the Company set forth on Schedule 11.3 as contemplated by
Section 11.3.
8.12 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
Company shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under any applicable collective bargaining
agreement, and shall provide UniCapital with proof that any required notice has
been provided.
8.13 NOTIFICATION OF CERTAIN MATTERS. (a) The Company and the
Stockholders shall give prompt notice to UniCapital of (i) the occurrence or
non-occurrence of any event known to any Stockholder or the Company the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty contained in Article 6 to be untrue or inaccurate in
any material respect at or prior to the Closing Date or the Merger Effective
Date and (ii) any material failure of
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any Stockholder or the Company to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by such person hereunder.
(b) UniCapital shall give prompt notice to each Stockholder of
(i) the occurrence or non-occurrence of any event known to UniCapital or Newco
the occurrence of non-occurrence of which would be likely to cause any
representation or warranty contained in Article 7 to be untrue or inaccurate in
any material respect at or prior to the Closing Date or the Merger Effective
Date and (ii) any material failure of UniCapital or Newco to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder.
(c) The delivery of any notice pursuant to this Section 8.13
shall not be deemed to (i) modify the representations or warranties hereunder of
the party delivering such notice, which modification may only be made pursuant
to Section 8.14, (ii) modify the conditions set forth in Sections 9 and 10 or
(iii) limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
8.14 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Merger
Effective Date to supplement or amend promptly the schedules hereto with respect
to any matter hereafter arising or discovered which, if existing or known at the
date of this Agreement, would have been required to be set forth or described in
the schedules, provided, that no amendment or supplement that constitutes or
reflects a material adverse change in the business, operations, assets,
properties, prospects or condition (financial or otherwise) of the Company (a
"Material Adverse Amendment") may be made unless UniCapital consents to such
Material Adverse Amendment; provided, further, however, that if the amendment or
supplement relates to changes in facts or circumstances occurring subsequent to
the date of this Agreement and such amendment or supplement constitutes or
reflects a Material Adverse Amendment, then such amendment or supplement shall
be accepted by UniCapital subject to the provisions of Section 12.2 and 12.5
hereof. No amendment of or supplement to a schedule shall be made later than 48
hours prior to the anticipated effectiveness of the Registration Statement
defined in Section 9.4. Only (i) the Schedules attached to this Agreement at the
time of its execution and (ii) amended Schedules as accepted under the standard
and provisions of this Section 18.4, shall be deemed to be a part of this
Agreement in accordance with Section 19.3 hereof.
8.15 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, the Company shall use its reasonable best efforts to (a) file all
information required to be filed by it pursuant to such act and (b) provide
UniCapital with all information reasonably requested and required by it to
satisfy any filing requirements it may have under such act.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE
STOCKHOLDERS
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The obligations of the Company and the Stockholders hereunder are
subject to the satisfaction on or prior to the Closing Date (or such earlier
date specified below) of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representa tions and warranties of UniCapital and Newco contained in Article 7
shall be accurate as of the Closing Date and as of the Merger Effective Date as
though such representations and warranties had been made as of such times; all
of the terms, covenants and conditions of this Agreement to be complied with and
performed by UniCapital and Newco on or before the Closing Date shall have been
duly complied with and performed; and a certificate to the foregoing effect
dated the Merger Effective Date and signed by a duly authorized agent, the
President or any Vice President of UniCapital shall have been delivered to the
Stockholders.
9.2 EMPLOYMENT AGREEMENTS. The Surviving Corporation shall have
executed and delivered Employment Agreements, in the form of Annex IV attached
hereto, to each of the persons listed on Schedule 9.2 hereto.
9.3 OPINION OF COUNSEL. The Stockholders shall have received an opinion
from Morgan, Lewis & Bockius LLP, counsel for UniCapital, dated the Merger
Effective Date, to the effect that:
(a) UniCapital and Newco have been duly organized and are
validly existing in good standing under the laws of their respective states of
incorporation;
(b) this Agreement has been duly authorized, executed and
delivered by UniCapital and Newco and constitutes a valid and binding agreement
of UniCapital and Newco enforceable in accordance with its terms, except (i) as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting the
rights of creditors, (ii) as the same may be subject to the effect of general
principles of equity and (iii) that no opinion need be expressed as to the
enforceability of indemnification provisions included herein; and
(c) the execution, delivery and performance of this Agreement
and the consummation of any transactions contemplated hereby will not conflict
with, or result in a breach or violation of, the Certificate of Incorporation of
Bylaws of UniCapital or Newco;
(d) the shares of UniCapital Stock to be received by the
Stockholders on the Merger Effective Date shall be duly authorized, validly
issued, fully paid and nonassessable.
9.4 REGISTRATION STATEMENT. UniCapital shall have filed with the
Securities and Exchange Commission ("SEC") a registration statement on Form S-1
covering the offer and sale of shares of UniCapital Stock in the IPO (the
"Registration Statement"). The Registration Statement shall have been declared
effective by the SEC not later than June 30, 1998, UniCapital and the
underwriters named therein shall have executed the Underwriting Agreement and
the underwriters
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named therein shall have agreed to acquire, subject to the conditions set forth
in the Underwriting Agreement, the shares of UniCapital Stock covered by the
Registration Statement. There shall have been no stop-order issued (that remains
in effect) by the Securities and Exchange Commission with respect to the
Registration Statement.
9.5 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND NEWCO
The obligations of UniCapital and Newco hereunder are subject to the
satisfaction, on or prior to the Closing Date (or such earlier date specified
below), of the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
Stockholders shall have delivered to UniCapital a certificate dated the Merger
Effective Date and signed by them to the effect that all of the representations
and warranties of the Stockholders contained in this Agreement shall be true on
and as of the Closing Date and as of the Merger Effective Date with the same
effect as though such representations and warranties had been made on and as of
such dates, except for matters expressly disclosed in the certificate or a
schedule thereto (which shall not serve to modify any representation or warranty
made herein or in any other document or otherwise in information supplied by the
Company or any Stockholder); and each and all of the agreements of the
Stockholders and the Company to be performed on or before the Closing Date
pursuant to the terms hereof shall have been performed.
10.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by UniCapital of the Company Stock and no
governmental agency or body shall have taken any other action or made any
request of UniCapital as a result of which the management of UniCapital deems it
inadvisable to proceed with the transactions hereunder.
10.3 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the Closing Date,
UniCapital shall have had sufficient time to review the unaudited balance sheet
of the Company as of the end of the calendar month most recently completed prior
to the Closing Date, and the unaudited statements of income, cash flows and
stockholders' equity of the Company for the periods then ended, which statements
shall have disclosed no material adverse change in the financial condition of
the Company or the results of their respective operations from the financial
statements originally furnished by the Company as set forth in Schedule 6.12.
10.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, operations, assets, properties, prospects or condition (financial or
otherwise) of the Company shall have occurred, and the Company shall not have
suffered any material loss or damage to any of its properties or assets, whether
or not covered by insurance, since the Balance Sheet Date, which
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change, loss or damage materially affects or impairs the ability of the Company
to conduct its business as now conducted or as proposed to be conducted; and
UniCapital shall have received on the Closing Date a certificate signed by the
Stockholders and dated the Merger Effective Date to such effect.
10.5 REGULATORY REVIEW. UniCapital, through its authorized
representatives, shall have completed a satisfactory review of the practices and
procedures of the Company including, but not limited to, environmental and land
use practices, import and export laws, compliance with contracts and federal,
state and local laws and regulations governing the respective operations of
which review reflects compliance with all applicable laws governing the Company,
disclosing no material actual or probable violations, compliance problems,
required capital expenditures or other substantive environmental, real estate
and land use related concerns and which review is otherwise satisfactory in all
respects to UniCapital, in its sole discretion.
10.6 STOCKHOLDERS' RELEASE. At the Closing Date, the Stockholders shall
have delivered to UniCapital an instrument in the form of Annex V dated the
Merger Effective Date releasing the Company from any and all claims of the
Stockholders against the Company except for claims for benefits accrued by the
Stockholders pursuant to any Benefit Plan.
10.7 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.2
shall have executed and delivered an Employment Agreement in the form of Annex
IV attached hereto.
10.8 OPINION OF COUNSEL. UniCapital shall have received an opinion from
Brenner, Saltzman & Wallman LLP, counsel to the Company and the Stockholders,
dated the Merger Effective Date, in form and substance satisfactory to
UniCapital, to the effect that, with respect to the Company:
(a) the Company has been duly organized and is validly
existing and in good standing under the laws of the state of its incorporation;
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(b) to the knowledge of such counsel, the Company is duly
authorized, qualified and licensed under all applicable laws, regulations,
ordinances or orders of public authorities to carry on its business in the
places and in the manner now conducted, except to the extent that the failure to
be in good standing would not have a material adverse effect on the Company;
(c) the authorized and outstanding capital stock of the
Company is as represented by the Stockholders in this Agreement and each share
of such stock has been duly and validly authorized and issued, is fully paid and
nonassessable and was not issued in violation of the preemptive rights of any
stockholder;
(d) the Company does not have any outstanding options,
warrants, calls, conversion rights or other commitments of any kind to issue or
sell any of its capital stock;
(e) this Agreement has been duly authorized, executed and
delivered by the Company and the Stockholders and constitutes a valid and
binding agreement of the Company and the Stockholders enforceable in accordance
with its terms, except (i) as such enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement and other similar laws
relating to or affecting the rights of creditors and as the same may be subject
to the effect of general principles of equity and (ii) that no opinion need be
expressed as to the enforceability of indemnification provisions included
herein;
(f) upon consummation of the Merger contemplated by this
Agreement, UniCapital will receive good title to the Company Stock, free and
clear of all liens, security interests, pledges, charges, voting trusts,
equities, restrictions, encumbrances and claims of every kind;
(g) to the knowledge of such counsel, except to the extent set
forth on Schedule 6.23, the Company is not in violation of or default under any
law or regulation, or under any order of any court, commission, board, bureau,
agency or instrumentality wherever located and there are no claims, actions,
suits or proceedings pending, or threatened against or affecting any Company, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
wherever located;
(h) to the knowledge of such counsel, except to the extent set
forth on Schedule 6.17, the Company is not in default under any of its material
contracts or agreements or has received notice of such default;
(i) no notice to, consent, authorization, approval or order of
any court or governmental agency or body or, to the knowledge of such counsel,
of any other third party is required (which has not been obtained) in connection
with the execution, delivery or consummation of this Agreement by the Company or
any Stockholders or for the transfer to UniCapital of the Company Stock; and
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(j) the execution of this Agreement and the performance of the
obligations hereunder will not violate or result in a breach or constitute a
default under any of the terms or provisions of the Company's charter documents
or the bylaws or any Contract or Lease listed on Schedules 6.17 and 6.35 (which
breach, violation or default is material to the Company).
Such opinion shall include any other matters incident to the matters set forth
herein as agreed to by the parties and their respective counsel.
10.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
10.10 GOOD STANDING CERTIFICATES. Stockholders shall have delivered to
UniCapital certificates, dated as of a date no earlier than five days prior to
the Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by UniCapital, in each state
in which the Company is authorized to do business, showing that the Company is
in good standing and authorized to do business and that all state franchise
and/or income tax returns and taxes for all periods prior to the dates of such
certificates have been filed and paid.
10.11 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC, and UniCapital and the representatives of
the underwriters named in the Registration Statement shall have executed the
Underwriting Agreement. There shall have been no stop-order issued (that remains
in effect) by the Securities and Exchange Commission with respect to the
Registration Statement.
10.12 REPAYMENT OF INDEBTEDNESS; PRE-CLOSING DISTRIBUTIONS. Prior to
the Closing Date, the Stockholders shall have repaid to the Company the amounts
referenced on Schedule 6.14.
10.13 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
10.14 TERMINATION OF STOCKHOLDERS' AGREEMENT. The Stockholders shall
have delivered to UniCapital evidence that certain Stockholders' Agreement dated
as of May 3, 1989 between Alan H. Kaufman, Edgar W. Lee and the Company has been
terminated and all claims of the Stockholders thereunder have been released.
11. COVENANTS OF UNICAPITAL
11.1 UNICAPITAL STOCK OPTIONS. Upon the effective date of the
Registration Statement (but subject in all events to the consummation of the
Merger), UniCapital shall make available options to purchase that number of
shares of UniCapital Stock having a fair market value on the effective date of
the Registration Statement, based upon the IPO price per share set forth in the
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Underwriting Agreement, equal to 6.25% of the Effective Date Consideration
(valuing the UniCapital Stock to be issued as part of the Effective Date
Consideration at the IPO price per share for the purposes of this Section 11.1)
to be granted to those non-Stockholder employees of the Surviving Corporation
after the Closing as are designated by the principal executive officer of the
Surviving Corporation who is entering into an Employment Agreement pursuant to
Section 9.2 hereof (or such other officer designated by the Surviving
Corporation and acceptable to UniCapital). Not later than seven days prior to
the effective date of the Registration Statement, the officer designating the
recipients of such options shall provide to UniCapital a written list of the
names of those designated recipients who will receive options exercisable at the
IPO price and the relative percentages of the 6.25% option pool provided under
this Section 11.1 to be awarded to each recipient, as well as the percentage of
options, if any, to be reserved for future issuance. Any options reserved for
future issuance shall be granted at an exercise price equal to the fair market
value of UniCapital Stock as of the date of grant. All options shall be granted
in accordance with UniCapital's policies, and authorized and issued under the
terms of UniCapital's principal stock option plan for the benefit of employees
of UniCapital and its subsidiaries.
11.2 INFORMATION FILING. To the extent the Unified Transaction is a
transaction that falls within Section 351 of the Code, UniCapital shall file all
information required to be filed by it pursuant to Treasury Regulation
Section 1.351-3(b).
11.3 RELEASE FROM GUARANTEES; INDEBTEDNESS. UniCapital shall cooperate
with the Stockholders from the date hereof through the Merger Effective Date to
cause those lenders holding the guaranteed indebtedness of the Company set forth
on Schedule 11.3 (the "Subject Indebtedness") to release the Stockholders from
any and all personal guarantees (the "Stockholder Guarantees") of such Subject
Indebtedness at the Merger Effective Date; including UniCapital's best efforts
to provide for the substitution of a UniCapital guarantee for the Stockholder
Guarantees or the assumption of such Subject Indebtedness by UniCapital. If any
lender holding Stockholder Guarantees is unwilling to release such guarantees
upon substitution of a UniCapital guarantee or the assumption by UniCapital of
the Subject Indebtedness owing to such lender, then UniCapital shall repay not
later than ten (10) days after the Merger Effective Date the amount of the
Subject Indebtedness owing to such lender as of the Closing Date (but not in
excess of the amount set forth on Schedule 11.3 as the maximum amount of Subject
Indebtedness that may be incurred under such lender's credit facility). The
failure of the Company to obtain the consent of its lenders to the change of
control of the Company, substitution of UniCapital as guarantor or the
assumption by UniCapital of Subject Indebtedness shall not be deemed a breach
hereunder.
11.4 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, UniCapital shall use its reasonable best efforts to (a) file all
information required to be filed by it pursuant to such act and (b) provide the
Company with all information reasonably requested and required by it to satisfy
any filing requirements it may have under such act.
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11.5 EMPLOYEE BENEFIT PLANS OF UNICAPITAL. During the two year period
after the Merger Effective Date and upon the termination of any of the Company's
major health insurance plans, retirement savings plans and/or disability plans
(each a "Terminated Plan"), UniCapital shall use its best efforts to promptly
make available a replacement for such Terminated Plan with a reasonably
comparable plan offering substantially similar benefits on substantially similar
terms to all current employees of the surviving corporation who were employees
of the Company at the time of the Merger.
12. INDEMNIFICATION; SURVIVAL
12.1 GENERAL INDEMNIFICATION BY STOCKHOLDERS. Subject to the
limitations contained in Section 12.5 hereof, each Stockholder jointly and
severally, covenants and agrees that such Stockholder will indemnify, defend,
protect and hold harmless UniCapital, Newco and the Surviving Corporation and
their respective officers, stockholders, directors, divisions, subdivisions,
affiliates, subsidiaries, parents, agents, employees, successors and assigns at
all times from and after the date of this Agreement until the Expiration Date
(as defined in Section 12.6) from and against all claims, damages, losses,
liabilities, actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) (collectively, "Losses") incurred
by UniCapital, Newco or the Surviving Corporation as a result of or arising from
(a) any breach of the representations and warranties made by the Stockholders
set forth herein or on the schedules or certificates delivered in connection
herewith, (b) any nonfulfillment of any covenant or agreement on the part of the
Stockholders or the Company under this Agreement, (c) the business, operations
or assets of the Company prior to the Merger Effective Date or the actions or
omissions of the Company's directors, officers, stockholders, employees or
agents prior to the Merger Effective Date, other than Losses arising from
matters expressly disclosed in the Financial Statements, this Agreement or the
Schedules to this Agreement, or (d) any liability under the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or other
federal or state law or regulation, at common law or otherwise, arising out of
or based upon (i) any untrue statement or alleged untrue statement of a material
fact relating to the Company or the Stockholders contained in any preliminary
prospectus, the Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement thereto (including any additional
registration statement filed pursuant to Rule 462(b) under the Securities Act),
which statement was provided or was based upon information or documents provided
to UniCapital or its counsel by the Company or the Stockholders, or (ii) any
omission or alleged omission to state therein a material fact relating to the
Company or the Stockholders required to be stated therein or necessary to make
the statements therein not misleading, which information was not provided to
UniCapital or its counsel by any Company or the Stockholders; provided, however,
that such indemnity shall not inure to the benefit of UniCapital, Newco or the
Surviving Corporation to the extent that such untrue statement (or alleged
untrue statement) was made in, or such omission (or alleged omission) occurred
in, any preliminary prospectus and the Stockholders provided, in writing,
corrected information to UniCapital for inclusion in the final prospectus, and
such information was not so included.
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12.2 SPECIFIC INDEMNIFICATION BY STOCKHOLDERS. Subject to the
limitations contained in Section 12.5 hereof, notwithstanding any disclosure
made in this Agreement or in the schedules or exhibits hereto, and
notwithstanding any investigation by UniCapital or Newco, each Stockholder
jointly and severally, covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless UniCapital, Newco and the Surviving
Corporation and their respective officers, stockholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parents, agents, employees, successors
and assigns at all times from and after the date of this Agreement, from and
against all Losses incurred by UniCapital, Newco or the Surviving Corporation as
a result of or incident to: (a) the existence of liabilities of the Company in
excess of the liabilities set forth on Schedule 6.13, to the extent of such
excess; (b) the failure of the Company or the Stockholders to file all required
Form 5500's prior to the Merger Effective Date; (c) tax matters listed on
Schedule 6.27; (d) the litigation matters listed on Schedule 6.25(d); (e) the
matters listed on Schedule 6.5; (f) any Material Adverse Amendments pursuant to
Section 8.14 hereof; (g) the matters listed on Schedule 6.30; (h) the matters
listed on Schedule 6.32; (i) the matters listed on Schedule 6.35(g) and Schedule
6.35(m); (j) the matters listed on Schedule 6.36; (k) those Scheduled Payments
delinquent for 90 days or longer as of the Closing Date net of applicable
reserves reflected on the balance sheet of the Company immediately prior to the
preparation of the Closing Date Balance Sheet and (l) any liabilities arising
from the Company's guaranty of the debt obligations of Alored Associates. The
Stockholders shall have no indemnification obligation pursuant to subsection (k)
of the foregoing sentence with respect to any Lease as to which Scheduled
Payments are not delinquent for 90 days or longer as of the Closing Date.
12.3 INDEMNIFICATION BY UNICAPITAL AND NEWCO. Subject to the
limitations contained in Section 12.5 hereof, UniCapital and Newco, jointly and
severally, covenant and agree that they will indemnify, defend, protect and hold
harmless the Stockholders, their respective heirs, personal representatives,
successors and assigns, at all times from and after the date of this Agreement
from and against all Losses incurred by the Stockholders as a result of or
arising from (a) any breach of the representations and warranties made by
UniCapital and Newco set forth herein or on the schedules or certificates
attached hereto, (b) any nonfulfillment of any agreement on the part of
UniCapital under this Agreement, (c) any liability of the Stockholders arising
after the Merger Effective Date for repayment, in their capacity as guarantors,
of the indebtedness or other obligations of the Company set forth on Schedule
11.3, (d) any liability under the Securities Act, the Exchange Act or other
federal or state law or regulation, at common law or otherwise, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact relating to UniCapital (including all of the companies, other than the
Company, acquired by UniCapital as part of the Unified Transaction, but only to
the extent that UniCapital is actually indemnified by such other companies for
such liability) contained in any preliminary prospectus, the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto (including any registration statement filed pursuant to Rule
462(b) under the Securities Act), or arising out of or based upon any omission
or alleged omission to state therein a material fact relating to UniCapital
(including all of the companies, other than the Company, acquired by UniCapital
as part of the Unified Transaction, but only to the extent that UniCapital is
actually indemnified by such other companies for such liability) required to be
stated therein or necessary to make the statements therein
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not misleading, which liability is not the subject of indemnification of
UniCapital, Newco and the Surviving Corporation pursuant to Section 12.1(c)
above.
12.4 THIRD-PARTY CLAIMS. (a) In order for a party hereto eligible to be
indemnified hereunder (an "Indemnified Party") to be entitled to any
indemnification provided for under this Agreement in respect of, arising out of
or involving a claim or demand made by any person or entity against the
Indemnified Party (a "Third-Party Claim"), such Indemnified Party must notify
the parties obligated to provide indemnification pursuant to Section 12.1, 12.2,
or 12.3 hereof (each, an "Indemnifying Party") in writing, and in reasonable
detail, of the Third-Party Claim within 30 business days after receipt by such
Indemnified Party of written notice of the Third-Party Claim; provided, however,
that failure to give such notification shall not affect the indemnification
provided hereunder except to the extent the Indemnifying Party shall have been
actually prejudiced as a result of such failure. Such notice shall state the
nature and the basis of such claim and a reasonable estimate of the amount
thereof. Thereafter, the Indemnified Party shall deliver to the Indemnifying
Party, within five business days after the Indemnified Party's receipt thereof,
copies of all notices and documents (including court papers) received by the
Indemnified Party relating to the Third-Party Claim. To the extent the
Indemnifying Party has actually paid any amount to the Indemnified Party in
respect of any Loss in connection with such Third-Party Claim, the Indemnifying
Party shall have a right of subrogation with respect to such Third-Party Claim
to the extent of such payment.
(b) The Indemnifying Party shall have right to defend and
settle, at its own expense and by its own counsel (provided that such counsel is
not reasonably objected to by the Indemnified Party), and provided further that
selection for these purposes of Brenner, Saltzman & Wallman LLP, absent any
actual or reasonably likely conflict of interest with respect to parties or
defenses, shall not be objected to by UniCapital), any Third-Party Claim as the
Indemnifying Party pursues the same in good faith and diligently and so long as
the Third -Party Claim does not relate to an actual or potential Loss to which
Section 12.4(e) applies in which the Indemnified Party is UniCapital, Newco or
the Surviving Corporation. If the Indemnifying Party undertakes to defend or
settle, it shall promptly notify the Indemnified Party of its intention to do
so, and the Indemnified Party shall cooperate with the Indemnifying Party and
its counsel in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnifying Party with any books, records or information reasonably requested
by the Indemnifying Party that are in the Indemnified Party's possession or
control. Notwithstanding the foregoing, the Indemnified Party shall have the
right to participate in any matter through counsel of its own choosing at its
own expense (unless there is a conflict of interest that prevents counsel for
the Indemnifying Party from representing the Indemnified Party, in which case
the Indemnifying Party will reimburse the Indemnified Party for the expenses of
its counsel). After the Indemnifying Party has notified the Indemnified Party of
its intention to undertake to defend or settle any such asserted liability, and
for so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except to the extent such participation is requested
by the Indemnifying Party, in which event the Indemnified Party shall be
reimbursed by the Indemnifying Party for reasonable additional legal expenses
and out-of-pocket
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expenses, and except in the case of a Third-Party Claim relating to an actual or
potential Loss to which Section 12.4(e) applies in which the Indemnified Party
is UniCapital, Newco or the Surviving Corporation.
(c) No Indemnifying Party shall, in the defense of any
Third-Party Claim, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) or enter into any settlement, except with
the written consent of the Indemnified Party, which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim or
matter.
(d) If the Indemnifying Party does not assume the defense of
any Third-Party Claim, then the Indemnified Party may defend against such
Third-Party Claim in such manner as it deems appropriate at the expense of the
Indemnifying Party.
(e) Notwithstanding anything to the contrary in this Article
12, if at any time, in the reasonable opinion of UniCapital, Newco or the
Surviving Corporation as the Indemnified Party (notice of which opinion shall be
given in writing to the Indemnifying Party), any Third-Party Claim seeks
material prospective relief which could have a material adverse effect on any
such Indemnified Party or any subsidiary, then such Indemnified Party shall have
the right to control or assume (as the case may be) the defense of any such
Third-Party Claim and the amount of any judgment or settlement and the
reasonable costs and expenses of defense (including, but not limited to, fees
and disbursements of counsel and experts, as well as any sampling, testing,
investigation, removal, treatment or remediation undertaken by UniCapital, Newco
or the Surviving Corporation and all counseling or engineering fees and expenses
related thereto) shall be included as part of the indemnification obligations of
the Indemnifying Party hereunder. If the Indemnified Party elects to exercise
such right, then the Indemnifying Party shall have the right to participate in,
but not control, the defense of such Third-Party Claim at the sole cost and
expense of the Indemnifying Party.
12.5 LIMITATIONS ON INDEMNIFICATION. (a) To the extent of any amount
that UniCapital actually receives as a result of a Net Worth Deficiency that is
directly attributable to an Indemnifiable Decrease, UniCapital shall not be
entitled to any indemnity under Article 12. An "Indemnifiable Decrease" shall be
equal to the amount of any Net Worth Deficiency that consists of a liability for
which UniCapital would otherwise be entitled to indemnity under Article 12 but
that has been (a) accrued or (b) actually paid (so long as it was not previously
accrued on or before December 31, 1997) during the Interim Net Worth Period. The
"Interim Net Worth Period" shall mean the period beginning on January 1, 1998
and ending on the Closing Date. No amounts under (a) or (b) that have not been
reflected on the Company's financial statements under generally accepted
accounting principles applied consistently with previous practice shall be
deemed to be an Indemnifiable Decrease.
(b) No Indemnified Party shall assert any claim (other than a
Third-Party Claim) for indemnification hereunder until such time as the
aggregate of all claims which such Indemnified Party may have against an
Indemnifying Party plus any Indemnifiable Decrease shall exceed
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$558,000 (the "Basket Limitation") at which time an Indemnified Party shall be
entitled to seek indemnification for all claims pursuant to this Article 12, but
only to the extent such claims, in the aggregate, exceed $558,000. For purposes
of the preceding sentence, UniCapital, Newco and the Surviving Corporation shall
be considered to be a single Indemnifying and Indemnified Party and the
Stockholders shall be considered to be a single Indemnifying and Indemnified
Party. Notwithstanding the foregoing, on each date on which any Earn-Out
Consideration is paid, the Basket Limitation shall be increased by that amount
(the "Basket Adjustment") equal to 1% of any such Earn-Out Consideration,
without prejudice to UniCapital's receipt of or right to received
indemnification for claims exceeding the amount of the Basket Limitation in
effect at the time such claims were brought. If the Basket Limitation is
adjusted pursuant to the preceding sentence after such time as any Indemnified
Party, pursuant to this Article 12, has collected an amount in excess (such
excess amount is referred to as the "Excess Indemnity") of the Basket Limitation
(prior to giving effect to the applicable Basket Adjustment), then such
Indemnified Party, within 10 business days after the final determination of such
Earn-Out Consideration, shall pay to the Indemnifying Party an amount equal to
the lesser of applicable Basket Adjustment or the Excess Indemnity. In addition,
notwithstanding any provision of this Agreement to the contrary, for the
purposes of preventing a double recovery the Stockholders shall not be obligated
to indemnify UniCapital or any other indemnified party pursuant to Section 12.1
or 12.2 with respect to any particular act, omission, condition or event if and
to the extent that the loss resulting or arising from such act, omission,
condition or event has, directly or indirectly, been taken into account in the
computation of any Net Worth Deficiency provided for in Section 3.1.
Notwithstanding any other term of this Agreement, in no event shall any
Stockholder be liable under this Article 12 for an amount which exceeds the
aggregate value (determined at the Merger Effective Date) of the Merger
Consideration received by such Stockholder under this Agreement. Notwithstanding
anything to the contrary contained in this Agreement, the limitations upon
indemnification contained in this Section 12.5 shall not apply to Losses arising
out of any of the following: (i) any breach of the representations and
warranties of the Stockholders contained in Sections 6.3, 6.5, 6.11, 6.14, 6.27
and 6.33 hereof; (ii) litigation net of applicable reserves reflected on balance
sheets of the Company at the Balance Sheet Date; (iii) the Company's failure to
qualify to do business in any jurisdiction; (iv) any tax matters identified on
Schedule 6.27; or (v) the matters listed on Schedule 6.35(g) and Schedule
6.35(m); (vi) any liabilities arising from the Company's guaranty of the debt
obligations of Alored Associates and (vii) any Material Adverse Amendment
pursuant to Section 8.14 hereof.
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The parties agree that
representations and warranties made by the parties in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive for a period of one year from the Merger Effective Date (which date is
hereinafter called the "Expiration Date"), except that:
(a) the representations and warranties contained in Section
6.27 hereof shall survive until such time as the limitations period has run for
all tax periods ended on or prior to the Merger Effective Date, which shall be
deemed to be the Expiration Date for purposes of this clause (a) and claims
arising from a breach of the representations and warranties contained in such
Section 6.27;
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(b) the representations and warranties contained in Section
6.28(g) hereof shall survive until such time as one full fiscal year's cycle of
transactions occurring entirely within the twenty-first century shall have been
processed and UniCapital's consolidated financial statements for the fiscal year
in which the last such transaction to be processed occurred have been audited,
which shall be deemed to be the Expiration Date for purposes of this clause (b)
and claims arising from a breach of the representations and warranties contained
in such Section 6.28(g);
(c) the representations and warranties contained in Section
6.33 hereof shall survive for a period of five years from the Merger Effective
Date, which shall be deemed the Expiration Date for purposes of this clause (c)
and claims arising from a breach of the representations and warranties contained
in such Section 6.33;
(d) solely for purposes of Section 12.1(d) hereof, and solely
to the extent that UniCapital actually incurs liability under the Securities
Act, the Exchange Act, or any other federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for purposes of this clause (d) and claims arising under such
laws;
(e) the representations and warranties of the Stockholders
contained in Section 6.5 hereof shall survive the Merger Effective Date without
time limitation; and
(f) any representations and warranties which serve as a basis
of the indemnity obligations of the Stockholders under Section 12.2 shall
survive the Merger Effective Date without time limitation except as otherwise
provided in this Section 12.6.
13. TERMINATION OF AGREEMENT
13.1 TERMINATION BY UNICAPITAL. UniCapital may, by notice in the manner
hereinafter provided on or before the Closing Date, terminate this Agreement (a)
if a material default shall be made by the Stockholders in the observance or due
and timely performance of any of the covenants, agreements or conditions
contained herein, and the curing of such default shall not have been made on or
before the Closing Date and shall not reasonably be expected to occur or (b) if
UniCapital in its sole judgment determines that any condition exists which has
made or could reasonably be expected to make any of the representations or
warranties contained in Article 6 hereof untrue in any material respect or (c)
if UniCapital in its sole judgment determines that information disclosed on the
schedules to the Agreement delivered pursuant to Section 8.14 has or could
reasonably be expected to have a material adverse effect on the business,
operations, assets, properties, prospects or condition (financial or otherwise)
of the Company.
13.2 TERMINATION BY THE STOCKHOLDERS. Prior to the initial filing of
the Registration Statement with the SEC, the Stockholders may, by notice in the
manner hereinafter provided on or before such initial filing, terminate this
Agreement (a) in accordance with Section 17.4(b) or (b) if a material default
shall be made by UniCapital in the observance or due and timely performance of
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any of the covenants, agreements or conditions contained herein, and the curing
of such default shall not have been made on or before such initial filing. From
and after the initial filing of the Registration Statement with the SEC, the
Stockholders shall have no right to terminate this Agreement.
13.3 AUTOMATIC TERMINATION. This Agreement shall terminate
automatically:
(a) if the Registration Statement has not been declared
effective by June 30, 1998, or, if the Registration Statement has been declared
effective, if the Closing has not occurred by July 15, 1998;
(b) if, between the Closing Date and the Merger Effective
Date, the Underwriting Agreement is terminated pursuant to the terms thereof;
(c) if the Merger Effective Date has not occurred within 10
business days after the Closing Date; or
(d) upon the date that the number of shares of UniCapital
Stock to be issued (other than as Earn-Out Consideration) to the persons who
will transfer property to UniCapital in the Unified Transaction can be
determined as a fixed number of shares, unless those same persons shall own
immediately after the Unified Transaction eighty percent (80%) or more of the
UniCapital Stock that will be issued and outstanding immediately after the
Unified Transaction.
13.4 LIQUIDATED DAMAGES. If the Merger fails to occur because of the
default of the Company or the Stockholders, then, in addition to the other
remedies available to UniCapital at law for fraud, in equity or pursuant to this
Agreement, the Stockholders shall pay to UniCapital the sum of $500,000 as
liquidated damages. It is hereby agreed that UniCapital's damages in the event
of a termination or default by the Company hereunder are uncertain and
impossible to ascertain and that the foregoing constitutes a reasonable
liquidation of such damages and is intended not as penalty but as liquidated
damages.
14. NONCOMPETITION AND NONSOLICITATION
14.1 NONCOMPETITION. (a) In order to protect the value and goodwill of
the Company and its business, each Stockholder covenants that, for the period
ending two years after the Closing Date, such Stockholder will not, directly or
indirectly, own, manage, operate, join, control, finance or participate in the
ownership, management, operation, control or financing of, or be connected as a
partner, principal, agent, representative, consultant or otherwise with, or use
or permit such Stockholder's name to be used in connection with, any business or
enterprise which is engaged directly or indirectly in competition anywhere in
the United States with the business conducted by UniCapital, the Surviving
Corporation or any of its or their respective subsidiaries or affiliates or with
any business engaged in originating, servicing or securitizing leases or other
specialty financing products or services (the "Restricted Business"). Each
Stockholder recognizes that the Restricted
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Business is expected to be conducted throughout the United States and that more
narrow geographical limitations of any nature on this non-competition covenant
(and the non-solicitation covenant set forth in subsection (b)) are therefore
not appropriate. The foregoing restriction shall not be construed to prohibit
the ownership by a Stockholder as a passive investment of not more than five
percent of any class of securities of any corporation which is engaged in any of
the foregoing businesses having a class of securities registered pursuant to
Section 12 of the Exchange Act.
(b) Each Stockholder further covenants that for the period
ending two years after the Closing Date, such Stockholder will not, either
directly or indirectly, (i) call on or solicit any customers or prospective
customers of the Restricted Business, or (ii) solicit the employment of any
person who is employed by UniCapital, the Surviving Corporation or any of its or
their respective subsidiaries or affiliates in the Restricted Business during
such period.
(c) Each Stockholder recognizes and acknowledges that by
reason of such Stockholder's relationship to the Company, such Stockholder has
had access to confidential information relating to the Restricted Business. Each
Stockholder acknowledges that such confidential information is a valuable and
unique asset and covenants that such Stockholder will not disclose any such
confidential information after the Closing Date to any person for any reason
whatsoever.
14.2 DAMAGES. Each Stockholder acknowledges and agrees that measuring
economic losses to UniCapital and the Surviving Corporation as a result of the
breach of the foregoing covenants in this Article 14 would be impossible, and
that any breach of the foregoing covenants would result in immediate and
irreparable damage to UniCapital and the Surviving Corporation for which they
would have no other adequate remedy. Accordingly, the Stockholders agree that,
in the event of a breach by them of any of the foregoing covenants, such
covenants may be enforced by UniCapital or the Surviving Corporation by, without
limitation, injunctions and restraining orders.
14.3 REASONABLE RESTRAINT. The parties agree that the foregoing
covenants in this Article 14 impose a reasonable restraint upon the Stockholders
in light of the activities and business of UniCapital on the date of the
execution of this Agreement and the current and future plans of UniCapital and
the Surviving Corporation (as successors to the businesses of the Company), and
that any violation will result in irreparable injury to UniCapital.
14.4 SEVERABILITY; REFORMATION. The covenants in this Article 14 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, if any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
14.5 INDEPENDENT COVENANT. All of the covenants in this Article 14
shall be construed as an agreement independent of any other provision of this
Agreement, and the existence of any
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claim or cause of action of any Stockholder against the Company, the Surviving
Corporation or UniCapital, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement of such covenants. The parties
specifically agree that the period of two years stated above shall be computed
by excluding from such computation any time during which any Stockholder is in
violation of any provision of this Article 14 and any time during which there is
pending in any court of competent jurisdiction any action (including any appeal
from any judgment) brought by any person, whether or not a party to this
Agreement, in which action UniCapital or the Surviving Corporation seek to
enforce the agreements and covenants of the Stockholders or in which any person
contests the validity of such agreements and covenants or their enforceability
or seeks to avoid their performance or enforcement.
14.6 MATERIALITY. The Stockholders hereby acknowledge and agree that
the covenants contained in this Article 14 are a material and substantial part
of this transaction and are entered into in connection with and as an inducement
to the acquisition by UniCapital and Newco of the businesses of the Company.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that they
have in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Company's business. The Stockholders agree that they
will not disclose any confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except to
authorized representatives of UniCapital or as may be required by law or order
of a court of competent jurisdiction unless the Stockholders can show that such
information has become known to the public generally through no fault of the
Stockholders. Prior to disclosing any confidential information required by law
or order of a court of competent jurisdiction, the Stockholders shall provide
UniCapital with prompt notice of the disclosure requirement so that UniCapital
may take whatever action it deems appropriate to prohibit such disclosure. In
the event of a breach or threatened breach by the Stockholders of the provisions
of this Section 15.1, UniCapital and the Surviving Corporation shall be entitled
to an injunction restraining Stockholders from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
UniCapital and the Surviving Corporation from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
15.2 UNICAPITAL. UniCapital and Newco recognize and acknowledge that
they have in the past, currently have, and prior to the Closing Date will have,
access to certain confidential information solely of the Company, such as lists
of customers, operational policies and pricing and cost policies that are
valuable, special and unique assets of its business. UniCapital and Newco agree
that, ("Company Information") and (i) certain confidential information
concerning the Stockholder and certain business and activities of the
Stockholder that are not a part of the transactions contemplated by this
Agreement ("Stockholder Information"). Prior to the Closing Date with respect to
Company Information and at any time with respect to Stockholder Information,
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UniCapital and Newco will not disclose any such confidential information to any
person, firm, corporation, association, or other entity for any purpose or
reason whatsoever without prior written consent of the Stockholders, except as
may be required by law or order of a court of competent jurisdiction, unless
UniCapital and Newco can show that such information has become known to the
public generally through no fault of UniCapital or Newco. Prior to disclosing
any confidential information required by law or order of a court of competent
jurisdiction, UniCapital and Newco shall provide Stockholders with prompt notice
of the disclosure requirement so that Stockholders may take whatever action they
deem appropriate to prohibit such disclosure. In the event of a breach or
threatened breach by UniCapital or Newco of the provisions of this Section 15.2,
the Stockholders shall be entitled to an injunction restraining UniCapital or
Newco from disclosing, in whole or in part, such confidential information.
Nothing contained herein shall be construed as prohibiting the Stockholders from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
15.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, UniCapital, the Surviving Corporation and the Stockholders
agree that, in the event of a breach by any of them of the foregoing covenant,
the covenant may be enforced against them by injunctions and restraining orders.
16. LOCK-UP AGREEMENTS
16.1 AGREEMENT. In connection with the IPO, for good and valuable
consideration, and to induce the underwriters that may participate in the IPO to
continue their efforts in connection with the IPO, each Stockholder hereby
agrees that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of such underwriters, it will not, during the period
commencing on the date of this Agreement and ending 180 days after the date of
the final prospectus contained in the Registration Statement relating to the IPO
(the "Prospectus"), (a) offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of UniCapital Stock or any securities
convertible into or exercisable or exchangeable for UniCapital Stock or (b)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of UniCapital Stock,
whether any such transaction described in clause (a) or (b) above is to be
settled by delivery of UniCapital Stock or such other securities, in cash or
otherwise. In addition, each Stockholder agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters that
may participate in the IPO, it will not, during the period commencing on the
date of this Agreement and ending 180 days after the date of the Prospectus,
make any demand for or exercise any right with respect to, the registration of
any shares of UniCapital Stock or any security convertible into or exercisable
or exchangeable for Common Stock.
16.2 INTENDED THIRD-PARTY BENEFICIARIES. Each Stockholder agrees that
the foregoing shall be binding upon their transferees, successors, assigns,
heirs, and personal representatives and
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shall benefit and be enforceable by the underwriters in the IPO. Each
Stockholder acknowledges and agrees that such underwriters and Morgan Stanley &
Co. Incorporated are intended third-party beneficiaries of the provisions of
this Article 16, and that Morgan Stanley & Co. Incorporated on behalf of such
underwriters shall be entitled to enforce the covenants contained in this
Article 16. In furtherance of the foregoing, UniCapital and its transfer agent
are hereby authorized to decline to make any transfer of securities if such
transfer would constitute a violation or breach of this Article 16. The
Stockholders also acknowledge and agree that none of the companies to be
acquired as part of the Unified Transaction shall have any rights as intended
third-party beneficiaries under this Agreement.
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK
17.1 INVESTMENT INTENT. The Stockholders acknowledge and agree that the
shares of UniCapital Stock to be delivered to the Stockholders pursuant to this
Agreement have not been and will not be registered under the Securities Act and
therefore may not be resold without compliance with the Securities Act. The
Stockholders represent and warrant that the shares of UniCapital Stock to be
acquired by the Stockholders pursuant to this Agreement are being acquired
solely for their own account, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution.
17.2 COMPLIANCE WITH LAW. The Stockholders covenant, warrant and
represent that none of the shares of UniCapital Stock issued to such
Stockholders will be offered, sold, assigned, pledged, hypothecated, transferred
or otherwise disposed of except after full compliance with all of the applicable
provisions of the Securities Act and the rules and regulations of the SEC
thereunder, and except after full compliance with any applicable state
securities laws.
17.3 ECONOMIC RISK; SOPHISTICATION. The Stockholders represent and
warrant that they are able to bear the economic risk of an investment in
UniCapital Stock acquired pursuant to this Agreement and can afford to sustain a
total loss of such investment. The Stockholders further represent and warrant
that they (a) fully understand the nature, scope and duration of the limitations
on transfer contained in this Agreement and (b) have such knowledge and
experience in financial and business matters that they are capable of evaluating
the merits and risks of the proposed investment and therefore have the capacity
to protect their own interests in connection with the acquisition of the
UniCapital Stock.
17.4 INFORMATION SUPPLIED. (a) The Stockholders represent and warrant
that they have had an adequate opportunity to ask questions and receive answers
from the officers of UniCapital concerning UniCapital, its business, operations,
plans and strategy, and the background and experience of its officers and
directors. The Stockholders represent and warrant that they have asked any and
all questions that they may have in the nature described in the preceding
sentence and that all such questions have been answered to their satisfaction.
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(b) Each Stockholder represents and warrants that such
Stockholder has received the draft Registration Statement, including the draft
preliminary prospectus that forms a part thereof, delivered to such Stockholder
on or about February 14, 1998 that describes, among other things, UniCapital,
the Unified Transaction, the Merger, the other acquisitions proposed to be
undertaken by UniCapital simultaneously with the Merger and the target companies
of such other acquisitions. Each Stockholder represents and warrants that such
Stockholder has reviewed such draft Registration Statement and draft preliminary
prospectus and has had adequate opportunity to ask questions of and receive
answers to such Stockholder's satisfaction from the officers of UniCapital
concerning the matters described therein.
18. SECURITIES LEGENDS
The certificates evidencing the UniCapital Stock to be received by the
Stockholders hereunder will bear a legend substantially in the form set forth
below and containing such other information as UniCapital may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES OR BLUE SKY LAWS.
SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
SECURITIES ACT AND ANY STATE SECURITIES OR BLUE SKY LAWS,
UNLESS, IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION) OF COUNSEL SATISFACTORY TO
THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
In addition, such certificates shall also bear (a) a legend reflecting the
restrictions contained in Article 16 and (b) such other legends as counsel for
UniCapital reasonably determines are required under the applicable laws of any
state.
19. GENERAL
19.1 COOPERATION. The Stockholders and UniCapital shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement. The
Stockholders will cooperate and use their best efforts to have the officers,
directors and employees of the Company prior to the Closing Date cooperate with
UniCapital on and after the Closing Date, and UniCapital will cooperate and use
its best efforts to have the officers, directors and employees of the Company
cooperate with the Stockholders on and
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after the Closing Date, in furnishing information, evidence, testimony and other
assistance in connection with any actions, proceedings, arrangements or disputes
of any nature with respect to matters pertaining to all periods prior to the
Closing Date.
19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of UniCapital, and the heirs and legal representatives of the
Stockholders.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company, UniCapital and Newco and supersedes any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the Stockholders (subject to the limitations
set forth below), the Company, UniCapital and Newco acting through their
respective officers, duly authorized by their respective Boards of Directors;
provided, that the Stockholder who owns a majority of the outstanding shares of
capital stock of the Company shall have the authority to approve and execute any
amendment to this Agreement on behalf of all of the Stockholders and without the
necessity of such majority Stockholder obtaining consent or authorization from
any other Stockholder, unless such amendment relates to any representation or
warranty made by a Stockholder other than such majority Stockholder which may
only be amended by the written agreement of such person; and provided further,
that no Stockholder shall have any power or authority to modify or amend this
Agreement in any respect from and after the initial filing of the Registration
Statement with the SEC.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
19.5 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with the transactions contemplated
hereby, and each of UniCapital and Newco, on the one hand, and the Stockholders,
on the other hand, agrees to indemnify the other against all loss, liability,
cost damages or expense arising out of or related to claims for fees or
commissions of brokers employed or alleged to have been employed by such
indemnifying party.
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19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consum mated, UniCapital will pay the fees, expenses and disbursements
of UniCapital and Newco and their respective agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto. Whether or not the transactions herein
contemplated shall be consummated, the Stockholders will pay the fees, expenses
and disbursements of the Stockholders and the Company and their respective
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments hereto and all other costs
and expenses incurred in the performance of this Agreement by the Stockholders
and the Company and in compliance with all conditions to be performed by the
Stockholders and the Company under this Agreement.
19.7 NOTICES. All notices and other communications hereunder shall be
in writing (including wire, telefax or similar writing) and shall be sent,
delivered or mailed, addressed, or telefaxed:
(a) If to UniCapital or Newco, addressed to them at:
UniCapital Corporation
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Telephone: (305) 861-0603
Telefax: (305) 866-8449
with a copy to:
David A. Gerson
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
301 Grant Street
Pittsburgh, PA 15219
Telephone: (412) 560-3330
Telefax: (412) 560-3399
(b) If to the Stockholders, addressed to them in care
of the Stockholders' Representative at:
Edgar W. Lee
Keystone Leasing
433 New Park Avenue
West Hartford, CT 06110
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Telephone: (860) 233-3663
Facsimile: (860) 232-9232
with a copy to:
Edgar W. Lee
50 Oak Bluff
Avon, CT 06001
Telephone: (860) 677-8130
Facsimile: (860) 232-9232
with a copy to:
Newton D. Brenner, Esq.
Brenner, Saltzman & Wallman LLP
271 Whitney Avenue
New Haven, CT 06511
Telephone: (203) 772-2600
Facsimile: (203) 562-2098
Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telefax, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 19.7 (or in accordance with the latest
unrevoked written direction from such party) and (ii) if given by telefax, when
such telefax is transmitted to the telefax number specified in this Section 19.7
(or in accordance with the latest unrevoked written direction from such party),
and the appropriate confirmation is received.
19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York, without giving effect to any of the
provisions thereof that would require the application of the substantive laws of
any other jurisdiction. Each party to this Agreement: (a) agrees that any legal
action or proceeding under this Agreement shall be brought in the courts of the
State of New York or in the United States District Court for the Southern
District of New York; (b) irrevocably submits to the jurisdiction of such
courts; (c) agrees not to assert any claim or defense that it is not personally
subject to the jurisdiction of such courts, that any such forum is not
convenient or the venue thereof is improper, or that this Agreement or the
subject matter hereof may not be enforced in such courts; and (d) agrees to
accept service of process on it by certified or registered mail or by any other
method authorized by law.
19.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or
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remedy, nor shall it be construed as a waiver of or acquiescence in any such
breach or default, or of any similar breach or default occurring later; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default occurring before or after that waiver.
19.10 TIME. Time is of the essence with respect to this Agreement.
19.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
19.12 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof. Section, subsection, schedule and
exhibit references are to this Agreement unless otherwise specified. Unless the
context of this Agreement clearly requires otherwise, (a) references to the
plural include the singular, the singular the plural, and the part the whole,
(b) "or" has the inclusive meaning frequently identified with the phrase
"and/or" and (c) "including" has the inclusive meaning frequently identified
with the phrase "but not limited to."Each accounting term used herein that is
not specifically defined herein shall have the meaning given to it under GAAP.
20. DEFINITIONS
20.1 "Accounts Receivable" is defined in Section 6.14.
20.2 "Acquisition Proposal" is defined in Section 8.10.
20.3 "Adjusted 1997 EBT" is defined in Section 2.5(a).
20.4 "Adjusted 1998 EBT" is defined in Section 2.5(a).
20.5 "Agent" is defined in Section 8.10.
20.6 "Agreement" is defined in the preamble to this Agreement.
20.7 "Articles of Merger" is defined in Section 1.1.
20.8 "Authorizations" are defined in Section 6.23.
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20.9 "Balance Sheet Date" is defined in Section 6.12(a).
20.10 "Basket Adjustment" is defined in Section 12.5(b).
20.11 "Basket Limitation" is defined in Section 12.5(b).
20.12 "Benefit Plan" is defined in Section 6.22.
20.13 "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq.
20.14 "Certificates" are defined in Section 2.2.
20.15 "Closing" is defined in Section 5.1(b).
20.16 "Closing Date" is defined in Section 5.2.
20.17 "Closing Date Balance Sheets" are defined in Section 3.1.
20.18 "Code" is defined in the recitals to this Agreement.
20.19 "Commonly Controlled Entity" is defined in Section 6.22.
20.20 "Company" is defined in the preamble to this Agreement.
20.21 "Company Documents" are defined in Section 6.2.
20.22 "Company EBT" is defined in Section 2.5(b).
20.23 "Company Stock" is defined in Section 2.1(a).
20.24 "Constituent Corporations" are defined in the recitals to this
Agreement.
20.25 "Contracts" are defined in Section 6.17.
20.26 "Disputed Amounts" are defined in Section 3.2.
20.27 "Earn-Out Consideration" is defined in Section 2.5(c).
20.28 "Earn-Out Escrow Cash" is defined in Section 4.1(b).
20.29 "Earn-Out Escrow Shares" are defined in Section 4.1(b).
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20.30 "EBT" is defined in Section 2.5(a).
20.31 "Effective Date Consideration" is defined in Section 2.1(a).
20.32 "Environmental Laws" mean any and all applicable treaties, laws,
regulations, ordinances, enforceable requirements, binding determinations,
orders, decrees, judgments, injunctions, permits, approvals, authorizations,
licenses or binding agreements issued, promulgated or entered into by any
Governmental Entity, relating to the environment, preservation or reclamation of
natural resources, or to the management, Release or threatened Release of or
exposure to Hazardous Substances, including CERCLA, the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.,
the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et. seq., the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq., and any similar or implementing state or local law and all amendments or
regulations promulgated thereunder.
20.33 "Environmental Liabilities" mean any and all Losses arising from
or related to any claim, proceeding, investigation, response or removal action,
remediation or other clean-up brought, prosecuted or undertaken by UniCapital,
Newco, the Surviving Corporation, any Governmental Entity or any other person or
entity on the basis of any violation of any Environmental Laws or pursuant to
any requirement imposed under any Environmental Laws (including any sampling,
testing, investigation, removal, treatment or remediation undertaken by
UniCapital, Newco or the Surviving Corporation so as to avoid any claim or
violation or to comply with any requirement and all counseling or engineering
fees and expenses related thereto), and arising from pre-Closing operations,
events, circumstances or conditions at, on, under or emanating from, or as a
result of any pre-Closing off-site disposal of Hazardous Substances from, any
property currently or formerly owned, operated or leased by the Company.
20.34 "Environmental Permits" mean all permits, licenses, approvals or
authorizations from any Governmental Entity required under Environmental Laws
for the operation of the business of the Company.
20.35 "Equipment" is defined in Section 6.35.
20.36 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
20.37 "Escrow Cash" is defined in Section 4.1(a).
20.38 "Escrow Property" is defined in Section 4.1(b).
61
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20.39 "Escrow Shares" are defined in Section 4.1(a).
20.40 "Exchange Act" is defined in Section 12.1.
20.41 "Expiration Date" is defined in Section 12.6.
20.42 "Financial Statements" are defined in Section 6.12.
20.43 "Foreign Plans" are defined in Section 6.22(i)(xiii).
20.44 "GAAP" is defined in Section 3.1.
20.45 "Governmental Entity" means any court, administrative or
regulatory agency or commission, or other governmental authority or
instrumentality, domestic, foreign or supranational.
20.46 "Hazardous Substances" mean all explosive or regulated
radioactive materials or substances, hazardous or toxic materials, wastes or
chemicals, petroleum and petroleum products (including crude oil or any fraction
thereof), asbestos or asbestos containing materials, and all other materials or
chemicals regulated pursuant to any Environmental Law, including materials
listed in 49 C.F.R. ss. 172.101 and materials defined as hazardous pursuant to
Section 101(14) of CERCLA.
20.47 "Indemnifiable Decrease" is defined in Section 12.5(a).
20.48 "Indemnified Party" is defined in Section 12.4(a).
20.49 "Indemnifying Party" is defined in Section 12.4(a).
20.50 "Indemnity Escrow Agent" is defined in Section 4.1(a).
20.51 "Independent Accounting Firm" is defined in Section 3.2.
20.52 "Intellectual Property" is defined in Section 6.28(a).
20.53 "Interim Net Worth Period" is defined in Section 12.5(a).
20.54 "IPO" is defined in the recitals to this Agreement.
20.55 "IPO Price" means the per share price that the Company Stock is
sold to the Underwriters in the IPO prior to the deduction of any discounts or
expenses.
20.56 "Lease Documents" are defined in Section 6.35.
20.57 "Leases" are defined in Section 6.35.
62
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20.58 "Liabilities" are defined in Section 6.13(a).
20.59 "Losses" are defined in Section 12.1.
20.60 "Material Adverse Amendment" is defined in Section 8.14.
20.61 "Merger" is defined in the recitals to this Agreement.
20.62 "Merger Consideration" is defined in Section 2.1(c).
20.63 "Merger Effective Date" is defined in Section 5.3.
20.64 "Net Worth Deficiency" is defined in Section 3.1.
20.65 "Newco" is defined in the preamble to this Agreement.
20.66 "1999 EBT" is defined in Section 2.5(b).
20.67 "Obligor" is defined in Section 6.35.
20.68 "Ordinary course" or "ordinary course of business" means the
conduct of business as conducted by the Company prior to the date of this
Agreement consistent in nature and, where relevant, amount with past practices.
20.69 "PCBs" are defined in Section 6.33(h).
20.70 "Pension Plan" is defined in Section 6.22.
20.71 "Permits" mean all permits, licenses, franchises, approvals and
authorizations from any Governmental Entity that are owned or held by the
Company or held by any Stockholder that relate to the operations of the Company.
20.72 "Prospectus" is defined in Section 16.1.
20.73 "Registration Statement" is defined in Section 9.4.
20.74 "Regulations" are defined in Section 6.23.
20.75 "Release" means any spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, disersal, leaching, emanation or migration of any
Hazardous Substance in, into, onto or through the environment (including ambient
air, surface water, ground water, soils, land surface, subsurface strata,
workplace or structure).
63
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20.76 "Restricted Business" is defined in Section 14.1(a).
20.77 "Scheduled Payments" are defined in Section 6.35.
20.78 "SEC" is defined in Section 9.4.
20.79 "Securities Act" is defined in Section 6.16.
20.80 "Stockholder Guarantees" is defined in Section 11.3.
20.81 "Stockholders" are defined in the preamble to this Agreement.
20.82 "Stockholders' Representative" is defined in Section 3.3.
20.83 "Subject Indebtedness" is defined in Section 11.3.
20.84 "Surviving Corporation" is defined in Section 1.2.
20.85 "Tax Returns" are defined in Section 6.27.
20.86 "Taxes" are defined in Section 6.27.
20.87 "Third-Party Claim" is defined in Section 12.4(a).
20.88 "Unaudited Financial Statements" are defined in Section 6.12(b).
20.89 "Underwriting Agreement" is defined in Section 5.1(a).
20.90 "UniCapital" is defined in the preamble to this Agreement.
20.91 "UniCapital Documents" are defined in Section 7.3.
20.92 "UniCapital Stock" is defined in Section 2.1(a).
20.93 "Unified Transactions" is defined in the recitals to this
Agreement.
20.94 "Welfare Plan" is defined in Section 6.22.
64
<PAGE> 71
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNICAPITAL CORPORATION
By: /s/ ROBERT NEW
------------------------------
Name: Robert New
Title: Chairman and Chief Executive Officer
KSTN ACQUISITION CORP.
By: /s/ ROBERT NEW
------------------------------
Name: Robert New
Title: President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
65
<PAGE> 72
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
K.L.C., INC.
By: /s/ ALAN H.KAUFMAN
----------------------------
Name: Alan H. Kaufman
Title: President
/s/ ALAN H. KAUFMAN
----------------------------------
Alan H. Kaufman
/s/ EDGAR W. LEE
----------------------------------
Edgar W. Lee
66
<PAGE> 73
ANNEXES
ANNEX I [Form of Certificate of Merger]
ANNEX II [Calculation and Composition of Consideration]
ANNEX III [Form of Indemnity Escrow Agreement]
ANNEX IV [Form of Employment Agreement]
ANNEX V [Form of Stockholder Release]
SCHEDULES
SCHEDULE 2.5 [Add-Backs]
SCHEDULE 6.1 [Jurisdictions in which Company and Subsidiaries Are Qualified
to do Business]
SCHEDULE 6.4 [Violations or Conflicts]
SCHEDULE 6.5 [Issued and Outstanding Stock of the Company and Subsidiaries]
SCHEDULE 6.6 [Transactions in Capital Stock]
SCHEDULE 6.8 [Subsidiaries]
SCHEDULE 6.9 [Predecessor Companies]
SCHEDULE 6.10 [Spin-offs of the Company]
SCHEDULE 6.11 [Third Party Options]
SCHEDULE 6.12 [Company Financial Statements]
SCHEDULE 6.13 [Liabilities and Obligations]
SCHEDULE 6.14 [Accounts and Notes Receivable Aging]
SCHEDULE 6.15 [Permits]
SCHEDULE 6.16 [Real and Personal Property]
SCHEDULE 6.17 [Contracts and Commitments]
SCHEDULE 6.20 [Insurance]
SCHEDULE 6.21 [Employee Information]
SCHEDULE 6.22 [Employee Benefit Plans]
SCHEDULE 6.23 [Authorizations]
SCHEDULE 6.24 [Transactions with Affiliates]
SCHEDULE 6.25 [Litigation]
SCHEDULE 6.27 [Taxes]
SCHEDULE 6.28 [Intellectual Property]
SCHEDULE 6.28(d) [Confidentiality and Non-Disclosure Agreements]
SCHEDULE 6.29 [Notice and Consents]
SCHEDULE 6.30 [Absence of Changes]
<PAGE> 74
SCHEDULE 6.31 [Deposit Accounts; Powers of Attorney]
SCHEDULE 6.32 [Transactions, Assets and Liabilities]
SCHEDULE 6.35 [Leases]
SCHEDULE 6.36 [Lease Funding]
SCHEDULE 7.8 [UniCapital and Newco Litigation]
SCHEDULE 7.10 [UniCapital and Newco Agreements]
SCHEDULE 9.2 [Employment Agreements]
SCHEDULE 11.3 [Personal Guarantees of the Indebtedness of the Company]
The registrant agrees to furnish a copy of each omitted schedule, exhibit or
annex to this Exhibit 2.05 to the Commission supplementally upon request
therefor.
<PAGE> 1
Exhibit 2.06
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
UNICAPITAL CORPORATION
(a Delaware corporation),
XFC ACQUISITION CORP.
(a Delaware corporation),
MATRIX FUNDING CORPORATION
(a Utah corporation),
and
RICHARD C. EMERY, J. ROBERT BONNEMORT, DAVID A. DICESARIS,
JACK S. AND JUDITH F. EMERY , TRUSTEES FOR JACK S. EMERY TRUST,
ALVIN W. AND LILA E. EMERY, TRUSTEES FOR ALVIN W. AND LILA E. EMERY
TRUST, JSE PARTNERS, LTD., A UTAH LIMITED PARTNERSHIP, LBK LIMITED
PARTNERSHIP, A UTAH LIMITED PARTNERSHIP, JOHN I. KASTELER, JR., CRAIG C.
MORTENSEN, SHANNI STAKER, AND CHRISTIAN F. EMERY,
Dated as of February 14, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
Table Of Contents
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
1. THE MERGER...............................................................................................2
1.1 DELIVERY AND FILING OF CERTIFICATE OF MERGER....................................................2
1.2 MERGER EFFECTIVE DATE...........................................................................2
1.3 ARTICLES OF INCORPORATION, BYLAWS, BOARD OF DIRECTORS AND OFFICERS OF THE
SURVIVING CORPORATION...........................................................................2
2. MERGER CONSIDERATION.....................................................................................3
2.1 CONVERSION OF CAPITAL STOCK; MERGER CONSIDERATION...............................................3
2.2 EXCHANGE PROCEDURES.............................................................................4
2.3 NO FRACTIONAL SHARES............................................................................4
2.4 ALLOCATION OF MERGER CONSIDERATION..............................................................4
2.5 EARN-OUT CONSIDERATION..........................................................................5
3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS' REPRESENTATIVE....................................................6
3.1 COMPUTATION.....................................................................................6
3.2 DISPUTES........................................................................................7
3.3 STOCKHOLDERS' REPRESENTATIVE....................................................................7
4. INDEMNITY ESCROW.........................................................................................8
4.1 CREATION OF ESCROW..............................................................................8
4.2 DURATION AND TERMS..............................................................................9
4.3 VOTING AND INVESTMENT...........................................................................9
5. CLOSING; MERGER EFFECTIVE DATE...........................................................................9
5.1 CLOSING.........................................................................................9
5.2 CLOSING DATE; LOCATION..........................................................................9
5.3 EFFECTIVENESS OF MERGER.........................................................................9
6. REPRESENTATIONS AND WARRANTIES OF MAJORITY STOCKHOLDERS.................................................10
6.1 CORPORATE EXISTENCE............................................................................10
6.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS........................................10
6.3 AUTHORITY; OWNERSHIP...........................................................................10
6.4 VALIDITY OF CONTEMPLATED TRANSACTIONS..........................................................10
6.5 CAPITAL STOCK OF THE COMPANY...................................................................11
6.6 TRANSACTIONS IN CAPITAL STOCK..................................................................11
6.7 NO BONUS SHARES................................................................................11
6.8 SUBSIDIARIES...................................................................................12
6.9 PREDECESSOR STATUS; ETC........................................................................12
</TABLE>
i
<PAGE> 3
<TABLE>
<C> <S> <C>
6.10 SPIN-OFFS BY COMPANY...........................................................................12
6.11 NO THIRD-PARTY OPTIONS.........................................................................12
6.12 FINANCIAL STATEMENTS...........................................................................12
6.13 LIABILITIES AND OBLIGATIONS....................................................................13
6.14 ACCOUNTS AND NOTES RECEIVABLE..................................................................13
6.15 PERMITS........................................................................................14
6.16 REAL AND PERSONAL PROPERTY.....................................................................14
6.17 CONTRACTS AND COMMITMENTS......................................................................15
6.18 GOVERNMENT CONTRACTS...........................................................................17
6.19 TITLE TO REAL PROPERTY.........................................................................17
6.20 INSURANCE......................................................................................17
6.21 EMPLOYEES......................................................................................17
6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS........................................................18
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS............................................................22
6.24 TRANSACTIONS WITH AFFILIATES...................................................................22
6.25 LITIGATION.....................................................................................22
6.26 RESTRICTIONS...................................................................................23
6.27 TAXES..........................................................................................23
6.28 INTELLECTUAL PROPERTY MATTERS..................................................................24
6.29 COMPLETENESS; NO VIOLATIONS....................................................................25
6.30 EXISTING CONDITION.............................................................................25
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY...........................................................27
6.32 BOOKS OF ACCOUNT...............................................................................27
6.33 ENVIRONMENTAL MATTERS..........................................................................28
6.34 NO ILLEGAL PAYMENTS............................................................................29
6.35 LEASES.........................................................................................29
6.36 LEASE FUNDING..................................................................................32
6.37 DISCLOSURE.....................................................................................32
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO.................................................................33
7.1 CORPORATE EXISTENCE............................................................................33
7.2 UNICAPITAL STOCK...............................................................................33
7.3 CORPORATE POWER AND AUTHORIZATION..............................................................33
7.4 NO CONFLICTS...................................................................................34
7.5 CAPITALIZATION OF UNICAPITAL...................................................................34
7.6 COMPLIANCE WITH LAW; AUTHORIZATIONS............................................................34
7.7 TRANSACTIONS WITH AFFILIATES...................................................................34
7.8 LITIGATION.....................................................................................35
7.9 REGISTRATION RIGHTS............................................................................35
7.10 MISCELLANEOUS..................................................................................35
8. COVENANTS OF STOCKHOLDERS AND COMPANY...................................................................35
8.1 BUSINESS IN THE ORDINARY COURSE................................................................35
</TABLE>
ii
<PAGE> 4
<TABLE>
<C> <S> <C>
8.2 EXISTING CONDITION.............................................................................35
8.3 MAINTENANCE OF PROPERTIES AND ASSETS...........................................................36
8.4 EMPLOYEES AND BUSINESS RELATIONS...............................................................36
8.5 MAINTENANCE OF INSURANCE.......................................................................36
8.6 COMPLIANCE WITH LAWS, ETC......................................................................36
8.7 CONDUCT OF BUSINESS............................................................................36
8.8 ACCESS.........................................................................................36
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS........................................................37
8.10 EXCLUSIVITY....................................................................................37
8.11 THIRD-PARTY....................................................................................38
8.12 NOTICE TO BARGAINING AGENTS....................................................................38
8.13 NOTIFICATION OF CERTAIN MATTERS................................................................38
8.14 AMENDMENT OF SCHEDULES.........................................................................39
8.15 HSR FILING.....................................................................................39
8.16 PRE-CLOSING DISPOSITIONS.......................................................................39
8.17 NON-CONTRAVENTION..............................................................................40
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS.................................40
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.....................................40
9.2 EMPLOYMENT AGREEMENTS..........................................................................40
9.3 OPINION OF COUNSEL.............................................................................40
9.4 REGISTRATION STATEMENT.........................................................................41
9.5 HSR ACT........................................................................................41
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND
NEWCO
41
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.....................................41
10.2 NO LITIGATION..................................................................................42
10.3 EXAMINATION OF FINANCIAL STATEMENTS............................................................42
10.4 NO MATERIAL ADVERSE CHANGE.....................................................................42
10.5 REGULATORY REVIEW..............................................................................42
10.6 STOCKHOLDERS' RELEASE..........................................................................42
10.7 EMPLOYMENT AGREEMENTS..........................................................................42
10.8 OPINION OF COUNSEL.............................................................................43
10.9 CONSENTS AND APPROVALS.........................................................................44
10.10 GOOD STANDING CERTIFICATES.....................................................................44
10.11 REGISTRATION STATEMENT.........................................................................44
10.12 REPAYMENT OF INDEBTEDNESS; PRE-CLOSING DISTRIBUTIONS...........................................44
10.13 HSR ACT........................................................................................45
11. COVENANTS OF UNICAPITAL.................................................................................45
</TABLE>
iii
<PAGE> 5
<TABLE>
<C> <S> <C>
11.1 LEASES.........................................................................................45
11.2 UNICAPITAL STOCK OPTIONS.......................................................................45
11.3 INFORMATION FILING.............................................................................45
11.4 HSR FILING.....................................................................................45
11.5 RELEASE FROM GUARANTEES; INDEBTEDNESS..........................................................46
12. INDEMNIFICATION; SURVIVAL...............................................................................46
12.1 GENERAL INDEMNIFICATION BY MAJORITY STOCKHOLDERS...............................................46
12.2 SPECIFIC INDEMNIFICATION BY MAJORITY STOCKHOLDERS..............................................47
12.3 INDEMNIFICATION BY UNICAPITAL AND NEWCO........................................................47
12.4 THIRD-PARTY CLAIMS.............................................................................48
12.5 LIMITATIONS ON INDEMNIFICATION.................................................................49
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.....................................................50
13. TERMINATION OF AGREEMENT................................................................................51
13.1 TERMINATION BY UNICAPITAL......................................................................51
13.2 TERMINATION BY THE STOCKHOLDERS................................................................52
13.3 AUTOMATIC TERMINATION..........................................................................52
13.4 LIQUIDATED DAMAGES.............................................................................52
14. NONCOMPETITION AND NONSOLICITATION......................................................................53
14.1 NONCOMPETITION.................................................................................53
14.2 DAMAGES........................................................................................53
14.3 REASONABLE RESTRAINT...........................................................................54
14.4 SEVERABILITY; REFORMATION......................................................................54
14.5 INDEPENDENT COVENANT...........................................................................54
14.6 MATERIALITY....................................................................................54
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................54
15.1 STOCKHOLDERS...................................................................................54
15.2 UNICAPITAL.....................................................................................55
15.3 DAMAGES........................................................................................55
16. LOCK-UP AGREEMENTS......................................................................................55
16.1 AGREEMENT......................................................................................55
16.2 INTENDED THIRD-PARTY BENEFICIARIES.............................................................56
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK........................................................................................56
17.1 INVESTMENT INTENT..............................................................................56
17.2 COMPLIANCE WITH LAW............................................................................56
17.3 ECONOMIC RISK; SOPHISTICATION..................................................................56
17.4 INFORMATION SUPPLIED...........................................................................57
</TABLE>
iv
<PAGE> 6
<TABLE>
<C> <S> <C>
18. SECURITIES LEGENDS......................................................................................57
19. GENERAL.................................................................................................58
19.1 COOPERATION....................................................................................58
19.2 SUCCESSORS AND ASSIGNS.........................................................................58
19.3 ENTIRE AGREEMENT...............................................................................58
19.4 COUNTERPARTS...................................................................................58
19.5 BROKERS AND AGENTS.............................................................................59
19.6 EXPENSES.......................................................................................59
19.7 NOTICES........................................................................................59
19.8 GOVERNING LAW..................................................................................60
19.9 EXERCISE OF RIGHTS AND REMEDIES................................................................60
19.10 TIME...........................................................................................61
19.11 REFORMATION AND SEVERABILITY...................................................................61
19.12 REMEDIES CUMULATIVE............................................................................61
19.13 CAPTIONS.......................................................................................61
20. DEFINITIONS.............................................................................................61
</TABLE>
v
<PAGE> 7
AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION (the
"Agreement") is made as of the 14th day of February, 1998, between UNICAPITAL
CORPORATION, a Delaware corporation ("UniCapital"); XFC Acquisition Corp., a
Delaware corporation ("Newco"); Matrix Funding Corporation, a Utah corporation
(the "Company"); and Richard C. Emery, J. Robert Bonnemort, David A. DiCesaris,
Jack S. and Judith F. Emery, Trustees for Jack S. Emery Trust, Alvin W. and Lila
E. Emery, Trustees for Alvin W. and Lila E. Emery Trust, LBK Limited
Partnership, a Utah limited partnership and JSE Partners Ltd., a Utah limited
partnership (collectively referred to as the "Majority Stockholders"), and John
I. Kasteler, Jr., Craig C. Mortensen, Shanni Staker, and Christian F. Emery
(collectively referred to as the "Minority Stockholders"), who, together with
the Majority Stockholders (collectively referred to as the "Stockholders"), are
all of the stockholders of the Company. Certain capitalized terms used herein
are defined in Article 20 hereof.
WHEREAS, UniCapital was incorporated on October 9, 1997 under the laws
of the State of Delaware for the purpose of acquiring a number of equipment
leasing businesses in different locations; and
WHEREAS, UniCapital intends to undertake an initial public offering of
its Common Stock (the "IPO") and in connection therewith intends to file a
Registration Statement on Form S-1 with the Securities and Exchange Commission
within 90 days of the execution and delivery of this Agreement; and
WHEREAS, Newco was duly incorporated on January 23, 1998 under the laws
of the State of Delaware solely for the purpose of completing this transaction,
and is a wholly-owned subsidiary of UniCapital; and
WHEREAS, the Company is a corporation organized and existing under the
laws of Utah; and
WHEREAS, the respective Boards of Directors of UniCapital, Newco and
the Company deem it advisable and in the best interests of such corporations and
their respective stockholders that Newco merge with and into the Company
pursuant to this Agreement and the applicable provisions of the laws of the
respective states of incorporation of Newco and the Company (such transaction
being herein called the "Merger" and the Company, Newco and UniCapital being
hereinafter collectively referred to as the "Constituent Corporations"); and
WHEREAS, the parties hereto intend that the transactions contemplated
in this Agreement constitute part of a single transaction involving the
simultaneous consummation of a number of similar agreements between UniCapital
and certain other corporations and partnerships and the IPO
1
<PAGE> 8
and that such single transaction (the "Unified Transaction") shall fall within
the provisions of Section 351 of the Internal Revenue Code of 1986, as amended
(the "Code"); and
WHEREAS, immediately prior to consummation of the Merger and as part of
an integrated plan that includes the Unified Transaction, the Company shall
redeem shares of Company Stock with a fair market value equal to the sum of
$3,000,000, plus interest actually earned on the Company's investment of
$3,000,000 during the period from January 1, 1998 through the day that is ten
days prior to the Closing Date, plus interest deemed earned on the Company's
original investment of $3,000,000 during the period from the day that is ten
days prior to the Closing Date through the Closing Date (the "Redemption
Amount"), and it is intended by the parties that this redemption (the
"Redemption") shall be part of an integrated plan that includes the Unified
Transaction and be treated as a distribution in exchange for such stock within
the provisions of Section 302 (b) of the Code;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 DELIVERY AND FILING OF CERTIFICATE OF MERGER. The Constituent
Corporations will cause Articles of Merger, in substantially the form of Annex I
attached hereto with such changes therein as may be required by applicable state
laws (the "Articles of Merger"), to be executed and delivered to the Secretary
of State of Delaware and the Division of Corporations and Commercial Code of
Utah on or before the Merger Effective Date.
1.2 MERGER EFFECTIVE DATE. The "Merger Effective Date" shall be the
date specified in Section 5.3. At the Merger Effective Date, the Articles of
Merger shall be filed in accordance with Section 1.1 either for immediate
effectiveness or to become effective if filed prior to such date. On the Merger
Effective Date upon the effectiveness of the Merger, Newco shall be merged with
and into the Company in accordance with the Articles of Merger, and the separate
existence of Newco shall cease. The Company, as the entity surviving the Merger,
is hereinafter sometimes referred to as the "Surviving Corporation." The Merger
shall have the effects specified in the laws of the state of incorporation of
the Surviving Corporation.
1.3 ARTICLES OF INCORPORATION, BYLAWS, BOARD OF DIRECTORS AND OFFICERS
OF THE SURVIVING CORPORATION. Upon the effectiveness of the Merger:
(a) the Articles of Incorporation of the Company, as amended
and restated in the Articles of Merger, shall be the Articles of Incorporation
of the Surviving Corporation until thereafter amended as provided by law;
2
<PAGE> 9
(b) the Bylaws of the Company shall be the Bylaws of the
Surviving Corporation and shall remain so until thereafter duly amended;
(c) the Surviving Corporation (and each of its Subsidiaries)
shall have a Board of Directors consisting of one member, who shall be Robert
New commencing upon the effectiveness of the Merger and who shall hold office
subject to the laws of the state of incorporation and the Articles of
Incorporation and Bylaws of the Surviving Corporation; and
(d) the officers of the Company immediately prior to the
Merger Effective Date shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, each of such officers to serve,
subject to the provisions of the Articles of Incorporation and Bylaws of the
Surviving Corporation, until such officer's successor is elected and qualified;
provided, that the Chairman of the Board (if any), the Treasurer and the
Secretary of the Company shall not succeed to the corresponding offices of the
Surviving Corporation, but instead (i) the sole director of the Surviving
Corporation shall be the Chairman of the Board of the Surviving Corporation,
(ii) the Treasurer of Newco shall be the Treasurer of the Surviving Corporation
and (iii) the Secretary of Newco shall be the Secretary of the Surviving
Corporation.
2. MERGER CONSIDERATION
2.1 CONVERSION OF CAPITAL STOCK; MERGER CONSIDERATION.
(a) Upon the effectiveness of the Merger, all of the shares
of capital stock of the Company issued and outstanding immediately prior to the
effectiveness of the Merger ("Company Stock") shall, by virtue of the Merger and
without any action on the part of the holder thereof but subject to the
effectiveness of the Merger, automatically be converted into the right to
receive, without interest,
(i) an aggregate of Nineteen Million Four
Hundred Fifteen Thousand Five Hundred Eighty Six Dollars ($19,415,586) in cash,
(ii) an aggregate of One Million Thirty-Five
Thousand Eight Hundred Eleven (1,035,811) shares of common stock, par value
$.001 per share, of UniCapital ("UniCapital Stock") (the consideration referred
to in clauses (i) and (ii), all of which is to be distributed to the
Stockholders on the Merger Effective Date in the relative amounts and
percentages as set forth on Annex II, subject to Article 4 hereof, is referred
to in this Agreement as the "Effective Date Consideration"); provided, however,
in the event that the aggregate value (based on the IPO price of the UniCapital
Stock) of the One Million Thirty-Five Thousand Eight Hundred Eleven (1,035,811)
shares of UniCapital Stock is less than Fifteen Million Five Hundred
Thirty-Seven Thousand One Hundred Sixty-Eight Dollars and Ninety Cents
($15,537,168.90), then the Company shall issue additional shares to the
Stockholders so that the aggregate value of the shares of UniCapital Stock
equals Fifteen Million Five Hundred Thirty-
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Seven Thousand One Hundred Sixty-Eight Dollars and Ninety Cents ($15,537,168.90)
with appropriate adjustment to the cash and stock components of the Effective
Date Consideration so as to eliminate fractional shares), and
(iii) the Earn-Out Consideration as described in
Section 2.5, to be distributed to the Stockholders within five business days
after the date the portion of the Earn-Out Consideration with respect to a given
calendar year (if any) is finally determined pursuant to Section 2.5 in the same
relative percentages of cash and stock as set forth on Annex II.
(b) Upon the effectiveness of the Merger, each share of
capital stock of Newco issued and outstanding immediately prior to the
effectiveness of the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, automatically be converted into one
fully paid and non-assessable share of common stock of the Surviving
Corporation, all of which converted common stock shall constitute all of the
outstanding shares of capital stock of the Surviving Corporation immediately
after the effectiveness of the Merger.
(c) The Effective Date Consideration and the Earn-Out
Consideration are referred to together in this Agreement as the "Merger
Consideration."
2.2 EXCHANGE PROCEDURES. On the Merger Effective Date, upon surrender
to UniCapital of certificates representing all of the outstanding shares of
Company Stock ("Certificates"), each Stockholder shall, subject to Article 4, be
entitled to receive, in exchange therefor, such Stockholder's relative share of
the cash portion of the Effective Date Consideration, as set forth on Annex II,
and a certificate representing that number of whole shares of UniCapital Stock
which such holder has the right to receive in respect of the Certificates
surrendered, as in accordance with the percentages set forth on Annex II, and
each Certificate so surrendered shall forthwith be canceled. On the Merger
Effective Date or as promptly thereafter as is practicable, and subject to and
in accordance with the provisions of Article 4, UniCapital shall cause to be
distributed to the Indemnity Escrow Agent (as defined in Article 4) a
certificate or certificates representing the Escrow Shares (as defined in
Article 4), which shall be registered in the name of the Indemnity Escrow Agent
as nominee for the Stockholders and shall be held in accordance with the
provisions of Article 4 and the Indemnity Escrow Agreement referred to therein.
2.3 NO FRACTIONAL SHARES. Notwithstanding any other provision of this
Article 2, no fractional shares of UniCapital Stock will be issued and any
holder of Company Stock entitled hereunder to receive a fractional share of
UniCapital Stock but for this Section 2.3 will be entitled hereunder to receive
no such fractional share but a cash payment in lieu thereof in an amount equal
to such fraction multiplied by $19.00.
2.4 ALLOCATION OF MERGER CONSIDERATION. The parties agree that they
will not take a position on any income tax return, before any governmental
agency charged with the collection
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of any income tax, or in any judicial proceeding that is in any way inconsistent
with the allocation (if any) of the Merger Consideration to the Company made by
UniCapital following the Closing.
2.5 EARN-OUT CONSIDERATION.
(a) If the consolidated earnings before taxes (the "EBT") of
the Company for the year ending December 31, 1998, increased by amounts in
respect of items of the kind set forth on Schedule 2.5 that affected net income
during such year (but only to the extent of such effect and, in the case of
amounts representing compensation and expenses for present and former employees
in excess of the amounts (if any) attributable to such employees under
post-Closing arrangements, only to the extent of any such actual pre-Closing
excess), and decreased by the amount of UniCapital corporate overhead allocated
to the Company for the period from the Closing Date through December 31, 1998
(the "Adjusted 1998 EBT"), exceeds the consolidated EBT of the Company for the
year ending December 31, 1997, inclusive of the add-backs set forth on Schedule
2.5 (the "Adjusted 1997 EBT"), then the Stockholders shall be entitled to
receive one-half of the difference between the Adjusted 1998 EBT and the
Adjusted 1997 EBT.
(b) If the consolidated EBT of the Company for the year
ending December 31, 1999, increased by amounts in respect of items of the kind
set forth on Schedule 2.5 that affected net income during such year and
decreased by the amount of UniCapital corporate overhead allocated to the
Company for such year (the " Adjusted 1999 EBT", and together with the Adjusted
1997 EBT and the Adjusted 1998 EBT, the "Company EBT"), exceeds the greater of
the Adjusted 1998 EBT and the Adjusted 1997 EBT, then the Stockholders shall be
entitled to receive one-half of the difference between (i) the Adjusted 1999 EBT
and (ii) the greater of the Adjusted 1998 EBT and the Adjusted 1997 EBT.
(c) The EBT of the Company for the years ending December 31,
1998 and December 31, 1999 shall be computed using generally accepted accounting
principles and practices as applied in the audited financial statements of the
Company included in the Registration Statement. The allocation of UniCapital
overhead shall be made on a pro rata basis applied consistently among UniCapital
subsidiaries. To the extent gain-on-sale treatment was accorded any Lease,
whether in the add-backs set forth on Schedule 2.5 or in any year, income from
the payment stream on such Lease shall not be included in the EBT of the Company
for any subsequent year.
(d) The amounts (if any) that the Stockholders become
entitled to receive pursuant to Sections 2.5(a) and/or 2.5(b) are referred to
herein as the "Earn-Out Consideration." The Earn-Out Consideration shall be paid
one-half in cash and one-half in shares of UniCapital Stock, valued at the
average of the closing prices per share of UniCapital Stock for the 20 trading
days preceding December 31 of the year to which the portion of Earn-Out
Consideration in question applies.
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(e) The EBT of the Company for any year shall be determined
within forty-five days following December 31 of such year.
(f) Notwithstanding anything in this Section 2.5 to the
contrary, if the Stockholders dispute the determination of Company EBT, then the
Stockholders' Representative shall notify UniCapital in writing of such dispute
and specify the amount thereof within 20 business days after notification of the
determination of Company EBT. If UniCapital and the Stockholders' Representative
cannot resolve any such dispute which would affect the Earn-Out Consideration,
then such dispute shall be resolved by an Independent Accounting Firm (as
defined in Section 3.2). The Independent Accounting Firm shall be directed to
consider only those agreements, contracts, commitments or other documents (or
summaries thereof) that were either (i) delivered or made available to Price
Waterhouse LLP in connection with the transactions contemplated hereby, or (ii)
reviewed by Price Waterhouse LLP during the course of determining Company EBT.
The determination of the Independent Accounting Firm shall be made as promptly
as practicable and shall be final and binding upon the parties, absent manifest
error which error may only be corrected by such Independent Accounting Firm. The
costs of the Independent Accounting Firm shall be borne by the party (either
UniCapital or the Stockholders as a group) whose determination of Company EBT
was further from the determination of the Independent Accounting Firm. Pending
resolution of any such dispute by the Independent Accounting Firm, only the
amount of the Earn-Out Consideration as determined by Price Waterhouse LLP shall
be paid by UniCapital. Once Company EBT is finally determined, the Earn-Out
Consideration attendant thereto not previously paid, if any, shall be paid in
accordance with this Section 2.5; provided that in the event the Stockholders'
determination of EBT was closer to the determination of the Independent
Accounting Firm than UniCapital's determination of EBT, the Stockholders shall
receive such Earn-Out Consideration plus interest which shall accrue at the rate
of 10% on any such Earn-Out Consideration that is resolved in the Stockholders
favor from the date the Earn-Out Consideration was first payable and the date on
which the Earn-Out Consideration is received by the Stockholders.
(g) Any Earn-Out Consideration paid by UniCapital shall be
treated as additional consideration paid by UniCapital for the shares of Company
Stock.
3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS' REPRESENTATIVE
3.1 COMPUTATION. As soon as practicable, but in any event within 30
days after the Closing, UniCapital shall engage Price Waterhouse LLP to prepare,
in accordance with generally accepted accounting principles ("GAAP") and
consistent with previous practice, a consolidated balance sheet of the Company
(the "Closing Date Balance Sheet") as of the end of business on the day prior to
the Closing Date (as defined in Section 5). If the aggregate stockholders'
equity of the Company as shown on the Closing Date Balance Sheet is less than
the aggregate stockholders' equity as shown on the unaudited consolidated
balance sheet of the Company as at December 31, 1997 by more than the sum of the
Redemption Amount and the Deferred Compensation Discretionary Amount (as defined
in Section 8.16(b)), then, subject to Section 3.2,
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commencing 20 business days after delivery of the Closing Date Balance Sheet to
UniCapital, the aggregate Merger Consideration shall be adjusted downward
dollar-for-dollar by the amount such deficiency exceeds the sum of the
Redemption Amount and the Deferred Compensation Discretionary Amount (the "Net
Worth Deficiency"). Upon adjustment, if any, of the Merger Consideration in
accordance with the foregoing, UniCapital shall be entitled to recover from the
Escrow Property pursuant to Article 4 that portion of the Net Worth Deficiency
which does not exceed one-half of the initial balance of the Escrow Property.
For any amount by which any Net Worth Deficiency exceeds one-half of the initial
balance of the Escrow Property, such portion of the Net Worth Deficiency shall
be paid by the Stockholders not later than the 25th business day after the
delivery of the Closing Date Balance Sheet (or if applicable, not later than the
5th business day after the final determination of any Disputed Amount in
accordance with Section 3.2). At its sole and exclusive option, and at any time
after such 25th business day (or if applicable, after such fifth business day),
UniCapital shall be entitled to recover from the Escrow Property pursuant to
Article 4 all or any portion of the amount of the Net Worth Deficiency not paid
by the Stockholders as required by this Article 3.
3.2 DISPUTES. Notwithstanding anything in this Article 3 to the
contrary, if there is any Net Worth Deficiency and the Stockholders dispute any
item contained on the Closing Date Balance Sheet, then the Stockholders'
Representative shall notify UniCapital in writing of each disputed item
(collectively, the "Disputed Amounts") and specify the amount thereof in dispute
within 20 business days after the delivery of the Closing Date Balance Sheet to
the Stockholders. If UniCapital and the Stockholders' Representative cannot
resolve any such dispute relating to the amount of the Net Worth Deficiency,
then such dispute shall be resolved by an independent nationally recognized
accounting firm which is reasonably acceptable to UniCapital and the
Stockholders' Representative (the "Independent Accounting Firm"). The
determination of the Independent Accounting Firm shall be made as promptly as
practical and shall be final and binding on the parties, absent manifest error
which error may only be corrected by such Independent Accounting Firm. Any
expenses relating to the engagement of the Independent Accounting Firm shall be
allocated between UniCapital and the Stockholders so that the Stockholders'
aggregate share of such costs shall bear the same proportion to the total costs
that the Disputed Amounts unsuccessfully contested by the Stockholders'
Representative (as finally determined by the Independent Accounting Firm) bear
to the total of the Disputed Amounts so submitted to the Independent Accounting
Firm. Pending resolution of any such dispute by the Independent Accounting Firm,
no such Disputed Amount shall be due to UniCapital. Once any such Disputed
Amount is finally determined to be due to UniCapital, UniCapital may proceed to
recover such amount in the manner set forth in Section 3.1.
3.3 STOCKHOLDERS' REPRESENTATIVE. (a) Each Stockholder, by signing this
Agreement, designates Richard C. Emery (or, in the event that Richard C. Emery
is unable or unwilling to serve or resigns, Jack S. Emery) to be such
Stockholder's representative for purposes of this Agreement (the "Stockholders'
Representative"). The Stockholders shall be bound by any and all actions taken
by the Stockholders' Representative on their behalf.
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(b) UniCapital and Newco shall be entitled to rely upon any
communication or writing given or executed by the Stockholders' Representative.
All communications or writings to be sent to Stockholders pursuant to this
Agreement may be addressed to the Stockholders' Representative and any
communication or writing so sent shall be deemed notice to all of the
Stockholders hereunder. The Stockholders hereby consent and agree that the
Stockholders' Representative is authorized to accept deliveries, including any
notice, on behalf of the Stockholders pursuant hereto.
(c) The Stockholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Stockholder, with full
power in his or her name and on his or her behalf to act according to the terms
of this Agreement in the absolute discretion of the Stockholders'
Representative, and in general to do all things and to perform all acts
including, without limitation, executing and delivering all agreements,
certificates, receipts, instructions and other instruments contemplated by or
deemed advisable in connection with Article 12 of this Agreement. This power of
attorney and all authority hereby conferred is granted subject to and coupled
with the interest of such Stockholder and the other Stockholders hereunder and
in consideration of the mutual covenants and agreements made herein, and shall
be irrevocable and shall not be terminated by any act of any Stockholder, by
operation of law, whether by such Stockholder's death or any other event.
(d) Notwithstanding the foregoing, the Stockholders'
Representative shall inform each Stockholder of all notices received, and of all
actions, decisions, notices and exercises of any rights, power or authority
proposed to be done, given or taken by such Stockholders' Representative, and,
except as provided in Section 19.3, shall act as directed by the Stockholders
holding a majority interest in the Escrow Property (as defined in Section
4.1(b)).
4. INDEMNITY ESCROW
4.1 CREATION OF ESCROW.
(a) At the Closing, as collateral security for the payment of
any indemnification obligations of the Majority Stockholders pursuant to
Sections 12.1 and 12.2 hereof and for the payment of amounts due pursuant to
Article 3 hereof, the following shall be delivered to UniCapital's Transfer
Agent as indemnity escrow agent (the "Indemnity Escrow Agent"):
(i) ten percent (10%) of the aggregate stock portion
of the Effective Date Consideration, all of which shall be contributed by the
Majority Stockholders, from each Majority Stockholder in the same proportion as
the stock portion of the Effective Date Consideration to be received by such
Majority Stockholder bears to the total stock portion of the Effective Date
Consideration that is to be received by all Majority Stockholders in accordance
with Annex II, rounded up to the nearest whole share (the "Escrow Shares"); and
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(ii) ten percent (10%) of the aggregate cash portion
of the Effective Date Consideration, all of which shall be contributed by the
Majority Stockholders, from each Majority Stockholder in the same proportion as
the cash portion of the Effective Date Consideration to be received by such
Majority Stockholder bears to the total cash portion of the Effective Date
Consideration that is to be received by all Majority Stockholders in accordance
with Annex II, rounded up to the nearest whole cent (the "Escrow Cash").
(b) The Escrow Shares and the Escrow Cash are referred to
together as the "Escrow Property." In addition, the Escrow Property shall
include all interest, cash and non-cash dividends and other property at any time
received or otherwise distributed on, in respect of or in exchange for any or
all of the Escrow Property, all securities hereafter issued in substitution for
any of the foregoing, all certificates and instruments representing or
evidencing such securities, all cash and non-cash proceeds of all of the
foregoing property except as provided in Section 4.3 and all rights, titles,
interests, privileges and preferences appertaining or incident to the foregoing
property.
4.2 DURATION AND TERMS. The Escrow Property shall be held and disbursed
by the Indemnity Escrow Agent in accordance with the terms of an Indemnity
Escrow Agreement substantially in the form attached hereto as Annex III. The
Indemnity Escrow Agent shall hold the Escrow Property pursuant to the Indemnity
Escrow Agreement until the later of: (a) the first anniversary of the Merger
Effective Date; or (b) the resolution of any claim for indemnification or
payment that is pending on the first anniversary of the Merger Effective Date,
but only to the extent of the amount of such pending claim.
4.3 VOTING AND INVESTMENT. The Stockholders shall be entitled to
exercise all voting powers incident to the Escrow Shares held by the Indemnity
Escrow Agent as their nominee, but shall not be entitled to exercise any
investment or dispositive powers over such Escrow Shares. The Escrow Cash shall
be invested from time to time by the Indemnity Escrow Agent as provided in the
Indemnity Escrow Agreement.
5. CLOSING; MERGER EFFECTIVE DATE
5.1 CLOSING. Within two business days following the date on which the
underwriting agreement relating to the offer and sale of shares of UniCapital
Stock in the IPO (the "Underwriting Agreement") shall have been executed, the
parties shall take all actions necessary to effect the Merger (other than the
filing with the appropriate state authorities of the Articles of Merger, which
shall be filed and become effective on the Merger Effective Date) and to effect
the conversion and delivery of shares referred to in Article 2 hereof
(hereinafter referred to as the "Closing"); provided, that such actions shall
not include the actual completion of the Merger, the Redemption or the actual
conversion and delivery of the shares referred to in Article 2 hereof, which
actions shall only be taken on the Merger Effective Date as herein provided.
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5.2 CLOSING DATE; LOCATION. The Closing shall take place at the offices
of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178. The date on
which the Closing shall occur shall be referred to as the "Closing Date."
5.3 EFFECTIVENESS OF MERGER. Concurrently with the consummation of the
sale of the shares of UniCapital Stock pursuant to the Underwriting Agreement,
the Merger shall become effective and all transactions contemplated by this
Agreement, including the conversion and delivery of shares and the delivery of a
check or checks in an amount equal to the cash which the Stockholders shall be
entitled to receive pursuant to the Merger referred to in Article 2 hereof,
shall occur and be deemed to be completed. The date on which the Merger is
effected shall be referred to as the "Merger Effective Date."
6. REPRESENTATIONS AND WARRANTIES OF MAJORITY STOCKHOLDERS
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, each Majority Stockholder jointly and severally represents and
warrants to UniCapital and Newco, as follows:
6.1 CORPORATE EXISTENCE. Each of the Company and the subsidiaries of
the Company listed on Schedule 6.8 (each, a "Subsidiary"), is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Except as set forth on Schedule 6.1(a), each
of the Company and its Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the conduct of
its business requires it to be so qualified. All of the jurisdictions in which
the Company and its Subsidiaries are duly qualified to do business are listed on
Schedule 6.1(b).
6.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
Company has the corporate power, authority and legal right to execute, deliver
and perform this Agreement. The execution, delivery and performance of this
Agreement by the Company have been duly authorized by the Board of Directors and
the Stockholders and no further corporate action on the part of the Company or
the Stockholders is necessary to authorize this Agreement and the performance of
the transactions contemplated hereby. This Agreement has been, and the other
agreements, documents and instruments required to be delivered by the Company in
accordance with the provisions hereof (the "Company Documents") will be, duly
executed and delivered on behalf of the Company by duly authorized officers of
the Company, and this Agreement constitutes, and the Company Documents when
executed and delivered will constitute, the legal, valid and binding obligations
of the Company, enforceable against it in accordance with their respective
terms.
6.3 AUTHORITY; OWNERSHIP. Each Stockholder has the full legal right,
power and capacity or authority to enter into this Agreement. Upon the date of
this Agreement and immediately prior to the Closing Date, each Stockholder owns
and will own beneficially and of
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record all of the shares of capital stock of the Company identified on Annex II
as being owned by such Stockholder. As a result of the consummation of the
Merger, UniCapital will acquire valid title in all issued and outstanding shares
of Company Stock, free and clear of all liens, security interests, pledges,
charges, voting trusts, equities, restrictions, encumbrances and claims of every
kind.
6.4 VALIDITY OF CONTEMPLATED TRANSACTIONS. The execution, delivery and
performance of this Agreement by the Company and each Stockholder does not and
will not violate, conflict with or result in the breach of any term, condition
or provision of, or require the consent of any other person under (a) any
existing law, ordinance, or governmental rule or regulation to which the
Company, any Subsidiary or any Stockholder is subject, (b) any judgment, order,
writ, injunction, decree or award of any Governmental Entity which is applicable
to the Company, any Subsidiary or any Stockholder, (c) the charter documents of
the Company or any Subsidiary or any securities issued by the Company or any
Subsidiary, or (d) any mortgage, indenture, agreement, contract, commitment,
lease, plan, Authorization, or other instrument, document or understanding, oral
or written, to which the Company, any Subsidiary or any Stockholder is a party,
by which the Company, any Subsidiary or Stockholder may have rights or by which
any of the properties or assets of the Company or any Subsidiary may be bound or
affected, or give any party with rights thereunder the right to terminate,
modify, accelerate or otherwise change the existing rights or obligations of the
Company or any Subsidiary thereunder. Except for filing the Articles of Merger
and filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and
except as aforesaid, no authorization, approval or consent of, and no
registration or filing with, any Governmental Entity is required in connection
with the execution, delivery or performance of this Agreement by the Company or
any Stockholder.
6.5 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of the shares shown on Schedule 6.5, of which only the
shares shown on such Schedule 6.5 to be issued and outstanding are issued and
outstanding. All of the issued and outstanding shares of the capital stock of
the Company are owned by the Stockholders as set forth on Annex II, and are free
and clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. Schedule 6.5 attached
hereto sets forth the number and class of the authorized capital stock of each
Subsidiary and the number of shares of each Subsidiary which are issued and
outstanding, which are the only shares issued and outstanding, all of which
shares are owned by the Company indicated as owning such shares on Schedule 6.5,
free and clear of all liens, security interests, pledges, charges, voting
trusts, equities, restrictions, encumbrances and claims of every kind. All of
the issued and outstanding shares of Company Stock to be outstanding on the
Merger Effective Date will have been duly authorized and validly issued, fully
paid and nonassessable, will be owned of record and beneficially by the
Stockholders and in the amounts set forth in Annex II, and will have been
offered, issued, sold and delivered by the Company in compliance with all
applicable state and federal laws concerning the offering, sale or issuance of
securities. None of such shares will
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have been, and none of the shares from which they will have derived were, issued
in violation of the preemptive rights of any past or present stockholder,
whether contractual or statutory.
6.6 TRANSACTIONS IN CAPITAL STOCK. Neither the Company nor any
Subsidiary has acquired any treasury stock since December 31, 1995. No option,
warrant, call, conversion right or commitment of any kind exists which obligates
the Company or any Subsidiary to issue any of its authorized but unissued
capital stock. Except for (i) the Redemption and (ii) payment of the monthly
dividend on the Company's preferred stock consistent with past practice, neither
the Company nor any Subsidiary has an obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof.
6.7 NO BONUS SHARES. None of the shares of capital stock of the Company
or any Subsidiary was, and none of the shares of Company Stock will be, issued
pursuant to awards, grants or bonuses, whether of stock or of options or other
rights.
6.8 SUBSIDIARIES. Schedule 6.8 lists the name of each Subsidiary.
Except as set forth on Schedule 6.8, neither the Company nor any Subsidiary
currently owns, of record or beneficially, or controls, directly or indirectly,
any capital stock, any securities convertible into capital stock or any other
equity interest in any corporation, association or other business entity. Except
as set forth on Schedule 6.8, neither the Company nor any Subsidiary is,
directly or indirectly, a participant in any joint venture, partnership or other
noncorporate entity.
6.9 PREDECESSOR STATUS; ETC. Schedule 6.9 lists all names of all
predecessor companies of the Company and each Subsidiary, including the names of
all entities from whom the Company and each Subsidiary previously acquired
assets representing all or substantially all of the assets of that entity.
Except as set forth on Schedule 6.9, neither the Company nor any Subsidiary has
been a subsidiary or division of another corporation or been a part of an
acquisi tion which was later rescinded.
6.10 SPIN-OFFS BY COMPANY. Since December 31, 1995, there has not been
any sale or spin-off of significant assets of the Company or any Subsidiary
other than in the ordinary course of business.
6.11 NO THIRD-PARTY OPTIONS. There are no existing agreements, options,
commitments or rights with, of or to any person to acquire any properties,
assets or rights of the Company, any Subsidiary or any interest therein, except
for the rights of lessees to purchase Equipment under Lease Documents.
6.12 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.12 are copies
of the following financial statements of the Company:
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(a) the consolidated balance sheets of the Company at June 30,
1997 (the "Audited Balance Sheet Date") and June 30, 1996, and the related
statements of income, cash flows and changes in stockholders' equity for the
fiscal years then ended, certified by Tanner and Co., the Company's independent
public accountants, together with the report of such independent public
accountants thereon (the "Audited Financial Statements"); and
(b) the unaudited consolidated balance sheets of the Company
at December 31, 1997 (the "Interim Balance Sheet Date") and December 31, 1996,
and the related statements of income and cash flows for the interim periods then
ended (the "Unaudited Financial Statements," and together with the Audited
Financial Statements, the "Financial Statements").
All of the Financial Statements have been prepared in accordance with GAAP
consistently applied throughout the periods involved. The Audited Financial
Statements, including the related notes, fairly present the financial position,
assets and liabilities (whether accrued, absolute, contingent or otherwise) of
the Company at the dates indicated and such statements of income, cash flows and
changes in stockholders' equity fairly present the results of operations, cash
flows and changes in stockholders' equity of the Company for the periods
indicated. The Unaudited Financial Statements fairly present the financial
position of the Company at the dates indicated, and such statements of income,
cash flows and changes in stockholders' equity fairly present the results of
operations, cash flows and changes in stockholders' equity for the periods
indicated, except for normal recurring year-end adjustments which are not
expected to be material in amount and except for the addition of required
footnotes thereto.
6.13 LIABILITIES AND OBLIGATIONS.
(a) Attached hereto as Schedule 6.13 is an accurate list, as
of January 31, 1998, of: (i) all liabilities of the Company and each of its
Subsidiaries which are reflected on the unaudited consolidated balance sheet as
of the Interim Balance Sheet Date included in the Unaudited Financial
Statements; (ii) all liabilities incurred thereafter other than in the ordinary
course of business; (iii) all material liabilities incurred thereafter in the
ordinary course of business; and (iv) all liabilities (A) incurred as of the
Interim Balance Sheet Date that are not reflected on the unaudited consolidated
balance sheet as of the Interim Balance Sheet Date and (B) all liabilities
incurred thereafter that would not have been so reflected had such liabilities
been incurred as of the Interim Balance Sheet Date. Each of the foregoing
liabilities that has not heretofore been paid or discharged is so noted on
Schedule 6.13. For purposes of this Agreement, "liabilities" means liabilities
of any kind, character or description, whether accrued, absolute, secured or
unsecured, contingent or otherwise.
(b) For each such liability for which the amount is not fixed
or is contested, Schedule 6.13 shall include a summary description of the
liability, together with copies of all relevant non-privileged documentation
relating thereto, detail of all amounts claimed and any other action or relief
sought, the names of the claimant and all other parties to the claim, suit or
proceeding, the name of each court or agency before which such claim, suit or
proceeding is
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pending, the date such claim, suit or proceeding was instituted, and a best
estimate of the maximum amount, if any, which is likely to become payable with
respect to each such liability. If no estimate is provided, the best estimate
shall for purposes of this Agreement be deemed to be zero. On the Closing Date,
the Company shall deliver, and shall cause its accountants, outside counsel and
other representatives or agents to deliver, copies of all privileged documents
related to liabilities as listed on Schedule 6.13.
(c) All of the liabilities reflected on the unaudited
consolidated balance sheet included in the Interim Financial Statements arose
only out of or were incurred only in connection with the conduct of the business
of the Company and its Subsidiaries. Except as set forth on Schedule 6.13 and
except for liabilities not required to be set forth thereon pursuant to Section
6.13(a), neither the Company nor any Subsidiary has any liabilities or
obligations with respect to its business, whether direct or indirect, matured or
unmatured, absolute contingent or otherwise, and there is no condition,
situation or set of circumstances which would reasonably be expected to result
in any such liability.
6.14 ACCOUNTS AND NOTES RECEIVABLE. Attached hereto as Schedule 6.14 is
a complete and accurate list, as of January 31, 1998, of the accounts and notes
receivable of the Company and each Subsidiary (including, without limitation,
receivables from and advances to employees and Stockholders) other than those
arising out of Leases (collectively, the "Accounts Receivable"). Schedule 6.14
includes an aging of all Accounts Receivable showing amounts due in 30-day aging
categories. On the Closing Date, the Majority Stockholders will deliver to
UniCapital a complete and accurate list, as of a date not more than two days
prior to the Closing Date, of the Accounts Receivable. All Accounts Receivable
represent valid obligations arising from bona fide business transactions in the
ordinary course of business consistent with past practice. The Accounts
Receivable are, and as of the Closing Date and the Merger Effective Date will
be, collectible net of any respective reserves shown on the Company's and the
Subsidiaries' books and records (which reserves are adequate and calculated
consistent with past practice). Subject in the case of Accounts Receivable
reflected on the Company's or its Subsidiaries' balance sheet to such reserves
reflected on such balance sheet, each of the Accounts Receivable will be
collected in full within ninety (90) days after the day on which it first became
due and payable. There is no contest, claim, counterclaim, defense or right of
set-off, other than rebates and returns in the ordinary course of business,
under any contract with any obligor of any Account Receivable relating to the
amount or validity of such Account Receivable. The allowance for collection
losses on the Interim Balance Sheet has been determined in accordance with GAAP
consistent with past practice.
6.15 PERMITS. Each material Permit, together with the name of the
Governmental Entity issuing such Permit is set forth on Schedule 6.15. Such
Permits are valid and in full force and effect and none of such Permits will be
terminated or impaired or become terminable as a result of the transactions
contemplated by this Agreement. Upon consummation of such transactions, the
Surviving Corporation will have all of the Company's right, title and interest
in the Permits.
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6.16 REAL AND PERSONAL PROPERTY. Attached hereto as Schedule 6.16 is an
accurate list, including substantially complete descriptions as of the Interim
Balance Sheet Date, of all the real and personal property (which in the case of
personal property had an original cost in excess of $25,000) owned or leased by
the Company (including its Subsidiaries) where the Company or any of its
Subsidiaries is a lessee or sublessee, including true and correct copies of
leases for equipment and properties on which are situated buildings, warehouses
and other structures used in the operation of the business of the Company
(including its Subsidiaries) and including an indication as to which assets were
formerly owned by any Stockholder or affiliate (which term, as used herein,
shall have the meaning ascribed thereto in Rule 144(a)(1) promulgated under the
Securities Act of 1933, as amended (the "Securities Act")) of the Company and
its Subsidiaries. Except as set forth on Schedule 6.16, all of the buildings,
leasehold improvements, structures, facilities, equipment and other material
items of tangible property and assets owned or leased by the Company and its
Subsidiaries are in good operating condition and repair, subject to normal wear
and maintenance, are usable in the regular and ordinary course of business and
conform to all applicable laws, ordinances, codes, rules and regulations, and
Authorizations relating to their construction, use and operation. All leases set
forth on Schedule 6.16 have been duly authorized, executed and delivered and
constitute the legal, valid and binding obligations of the Company (or its
Subsidiaries) and, to the knowledge of the Majority Stockholders, no other party
to any such lease is in default thereunder and such leases constitute the legal,
valid and binding obligations of such other parties. All fixed assets used by
the Company (including its Subsidiaries) in the operation of its business are
either owned by the Company (or its Subsidiaries) or leased under an agreement
set forth on Schedule 6.16. The Company and the Majority Stockholders have
heretofore delivered to UniCapital copies of all title reports and title
insurance policies received or held by the Company (including its Subsidiaries).
The Company and the Majority Stockholders have indicated on Schedule 6.16 a
summary description of all plans or projects involving the opening of new
operations, expansion of any existing operations or the acquisition of any real
property or existing business to which management of the Company (or its
Subsidiaries) has devoted any significant effort or expenditure in the two-year
period prior to the date of this Agreement which, if pursued by the Company (or
its Subsidiaries) would require additional expenditures of significant efforts
or capital.
6.17 CONTRACTS AND COMMITMENTS. Schedule 6.17 sets forth an accurate,
correct and complete list of all agreements, contracts, commitments,
arrangements and understandings, written or oral, including all amendments and
supplements thereto, of the Company and its Subsidiaries other than Leases and
other Lease Documents (the "Contracts"), to which the Company or any Subsidiary
is a party or is bound, or by which any of their respective assets are bound,
and which involve any:
(a) agreement, contract, commitment, arrangement or
understanding with any present or former employee or consultant or for the
employment of any person, including any consultant;
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(b) agreement, contract, commitment, arrangement or
understanding for the future purchase of, or payment for, supplies or products,
or for the performance of services by a third party involving in any one case
$25,000 or more;
(c) agreement, contract, commitment, arrangement or
understanding to sell or supply products or to perform services involving in any
one case $25,000 or more;
(d) agreement, contract, commitment, arrangement or
understanding containing minimum requirements or "take or pay" provisions;
(e) agreement, contract, commitment, arrangement or
understanding not otherwise listed on Schedule 6.17 and continuing over a period
of more than six months from the date hereof or exceeding $25,000 in value;
(f) distribution, dealer, representative or sales agency
agreement, contract, commitment, arrangement or understanding;
(g) agreement, contract, commitment, arrangement or
understanding containing a provision to indemnify any person or entity or assume
any tax, environmental or other liability;
(h) agreement, contract, commitment, arrangement or
understanding with federal, state, local, regulatory or other governmental
entities;
(i) note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement or other contract or commitment for the
borrowing or lending of money or agreement or arrangement for a line of credit
or guarantee, pledge or undertaking of the indebtedness of any other person;
(j) agreement, contract, commitment, arrangement or
understanding for any charitable or political contribution;
(k) agreement, contract, commitment, arrangement or
understanding for any capital expenditure or leasehold improvement in excess of
$25,000;
(l) agreement, contract, commitment, arrangement or
understanding limiting or restraining the Company, any Subsidiary or any
successor thereto, or to the knowledge of the Company and each Majority
Stockholder, any employee of the Company or any Subsidiary or any successor
thereto, from engaging or competing in any manner or in any business;
(m) license, franchise, distributorship or other agreement
which relates in whole or in part to any software, patent, trademark, trade
name, service mark or copyright or to any ideas, technical assistance or other
know-how of or used by the Company or any Subsidiary;
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(n) agreement, contract, commitment, arrangement or
understanding to which the Company or any Subsidiary, on the one hand, and any
affiliate, officer, director or stockholder of the Company or any Subsidiary, on
the other hand, are parties; or
(o) material agreement, contract, commitment, arrangement or
understanding not made in the ordinary course of business.
Each of the Contracts listed on Schedule 6.17, or not required to be listed
therein because of the amount thereof, is valid and enforceable in accordance
with its terms; the Company and each Subsidiary is, and to the knowledge of each
Company and each Majority Stockholder, all other parties thereto are, in
compliance with the provisions thereof. Neither the Company nor any Subsidiary,
and to the knowledge of the Company and each Majority Stockholder, no other
party thereto is, in default in the performance, observance or fulfillment of
any material obligation, covenant or condition contained therein; and no event
has occurred which with or without the giving of notice or lapse of time, or
both, would constitute a default thereunder. None of the rights of the Company
or any Subsidiary under any Contract will be impaired by the consummation of the
transactions contemplated hereby, and all such rights will be enforceable by the
applicable Surviving Corporation after the Merger Effective Date without the
consent or agreement of any other party. The Company has delivered accurate and
complete copies of each Contract to UniCapital. No Contract obligates any party
to obtain any consent in connection with the transactions contemplated hereby.
6.18 GOVERNMENT CONTRACTS. Neither the Company nor any Subsidiary is
now or has ever been a party to any contract with any Governmental Entity
subject to price redetermination or renegotiation.
6.19 TITLE TO REAL PROPERTY. The Company and each Subsidiary has good
and insurable title to all real property owned and used in its business, subject
to no mortgage, pledge, lien, conditional sales agreement, encumbrance or
charge, except for:
(a) liens, if any, reflected on Schedules 6.13 and 6.16 as
securing specified liabilities (with respect to which no material default
exists);
(b) liens for current taxes and assessments not yet due or in
default;
(c) easements for utilities serving the property only; and
(d) easements, covenants and restrictions and other exceptions
to title shown of record in the offices of the county clerks in which the
properties, assets and leasehold estates are located which, in UniCapital's sole
judgment, do not adversely affect UniCapital's intended use of such properties.
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6.20 INSURANCE. The assets, properties and operations of the Company
and each Subsidiary are insured under various policies of general liability and
other forms of insurance, all of which are described on Schedule 6.20, which
discloses for each policy the risks insured against, coverage limits, deductible
amounts, all outstanding claims thereunder, and whether the terms of such policy
provide for retrospective premium adjustments. All such policies are in full
force and effect in accordance with their terms, no notice of cancellation has
been received, and there is no existing default or event which, with the giving
of notice or lapse of time or both, would constitute a default thereunder. Such
policies are in amounts which, in relation to the business and assets of the
Company and the Subsidiaries, are consistent with the normal or customary
industry practice and all premiums due to date have been paid in full. Neither
the Company nor any Subsidiary has been refused any insurance, nor has the
Company's or any Subsidiary's coverage been limited, by any insurance carrier to
which it has applied for insurance or with which it has carried insurance during
the past five years. Schedule 6.20 also contains a true and complete description
of all outstanding bonds and other surety arrangements issued or entered into in
connection with the business, assets and liabilities of the Company and its
Subsidiaries.
6.21 EMPLOYEES. Schedule 6.21 contains the following with respect to
the Company and each Subsidiary:
(a) a list of all employees of the Company and its
Subsidiaries (including name, title and position);
(b) each such employee's length of service; and
(c) the compensation (including terms of payment, bonuses,
commissions and deferred compensation, as well as any benefits) of each such
employee.
Except as disclosed on Schedule 6.21: (i) there have not been in the past five
years and, to the knowledge of the Company and the Majority Stockholders, there
are not pending, any labor disputes, work stoppages, requests for
representation, pickets or work slow-downs due to labor disagreements; (ii)
there are and have been no unresolved violations of any Laws of any Governmental
Entity respecting the employment of any employees; (iii) there is no unfair
labor practice, charge or complaint pending, unresolved or, to the knowledge of
the Company and the Majority Stockholders, threatened before the National Labor
Relations Board or similar body in any foreign country; (iv) there is no
employment handbook, personnel policy manual, or similar document that creates
prospective employment rights or obligations; (v) the employees of the Company
and its Subsidiaries are not covered by any collective bargaining agreement;
(vi) the Company and its Subsidiaries have provided or will timely provide prior
to Closing all notices required by law to be given prior to Closing to all
local, state, federal or national labor, wage-payment, equal employment
opportunity, unemployment insurance and related agencies; (vii) the Company and
its Subsidiaries have paid or properly accrued in the ordinary course of
business all wages and compensation due to employees, including all vacations or
vacation pay, holidays
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or holiday pay, sick days or sick pay, and bonuses; and (viii) the transactions
contemplated by this Agreement will not create liability under any Laws of any
Governmental Entity respecting reductions in force or the impact on employees on
plant closing or sales of businesses. All employees of the Company and its
Subsidiaries are legally able to work in the United States.
6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. Schedule 6.22 sets forth
a complete and accurate list of each Benefit Plan covering any present or former
officers, employees or directors of the Company and its Subsidiaries. "Benefit
Plan" means each "employee pension benefit plan" (as defined in Section 3(2) of
ERISA, hereinafter a "Pension Plan"), "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA, hereinafter a "Welfare Plan") and each other
plan or arrangement (written or oral) relating to deferred compensation, bonus,
performance compensation, stock purchase, stock option, stock appreciation,
severance, vacation, sick leave, holiday pay, fringe benefits, personnel policy,
reimbursement program, incentive, insurance, welfare or similar plan, program,
policy or arrangement, in each case maintained or contributed to, or required to
be maintained or contributed to, by the Company, its Subsidiaries or its
affiliates or any other person or entity that, together with the Company or any
Subsidiary, is treated as a single employer under Section 414(b), (c), (m) or
(o) of the Code (each, together with the Company or any Subsidiary, a "Commonly
Controlled Entity") for the benefit of any present or former officer, employee
or director. The Company and its Subsidiaries have no intent or commitment to
create any additional Benefit Plan or amend any Benefit Plan so as to increase
benefits thereunder. The Company and its Subsidiaries have not created any
Benefit Plan or declared or paid any bonus compensation in contemplation of the
transactions contemplated by this Agreement. A current, accurate and complete
copy of each Benefit Plan has been made available to UniCapital. Except as
disclosed on Schedule 6.22:
(a) each Benefit Plan is in substantial compliance with all
reporting, disclosure and other requirements of ERISA applicable to such Benefit
Plan;
(b) each Pension Plan which is intended to be qualified under
Section 401(a) of the Code, has been determined by the Internal Revenue Service
to be so qualified and, to the knowledge of the Company and the Majority
Stockholders, no condition exists that would adversely affect any such
determination;
(c) neither any Benefit Plan, nor the Company, nor its
Subsidiaries, nor any Commonly Controlled Entity, nor any trustee or agent has
been or is presently engaged in any prohibited transactions as defined by
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
applicable which could subject the Company or any Subsidiary to the tax or
penalty imposed by Section 4975 of the Code or Section 502 of ERISA;
(d) there is no event or condition existing which could be
deemed a "reportable event" (within the meaning of Section 4043 of ERISA) with
respect to which the thirty-day notice requirement has not been waived; to the
knowledge of the Company and the
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Majority Stockholders, no condition exists which could subject the Company or
any Subsidiary to a penalty under Section 4071 of ERISA;
(e) neither the Company nor any Subsidiary nor any Commonly
Controlled Entity is or has ever been party to any "multi-employer plan," as
that term is defined in Section 3(37) of ERISA;
(f) true and correct copies of the most recent annual report
on Form 5500 and any attached schedules for each Benefit Plan (if any such
report was required by applicable law) and a true and correct copy of the most
recent determination letter issued by the Internal Revenue Service for each
Pension Plan have been provided to UniCapital;
(g) with respect to each Benefit Plan, there are no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
pending or, to the knowledge of the Company and the Majority Stockholders,
threatened against any Benefit Plan, the Company, any Subsidiary, any Commonly
Controlled Entity or any trustee or agent of any Benefit Plan; and
(h) with respect to each Benefit Plan to which the Company,
any Subsidiary or any Commonly Controlled Entity is a party which constitutes a
group health plan subject to Section 4980B of the Code, each such Benefit Plan
substantially complies, and in each case has substantially complied, with all
applicable requirements of Section 4980B of the Code.
(i) Except as set forth on Schedule 6.22:
(i) there is no outstanding liability (except for
premiums due) under Title IV of ERISA with respect to any Pension Plan;
(ii) neither the Pension Benefit Guaranty Corporation
nor the Company nor any Subsidiary nor any Commonly Controlled Entity has
instituted proceedings to terminate any Pension Plan and the Pension Benefit
Guaranty Corporation has not informed the Company of its intent to institute
proceedings to terminate any Pension Plan;
(iii) full payment has been made of all amounts which
the Company, its Subsidiaries or any Commonly Controlled Entity was required to
have paid as a contribution to the Pension Plans as of the last day of the most
recent fiscal year of each of the Pension Plans ended prior to the date of this
Agreement, and none of the Pension Plans has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of each
such Pension Plan ended prior to the date of this Agreement;
(iv) to the knowledge of the Company and the Majority
Stockholders, the actuarial assumptions utilized, where appropriate, in
connection with determining the funding of each Pension Plan which is a defined
benefit pension plan (as set forth in the actuarial report
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for such Pension Plan) are reasonable. Copies of the most recent actuarial
reports have been furnished to UniCapital. Based on such actuarial assumptions,
as of the Interim Balance Sheet Date, the fair market value of the assets or
properties held under each such Pension Plan exceeds the actuarially determined
present value of all accrued benefits of such Pension Plan (whether or not
vested) determined on an ongoing Pension Plan basis;
(v) each of the Benefit Plans is, and its
administration is and has been during the six-year period preceding the date of
this Agreement, in substantial compliance with, and neither the Company nor any
Subsidiary has received any claim or notice that any such Benefit Plan is not in
compliance with, all applicable laws and orders and prohibited transaction
exemptions, including without limitation, to the extent applicable, the
requirements of ERISA;
(vi) neither the Company nor any Subsidiary nor any
Commonly Controlled Entity is in default in performing any of its contractual
obligations under any of the Benefit Plans or any related trust agreement or
insurance contract;
(vii) there are no material outstanding liabilities
of any Benefit Plan other than liabilities for benefits to be paid to
participants in the Benefit Plans and their beneficiaries in accordance with the
terms of the Benefit Plans;
(viii) each Benefit Plan may be amended or modified
by the Company or applicable Subsidiary or Commonly Controlled Entity at any
time without liability except under any defined pension benefit plan;
(ix) no Benefit Plan other than a Pension Plan,
retiree medical plan or severance plan provides benefits to any individual after
termination of employment;
(x) the consummation of the transactions contemplated
by this Agreement will not (in and of itself): (A) entitle any employee of the
Company or any Subsidiary to severance pay, unemployment compensation or any
other payment; (B) accelerate the time of payment or vesting, or increase the
amount of compensation due to any such employee; (C) result in any liability
under Title IV of ERISA; (D) result in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
available; or (E) result (either alone or in conjunction with any other event)
in the payment or series of payments by the Company, any Subsidiary or any of
its affiliates to any person of an "excess parachute payment@ within the meaning
of Section 280G of the Code;
(xi) with respect to each Benefit Plan that is funded
wholly or partially through an insurance policy, all premiums required to have
been paid to date under the insurance policy have been paid, all premiums
required to be paid under the insurance policy through the Merger Effective Date
will have been paid on or before the Merger Effective Date and, as of the Merger
Effective Date, there will be no liability of the Company, any Subsidiary or any
Commonly Controlled Entity under any insurance policy or ancillary agreement
with respect to
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such insurance policy in the nature of a retroactive rate adjustment, loss
sharing arrangement or other actual or contingent liability arising wholly or
partially out of events occurring prior to the Merger Effective Date;
(xii) (A) each Benefit Plan that constitutes a
Welfare Plan, and for which contributions are claimed by the Company, any
Subsidiary or any Commonly Controlled Entity as deductions under any provision
of the Code, is in material compliance with all applicable requirements
pertaining to such deduction;
(B) with respect to any welfare benefit fund
(within the meaning of Section 419 of the Code) related to a welfare benefit
plan, there is no disqualified benefit (within the meaning of Section 4976(b) of
the Code) that would result in the imposition of a tax under Section 4976(a) of
the Code; and
(C) all welfare benefit funds intended to be
exempt from tax under Section 501(a) of the Code have been determined by the
Internal Revenue Service to be so exempt and no event or condition exists which
would adversely affect any such determination; and
(xiii) all benefit plans outside of the United
States, if any (the "Foreign Plans"), are in compliance with all applicable laws
and regulations and have been operated in accordance with the plans' respective
terms. There are no material unfunded liabilities under or in respect of the
Foreign Plans, and all contributions or other payments required to be made to or
in respect of the Foreign Plans prior to the Merger Effective Date have been
made or will be made prior to the Merger Effective Date.
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS. Each of the Company and the
Subsidiaries has complied with each, and is not in violation of any, law,
ordinance, or governmental or regulatory rule or regulation, whether federal,
state, local or foreign ("Regulations"), to which the Company's and its
Subsidiaries' respective business, operations, assets or properties is subject.
Each of the Company and its Subsidiaries owns, holds, possesses or lawfully uses
in the operation of its business all franchises, licenses, permits, easements,
rights, applications, filings, registrations and other authorizations
("Authorizations") which are in any manner necessary for it to conduct its
business as now or previously conducted or for the ownership and use of the
assets owned or used by it in the conduct of its business, free and clear of all
liens, charges, restrictions and encumbrances and in compliance with all
Regulations. All such Authorizations are listed and described on Schedule 6.23.
Neither the Company nor any Subsidiary is in default, nor has the Company nor
any Subsidiary received any notice of any claim of default, with respect to any
such Authorization. All such Authorizations are renewable by their terms or in
the ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
None of such Authorizations will be adversely affected by consummation of the
transactions contemplated hereby. No Stockholder and no director, officer,
employee or former employee of the Company,
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any Subsidiary or any affiliates of the Company or any Subsidiary, or any other
person, firm or corporation, owns or has any proprietary, financial or other
interest (direct or indirect) in any Authorization which the Company or any
Subsidiary owns, possesses or uses in the operation of its respective business
as now or previously conducted.
6.24 TRANSACTIONS WITH AFFILIATES. No Stockholder and no director,
officer or employee of the Company or any Subsidiary, or any member of his or
her immediate family or any other of its, his or her affiliates, owns or has a
5% or more ownership interest in any corporation or other entity that is or was
during the last three years a party to, or in any property which is or was
during the last three years the subject of, any contract, agreement or
understanding, business arrangement or relationship with the Company or any
Subsidiary.
6.25 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of the Company and the Majority Stockholders, threatened against the
Company or any Subsidiary which relates to the transactions contemplated by this
Agreement.
(b) Except as set forth on Schedule 6.25, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of the Company and the Majority Stockholders,
threatened against the Company or any Subsidiary or which relates to the Company
or any Subsidiary.
(c) Neither the Company nor any Majority Stockholder knows of
any reasonably likely basis for any litigation, arbitration, investigation or
proceeding referred to in Sections 6.25(a) or (b).
(d) Except as set forth on Schedule 6.25, neither the Company
nor any Subsidiary is a party to or subject to the provisions of any judgment,
order, writ, injunction, decree or award of any court, arbitrator or
governmental or regulatory official, body or authority.
6.26 RESTRICTIONS. Neither the Company nor any Subsidiary is a party to
any indenture, agreement, contract, commitment, lease, plan, license, permit,
authorization or other instrument, document or understanding, oral or written,
or subject to any charter or other corporate restriction or any judgment, order,
writ, injunction, decree or award which materially adversely affects or
materially restricts or, so far as the Company or any of the Majority
Stockholders can now reasonably foresee, may in the future materially adversely
affect or materially restrict, the business, operations, assets, properties,
prospects or condition (financial or otherwise) of the Company or any Subsidiary
after consummation of the transactions contemplated hereby.
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6.27 TAXES. All federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by the Company and its
Subsidiaries (the "Tax Returns") with respect to any federal, state, local or
foreign taxes, assessments, interest, penalties, deficiencies, fees and other
governmental charges or impositions (including without limitation all income
tax, unemployment compensation, social security, payroll, sales and use, excise,
privilege, property, ad valorem, franchise, license, school and any other tax or
similar governmental charge or imposition under laws of the United States or any
state or municipal or political subdivision thereof or any foreign country or
political subdivision thereof) (singly, a "Tax", and collectively, the "Taxes")
have been timely filed with the appropriate governmental agencies in all
jurisdictions in which such Tax Returns are required to be filed, and all such
Tax Returns properly reflect the liabilities of the Company and its Subsidiaries
for Taxes for the periods, property or events covered thereby. All Taxes,
including without limitation those which are called for by the Tax Returns,
required to be paid, withheld or accrued by the Company or any Subsidiary and
any deficiency assessments, penalties and interest have been timely paid,
withheld or accrued. The accruals for Taxes contained in the Interim Balance
Sheet are adequate to cover the Tax liabilities of the Company and its
Subsidiaries as of that date and include adequate provision for all deferred
Taxes, and nothing has occurred subsequent to that date to make any of such
accruals inadequate. Each of the Company's and its Subsidiaries' Tax basis in
its assets for purposes of determining its future amortization, depreciation and
other federal income tax deductions is accurately reflected on the Company's Tax
books and records. Neither the Company nor any Subsidiary is or has at any time
been a party to a Tax sharing, Tax indemnity or Tax allocation agreement, and
neither the Company nor any Subsidiary has assumed any Tax liability of any
other person or entity under contract. Except as set forth on Schedule 6.27,
neither the Company nor any Subsidiary has received any notice of assessment or
proposed assessment in connection with any Tax Returns and there are not pending
tax examinations of or tax claims asserted against the Company, any Subsidiary
or any of their assets or properties. Neither the Company nor any Subsidiary has
extended, or waived the application of, any statute of limitations of any
jurisdiction regarding the assessment or collection of any Taxes. There are now
(and as of immediately following the Closing there will be) no Liens (other than
any Lien for current Taxes not yet due and payable) on any of the assets or
properties of the Company or any Subsidiary relating to or attributable to
Taxes. To the knowledge of the Company and the Majority Stockholders, there is
no basis for the assertion of any claim relating to or attributable to Taxes
which, if adversely determined, would result in any Lien on the assets of the
Company or any Subsidiary or otherwise have an adverse effect on the Company or
any Subsidiary or their business, operations, assets, properties, prospects or
condition (financial or otherwise). Neither the Company nor the Majority
Stockholders have any knowledge of any basis for any additional assessment of
any Taxes. All Tax payments related to employees, including income tax
withholding, FICA, FUTA, unemployment and worker's compensation, required to be
made by the Company and its Subsidiaries have been fully and properly paid,
withheld, accrued or recorded. There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Company or any Subsidiary that,
individually or collectively, could give rise to any payment (or portion
thereof) that would not be deductible pursuant to Sections 280G, 404 or
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162 of the Code. Two correct and complete copies of (a) all Tax examinations,
(b) all extensions of statutory limitations and (c) all federal, state and local
income tax returns and franchise tax returns of the Company (including, if filed
separately, its Subsidiaries) for the last five fiscal years, or such shorter
period of time as any of them shall have existed, have heretofore been delivered
by the Company and the Stockholders to UniCapital. Each of the Company and its
Subsidiaries currently utilizes the accrual method of accounting for income tax
purposes and has not changed its method of accounting for income tax purposes in
the past five years.
6.28 INTELLECTUAL PROPERTY MATTERS.
(a) Neither the Company nor any Subsidiary has utilized or
currently utilizes any patent, trademark, trade name, service mark, copyright,
software, trade secret or know-how except for those listed on Schedule 6.28 (the
"Intellectual Property"), all of which are owned by the Company or a Subsidiary
free and clear of any liens, claims, charges or encumbrances, or are licensed by
the Company or a Subsidiary or are in the public domain. The Intellectual
Property constitutes all such assets, properties and rights which are used or
held for use in, or are necessary for, the conduct of the business of the
Company and its Subsidiaries.
(b) Except as set forth on Schedule 6.28, there are no
royalty, commission or similar arrangements, and no licenses, sublicenses or
agreements, pertaining to any of the Intellectual Property or products or
services of the Company or any Subsidiary.
(c) Neither the Company nor any Subsidiary infringes upon or
unlawfully or wrongfully uses any patent, trademark, trade name, service mark,
copyright or trade secret owned or claimed by another. No action, suit,
proceeding or investigation has been instituted or, to the knowledge of the
Company and the Majority Stockholders, threatened relating to any, patent,
trademark, trade name, service mark, copyright or trade secret formerly or
currently used by the Company or any Subsidiary. None of the Intellectual
Property is subject to any outstanding order, decree or judgment. Neither the
Company nor any Subsidiary has agreed to indemnify any person or entity for or
against any infringement of or by the Intellectual Property.
(d) Except as set forth on Schedule 6.28, no present or former
employee of the Company or any Subsidiary and no other person or entity owns or
has any proprietary, financial or other interest, direct or indirect, in whole
or in part, in any patent, trademark, trade name, service mark or copyright, or
in any application therefor, or in any trade secret, which the Company or its
Subsidiaries own, possess or use in their operations as now or heretofore
conducted. Schedule 6.28 lists all confidentiality or non-disclosure agreements
currently in force and effect to which the Company, its Subsidiaries or any of
their employees is a party.
(e) Schedule 6.28 sets forth a complete and accurate list of
all items of Intellectual Property duly registered in, filed in or issued by the
United States Copyright Office
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or the United States Patent and Trademark Office, any offices in the various
states of the United States and any offices in other jurisdictions.
(f) All rights of the Company in the Intellectual Property
shall vest in the applicable Surviving Corporation pursuant to the transactions
contemplated hereby without any consent or other approval.
(g) All Intellectual Property in the form of computer software
that is utilized by the Company or its Subsidiaries in the operation of their
respective businesses is capable of processing date data between and within the
twentieth and twenty-first centuries, or can be rendered capable or will be
replaced with software which will be capable of processing such data within
twenty three (23) months by the expenditure of no more than One Hundred Fifty
Thousand Dollars ($150,000).
6.29 COMPLETENESS; NO VIOLATIONS. The certified copies of the Articles
of Incorporation and Bylaws, both as amended to date, of the Company (and the
Subsidiaries), and the copies of all leases, instruments, agreements, licenses,
permits, certificates or other documents which are included on schedules
attached hereto or which have been delivered or which have been made available
to UniCapital in connection with the transactions contemplated hereby, are
complete and correct; neither the Company (including its Subsidiaries) nor, to
the knowledge of the Majority Stockholders, any other party to any of the
foregoing is in material default thereunder; and, except as set forth in the
schedules and documents attached to this Agreement, the rights and benefits of
the Company (including its Subsidiaries) thereunder will not be materially and
adversely affected by the transactions contemplated hereby, and the execution of
this Agreement and the performance of the obligations hereunder will not result
in a material violation or breach or constitute a material default under any of
the terms or provisions thereof. Except as set forth on Schedule 6.29, none of
such leases, instruments, agreements, contracts, licenses, permits, certificates
or other documents requires notice to, or the consent or approval of, any
governmental agency or other third party to any of the transactions contemplated
hereby to remain in full force and effect. The consummation of the transactions
contemplated hereby will not give rise to any right of termination, cancellation
or acceleration or result in the loss of any right or benefit thereunder.
6.30 EXISTING CONDITION. Since the Audited Balance Sheet Date, except
as set forth on Schedule 6.30 neither the Company nor any Subsidiary has:
(a) incurred any liabilities, other than liabilities incurred
in the ordinary course of business consistent with past practice, or discharged
or satisfied any lien or encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice, or failed to pay or
discharge when due any liabilities of which the failure to pay or discharge has
caused or will cause any material damage or risk of material loss to it or any
of its assets or properties;
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(b) sold, encumbered, assigned or transferred any assets,
properties or rights or any interest therein, except for the sales in the
ordinary course of business consistent with past practice, or made any agreement
or commitment or granted any option or right with, of or to any person to
acquire any assets, properties or rights of the Company, any Subsidiary or any
interest therein;
(c) created, incurred, assumed or guaranteed any indebtedness
for money borrowed, or mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract or other
encumbrance of any nature whatsoever, except in the ordinary course of business
consistent with past practice;
(d) made or suffered any amendment or termination of any
material agreement, contract, commitment, lease or plan to which it is a party
or by which it is bound, or canceled, modified or waived any substantial debts
or claims held by it or waived any rights of substantial value, whether or not
in the ordinary course of business;
(e) except for (i) the Redemption and (ii) payment of the
monthly dividend on the Company's preferred stock consistent with past practice,
declared, set aside or paid any dividend or made or agreed to make any other
distribution or payment in respect of its capital shares or redeemed, purchased
or otherwise acquired or agreed to redeem, purchase or acquire any of its shares
of capital stock or other ownership interests;
(f) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting its business,
operations, assets, properties or prospects or (ii) of any item or items carried
on its books of account individually or in the aggregate at more than $25,000,
or suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;
(g) suffered any material adverse change in its business,
operations, assets, properties, prospects or condition (financial or otherwise),
other than as directly caused by adverse economic conditions not specific to, or
having an extraordinary impact upon, the Company;
(h) received notice or had knowledge of any actual or
threatened labor trouble, strike or other occurrence, event or condition of any
similar character which has had or might have an adverse effect on its business,
operations, assets, properties or prospects;
(i) made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $25,000, except such
as may be involved in ordinary repair, maintenance or replacement of its assets;
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(j) increased the salaries or other compensation of, or made
any advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its employees or made any increase in, or any addition to, other
benefits to which any of its employees may be entitled;
(k) changed any of the accounting principles followed by it or
the methods of applying such principles;
(l) entered into any transaction other than in the ordinary
course of business consistent with past practice;
(m) changed its authorized capital or its securities
outstanding or otherwise changed its ownership interests, or granted any
options, warrants, calls, conversion rights or commitments with respect to any
of its capital stock or other ownership interests; or
(n) agreed to take any of the actions referred to above.
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Attached hereto as Schedule
6.31 is an accurate list, as of the date of this Agreement, of:
(a) the name of each financial institution in which the
Company (including its Subsidiaries) has accounts or safe deposit boxes;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have
access thereto; and
(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Company or any
Subsidiary and a description of the terms of such power.
6.32 BOOKS OF ACCOUNT. The books, records and accounts of each of the
Company and its Subsidiaries accurately and fairly reflect, in reasonable
detail, the transactions and the assets and liabilities of such company. Neither
the Company nor any Subsidiary has engaged in any transaction, maintained any
bank account or used any of the funds of the Company or any Subsidiary except
for transactions, bank accounts and funds which have been and are reflected in
the normally maintained books and records of the business.
6.33 ENVIRONMENTAL MATTERS. (a) The Company has secured, and is in
compliance with, all Environmental Permits, with respect to any premises on
which its business is operated,
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all of which Environmental Permits shall vest in the applicable Surviving
Corporation upon consummation of the transactions contemplated hereby. Each of
the Subsidiaries has secured, and is in compliance with, all Environmental
Permits, with respect to any premises on which its business is operated. Each of
the Company and its Subsidiaries is in compliance with all Environmental Laws.
(b) Neither the Company nor any Subsidiary nor any Stockholder
has received any communication from any Governmental Entity that alleges that
the Company or any Subsidiary is not in compliance with any Environmental Laws
or Environmental Permits.
(c) Neither the Company nor any Subsidiary has entered into or
agreed to any court decree or order, and neither the Company nor any Subsidiary
is subject to any judgment, decree or order, relating to compliance with any
Environmental Law or to investigation or cleanup of a Hazardous Substance under
any Environmental Law.
(d) No lien, charge, interest or encumbrance has been
attached, asserted, or to the knowledge of the Company and the Majority
Stockholders, threatened to or against any assets or properties of the Company
or any Subsidiary pursuant to any Environmental Law.
(e) There has been no treatment, storage, disposal or release
of any Hazardous Substance on any property owned, operated or leased by the
Company or any Subsidiary other than common household and office products in de
minimis quantities.
(f) Neither the Company nor any Subsidiary has received a
CERCLA 104(e) information request nor has the Company been named a potentially
responsible party for any National Priorities List site under CERCLA or any site
under analogous state law or received an analogous notice or request from any
non-U.S. Governmental Entity, which notice, request or any resulting inquiry or
litigation has not been fully and finally resolved without possibility of
reopening.
(g) There are no aboveground tanks or underground storage
tanks on, under or about any property owned, operated or leased by the Company
or any Subsidiary and any former aboveground or underground tanks on any
property owned, operated or leased by the Company or any Subsidiary have been
removed in accordance with all Environmental Laws and no residual contamination,
if any, remains at such sites in excess of applicable standards.
(h) There are no polychlorinated biphenyls ("PCBs") leaking
from any article, container or equipment on, under or about any property owned,
operated or leased by the Company or any Subsidiary and there are no such
articles, containers or equipment containing PCBs, and there is no asbestos
containing material in a condition or location currently constituting a
violation of any Environmental Law at, on, under or within any property owned,
operated or leased by the Company or any Subsidiary.
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(i) The Company and the Stockholders have provided to
UniCapital true and complete copies of, or access to, all written environmental
assessment materials and reports in their possession that have been prepared by
or on behalf of the Company or any Subsidiary during the past five years.
6.34 NO ILLEGAL PAYMENTS. Neither the Company nor any Subsidiary nor,
to the knowledge of the Company and the Majority Stockholders, any affiliate,
officer, agent or employee thereof, directly or indirectly, has, during the past
five years, on behalf of or with respect to the Company, any Subsidiary or any
affiliate thereof, (a) made any unlawful domestic or foreign political
contributions, (b) made any payment or provided services which were not legal to
make or provide or which the Company, any Subsidiary or any affiliate thereof or
any such officer, agent or employee should have known were not legal for the
payee or the recipient of such services to receive, (c) received any payment or
any services which were not legal for the payer or the provider of such services
to make or provide, (d) made any payment to any person or entity, or agent or
employee thereof, in connection with any Lease (as hereinafter defined) to
induce such person or entity to enter into a Lease transaction, (e) had any
transactions or payments related to the Company or any Subsidiary which are not
recorded in their accounting books and records or (f) had any off-book bank or
cash accounts or "slush funds" related to the Company or any Subsidiary.
6.35 LEASES. Schedule 6.35 hereto sets forth each of the Company's and
its Subsidiaries' lease financing arrangements as of the Interim Balance Sheet
Date (which, together with all other lease/financing arrangements entered into
by the Company and its Subsidiaries between such date and the Closing Date, are
referred to herein as the "Leases"). The term "Lease Documents" means the lease
arrangements and financing contracts evidencing the Leases described on Schedule
6.35, together with all related documents and agreements including, without
limitation, master lease agreements, schedules or other addenda to such Leases,
certificates of delivery and acceptance, UCC financing statements, remarketing
agreements, residual guaranty agreements, software licenses, insurance policies,
guaranty agreements and other credit supports. The term "Equipment" means all
equipment, inventory and other property described as being leased or financed
pursuant to a Lease, or in which the Company or any Subsidiary is granted a
security interest pursuant to a Lease. The term "Obligor" means any lessee party
or other party obligated to pay or perform any obligations under or in respect
of a Lease or the Equipment covered by a Lease (excluding the lessor party
thereunder, but otherwise including, without limitation, any guarantor of a
Lease or any vendor, manufacturer or similar party under a remarketing
agreement, residual guaranty or similar agreement). The term "Scheduled
Payments" means the monthly or periodic rental payments or installments of
principal and interest under the terms of the Leases. Except as set forth on
Schedule 6.35:
(a) There is no restriction or limitation in any of the Lease
Documents or otherwise, restricting the Company from executing this Agreement or
entering into the transactions contemplated by this Agreement, other than
consents which have been, or prior to the Closing will have been, obtained.
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(b) The Company or a Subsidiary owns the Equipment covered by
each Lease or has a vested and perfected first priority security interest in the
Equipment. All Equipment is located in the United States.
(c) With respect to each Lease, only one chattel paper
original of such Lease exists and is held by the Company, a Subsidiary or the
respective secured lender.
(d) Each Lease is in full force and effect in accordance with
its terms, and there has been no occurrence which would or might permit any
Obligor to terminate such Lease or suspend or reduce any payments or obligations
due or to become due in respect of such Lease or the related Lease Documents by
reason of default by the lessor party under such Lease. None of the Obligors in
respect of a Lease or the related Lease Documents is the subject of a
bankruptcy, insolvency or similar proceeding.
(e) Except for the delinquency in the payment of any Scheduled
Payment that is not more than ninety (90) days past due, there does not exist
any default in the payment of any Scheduled Payments due under any Lease or the
related Lease Documents, and there does not exist any other default, breach,
violation or event permitting acceleration, termination or repossession under
any Lease or the related Lease Documents or any event which, to the knowledge of
the Company and the Majority Stockholders, with notice and the expiration of any
applicable grace or cure period, would constitute such a default, breach,
violation or event permitting acceleration, termination or repossession under
such Lease or the related Lease Documents.
(f) Neither the Company nor any Subsidiary has acted in a
manner which (nor has the Company or any Subsidiary failed to act where such
failure to act) would alter or reduce any of the Company's or Subsidiary's
rights or benefits under any manufacturer's or vendors' warranties or guarantees
with respect to any Equipment.
(g) The Company and its Subsidiaries have complied with all
requirements of any federal, state or local law, including without limitation,
usury laws, applicable to each Lease.
(h) Each Lease has the following characteristics:
(i) such Lease was originated in the United States
and the Scheduled Payments thereunder are payable in U.S. dollars by Obligors
domiciled in the United States;
(ii) the lessee party under such Lease has
unconditionally accepted the Equipment covered by such Lease ;
(iii) except for Leases less than thirty (30) days
old, at least one Scheduled Payment has been made by the Obligor under each such
Lease; and
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(iv) no Obligor in respect of such Lease is an
affiliate of the Company or a Subsidiary.
(i) Each Lease and the related Lease Documents are valid,
binding, legally enforceable and non-cancelable obligations of the parties
thereto, enforceable in accordance with their respective terms, except (i) as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting the
rights of creditors, and (ii) as the same may be subject to the effect of
general principles of equity. Each Lease is a business obligation of the lessee
thereunder and is not a "consumer transaction" under any applicable federal or
state regulation.
(j) To the knowledge of the Majority Stockholders, no Lease or
related Lease Document is the subject of a fraudulent scheme by any Obligor or
any supplier of Equipment.
(k) Each item of Equipment is subject to a Lease.
(l) Each Lease is a fixed rate lease contract.
(m) No Lease or related Lease Document is subject to any
legally enforceable right of rescission, set-off, counterclaim, abatement or
defense, including without limitation any defense of usury, nor will the
operation of any of the terms of any Lease or any related Lease Document or the
exercise of any right or remedy thereunder render such Lease or any related
Lease Document or the obligations thereunder unenforceable, or subject the same
to any right of rescission, set-off, counterclaim, abatement or defense. No
Obligor has asserted any legally enforceable right of rescission, set-off,
counterclaim, abatement or defense to its obligations under a Lease or any
related Lease Document.
(n) As to the Leases and the related Lease Documents, (i) none
has been amended or modified (A) to extend the maturity date for a period of
longer than one year, or (B) to alter the amount or time of payment of any
amount due thereunder, unless as to (A) and (B) such extension or alteration is
reasonably expected to result in a net economic benefit to the Company or any
Subsidiary; (ii) no indulgences or waivers have been granted in respect of the
obligations of any Obligor under any Lease, and (iii) neither the Company nor
any Subsidiary has advanced any monies on behalf of any Obligor.
(o) Each Lease requires the Obligor thereunder at its own cost
and expense to maintain the Equipment leased thereunder in good repair,
condition and working order, and, to the knowledge of the Majority Stockholders,
each Obligor under a Lease is currently in compliance with such requirement.
(p) Each Lease requires the Obligor thereunder (i) to pay all
fees, taxes (except income taxes), and other charges or liabilities arising with
respect to the Equipment
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leased thereunder or the use thereof, (ii) to keep the Equipment free and clear
of any and all liens, security interests and other encumbrances, other than
security interests of the Company or the respective Subsidiary, (iii) to hold
harmless the lessor thereunder and its successors and assigns against the
imposition of any fees, charges, liabilities and encumbrances, (iv) to bear all
risk of loss associated with the Equipment covered by or securing the
obligations under such Lease during the term of such Lease and (v) to maintain
at the cost of the Obligor public liability and casualty insurance in respect of
such Equipment covered by such Lease.
(q) Each Lease prohibits without the lessor's prior written
consent or knowledge by written notice any relocation of the Equipment covered
by such Lease and requires the Obligor to execute such agreements and documents
as may reasonably be requested by the lessor in connection with any such
relocation.
(r) Each Lease involves either the lease of tangible or
intangible personal property or fixtures owned by the Company or the respective
Subsidiary or the loan of money secured by a security interest in tangible or
intangible personal property owned by the Obligor thereunder.
(s) Neither the Company nor any Subsidiary has received any
notice challenging its ownership or the priority of its security interest in the
Equipment covered by each Lease, and there are no proceedings pending before any
court or governmental entity or, to the knowledge of the Company and the
Majority Stockholders, threatened by any Obligor or other party, (i) asserting
the invalidity of any Lease or the related Lease Documents, (ii) seeking to
prevent payment or performance by any Obligor of any Lease or any of the terms
of the related Lease Documents, or (iii) seeking any determination or ruling
that might adversely affect the validity or enforceability of any Lease or any
of the terms or provisions of the related Lease Documents.
(t) As to each Lease, there are no agreements or
understandings between the Company or any Subsidiary and the Obligors in respect
of such Lease or otherwise binding on the Company or any Subsidiary other than
as expressly set forth in the Lease and the related Lease Documents.
6.36 LEASE FUNDING. Each of the Company and its Subsidiaries is in
compliance with all of the terms and covenants of, and is not in default or
breach under, each agreement, contract, understanding or arrangement with any
funding source for the Leases.
6.37 DISCLOSURE. The Company has delivered, or in the case of Leases
and Lease Documents, made available, to UniCapital true and complete copies of
each agreement, contract, commitment or other document (or, in the case of any
such document not in the possession of or reasonably available to the Company or
a Stockholder, accurate and complete summaries thereof) that is referred to in
the schedules to this Agreement or that has been requested by UniCapital or its
representatives. Without limiting any exclusion, exception or other limitation
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contained in any of the representations and warranties made herein, this
Agreement and the schedules hereto and all other documents and information
prepared or certified by the Stockholders to the Company and provided to
UniCapital and its representatives pursuant hereto do not and will not include
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements herein and therein not misleading. If any
Majority Stockholder becomes aware of any fact or circumstance that would change
a representation or warranty of any Majority Stockholder in this Agreement or
any representation made on behalf of the Company (including its Subsidiaries),
then the Majority Stockholder shall immediately give notice of such fact or
circumstance to UniCapital. However, such notification shall not relieve the
Company or any of the Majority Stockholders of their respective obligations
under this Agreement, and at the sole option of UniCapital, the truth and
accuracy of any and all warranties and representations of the Majority
Stockholders, at the date of this Agreement and at the Closing, shall be a
precondition to the consummation of this transaction.
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, UniCapital and Newco, jointly and severally, represent and
warrant to the Stockholders as follows:
7.1 CORPORATE EXISTENCE. UniCapital is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Newco is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. Immediately prior to the
effectiveness of the Merger, each of UniCapital and Newco is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction where the conduct of its business requires it to be so qualified.
7.2 UNICAPITAL STOCK. The shares of UniCapital Stock to be issued and
delivered to the Stockholders on the Merger Effective Date, when issued and
delivered in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable shares, and except for
restrictions upon resale will be legally equivalent in all respects to the
majority of UniCapital Stock issued and outstanding as of the date hereof. The
UniCapital Stock to be issued upon the conversion of Company Stock pursuant to
the terms of this Agreement will be voting common shares free and clear of all
liens, encumbrances and claims of every kind, other than restrictions upon
transfer contained herein and other than any liens, encumbrances or claims
arising other than by the actions of UniCapital or Newco.
7.3 CORPORATE POWER AND AUTHORIZATION. UniCapital and Newco have the
corporate power, authority and legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance by UniCapital and Newco of
this Agreement and all related documents and agreements required to be executed
and delivered by UniCapital and Newco in accordance with the provisions hereof
(the "UniCapital Documents") have been duly authorized by all necessary
corporate action. This Agreement has been duly executed and delivered by
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UniCapital and Newco and constitutes, and the UniCapital Documents when executed
and delivered will constitute, the legal, valid and binding obligations of
UniCapital and Newco enforceable against UniCapital and Newco in accordance with
their terms.
7.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement by UniCapital and Newco will not violate, conflict with or result in
the breach of any term, condition or provision of, or require the consent of any
other person under (a) any existing law, ordinance, or governmental rule or
regulation to which UniCapital or Newco is subject, (b) any judgment, order,
writ, injunction, decree or award of any Governmental Entity which is applicable
to UniCapital or Newco, (c) the charter documents of UniCapital or Newco, or (d)
any mortgage, indenture, agreement, contract, commitment, lease, plan,
Authorization, or other instrument, document or understanding, oral or written,
to which UniCapital or Newco is a party, by which UniCapital or Newco may have
rights or by which any of the properties or assets of UniCapital or Newco may be
bound or affected, or give any party with rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of UniCapital or Newco thereunder. Except for filing the Articles of
Merger and filings under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and except as aforesaid, no authorization, approval or consent of, and no
registration or filing with, any Governmental Entity is required in connection
with the execution, delivery or performance of this Agreement by UniCapital or
Newco.
7.5 CAPITALIZATION OF UNICAPITAL. The IPO will result in an aggregate
market capitalization of UniCapital that will exceed Three Hundred Million
Dollars ($300,000,000), as determined by multiplying the outstanding shares of
UniCapital immediately following the closing of the IPO by the offering price.
7.6 COMPLIANCE WITH LAW; AUTHORIZATIONS. Each of UniCapital and Newco
has complied with each, and is not in violation of, Regulations to which
UniCapital's and Newco's respective business, operations, assets or properties
is subject. Each of UniCapital and Newco owns, holds, possesses or lawfully uses
in the operation of its business all Authorizations which are in any manner
necessary for it to conduct its business as now or previously conducted or for
the ownership and use of the assets owned or used by UniCapital and Newco,
respectively, in the conduct of the business of such company, free and clear of
all liens, charges, restrictions and encumbrances and in compliance with all
Regulations. Neither UniCapital nor Newco is in default, nor has UniCapital or
Newco received any notice of any claim of default, with respect to any such
Authorization. All such Authorizations are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
None of such Authorizations will be adversely affected by consummation of the
transactions contemplated hereby. No stockholder and no director, officer,
employee or former employee of UniCapital, Newco or any of their affiliates, or
any other person, firm or corporation, owns or has any proprietary, financial or
other interest
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(direct or indirect) in any Authorization which UniCapital or Newco owns,
possesses or uses in the operation of the business of UniCapital and Newco as
now or previously conducted.
7.7 TRANSACTIONS WITH AFFILIATES. Except as described in the
Registration Statement, no stockholder and no director, officer or employee of
UniCapital or Newco, or any member of his or her immediate family or any other
of its, his or her affiliates, owns or has a 5% or more ownership interest in
any corporation or other entity that is or was during the last three years a
party to, or in any property which is or was during the last three years the
subject of, any contract, agreement or understanding, business arrangement or
relationship with UniCapital or Newco.
7.8 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of UniCapital and Newco, threatened against UniCapital or Newco which
relates to the transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 7.8, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of UniCapital or Newco, threatened against
UniCapital or Newco or which relates to UniCapital or Newco.
(c) Neither UniCapital nor Newco knows of any reasonably
likely basis for any litigation, arbitration, investigation or proceeding
referred to in Sections 7.8(a) or (b);
(d) Neither UniCapital nor Newco is a party to or subject to
the provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority."
7.9 REGISTRATION RIGHTS. As of the date hereof and as of the Merger
Effective Date, no officer, director or shareholder of UniCapital will have been
granted any registration rights with respect to the registration of any shares
of capital stock of UniCapital.
7.10 MISCELLANEOUS. Prior to the consummation of the Merger, UniCapital
and Newco have no material properties or assets and are not party to any
contracts other than this Agreement, the letter of intent among the parties to
this Agreement, certain employment agreements with officers of UniCapital,
certain real property leases relating to the principal executive offices of
UniCapital, and those agreements and letters of intent listed on Schedule 7.9
hereto.
8. COVENANTS OF STOCKHOLDERS AND COMPANY
The following covenants shall apply during the period from and after
the date hereof through the Closing Date.
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8.1 BUSINESS IN THE ORDINARY COURSE. Except as otherwise contemplated
in Section 8.16, the Company shall, and the Majority Stockholders shall cause
the Company to, conduct its business and the business of its Subsidiaries solely
in the ordinary course and consistent with past practice.
8.2 EXISTING CONDITION. The Company shall not, and no Majority
Stockholder shall suffer the Company or any Subsidiary to, cause or permit to
occur any of the events or occurrences described in Section 6.30 hereof.
8.3 MAINTENANCE OF PROPERTIES AND ASSETS. Except as otherwise
contemplated in Section 8.16, the Company shall, and the Majority Stockholders
shall cause the Company to, maintain and service its properties and assets and
the properties and assets of its Subsidiaries in order to preserve their value
and usefulness in the conduct of their respective business.
8.4 EMPLOYEES AND BUSINESS RELATIONS. The Company shall, and the
Majority Stockholders shall cause the Company to, use commercially reasonable
efforts to keep available the services of the current employees and agents of
the Company and its Subsidiaries and to maintain the Company's and its
Subsidiaries' relations and goodwill with their respective suppliers, customers,
distributors and any others with whom or with which they have business
relations.
8.5 MAINTENANCE OF INSURANCE. The Company shall, and the Majority
Stockholders shall cause the Company and its Subsidiaries to, notify UniCapital
of any material changes in the terms of the insurance policies and binders
referred to on Schedule 6.20 hereto.
8.6 COMPLIANCE WITH LAWS, ETC. The Company shall, and the Majority
Stockholders shall cause the Company to, comply with all laws, ordinances,
rules, regulations and orders applicable to the Company, its Subsidiaries or
their respective businesses, operations, properties or assets, noncompliance
with which might materially affect the Company or its Subsidiaries.
8.7 CONDUCT OF BUSINESS. The Company shall, and the Majority
Stockholders shall cause the Company to, use commercially reasonable efforts to
conduct the business of the Company and its Subsidiaries in such a manner that
on the Closing Date and on the Merger Effective Date the representations and
warranties of the Majority Stockholders contained in this Agreement shall be
true, as though such representations and warranties were made on and as of each
such date (except to the extent such representations or warranties expressly
speak as of a specific date), and the Company shall, and the Majority
Stockholders shall cause the Company and each of its Subsidiaries to, use
commercially reasonable efforts to cause all of the conditions to the
obligations of UniCapital and the Stockholders under this Agreement to be
satisfied on or prior to the Closing Date. The Company shall, and the Majority
Stockholders shall cause the Company to, maintain credit underwriting standards
consistent with past practice. Furthermore, the Company shall, and the Majority
Stockholders shall cause the Company to, maintain a residual value accounting
methodology consistent with past practice.
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8.8 ACCESS. Upon prior reasonable notice, the Company shall, and the
Majority Stockholders shall cause the Company to, give to UniCapital's officers,
employees, counsel, accountants and other representatives free and full access
to and the right to inspect, during normal business hours, all of the premises,
properties, assets, records, contracts and other documents relating to the
Company and its Subsidiaries and shall permit them to consult with the officers,
employees, accountants, counsel and agents of the Company or any Subsidiary for
the purpose of making such investigation of the Company or any Subsidiary as
UniCapital shall desire to make, provided that such investigation shall not
unreasonably interfere with the Company's or any Subsidiary's business
operations, and provided further that UniCapital shall not contact or consult
with any non-officer employees of the Company or its Subsidiaries without the
Company's prior consent, which shall not be unreasonably withheld. Furthermore,
the Company shall, and the Majority Stockholders shall cause the Company to,
furnish to UniCapital all such documents and copies of documents and records and
information with respect to the affairs of the Company and its Subsidiaries and
copies of any working papers relating thereto as UniCapital shall from time to
time reasonably request. No information or knowledge obtained in any
investigation pursuant to this Section 8.8 or otherwise shall affect or be
deemed to modify any representation or warranty contained in this Agreement or
the conditions to the obligations of the parties to consummate the Merger.
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS. Neither the Company nor
any Subsidiary nor any Stockholder shall give notice to third parties or
otherwise make any press release or other public statement concerning this
Agreement or the transactions contemplated hereby. Neither the Company nor any
Subsidiary nor any Stockholder shall grant any interview, publish any article,
report or statement, or respond to any press inquiry or other inquiry of any
third party relating to this Agreement, the business of the Company or its
Subsidiaries, the business (current and proposed) of UniCapital, the
Registration Statement (as defined below), the IPO or any other matter connected
with any of the foregoing without the express prior written approval of
UniCapital, and all inquiries and questions with respect to any of the foregoing
shall be coordinated through Robert New, Chief Executive Officer of UniCapital.
The Company, each Subsidiary and each Stockholder shall coordinate all
communications with the employees and agents of the Company and its Subsidiaries
through UniCapital prior to making any such communication. Notwithstanding the
foregoing, (i) the Company, any Subsidiary or any Stockholder may communicate,
whether orally or in writing, with any parties from whom any consents, approvals
or waivers are necessary or advisable, or to whom notice is necessary or
advisable, and (ii) this Section 8.9 shall not be interpreted to prevent the
Company, any Subsidiary or any Stockholder from disclosing information as
compelled by a court order, provided however, that prior to disclosing any
information concerning this Agreement or the transaction contemplated hereby in
response to any such court order, the Company, Subsidiary or Stockholder, as
applicable, shall provide UniCapital with prompt notice of the court order so
that UniCapital may take whatever action it deems appropriate to prohibit such
disclosure.
8.10 EXCLUSIVITY. Except with respect to this Agreement and the
transactions contemplated hereby, none of the Company, the Subsidiaries, the
Stockholders or their affiliates
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shall, and each of them shall cause its respective employees, agents and
representatives (including, without limitation, any investment banking, legal or
accounting firm retained by it or them and any individual member or employee of
the foregoing) (each, an "Agent") not to, (a) initiate, solicit or seek,
directly or indirectly, any inquiries or the making or implementation of any
proposal or offer (including, without limitation, any proposal or offer to its
shareholders or any of them) with respect to a merger, acquisition,
consolidation, recapitalization, liquidation, dissolution or similar transaction
involving, or any purchase of all or any portion of the assets or any equity
securities of, the Company or any Subsidiary (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal"), or (b) engage in any
negotiations concerning, or provide any confidential information or data to, or
have any substantive discussions with, any person relating to an Acquisition
Proposal, (c) otherwise cooperate in any effort or attempt to make, implement or
accept an Acquisition Proposal, or (d) enter into or consummate any agreement or
understanding with any person or entity relating to an Acquisition Proposal,
except for the Merger contemplated hereby. If the Company, any Subsidiary, or
any Stockholder, or any of their respective Agents, have provided any person or
entity (other than UniCapital) with any confidential information or data
relating to an Acquisition Proposal, then they shall request the immediate
return thereof. The Company and the Stockholders shall notify UniCapital
immediately if any inquiries, proposals or offers related to an Acquisition
Proposal are received by, any confidential information or data is requested
from, or any negotiations or discussions related to an Acquisition Proposal are
sought to be initiated or continued with, it or any individual or entity
referred to in the first sentence of this Section 8.10. The covenant contained
in this Section 8.10 shall not survive any termination of this Agreement
pursuant to Sections 13.1, 13.2 or 13.3.
8.11 THIRD-PARTY APPROVALS. Prior to the Closing Date, the Company and
its Subsidiaries shall satisfy any requirement for notice and approval of the
transactions contemplated by this Agreement under applicable agreements with
third parties, and shall provide UniCapital with satisfactory evidence of such
third-party approvals.
8.12 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
Company and its Subsidiaries shall satisfy any requirement for notice of the
transactions contemplated by this Agreement under any applicable collective
bargaining agreement, and shall provide UniCapital with proof that any required
notice has been provided.
8.13 NOTIFICATION OF CERTAIN MATTERS. (a) The Company and the
Stockholders shall give prompt notice to UniCapital of (i) the occurrence or
non-occurrence of any event known to any Stockholder or the Company the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty contained in Article 6 to be untrue or inaccurate in
any material respect at or prior to the Closing Date or the Merger Effective
Date and (ii) any material failure of any Stockholder or the Company to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by such person hereunder.
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(b) UniCapital shall give prompt notice to each Stockholder of
(i) the occurrence or non-occurrence of any event known to UniCapital or Newco
the occurrence of non-occurrence of which would be likely to cause any
representation or warranty contained in Article 7 to be untrue or inaccurate in
any material respect at or prior to the Closing Date or the Merger Effective
Date and (ii) any material failure of UniCapital or Newco to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder.
(c) The delivery of any notice pursuant to this Section 8.13
shall not be deemed to (i) modify the representations or warranties hereunder of
the party delivering such notice, which modification may only be made pursuant
to Section 8.14, (ii) modify the conditions set forth in Sections 9 and 10 or
(iii) limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
8.14 AMENDMENT OF SCHEDULES. (a) With respect to any schedules that are
not attached to this Agreement at the time of its execution, the Majority
Stockholders covenant and agree that such Majority Stockholders shall deliver
final and binding copies of all schedules to this Agreement (other than Schedule
6.5 and Annex II, amended and restated copies of which shall be provided by the
Majority Stockholders in accordance with Section 8.16 hereof, and the list to be
delivered pursuant to Section 6.14) not later than ten business days after
execution of this Agreement. From the date of delivery of any schedules referred
to in the preceding sentence, until and including the Closing Date, UniCapital
shall have the right to review such schedules and to accept or reject any of
them, in whole or in part, in its reasonable discretion. In the event that
UniCapital rejects any such schedule or any part thereof, the Majority
Stockholders shall have the right to revise and resubmit such schedule. Only (i)
the initial schedules attached to this Agreement at the time of its execution,
(ii) schedules accepted by UniCapital in its reasonable discretion under this
Section 8.14(a), or (iii) amended schedules as accepted under the standards and
provisions of Section 8.14(b) , shall be deemed to be a part of this Agreement
in accordance with Section 19.3 hereof.
(b) Each party hereto agrees that, with respect to the
representations and warranties of such party contained in this Agreement, such
party shall have the continuing obligation until the Merger Effective Date to
supplement or amend promptly the schedules hereto with respect to any matter
hereafter arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
schedules, provided, that no amendment or supplement to a schedule that
constitutes or reflects a material adverse change to the Company or any
Subsidiary may be made unless UniCapital consents to such amendment or
supplement; provided, further, however, that if the amendment or supplement
relates to changes in facts or circumstances occurring subsequent to the date
such schedule was accepted by UniCapital and such amendment or supplement
constitutes or reflects a material adverse change to the Company or any
Subsidiary (a "Material Adverse Amendment"), then such amendment or supplement
shall be accepted by UniCapital subject to the provisions of Section 12.2 and
12.5 hereof. No amendment of or supplement to a schedule
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shall be made later than 48 hours prior to the anticipated effectiveness of the
Registration Statement defined in Section 9.4.
8.15 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, the Company shall use its reasonable best efforts to (a) file all
information required to be filed by it pursuant to such act and (b) provide
UniCapital with all information reasonably requested and required by it to
satisfy any filing requirements it may have under such act.
8.16 PRE-CLOSING DISPOSITIONS. (a) Notwithstanding anything to the
contrary contained in this Agreement, on the same day as and immediately prior
to the Closing, the Company shall effect the Redemption. The Majority
Stockholders shall provide to UniCapital no later than ten business days prior
to the Closing Date (i) written notice of the Redemption Amount and the number
of shares of Company Stock to be redeemed, (ii) an amended and restated copy of
Annex II, which shall designate the relative amounts and percentages of cash and
stock to be distributed to each Stockholder in accordance with Section 2.2, and
(iii) an amended and restated copy of Schedule 6.5, which amended and restated
copies of Annex II and Schedule 6.5 shall reflect only those changes as may
result from the Redemption. Subject to UniCapital's approval of the Redemption
Amount and the amended and restated Annex II and Schedule 6.5, such amended and
restated Annex II and Schedule 6.5 shall become part of this Agreement in
accordance with Section 19.3 hereof.
(b) Prior to consummation of the Merger the Company shall make
a discretionary contribution with respect to its deferred compensation plans in
the amount of Three Hundred Seventy Three Thousand Six Hundred Sixty Four
Dollars ($373,664) (the "Deferred Compensation Discretionary Amount").
8.17 NON-CONTRAVENTION. The Stockholders covenant that they will not
vote their shares of Company Stock in contravention of any of the covenants
given by any of the Stockholders in this Section 8.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND
THE STOCKHOLDERS
The obligations of the Company and the Stockholders hereunder are
subject to the satisfaction on or prior to the Closing Date (or such earlier
date specified below) of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representations and warranties of UniCapital and Newco contained in Article 7
shall be accurate as of the Closing Date and as of the Merger Effective Date as
though such representations and warranties had been made as of such times; all
of the terms, covenants and conditions of this Agreement to be complied with and
performed by UniCapital and Newco on or before the
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Closing Date shall have been duly complied with and performed; and a certificate
to the foregoing effect dated the Merger Effective Date and signed by a duly
authorized agent, the President or any Vice President of UniCapital shall have
been delivered to the Stockholders.
9.2 EMPLOYMENT AGREEMENTS. The Surviving Corporation shall have
executed and delivered Employment Agreements, in the form of Annex IV attached
hereto, to each of the persons listed on Schedule 9.2 hereto.
9.3 OPINION OF COUNSEL. The Stockholders shall have received an opinion
from Morgan, Lewis & Bockius LLP, counsel for UniCapital, dated the Merger
Effective Date, to the effect that:
(a) UniCapital and Newco have been duly organized and are
validly existing in good standing under the laws of their respective states of
incorporation;
(b) this Agreement has been duly authorized, executed and
delivered by UniCapital and Newco and constitutes a valid and binding agreement
of UniCapital and Newco enforceable in accordance with its terms, except (i) as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting the
rights of creditors, (ii) as the same may be subject to the effect of general
principles of equity and (iii) that no opinion need be expressed as to the
enforceability of indemnification provisions included herein;
(c) the execution, delivery and performance of this Agreement
and the consummation of any transactions contemplated hereby will not conflict
with, or result in a breach or violation of, the Certificate of Incorporation or
Bylaws of UniCapital or Newco; and
(d) the shares of UniCapital Stock to be received by the
Stockholders on the Merger Effective Date shall be duly authorized, validly
issued, fully paid and nonassessable.
9.4 REGISTRATION STATEMENT. UniCapital shall have filed with the
Securities and Exchange Commission ("SEC") a registration statement on Form S-1
covering the offer and sale of shares of UniCapital Stock in the IPO (the
"Registration Statement"). The Registration Statement shall have been declared
effective by the SEC not later than June 30, 1998, UniCapital and the
underwriters named therein shall have executed the Underwriting Agreement and
the underwriters named therein shall have agreed to acquire, subject to the
conditions set forth in the Underwriting Agreement, the shares of UniCapital
Stock covered by the Registration Statement. There shall have been no stop-order
issued (that remains in effect) by the Securities and Exchange Commission with
respect to the Registration Statement.
9.5 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
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10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND NEWCO
The obligations of UniCapital and Newco hereunder are subject to the
satisfaction, on or prior to the Closing Date (or such earlier date specified
below), of the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
Majority Stockholders shall have delivered to UniCapital a certificate dated the
Merger Effective Date and signed by them to the effect that all of the
representations and warranties of the Majority Stockholders contained in this
Agreement shall be true on and as of the Closing Date and as of the Merger
Effective Date with the same effect as though such representations and
warranties had been made on and as of such dates, except for matters expressly
disclosed in the certificate or a schedule thereto (which shall not serve to
modify any representation or warranty made herein or in any other document or
otherwise in information supplied by the Company or any Stockholder); and each
and all of the agreements of the Stockholders and the Company to be performed on
or before the Closing Date pursuant to the terms hereof shall have been
performed.
10.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by UniCapital of the Company Stock and no
governmental agency or body shall have taken any other action or made any
request of UniCapital as a result of which the management of UniCapital deems it
inadvisable to proceed with the transactions hereunder.
10.3 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the Closing Date,
UniCapital shall have had sufficient time to review the unaudited consolidated
balance sheet of the Company and its Subsidiaries as of the end of the calendar
month most recently completed prior to the Closing Date, and the unaudited
consolidated statements of income, cash flows and stockholders' equity of the
Company and its Subsidiaries for the periods then ended, which statements shall
have disclosed no material adverse change in the financial condition of the
Company or any Subsidiary or the results of its respective operations from the
December 31, 1997 financial statements originally furnished by the Company as
set forth on Schedule 6.12, except as otherwise provided herein.
10.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, operations, assets, properties, prospects or condition (financial or
otherwise) of the Company or any Subsidiary shall have occurred, and neither the
Company nor any Subsidiary shall have suffered any material loss or damage to
any of its properties or assets, whether or not covered by insurance, since the
Interim Balance Sheet Date, which change, loss or damage materially affects or
impairs the ability of the Company or any Subsidiary to conduct its business as
now conducted or as proposed to be conducted; and UniCapital shall have received
on the Closing
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Date a certificate signed by the Majority Stockholders and dated the Merger
Effective Date to such effect.
10.5 REGULATORY REVIEW. UniCapital, through its authorized
representatives, shall have completed a satisfactory review of the practices and
procedures of the Company and its Subsidiaries including, but not limited to,
environmental and land use practices, import and export laws, compliance with
contracts and federal, state and local laws and regulations governing the
operations of the Company and its Subsidiaries, which review reflects compliance
with all applicable laws governing the Company and its Subsidiaries, disclosing
no material actual or probable violations, compliance problems, required capital
expenditures or other substantive environmental, real estate and land use
related concerns and which review is otherwise satisfactory in all respects to
UniCapital, in its sole discretion.
10.6 STOCKHOLDERS' RELEASE. At the Closing Date, the Stockholders shall
have delivered to UniCapital an instrument dated the Merger Effective Date
releasing the Company and its Subsidiaries from any and all claims of
Stockholders against the Company or any of its Subsidiaries, except claims for
benefits accrued by the Stockholders pursuant to any Benefit Plan.
10.7 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.2
shall have executed and delivered an Employment Agreement in the form of Annex
IV attached hereto.
10.8 OPINION OF COUNSEL. UniCapital shall have received an opinion from
Ray, Quinney & Nebeker, counsel to the Stockholders, dated the Merger Effective
Date, in form and substance satisfactory to UniCapital, to the effect that, with
respect to the Company:
(a) each of the Company and its Subsidiaries has been duly
organized and is validly existing and in good standing under the laws of the
state of its incorporation;
(b) to the knowledge of such counsel, the Company and each of
the Subsidiaries are duly authorized, qualified and licensed under all
applicable laws, regulations, ordinances or orders of public authorities to
carry on their respective business in the places and in the manner now
conducted, except to the extent that the failure to be so qualified would not
have a material adverse effect on the Company and its Subsidiaries, taken as a
whole;
(c) the authorized and outstanding capital stock of the
Company is as represented by the Stockholders in this Agreement and has been
duly and validly authorized and issued, is fully paid and nonassessable and was
not issued in violation of the preemptive rights of any stockholder;
(d) all of the outstanding capital stock of each Subsidiary is
owned by the Company or other Subsidiaries and has been duly and validly
authorized and issued, is fully paid and nonassessable, and was not issued in
violation of the preemptive rights of any stockholder;
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(e) to the knowledge of such counsel, neither the Company nor
any Subsidiary has any outstanding options, warrants, calls, conversion rights
or other commitments of any kind to issue or sell any of its capital stock;
(f) this Agreement has been duly authorized, executed and
delivered by the Company and the Stockholders and constitutes a valid and
binding agreement of the Company and the Stockholders enforceable in accordance
with its terms, except as such enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement and other similar laws
relating to or affecting the rights of creditors and except (i) as the same may
be subject to the effect of general principles of equity and (ii) that no
opinion need be expressed as to the enforceability of indemnification provisions
included herein;
(g) upon consummation of the Merger contemplated by this
Agreement, UniCapital will receive good title to the Company Stock, free and
clear of all liens, security interests, pledges, charges, voting trusts,
equities, restrictions, encumbrances and claims of every kind;
(h) to the knowledge of such counsel, except to the extent set
forth on Schedule 6.23, neither the Company nor any Subsidiary is in violation
of or default under any law or regulation, or under any order of any court,
commission, board, bureau, agency or instrumentality wherever located and there
are no claims, actions, suits or proceedings pending, or threatened against or
affecting the Company or any Subsidiary, at law or in equity, or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality wherever located;
(i) to the knowledge of such counsel, except to the extent set
forth on Schedule 6.17, neither the Company nor any Subsidiary is in default
under any of its material contracts or agreements or has received notice of such
default;
(j) except for such notice and authorization as may be
required pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
no notice to, consent, authorization, approval or order of any court or
governmental agency or body or of any other third party is required in
connection with the execution, delivery or consummation of this Agreement by any
Stockholders or for the transfer to UniCapital of the Company Stock; and
(k) the execution of this Agreement and the performance of the
obligations hereunder will not violate or result in a breach or constitute a
default under any of the terms or provisions of the Company's or any
Subsidiary's charter documents or bylaws or, to the knowledge of such counsel,
of any lease, instrument, license, permit or any other agreement to which the
Company or any Subsidiary is a party or by which the Company, any Subsidiary or
any Stockholder is bound.
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Such opinion shall include any other matters incident to the matters set forth
herein as agreed to by the parties and their respective counsel.
10.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
10.10 GOOD STANDING CERTIFICATES. Stockholders shall have delivered to
UniCapital certificates, dated as of a date no earlier than five days prior to
the Closing Date, duly issued by the appropriate governmental authority in the
respective states of incorporation of the Company and each Subsidiary and,
unless waived by UniCapital, in each state, respectively, in which the Company
and the Subsidiaries are authorized to do business, showing that the Company and
the Subsidiaries are in good standing and authorized to do business and that all
state franchise and/or income tax returns and taxes for the Company and the
Subsidiaries for all periods prior to the dates of such certificates have been
filed and paid.
10.11 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC, and UniCapital and the representatives of
the underwriters named in the Registration Statement shall have executed the
Underwriting Agreement. There shall have been no stop-order issued (that remains
in effect) by the Securities and Exchange Commission with respect to the
Registration Statement.
10.12 REPAYMENT OF INDEBTEDNESS; PRE-CLOSING DISTRIBUTIONS. Prior to
the Closing Date, the Stockholders shall have (i) repaid to the Company
(including its Subsidiaries) in full all amounts owing by the Stockholders to
such entities and (ii) completed all transactions contemplated by Section 8.16.
10.13 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
11. COVENANTS OF UNICAPITAL
11.1 LEASES. At the Merger Effective Date, the Surviving Corporation
shall enter into lease arrangements with each of the persons or entities listed
on Schedule 11.1, if any, with respect to the corresponding properties or assets
listed on Schedule 11.1 in accordance with the terms and conditions of the form
of lease agreement, if any, attached hereto as Annex V.
11.2 UNICAPITAL STOCK OPTIONS. Effective upon the effective date of
the Registration Statement (but subject in all events to the consummation of the
Merger), UniCapital shall cause options to purchase that number of shares of
UniCapital Stock having a fair market value on the effective date of the
Registration Statement, based upon the IPO price per share set forth in the
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Underwriting Agreement, equal to 6.25% of the Effective Date Consideration
(valuing the UniCapital Stock to be issued as part of the Effective Date
Consideration at the IPO price per share for the purposes of this Section 11.2)
to be granted to those employees of the Surviving Corporation (other than
Richard C. Emery, Alvin Emery, Jack Emery, J. Robert Bonnemort, and David A.
DiCesaris) after the Closing as are designated by the principal executive
officer of the Surviving Corporation who is entering into an Employment
Agreement pursuant to Section 9.2 hereof (or such other officer designated by
the Surviving Corporation and acceptable to UniCapital). Not later than seven
days prior to the effective date of the Registration Statement, the officer
designating the recipients of such options shall provide to UniCapital a written
list of the names of those designated recipients who will receive options
exercisable at the IPO price and the relative percentages of the 6.25% option
pool provided under this Section 11.2 to be awarded to each recipient, as well
as the percentage of options, if any, to be reserved for future issuance. Any
options reserved for future issuance shall be granted at an exercise price equal
to the fair market value of UniCapital Stock as of the date of grant. All
options shall be granted in accordance with UniCapital's policies, and
authorized and issued under the terms of UniCapital's principal stock option
plan for the benefit of employees of UniCapital and its subsidiaries.
11.3 INFORMATION FILING. To the extent the Unified Transaction is a
transaction that falls within Section 351 of the Code, UniCapital shall file all
information required to be filed by it pursuant to Treasury Regulation
ss.1.351-3(b).
11.4 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, UniCapital shall use its reasonable best efforts to (a) file all
information required to be filed by it pursuant to such act and (b) provide the
Company with all information reasonably requested and required by it to satisfy
any filing requirements it may have under such act.
11.5 RELEASE FROM GUARANTEES; INDEBTEDNESS. Not later than 120 days
following the Merger Effective Date, UniCapital shall cause the Stockholders to
be released from any and all personal guarantees of the indebtedness of the
Company at the Closing Date set forth on Schedule 11.5; provided, that, in the
event that the beneficiary of any such guarantee is unwilling to permit the
substitution of UniCapital's guarantee for the Stockholder's guarantee or the
assumption by UniCapital of the indebtedness, or in the event that the lender
with respect to the indebtedness to which such guarantee relates accelerates
such indebtedness whether or not prior to such 120 day period because of the
consummation of the transactions contemplated hereby, UniCapital shall repay up
to that amount of recourse indebtedness set forth on Schedule 11.5. The failure
of the Company to obtain the consent of its lenders to the change of control of
the Company or the substitution of a UniCapital guaranty or the assumption by
UniCapital of the indebtedness set forth on Schedule 11.5 shall not be deemed a
breach hereunder.
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12. INDEMNIFICATION; SURVIVAL
12.1 GENERAL INDEMNIFICATION BY MAJORITY STOCKHOLDERS. Subject to the
limitations contained in Section 12.5 hereof, each Majority Stockholder jointly
and severally covenants and agrees that such Majority Stockholder will
indemnify, defend, protect and hold harmless UniCapital, Newco and the Surviving
Corporation and their respective officers, stockholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parents, agents, employees, successors
and assigns at all times from and after the date of this Agreement until the
Expiration Date (as defined in Section 12.6) from and against all claims,
damages, losses, liabilities, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) (collectively,
"Losses") incurred by UniCapital, Newco or the Surviving Corporation as a result
of or arising from (a) any breach of the representations and warranties made by
the Majority Stockholders set forth herein or on the schedules or certificates
delivered in connection herewith, (b) any nonfulfillment of any covenant or
agreement on the part of the Stockholders or the Company under this Agreement,
(c) the business, operations or assets of the Company and its Subsidiaries prior
to the Merger Effective Date or the actions or omissions of the Company's (or
any of its Subsidiaries') directors, officers, stockholders, employees or agents
prior to the Merger Effective Date, other than Losses arising from matters
expressly disclosed in the Financial Statements, this Agreement or the Schedules
to this Agreement, or (d) any liability under the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or other federal or state
law or regulation, at common law or otherwise, arising out of or based upon (i)
any untrue statement or alleged untrue statement of a material fact relating to
the Company (including its Subsidiaries) or the Stockholders contained in any
preliminary prospectus, the Registration Statement or any prospectus forming a
part thereof, or any amendment thereof or supplement thereto (including any
additional registration statement filed pursuant to Rule 462(b) under the
Securities Act), which statement was provided or was based upon information or
documents provided to UniCapital or its counsel by the Company (including its
Subsidiaries) or the Stockholders, or (ii) any omission or alleged omission to
state therein a material fact relating to the Company (including its
Subsidiaries) or the Stockholders required to be stated therein or necessary to
make the statements therein not misleading, which information was not provided
to UniCapital or its counsel by the Company (including its Subsidiaries) or the
Stockholders; provided, however, that such indemnity shall not inure to the
benefit of UniCapital, Newco or the Surviving Corporation to the extent that
such untrue statement (or alleged untrue statement) was made in, or such
omission (or alleged omission) occurred in, any preliminary prospectus and the
Stockholders provided, in writing, corrected information to UniCapital for
inclusion in the final prospectus, and such information was not so included.
12.2 SPECIFIC INDEMNIFICATION BY MAJORITY STOCKHOLDERS. Subject to the
limitations contained in Section 12.5 hereof, notwithstanding any disclosure
made in this Agreement or in the schedules or exhibits hereto, and
notwithstanding any investigation by UniCapital or Newco, each Majority
Stockholder jointly and severally covenants and agrees that such Majority
Stockholder will indemnify, defend, protect and hold harmless UniCapital, Newco
and the Surviving Corporation and their respective officers, stockholders,
directors, divisions, subdivisions, affiliates, subsidiaries, parents, agents,
employees, successors and assigns at all
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times from and after the date of this Agreement, from and against all Losses
incurred by UniCapital, Newco or the Surviving Corporation as a result of or
incident to: (a) the Company's or any Subsidiary's failure to qualify to do
business in any jurisdiction identified on Schedule 6.1(a); (b) the existence of
liabilities of the Company (including its Subsidiaries) in excess of the
liabilities set forth on Schedule 6.13, to the extent of such excess; (c) the
failure of the Company, any Subsidiary or the Stockholders to file all required
Form 5500's prior to the Merger Effective Date; (d) the litigation matters
listed on Schedule 6.25; (e) the tax matters listed on Schedule 6.27; (f) those
Scheduled Payments delinquent for 90 days or longer as of the Closing Date, net
of applicable reserves reflected on the balance sheet of the Company immediately
prior to the preparation of the Closing Date Balance Sheet; (g) with respect to
the Redemption described in Section 8.16 hereof, the determination of the value
accorded to the shares of Company Stock redeemed, the selection of which
Stockholders' shares of Company Stock were redeemed, the determination of the
relative number of shares of Company Stock redeemed or the selection of which
shares of Company Stock were redeemed; (h) the determination of the relative
value accorded to shares of common and preferred Company Stock as reflected on
Annex II; (i) the Company's general partnership interest in Commercial Union
Associates, a Utah general partnership; and (j) any Material Adverse Amendments
pursuant to Section 8.14(b) hereof.
12.3 INDEMNIFICATION BY UNICAPITAL AND NEWCO. Subject to the
limitations contained in Section 12.5 hereof, UniCapital and Newco, jointly and
severally, covenant and agree that they will indemnify, defend, protect and hold
harmless the Stockholders, their respective heirs, personal representatives, and
successors at all times from and after the date of this Agreement from and
against all Losses incurred by the Stockholders as a result of or arising from
(a) any breach of the representations and warranties made by UniCapital and
Newco set forth herein or on the schedules or certificates attached hereto, (b)
any nonfulfillment of any agreement on the part of UniCapital under this
Agreement, or (c) any liability under the Securities Act, the Exchange Act or
other federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to UniCapital (including all of the companies, other than
the Company, acquired by UniCapital as part of the Unified Transaction, but only
to the extent that UniCapital is actually indemnified by such other companies
for such liability) contained in any preliminary prospectus, the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto (including any registration statement filed pursuant to Rule
462(b) under the Securities Act), or arising out of or based upon any omission
or alleged omission to state therein a material fact relating to UniCapital
(including all of the companies, other than the Company, acquired by UniCapital
as part of the Unified Transaction, but only to the extent that UniCapital is
actually indemnified by such other companies for such liability) required to be
stated therein or necessary to make the statements therein not misleading, which
liability is not the subject of indemnification of UniCapital, Newco and the
Surviving Corporation pursuant to Section 12.1(c) above.
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12.4 THIRD-PARTY CLAIMS.
(a) In order for a party hereto eligible to be indemnified
hereunder (an "Indemnified Party") to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of or involving a
claim or demand made by any person or entity against the Indemnified Party (a
"Third-Party Claim"), such Indemnified Party must notify the parties obligated
to provide indemnification pursuant to Section 12.1, 12.2, or 12.3 hereof (each,
an "Indemnifying Party") in writing, and in reasonable detail, of the
Third-Party Claim within 30 business days after receipt by such Indemnified
Party of written notice of the Third-Party Claim; provided, however, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been actually
prejudiced as a result of such failure. Such notice shall state the nature and
the basis of such claim and a reasonable estimate of the amount thereof.
Thereafter, the Indemnified Party shall deliver to the Indemnifying Party,
within five business days after the Indemnified Party's receipt thereof, copies
of all notices and documents (including court papers) received by the
Indemnified Party relating to the Third-Party Claim. To the extent the
Indemnifying Party has actually paid any amount to the Indemnified Party in
respect of any Loss in connection with such Third-Party Claim, the Indemnifying
Party shall have a right of subrogation with respect to such Third-Party Claim
to the extent of such payment.
(b) The Indemnifying Party shall have right to defend and
settle, at its own expense and by its own counsel (provided that such counsel is
not reasonably objected to by the Indemnified Party and provided further that
selection for these purposes of Ray, Quinney & Nebeker by the Majority
Stockholders, absent any actual or reasonably likely conflict of interest with
respect to parties or defenses, shall not be objected to by UniCapital), any
Third-Party Claim as the Indemnifying Party pursues the same in good faith and
diligently and so long as the Third-Party Claim does not relate to an actual or
potential Loss to which Section 12.4(e) applies in which the Indemnified Party
is UniCapital, Newco or the Surviving Corporation. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified Party
of its intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. Notwithstanding the foregoing, the Indemnified Party
shall have the right to participate in any matter through counsel of its own
choosing at its own expense (unless there is a conflict of interest that
prevents counsel for the Indemnifying Party from representing the Indemnified
Party, in which case the Indemnifying Party will reimburse the Indemnified Party
for the expenses of its counsel). After the Indemnifying Party has notified the
Indemnified Party of its intention to undertake to defend or settle any such
asserted liability, and for so long as the Indemnifying Party diligently pursues
such defense, the Indemnifying Party shall not be liable for any additional
legal expenses incurred by the Indemnified Party in connection with any defense
or settlement of such asserted liability, except to the extent such
participation is requested by the Indemnifying Party, in which event the
Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable
additional legal expenses and out-of-pocket expenses, and except in the case of
a Third-Party Claim relating to an actual or potential Loss to which
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Section 12.4(e) applies in which the Indemnified Party is UniCapital, Newco or
the Surviving Corporation.
(c) No Indemnifying Party shall, in the defense of any
Third-Party Claim, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) or enter into any settlement, except with
the written consent of the Indemnified Party, which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim or
matter.
(d) If the Indemnifying Party does not assume the defense of
any Third-Party Claim, then the Indemnified Party may defend against such
Third-Party Claim in such manner as it deems appropriate at the expense of the
Indemnifying Party.
(e) Notwithstanding anything to the contrary in this Article
12, if at any time, in the reasonable opinion of UniCapital, Newco or the
Surviving Corporation as the Indemnified Party (notice of which opinion shall be
given in writing to the Indemnifying Party), any Third-Party Claim seeks
material prospective relief which could have a material adverse effect on any
such Indemnified Party or any subsidiary, then such Indemnified Party shall have
the right to control or assume (as the case may be) the defense of any such
Third-Party Claim and the amount of any judgment or settlement and the
reasonable costs and expenses of defense (including, but not limited to, fees
and disbursements of counsel and experts, as well as any sampling, testing,
investigation, removal, treatment or remediation undertaken by UniCapital, Newco
or the Surviving Corporation and all counseling or engineering fees and expenses
related thereto) shall be included as part of the indemnification obligations of
the Indemnifying Party hereunder. If the Indemnified Party elects to exercise
such right, then the Indemnifying Party shall have the right to participate in,
but not control, the defense of such Third-Party Claim at the sole cost and
expense of the Indemnifying Party.
12.5 LIMITATIONS ON INDEMNIFICATION. (a) UniCapital shall not be
entitled to indemnification as provided pursuant to this Section 12 with respect
to any otherwise indemnifiable claims for which UniCapital has in fact been paid
pursuant to Section 3.1 hereof.
(b) No Indemnified Party shall assert any claim (other than a
Third-Party Claim) for indemnification hereunder until such time as the
aggregate of all claims which such Indemnified Party may have against an
Indemnifying Party plus any Indemnifiable Decrease shall equal Three Hundred
Ninety Thousand Nine Hundred Sixty Dollars ($390,960) (the "Basket Limitation"),
at which time an Indemnified Party shall be entitled to seek indemnification for
all claims pursuant to this Article 12, but only to the extent such claims, in
the aggregate, exceed the Basket Limitation. For purposes of the preceding
sentence, UniCapital, Newco and the Surviving Corporation shall be considered to
be a single Indemnifying and Indemnified Party and the Majority Stockholders
shall be considered to be a single Indemnifying and Indemnified Party.
Notwithstanding the foregoing, on each date on which any Earn-Out Consideration
is paid, the Basket Limitation shall be increased by that
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amount (the "Basket Adjustment") equal to one percent (1%) of any such Earn-Out
Consideration, without prejudice to UniCapital's receipt of or right to receive
indemnification for claims exceeding the amount of the Basket Limitation in
effect at the time such claims were brought. If the Basket Limitation is
adjusted pursuant to the preceding sentence after such time as any Indemnified
Party, pursuant to this Article 12, has collected an amount in excess (such
excess amount is referred to as the "Excess Indemnity") of the Basket Limitation
(prior to giving effect to the applicable Basket Adjustment), then such
Indemnified Party, within 10 business days after the final determination of such
Earn-Out Consideration, shall pay to the Indemnifying Party an amount equal to
the lesser of the applicable Basket Adjustment or the Excess Indemnity. In
addition, notwithstanding any provision of this Agreement to the contrary, for
the purposes of preventing a double recovery the Stockholders shall not be
obligated to indemnify UniCapital or any other indemnified party pursuant to
Section 12.1 or 12.2 with respect to any particular act, omission, condition or
event if and to the extent that the loss resulting or arising from such act,
omission, condition or event has, directly or indirectly, been taken into
account in the computation of any Net Worth Deficiency provided for in Section
3.1. Notwithstanding any other term of this Agreement, in no event shall any
Majority Stockholder be liable under this Article 12 for an amount which exceeds
the aggregate value (determined at the Merger Effective Date) of the Merger
Consideration received by such Majority Stockholder under this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, the
limitations upon indemnification contained in this Section 12.5 shall not apply
to Losses arising out of: (i) any breach of the representations and warranties
of the Majority Stockholders contained in Sections 6.3, 6.5, 6.14, 6.27 and 6.33
hereof; (ii) the Company's failure to qualify to do business in any jurisdiction
identified on Schedule 6.1(a); (iii) any tax matters identified on Schedule
6.27; (iv) litigation net of applicable reserves reflected on the consolidated
balance sheet of the Company at the Interim Balance Sheet Date; (v) with respect
to the Redemption described in Section 8.16 hereof, the determination of the
value accorded to the shares of Company Stock redeemed, the selection of which
Stockholders' shares of Company Stock were redeemed, the determination of the
relative number of shares of Company Stock redeemed or the selection of which
shares of Company Stock were redeemed; (vi) the determination of the relative
value accorded to shares of common and preferred Company Stock as reflected on
Annex II; and (vii) a Material Adverse Amendment pursuant to Section 8.14(b)
hereof.
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The parties agree that
representations and warranties made by the parties in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive for a period of one year from the Merger Effective Date (which date is
hereinafter called the "Expiration Date"), except that:
(a) the representations and warranties contained in Section
6.27 hereof shall survive until such time as the limitations period has run for
all tax periods ended on or prior to the Merger Effective Date, which shall be
deemed to be the Expiration Date for purposes of this
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clause (a) and claims arising from a breach of the representations and
warranties contained in such Section 6.27;
(b) the representations and warranties contained in Section
6.28(g) hereof shall survive until such time as one full fiscal year's cycle of
transactions occurring entirely within the twenty-first century shall have been
processed and UniCapital's consolidated financial statements for the fiscal year
in which the last such transaction to be processed occurred have been audited,
which shall be deemed to be the Expiration Date for purposes of this clause (b)
and claims arising from a breach of the representations and warranties contained
in such Section 6.28(g);
(c) the representations and warranties contained in Section
6.33 hereof shall survive for a period of five years from the Merger Effective
Date, which shall be deemed the Expiration Date for purposes of this clause (c)
and claims arising from a breach of the representations and warranties contained
in such Section 6.33;
(d) solely for purposes of Section 12.1(d) hereof, and solely
to the extent that UniCapital actually incurs liability under the Securities
Act, the Exchange Act, or any other federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for purposes of this clause (d) and claims arising under such
laws;
(e) the representations and warranties of the Majority
Stockholders contained in Section 6.5 hereof shall survive the Merger Effective
Date without time limitation; and
(f) any representations and warranties which serve as a basis
of the indemnity obligations of the Majority Stockholders under Section 12.2
shall survive the Merger Effective Date without time limitation.
13. TERMINATION OF AGREEMENT
13.1 TERMINATION BY UNICAPITAL. UniCapital may, by notice in the manner
hereinafter provided on or before the Closing Date, terminate this Agreement (a)
if a material default shall be made by the Stockholders in the observance or due
and timely performance of any of the covenants, agreements or conditions
contained herein, and the curing of such default shall not have been made on or
before the Closing Date and shall not reasonably be expected to occur, (b) if
UniCapital in its sole judgment determines that any condition exists which has
made or could reasonably be expected to make any of the representations or
warranties contained in Article 6 hereof untrue in any material respect, or (c)
if UniCapital in its sole judgment determines that information disclosed on the
schedules to the Agreement delivered pursuant to Section 8.14 has or could
reasonably be expected to have a material adverse effect on the
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business, operations, assets, properties, prospects or condition (financial or
otherwise) of the Company or any Subsidiary.
13.2 TERMINATION BY THE STOCKHOLDERS. Prior to the initial filing of
the Registration Statement with the SEC, the Stockholders may, by notice in the
manner hereinafter provided on or before such initial filing, terminate this
Agreement (a) in accordance with Section 17.4(b) or (b) if a material default
shall be made by UniCapital in the observance or due and timely performance of
any of the covenants, agreements or conditions contained herein, and the curing
of such default shall not have been made on or before such initial filing. From
and after the initial filing of the Registration Statement with the SEC, the
Stockholders shall have no right to terminate this Agreement.
13.3 AUTOMATIC TERMINATION. This Agreement shall terminate
automatically:
(a) if the Registration Statement has not been declared
effective by June 30, 1998;
(b) if, between the Closing Date and the Merger Effective
Date, the Underwriting Agreement is terminated pursuant to the terms thereof;
(c) if the Merger Effective Date has not occurred within 10
business days after the Closing Date; or
(d) upon the date that the number of shares of UniCapital
Stock to be issued (other than as Earn-Out Consideration) to the persons who
will transfer property to UniCapital in the Unified Transaction can be
determined as a fixed number of shares, unless those same persons shall own
immediately after the Unified Transaction eighty percent (80%) or more of the
UniCapital Stock that will be issued and outstanding immediately after the
Unified Transaction.
13.4 LIQUIDATED DAMAGES. If the Merger fails to occur because of the
default of the Company or the Stockholders, then, in addition to the other
remedies available to UniCapital at law for fraud, in equity or pursuant to this
Agreement, the Majority Stockholders shall pay to UniCapital the sum of $500,000
as liquidated damages. It is hereby agreed that UniCapital's damages in the
event of a termination or default by the Company hereunder are uncertain and
impossible to ascertain and that the foregoing constitutes a reasonable
liquidation of such damages and is intended not as penalty but as liquidated
damages.
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14. NONCOMPETITION AND NONSOLICITATION
14.1 NONCOMPETITION.
(a) In order to protect the value and goodwill of the Company,
its Subsidiaries and their respective businesses, each Stockholder covenants
that, for the period ending two years after the Closing Date, such Stockholder
will not, directly or indirectly, own, manage, operate, join, control, finance
or participate in the ownership, management, operation, control or financing of,
or be connected as a partner, principal, agent, representative, consultant or
otherwise with, or use or permit such Stockholder's name to be used in
connection with, any business or enterprise which is engaged directly or
indirectly in competition anywhere in the United States with the business
conducted by UniCapital, the Surviving Corporation or any of its or their
respective subsidiaries or affiliates or with any business engaged in
originating, servicing or securitizing leases or other specialty financing
products or services (the "Restricted Business"). Each Stockholder recognizes
that the Restricted Business is expected to be conducted throughout the United
States and that more narrow geographical limitations of any nature on this
non-competition covenant (and the non-solicitation covenant set forth in
subsection (b)) are therefore not appropriate. The foregoing restriction shall
not be construed to prohibit the ownership by a Stockholder as a passive
investment of not more than five percent of any class of securities of any
corporation which is engaged in any of the foregoing businesses having a class
of securities registered pursuant to Section 12 of the Exchange Act. Provided,
however, that as to the Minority Stockholders the Restricted Business shall be
restricted only as to include the business of the Company or any Subsidiary.
(b) Each Stockholder further covenants that for the period
ending two years after the Closing Date, such Stockholder will not, either
directly or indirectly, (i) call on or solicit any customers or prospective
customers of the Restricted Business, or (ii) solicit the employment of any
person who is employed by UniCapital, the Surviving Corporation or any of its or
their respective subsidiaries or affiliates in the Restricted Business during
such period.
(c) Each Stockholder recognizes and acknowledges that by
reason of such Stockholder's relationship to the Company, such Stockholder has
had access to confidential information relating to the Restricted Business. Each
Stockholder acknowledges that such confidential information is a valuable and
unique asset and covenants that such Stockholder will not disclose any such
confidential information after the Closing Date to any person for any reason
whatsoever.
14.2 DAMAGES. Each Stockholder acknowledges and agrees that measuring
economic losses to UniCapital and the Surviving Corporation as a result of the
breach of the foregoing covenants in this Article 14 would be impossible, and
that any breach of the foregoing covenants would result in immediate and
irreparable damage to UniCapital and the Surviving Corporation for which they
would have no other adequate remedy. Accordingly, the Stockholders agree that,
in the event of a breach by them of any of the foregoing covenants, such
covenants may be
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enforced by UniCapital or the Surviving Corporation by, without limitation,
injunctions and restraining orders.
14.3 REASONABLE RESTRAINT. The parties agree that the foregoing
covenants in this Article 14 impose a reasonable restraint upon the Stockholders
in light of the activities and business of UniCapital on the date of the
execution of this Agreement and the current and future plans of UniCapital and
the Surviving Corporation (as successors to the businesses of the Company), and
that any violation will result in irreparable injury to UniCapital.
14.4 SEVERABILITY; REFORMATION. The covenants in this Article 14 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, if any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
14.5 INDEPENDENT COVENANT. All of the covenants in this Article 14
shall be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of any Stockholder
against the Company, any Subsidiary, the Surviving Corporation or UniCapital,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement of such covenants. The parties specifically agree
that the period of two years stated above shall be computed by excluding from
such computation any time during which any Stockholder is in violation of any
provision of this Article 14 and any time during which there is pending in any
court of competent jurisdiction any action (including any appeal from any
judgment) brought by any person, whether or not a party to this Agreement, in
which action UniCapital or the Surviving Corporation seek to enforce the
agreements and covenants of the Stockholders or in which any person contests the
validity of such agreements and covenants or their enforceability or seeks to
avoid their performance or enforcement.
14.6 MATERIALITY. The Stockholders hereby acknowledge and agree that
the covenants contained in this Article 14 are a material and substantial part
of this transaction and are entered into in connection with and as an inducement
to the acquisition by UniCapital and Newco of the business of the Company.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that they
have in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company and its Subsidiaries, such as
lists of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of the Company and its Subsidiaries and such
companies' respective businesses. The Stockholders agree that they will
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not disclose any confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except to
authorized representatives of UniCapital or as may be required by law or order
of a court of competent jurisdiction, unless the Stockholders can show that such
information has become known to the public generally through no fault of the
Stockholders. Prior to disclosing any confidential information required by law
or order of a court of competent jurisdiction, the Stockholders shall provide
UniCapital with prompt notice of the disclosure requirement so that UniCapital
may take whatever action it deems appropriate to prohibit such disclosure. In
the event of a breach or threatened breach by the Stockholders of the provisions
of this Section 15.1, UniCapital and the Surviving Corporation shall be entitled
to an injunction restraining Stockholders from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
UniCapital and the Surviving Corporation from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
15.2 UNICAPITAL. UniCapital recognizes and acknowledges that it has in
the past, currently has, and prior to the Closing Date will have, access to
certain confidential information solely of the Company and its Subsidiaries in
connection with their respective businesses. UniCapital agrees that, (i) prior
to the Closing Date, or, (ii) if this Agreement terminates prior to the Closing
Date, then indefinitely, it will not disclose any such confidential information
to any person, firm, corporation, association, or other entity for any purpose
or reason whatsoever without prior written consent of the Stockholders except as
may be required by law or order of a court of competent jurisdiction, unless
UniCapital can show that such information has become known to the public
generally through no fault of UniCapital. Prior to disclosing any confidential
information required by law or order of a court of competent jurisdiction,
UniCapital shall provide the Stockholders with prompt notice of the disclosure
requirement so that the Stockholders may take whatever action they deem
appropriate to prohibit such disclosure. In the event of a breach or threatened
breach by UniCapital of the provisions of this Section 15.2, the Stockholders
shall be entitled to an injunction restraining UniCapital from disclosing, in
whole or in part, such confidential information. Nothing contained herein shall
be construed as prohibiting the Stockholders from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
15.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, UniCapital, the Surviving Corporation and the Stockholders
agree that, in the event of a breach by any of them of the foregoing covenant,
the covenant may be enforced against them by injunctions and restraining orders.
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16. LOCK-UP AGREEMENTS
16.1 AGREEMENT. In connection with the IPO, for good and valuable
consideration, and to induce the underwriters that may participate in the IPO to
continue their efforts in connection with the IPO, each Stockholder hereby
agrees that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of such underwriters, it will not, during the period
commencing on the date of this Agreement and ending 180 days after the date of
the final prospectus contained in the Registration Statement relating to the IPO
(the "Prospectus"), (a) offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of UniCapital Stock or any securities
convertible into or exercisable or exchangeable for UniCapital Stock or (b)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of UniCapital Stock,
whether any such transaction described in clause (a) or (b) above is to be
settled by delivery of UniCapital Stock or such other securities, in cash or
otherwise. In addition, each Stockholder agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters that
may participate in the IPO, it will not, during the period commencing on the
date of this Agreement and ending 180 days after the date of the Prospectus,
make any demand for or exercise any right with respect to, the registration of
any shares of UniCapital Stock or any security convertible into or exercisable
or exchangeable for Common Stock.
16.2 INTENDED THIRD-PARTY BENEFICIARIES. Each Stockholder agrees that
the foregoing shall be binding upon their transferees, successors, assigns,
heirs, and personal representatives and shall benefit and be enforceable by the
underwriters in the IPO. Each Stockholder acknowledges and agrees that such
underwriters and Morgan Stanley & Co. Incorporated are intended third-party
beneficiaries of the provisions of this Article 16, and that Morgan Stanley &
Co. Incorporated on behalf of such underwriters shall be entitled to enforce the
covenants contained in this Article 16. In furtherance of the foregoing,
UniCapital and its transfer agent are hereby authorized to decline to make any
transfer of securities if such transfer would constitute a violation or breach
of this Article 16. The Stockholders also acknowledge and agree that none of the
companies to be acquired as part of the Unified Transaction shall have any
rights as intended third-party beneficiaries under this Agreement.
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK
17.1 INVESTMENT INTENT. The Stockholders acknowledge and agree that the
shares of UniCapital Stock to be delivered to the Stockholders pursuant to this
Agreement have not been and will not be registered under the Securities Act and
therefore may not be resold without compliance with the Securities Act. The
Stockholders represent and warrant that the shares of UniCapital Stock to be
acquired by the Stockholders pursuant to this Agreement are being
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<PAGE> 65
acquired solely for their own account, for investment purposes only, and with no
present intention of distributing, selling or otherwise disposing of it in
connection with a distribution.
17.2 COMPLIANCE WITH LAW. The Stockholders covenant, warrant and
represent that none of the shares of UniCapital Stock issued to such
Stockholders will be offered, sold, assigned, pledged, hypothecated, transferred
or otherwise disposed of except after full compliance with all of the applicable
provisions of the Securities Act and the rules and regulations of the SEC
thereunder, and except after full compliance with any applicable state
securities laws.
17.3 ECONOMIC RISK; SOPHISTICATION. The Stockholders represent and
warrant that they are able to bear the economic risk of an investment in
UniCapital Stock acquired pursuant to this Agreement and can afford to sustain a
total loss of such investment. The Stockholders further represent and warrant
that they (a) fully understand the nature, scope and duration of the limitations
on transfer contained in this Agreement and (b) have such knowledge and
experience in financial and business matters that they are capable of evaluating
the merits and risks of the proposed investment and therefore have the capacity
to protect their own interests in connection with the acquisition of the
UniCapital Stock.
17.4 INFORMATION SUPPLIED.
(a) The Stockholders represent and warrant that they have had
an adequate opportunity to ask questions and receive answers from the officers
of UniCapital concerning UniCapital, its business, operations, plans and
strategy, and the background and experience of its officers and directors. The
Stockholders represent and warrant that they have asked any and all questions
that they may have in the nature described in the preceding sentence and that
all such questions have been answered to their satisfaction.
(b) Each Stockholder represents and warrants that such
Stockholder has received the draft Registration Statement, including the draft
preliminary prospectus that forms a part thereof, delivered to such Stockholder
on or about February 14, 1998, that describes, among other things, UniCapital,
the Merger, the other acquisitions proposed to be undertaken by UniCapital
simultaneously with the Merger and the target companies of such other
acquisitions. Each Stockholder represents and warrants that such Stockholder has
reviewed such draft Registration Statement and draft preliminary prospectus and
has had adequate opportunity to ask questions of and receive answers to such
Stockholder's satisfaction from the officers of UniCapital concerning the
matters described therein.
18. SECURITIES LEGENDS
The certificates evidencing the UniCapital Stock to be received by the
Stockholders hereunder will bear a legend substantially in the form set forth
below and containing such other
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information as UniCapital may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES OR BLUE SKY LAWS.
SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
SECURITIES ACT AND ANY STATE SECURITIES OR BLUE SKY LAWS,
UNLESS, IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION) OF COUNSEL SATISFACTORY TO
THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
In addition, such certificates shall also bear (a) a legend reflecting the
restrictions contained in Article 16 and (b) such other legends as counsel for
UniCapital reasonably determines are required under the applicable laws of any
state.
19. GENERAL
19.1 COOPERATION. The Majority Stockholders and UniCapital shall each
deliver or cause to be delivered to the other on the Closing Date, and at such
other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The Majority Stockholders will cooperate and use their best
efforts to have the officers, directors and employees of the Company prior to
the Closing Date cooperate with UniCapital on and after the Closing Date in
furnishing information, evidence, testimony and other assistance in connection
with any actions, proceedings, arrangements or disputes of any nature with
respect to matters pertaining to all periods prior to the Closing Date.
19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of UniCapital, and the heirs and legal representatives of the
Stockholders.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company, UniCapital and Newco and supersedes any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only
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by a written instrument executed by the Stockholders (subject to the limitations
set forth below), the Company, UniCapital and Newco acting through their
respective officers, duly authorized by their respective Boards of Directors;
provided, that the Stockholders' Representative shall have the authority to
approve and execute any amendment to this Agreement on behalf of all of the
Stockholders and without the necessity of the Stockholders' Representative
obtaining consent or authorization from any other Stockholder, unless such
amendment relates to any representation or warranty made by a Stockholder other
than the Stockholders' Representative which may only be amended by the written
agreement of such person; and provided further, that no Stockholder shall have
any power or authority to modify or amend this Agreement in any respect from and
after the initial filing of the Registration Statement with the SEC.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
19.5 BROKERS AND AGENTS. Each of UniCapital and Newco represents and
warrants that it employed no broker or agent in connection with the transactions
contemplated hereby, and each of UniCapital and Newco, on the one hand, and the
Majority Stockholders, on the other hand, agrees to indemnify the other against
all loss, liability, cost damages or expense arising out of or related to claims
for fees or commissions of brokers employed or alleged to have been employed by
such indemnifying party.
19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, UniCapital will pay the fees, expenses and disbursements
of UniCapital and Newco and their respective agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto. Whether or not the transactions herein
contemplated shall be consummated, the Majority Stockholders will pay the fees,
expenses and disbursements of the Stockholders and the Company and their
respective agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments hereto
and all other costs and expenses incurred in the performance of this Agreement
by the Stockholders and the Company and in compliance with all conditions to be
performed by the Stockholders and the Company under this Agreement.
19.7 NOTICES. All notices and other communications hereunder shall be
in writing (including wire, telefax or similar writing) and shall be delivered,
addressed, or telefaxed as follows:
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(a) If to UniCapital or Newco, addressed to them at:
UniCapital Corporation
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Telephone: (305) 861-0603
Telefax: (305) 866-8449
with a copy to:
David A. Gerson
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
301 Grant Street
Pittsburgh, PA 15219
Telephone: (412) 560-3330
Telefax: (412) 560-3399
(b) If to the Stockholders, addressed to them in care
of the Stockholders' Representative at:
Richard C. Emery
Matrix Funding Corporation
6925 Union Park Center, Suite 250
Midvale, Utah 84047
Telephone: (801) 566-9201
Telefax: (801) 566-9306
with a copy to:
Gerald T. Snow
Ray, Quinney & Nebeker
400 Deseret Building
79 South Main Street
Salt Lake City, Utah 45384
Telephone: (801) 532-1500
Telefax: (801) 532-7543
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Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telefax, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 19.7 (or in accordance with the latest
unrevoked written direction from such party); (ii) if given by telefax, when
such telefax is transmitted to the telefax number specified in this Section 19.7
(or in accordance with the latest unrevoked written direction from such party),
and the appropriate confirmation is received.
19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York, without giving effect to any of the
provisions thereof that would require the application of the substantive laws of
any other jurisdiction. Each party to this Agreement: (a) agrees that any legal
action or proceeding under this Agreement shall be brought in the courts of the
State of New York or in the United States District Court for the Southern
District of New York; (b) irrevocably submits to the jurisdiction of such
courts; (c) agrees not to assert any claim or defense that it is not personally
subject to the jurisdiction of such courts, that any such forum is not
convenient or the venue thereof is improper, or that this Agreement or the
subject matter hereof may not be enforced in such courts; and (d) agrees to
accept service of process on it by certified or registered mail or by any other
method authorized by law.
19.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.10 TIME. Time is of the essence with respect to this Agreement.
19.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
19.12 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
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20. DEFINITIONS
20.1 "1999 EBT" is defined in Section 2.5(b).
20.2 "Accounts Receivable" is defined in Section 6.14.
20.3 "Acquisition Proposal" is defined in Section 8.10.
20.4 "Adjusted 1997 EBT" is defined in Section 2.5(a).
20.5 "Adjusted 1998 EBT" is defined in Section 2.5(a).
20.6 "Adjusted 1999 EBT" is defined in Section 2.5(b).
20.7 "Agent" is defined in Section 8.10.
20.8 "Agreement" is defined in the preamble to this Agreement.
20.9 "Articles of Merger" is defined in Section 1.1.
20.10 "Audited Balance Sheet Date" is defined in Section 6.12(a).
20.11 "Audited Financial Statements" are defined in Section 6.12(a).
20.12 "Authorizations" are defined in Section 6.23.
20.13 "Basket Adjustment" is defined in Section 12.5(b).
20.14 "Basket Limitation" is defined in Section 12.5(b).
20.15 "Benefit Plan" is defined in Section 6.22.
20.16 "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq.
20.17 "Certificates" are defined in Section 2.2.
20.18 "Closing" is defined in Section 5.1.
20.19 "Closing Date" is defined in Section 5.2.
20.20 "Closing Date Balance Sheet" is defined in Section 3.1.
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20.21 "Code" is defined in the recitals to this Agreement.
20.22 "Commonly Controlled Entity" is defined in Section 6.22.
20.23 "Company" is defined in the preamble to this Agreement.
20.24 "Company Documents" are defined in Section 6.2.
20.25 "Company EBT" is defined in Section 2.5(b).
20.26 "Company Stock" is defined in Section 2.1(a).
20.27 "Constituent Corporations" are defined in the recitals to this
Agreement.
20.28 "Contracts" are defined in Section 6.17.
20.29 "Deferred Compensation Discretionary Amount" is defined in
Section 8.16(b).
20.30 "Disputed Amounts" are defined in Section 3.2.
20.31 "Earn-Out Consideration" is defined in Section 2.5(d).
20.32 "Earn-Out Escrow Cash" is defined in Section 4.1(b).
20.33 "Earn-Out Escrow Shares" are defined in Section 4.1(b).
20.34 "EBT" is defined in Section 2.5(a).
20.35 "Effective Date Consideration" is defined in Section 2.1(a).
20.36 "Environmental Laws" mean any and all applicable treaties, laws,
regulations, ordinances, enforceable requirements, binding determinations,
orders, decrees, judgments, injunctions, permits, approvals, authorizations,
licenses or binding agreements issued, promulgated or entered into by any
Governmental Entity, relating to the environment, preservation or reclamation of
natural resources, or to the management, Release or threatened Release of or
exposure to Hazardous Substances, including CERCLA, the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.,
the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et. seq., the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
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seq., and any similar or implementing state or local law and all amendments or
regulations promulgated thereunder.
20.37 "Environmental Liabilities" mean any and all Losses arising from
or related to any claim, proceeding, investigation, response or removal action,
remediation or other clean-up brought, prosecuted or undertaken by UniCapital,
Newco, the Surviving Corporation, any Governmental Entity or any other person or
entity on the basis of any violation of any Environmental Laws or pursuant to
any requirement imposed under any Environmental Laws (including any sampling,
testing, investigation, removal, treatment or remediation undertaken by
UniCapital, Newco or the Surviving Corporation so as to avoid any claim or
violation or to comply with any requirement and all counseling or engineering
fees and expenses related thereto), and arising from pre-Closing operations,
events, circumstances or conditions at, on, under or emanating from, or as a
result of any pre-Closing off-site disposal of Hazardous Substances from, any
property currently or formerly owned, operated or leased by the Company or any
Subsidiary.
20.38 "Environmental Permits" mean all permits, licenses, approvals or
authorizations from any Governmental Entity required under Environmental Laws
for the operation of the business of the Company and its Subsidiaries.
20.39 "Equipment" is defined in Section 6.35.
20.40 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
20.41 "Escrow Cash" is defined in Section 4.1(a).
20.42 "Escrow Property" is defined in Section 4.1(b).
20.43 "Escrow Shares" are defined in Section 4.1(a).
20.44 "Excess Indemnity" is defined in Section 12.5(b).
20.45 "Exchange Act" is defined in Section 12.1.
20.46 "Expiration Date" is defined in Section 12.6.
20.47 "Financial Statements" are defined in Section 6.12(b).
20.48 "Foreign Plans" are defined in Section 6.22(i)(xiii).
20.49 "GAAP" is defined in Section 3.1.
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20.50 "Governmental Entity" means any court, administrative or
regulatory agency or commission, or other governmental authority or
instrumentality, domestic, foreign or supranational.
20.51 "Hazardous Substances" mean all explosive or regulated
radioactive materials or substances, hazardous or toxic materials, wastes or
chemicals, petroleum and petroleum products (including crude oil or any fraction
thereof), asbestos or asbestos containing materials, and all other materials or
chemicals regulated pursuant to any Environmental Law, including materials
listed in 49 C.F.R. ss. 172.101 and materials defined as hazardous pursuant to
Section 101(14) of CERCLA.
20.52 "Indemnifiable Decrease" is defined in Section 12.5(a).
20.53 "Indemnified Party" is defined in Section 12.4(a).
20.54 "Indemnifying Party" is defined in Section 12.4(a).
20.55 "Indemnity Escrow Agent" is defined in Section 4.1(a).
20.56 "Independent Accounting Firm" is defined in Section 3.2.
20.57 "Intellectual Property" is defined in Section 6.28(a).
20.58 "Interim Balance Sheet Date" is defined in Section 6.12(b).
20.59 "Interim Net Worth Period" is defined in Section 12.5(a).
20.60 "IPO" is defined in the recitals to this Agreement.
20.61 "Lease Documents" are defined in Section 6.35.
20.62 "Leases" are defined in Section 6.35.
20.63 "liabilities" are defined in Section 6.13(a).
20.64 "Losses" are defined in Section 12.1.
20.65 "Majority Stockholders" are defined in the preamble to this
Agreement.
20.66 "Material Adverse Amendments" are defined in Section 8.14(b).
20.67 "Merger" is defined in the recitals to this Agreement.
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20.68 "Merger Consideration" is defined in Section 2.1(c).
20.69 "Merger Effective Date" is defined in Section 5.3.
20.70 "Minority Stockholders" are defined in the preamble to this
Agreement.
20.71 "Net Worth Deficiency" is defined in Section 3.1.
20.72 "Newco" is defined in the preamble to this Agreement.
20.73 "Obligor" is defined in Section 6.35.
20.74 "Ordinary course" or "ordinary course of business" means the
conduct of business as conducted by the Company prior to the date of this
Agreement consistent in nature and, where relevant, amount with past practices.
20.75 "PCBs" are defined in Section 6.33(h).
20.76 "Pension Plan" is defined in Section 6.22.
20.77 "Permits" mean all permits, licenses, franchises, approvals and
authorizations from any Governmental Entity that are owned or held by the
Company or any Subsidiary, or held by any Stockholder that relate to the
operations of the Company or any Subsidiary.
20.78 "Prospectus" is defined in Section 16.1.
20.79 "Redemption" is defined in the preamble to this Agreement.
20.80 "Redemption Amount" is defined in the preamble to this Agreement.
20.81 "Registration Statement" is defined in Section 9.4.
20.82 "Regulations" are defined in Section 6.23.
20.83 "Release" means any spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, emanation or migration of any
Hazardous Substance in, into, onto or through the environment (including ambient
air, surface water, ground water, soils, land surface, subsurface strata,
workplace or structure).
20.84 "Restricted Business" is defined in Section 14.1(a).
20.85 "Scheduled Payments" are defined in Section 6.35.
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20.86 "SEC" is defined in Section 9.4.
20.87 "Securities Act" is defined in Section 6.16.
20.88 "Stockholders" are defined in the preamble to this Agreement.
20.89 "Stockholders' Representative" is defined in Section 3.3.
20.90 "Subsidiary" is defined in Section 6.1.
20.91 "Surviving Corporation" is defined in Section 1.2.
20.92 "Tax Returns" are defined in Section 6.27.
20.93 "Taxes" are defined in Section 6.27.
20.94 "Third-Party Claim" is defined in Section 12.4(a).
20.95 "Unaudited Financial Statements" are defined in Section 6.12(b).
20.96 "Underwriting Agreement" is defined in Section 5.1.
20.97 "UniCapital" is defined in the preamble to this Agreement.
20.98 "UniCapital Documents" are defined in Section 7.3.
20.99 "UniCapital Stock" is defined in Section 2.1(a).
20.100 "Welfare Plan" is defined in Section 6.22.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNICAPITAL CORPORATION
By: /s/ ROBERT NEW
----------------------------
Name: Robert New
Title: Chairman and Chief Executive Officer
XFC ACQUISITION CORP.
By: /s/ ROBERT NEW
-----------------------------
Name: Robert New
Title: President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
<PAGE> 77
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
MINORITY STOCKHOLDERS
/s/ JOHN I. KASTELER, JR.
-----------------------------------
John I. Kasteler, Jr.
/s/ CRAIG C. MORTENSEN
-----------------------------------
Craig C. Mortensen
/s/ SHANNI STAKER
-----------------------------------
Shanni Staker
/s/ CHRISTIAN F. EMERY
-----------------------------------
Christian F. Emery
<PAGE> 78
ANNEXES
ANNEX I [Form of Articles of Merger]
ANNEX II [Calculation and Composition of Consideration]
ANNEX III [Form of Indemnity Escrow Agreement]
ANNEX IV [Form of Employment Agreement]
ANNEX V [Form of Lease]
SCHEDULES
SCHEDULE 2.5 [Add-Backs]
SCHEDULE 6.1 [Jurisdictions in which Company and Subsidiaries Are Qualified
to do Business]
SCHEDULE 6.4 [Validity of Contemplated Transactions]
SCHEDULE 6.5 [Issued and Outstanding Stock of the Company and Subsidiaries]
SCHEDULE 6.8 [Subsidiaries]
SCHEDULE 6.9 [Predecessor Companies]
SCHEDULE 6.12 [Company Financial Statements]
SCHEDULE 6.13 [Liabilities and Obligations]
SCHEDULE 6.14 [Accounts and Notes Receivable Aging]
SCHEDULE 6.15 [Permits]
SCHEDULE 6.16 [Real and Personal Property]
SCHEDULE 6.17 [Contracts and Commitments]
SCHEDULE 6.20 [Insurance]
SCHEDULE 6.21 [Employee Information]
SCHEDULE 6.22 [Employee Benefit Plans]
SCHEDULE 6.23 [Authorizations]
SCHEDULE 6.25 [Litigation]
SCHEDULE 6.27 [Taxes]
SCHEDULE 6.28 [Intellectual Property]
SCHEDULE 6.29 [Notice and Consents]
SCHEDULE 6.30 [Absence of Changes]
SCHEDULE 6.31 [Deposit Accounts; Powers of Attorney]
SCHEDULE 6.35 [Leases]
SCHEDULE 7.9 [UniCapital and Newco Agreements]
SCHEDULE 9.2 [Employment Agreements]
SCHEDULE 11.1 [Lease Arrangements]
SCHEDULE 11.5 [Personal Guarantees of the Indebtedness of the Company]
The registrant agrees to furnish a copy of each omitted schedule, exhibit or
annex to this Exhibit 2.06 to the Commission supplementally upon request
therefor.
<PAGE> 1
Exhibit 2.07
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
PURCHASE AGREEMENT
by and among
UNICAPITAL CORPORATION
(a Delaware corporation),
MFA ACQUISITION CORP.
(a Delaware corporation),
MERRIMAC FINANCIAL ASSOCIATES
(a Massachusetts general partnership)
and
ALLAN Z. GILBERT, JORDAN L. SHATZ and MARK F. CIGNOLI
Dated as of February 14, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
----------------- PAGE
----
<S> <C> <C> <C>
1. THE SALE AND PURCHASE ...................................................................................2
1.1 AGREEMENT TO SELL...............................................................................2
1.2 AGREEMENT TO PURCHASE...........................................................................2
2. CONSIDERATION AND EXCHANGE...............................................................................2
2.1 CONSIDERATION...................................................................................2
2.2 EXCHANGE PROCEDURES.............................................................................2
2.3 NO FRACTIONAL SHARES............................................................................3
2.4 ALLOCATION OF CONSIDERATION.....................................................................3
2.5 EARN-OUT CONSIDERATION..........................................................................3
3. POST-CLOSING ADJUSTMENT; PARTNERS' REPRESENTATIVE........................................................5
3.1 COMPUTATION.....................................................................................5
3.2 DISPUTES........................................................................................5
3.3 PARTNERS' REPRESENTATIVE........................................................................6
4. INDEMNITY ESCROW.........................................................................................7
4.1 CREATION OF ESCROW..............................................................................7
4.2 DURATION AND TERMS..............................................................................7
4.3 VOTING AND INVESTMENT...........................................................................7
5. CLOSING; CLOSING DATE....................................................................................7
5.1 CLOSING.........................................................................................7
5.2 CLOSING DATE; LOCATION..........................................................................8
6. REPRESENTATIONS AND WARRANTIES OF THE PARTNERS..................................................8
6.1 EXISTENCE.......................................................................................8
6.2 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS...................................................8
6.3 AUTHORITY; OWNERSHIP............................................................................8
6.4 VALIDITY OF CONTEMPLATED TRANSACTIONS...........................................................8
6.5 PARTNERSHIP INTERESTS...........................................................................9
6.6 NO BONUS INTERESTS. ...........................................................................9
6.7 BOOKS OF ACCOUNT................................................................................9
6.8 SUBSIDIARIES....................................................................................9
6.9 PREDECESSOR STATUS; ETC.........................................................................9
6.10 SPIN-OFFS.......................................................................................9
6.11 NO THIRD-PARTY OPTIONS.........................................................................10
6.12 FINANCIAL STATEMENTS...........................................................................10
6.13 LIABILITIES AND OBLIGATIONS....................................................................10
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
6.14 ACCOUNTS AND NOTES RECEIVABLE..................................................................11
6.15 PERMITS........................................................................................11
6.16 REAL AND PERSONAL PROPERTY.....................................................................11
6.17 CONTRACTS AND COMMITMENTS......................................................................12
6.18 GOVERNMENT CONTRACTS...........................................................................14
6.19 TITLE TO REAL PROPERTY.........................................................................14
6.20 INSURANCE......................................................................................14
6.21 EMPLOYEES......................................................................................15
6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS........................................................15
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS............................................................19
6.24 TRANSACTIONS WITH AFFILIATES...................................................................19
6.25 LITIGATION.....................................................................................19
6.26 RESTRICTIONS...................................................................................20
6.27 TAXES..........................................................................................20
6.28 INTELLECTUAL PROPERTY MATTERS..................................................................21
6.29 COMPLETENESS; NO VIOLATIONS....................................................................22
6.30 EXISTING CONDITION.............................................................................22
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY...........................................................24
6.32 ENVIRONMENTAL MATTERS..........................................................................24
6.33 NO ILLEGAL PAYMENTS............................................................................25
6.34 LEASES.........................................................................................26
6.35 LEASE FUNDING..................................................................................29
6.36 DISCLOSURE.....................................................................................29
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO.................................................................29
7.1 CORPORATE EXISTENCE............................................................................29
7.2 UNICAPITAL STOCK...............................................................................29
7.3 CORPORATE POWER AND AUTHORIZATION..............................................................30
7.4 NO CONFLICTS...................................................................................30
7.5 CAPITALIZATION OF UNICAPITAL...................................................................30
7.6 COMPLIANCE WITH LAW; AUTHORIZATIONS............................................................30
7.7 TRANSACTIONS WITH AFFILIATES...................................................................31
7.8 LITIGATION.....................................................................................31
7.9 MISCELLANEOUS..................................................................................31
7.10 REGISTRATION RIGHTS............................................................................31
8. COVENANTS...............................................................................................32
8.1 BUSINESS IN THE ORDINARY COURSE................................................................32
8.2 EXISTING CONDITION.............................................................................32
8.3 MAINTENANCE OF PROPERTIES AND ASSETS...........................................................32
8.4 EMPLOYEES AND BUSINESS RELATIONS...............................................................32
8.5 MAINTENANCE OF INSURANCE.......................................................................32
8.6 COMPLIANCE WITH LAWS, ETC......................................................................32
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
8.7 CONDUCT OF BUSINESS............................................................................32
8.8 ACCESS.........................................................................................33
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS........................................................33
8.10 EXCLUSIVITY....................................................................................33
8.11 SUPPLIER APPROVAL..............................................................................34
8.12 NOTICE TO BARGAINING AGENTS....................................................................34
8.13 NOTIFICATION OF CERTAIN MATTERS................................................................34
8.14 AMENDMENT OF SCHEDULES.........................................................................35
8.15 HSR FILING.....................................................................................35
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTNERSHIP AND
THE PARTNERS............................................................................................36
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.....................................36
9.2 EMPLOYMENT AGREEMENTS..........................................................................36
9.3 OPINION OF COUNSEL.............................................................................36
9.4 REGISTRATION STATEMENT.........................................................................37
9.5 REVOLVING CREDIT AGREEMENT.....................................................................37
9.6 HSR ACT........................................................................................37
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL
AND NEWCO...............................................................................................37
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.....................................37
10.2 NO LITIGATION..................................................................................37
10.3 EXAMINATION OF FINANCIAL STATEMENTS............................................................38
10.4 NO MATERIAL ADVERSE CHANGE.....................................................................38
10.5 REGULATORY REVIEW..............................................................................38
10.6 PARTNER'S RELEASE..............................................................................38
10.7 EMPLOYMENT AGREEMENTS..........................................................................38
10.8 OPINION OF COUNSEL.............................................................................39
10.9 CONSENTS AND APPROVALS.........................................................................40
10.10 PARTNERSHIP AGREEMENT..........................................................................40
10.11 REGISTRATION STATEMENT.........................................................................40
10.12 REPAYMENT OF INDEBTEDNESS......................................................................40
10.13 NET INCOME.....................................................................................40
10.14 JAM ASSOCIATES LEASE...........................................................................40
10.15 HSR ACT........................................................................................41
10.16 FIRPTA COMPLIANCE..............................................................................41
11. COVENANTS OF UNICAPITAL........................................................................41
11.1 UNICAPITAL STOCK OPTIONS.......................................................................41
11.2 INFORMATION FILING.............................................................................41
11.3 HSR FILING.....................................................................................41
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
12. INDEMNIFICATION; SURVIVAL...............................................................................42
12.1 GENERAL INDEMNIFICATION BY PARTNERS............................................................42
12.2 SPECIFIC INDEMNIFICATION BY PARTNERS...........................................................42
12.3 INDEMNIFICATION BY UNICAPITAL AND NEWCO........................................................43
12.4 THIRD-PARTY CLAIMS.............................................................................43
12.5 LIMITATIONS ON INDEMNIFICATION.................................................................45
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.....................................................46
13. TERMINATION OF AGREEMENT.......................................................................47
13.1 TERMINATION BY UNICAPITAL......................................................................47
13.2 TERMINATION BY THE PARTNERS....................................................................47
13.3 AUTOMATIC TERMINATION..........................................................................47
13.4 LIQUIDATED DAMAGES.............................................................................48
14. NONCOMPETITION AND NONSOLICITATION.............................................................48
14.1 NONCOMPETITION.................................................................................48
14.2 DAMAGES........................................................................................49
14.3 REASONABLE RESTRAINT...........................................................................49
14.4 SEVERABILITY; REFORMATION......................................................................49
14.5 INDEPENDENT COVENANT...........................................................................49
14.6 MATERIALITY....................................................................................49
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION......................................................50
15.1 PARTNERS.......................................................................................50
15.2 UNICAPITAL.....................................................................................50
15.3 DAMAGES........................................................................................50
16. LOCK-UP AGREEMENTS.............................................................................50
16.1 AGREEMENT......................................................................................50
16.2 INTENDED THIRD-PARTY BENEFICIARIES.............................................................51
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK........................................................................................51
17.1 INVESTMENT INTENT..............................................................................51
17.2 COMPLIANCE WITH LAW............................................................................51
17.3 ECONOMIC RISK; SOPHISTICATION..................................................................52
17.4 INFORMATION SUPPLIED...........................................................................52
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
18. SECURITIES LEGENDS.............................................................................52
19. GENERAL.................................................................................................53
19.1 COOPERATION....................................................................................53
19.2 SUCCESSORS AND ASSIGNS.........................................................................53
19.3 ENTIRE AGREEMENT...............................................................................53
19.4 COUNTERPARTS...................................................................................54
19.5 BROKERS AND AGENTS.............................................................................54
19.6 EXPENSES.......................................................................................54
19.7 NOTICES........................................................................................54
19.8 GOVERNING LAW..................................................................................55
19.9 EXERCISE OF RIGHTS AND REMEDIES................................................................55
19.10 TIME...........................................................................................55
19.11 REFORMATION AND SEVERABILITY...................................................................56
19.12 REMEDIES CUMULATIVE............................................................................56
19.13 CAPTIONS.......................................................................................56
20. DEFINITIONS.............................................................................................56
</TABLE>
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<PAGE> 7
AMENDED AND RESTATED PURCHASE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AGREEMENT (the "Agreement") is made
as of the 14th day of February, 1998, between UNICAPITAL CORPORATION, a Delaware
corporation ("UniCapital "); MFA ACQUISITION CORP., a Delaware corporation
("Newco"); MERRIMAC FINANCIAL ASSOCIATES, a Massachusetts general partnership
(the "Partnership"); and ALLAN Z. GILBERT, JORDAN L. SHATZ and MARK F. CIGNOLI,
who are all of the partners of the Partnership (each a "Partner" and
collectively, the "Partners"). Certain capitalized terms used herein are defined
in Article 20 hereof.
WHEREAS, UniCapital was incorporated on October 9, 1997 under the laws
of the State of Delaware for the purpose of acquiring a number of equipment
leasing businesses in different locations;
WHEREAS, UniCapital intends to undertake an initial public offering of
its Common Stock (the "IPO") and in connection therewith intends to file a
registration statement on Form S-1 ("Registration Statement") with the
Securities and Exchange Commission ("SEC") within 90 days of the execution and
delivery of this Agreement;
WHEREAS, Newco was duly incorporated on January 26, 1998 under the laws
of the State of Delaware solely for the purpose of completing this transaction,
and is a wholly-owned subsidiary of UniCapital;
WHEREAS, the Partners desire to sell to Newco all of the Partners'
rights, titles and interests in and to the Partnership (the "Partnership
Interests") pursuant to this Agreement;
WHEREAS, the respective Boards of Directors of UniCapital and Newco
deem it advisable and in the best interests of such corporations and their
respective partners that Newco purchase from the Partners all of the Partners'
Partnership Interests; and
WHEREAS, the parties hereto intend that the transactions contemplated
in this Agreement will constitute part of a single transaction involving the
simultaneous consummation of a number of similar agreements between UniCapital
and certain other corporations and partnerships and the IPO and that such single
transaction (the "Unified Transaction") shall fall within the provisions of
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
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<PAGE> 8
1. THE SALE AND PURCHASE
1.1 AGREEMENT TO SELL. On the Closing Date (as defined in Section 5.2),
the Partners will sell, assign and transfer to Newco all of the Partnership
Interests upon and subject to the terms and conditions of this Agreement, such
that, upon such sale, assignment and transfer, Newco will be the holder of 100%
of the Partnership Interests, free and clear of all liens, pledges, security
interests, charges, claims restrictions and other encumbrances of any nature
whatsoever.
1.2 AGREEMENT TO PURCHASE. On the Closing Date, Newco will purchase the
Partnership Interests from the Partners, as aforesaid, upon and subject to the
terms and conditions of this Agreement and upon the representations and
warranties contained herein, and will deliver the Closing Date Consideration
defined in Section 2.1.
2. CONSIDERATION AND EXCHANGE
2.1 CONSIDERATION.
(a) Upon the Closing Date, an aggregate of 178,750 shares of
common stock, par value $.001 per share, of UniCapital ("UniCapital Stock") (the
"Closing Date Consideration") will be paid to the Partners by Newco (or by
UniCapital, on behalf of and at the direction of Newco); provided, however, in
the event that the aggregate value (based on the IPO price of the UniCapital
Stock) of the 178,750 shares of UniCapital Stock is less than $2,681,250, then
UniCapital, on behalf of and at the direction of Newco, shall issue additional
shares of UniCapital Stock to the Partners so that the aggregate value of the
shares of UniCapital Stock issued to the Partners equals $2,681,250 (with
appropriate downward adjustment so as to eliminate any fractional share).
(b) The Earn-Out Consideration, as described in Section 2.5,
is to be distributed to the Partners within five business days after the date
the portion of the Earn-Out Consideration with respect to a given calendar year
(if any) is finally determined pursuant to Section 2.5 in the percentages set
forth on Annex I.
(c) The Closing Date Consideration and the Earn-Out
Consideration are referred to together in this Agreement as the "Consideration."
2.2 EXCHANGE PROCEDURES.
(a) In exchange for the Partnership Interests, Newco, or
UniCapital, on behalf of and at the direction of Newco, shall cause to be made
available to the Partners the Consideration. On the Closing Date, each Partner
shall, subject to Article 4, be entitled to receive a certificate representing
that number of whole shares of UniCapital Stock which such Partner has the right
to receive, based on such Partners' pro rata interest in the Partnership, as
2
<PAGE> 9
calculated in accordance with Annex I. The certificates evidencing the
UniCapital Stock shall bear appropriate legends pursuant to the terms of this
Agreement, and UniCapital shall be entitled to issue appropriate stop transfer
instructions to its transfer agent consistent with the terms of this Agreement.
(b) On the Closing Date or as promptly thereafter as is
practicable, and subject to and in accordance with the provisions of Article 4,
Newco, or UniCapital, on behalf of and at the direction of Newco, shall cause to
be distributed to the Indemnity Escrow Agent (as defined in Article 4) a
certificate or certificates representing the Escrow Shares (as defined in
Article 4), which shall be registered in the name of the Indemnity Escrow Agent
as nominee for the Partners and shall be held in accordance with the provisions
of Article 4 and the Indemnity Escrow Agreement referred to therein.
(c) All UniCapital Stock to be delivered on the Closing Date
in accordance with the terms hereof shall be deemed to have been delivered in
full satisfaction of and as full payment for all of the Partnership Interests,
and following the Closing Date, the Partners shall have no further rights to, or
ownership in, the Partnership. The Partners shall jointly and severally
indemnify and hold harmless Newco and UniCapital from and against any and all
loss, liability, cost, damage and/or expense suffered or incurred by Newco or
UniCapital as a result of the allocation of Consideration among or between the
Partners in any manner other than pro rata in the percentages set forth on Annex
I.
2.3 NO FRACTIONAL SHARES. Notwithstanding any other provision of this
Article 2, no fractional shares of UniCapital Stock will be issued and any
Partner entitled hereunder to receive a fractional share of UniCapital Stock but
for this Section 2.3 will be entitled hereunder to receive no such fractional
share but a cash payment in lieu thereof in an amount equal to such fraction
multiplied by $19.00.
2.4 ALLOCATION OF CONSIDERATION. The parties agree that they will not
take a position on any income tax return, before any governmental agency charged
with the collection of any income tax, or in any judicial proceeding that is in
any way inconsistent with the reasonable allocation (if any) of the
Consideration made by Newco or UniCapital following the Closing.
2.5 EARN-OUT CONSIDERATION.
(a) If the consolidated earnings before taxes (the "EBT") of
Newco, for the twelve months ending December 31, 1998, increased by amounts in
respect of those items set forth on Schedule 2.5 that affected net income during
the period from January 1, 1998 through the Closing Date and decreased by the
amount of UniCapital corporate overhead allocated to Newco for the period from
the Closing Date through December 31, 1998 (the "Adjusted 1998 EBT"), exceeds
the consolidated EBT of Newco for the twelve months ending December 31, 1997,
inclusive of the add-backs set forth on Schedule 2.5 ("Adjusted 1997 EBT"), then
the
3
<PAGE> 10
Partners shall be entitled to receive one-half of the difference between the
Adjusted 1998 EBT and the Adjusted 1997 EBT.
(b) If the consolidated EBT of Newco for the year ending
December 31, 1999, adjusted for the amount of UniCapital corporate overhead
allocated to Newco (the "Adjusted 1999 EBT", and together with Adjusted 1997 EBT
and Adjusted 1998 EBT, the "Newco EBT"), exceeds the greater of Adjusted 1998
EBT and Adjusted 1997 EBT, then the Partners shall be entitled to receive
one-half of the difference between (i) the Adjusted 1999 EBT and (ii) the
greater of the Adjusted 1998 EBT and the Adjusted 1997 EBT.
(c) The EBT of Newco for the years ending December 31, 1998
and December 31, 1999 shall be computed using generally accepted accounting
principles and practices as applied in the audited financial statements of
UniCapital included in the Registration Statement. The allocation of UniCapital
overhead shall be made on a pro rata basis applied consistently among UniCapital
subsidiaries. To the extent gain-on-sale treatment was accorded any Lease,
whether in the add-backs set forth on Schedule 2.5 or in any year, income from
the payment stream on such Lease shall not be included in Newco EBT for any
subsequent year.
(d) The amounts (if any) that the Partners become entitled to
receive pursuant to Sections 2.5(a) and/or 2.5(b) are referred to herein as the
"Earn-Out Consideration." The Earn-Out Consideration shall be paid in shares of
UniCapital Stock, valued at the average of the closing prices per share of
UniCapital Stock for the 20 trading days preceding December 31 of the year to
which the portion of Earn-Out Consideration in question applies.
(e) Newco EBT shall be determined within forty-five days
following December 31 of such year.
(f) Notwithstanding anything in this Section 2.5 to the
contrary, if the Partners dispute the determination of Newco EBT, then the
Partners' Representative shall notify Newco and UniCapital in writing of such
dispute and specify the amount thereof within 20 business days after
notification of the determination of Newco EBT. If UniCapital, Newco and the
Partners' Representative cannot resolve any such dispute which would affect the
Earn-Out Consideration, then such dispute shall be resolved by an Independent
Accounting Firm (as defined in Section 3.2). The Independent Accounting Firm
shall be directed to consider only those agreements, contracts, commitments or
other documents (or summaries thereof) that were either (i) delivered or made
available to Price Waterhouse LLP in connection with the transactions
contemplated hereby, or (ii) reviewed by Price Waterhouse LLP during the course
of determining Newco EBT. The determination of the Independent Accounting Firm
shall be made as promptly as practicable and shall be final and binding upon the
parties, absent manifest error which error may only be corrected by such
Independent Accounting Firm. The costs of the Independent Accounting Firm shall
be borne by the party (either UniCapital and Newco or the Partners collectively)
whose determination of Newco EBT was further from the determination of the
Independent Accounting Firm. Pending resolution of any such dispute by the
Independent
4
<PAGE> 11
Accounting Firm, only the amount of the Earn-Out Consideration as determined by
Price Waterhouse LLP shall be paid by Newco, or by UniCapital, on behalf of and
at the direction of Newco. Once Newco EBT is finally determined, the Earn-Out
Consideration attendant thereto not previously paid, if any, shall be paid in
accordance with this Section 2.5; provided that in the event the Partners'
determination of EBT was closer to the determination of the Independent
Accounting Firm than UniCapital's determination of EBT, the Partners shall
receive such Earn- Out Consideration, plus interest which shall accrue at the
rate of 10% per annum on any such Earn-Out Consideration that is resolved in the
Partners' favor from the date the Earn-Out Consideration was first payable to
the date on which the Earn-Out Consideration is received by the Partners.
(g) Any Earn-Out Consideration paid by UniCapital shall be
treated as additional consideration paid by UniCapital for the Partnership
Interests.
3. POST-CLOSING ADJUSTMENT; PARTNERS' REPRESENTATIVE
3.1 COMPUTATION. As soon as practicable, but in any event within 30
days after the Closing, UniCapital or Newco shall engage Price Waterhouse LLP to
prepare, in accordance with generally accepted accounting principles ("GAAP")
and consistent with previous practice, a balance sheet of the Partnership (the
"Closing Date Balance Sheet") as of the end of business on the day prior to the
Closing Date (as defined in Section 5). If (i) (a) the Partnership's net worth
as shown on the Closing Date Balance Sheet plus (b) $2,778,750 to adjust for the
distribution of cash made by the Partnership to the Partners on or about January
15, 1998 is less than (ii) the Partnership's net worth as shown on the balance
sheet of the Partnership as at December 31, 1997 as audited by Price Waterhouse
LLP, then, subject to Section 3.2, commencing 10 business days after delivery of
the Closing Date Balance Sheet to UniCapital and Newco, the aggregate
Consideration shall be adjusted downward dollar-for-dollar in the amount of any
such deficiency (the "Net Worth Deficiency"). Upon determination of the Net
Worth Deficiency, Newco, or UniCapital on behalf of Newco, shall be entitled to
recover from the Indemnity Escrow pursuant to Article 4 that portion of the Net
Worth Deficiency which does not exceed one-half of the balance of the Indemnity
Escrow. For any amount by which the Net Worth Deficiency exceeds one-half of the
balance of the Indemnity Escrow, the Partners shall immediately return to Newco,
or UniCapital on behalf of Newco, that number of shares of UniCapital Stock
whose value (based on the IPO price of the UniCapital Stock) equals the amount
by which the Net Worth Deficiency exceeds one-half of the balance of the
Indemnity Escrow. At its sole and exclusive option, and at any time or from time
to time after the determination of any Net Worth Deficiency, Newco, or
UniCapital on behalf of Newco, shall be entitled to recover from the Indemnity
Escrow pursuant to Article 4 all or any portion of the amount of the Net Worth
Deficiency.
3.2 DISPUTES. Notwithstanding anything in this Article 3 to the
contrary, if there is any Net Worth Deficiency and the Partners dispute any item
contained on the Closing Date
5
<PAGE> 12
Balance Sheet, then the Partners' Representative (as defined below) shall notify
Newco and UniCapital in writing of each disputed item (collectively, the
"Disputed Amounts") and specify the amount thereof in dispute within 10 business
days after the delivery of the Closing Date Balance Sheet to the Partners. If
Newco, UniCapital and the Partners' Representative cannot resolve any such
dispute relating to the Net Worth Deficiency, then such dispute shall be
resolved by an independent nationally recognized accounting firm which is
reasonably acceptable to Newco, UniCapital and the Partners' Representative (the
"Independent Accounting Firm"). The determination of the Independent Accounting
Firm shall be made as promptly as practicable and shall be final and binding on
the parties, absent manifest error which error may only be corrected by such
Independent Accounting Firm. Any expenses relating to the engagement of the
Independent Accounting Firm shall be allocated between Newco or UniCapital and
the Partners so that the Partners' aggregate share of such costs shall bear the
same proportion to the total costs that the Disputed Amounts unsuccessfully
contested by the Partners' Representative (as finally determined by the
Independent Accounting Firm) bear to the total of the Disputed Amounts so
submitted to the Independent Accounting Firm. Pending resolution of any such
dispute by the Independent Accounting Firm, no such Disputed Amount shall be due
to Newco or UniCapital. Once any such Disputed Amount is finally determined to
be due to Newco or UniCapital, Newco or UniCapital may proceed to recover such
amount in the manner set forth in Section 3.1.
3.3 PARTNERS' REPRESENTATIVE. (a) Each Partner, by signing this
Agreement, designates Allan Z. Gilbert (or, in the event that Allan Z. Gilbert
is unable or unwilling to serve or resigns, Mark F. Cignoli) to be such
Partners' representative for purposes of this Agreement (the "Partners'
Representative"). The Partners shall be bound by any and all actions taken by
the Partners' Representative on their behalf.
(b) UniCapital and Newco shall be entitled to rely upon any
communication or writing given or executed by the Partners' Representative. All
communications or writings to be sent to Partners pursuant to this Agreement may
be addressed to the Partners' Representative and any communication or writing so
sent shall be deemed notice to all of the Partners hereunder. The Partners
hereby consent and agree that the Partners' Representative is authorized to
accept deliveries, including any notice, on behalf of the Partners pursuant
hereto.
(c) The Partners' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Partner, with full
power in his name and on his behalf to act according to the terms of this
Agreement in the absolute discretion of the Partners' Representative, and in
general to do all things and to perform all acts including, without limitation,
executing and delivering all agreements, certificates, receipts, instructions
and other instruments contemplated by or deemed advisable in connection with
Article 12 of this Agreement. This power of attorney and all authority hereby
conferred is granted subject to and coupled with the interest of such Partner
and the other Partners hereunder and in consideration of the mutual covenants
and agreements made herein, and shall be irrevocable and shall not be
6
<PAGE> 13
terminated by any act of any Partner, by operation of law, whether by such
Partner's death or any other event.
(d) Notwithstanding the foregoing, the Partners'
Representative shall inform each Partner of all notices received, and of all
actions, decisions, notices and exercises of any rights, power or authority
proposed to be done, given or taken by such Partners' Representative, and shall
act as directed by the Partners holding a majority interest in the Escrow
Property (as defined in Section 4.1(c)).
4. INDEMNITY ESCROW
4.1 CREATION OF ESCROW.
(a) At the Closing, as collateral security for the payment of
any indemnification obligations of the Partners pursuant to Sections 12.1 and
12.2 hereof and for the payment of amounts due pursuant to Article 3 hereof,
eighteen percent (18%) of the number of shares of UniCapital Stock issuable to
each Partner as part of the Closing Date Consideration in accordance with Annex
I, rounded up to the nearest whole share (the "Escrow Shares") shall be
delivered to UniCapital's Transfer Agent as indemnity escrow agent (the
"Indemnity Escrow Agent").
(b) The Escrow Shares shall include all cash and non-cash
dividends and other property at any time received or otherwise distributed in
respect of or in exchange for any or all of the Escrow Shares, all securities
hereafter issued in substitution for any of the foregoing, all certificates and
instruments representing or evidencing such securities, all cash and non-cash
proceeds of all of the foregoing property and all rights, titles, interests,
privileges and preferences appertaining or incident to the foregoing property
(referred to together as the "Escrow Property"), except as provided in
Section 4.3.
4.2 DURATION AND TERMS. The Escrow Property shall be held and disbursed
by the Indemnity Escrow Agent in accordance with the terms of an Indemnity
Escrow Agreement substantially in the form attached hereto as Annex II. The
Indemnity Escrow Agent shall hold the Escrow Property pursuant to the Indemnity
Escrow Agreement until the later of: (a) the first anniversary of the Closing
Date; or (b) the resolution of any claim for indemnification or payment that is
pending on the first anniversary of the Closing Date, but only to the extent of
the amount of such pending claim.
4.3 VOTING AND INVESTMENT. The Partners shall be entitled to exercise
all voting powers incident to the Escrow Property held by the Indemnity Escrow
Agent as their nominee, but shall not be entitled to exercise any investment or
dispositive powers over such Escrow Property. The Escrow Property that is cash,
if any, shall be invested from time to time by the Indemnity Escrow Agent as
provided in the Indemnity Escrow Agreement.
7
<PAGE> 14
5. CLOSING; CLOSING DATE
5.1 CLOSING. Concurrently with the consummation of the sale of the
shares of UniCapital Stock pursuant to the underwriting agreement relating to
the offer and sale of shares of UniCapital Stock in the IPO (the "Underwriting
Agreement"), the parties hereto shall take all actions necessary to effect the
sale and purchase of the Partnership Interests and to effect delivery of shares
referred to in Article 2 hereof (hereinafter referred to as the "Closing").
5.2 CLOSING DATE; LOCATION. The Closing shall take place at the offices
of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178. The date on
which the Closing shall occur shall be referred to as the "Closing Date."
6. REPRESENTATIONS AND WARRANTIES OF THE PARTNERS
As of the date hereof and as of the Closing Date, each Partner jointly
and severally, represents and warrants to UniCapital and Newco, as follows:
6.1 EXISTENCE. The Partnership is a general partnership duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Massachusetts and except as set forth on Schedule 6.1 is duly qualified to do
business and is in good standing as a foreign partnership in each jurisdiction
where the conduct of its business requires it to be so qualified. The
Partnership has delivered to UniCapital a true, complete and correct copy of its
partnership agreement. The Partnership is not in violation of its partnership
agreement.
6.2 POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The Partnership has
the full legal right, requisite power and authority to execute, deliver and
perform this Agreement. The execution, delivery and performance of this
Agreement by the Partnership has been duly authorized by the Partners and no
further action is necessary to authorize this Agreement and the performance of
the transactions contemplated hereby. This Agreement has been, and the other
agreements, documents and instruments required to be delivered by the
Partnership in accordance with the provisions hereof (the "Partnership
Documents") will be, duly executed and delivered on behalf of the Partnership by
duly authorized representatives of the Partnership, and this Agreement
constitutes, and the Partnership Documents when executed and delivered will
constitute, the legal, valid and binding obligations of the Partnership,
enforceable against it in accordance with its terms.
6.3 AUTHORITY; OWNERSHIP. Except as set forth on Schedule 6.3, each
Partner has the full legal right, power and authority to enter into this
Agreement. Except as set forth on Schedule 6.3, upon the date of this Agreement
and as of the Closing Date, each Partner owns and will own that percentage of
the Partnership Interests set forth on Annex I as being held by such Partner
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind. As a result of the
transactions contemplated hereby,
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Newco will be the record and beneficial owner of 100% of the Partnership
Interests, free and clear of all liens, security interests, pledges, charges,
voting trusts, equities, restrictions, encumbrances and claims of every kind.
6.4 VALIDITY OF CONTEMPLATED TRANSACTIONS. Except as set forth on
Schedule 6.4, the execution, delivery and performance of this Agreement by the
Partnership and each Partner does not and will not violate, conflict with or
result in the breach of any term, condition or provision of, or require the
consent of any other person under (a) any existing law, ordinance, or
governmental rule or regulation to which the Partnership or any Partner is
subject, (b) any judgment, order, writ, injunction, decree or award of any
Governmental Entity which is applicable to the Partnership or any Partner, or
(c) any mortgage, indenture, agreement, contract, commitment, lease, plan,
Authorization, or other instrument, document or understanding, oral or written,
to which the Partnership or any Partner is a party, by which the Partnership or
any Partner may have rights or by which any of the properties or assets of the
Partnership may be bound or affected, or give any party with rights thereunder
the right to terminate, modify, accelerate or otherwise change the existing
rights or obligations of the Partnership thereunder. Except as aforesaid and
filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, no
authorization, approval or consent of, and no registration or filing with, any
Governmental Entity is required in connection with the execution, delivery or
performance of this Agreement by the Partnership or any Partner.
6.5 PARTNERSHIP INTERESTS. Schedule 6.5 sets forth all of the
outstanding Partnership Interests of the Partnership and the holders thereof.
6.6 NO BONUS INTERESTS. No portion of any Partnership Interest was
issued pursuant to any awards, grants or bonuses.
6.7 BOOKS OF ACCOUNT. The books, records and accounts of the
Partnership accurately and fairly reflect, in reasonable detail, the
transactions and the assets and liabilities of the Partnership. The Partnership
has not engaged in any transaction, maintained any bank account or used any of
the funds of the Partnership except for transactions, bank accounts and funds
which have been and are reflected in the normally maintained books and records
of the business.
6.8 SUBSIDIARIES. Schedule 6.8 lists the name of each Partnership
subsidiary (each a "Partnership Subsidiary"). Except as set forth in Schedule
6.8, neither the Partnership nor any Partnership Subsidiary currently owns, of
record or beneficially, or controls, directly or indirectly, any capital stock,
any securities convertible into capital stock or any other equity interest in
any corporation, association or other business entity. Except as set forth on
Schedule 6.8, neither the Partnership nor any Partnership Subsidiary is,
directly or indirectly, a participant in any joint venture, partnership or other
noncorporate entity.
6.9 PREDECESSOR STATUS; ETC. Schedule 6.9 lists all names of all
predecessor companies of the Partnership and each Partnership Subsidiary,
including the names of all entities
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from whom the Partnership previously acquired assets representing all or
substantially all of the assets of that entity. Except as set forth on Schedule
6.9, the Partnership has never been a subsidiary or division of another
corporation or been a part of an acquisition which was later rescinded.
6.10 SPIN-OFFS. Since December 31, 1995, there has not been any sale or
spin-off of significant assets of the Partnership or the Partnership Subsidiary
other than in the ordinary course of business.
6.11 NO THIRD-PARTY OPTIONS. There are no existing agreements, options,
commitments or rights with, of or to any person to acquire any properties,
assets or rights of the Partnership or any interest therein.
6.12 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.12 are copies
of the consolidated balance sheets of the Partnership at December 31, 1997 (the
"Audited Balance Sheet Date") and the related statements of income, cash flows
and changes in partners' equity for the fiscal year then ended, audited by Price
Waterhouse LLP, and the consolidated balance sheets of the Partnership at
December 31, 1996 and December 31, 1995, and the related statements of income,
cash flows and changes in partners' equity for the fiscal years then ended,
certified by Kennedy, Hentoff & Patterson, LLP, Certified Public Accountants,
the Partnership's independent public accountants, together with the report of
such independent public accountants thereon (collectively the "Audited Financial
Statements"). All of the Audited Financial Statements have been prepared in
accordance with GAAP consistently applied throughout the periods involved. All
of the balance sheets included in the Audited Financial Statements, including
the related notes, fairly present the financial position, assets and liabilities
(whether accrued, absolute, contingent or otherwise) of the Partnership at the
dates indicated and such statements of income, cash flows and changes in
Partners' equity fairly present the results of operations, cash flows and
changes in Partners' equity of the Partnership for the periods indicated.
6.13 LIABILITIES AND OBLIGATIONS.
(a) Attached hereto as Schedule 6.13 is an accurate list, as
of a date not more than two days prior to the date of this Agreement, of: (i)
all liabilities of the Partnership and each of its Subsidiaries which are
reflected on the audited consolidated balance sheet as of the Audited Balance
Sheet Date included in the Audited Financial Statements; (ii) all liabilities
incurred thereafter other than in the ordinary course of business; (iii) all
material liabilities incurred thereafter in the ordinary course of business; and
(iv) all liabilities (A) incurred as of the Audited Balance Sheet Date that are
not reflected on the audited consolidated balance sheet as of the Audited
Balance Sheet Date and (B) all liabilities incurred thereafter that would not
have been so reflected had such liabilities been incurred as of the Audited
Balance Sheet Date or incurred thereafter that are not reflected on such balance
sheet. Each of the foregoing liabilities that has not heretofore been paid or
discharged is so noted on Schedule 6.13. For purposes of this
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Agreement, "liabilities" means liabilities of any kind, character or
description, whether accrued, absolute, secured or unsecured, contingent or
otherwise.
(b) For each such liability for which the amount is not fixed
or is contested, Schedule 6.13 shall include a summary description of the
liability, together with copies of all relevant non-privileged documentation
relating thereto, detail of all amounts claimed and any other action or relief
sought, the names of the claimant and all other parties to the claim, suit or
proceeding, the name of each court or agency before which such claim, suit or
proceeding is pending, the date such claim, suit or proceeding was instituted,
and a best estimate of the maximum amount, if any, which is likely to become
payable with respect to each such liability. If no estimate is provided, the
best estimate shall for purposes of this Agreement be deemed to be zero. On the
Closing Date, the Partnership shall deliver, and cause its accountants, outside
counsel and other representatives or agents to deliver, copies of all privileged
documents related to liabilities as listed on Schedule 6.13.
(c) All of the liabilities reflected on the audited
consolidated balance sheet included in the Audited Financial Statements arose
only out of or were incurred only in connection with the conduct of the business
of the Partnership. Except as set forth on Schedule 6.13 and except for
liabilities not required to be set forth thereon pursuant to Section 6.13(a),
the Partnership has no liabilities or obligations with respect to its business,
whether direct or indirect, matured or unmatured, absolute contingent or
otherwise, and there is no condition, situation or set of circumstances which
would reasonably be expected to result in any such liability.
6.14 ACCOUNTS AND NOTES RECEIVABLE. Attached hereto as Schedule 6.14 is
a complete and accurate list, as of a date not more than two days prior to the
date of this Agreement, of the accounts and notes receivable of the Partnership
(including, without limitation, receivables from and advances to employees and
Partners) other than those arising out of Leases (collectively, the "Accounts
Receivable"). Schedule 6.14 includes an aging of all Accounts Receivable showing
amounts due in 30-day aging categories. On the Closing Date, the Partners will
deliver to UniCapital a complete and accurate list, as of a date not more than
two days prior to the Closing Date, of the Accounts Receivable. All Accounts
Receivable represent valid obligations arising from bona fide business
transactions in the ordinary course of business consistent with past practice.
The Accounts Receivable are, and as of the Closing Date will be, collectible net
of any respective reserves shown on the Partnership's books and records (which
reserves are adequate and calculated consistent with past practice). Subject in
the case of Accounts Receivable reflected on the Partnership's balance sheet to
such reserves reflected on such balance sheet, each of the Accounts Receivable
will be collected in full within ninety days after the day on which it first
became due and payable. There is no contest, claim, counterclaim, defense or
right of set-off, other than rebates and returns in the ordinary course of
business, under any contract with any obligor of any Account Receivable relating
to the amount or validity of such Account Receivable. The allowance for
collection losses on the Audited Financial Statements has been determined in
accordance with GAAP consistent with past practice.
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6.15 PERMITS. Each material Permit, together with the name of the
Governmental Entity issuing such Permit, is set forth on Schedule 6.15. Such
Permits are valid and in full force and effect and none of such Permits will be
terminated or impaired or become terminable as a result of the transactions
contemplated by this Agreement. Upon consummation of such transactions, Newco
will have all of the Partnership's right, title and interest in the Permits.
6.16 REAL AND PERSONAL PROPERTY. Attached hereto as Schedule 6.16 is an
accurate list, including substantially complete descriptions as of the Audited
Balance Sheet Date, of all the real and personal property (which in the case of
personal property had an original cost in excess of $25,000) owned or leased by
the Partnership (including its Partnership Subsidiaries) where the Partnership
or its Subsidiary is a lessee or sublessee, including true and correct copies of
leases for equipment and properties on which are situated buildings, warehouses
and other structures used in the operation of the business of the Partnership
(including its Partnership Subsidiaries) and including an indication as to which
assets were formerly owned by any Partner or affiliate (which term, as used
herein, shall have the meaning ascribed thereto in Rule 144(a)(1) promulgated
under the Securities Act of 1933, as amended (the "Securities Act")) of the
Partnership. Except as set forth on Schedule 6.16, all of the Partnership's
buildings, leasehold improvements, structures, facilities, equipment and other
material items of tangible property and assets are in good operating condition
and repair, subject to normal wear and maintenance, are usable in the regular
and ordinary course of business and conform to all applicable laws, ordinances,
codes, rules and regulations, and Authorizations relating to their construction,
use and operation. All leases set forth on Schedule 6.16 have been duly
authorized, executed and delivered and constitute the legal, valid and binding
obligations of the Partnership (or its Partnership Subsidiaries) and, to the
knowledge of the Partners, no other party to any such lease is in default
thereunder and such leases constitute the legal, valid and binding obligations
of such other parties. All fixed assets used by the Partnership (including its
Partnership Subsidiaries) in the operation of its business are either owned by
the Partnership (or its Partnership Subsidiaries) or leased under an agreement
set forth on Schedule 6.16. The Partnership and the Partners have heretofore
delivered to UniCapital copies of all title reports and title insurance policies
received or held by the Partnership (including its Partnership Subsidiaries).
The Partnership and the Partners have indicated on Schedule 6.16 a summary
description of all plans or projects involving the opening of new operations,
expansion of any existing operations or the acquisition of any real property or
existing business to which management of the Partnership (or its Partnership
Subsidiaries) has devoted any significant effort or expenditure in the two-year
period prior to the date of this Agreement which, if pursued by the Partnership
(or its Partnership Subsidiaries) would require additional expenditures of
significant efforts or capital.
6.17 CONTRACTS AND COMMITMENTS. Schedule 6.17 sets forth an accurate,
correct and complete list of all agreements, contracts, commitments,
arrangements and understandings, written or oral, including all amendments and
supplements thereto, of the Partnership other than Leases (the "Contracts"), to
which the Partnership is a party or is bound, or by which any of its assets are
bound, and which involve any:
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(a) agreement, contract, commitment, arrangement or
understanding with any present or former employee or consultant or for the
employment of any person, including any consultant;
(b) agreement, contract, commitment, arrangement or
understanding for the future purchase of, or payment for, supplies or products,
or for the performance of services by a third party involving in any one case
$10,000 or more;
(c) agreement, contract, commitment, arrangement or
understanding to sell or supply products or to perform services involving in any
one case $10,000 or more;
(d) agreement, contract, commitment, arrangement or
understanding containing minimum requirements or "take or pay" provisions;
(e) agreement, contract, commitment, arrangement or
understanding not otherwise listed on Schedule 6.17 and continuing over a period
of more than six months from the date hereof or exceeding $10,000 in value;
(f) distribution, dealer, representative or sales agency
agreement, contract, commitment, arrangement or understanding;
(g) agreement, contract, commitment, arrangement or
understanding containing a provision to indemnify any person or entity or assume
any tax, environmental or other liability;
(h) agreement, contract, commitment, arrangement or
understanding with federal, state, local, regulatory or other governmental
entities;
(i) note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement or other contract or commitment for the
borrowing or lending of money or agreement or arrangement for a line of credit
or guarantee, pledge or undertaking of the indebtedness of any other person;
(j) agreement, contract, commitment, arrangement or
understanding for any charitable or political contribution;
(k) agreement, contract, commitment, arrangement or
understanding for any capital expenditure or leasehold improvement in excess of
$10,000;
(l) agreement, contract, commitment, arrangement or
understanding limiting or restraining the Partnership or any successor thereto,
or to the knowledge of the Partnership and each Partner, any employee of the
Partnership or any successor thereto, from engaging or competing in any manner
or in any business;
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(m) license, franchise, distributorship or other agreement
which relates in whole or in part to any software, patent, trademark, trade
name, service mark or copyright or to any ideas, technical assistance or other
know-how of or used by the Partnership;
(n) agreement, contract, commitment, arrangement or
understanding to which the Partnership, on the one hand, and any affiliate,
officer, director or partner of the Partnership, on the other hand, are parties;
or
(o) material agreement, contract, commitment, arrangement or
understanding not made in the ordinary course of business.
Each of the Contracts listed on Schedule 6.17, or not required to be listed
therein because of the amount thereof, is valid and enforceable in accordance
with its terms; the Partnership is, and to the knowledge of the Partnership and
each Partner, all other parties thereto are, in compliance with the provisions
thereof. The Partnership is not, and to the knowledge of the Partnership and
each Partner, no other party thereto is, in default in the performance,
observance or fulfillment of any material obligation, covenant or condition
contained therein; and no event has occurred which with or without the giving of
notice or lapse of time, or both, would constitute a default thereunder. None of
the rights of the Partnership under any Contract will be impaired by the
consummation of the transactions contemplated hereby, and all such rights will
be enforceable by Newco after the Closing Date without the consent or agreement
of any other party. The Partnership has delivered accurate and complete copies
of each Contract to UniCapital. No Contract obligates any party to obtain any
consent in connection with the transactions contemplated hereby.
6.18 GOVERNMENT CONTRACTS. The Partnership is not now nor has it ever
been a party to any contract with any Governmental Entity subject to price
redetermination or renegotiation.
6.19 TITLE TO REAL PROPERTY. The Partnership has good and insurable
title to all real property owned and used in its business, subject to no
mortgage, pledge, lien, conditional sales agreement, encumbrance or charge,
except for:
(a) liens, if any, reflected on Schedules 6.13 and 6.16 as
securing specified liabilities (with respect to which no material default
exists);
(b) liens for current taxes and assessments not yet due or in
default;
(c) easements for utilities serving the property only; and
(d) easements, covenants and restrictions and other exceptions
to title shown of record in the offices of the county clerks in which the
properties, assets and leasehold estates are located which, in UniCapital's sole
judgment, do not adversely affect UniCapital's intended use of such properties.
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6.20 INSURANCE. The assets, properties and operations of the
Partnership are insured under various policies of general liability and other
forms of insurance, all of which are described in Schedule 6.20, which discloses
for each policy the risks insured against, coverage limits, deductible amounts,
all outstanding claims thereunder, and whether the terms of such policy provide
for retrospective premium adjustments. All such policies are in full force and
effect in accordance with their terms, no notice of cancellation has been
received, and there is no existing default or event which, with the giving of
notice or lapse of time or both, would constitute a default thereunder. Such
policies are in amounts which, in relation to the business and assets of the
Partnership, are consistent with normal or customary industry practice and all
premiums due to date have been paid in full. The Partnership has not been
refused any insurance, nor has the Partnership's coverage been limited, by any
insurance carrier to which it has applied for insurance or with which it has
carried insurance during the past five years. Schedule 6.20 also contains a true
and complete description of all outstanding bonds and other surety arrangements
issued or entered into in connection with the business, assets and liabilities
of the Partnership.
6.21 EMPLOYEES. Schedule 6.21 contains the following with respect to
the Partnership:
(a) a list of all employees of the Partnership (including
name, title and position);
(b) each such employee's length of service; and
(c) the compensation (including terms of payment, bonuses,
commissions and deferred compensation, as well as any benefits) of each such
employee.
Except as disclosed on Schedule 6.21: (i) there have not been in the past five
years and, to the knowledge of the Partnership and the Partners, there are not
pending, any labor disputes, work stoppages, requests for representation,
pickets or work slow-downs due to labor disagreements; (ii) there are and have
been no unresolved violations of any Laws of any Governmental Entity respecting
the employment of any employees; (iii) there is no unfair labor practice, charge
or complaint pending, unresolved or, to the knowledge of the Partnership and the
Partners, threatened before the National Labor Relations Board or similar body
in any foreign country; (iv) there is no employment handbook, personnel policy
manual, or similar document that creates prospective employment rights or
obligations; (v) the employees of the Partnership are not covered by any
collective bargaining agreement; (vi) the Partnership has provided or will
timely provide prior to Closing all notices required by law to be given prior to
Closing to all local, state, federal or national labor, wage-payment, equal
employment opportunity, unemployment insurance and related agencies; (vii) the
Partnership has paid or properly accrued in the ordinary course of business all
wages and compensation due to employees, including all vacations or vacation
pay, holidays or holiday pay, sick days or sick pay, and bonuses; and (viii) the
transactions contemplated by this Agreement will not create liability under any
Laws of any Governmental Entity respecting reductions in force or the impact on
employees on plant closing
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or sales of businesses. All employees of the Partnership are legally able to
work in the United States.
6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. Schedule 6.22 sets forth
a complete and accurate list of each Benefit Plan covering any present or former
officers, employees or directors of the Partnership. "Benefit Plan" means each
"employee pension benefit plan" (as defined in Section 3(3) of ERISA,
hereinafter a "Pension Plan"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA, hereinafter a "Welfare Plan") and each other plan or
arrangement (written or oral) relating to deferred compensation, bonus,
performance compensation, stock purchase, stock option, stock appreciation,
severance, vacation, sick leave, holiday pay, fringe benefits, personnel policy,
reimbursement program, incentive, insurance, welfare or similar plan, program,
policy or arrangement, in each case maintained or contributed to, or required to
be maintained or contributed to, by the Partnership or its affiliates or any
other person or entity that, together with the Partnership, is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code (each,
together with the Partnership, a "Commonly Controlled Entity") for the benefit
of any present or former officer, employee or director. The Partnership has no
intent or commitment to create any additional Benefit Plan or amend any Benefit
Plan so as to increase benefits thereunder. The Partnership has not created any
Benefit Plan or declared or paid any bonus compensation in contemplation of the
transactions contemplated by this Agreement. A current, accurate and complete
copy of each Benefit Plan has been made available to UniCapital. Except as
disclosed on Schedule 6.22:
(a) each Benefit Plan is in substantial compliance with all
reporting, disclosure and other requirements of ERISA applicable to such Benefit
Plan;
(b) each Pension Plan which is intended to be qualified under
Section 401(a) of the Code, has been determined by the Internal Revenue Service
to be so qualified and, to the knowledge of the Partnership and the Partners, no
condition exists that would adversely affect any such determination;
(c) neither any Benefit Plan, nor the Partnership, nor any
Commonly Controlled Entity, nor any trustee or agent has been or is presently
engaged in any prohibited transactions as defined by Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not applicable which could
subject the Partnership to the tax or penalty imposed by Section 4975 of the
Code or Section 502 of ERISA;
(d) there is no event or condition existing which could be
deemed a "reportable event" (within the meaning of Section 4043 of ERISA) with
respect to which the thirty-day notice requirement has not been waived; to the
knowledge of the Partnership and the Partners, no condition exists which could
subject the Partnership to a penalty under Section 4071 of ERISA;
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(e) neither the Partnership nor any Commonly Controlled Entity
is or has ever been party to any "multi-employer plan," as that term is defined
in Section 3(37) of ERISA;
(f) true and correct copies of the most recent annual report
on Form 5500 and any attached schedules for each Benefit Plan (if any such
report was required by applicable law) and a true and correct copy of the most
recent determination letter issued by the Internal Revenue Service for each
Pension Plan have been provided to UniCapital;
(g) with respect to each Benefit Plan, there are no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
pending or, to the knowledge of the Partnership and the Partners, threatened
against any Benefit Plan, the Partnership, any Commonly Controlled Entity or any
trustee or agent of any Benefit Plan; and
(h) with respect to each Benefit Plan to which the Partnership
or any Commonly Controlled Entity is a party which constitutes a group health
plan subject to Section 4980B of the Code, each such Benefit Plan substantially
complies, and in each case has substantially complied, with all applicable
requirements of Section 4980B of the Code.
(i) Except as set forth in Schedule 6.22:
(i) there is no outstanding liability (except for
premiums due) under Title IV of ERISA with respect to any Pension Plan;
(ii) neither the Pension Benefit Guaranty Corporation
nor the Partnership, nor any Commonly Controlled Entity has instituted
proceedings to terminate any Pension Plan and the Pension Benefit Guaranty
Corporation has not informed the Partnership of its intent to institute
proceedings to terminate any Pension Plan;
(iii) full payment has been made of all amounts which
the Partnership or any Commonly Controlled Entity was required to have paid as a
contribution to the Pension Plans as of the last day of the most recent fiscal
year of each of the Pension Plans ended prior to the date of this Agreement, and
none of the Pension Plans has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of each such Pension
Plan ended prior to the date of this Agreement;
(iv) to the knowledge of the Partnership and the
Partners, the actuarial assumptions utilized, where appropriate, in connection
with determining the funding of each Pension Plan which is a defined benefit
pension plan (as set forth in the actuarial report for such Pension Plan) are
reasonable. Copies of the most recent actuarial reports have been furnished to
UniCapital. Based on such actuarial assumptions, as of the Audited Balance Sheet
Date, the fair market value of the assets or properties held under each such
Pension Plan exceeds the
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actuarially determined present value of all accrued benefits of such Pension
Plan (whether or not vested) determined on an ongoing Pension Plan basis;
(v) each of the Benefit Plans is, and its
administration is and has been during the six-year period preceding the date of
this Agreement, in substantial compliance with, and the Partnership has not
received any claim or notice that any such Benefit Plan is not in compliance
with, all applicable laws and orders and prohibited transaction exemptions,
including without limitation, to the extent applicable, the requirements of
ERISA;
(vi) neither the Partnership nor any Commonly
Controlled Entity is in default in performing any of its contractual obligations
under any of the Benefit Plans or any related trust agreement or insurance
contract;
(vii) there are no material outstanding liabilities
of any Benefit Plan other than liabilities for benefits to be paid to
participants in the Benefit Plans and their beneficiaries in accordance with the
terms of the Benefit Plans;
(viii) each Benefit Plan may be amended or modified
by the Partnership or the applicable Commonly Controlled Entity at any time
without liability except under any defined pension benefit plan;
(ix) no Benefit Plan other than a Pension Plan,
retiree medical plan or severance plan provides benefits to any individual after
termination of employment;
(x) the consummation of the transactions contemplated
by this Agreement will not (in and of itself): (A) entitle any employee of the
Partnership to severance pay, unemployment compensation or any other payment;
(B) accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee; (C) result in any liability under Title
IV of ERISA; (D) result in any prohibited transaction described in Section 406
of ERISA or Section 4975 of the Code for which an exemption is not available; or
(E) result (either alone or in conjunction with any other event) in the payment
or series of payments by the Partnership or any of its affiliates to any person
of an "excess parachute payment" within the meaning of Section 280G of the Code;
(xi) with respect to each Benefit Plan that is funded
wholly or partially through an insurance policy, all premiums required to have
been paid to date under the insurance policy have been paid, all premiums
required to be paid under the insurance policy through the Closing Date will
have been paid on or before the Closing Date and, as of the Closing Date, there
will be no liability of the Partnership or any Commonly Controlled Entity under
any insurance policy or ancillary agreement with respect to such insurance
policy in the nature of a retroactive rate adjustment, loss sharing arrangement
or other actual or contingent liability arising wholly or partially out of
events occurring prior to the Closing Date;
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(xii) (A) each Benefit Plan that constitutes a
"Welfare Plan," within the meaning of Section 3(1) of ERISA, and for which
contributions are claimed by the Partnership or any Commonly Controlled Entity
as deductions under any provision of the Code, is in material compliance with
all applicable requirements pertaining to such deduction;
(B) with respect to any welfare benefit fund
(within the meaning of Section 419 of the Code) related to a welfare benefit
plan, there is no disqualified benefit (within the meaning of Section 4976(b) of
the Code) that would result in the imposition of a tax under Section 4976(a) of
the Code; and
(C) all welfare benefit funds intended to be
exempt from tax under Section 501(a) of the Code have been determined by the
Internal Revenue Service to be so exempt and no event or condition exists which
would adversely affect any such determination; and
(xiii) all benefit plans outside of the United
States, if any (the "Foreign Plans"), are in compliance with all applicable laws
and regulations and have been operated in accordance with the plans' respective
terms. There are no material unfunded liabilities under or in respect of the
Foreign Plans, and all contributions or other payments required to be made to or
in respect of the Foreign Plans prior to the Closing Date have been made or will
be made prior to the Closing Date.
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS. The Partnership has complied
with each, and is not in violation of any, law, ordinance, or governmental or
regulatory rule or regulation, whether federal, state, local or foreign
("Regulations"), to which the Partnership's business, operations, assets or
properties is subject. The Partnership owns, holds, possesses or lawfully uses
in the operation of its business all franchises, licenses, permits, easements,
rights, applications, filings, registrations and other authorizations
("Authorizations") which are in any manner necessary for it to conduct its
business as now or previously conducted or for the ownership and use of the
assets owned or used by the Partnership in the conduct of the business of the
Partnership, free and clear of all liens, charges, restrictions and encumbrances
and in compliance with all Regulations. All such Authorizations are listed and
described in Schedule 6.23. The Partnership is not in default, nor has the
Partnership received any notice of any claim of default, with respect to any
such Authorization. All such Authorizations are renewable by their terms or in
the ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
None of such Authorizations will be adversely affected by consummation of the
transactions contemplated hereby. No Partner and no director, officer, employee
or former employee of the Partnership or any affiliates of the Partnership, or
any other person, firm or corporation, owns or has any proprietary, financial or
other interest (direct or indirect) in any Authorization which the Partnership
owns, possesses or uses in the operation of the business of the Partnership as
now or previously conducted.
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6.24 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
6.24, no Partner and no director, officer or employee of the Partnership, or any
member of his or her immediate family or any other of its, his or her
affiliates, owns or has a 5% or more ownership interest in any corporation or
other entity that is or was during the last three years a party to, or in any
property which is or was during the last three years the subject of, any
contract, agreement or understanding, business arrangement or relationship with
the Partnership.
6.25 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of the Partnership and the Partners, threatened against the
Partnership or which relates to the transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 6.25, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of the Partnership and the Partners, threatened
against the Partnership or which relates to the Partnership
(c) Neither the Partnership nor any Partner knows of any
reasonably likely basis for any litigation, arbitration, investigation or
proceeding referred to in Sections 6.25(a) or (b).
(d) The Partnership is not a party to or subject to the
provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority.
6.26 RESTRICTIONS. The Partnership is not a party to any indenture,
agreement, contract, commitment, lease, plan, license, permit, authorization or
other instrument, document or understanding, oral or written, or subject to any
charter or other corporate restriction or any judgment, order, writ, injunction,
decree or award which materially adversely affects or materially restricts or,
so far as the Partnership or any of the Partners can now reasonably foresee, may
in the future materially adversely affect or materially restrict, the business,
operations, assets, properties, prospects or condition (financial or otherwise)
of the Partnership after consummation of the transactions contemplated hereby.
6.27 TAXES. All federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by the Partnership
(the "Tax Returns") with respect to any federal, state, local or foreign taxes,
assessments, interest, penalties, deficiencies, fees and other governmental
charges or impositions (including without limitation all income tax,
unemployment compensation, social security, payroll, sales and use, excise,
privilege, property, ad valorem, franchise, license, school and any other tax or
similar governmental charge or imposition under laws of the United States or any
state or municipal or political subdivision thereof or any foreign country or
political subdivision thereof) (each, a "Tax," and collectively, the "Taxes")
have been timely filed with the appropriate governmental agencies in all
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jurisdictions in which such Tax Returns are required to be filed, and all such
Tax Returns properly reflect the liabilities of the Partnership for Taxes for
the periods, property or events covered thereby. All Taxes, including without
limitation those which are called for by the Tax Returns, required to be paid,
withheld or accrued by the Partnership and any deficiency assessments, penalties
and interest have been timely paid, withheld or accrued. The accruals for Taxes
contained in the Interim Balance Sheet are adequate to cover the Tax liabilities
of the Partnership as of that date and include adequate provision for all
deferred Taxes, and nothing has occurred subsequent to that date to make any of
such accruals inadequate. The Partnership's Tax basis in its assets for purposes
of determining its future amortization, depreciation and other federal income
tax deductions is accurately reflected on the Partnership's Tax books and
records. The Partnership is not nor has it any time ever been a party to a Tax
sharing, Tax indemnity or Tax allocation agreement, and the Partnership has not
assumed any Tax liability of any other person or entity under contract. The
Partnership has not received any notice of assessment or proposed assessment in
connection with any Tax Returns and there are no pending tax examinations of or
tax claims asserted against the Partnership or any of its assets or properties.
The Partnership has not extended, or waived the application of, any statute of
limitations of any jurisdiction regarding the assessment or collection of any
Taxes. There are now (and as of immediately following the Closing there will be)
no Liens (other than any Lien for current Taxes not yet due and payable) on any
of the assets or properties of the Partnership relating to or attributable to
Taxes. To the knowledge of the Partnership and the Partners, there is no basis
for the assertion of any claim relating to or attributable to Taxes which, if
adversely determined, would result in any Lien on the assets of the Partnership
or otherwise have an adverse effect on the Partnership or its business,
operations, assets, properties, prospects or condition (financial or otherwise).
Neither the Partnership nor the Partners have any knowledge of any basis for any
additional assessment of any Taxes. All Tax payments related to employees,
including income tax withholding, FICA, FUTA, unemployment and worker's
compensation, required to be made by the Partnership have been fully and
properly paid, withheld, accrued or recorded. All Taxes required to be withheld
by the Partnership or any Partnership Subsidiary, including, but not limited to,
Taxes arising as a result of payments (or amounts allocable to foreign partners
or foreign persons), have been fully and properly paid, withheld, accrued or
recorded. There are no contracts, agreements, plans or arrangements, including
but not limited to the provisions of this Agreement, covering any employee or
former employee of the Partnership that, individually or collectively, could
give rise to any payment (or portion thereof) that would not be deductible
pursuant to Sections 280G, 404 or 162 of the Code. Two correct and complete
copies of (a) all Tax examinations, (b) all extensions of statutory limitations
and (c) all federal, state and local income tax returns and franchise tax
returns of the Partnership (including, if filed separately, its Subsidiaries)
for the last five fiscal years, or such shorter period of time as any of them
shall have existed, have heretofore been delivered by the Partnership and the
Partners to UniCapital. The Partnership currently utilizes the accrual method of
accounting for income tax purposes and has not changed its method of accounting
for income tax purposes in the past five years. The Partnership qualifies (and
has since the date of its formation qualified) to be treated as a partnership
for federal income tax purposes and none of the Partnership, or any Partner or
any taxing authority has taken a position inconsistent with such treatment. No
Partner is a "foreign
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person" within the meaning of Section 1445 of the Code and each Partner will
furnish UniCapital and Newco with a FIRPTA Certificate in the form of Annex IV
hereto as a condition to closing.
6.28 INTELLECTUAL PROPERTY MATTERS.
(a) The Partnership has not utilized or does not currently
utilize any patent, trademark, trade name, service mark, copyright, software,
trade secret or know-how except for those listed on Schedule 6.28 (the
"Intellectual Property"), all of which are owned by the Partnership free and
clear of any liens, claims, charges or encumbrances. The Intellectual Property
constitutes all such assets, properties and rights which are used or held for
use in, or are necessary for, the conduct of the business of the Partnership.
(b) There are no royalty, commission or similar arrangements,
and no licenses, sublicenses or agreements, pertaining to any of the
Intellectual Property or products or services of the Partnership.
(c) The Partnership does not infringe upon or unlawfully or
wrongfully use any patent, trademark, trade name, service mark, copyright or
trade secret owned or claimed by another. No action, suit, proceeding or
investigation has been instituted or, to the knowledge of the Partnership and
the Partners, threatened relating to any, patent, trademark, trade name, service
mark, copyright or trade secret formerly or currently used by the Partnership.
None of the Intellectual Property is subject to any outstanding order, decree or
judgment. The Partnership has not agreed to indemnify any person or entity for
or against any infringement of or by the Intellectual Property.
(d) No present or former employee of the Partnership and no
other person or entity owns or has any proprietary, financial or other interest,
direct or indirect, in whole or in part, in any patent, trademark, trade name,
service mark or copyright, or in any application therefor, or in any trade
secret, which the Partnership owns, possesses or uses in its operations as now
or heretofore conducted. Schedule 6.28(d) lists all confidentiality or
non-disclosure agreements currently in force and effect to which the Partnership
or any of its employees is a party.
(e) Schedule 6.28(e) sets forth a complete and accurate list
of all items of Intellectual Property duly registered in, filed in or issued by
the United States Copyright Office or the United States Patent and Trademark
Office, any offices in the various states of the United States and any offices
in other jurisdictions.
(f) All rights of the Partnership in the Intellectual Property
shall vest in Newco pursuant to the transactions contemplated hereby without any
consent or other approval.
(g) All Intellectual Property in the form of computer software
that is utilized by the Partnership in the operations of its business is capable
of processing date data between and
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within the twentieth and twenty-first centuries, or can be rendered capable of
processing such data within six months by the expenditure of no more than
$2,000.00.
6.29 COMPLETENESS; NO VIOLATIONS. The certified copy of the Partnership
Agreement, as amended to date, of the Partnership, and the copies of all leases,
instruments, agreements, licenses, permits, certificates or other documents
which are included on schedules attached hereto or which have been delivered or
otherwise made available to UniCapital in connection with the transactions
contemplated hereby, are complete and correct; neither the Partnership
(including the Partnership Subsidiaries) nor, to the knowledge of the Partners,
any other party to any of the foregoing is in material default thereunder; and,
except as set forth in the schedules and documents attached to this Agreement,
the rights and benefits of the Partnership (including its Partnership
Subsidiaries) thereunder will not be materially and adversely affected by the
transactions contemplated hereby, and the execution of this Agreement and the
performance of the obligations hereunder will not result in a material violation
or breach or constitute a material default under any of the terms or provisions
thereof. Except as set forth on Schedule 6.29, none of such leases, instruments,
agreements, contracts, licenses, permits, certificates or other documents
requires notice to, or the consent or approval of, any governmental agency or
other third party to any of the transactions contemplated hereby to remain in
full force and effect. The consummation of the transactions contemplated hereby
will not give rise to any right of termination, cancellation or acceleration or
result in the loss of any right or benefit thereunder.
6.30 EXISTING CONDITION. Except as described in Schedule 6.30, since
the Audited Balance Sheet Date, the Partnership has not:
(a) incurred any liabilities, other than liabilities incurred
in the ordinary course of business consistent with past practice, or discharged
or satisfied any lien or encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice, or failed to pay or
discharge when due any liabilities of which the failure to pay or discharge has
caused or will cause any material damage or risk of material loss to it or any
of its assets or properties;
(b) sold, encumbered, assigned or transferred any assets,
properties or rights or any interest therein, except for the sales in the
ordinary course of business consistent with past practice, or made any agreement
or commitment or granted any option or right with, of or to any person to
acquire any assets, properties or rights of the Partnership or any interest
therein;
(c) created, incurred, assumed or guaranteed any indebtedness
for money borrowed, or mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract or other
encumbrance of any nature whatsoever, except in the ordinary course of business
consistent with past practice;
(d) made or suffered any amendment or termination of any
material agreement, contract, commitment, lease or plan to which it is a party
or by which it is bound, or
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canceled, modified or waived any substantial debts or claims held by it or
waived any rights of substantial value, except in the ordinary course of
business consistent with past practice;
(e) declared, set aside or paid any dividend or made or agreed
to make any other distribution or payment in respect of its capital shares or
redeemed, purchased or otherwise acquired or agreed to redeem, purchase or
acquire any of its shares of capital stock or other ownership interests;
(f) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting its business,
operations, assets, properties or prospects or (ii) of any item or items carried
on its books of account individually or in the aggregate at more than $25,000,
or suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;
(g) suffered any material adverse change in its business,
operations, assets, properties, prospects or condition (financial or otherwise),
other than as directly caused by adverse economic conditions not specific to, or
having an extraordinary impact upon, the Partnership;
(h) received notice or had knowledge of any actual or
threatened labor trouble, strike or other occurrence, event or condition of any
similar character which has had or might have an adverse effect on its business,
operations, assets, properties or prospects;
(i) made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $25,000, except such
as may be involved in ordinary repair, maintenance or replacement of its assets;
(j) increased the salaries or other compensation of, or made
any advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its employees or made any increase in, or any addition to, other
benefits to which any of its employees may be entitled;
(k) changed any of the accounting principles followed by it or
the methods of applying such principles;
(l) entered into any transaction other than in the ordinary
course of business consistent with past practice;
(m) changed its authorized capital or its securities
outstanding or otherwise changed its ownership interests, or granted any
options, warrants, calls, conversion rights or commitments with respect to any
of its capital stock or other ownership interests; or
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(n) agreed to take any of the actions referred to above.
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Attached hereto as Schedule
6.31 is an accurate list, as of the date of this Agreement, of:
(a) the name of each financial institution in which the
Partnership (including the Partnership Subsidiaries) has accounts or safe
deposit boxes;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have
access thereto; and
(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Partnership and a
description of the terms of such power.
6.32 ENVIRONMENTAL MATTERS. (a) The Partnership has secured, and is in
compliance with, all Environmental Permits, with respect to any premises on
which its business is operated, all of which Environmental Permits shall vest in
Newco upon consummation of the transactions contemplated hereby. The Partnership
is in compliance with all Environmental Laws.
(b) Neither the Partnership nor Partner has received any
communication from any Governmental Entity that alleges that the Partnership is
not in compliance with any Environmental Laws or Environmental Permits.
(c) The Partnership has not entered into or agreed to any
court decree or order, and the Partnership is not subject to any judgment,
decree or order, relating to compliance with any Environmental Law or to
investigation or cleanup of a Hazardous Substance under any Environmental Law.
(d) No lien, charge, interest or encumbrance has been
attached, asserted, or to the knowledge of the Partnership and the Partners,
threatened to or against any assets or properties of the Partnership pursuant to
any Environmental Law.
(e) There has been no treatment, storage, disposal or release
of any Hazardous Substance on any property owned, operated or leased by the
Partnership.
(f) The Partnership has not received a CERCLA 104(e)
information request nor has it been named a potentially responsible party for
any National Priorities List site under CERCLA or any site under analogous state
law or received an analogous notice or request from
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any non-U.S. Governmental Entity, which notice, request or any resulting inquiry
or litigation has not been fully and finally resolved without possibility of
reopening.
(g) There are no aboveground tanks or underground storage
tanks on, under or about any property owned, operated or leased by the
Partnership and any former aboveground or underground tanks on any property
owned, operated or leased by the Partnership have been removed in accordance
with all Environmental Laws and no residual contamination, if any, remains at
such sites in excess of applicable standards.
(h) There are no polychlorinated biphenyls ("PCBs") leaking
from any article, container or equipment on, under or about any property owned,
operated or leased by the Partnership and there are no such articles, containers
or equipment containing PCBs, and there is no asbestos containing material in a
condition or location currently constituting a violation of any Environmental
Law at, on, under or within any property owned, operated or leased by the
Partnership.
(i) The Partnership and the Partners have provided to
UniCapital true and complete copies of, or access to, all written environmental
assessment materials and reports in their possession that have been prepared by
or on behalf of the Partnership during the past five years.
6.33 NO ILLEGAL PAYMENTS. The Partnership has not and, to the knowledge
of the Partnership and the Partners, no affiliate, officer, agent or employee
thereof, directly or indirectly, has, during the past five years, on behalf of
or with respect to the Partnership or any affiliate thereof, (a) made any
unlawful domestic or foreign political contributions, (b) made any payment or
provided services which were not legal to make or provide or which the
Partnership or any affiliate thereof or any such officer, agent or employee
should have known were not legal for the payee or the recipient of such services
to receive, (c) received any payment or any services which were not legal for
the payer or the provider of such services to make or provide, (d) made any
payment to any person or entity, or agent or employee thereof, in connection
with any Lease (as hereinafter defined) to induce such person or entity to enter
into a Lease transaction, (e) had any transactions or payments related to the
Partnership which are not recorded in their accounting books and records or (f)
had any off-book bank or cash accounts or "slush funds" related to the
Partnership.
6.34 LEASES. Schedule 6.34 hereto sets forth the Partnership's lease
financing arrangements as of the Audited Balance Sheet Date (which, together
with all other lease/financing arrangements entered into by the Partnership
between such date and the Closing Date, are referred to herein as the "Leases").
The term "Lease Documents" means the lease arrangements and financing contracts
evidencing the Leases described in Schedule 6.34, together with all related
documents and agreements including, without limitations, master lease
agreements, schedules or other addenda to such Leases, certificates of delivery
and acceptance, UCC financing statements, remarketing agreements, residual
guaranty agreements, insurance
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policies, guaranty agreements and other credit supports. The term "Equipment"
means all equipment, inventory and other property described as being leased or
financed pursuant to a Lease, or in which the Partnership is granted a security
interest pursuant to a Lease. The term "Obligor" means any lessee party or other
party obligated to pay or perform any obligations under or in respect of a Lease
or the Equipment covered by a Lease (excluding the lessor party thereunder, but
otherwise including, without limitation, any guarantor of a Lease or any vendor,
manufacturer or similar party under a remarketing agreement, residual guaranty
or similar agreement). The term "Scheduled Payments" means the monthly or
periodic rental payments or installments of principal and interest under the
terms of the Leases.
(a) There is no restriction or limitation in any of the Lease
Documents or otherwise, restricting the Partnership from executing this
Agreement, or entering into the transactions contemplated by this Agreement,
other than consents which have been, or prior to the Closing will have been,
obtained.
(b) The Partnership owns the Equipment covered by each Lease
or has a vested and perfected first priority security interest in the Equipment.
All Equipment is located within the United States.
(c) With respect to each Lease, only one chattel paper
original of such Lease exists and is held by the Partnership.
(d) Each Lease is in full force and effect in accordance with
its terms, and there has been no occurrence which would or might permit any
Obligor to terminate such Lease or suspend or reduce any payments or obligations
due or to become due in respect of such Lease or the related Lease Documents by
reason of default by the lessor party under such Lease. Except as listed on
Schedule 6.34(d), none of the Obligors in respect of a Lease or the related
Lease Documents is the subject of a bankruptcy, insolvency or similar
proceeding.
(e) Except for the delinquency in the payment of any Scheduled
Payment that is (i) not more than 70 days past due or (ii) more than 70 days
past due but for which adequate reserves are shown on the Partnership's books
and records (which reserves are calculated consistent with past practice), there
does not exist any default in the payment of any Scheduled Payments due under
any Lease or the related Lease Documents, and there does not exist any other
default, breach, violation or event permitting acceleration, termination or
repossession under any Lease or the related Lease Documents or any event which,
to the knowledge of the Partnership and the Partners, with notice and the
expiration of any applicable grace or cure period, would constitute such a
default, breach, violation or event permitting acceleration, termination or
repossession under such Lease or the related Lease Documents.
(f) The Partnership has not acted in a manner which (nor has
the Partnership failed to act where such failure to act) would alter or reduce
any of the Partnership's rights or
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benefits under any manufacturer's or vendors' warranties or guarantees with
respect to any Equipment.
(g) The Partnership has complied with all requirements of any
federal, state or local law, including without limitation, usury laws,
applicable to each Lease.
(h) Each Lease has the following characteristics:
(i) such Lease was originated in the United States
and the Scheduled Payments thereunder are payable in U.S. dollars by Obligors
domiciled in the United States;
(ii) the lessee party under such Lease has
unconditionally accepted the Equipment covered by such Lease;
(iii) at least one Scheduled Payment has been made by
the Obligor under each such Lease; and
(iv) no Obligor in respect of such Lease is an
affiliate of the Partnership.
(i) Each Lease and the related Lease Documents are valid,
binding, legally enforceable and non-cancelable obligations of the parties
thereto, enforceable in accordance with their respective terms. Each Lease is a
business obligation of the lessee thereunder and is not a "consumer transaction"
under any applicable federal or state regulation.
(j) No Lease or related Lease Document is the subject of a
fraudulent scheme by any Obligor or any supplier of Equipment.
(k) Each item of Equipment is subject to a Lease.
(l) Each Lease is a fixed rate lease contract.
(m) No Lease or related Lease Document is subject to any right
of rescission, set-off, counterclaim, abatement or defense, including without
limitation any defense of usury, nor will the operation of any of the terms of
any Lease or any related Lease Document or the exercise of any right or remedy
thereunder render such Lease or any related Lease Document or the obligations
thereunder unenforceable, or subject the same to any right of rescission,
set-off, counterclaim, abatement or defense. No Obligor has asserted any right
of rescission, set-off, counterclaim, abatement or defense to its obligations
under a Lease or any related Lease Document.
(n) As to the Leases and the related Lease Documents, (i) none
has been amended or modified (a) to extend the maturity date for a period of
longer than one year, or (b)
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to alter the amount or time of payment of any amount due thereunder, unless as
to (a) and (b) such extension or alteration is reasonably expected to result in
a net economic benefit to the Partnership or any Subsidiary; (ii) no indulgences
or waivers have been granted in respect of the obligations of any Obligor under
any Lease; and (iii) neither the Partnership nor its Subsidiaries have advanced
any monies on behalf of any Obligor.
(o) Each Lease requires the Obligor thereunder at its own cost
and expense to maintain the Equipment leased thereunder in good repair,
condition and working order, and each Obligor under a Lease is currently in
compliance with such requirement.
(p) Each Lease requires the Obligor thereunder (i) to pay all
fees, taxes (except income taxes), and other charges or liabilities arising with
respect to the Equipment leased thereunder or the use thereof, (ii) to keep the
Equipment free and clear of any and all liens, security interests and other
encumbrances, other than security interests of the Partnership, (iii) to hold
harmless the lessor thereunder and its successors and assigns against the
imposition of any fees, charges, liabilities and encumbrances, (iv) to bear all
risk of loss associated with the Equipment covered by or securing the
obligations under such Lease during the term of such Lease and (v) to maintain
at the cost of the Obligor public liability and casualty insurance in respect of
such Equipment covered by such Lease.
(q) Each Lease prohibits without the lessor's prior written
consent any relocation of the Equipment covered by such Lease and requires the
Obligor to execute such agreements and documents as may reasonably be requested
by the lessor in connection with any such relocation.
(r) Each Lease involves either the lease of tangible personal
property owned by the Partnership or the loan of money secured by a security
interest in tangible personal property owned by the Obligor thereunder.
(s) The Partnership has not received any notice challenging
its ownership or the priority of its security interest in the Equipment covered
by each Lease, and there are no proceedings pending before any court or
governmental entity or, to the knowledge of the Partnership and the Partners,
threatened by any Obligor or other party, (i) asserting the invalidity of any
Lease or the related Lease Documents, (ii) seeking to prevent payment or
performance by any Obligor of any Lease or any of the terms of the related Lease
Documents, or (iii) seeking any determination or ruling that might adversely
affect the validity or enforceability of any Lease or any of the terms or
provisions of the related Lease Documents.
(t) As to each Lease, there are no agreements or
understandings between the Partnership and the Obligors in respect of such Lease
or otherwise binding on the Partnership other than as expressly set forth in the
Lease and the related Lease Documents.
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6.35 LEASE FUNDING. The Partnership is in compliance with all of the
terms and covenants of, and is not in default or breach under, each agreement,
contract, understanding or arrangement with any funding source for the Leases.
6.36 DISCLOSURE. The Partnership has delivered, or in the case of the
Leases and Lease Documents, made available, to UniCapital true and complete
copies of each agreement, contract, commitment or other document (or, in the
case of any such document not in the possession of or reasonably available to
the Partnership or a Partner, accurate and complete summaries thereof) that is
referred to in the schedules to this Agreement or that has been requested by
UniCapital or its representatives. Without limiting any exclusion, exception or
other limitation contained in any of the representations and warranties made
herein, this Agreement and the schedules hereto and all other documents and
information prepared or certified by the Partners and provided to UniCapital and
its representatives pursuant hereto do not and will not when delivered include
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements herein and therein not misleading. If any
Partners become aware of any fact or circumstance that would change a
representation or warranty of any Partner in this Agreement or any
representation made on behalf of the Partnership (including the Partnership
Subsidiaries), then the Partners shall immediately give notice of such fact or
circumstance to UniCapital. However, such notification shall not relieve the
Partnership or any of the Partners of their respective obligations under this
Agreement, and at the sole option of UniCapital, the truth and accuracy of any
and all warranties and representations of the Partners, at the date of this
Agreement and at the Closing, shall be a precondition to the consummation of
this transaction.
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO
As of the date hereof and as of the Closing Date, UniCapital and Newco,
jointly and severally, represent and as follows:
7.1 CORPORATE EXISTENCE. UniCapital is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Newco is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
7.2 UNICAPITAL STOCK. The shares of UniCapital Stock to be delivered to
the Partners on the Closing Date, when delivered in accordance with the terms of
this Agreement, will be validly issued, fully paid and nonassessable shares. The
UniCapital Stock to be delivered in exchange for the Partnership Interests
pursuant to the terms of this Agreement will be free and clear of all liens,
encumbrances and claims of every kind, other than restrictions upon transfer
contained herein and other than any liens, encumbrances or claims arising other
than by the actions of UniCapital or Newco, and except for restrictions upon
resale, will be legally equivalent in all respects to the majority of UniCapital
Stock issued and outstanding on the date hereof.
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7.3 CORPORATE POWER AND AUTHORIZATION. UniCapital and Newco have the
corporate power, authority and legal right to execute, deliver and perform this
Agreement and all related documents and agreements required to be executed and
delivered in accordance with the provisions hereof (the "UniCapital Documents").
The execution, delivery and performance of this Agreement by UniCapital and
Newco have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by UniCapital and Newco and
constitutes, and the UniCapital Documents when executed and delivered will
constitute, the legal, valid and binding obligations of UniCapital and Newco
enforceable against UniCapital and Newco in accordance with their terms.
7.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement by UniCapital and Newco will not violate, conflict with or result in
the breach of any term, condition or provision of, or require the consent of any
other person under (a) any existing law, ordinance, or governmental rule or
regulation to which UniCapital or Newco is subject, (b) any judgment, order,
writ, injunction, decree or award of any Governmental Entity that is applicable
to UniCapital or Newco, (c) the charter documents of UniCapital or Newco, or (d)
any mortgage, indenture, agreement, contract, commitment, lease, plan,
Authorization, or other instrument, document or understanding, oral or written,
to which UniCapital or Newco is a party, by which UniCapital or Newco may have
rights or by which any of the properties or assets of UniCapital or Newco may be
bound or affected, or give any party with rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of UniCapital or Newco thereunder. Except as aforesaid and for
filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, no
authorization, approval or consent of, and no registration or filing with, any
Governmental Entity is required in connection with the execution, delivery or
performance of this Agreement by UniCapital or Newco.
7.5 CAPITALIZATION OF UNICAPITAL. The IPO will result in an aggregate
market capitalization of UniCapital that will exceed Three Hundred Million
Dollars ($300,000,000) as determined by multiplying the outstanding shares of
UniCapital Stock immediately following the closing of the IPO by the offering
price.
7.6 COMPLIANCE WITH LAW; AUTHORIZATIONS. Each of UniCapital and Newco
have complied with each, and is not in violation of Regulations to which
UniCapital's and Newco's respective business, operations, assets or properties
is subject. Each of UniCapital and Newco owns, holds, possesses or lawfully uses
in the operation of its business all Authorizations which are in any manner
necessary for it to conduct its business as now or previously conducted or for
the ownership and use of the assets owned or used by UniCapital and Newco,
respectively, in the conduct of the business of the Partnership, free and clear
of all liens, charges, restrictions and encumbrances and in compliance with all
Regulations. Neither UniCapital nor Newco is in default, nor has UniCapital or
Newco received any notice of any claim of default, with respect to any such
Authorization. All such Authorizations are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
None of such Authorizations will be adversely
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affected by consummation of the transactions contemplated hereby. No stockholder
and no director, officer, employee or former employee of UniCapital or Newco or
any of their affiliates, or any other person, firm or corporation, owns or has
any proprietary, financial or other interest (direct or indirect) in any
Authorization which UniCapital or Newco owns, possesses or uses in the operation
of the business of UniCapital and Newco as now or previously conducted.
7.7 TRANSACTIONS WITH AFFILIATES. Except as described in the
Registration Statement, no stockholder and no director, officer or employee of
UniCapital or Newco, or any member of his or her immediate family or any other
of its, his or her affiliates, owns or has a 5% or more ownership interest in
any corporation or other entity that is or was during the last three years a
party to, or in any property which is or was during the last three years the
subject of, any contract, agreement or understanding, business arrangement or
relationship with UniCapital or Newco.
7.8 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of UniCapital and Newco, threatened against UniCapital or Newco which
relates to the transactions contemplated by this agreement.
(b) Except as set forth on Schedule 7.8, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of UniCapital or Newco, threatened against
UniCapital or Newco or which relates to UniCapital or Newco.
(c) Neither UniCapital nor Newco is a party to or subject to
the provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental of regulatory official, body or authority.
7.9 MISCELLANEOUS. Prior to the consummation of the transactions
contemplated hereby, UniCapital and Newco have no material properties or assets
and are not party to any contracts other than this Agreement, the letter of
intent among the parties to this Agreement, certain employment agreements with
officers of UniCapital, certain real property leases relating to the principal
executive offices of UniCapital, and those agreements and letters of intent
listed on Schedule 7.9 hereto.
7.10 REGISTRATION RIGHTS. As of the date hereof and as of the Closing
Date, no officer, director or shareholder of UniCapital will have been granted
any registration rights with respect to the registration of any shares of
capital stock of UniCapital.
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8. COVENANTS
The following covenants shall apply during the period from and after
the date hereof through the Closing Date. For purposes of this Article 8, each
reference to the "Partnership" shall be deemed to refer as well to each and all
of its Subsidiaries unless the context otherwise specifically requires.
8.1 BUSINESS IN THE ORDINARY COURSE. The Partnership shall, and the
Partners shall cause the Partnership to, conduct its business solely in the
ordinary course and consistent with past practice.
8.2 EXISTING CONDITION. The Partnership shall not, and no Partner shall
suffer the Partnership to, cause or permit to occur any of the events or
occurrences described in Section 6.30 hereof; provided, however, that on the
Closing Date, but prior to the Closing, the Partnership may make a distribution
of cash to each of the Partners in a reasonable amount for the sole purpose of
providing for the payment by each Partner of the estimated income taxes
attributable to each Partner for the earnings of the Partnership for the period
from January 1, 1998 through the Closing Date, the amount of income taxes for
each such Partner to be estimated in good faith by each of the Partners and the
Partnership.
8.3 MAINTENANCE OF PROPERTIES AND ASSETS. The Partnership shall, and
the Partners shall cause the Partnership to, maintain and service its properties
and assets in order to preserve their value and usefulness in the conduct of its
business.
8.4 EMPLOYEES AND BUSINESS RELATIONS. The Partnership shall, and the
Partners shall cause the Partnership to, use commercially reasonable efforts to
keep available the services of its current employees and agents and to maintain
its relations and goodwill with its suppliers, customers, distributors and any
others with whom or with which it has business relations.
8.5 MAINTENANCE OF INSURANCE. The Partnership shall, and the Partners
shall cause the Partnership to, notify UniCapital of any material changes in the
terms of the insurance policies and binders referred to on Schedule 6.20 hereto.
8.6 COMPLIANCE WITH LAWS, ETC. The Partnership shall, and the Partners
shall cause the Partnership to, comply with all laws, ordinances, rules,
regulations and orders applicable to the Partnership or its business,
operations, properties or assets, noncompliance with which might materially
affect the Partnership.
8.7 CONDUCT OF BUSINESS. The Partnership shall, and the Partners shall
cause the Partnership to, use commercially reasonable efforts to conduct its
business in such a manner that on the Closing Date the representations and
warranties of the Partners contained in this Agreement shall be true, as though
such representations and warranties were made on and as of each such date
(except to the extent such representations or warranties expressly speak as of a
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specific date), and the Partnership shall, and the Partners shall cause the
Partnership to, use commercially reasonable efforts to cause all of the
conditions to the obligations of UniCapital and the Partners under this
Agreement to be satisfied on or prior to the Closing Date.
8.8 ACCESS. Upon prior reasonable notice, the Partnership shall, and
the Partners shall cause the Partnership to, give to UniCapital's officers,
employees, counsel, accountants and other representatives free and full access
to and the right to inspect, during normal business hours, all of the premises,
properties, assets, records, contracts and other documents relating to the
Partnership and shall permit them to consult with the officers, employees,
accountants, counsel and agents of the Partnership for the purpose of making
such investigation of the Partnership as UniCapital shall desire to make,
provided that such investigation shall not unreasonably interfere with the
Partnership's business operations, and provided further that UniCapital shall
not contract or consult with any non-officer employees of the Partnership
without the Partnership's prior consent, which shall not be unreasonably
withheld. Furthermore, the Partnership shall, and the Partners shall cause the
Partnership to, furnish to UniCapital all such documents and copies of documents
and records and information with respect to the affairs of the Partnership and
copies of any working papers relating thereto as UniCapital shall from time to
time reasonably request. No information or knowledge obtained in any
investigation pursuant to this Section 8.8 or otherwise shall affect or be
deemed to modify any representation or warranty contained in this Agreement or
the conditions to the obligations of the parties to consummate the transactions
contemplated hereby.
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS. Neither the Partnership
nor any Partner shall give notice to third parties or otherwise make any press
release or other public statement concerning this Agreement or the transactions
contemplated hereby. Neither the Partnership nor Partner shall grant any
interview, publish any article, report or statement, or respond to any press
inquiry or other inquiry of any third party relating to this Agreement, the
business of the Partnership, the business (current and proposed) of UniCapital,
the Registration Statement (as defined below), the IPO or any other matter
connected with any of the foregoing without the express prior written approval
of UniCapital, and all inquiries and questions with respect to any of the
foregoing shall be coordinated through Robert New, Chief Executive Officer of
UniCapital. The Partnership and each Partner shall coordinate all communications
with the employees and agents of the Partnership through UniCapital prior to
making any such communication. Notwithstanding the foregoing, this Section 8.9
shall not be interpreted to prevent the Partnership or any Partner from
disclosing information as compelled by a court order, provided however, that
prior to disclosing any information concerning this Agreement or the transaction
contemplated hereby in response to any such court order, the Partnership or
Partner, as applicable, shall provide UniCapital with prompt notice of the court
order so that UniCapital may take whatever action it deems appropriate to
prohibit such disclosure.
8.10 EXCLUSIVITY. Except with respect to this Agreement and the
transactions contemplated hereby, neither the Partnership nor Partner and none
of their affiliates shall, and each of them shall cause its respective
employees, agents and representatives (including, without
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limitation, any investment banking, legal or accounting firm retained by it or
them and any individual member or employee of the foregoing) (each, an "Agent")
not to, (a) initiate, solicit or seek, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its shareholders or any of them) with
respect to a merger, acquisition, consolidation, recapitalization, liquidation,
dissolution or similar transaction involving, or any purchase of all or any
portion of the assets or any equity securities of, the Partnership (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal"),
or (b) engage in any negotiations concerning, or provide any confidential
information or data to, or have any substantive discussions with, any person
relating to an Acquisition Proposal, (c) otherwise cooperate in any effort or
attempt to make, implement or accept an Acquisition Proposal, or (d) enter into
or consummate any agreement or understanding with any person or entity relating
to an Acquisition Proposal, except for the acquisition of the Partnership
Interests contemplated hereby. If the Partnership or any Partner, or any of
their respective Agents, have provided any person or entity (other than
UniCapital) with any confidential information or data relating to an Acquisition
Proposal, then they shall request the immediate return thereof. The Partnership
and the Partners shall notify UniCapital immediately if any inquiries, proposals
or offers related to an Acquisition Proposal are received by, any confidential
information or data is requested from, or any negotiations or discussions
related to an Acquisition Proposal are sought to be initiated or continued with,
it or any individual or entity referred to in the first sentence of this Section
8.10. The covenant contained in this Section 8.10 shall not survive any
termination of this Agreement pursuant to Sections 13.1, 13.2 or 13.3.
8.11 SUPPLIER APPROVAL. Prior to the Closing Date, the Partnership
shall satisfy any requirement for notice and approval of the transactions
contemplated by this Agreement under applicable agreements with third parties,
and shall provide UniCapital with satisfactory evidence of such third-party
approvals, provided, however, that Newco will indemnify and hold the Partners
harmless from penalties validly imposed by BankBoston, N.A., f/k/a The First
National Bank of Boston ("BankBoston"), upon the Partners directly related to
(i) the Partners' failure under the Partnership's Revolving Credit Agreement
dated November 5, 1991, as amended, with BankBoston to obtain the valid and
binding assignment of such agreement to Newco pursuant to the terms and
conditions of such agreement, or (ii) the prepayment of the outstanding
principal under such agreement on or as of the Closing Date at the direction of
UniCapital prior to its maturity, provided further, however, that neither
UniCapital nor Newco shall have any duty to indemnify or hold harmless the
Partners pursuant to this Section 8.11 unless the Partners shall have diligently
pursued and used their best efforts prior to the Closing to obtain BankBoston's
consent to such assignment or prepayment, as the case may be.
8.12 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
Partnership shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under any applicable collective bargaining
agreement, and shall provide UniCapital with proof that any required notice has
been provided.
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8.13 NOTIFICATION OF CERTAIN MATTERS. (a) The Partnership and the
Partners shall give prompt notice to UniCapital of (i) the occurrence or
non-occurrence of any event known to any Partner or the Partnership the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty contained in Article 6 to be untrue or inaccurate in
any material respect at or prior to the Closing Date and (ii) any material
failure of any Partner or the Partnership to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such person
hereunder.
(b) UniCapital shall give prompt notice to each Partner of (i)
the occurrence or non-occurrence of any event known to UniCapital the occurrence
of non-occurrence of which would be likely to cause any representation or
warranty contained in Article 7 to be untrue or inaccurate in any material
respect at or prior to the Closing Date and (ii) any material failure of
UniCapital to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder.
(c) The delivery of any notice pursuant to this Section 8.13
shall not be deemed to (i) modify the representations or warranties hereunder of
the party delivering such notice, which modification may only be made pursuant
to Section 8.14, (ii) modify the conditions set forth in Sections 9 and 10 or
(iii) limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
8.14 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing
Date to supplement or amend promptly the schedules hereto with respect to any
matter hereafter arising or discovered which, if existing or known at the date
of this Agreement, would have been required to be set forth or described in the
schedules, provided, that no amendment or supplement to a schedule that
constitutes or reflects a material adverse change in the business, operations,
assets, properties, prospects or condition (financial or otherwise) of the
Partnership or any Subsidiary (a "Material Adverse Amendment") may be made
unless UniCapital consents to such Material Adverse Amendment; provided further,
however, that if the amendment or supplement relates to changes in facts or
circumstances occurring subsequent to the date of this Agreement and such
amendment or supplement constitutes a Material Adverse Amendment, then such
amendment or supplement shall be accepted by UniCapital, subject to the
provisions of Section 12.2 and 12.5 hereof. No amendment of or supplement to a
schedule shall be made later than 48 hours prior to the anticipated
effectiveness of the Registration Statement defined in Section 9.4. Only (i) the
schedules attached to this Agreement at the time of its execution and (ii)
amended schedules as accepted under the standards and provisions of this Section
8.14, shall be deemed to be part of this Agreement in accordance with Section
19.
8.15 HSR FILING. To the extent that the transaction contemplated by
this Agreement is a transaction subject to the filing requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, the Partnership shall use
its reasonable best efforts to (a) file all information
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required to be filed by it pursuant to such act and (b) provide UniCapital with
all information reasonably requested and required by it to satisfy any filing
requirements it may have under such act.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTNERSHIP AND
THE PARTNERS
The obligations of the Partnership and the Partners hereunder are
subject to the satisfaction on or prior to the Closing Date (or such earlier
date specified below) of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representations and warranties of UniCapital and Newco contained in Article 7
shall be accurate as of the Closing Date as though such representations and
warranties had been made as of such times; all of the terms, covenants and
conditions of this Agreement to be complied with and performed by UniCapital and
Newco on or before the Closing Date shall have been duly complied with and
performed; and a certificate to the foregoing effect dated the Closing Date and
signed by a duly authorized agent, the President or any Vice President of
UniCapital shall have been delivered to the Partners.
9.2 EMPLOYMENT AGREEMENTS. Newco shall have afforded (i) Mark F.
Cignoli an opportunity to enter into an Employment Agreement in the form of
Annex IIIA attached hereto and (ii) Daniel P. Shatz an opportunity to enter into
an Employment Agreement in the form of Annex IIIB attached hereto
9.3 OPINION OF COUNSEL. The Partners shall have received an opinion
from counsel for UniCapital, dated the Closing Date, to the effect that:
(a) UniCapital and Newco have been duly organized and are
validly existing in good standing under the laws of their respective states of
incorporation;
(b) this Agreement has been duly authorized, executed and
delivered by UniCapital and Newco and constitutes a valid and binding agreement
of UniCapital and Newco enforceable in accordance with its terms, except (i) as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting the
rights of creditors, (ii) as the same may be subject to the effect of general
principles of equity and (iii) that no opinion need be expressed as to the
enforceability of indemnification provisions included herein;
(c) the shares of UniCapital Stock to be received by the
Partners on the Closing Date shall be duly authorized, fully paid and
nonassessable; and
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(d) the execution, delivery and performance of this Agreement
and the consummation of any transactions contemplated hereby will not conflict
with, or result in a breach or violation of, the Certificate of Incorporation or
Bylaws of UniCapital or Newco.
9.4 REGISTRATION STATEMENT. UniCapital shall have filed with the SEC a
Registration Statement covering the offer and sale of shares of UniCapital Stock
in the IPO. The Registration Statement shall have been declared effective by the
SEC not later than June 30, 1998, UniCapital and the underwriters named therein
shall have executed the Underwriting Agreement and the underwriters named
therein shall have agreed to acquire, subject to the conditions set forth in the
Underwriting Agreement, the shares of UniCapital Stock covered by the
Registration Statement. There shall have been no stop-order issued (that remains
in effect) by the Securities and Exchange Commission with respect to the
Registration Statement.
9.5 REVOLVING CREDIT AGREEMENT. UniCapital shall have, at its option,
either (i) paid the entire outstanding principal and accrued interest under each
of (A) the Partnership's Revolving Credit Agreement, dated as of November 5,
1991, as amended, with BankBoston and (B) the Partnership's Promissory Note,
dated as of January 20, 1998, with BankBoston, or (ii) assumed the Partnership's
obligations under such credit agreement and promissory note. Furthermore,
BankBoston shall have released the Partner's personal guaranties of the
Partnership's obligations under such credit agreement.
9.6 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND NEWCO
The obligations of UniCapital and Newco hereunder are subject to the
satisfaction, on or prior to the Closing Date (or such earlier date specified
below), of the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
Partners shall have delivered to UniCapital a certificate dated the Closing Date
and signed by each of them to the effect that all of the representations and
warranties of the Partners contained in this Agreement shall be true on and as
of the Closing Date with the same effect as though such representations and
warranties had been made on and as of such dates, except for matters expressly
disclosed in the certificate or a schedule thereto (which shall not serve to
modify any representation or warranty made herein or in any other document or
otherwise in information supplied by the Partnership or any Partner) and that
all terms, covenants and conditions of this Agreement to be complied with and
performed by the Partners on or before the Closing Date have been duly complied
with and performed; and each and all of the agreements of the Partners and the
Partnership to be performed on or before the Closing Date pursuant to the terms
hereof shall have been performed.
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10.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by UniCapital of the Partnership Interests or the
consummation of the Unified Transaction, and no governmental agency or body
shall have taken any other action or made any request of UniCapital as a result
of which the management of UniCapital deems it inadvisable to proceed with the
transactions hereunder.
10.3 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the Closing Date,
UniCapital shall have had sufficient time to review the unaudited balance sheets
of the Partnership as of the end of the most recently completed calendar month
immediately prior to the Closing Date, and the unaudited statements of income,
cash flows and Partners' equity of the Partnership for the periods then ended,
which statements shall have disclosed no material adverse change in the
financial condition of the Partnership or the results of its operations from the
financial statements originally furnished by the Partnership as set forth in
Schedule 6.12, except for (i) an increase of $2,778,750 in the outstanding
principal under the Partnership's Revolving Credit Agreement, dated as of
November 5, 1991, as amended, with BankBoston on or about January 15, 1998 and
(ii) the aggregate distribution of $2,778,750 in cash by the Partnership to the
Partners on or about January 15, 1998.
10.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, operations, assets, properties, prospects or condition (financial or
otherwise) of the Partnership shall have occurred, except for (i) an increase of
$2,778,750 in the outstanding principal under the Partnership's Revolving Credit
Agreement, dated as of November 5, 1991, as amended, with BankBoston on or about
January 15, 1998 and (ii) the distribution of $2,778,750 in cash by the
Partnership to the Partners on or about January 15, 1998, and the Partnership
shall not have suffered any material loss or damage to any of its properties or
assets, whether or not covered by insurance, since the Audited Balance Sheet
Date, which change, loss or damage materially affects or impairs the ability of
the Partnership to conduct its business as now conducted or as proposed to be
conducted; and UniCapital shall have received on the Closing Date a certificate
signed by the Partners and dated the Closing Date to such effect.
10.5 REGULATORY REVIEW. UniCapital, through its authorized
representatives, shall have completed a satisfactory review of the practices and
procedures of the Partnership including, but not limited to, environmental and
land use practices, import and export laws, compliance with contracts and
federal, state and local laws and regulations governing the operations of the
Partnership, which review reflects compliance with all applicable laws governing
the Partnership, disclosing no material actual or probable violations,
compliance problems, required capital expenditures or other substantive
environmental, real estate and land use related concerns and which review is
otherwise satisfactory in all respects to UniCapital, in its sole discretion.
10.6 PARTNER'S RELEASE. At the Closing Date, each of the Partners shall
have delivered to UniCapital an instrument in a form acceptable to UniCapital
dated the Closing Date releasing
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UniCapital, Newco, the Partnership and its Subsidiaries (collectively, the
"Released Parties") from any and all claims of the Partners against the Released
Parties.
10.7 EMPLOYMENT AGREEMENTS. Mark F. Cignoli shall have executed and
delivered an Employment Agreement in the form of Annex IIIA attached hereto.
10.8 OPINION OF COUNSEL. UniCapital shall have received an opinion from
Gilman, McLaughlin & Hanrahan, LLP, counsel to the Partners, dated the Closing
Date, in form and substance satisfactory to UniCapital, to the effect that:
(a) the Partnership and each of its Subsidiaries has been duly
organized and is validly existing and in good standing under the laws of the
state of its organization.
(b) to the knowledge of such counsel, the Partnership and each
of its Subsidiaries is duly authorized, qualified and licensed under all
applicable laws, regulations, ordinances or orders of public authorities to
carry on its business in the places and in the manner now conducted;
(c) the Partnership Interests are held by the Partners as
represented by the Partners in this Agreement;
(d) neither the Partnership nor any of its Subsidiaries has
any outstanding options, warrants, calls, conversion rights or other commitments
of any kind to issue or sell any interests in the Partnership;
(e) this Agreement has been duly authorized, executed and
delivered by the Partnership and the Partners and constitutes a valid and
binding agreement of the Partnership and the Partners enforceable in accordance
with its terms, except as such enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement and other similar laws
relating to or affecting the rights of creditors and except (i) as the same may
be subject to the effect of general principles of equity and (ii) that no
opinion need be expressed as to the enforceability of indemnification provisions
included herein;
(f) upon consummation of the acquisition contemplated by this
Agreement, UniCapital will receive good title to the Partnership Interests, free
and clear of all liens, security interests, pledges, charges, voting trusts,
equities, restrictions, encumbrances and claims of every kind with respect to
such Partnership Interests;
(g) to the knowledge of such counsel, except to the extent set
forth on Schedule 6.23, neither the Partnership nor any of its Subsidiaries is
in violation of or default under any law or regulation, or under any order of
any court, commission, board, bureau, agency or instrumentality wherever located
and there are no claims, actions, suits or proceedings pending, or threatened
against or affecting the Partnership or such Subsidiaries, at law or in
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equity, or before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality wherever
located;
(h) to the knowledge of such counsel, except to the extent set
forth on Schedule 6.17, the Partnership is not in default under any of its
material contracts or agreements or has received notice of such default;
(i) no notice to, consent, authorization, approval or order of
any court or governmental agency or body or of any other third party is required
in connection with the execution, delivery or consummation of this Agreement by
any Partners or for the transfer to UniCapital of the Partnership Interests; and
(j) the execution of this Agreement and the performance of the
obligations hereunder will not violate or result in a breach of or constitute a
default under any of the terms or provisions of the Partnership Agreement of the
Partnership or any Contract or Lease listed on Schedules 6.17 and 6.34.
Such opinion shall include any other matters incident to the matters set forth
herein as agreed to by the parties and their respective counsel.
10.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
10.10 PARTNERSHIP AGREEMENT. The Partners shall have delivered to
UniCapital, a copy of the partnership agreement of the Partnership certified by
the Partners.
10.11 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC, and UniCapital and the representatives of
the underwriters named in the Registration Statement shall have executed the
Underwriting Agreement. There shall have been no stop-order issued (that remains
in effect) by the Securities and Exchange Commission with respect to the
Registration Statement.
10.12 REPAYMENT OF INDEBTEDNESS. Prior to the Closing Date, the
Partners shall have repaid to the Partnership (including its Subsidiaries) in
full all amounts owing by the Partners to such entities.
10.13 NET INCOME. The Partnership's aggregate after tax net income for
the twelve months ended December 31, 1997 shall be set forth in the Registration
Statement in UniCapital's unaudited pro forma combined income statement for the
twelve months ended December 31, 1997 (prior to pro forma and offering
adjustments).
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10.14 JAM ASSOCIATES LEASE. JAM Associates shall have terminated its
existing lease with the Partnership for all of the office and warehouse space
owned by JAM Associates at 13 Alexander Park, Unit 2, Billerica, MA, except for
that portion of such property that is presently occupied by Data Intelligence
Systems Corp. (the "Premises"), and Newco shall have executed and delivered a
lease for the Premises to JAM Associates on terms and conditions that reflect
the fair market rental value of the Premises and which terms and conditions are
reasonably acceptable to Newco, UniCapital and JAM Associates.
10.15 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
10.16 FIRPTA COMPLIANCE. Each of the Partners shall have delivered to
UniCapital a properly executed FIRPTA Certificate in the form of Annex IV for
purposes of satisfying UniCapital's obligations under Treas. Reg.
ss.1.1445-2(b).
11. COVENANTS OF UNICAPITAL
11.1 UNICAPITAL STOCK OPTIONS. Upon the effective date of the
Registration Statement (but subject in all events to the consummation of the
transactions contemplated hereby), UniCapital shall make available options to
purchase that number of shares of UniCapital Stock having a fair market value on
the effective date of the Registration Statement, based upon the IPO price per
share set forth in the Underwriting Agreement, equal to 6.25% of the
Consideration (valuing the UniCapital Stock to be issued as part of the
Consideration at the IPO price per share for the purposes of this Section 11.2)
to be granted to those non-Partner key employees of Newco after the Closing as
are designated by Mark F. Cignoli (or such other officer designated by Newco and
acceptable to UniCapital). Not later than seven days prior to the effective date
of the Registration Statement, the individual designating the recipients of such
options shall provide to UniCapital a written list of the names of those
designated recipients who will receive options exercisable at the IPO price and
the relative percentages of the 6.25% option pool provided under this Section
11.1 to be awarded to each recipient, as well as the percentage of options, if
any, to be reserved for future issuance. Any options reserved for future
issuance shall be granted at an exercise price equal to the fair market value of
UniCapital Stock as of the date of grant. All options shall be granted in
accordance with UniCapital's policies, and authorized and issued under the terms
of UniCapital's principal stock option plan for the benefit of employees of
UniCapital and its subsidiaries.
11.2 INFORMATION FILING. To the extent the Unified Transaction is a
transaction that falls within Section 351 of the Code, UniCapital shall file all
information required to be filed by it pursuant to Treasury Regulation
Section 1.351-3(b).
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11.3 HSR FILING. To the extent that the transaction contemplated by
this Agreement is a transaction subject to the filing requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, UniCapital shall use its
reasonable best efforts to (a) file all information required to be filed by it
pursuant to such act and (b) provide the Partnership with all information
reasonably requested and required by it to satisfy any filing requirements it
may have under such act.
12. INDEMNIFICATION; SURVIVAL
12.1 GENERAL INDEMNIFICATION BY PARTNERS. Subject to the limitations
contained in Section 12.5 hereof, each Partner, jointly and severally, covenants
and agrees that such Partner will indemnify, defend, protect and hold harmless
UniCapital and Newco and their respective officers, partners, directors,
divisions, subdivisions, affiliates, subsidiaries, parents, agents, employees,
successors and assigns at all times from and after the date of this Agreement
until the Expiration Date (as defined in Section 12.6) from and against all
claims, damages, losses, liabilities, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of investigation)
(collectively, "Losses") incurred by UniCapital or Newco as a result of or
arising from (a) any breach of the representations and warranties made by the
Partners set forth herein or on the schedules or certificates delivered in
connection herewith, (b) any nonfulfillment of any covenant or agreement on the
part of the Partners or the Partnership under this Agreement, (c) the business,
operations or assets of the Partnership prior to the Closing Date or the actions
or omissions of the Partnership's directors, officers, partners, employees or
agents prior to the Closing Date, other than Losses arising from matters
expressly disclosed in the Audited Financial Statements, this Agreement or the
schedules to this Agreement, or (d) any liability under the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or other
federal or state law or regulation, at common law or otherwise, arising out of
or based upon (i) any untrue statement or alleged untrue statement of a material
fact relating to the Partnership (including its Subsidiaries) or the Partners
contained in any preliminary prospectus, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto (including any additional registration statement filed pursuant to Rule
462(b) under the Securities Act), which statement was provided or was based upon
information or documents provided to UniCapital or its counsel by the
Partnership (including its Subsidiaries) or the Partners, or (ii) any omission
or alleged omission to state therein a material fact relating to the Partnership
(including its Subsidiaries) or the Partners required to be stated therein or
necessary to make the statements therein not misleading, which information was
not provided to UniCapital or its counsel by the Partnership (including its
Subsidiaries) or the Partners; provided, however, that such indemnity shall not
inure to the benefit of UniCapital or Newco to the extent that such untrue
statement (or alleged untrue statement) was made in, or such omission (or
alleged omission) occurred in, any preliminary prospectus and the Partners
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provided, in writing, corrected information to UniCapital for inclusion in the
final prospectus, and such information was not so included.
12.2 SPECIFIC INDEMNIFICATION BY PARTNERS. Subject to the limitations
contained in Section 12.5 hereof, notwithstanding any disclosure made in this
Agreement or in the schedules or exhibits hereto, and notwithstanding any
investigation by UniCapital or Newco, each Partner, jointly and severally,
covenants and agrees that such Partner will indemnify, defend, protect and hold
harmless UniCapital and Newco and their respective officers, partners,
directors, divisions, subdivisions, affiliates, subsidiaries, parents, agents,
employees, successors and assigns at all times from and after the date of this
Agreement, from and against all Losses incurred by UniCapital or Newco as a
result of or incident to: (a) the existence of liabilities of the Partnership
(including its Subsidiaries) in excess of the liabilities set forth on Schedule
6.13, to the extent of such excess; (b) the failure of the Partnership or the
Partners to file all required Form 5500's prior to the Closing Date; (c) the
litigation matters listed on Schedule 6.25; (d) the failure of the Partnership
to be qualified to do business in each jurisdiction where the conduct of its
business requires it to be so qualified; (e) any Material Adverse Amendments
pursuant to Section 8.14(b) hereof; and (f) those Scheduled Payments delinquent
for 90 days or longer as of the Closing Date net of applicable reserves
reflected on the balance sheet of the Partnership immediately prior to the
preparation of the Closing Date Balance Sheet.
12.3 INDEMNIFICATION BY UNICAPITAL AND NEWCO. Subject to the
limitations contained in Section 12.5 hereof, UniCapital and Newco, jointly and
severally, covenant and agree that they will indemnify, defend, protect and hold
harmless the Partners at all times from and after the date of this Agreement
from and against all Losses incurred by the Partners as a result of or arising
from (a) any breach of the representations and warranties made by UniCapital and
Newco set forth herein or on the schedules or certificates attached hereto, (b)
any nonfulfillment of any agreement on the part of UniCapital under this
Agreement, or (c) any liability under the Securities Act, the Exchange Act or
other federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
material fact relating to UniCapital (including all of the companies, other than
the Partnership, acquired by UniCapital as part of the Unified Transaction, but
only to the extent that UniCapital is actually indemnified by such other
companies for such liability) contained in any preliminary prospectus, the
Registration Statement or any prospectus forming a part thereof, or any
amendment thereof or supplement thereto (including any registration statement
filed pursuant to Rule 462(b) under the Securities Act), or arising out of or
based upon any omission or alleged omission to state therein a material fact
relating to UniCapital (including all of the companies, other than the
Partnership, acquired by UniCapital as part of the Unified Transaction, but only
to the extent that UniCapital is actually indemnified by such other companies
for such liability) required to be stated therein or necessary to make the
statements therein not misleading, which liability is not the subject of
indemnification of UniCapital and Newco pursuant to Section 12.1(c) above.
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12.4 THIRD-PARTY CLAIMS.
(a) In order for a party hereto eligible to be indemnified
hereunder (an "Indemnified Party") to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of or involving a
claim or demand made by any person or entity against the Indemnified Party (a
"Third-Party Claim"), such Indemnified Party must notify the parties obligated
to provide indemnification pursuant to Section 12.1, 12.2, or 12.3 hereof (each,
an "Indemnifying Party") in writing, and in reasonable detail, of the
Third-Party Claim within 30 business days after receipt by such Indemnified
Party of written notice of the Third-Party Claim; provided, however, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been actually
prejudiced as a result of such failure. Such notice shall state the nature and
the basis of such claim and a reasonable estimate of the amount thereof.
Thereafter, the Indemnified Party shall deliver to the Indemnifying Party,
within five business days after the Indemnified Party's receipt thereof, copies
of all notices and documents (including court papers) received by the
Indemnified Party relating to the Third-Party Claim. To the extent the
Indemnifying Party has actually paid any amount to the Indemnified Party in
respect of any Loss in connection with such Third-Party Claim, the Indemnifying
Party shall have a right of subrogation with respect to such Third-Party Claim
to the extent of such payment.
(b) The Indemnifying Party shall have right to defend and
settle, at its own expense and by its own counsel (provided that such counsel is
not reasonably objected to by the Indemnified Party and provided further that
selection for these purposes of Gilman, McLaughlin & Hanrahan, absent any actual
or reasonably likely conflict of interest with respect to parties or defenses,
shall not be objected to by UniCapital), any Third-Party Claim as the
Indemnifying Party pursues the same in good faith and diligently and so long as
the Third-Party Claim does not relate to an actual or potential Loss to which
Section 12.4(e) applies in which the Indemnified Party is UniCapital or Newco.
If the Indemnifying Party undertakes to defend or settle, it shall promptly
notify the Indemnified Party of its intention to do so, and the Indemnified
Party shall cooperate with the Indemnifying Party and its counsel in the defense
thereof and in any settlement thereof. Such cooperation shall include, but shall
not be limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. Notwithstanding the foregoing, the
Indemnified Party shall have the right to participate in any matter through
counsel of its own choosing at its own expense (unless there is a conflict of
interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, in which case the Indemnifying Party will reimburse the
Indemnified Party for the expenses of its counsel). After the Indemnifying Party
has notified the Indemnified Party of its intention to undertake to defend or
settle any such asserted liability, and for so long as the Indemnifying Party
diligently pursues such defense, the Indemnifying Party shall not be liable for
any additional legal expenses incurred by the Indemnified Party in connection
with any defense or settlement of such asserted liability, except to the extent
such participation is requested by the Indemnifying Party, in which event the
Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable
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additional legal expenses and out-of-pocket expenses, and except in the case of
a Third-Party Claim relating to an actual or potential Loss to which Section
12.4(e) applies in which the Indemnified Party is UniCapital or Newco.
(c) No Indemnifying Party shall, in the defense of any
Third-Party Claim, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) or enter into any settlement, except with
the written consent of the Indemnified Party, which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim or
matter.
(d) If the Indemnifying Party does not assume the defense of
any Third-Party Claim, then the Indemnified Party may defend against such
Third-Party Claim in such manner as it deems appropriate at the expense of the
Indemnifying Party.
(e) Notwithstanding anything to the contrary in this Article
12, if at any time, in the reasonable opinion of UniCapital or Newco as the
Indemnified Party (notice of which opinion shall be given in writing to the
Indemnifying Party), any Third-Party Claim seeks material prospective relief
which could have a material adverse effect on any such Indemnified Party or any
subsidiary, then such Indemnified Party shall have the right to control or
assume (as the case may be) the defense of any such Third-Party Claim and the
amount of any judgment or settlement and the reasonable costs and expenses of
defense (including, but not limited to, fees and disbursements of counsel and
experts, as well as any sampling, testing, investigation, removal, treatment or
remediation undertaken by UniCapital or Newco and all counseling or engineering
fees and expenses related thereto) shall be included as part of the
indemnification obligations of the Indemnifying Party hereunder. If the
Indemnified Party elects to exercise such right, then the Indemnifying Party
shall have the right to participate in, but not control, the defense of such
Third-Party Claim at the sole cost and expense of the Indemnifying Party.
12.5 LIMITATIONS ON INDEMNIFICATION. (a) To the extent of any amount
that Newco or UniCapital actually receives as a result of a Net Worth Deficiency
that is directly attributable to an Indemnifiable Decrease, Newco or UniCapital
shall not be entitled to any indemnity under Article 12. An "Indemnifiable
Decrease" shall be equal to the amount of any Net Worth Deficiency that consists
of a liability for which Newco or UniCapital would otherwise be entitled to
indemnity under Article 12 but that has been (a) accrued or (b) actually paid
(so long as it was not previously accrued on or before December 31, 1997) during
the Interim Net Worth Period. The "Interim Net Worth Period" shall mean the
period beginning on January 1, 1998 and ending on the Closing Date. No amounts
under (a) or (b) that have not been reflected on the Partnership's (or its
Subsidiaries') financial statements under generally accepted accounting
principles applied consistently with previous practice shall be deemed to be an
Indemnifiable Decrease.
(b) No Indemnified Party shall assert any claim (other than a
Third-Party Claim) for indemnification hereunder until such time as the
aggregate of all claims which such
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Indemnified Party may have against an Indemnifying Party plus any Indemnifiable
Decrease shall exceed that dollar amount which is equal to 0.5% of the aggregate
value of the Closing Date Consideration (based on the IPO price of the
UniCapital Stock) (the "Basket Limitation"), at which time an Indemnified Party
shall be entitled to seek indemnification for all claims pursuant to this
Article 12, but only to the extent that such claims, in the aggregate, exceed
the value of the Basket Limitation. For purposes of the preceding sentence,
UniCapital and Newco shall be considered to be a Single Indemnifying and
Indemnified Party and the Partners shall be considered to be a Single
Indemnifying and Indemnified Party. Notwithstanding the foregoing, on each date
on which any Earn-Out Consideration is paid, the Basket Limitation shall be
increased by that amount (the "Basket Adjustment") equal to 0.5% of any such
Earn-Out Consideration, without prejudice to Newco's or UniCapital's receipt of
or right to receive indemnification for claims exceeding the amount of the
Basket Limitation in effect at the time such claims were brought. If the Basket
Limitation is adjusted pursuant to the preceding sentence after such time as any
Indemnified Party, pursuant to this Article 12, has collected an amount in
excess (such excess amount is referred to as the "Excess Indemnity") of the
Basket Limitation (prior to giving effect to the applicable Basket Adjustment),
then such Indemnified Party, within 10 business days after the final
determination of such Earn-Out Consideration, shall pay to the Indemnifying
Party an amount equal to the lesser of applicable Basket Adjustment or the
Excess Indemnity. In addition, notwithstanding any provision of this Agreement
to the contrary, for the purposes of preventing a double recovery the Partners
shall not be obligated to indemnify UniCapital or any other indemnified party
pursuant to Section 12.1 or 12.2 with respect to any particular act, omission,
condition or event if and to the extent that the loss resulting or arising from
such act, omission, condition or event has, directly or indirectly, been taken
into account in the computation of any Net Worth Deficiency provided for in
Section 3.1. Notwithstanding any other term of this Agreement, in no event shall
any Partner be liable under this Article 12 for an amount which exceeds the
aggregate value (determined at the Closing Date) of the Consideration received
by such Partner under this Agreement. Notwithstanding anything to the contrary
contained in this Agreement, the limitations upon indemnification contained in
this Section 12.5 shall not apply to Losses arising out of (i) any breach of the
representations and warranties of the Partners contained in Sections 6.1, 6.3,
6.5, 6.14, 6.27, 6.28 and 6.32 hereof, (ii) the failure of the Partnership to be
qualified to do business in each jurisdiction where the conduct of its business
requires it to be so qualified, (iii) litigation net of applicable reserves
reflected on balance sheets of the Partnership at the Audited Balance Sheet
Date, and (iv) any Material Adverse Amendment pursuant to Section 8.14(b)
hereof.
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The parties agree that
representations and warranties made by the parties in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive for a period of one year from the Closing Date (which date is
hereinafter called the "Expiration Date"), except that:
(a) the representations and warranties contained in Section
6.27 hereof shall survive until such time as the limitations period has run for
all tax periods ended prior to the Closing Date, which shall be deemed to be the
Expiration Date for purposes of this clause (a) and claims arising from a breach
of the representations and warranties contained in such Section 6.27;
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(b) the representations and warranties contained in Section
6.28(g) hereof shall survive until such time as one full fiscal year's cycle of
transactions occurring entirely within the twenty-first century shall have been
processed and UniCapital's consolidated financial statements for the fiscal year
in which the last such transaction to be processed occurred have been audited,
which shall be deemed to be the Expiration Date for purposes of this clause (b)
and claims arising from a breach of the representations and warranties contained
in such Section 6.28(g);
(c) the representations and warranties contained in Section
6.32 hereof shall survive for a period of five years from the Closing Date,
which shall be deemed the Expiration Date for purposes of this clause (c) and
claims arising from a breach of the representations and warranties contained in
such Section 6.32;
(d) solely for purposes of Section 12.1(c) hereof, and solely
to the extent that UniCapital actually incurs liability under the Securities
Act, the Exchange Act, or any other federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for purposes of this clause (d) and claims arising under such
laws;
(e) the representations and warranties of the Partners
contained in Section 6.5 hereof shall survive the Closing Date without time
limitation; and
(f) any representations and warranties which serve as a basis
of the indemnity obligations of the Partners under Section 12.2 shall survive
the Closing Date without time limitation.
13. TERMINATION OF AGREEMENT
13.1 TERMINATION BY UNICAPITAL. UniCapital may, by notice in the manner
hereinafter provided on or before the Closing Date, terminate this Agreement (a)
if a material default shall be made by the Partners in the observance or due and
timely performance of any of the covenants, agreements or conditions contained
herein, and the curing of such default shall not have been made on or before the
Closing Date and shall not reasonably be expected to occur, (b) if UniCapital in
its sole judgment determines that any condition exists which has made or could
reasonably be expected to make any of the representations or warranties
contained in Article 6 hereof untrue in any material respect or (c) if
UniCapital in its sole judgment determine that information disclosed on the
schedules to the Agreement delivered pursuant to Section 8.14 has or could
reasonably be expected to have a material adverse effect on the business,
operations, assets, properties, prospects or condition (financial or otherwise)
of the Partnership.
13.2 TERMINATION BY THE PARTNERS. Prior to the initial filing of the
Registration Statement with the SEC, the Partners may, by notice in the manner
hereinafter provided on or before such initial filing, terminate this Agreement
if a material default shall be made by UniCapital in the observance or due and
timely performance of any of the covenants, agreements
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or conditions contained herein, and the curing of such default shall not have
been made on or before such initial filing. From and after the initial filing of
the Registration Statement with the SEC, the Partners shall have no right to
terminate this Agreement.
13.3 AUTOMATIC TERMINATION. This Agreement shall terminate
automatically:
(a) if the Registration Statement has not been declared
effective by June 30, 1998;
(b) if, between the date of execution of the Underwriting
Agreement and the Closing Date, the Underwriting Agreement is terminated
pursuant to the terms thereof; or
(c) upon the date that the number of shares of UniCapital
Stock to be issued and/or delivered to the persons who will transfer property to
UniCapital in the Unified Transaction can be determined as a fixed number of
shares, unless those same persons will be issued in the Unified Transaction
eighty percent (80%) or more of the UniCapital Stock that will be issued and
outstanding immediately after the Unified Transaction.
13.4 LIQUIDATED DAMAGES. If the Closing fails to occur because of the
default of the Partnership or the Partners, then, in addition to the other
remedies available to UniCapital at law for fraud, in equity or pursuant to this
Agreement, the Partners shall pay to UniCapital the sum of $500,000 as
liquidated damages. It is hereby agreed that UniCapital's damages in the event
of a termination or default by the Partnership hereunder are uncertain and
impossible to ascertain and that the foregoing constitutes a reasonable
liquidation of such damages and is intended not as penalty but as liquidated
damages.
14. NONCOMPETITION AND NONSOLICITATION
14.1 NONCOMPETITION.
(a) In order to protect the value and goodwill of the
Partnership and its business, each Partner covenants that, for the period ending
two years after the Closing Date, such Partner will not, directly or indirectly,
own, manage, operate, join, control, finance or participate in the ownership,
management, operation, control or financing of, or be connected as a partner,
principal, agent, representative, consultant or otherwise with, or use or permit
such Partner's name to be used in connection with, any business or enterprise
which is engaged directly or indirectly in competition anywhere in the United
States with the business conducted by UniCapital, Newco or any of its or their
respective subsidiaries or affiliates or with any business engaged in
originating, servicing or securitizing leases or other specialty financing
products or services (the "Restricted Business"). Each Partner recognizes that
the Restricted Business is expected to be conducted throughout the United States
and that more narrow geographical limitations of any nature on this
non-competition covenant (and the non-solicitation
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covenant set forth in subsection (b)) are therefore not appropriate. The
foregoing restriction shall not be construed to prohibit either (i) the
ownership by a Partner as a passive investment of not more than five percent of
any class of securities of any corporation which is engaged in any of the
foregoing businesses having a class of securities registered pursuant to Section
12 of the Exchange Act or (ii) those activities necessary to effect the timely
liquidation of the portfolio of all lease financings existing as of the date of
this Agreement held by Master Financial Associates, a Massachusetts general
partnership owned by the Partners, and the timely winding up and dissolution of
Master Financial Associates thereafter by the Partners.
(b) Each Partner further covenants that for the period ending
two years after the Closing Date, such Partner will not, either directly or
indirectly, (i) call on or solicit any customers or prospective customers of the
Restricted Business, or (ii) solicit the employment of any person who is
employed by UniCapital, Newco or any of its or their respective subsidiaries or
affiliates in the Restricted Business during such period.
(c) Each Partner recognizes and acknowledges that by reason of
such Partner's relationship to the Partnership, such Partner has had access to
confidential information relating to the Restricted Business. Each Partner
acknowledges that such confidential information is a valuable and unique asset
and covenants that such Partner will not disclose any such confidential
information after the Closing Date to any person for any reason whatsoever.
14.2 DAMAGES. Each Partner acknowledges and agrees that measuring
economic losses to UniCapital and Newco as a result of the breach of the
foregoing covenants in this Article 14 would be impossible, and that any breach
of the foregoing covenants would result in immediate and irreparable damage to
UniCapital and Newco for which they would have no other adequate remedy.
Accordingly, the Partners agree that, in the event of a breach by them of any of
the foregoing covenants, such covenants may be enforced by UniCapital or Newco
by, without limitation, injunctions and restraining orders.
14.3 REASONABLE RESTRAINT. The Parties agree that the foregoing
covenants in this Article 14 impose a reasonable restraint upon the Partners in
light of the activities and business of UniCapital on the date of the execution
of this Agreement and the current and future plans of UniCapital and Newco (as
successors to the business of the Partnership), and that any violation will
result in irreparable injury to UniCapital.
14.4 SEVERABILITY; REFORMATION. The covenants in this Article 14 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, if any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
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14.5 INDEPENDENT COVENANT. All of the covenants in this Article 14
shall be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of any Partner
against the Partnership, the Partnership's Subsidiaries, Newco or UniCapital,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement of such covenants. The parties specifically agree
that the period of two years stated above shall be computed by excluding from
such computation any time during which any Partner is in violation of any
provision of this Article 14 and any time during which there is pending in any
court of competent jurisdiction any action (including any appeal from any
judgment) brought by any person, whether or not a party to this Agreement, in
which action UniCapital seeks to enforce the agreements and covenants of the
Partners or in which any person contests the validity of such agreements and
covenants or their enforceability or seeks to avoid their performance or
enforcement.
14.6 MATERIALITY. The Partners hereby acknowledge and agree that the
covenants contained in this Article 14 are a material and substantial part of
this transaction and are entered into in connection with and as an inducement to
the acquisition by UniCapital and Newco of the business of the Partnership.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 PARTNERS. The Partners recognize and acknowledge that they have in
the past, currently have, and in the future may possibly have, access to certain
confidential information of the Partnership, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Partnership and the Partnership's business. The
Partners agree that they will not disclose any confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except to authorized representatives of UniCapital or as may be
required by law or order of a court of competent jurisdiction, unless the
Partners can show that such information has become known to the public generally
through no fault of the Partners. Prior to disclosing any confidential
information required by law or order of a court of competent jurisdiction, the
Partners shall provide UniCapital with prompt notice of the disclosure
requirement so that UniCapital may take whatever action it deems appropriate to
prohibit such disclosure. In the event of a breach or threatened breach by the
Partners of the provisions of this Section 15.1, UniCapital and Newco shall be
entitled to an injunction restraining Partners from disclosing, in whole or in
part, such confidential information. Nothing herein shall be construed as
prohibiting UniCapital and Newco from pursuing any other available remedy for
such breach or threatened breach, including the recovery of damages.
15.2 UNICAPITAL. UniCapital recognizes and acknowledges that it has in
the past, currently has, and prior to the Closing Date will have, access to
certain confidential information solely of the Partnership in connection with
its business. UniCapital agrees that, prior to the Closing Date, it will not
disclose any such confidential information to any person, firm,
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corporation, association, or other entity for any purpose or reason whatsoever
without prior written consent of the Partners. In the event of a breach or
threatened breach by UniCapital of the provisions of this Section 15.2, the
Partners shall be entitled to an injunction restraining UniCapital from
disclosing, in whole or in part, such confidential information. Nothing
contained herein shall be construed as prohibiting the Partners from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
15.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, UniCapital, Newco and the Partners agree that, in the event of
a breach by any of them of the foregoing covenant, the covenant may be enforced
against them by injunctions and restraining orders.
16. LOCK-UP AGREEMENTS
16.1 AGREEMENT. In connection with the IPO, for good and valuable
consideration, and to induce the underwriters that may participate in the IPO to
continue their efforts in connection with the IPO, each Partner hereby agrees
that, without the prior written consent of Morgan Stanley & Co. Incorporated on
behalf of such underwriters, it will not, during the period commencing on the
date of this Agreement and ending 180 days after the date of the final
prospectus contained in the Registration Statement relating to the IPO (the
"Prospectus"), (a) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of UniCapital Stock or any securities
convertible into or exercisable or exchangeable for UniCapital Stock or (b)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of UniCapital Stock,
whether any such transaction described in clause (a) or (b) above is to be
settled by delivery of UniCapital Stock or such other securities, in cash or
otherwise. In addition, each Partner agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters that
may participate in the IPO, it will not, during the period commencing on the
date of this Agreement and ending 180 days after the date of the Prospectus,
make any demand for or exercise any right with respect to, the registration of
any shares of UniCapital Stock or any security convertible into or exercisable
or exchangeable for Common Stock.
16.2 INTENDED THIRD-PARTY BENEFICIARIES. Each Partner agrees that the
foregoing shall be binding upon their transferees, successors, assigns, heirs,
and personal representatives and shall benefit and be enforceable by the
underwriters in the IPO. Each Partner acknowledges and agrees that such
underwriters and Morgan Stanley & Co. Incorporated are intended third party
beneficiaries of the provisions of this Article 16, and that Morgan Stanley &
Co. Incorporated on behalf of such underwriters shall be entitled to enforce the
covenants contained in this Article 16. In furtherance of the foregoing,
UniCapital and its transfer agent are hereby
52
<PAGE> 59
authorized to decline to make any transfer of securities if such transfer would
constitute a violation or breach of this Article 16. The Partners also
acknowledge and agree that none of the companies to be acquired as part of the
Unified Transaction shall have any rights as intended third-party beneficiaries
under this Agreement. The Partners also acknowledge and agree that none of the
companies to be acquired as part of the Unified Transaction shall have any
rights as intended third-party beneficiaries under this Agreement.
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK
17.1 INVESTMENT INTENT. The Partners acknowledge and agree that the
shares of UniCapital Stock to be delivered to the Partners pursuant to this
Agreement have not been and will not be registered under the Securities Act and
therefore may not be resold without compliance with the Securities Act. The
Partners represent and warrant that the shares of UniCapital Stock to be
acquired by the Partners pursuant to this Agreement are being acquired solely
for their own account, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution.
17.2 COMPLIANCE WITH LAW. The Partners covenant, warrant and represent
that none of the shares of UniCapital Stock issued to such Partners will be
offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the Securities Act and the rules and regulations of the SEC thereunder, and
except after full compliance with any applicable state securities laws.
17.3 ECONOMIC RISK; SOPHISTICATION. The Partners represent and warrant
that they are able to bear the economic risk of an investment in UniCapital
Stock acquired pursuant to this Agreement and can afford to sustain a total loss
of such investment. The Partners further represent and warrant that they (a)
fully understand the nature, scope and duration of the limitations on transfer
contained in this Agreement and (b) have such knowledge and experience in
financial and business matters that they are capable of evaluating the merits
and risks of the proposed investment and therefore have the capacity to protect
their own interests in connection with the acquisition of the UniCapital Stock.
17.4 INFORMATION SUPPLIED.
(a) The Partners represent and warrant that they have had an
adequate opportunity to ask questions and receive answers from the officers of
UniCapital concerning UniCapital, its business, operations, plans and strategy,
and the background and experience of its officers and directors. The Partners
represent and warrant that they have asked any and all questions that they may
have in the nature described in the preceding sentence and that all such
questions have been answered to their satisfaction.
(b) Each Partner represents and warrants that he has received
the draft Registration Statement, including the draft preliminary prospectus
that forms a part thereof, delivered to him on or about February 14, 1998 that
describes, among other things, UniCapital,
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the transactions contemplated hereby, the other acquisitions proposed to be
undertaken by UniCapital simultaneously with the transactions contemplated
hereby, and the target companies of such other acquisitions. Each Partner
represents and warrants that he has reviewed such draft Registration Statement
and draft preliminary prospectus and has had adequate opportunity to ask
questions of and receive answers to his satisfaction from the officers of
UniCapital concerning the matters described therein.
18. SECURITIES LEGENDS
The certificates evidencing the UniCapital Stock to be received by the
Partners hereunder will bear a legend substantially in the form set forth below
and containing such other information as UniCapital may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES OR BLUE SKY LAWS.
SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
SECURITIES ACT AND ANY STATE SECURITIES OR BLUE SKY LAWS,
UNLESS, IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION) OF COUNSEL SATISFACTORY TO
THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
In addition, such certificates shall also bear (a) a legend reflecting the
restrictions contained in Article 16 and (b) such other legends as counsel for
UniCapital reasonably determines are required under the applicable laws of any
state.
19. GENERAL
19.1 COOPERATION. The Partners and UniCapital shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement. The
Partners will cooperate and use their best efforts to have the officers,
directors and employees of The Partnership prior to the Closing Date cooperate
with UniCapital on and after the Closing Date in furnishing information,
evidence, testimony and other assistance in connection with any actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Closing Date.
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19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of UniCapital, and the heirs and legal representatives of the
Partners.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Partners, the
Partnership, UniCapital and Newco and supersedes any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the Partners (subject to the limitations set
forth below), the Partnership, UniCapital and Newco acting through their
respective officers, duly authorized by their respective Boards of Directors;
provided, that any Partner who owns a majority of the Partnership Interests
shall have the authority to approve and execute any amendment to this Agreement
on behalf of all of the Partners and without the necessity of such majority
Partner obtaining consent or authorization from any other Partner, unless such
amendment relates to any representation or warranty made by a Partner other than
such majority Partner which may only be amended by the written agreement of such
person; and provided further, that no Partner shall have any power or authority
to modify or amend this Agreement in any respect from and after the initial
filing of the Registration Statement with the SEC.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
19.5 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with the transactions contemplated
hereby, and each of UniCapital and Newco, on the one hand, and the Partners, on
the other hand, agrees to indemnify the other against all loss, liability, cost
damages or expense arising out of or related to claims for fees or commissions
of brokers employed or alleged to have been employed by such indemnifying party.
19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, UniCapital will pay the fees, expenses and disbursements
of UniCapital and Newco and their respective agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto. Whether or not the transactions herein
contemplated shall be consummated, the Partners will pay the fees, expenses and
disbursements of the Partners and the Partnership and their respective agents,
representatives, accountants and counsel incurred in connection with the subject
matter of this Agreement and any amendments hereto and all other costs and
expenses incurred in the performance of this Agreement by the Partners and the
Partnership and in compliance with all conditions to be performed by the
Partners and the Partnership under this Agreement.
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19.7 NOTICES. All notices and other communications hereunder shall be
in writing (including wire, telefax or similar writing) and shall be sent,
delivered or mailed, addressed, or telefaxed:
(a) If to UniCapital or Newco, addressed to them at:
UniCapital Corporation
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Attn.: Martin Kalb, Esquire
Telefax: (305) 866-8449
with a required copy to:
David A. Gerson, Esquire
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
301 Grant Street
Pittsburgh, PA 15219
Telefax: (412) 560-3399
(b) If to the Partners, addressed to them in care of
the Partners' Representative at:
Allan Z. Gilbert
3 Burning Bush Drive
Boxford, MA 01921
Telefax: (978) 670-5696
with a copy to:
Michael Eby, Esquire
Gilman, McLaughlin & Hanrahan, LLP
470 Atlantic Avenue
Boston, MA 02210
Telefax: (617) 338-8079
Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telefax, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 19.7 (or in accordance with the latest
unrevoked written direction from such party) and (ii) if given by telefax, when
such telefax is transmitted to the telefax number specified in this Section 19.7
(or in accordance with the latest unrevoked written direction from such party),
and the appropriate confirmation is received.
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19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York, without giving effect to any of the
provisions thereof that would require the application of the substantive laws of
any other jurisdiction. Each party to this Agreement: (a) agrees that any legal
action or proceeding under this Agreement shall be brought in the courts of the
State of New York or in the United States District Court for the Southern
District of New York; (b) irrevocably submits to the jurisdiction of such
courts; (c) agrees not to assert any claim or defense that it is not personally
subject to the jurisdiction of such courts, that any such forum is not
convenient or the venue thereof is improper, or that this Agreement or the
subject matter hereof may not be enforced in such courts; and (d) agrees to
accept service of process on it by certified or registered mail or by any other
method authorized by law.
19.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.10 TIME. Time is of the essence with respect to this Agreement.
19.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
19.12 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
20. DEFINITIONS
20.1 "Accounts Receivable" is defined in Section 6.14.
20.2 "Acquisition Proposal" is defined in Section 8.10.
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<PAGE> 64
20.3 "Adjusted 1997 EBT" is defined in Section 2.5(a).
20.4 "Adjusted 1998 EBT" is defined in Section 2.5(a).
20.5 "Adjusted 1999 EBT" is defined in Section 2.5(b).
20.6 "Agent" is defined in Section 8.10.
20.7 "Agreement" is defined in the preamble to this Agreement.
20.8 "Audited Balance Sheet Date" is defined in Section 6.12.
20.9 "Audited Financial Statements" are defined in Section 6.12.
20.10 "Authorizations" are defined in Section 6.23.
20.11 "Basket Adjustment" is defined in Section 12.5.
20.12 "Basket Limitation" is defined in Section 12.5(b).
20.13 "Benefit Plan" is defined in Section 6.22.
20.14 "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq.
20.15 "Closing" is defined in Section 5.1.
20.16 "Closing Date" is defined in Section 5.2.
20.17 "Closing Date Balance Sheet" is defined in Section 3.1.
20.18 "Closing Date Consideration" is defined in Section 2.1(a).
20.19 "Code" is defined in the recitals to this Agreement.
20.20 "Commonly Controlled Entity" is defined in Section 6.22.
20.21 "Contracts" are defined in Section 6.17.
20.22 "Disputed Amounts" are defined in Section 3.2.
20.23 "EBT" is defined in Section 2.5(a).
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20.24 "Earn-Out Consideration" is defined in Section 2.5(d).
20.25 "Environmental Laws" mean any and all applicable treaties, laws,
regulations, ordinances, enforceable requirements, binding
determinations, orders, decrees, judgments, injunctions, permits,
approvals, authorizations, licenses or binding agreements issued,
promulgated or entered into by any Governmental Entity, relating
to the environment, preservation or reclamation of natural
resources, or to the management, Release or threatened Release of
or exposure to Hazardous Substances, including CERCLA, the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
seq., the Federal Water Pollution Control Act, 33 U.S.C. Section
1251 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq.,
the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.,
the Occupational Safety and Health Act, 29 U.S.C. Section 651 et
seq., the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. Section 11001 et. seq., the Safe Drinking Water
Act, 42 U.S.C. Section 300(f) et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq., and any
similar or implementing state or local law and all amendments or
regulations promulgated thereunder.
20.26 "Environmental Liabilities" mean any and all Losses arising from
or related to any claim, proceeding, investigation, response or
removal action, remediation or other clean-up brought, prosecuted
or undertaken by UniCapital, Newco, any Governmental Entity or
any other person or entity on the basis of any violation of any
Environmental Laws or pursuant to any requirement imposed under
any Environmental Laws (including any sampling, testing,
investigation, removal, treatment or remediation undertaken by
UniCapital or Newco so as to avoid any claim or violation or to
comply with any requirement and all counseling or engineering
fees and expenses related thereto), and arising from pre-Closing
operations, events, circumstances or conditions at, on, under or
emanating from, or as a result of any pre-Closing off-site
disposal of Hazardous Substances from, any property currently or
formerly owned, operated or leased by the Partnership.
20.27 "Environmental Permits" mean all permits, licenses, approvals or
authorizations from any Governmental Entity required under
Environmental Laws for the operation of the business of the
Partnership.
20.28 "Equipment" is defined in Section 6.34.
20.29 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
20.30 "Escrow Property" is defined in Section 4.1(b).
59
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20.31 "Escrow Shares" are defined in Section 4.1(a).
20.32 "Exchange Act" is defined in Section 12.1.
20.33 "Expiration Date" is defined in Section 12.6.
20.34 "Foreign Plans" are defined in Section 6.22(i)(xiii).
20.35 "GAAP" is defined in Section 3.1.
20.36 "Governmental Entity" means any court, administrative or
regulatory agency or commission, or other governmental authority
or instrumentality, domestic, foreign or supranational.
20.37 "Hazardous Substances" mean all explosive or regulated
radioactive materials or substances, hazardous or toxic
materials, wastes or chemicals, petroleum and petroleum products
(including crude oil or any fraction thereof), asbestos or
asbestos containing materials, and all other materials or
chemicals regulated pursuant to any Environmental Law, including
materials listed in 49 C.F.R. Section 172.101 and materials
defined as hazardous pursuant to Section 101(14) of CERCLA.
20.38 "Indemnifiable Decrease" is defined in Section 12.5(a).
20.39 "Indemnified Party" is defined in Section 12.4(a).
20.40 "Indemnifying Party" is defined in Section 12.4(a).
20.41 "Indemnity Escrow Agent" is defined in Section 4.1(a).
20.42 "Independent Accounting Firm" is defined in Section 3.2.
20.43 "Intellectual Property" is defined in Section 6.28(a).
20.44 "Interim Net Worth Period" is defined in Section 12.5(a).
20.45 "IPO" is defined in the recitals to this Agreement.
20.46 "Lease Documents" are defined in Section 6.34.
20.47 "Leases" are defined in Section 6.34.
20.48 "Liabilities" are defined in Section 6.13(a).
60
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20.49 "Losses" are defined in Section 12.1.
20.50 "Material Adverse Amendment" is defined in Section 8.14.
20.51 "Net Worth Deficiency" is defined in Section 3.1.
20.52 "Newco" is defined in the preamble to this Agreement.
20.53 "Newco EBT" is defined in Section 2.5(b).
20.54 "Obligor" is defined in Section 6.34.
20.55 "Ordinary course" or "ordinary course of business" means the
conduct of business as conducted by the Partnership prior to the
date of this Agreement consistent in nature and, where relevant,
amount with past practices.
20.56 "Partners" are defined in the preamble to this Agreement.
20.57 "Partners' Representative" is defined in Section 3.3.
20.58 "Partnership Subsidiary" is defined in Section 6.8.
20.59 "PCBs" are defined in Section 6.32(h).
20.60 "Pension Plan" is defined in Section 6.22.
20.61 "Permits" mean all permits, licenses, franchises, approvals and
authorizations from any Governmental Entity that are owned or
held by the Partnership, or held by any Partner that relate to
the operations of the Partnership.
20.62 "Prospectus" is defined in Section 16.1.
20.63 "Registration Statement" is defined in the recitals to this
Agreement.
20.64 "Regulations" are defined in Section 6.23.
20.65 "Release" means any spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, emanation or
migration of any Hazardous Substance in, into, onto or through
the environment (including ambient air, surface water, ground
water, soils, land surface, subsurface strata, workplace or
structure).
20.66 "Released Parties" are defined in Section 10.6.
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20.67 "Restricted Business" is defined in Section 14.1(a).
20.68 "Scheduled Payments" are defined in Section 6.34.
20.69 "SEC" is defined in the recitals to this Agreement.
20.70 "Securities Act" is defined in Section 6.16.
20.71 "Third-Party Claim" is defined in Section 12.4(a).
20.72 "Underwriting Agreement" is defined in Section 5.1.
20.73 "UniCapital" is defined in the preamble to this Agreement.
20.74 "UniCapital Documents" is defined in Section 7.3.
20.75 "UniCapital Stock" is defined in Section 2.1(a).
20.76 "Welfare Plan" is defined in Section 6.22.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNICAPITAL CORPORATION
By:/s/ ROBERT J. NEW
-----------------
Name: Robert J. New
Title: Chairman and Chief Executive Officer
MFA ACQUISITION CORP.
By:/s/ ROBERT J. NEW
-----------------
Name: Robert J. New
Title: President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
<PAGE> 70
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
MERRIMAC FINANCIAL ASSOCIATES
By:/s/ ALLAN Z. GILBERT
--------------------
Name: Allan Z. Gilbert
Title: General Partner
By:/s/ JORDAN L. SHATZ
-------------------
Name: Jordan L. Shatz
Title: General Partner
By:/s/ MARK F. CIGNOLI
-------------------
Name: Mark F. Cignoli
Title: General Partner
/s/ ALLAN Z. GILBERT
--------------------
ALLAN Z. GILBERT
/s/ JORDAN L. SHATZ
-------------------
JORDAN L. SHATZ
/s/ MARK F.CIGNOLI
------------------
MARK F. CIGNOLI
<PAGE> 71
ANNEXES
ANNEX I [Calculation and Composition of Consideration]
ANNEX II [Form of Indemnity Escrow Agreement]
ANNEX III [Form of Cignoli Employment Agreement]
ANNEX III [Form of Shatz Employment Agreement]
ANNEX IV [Form of FIRPTA Certificate]
SCHEDULES
SCHEDULE 2.5 [Add-Backs]
SCHEDULE 6.1 [Existence]
SCHEDULE 6.3 [Authority]
SCHEDULE 6.4 [Validity of Contemplated Transactions]
SCHEDULE 6.5 [Partnership Interests]
SCHEDULE 6.8 [Subsidiaries]
SCHEDULE 6.9 [Predecessor Companies]
SCHEDULE 6.12 [Partnership Financial Statements]
SCHEDULE 6.13 [Liabilities and Obligations]
SCHEDULE 6.14 [Accounts and Notes Receivable Aging]
SCHEDULE 6.15 [Permits]
SCHEDULE 6.16 [Real and Personal Property]
SCHEDULE 6.17 [Contracts and Commitments]
SCHEDULE 6.20 [Insurance]
SCHEDULE 6.21 [Employee Information]
SCHEDULE 6.22 [Employee Benefit Plans]
SCHEDULE 6.23 [Authorizations]
SCHEDULE 6.24 [Transactions with Affiliates]
SCHEDULE 6.25 [Litigation]
SCHEDULE 6.28 [Intellectual Property]
SCHEDULE 6.28(d) [Confidentiality and Non-Disclosure Agreements]
SCHEDULE 6.28(e) [Registered Intellectual Property]
SCHEDULE 6.29 [Notice and Consents]
SCHEDULE 6.30 [Absence of Changes]
SCHEDULE 6.31 [Deposit Accounts; Powers of Attorney]
SCHEDULE 6.34 [Leases]
SCHEDULE 7.9 [UniCapital and Newco Agreements]
The registrant agrees to furnish a copy of each omitted schedule, exhibit or
annex to this Exhibit 2.07 to the Commission supplementally upon request
therefor.
<PAGE> 1
Exhibit 2.08
- --------------------------------------------------------------------------------
AMENDMENT AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
UNICAPITAL CORPORATION
(a Delaware corporation),
MCMG ACQUISITION CORP.
(a Delaware corporation),
MUNICIPAL CAPITAL MARKETS GROUP, INC.
(a Texas corporation),
and
THE STOCKHOLDERS NAMED THEREIN
Dated as of February 14, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
Table of Contents
-----------------
Page
----
<S> <C> <C> <C>
1. THE MERGER...............................................................................................2
1.1 Delivery and Filing of Articles of Merger.......................................................2
1.2 Merger Effective Date...........................................................................2
1.3 Certificate of Incorporation, Bylaws, Board of Directors and Officers
of the Surviving Corporation....................................................................2
2. MERGER CONSIDERATION.....................................................................................3
2.1 Conversion of Capital Stock; Merger Consideration...............................................3
2.2 Exchange Procedures.............................................................................3
2.3 No Fractional Shares............................................................................4
3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS' REPRESENTATIVE....................................................5
3.1 Computation.....................................................................................5
3.2 Disputes........................................................................................6
3.3 Stockholders' Representative....................................................................7
4.1 Creation of Escrow..............................................................................7
4.2 Duration and Terms..............................................................................8
4.3 Voting and Investment...........................................................................8
5. CLOSING; MERGER EFFECTIVE DATE...........................................................................8
5.1 Closing.........................................................................................8
5.2 Closing Date; Location..........................................................................8
5.3 Effectiveness of Merger.........................................................................9
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS...........................................................9
6.1 Corporate Existence.............................................................................9
6.2 Corporate Power; Authorization; Enforceable Obligations.........................................9
6.3 Authority; Ownership............................................................................9
6.4 Validity of Contemplated Transactions..........................................................10
6.5 Capital Stock of Each Company..................................................................10
6.6 Transactions in Capital Stock..................................................................10
6.7 No Bonus Shares................................................................................10
6.8 Subsidiaries...................................................................................10
6.9 Predecessor Status; etc........................................................................11
6.10 Spin-offs by Companies.........................................................................11
6.11 No Third-Party Options.........................................................................11
6.12 Financial Statements...........................................................................11
6.13 Liabilities and Obligations....................................................................11
6.14 Accounts and Notes Receivable..................................................................12
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
6.15 Permits........................................................................................12
6.16 Real and Personal Property.....................................................................13
6.17 Contracts and Commitments......................................................................13
6.18 Government Contracts...........................................................................15
6.19 Title to Real Property.........................................................................15
6.20 Insurance......................................................................................15
6.21 Employees......................................................................................16
6.22 Employee Benefit Plans and Arrangements........................................................16
6.23 Compliance with Law; Authorizations............................................................20
6.24 Transactions With Affiliates...................................................................20
6.25 Litigation.....................................................................................21
6.26 Restrictions...................................................................................21
6.27 Taxes..........................................................................................21
6.28 Intellectual Property Matters..................................................................22
6.29 Completeness; No Violations....................................................................23
6.30 Existing Condition.............................................................................24
6.31 Deposit Accounts; Powers of Attorney...........................................................25
6.32 Books of Account...............................................................................26
6.33 Environmental Matters..........................................................................26
6.34 No Illegal Payments............................................................................27
6.35 Intentionally Omitted..........................................................................27
6.36 Intentionally Omitted..........................................................................27
6.37 Disclosure.....................................................................................27
7. REPRESENTATIONS AND WARRANTIES OF UNICAPITAL
AND NEWCO...............................................................................................28
7.1 Corporate Existence............................................................................28
7.2 UniCapital Stock...............................................................................28
7.3 Corporate Power and Authorization..............................................................28
7.4 No Conflicts...................................................................................28
7.5 Capitalization of UniCapital...................................................................29
7.6 Compliance with Law; Authorizations............................................................29
7.7 Transactions With Affiliates...................................................................29
7.8 Litigation.....................................................................................29
7.10 Miscellaneous..................................................................................30
8. COVENANTS OF STOCKHOLDERS AND THE COMPANY...............................................................30
8.1 Business in the Ordinary Course................................................................30
8.2 Existing Condition.............................................................................30
8.3 Maintenance of Properties and Assets...........................................................30
8.4 Employees and Business Relations...............................................................30
8.5 Maintenance of Insurance.......................................................................31
8.6 Compliance with Laws, etc......................................................................31
</TABLE>
ii
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
8.7 Conduct of Business............................................................................31
8.8 Access.........................................................................................31
8.9 Press Releases and Other Communications........................................................31
8.10 Exclusivity....................................................................................32
8.11 Third-Party Supplier...........................................................................32
8.12 Notice to Bargaining Agents....................................................................32
8.13 Notification of Certain Matters................................................................33
8.14 Amendment of Schedules.........................................................................33
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
AND THE STOCKHOLDERS....................................................................................34
9.1 Representations and Warranties; Performance of Obligations.....................................34
9.2 Employment Agreements..........................................................................34
9.3 Opinion of Counsel.............................................................................34
9.4 Registration Statement.........................................................................35
9.5 HSR Act........................................................................................35
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL
AND NEWCO...............................................................................................35
10.1 Representations and Warranties; Performance of Obligations.....................................35
10.2 No Litigation..................................................................................35
10.3 Examination of Financial Statements............................................................36
10.4 No Material Adverse Change.....................................................................36
10.5 Regulatory Review..............................................................................36
10.6 Stockholders' Release..........................................................................36
10.7 Employment Agreements..........................................................................36
10.8 Opinion of Counsel.............................................................................36
10.9 Consents and Approvals.........................................................................38
10.10 Good Standing Certificates.....................................................................38
10.11 Registration Statement.........................................................................38
10.12 Repayment of Indebtedness......................................................................38
10.13 Net Income.....................................................................................38
10.14 HSR Act........................................................................................38
10.15 NASD Consent...................................................................................38
11.1 Leases.........................................................................................39
11.2 UniCapital Stock Options.......................................................................39
11.3 Information Filing.............................................................................39
11.5 Notification of Certain Matters................................................................39
11.6 Release From Guarantees; Indebtedness..........................................................40
12. INDEMNIFICATION; SURVIVAL...............................................................................40
12.1 General Indemnification by Stockholders........................................................40
12.2 Specific Indemnification by Stockholders.......................................................41
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C> <C>
12.3 Indemnification by UniCapital and Newco........................................................41
12.4 Third-Party Claims.............................................................................42
12.5 Limitations on Indemnification.................................................................43
12.6 Survival of Representations and Warranties.....................................................44
13. TERMINATION OF AGREEMENT................................................................................45
13.1 Termination by UniCapital......................................................................45
13.2 Termination by the Stockholders................................................................45
13.3 Automatic Termination..........................................................................46
13.4 Liquidated Damages.............................................................................46
14. NONCOMPETITION AND NONSOLICITATION......................................................................46
14.1 Noncompetition.................................................................................46
14.2 Damages........................................................................................47
14.3 Reasonable Restraint...........................................................................47
14.4 Severability; Reformation......................................................................47
14.5 Independent Covenant...........................................................................47
14.6 Materiality....................................................................................48
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................48
15.1 Stockholders...................................................................................48
15.2 UniCapital.....................................................................................48
15.3 Damages........................................................................................49
16. LOCK-UP AGREEMENTS......................................................................................49
16.1 Agreement......................................................................................49
16.2 Intended Third-Party Beneficiaries.............................................................49
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK........................................................................................50
17.1 Investment Intent..............................................................................50
17.2 Compliance with Law............................................................................50
17.3 Economic Risk; Sophistication..................................................................50
17.4 Information Supplied...........................................................................50
18. SECURITIES LEGENDS......................................................................................51
19. GENERAL.................................................................................................51
19.1 Cooperation....................................................................................51
19.2 Successors and Assigns.........................................................................51
19.3 Entire Agreement...............................................................................52
19.4 Counterparts...................................................................................52
19.5 Brokers and Agents.............................................................................52
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C> <C> <C>
19.6 Expenses.......................................................................................52
19.7 Notices........................................................................................52
19.8 Governing Law..................................................................................53
19.9 Exercise of Rights and Remedies................................................................54
19.10 Time...........................................................................................54
19.11 Reformation and Severability...................................................................54
19.12 Remedies Cumulative............................................................................54
19.13 Captions.......................................................................................54
20. DEFINITIONS.............................................................................................54
</TABLE>
v
<PAGE> 7
AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF
REORGANIZATION (the "Agreement") is made as of the 14th day of February, 1998,
between UNICAPITAL CORPORATION, a Delaware corporation ("UniCapital"); MCMG
ACQUISITION CORP., a Delaware corporation ("Newco"); MUNICIPAL CAPITAL MARKETS
GROUP, INC., (the "Company") and Fred R. Cornwall, James E. Craft and Michael W.
Harling and (collectively referred to as the "Stockholders"), who are all of the
stockholders of the Company. Certain capitalized terms used herein are defined
in Article 20 hereof.
WHEREAS, UniCapital was incorporated on October 9, 1997 under the laws
of the State of Delaware for the purpose of acquiring a number of equipment
leasing businesses in different locations; and
WHEREAS, UniCapital intends to undertake an initial public offering of
its Common Stock (the "IPO") and in connection therewith intends to file a
Registration Statement on Form S-1 with the Securities and Exchange Commission
within 90 days of the execution and delivery of this Agreement;
WHEREAS, Newco was duly incorporated on January 27, 1998 under the laws
of the State of Delaware solely for the purpose of completing this transaction,
and is a wholly-owned subsidiary of UniCapital; and
WHEREAS, the Company is a corporation organized and existing under the
laws of the state of Texas; and
WHEREAS, the respective Boards of Directors of UniCapital, Newco and
the Company deem it advisable and in the best interests of such corporations and
their respective stockholders that Newco merge with and into the Company
pursuant to this Agreement and the applicable provisions of the laws of the
respective states of incorporation of the Company and Newco (such transaction
being herein called the "Merger" and the Company, Newco and UniCapital being
hereinafter collectively referred to as the "Constituent Corporations"); and
WHEREAS, the parties hereto intend that the transactions contemplated
in this Agreement constitute part of a single transaction involving the
simultaneous consummation of (i) a number of similar agreements between
UniCapital and certain other corporations and partnerships and (ii) the IPO, and
that such single transaction (the "Unified Transaction") shall fall within the
provisions of Section 351 of the Internal Revenue Code of 1986, as amended (the
"Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1
<PAGE> 8
1. THE MERGER
1.1 DELIVERY AND FILING OF ARTICLES OF MERGER. The Constituent
Corporations will cause a Articles of Merger, in substantially the form of Annex
I attached hereto with such changes therein as may be required by applicable
state laws (the "Articles of Merger"), to be executed and delivered to the
Secretary of State of the state of incorporation of Newco and the Company on or
before the Merger Effective Date.
1.2 MERGER EFFECTIVE DATE. The "Merger Effective Date" shall be the
date specified in Section 5.3. At the Merger Effective Date, the Articles of
Merger shall either be filed for immediate effectiveness with the Secretary of
State of the applicable state of incorporation of Newco and the Company or
become effective if filed with such Secretary of State prior to such date. On
the Merger Effective Date upon the effectiveness of the Merger, Newco shall be
merged with and into the Company, in accordance with the Articles of Merger, and
the separate existence of the Newco shall cease. The Company, as the entity
surviving the Merger, is hereinafter sometimes referred to as the "Surviving
Corporation." The Merger shall have the effects specified in the laws of the
state of incorporation of the Surviving Corporation.
1.3 CERTIFICATE OF INCORPORATION, BYLAWS, BOARD OF DIRECTORS AND
OFFICERS OF THE SURVIVING CORPORATION. Upon the effectiveness of the Merger:
(a) the Articles of Incorporation of the Company, as amended
and restated in the Articles of Merger, shall be the Articles of Incorporation
of the Surviving Corporation until thereafter amended as provided by law;
(b) the Bylaws of the Company shall be the Bylaws of the
Surviving Corporation and shall remain so until thereafter duly amended;
(c) the Surviving Corporation shall have a Board of Directors
consisting of one member, who shall be Robert New commencing upon the
effectiveness of the Merger and who shall hold office subject to the laws of the
State of Texas and the Articles of Incorporation and Bylaws of the Surviving
Corporation; and
(d) the officers of the Company immediately prior to the
Merger Effective Date shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, each of such officers to serve,
subject to the provisions of the Certificate of Incorporation and Bylaws of the
Surviving Corporation, until such officer's successor is elected and qualified;
provided, that the Chairman of the Board (if any), the Treasurer and the
Secretary of the Company shall not succeed to the corresponding offices of the
Surviving Corporation, but instead (i) the sole director of the Surviving
Corporation shall be the Chairman of the Board of the Surviving Corporation,
(ii) the Treasurer of Newco shall be the Treasurer of the Surviving Corporation
and (iii) the Secretary of Newco shall be the Secretary of the Surviving
Corporation.
2
<PAGE> 9
2. MERGER CONSIDERATION
2.1 CONVERSION OF CAPITAL STOCK; MERGER CONSIDERATION.
(a) Upon the effectiveness of the Merger, all of the shares of
capital stock of the Company issued and outstanding immediately prior to the
effectiveness of the Merger ("Company Stock") shall, by virtue of the Merger and
without any action on the part of the holder thereof but subject to the
effectiveness of the Merger, automatically be converted into the right to
receive, without interest,
(i) an aggregate of $7,042,500 in cash,
(ii) an aggregate of 370,657 shares of common stock,
par value $.001 per share, of UniCapital ("UniCapital Stock") (the consideration
referred to in clauses (i) and (ii), all of which is to be distributed to the
Stockholders on the Merger Effective Date in the percentages set forth on Annex
II, subject to Article 4 hereof, is referred to in this Agreement as the
"Effective Date Consideration"); provided, however, in the event that the
aggregate value (based on the IPO Price of the UniCapital Stock) of the 370,657
shares of UniCapital Stock is less than $5,559,855, then UniCapital shall issue
additional shares to the Stockholders so that the aggregate value of the shares
of UniCapital Stock equals $5,559,855 (with appropriate adjustment to the cash
and stock components of the Effective Date Consideration so as to eliminate
fractional shares), and
(iii) the Earn-Out Consideration as described in
Section 2.5, to be distributed to the Stockholders within five business days
after the date the portion of the Earn- Out Consideration with respect to a
given calendar year (if any) is finally determined pursuant to Section 2.5 in
the percentages set forth on Annex II.
(b) Upon the effectiveness of the Merger, each share of
capital stock of Newco issued and outstanding immediately prior to the
effectiveness of the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, automatically be converted into one
fully paid and non-assessable share of common stock of the Surviving
Corporation, all of which converted common stock shall constitute all of the
outstanding shares of capital stock of the Surviving Corporation immediately
after the effectiveness of the Merger.
(c) The Effective Date Consideration and the Earn-Out
Consideration are referred to together in this Agreement as the "Merger
Consideration."
2.2 EXCHANGE PROCEDURES. On the Merger Effective Date, upon surrender
to UniCapital of certificates representing all of the outstanding shares of
Company Stock ("Certificates"), each Stockholder shall, subject to Article 4, be
entitled to receive, in exchange therefor, such Stockholder's pro rata share of
the cash portion of the Effective Date
3
<PAGE> 10
Consideration by wire transfer, calculated in accordance with Annex II, and a
certificate representing that number of whole shares of UniCapital Stock which
such holder has the right to receive in respect of the Certificates surrendered,
calculated in accordance with Annex II, and each Certificate so surrendered
shall forthwith be canceled. On the Merger Effective Date or as promptly
thereafter as is practicable, and subject to and in accordance with the
provisions of Article 4, UniCapital shall cause to be distributed to the
Indemnity Escrow Agent (as defined in Article 4) a certificate or certificates
representing the Escrow Shares (as defined in Article 4), which shall be
registered in the name of the Indemnity Escrow Agent as nominee for the
Stockholders and shall be held in accordance with the provisions of Article 4
and the Indemnity Escrow Agreement referred to therein.
2.3 NO FRACTIONAL SHARES. Notwithstanding any other provision of this
Article 2, no fractional shares of UniCapital Stock will be issued and any
holder of Company Stock entitled hereunder to receive a fractional share of
UniCapital Stock but for this Section 2.3 will be entitled hereunder to receive
no such fractional share but a cash payment in lieu thereof in an amount equal
to such fraction multiplied by $19.00.
2.4 ALLOCATION OF MERGER CONSIDERATION. The parties agree that they
will not take a position on any income tax return, before any governmental
agency charged with the collection of any income tax, or in any judicial
proceeding that is in any way inconsistent with the allocation (if any) of the
Merger Consideration made by UniCapital following the Closing.
2.5 EARN-OUT CONSIDERATION.
(a) If the earnings before taxes (the "EBT") of the Company
for the twelve months ending December 31, 1998, increased by amounts in respect
of those items set forth on Schedule 2.5 that affected net income during the
period from January 1, 1998 through the Closing Date and decreased by the amount
of UniCapital corporate overhead allocated to the Company for the period from
the Closing Date through December 31, 1998 (the "Adjusted 1998 EBT"), exceeds
the EBT of the Company for the twelve months ending December 31, 1997, inclusive
of the add-backs set forth on Schedule 2.5 (the "Adjusted 1997 EBT"), then the
Stockholders shall be entitled to receive one-half of the difference between the
Adjusted 1998 EBT and the Adjusted 1997 EBT.
(b) If the EBT of the Company for the year ending December 31,
1999, decreased by the amount of UniCapital corporate overhead allocated to the
Company (the "Adjusted 1999 EBT," and together with the Adjusted 1997 EBT and
the Adjusted 1998 EBT, the "Company EBT"), exceeds the greater of Adjusted 1998
EBT or the Adjusted 1997 EBT, then the Stockholders shall be entitled to receive
one-half of the difference between (i) the Adjusted 1999 EBT and (ii) the
greater of the Adjusted 1998 EBT or the Adjusted 1997 EBT.
(c) The EBT of the Company for the years ending December 31,
1998 and December 31, 1999 shall be computed using generally accepted accounting
principles and
4
<PAGE> 11
practices as applied in the audited financial statements of the Company included
in the Registration Statement. The allocation of UniCapital overhead shall be
made on a pro rata basis applied consistently among UniCapital subsidiaries.
(d) The amounts (if any) that the Stockholders become entitled
to receive pursuant to Sections 2.5(a) and/or 2.5(b) are referred to herein as
the "Earn-Out Consideration." The Earn-Out Consideration shall be paid one-half
in cash and one-half in shares of UniCapital Stock, valued at the average of the
closing prices per share of UniCapital Stock for the [20] trading days preceding
December 31 of the year to which the portion of Earn-Out Consideration in
question applies.
(e) Company EBT shall be determined within forty-five days
following December 31 of such year.
(f) Notwithstanding anything in this Section 2.5 to the
contrary, if the Stockholders dispute the determination of Company EBT, then the
Stockholders' Representative shall notify UniCapital in writing of such dispute
and specify the amount thereof within 20 business days after notification of the
determination of Company EBT. If UniCapital and the Stockholders' Representative
cannot resolve any such dispute which would affect the Earn-Out Consideration,
then such dispute shall be resolved by an Independent Accounting Firm (as
defined in Section 3.2). The Independent Accounting Firm shall be directed to
consider only those agreements, contracts, commitments or other documents (or
summaries thereof) of the Company that were either (i) delivered or made
available to Price Waterhouse LLP in connection with the transactions
contemplated hereby, or (ii) reviewed by Price Waterhouse LLP during the course
of determining Company EBT. The determination of the Independent Accounting Firm
shall be made as promptly as practicable and shall be final and binding upon the
parties, absent manifest error which error may only be corrected only by such
Independent Accounting Firm. The costs of the Independent Accounting Firm shall
be borne by the party (either UniCapital or the Stockholders as a group) whose
determination of Company EBT was further from the determination of the
Independent Accounting Firm. Pending resolution of any such dispute by the
Independent Accounting Firm, only the amount of the Earn-Out Consideration as
determined by Price Waterhouse LLP shall be paid by UniCapital. Once Company EBT
is finally determined, the Earn-Out Consideration attendant thereto not
previously paid, if any, shall be paid in accordance with this Section 2.5;
provided that in the event the Stockholders' determination of EBT was closer to
the determination of the Independent Accounting Firm than UniCapital's
determination of EBT, the Stockholders shall receive such Earn-Out Consideration
plus interest which shall accrue at the rate of 10% per annum on any such
Earn-Out Consideration that is resolved in the Stockholders' favor from the date
the Earn-Out Consideration was first payable to the date on which the Earn-Out
Consideration is received by the Stockholders.
(g) Any Earn-Out Consideration paid by UniCapital shall be
treated as additional consideration paid by UniCapital for the shares of Company
Stock.
5
<PAGE> 12
3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS' REPRESENTATIVE
3.1 COMPUTATION. As soon as practicable, but in any event within 30
days after the Closing, UniCapital shall engage Price Waterhouse LLP to prepare,
in accordance with generally accepted accounting principles ("GAAP") and
consistent with previous practice, of the independent auditors of the Company in
the Financial Statements (as defined herein) (to the extent such practices are
in accordance with GAAP) a balance sheet of the Company (the "Closing Date
Balance Sheet") as of the end of business on the day prior to the Closing Date
(as defined in Section 5). If the aggregate stockholders' equity of the Company
as shown on the Closing Date Balance Sheet is less than the aggregate
stockholders' equity as shown on the balance sheet of the Company as at December
31, 1997 as certified by Grant Thorton and reviewed by Price Waterhouse LLP,
then, subject to Section 3.2, commencing 10 business days after delivery of the
Closing Date Balance Sheet to UniCapital, the aggregate Merger Consideration
shall be adjusted downward dollar-for-dollar in the amount of any such
deficiency (the "Net Worth Deficiency"). Upon determination of the Net Worth
Deficiency, if any, UniCapital shall be entitled to recover from the Escrow
Property pursuant to Article 4 that portion of the Net Worth Deficiency which
does not exceed one-half of the balance of the Escrow Property. For any amount
by which any Net Worth Deficiency exceeds one-half of the initial balance of the
Escrow Property, such portion of the Net Worth Deficiency shall be paid by the
Stockholders not later than the 25th business day after the delivery of the
Closing Date Balance Sheet (or if applicable, not later than the 5th business
day after the final determination of any Disputed Amount in accordance with
Section 3.2). At its sole and exclusive option, and at any time after such 25th
business day (or if applicable, not later than the fifth business day after the
final determination of any Disputed Amount in accordance with Section 3.2),
UniCapital shall be entitled to recover from the Escrow Property pursuant to
Article 4 all or any portion of the amount of the Net Worth Deficiency not paid
by the Stockholders as required by this Article 3.
3.2 DISPUTES. Notwithstanding anything in this Article 3 to the
contrary, if there is any Net Worth Deficiency and the Stockholders dispute any
item contained on the Closing Date Balance Sheet, then the Stockholders'
Representative shall notify UniCapital in writing of each disputed item
(collectively, the "Disputed Amounts") and specify the amount thereof in dispute
within 10 business days after the delivery of the Closing Date Balance Sheet to
the Stockholders. If UniCapital and the Stockholders' Representative cannot
resolve any such dispute relating to the Net Worth Deficiency, then such dispute
shall be resolved by an independent nationally recognized accounting firm which
is reasonably acceptable to UniCapital and the Stockholders' Representative (the
"Independent Accounting Firm"). The determination of the Independent Accounting
Firm shall be made as promptly as practical and shall be final and binding on
the parties, absent manifest error which error may only be corrected by such
Independent Accounting Firm. Any expenses relating to the engagement of the
Independent Accounting Firm shall be allocated between UniCapital and the
Stockholders so that the Stockholders' aggregate share of such costs shall bear
the same proportion to the total costs that the Disputed Amounts unsuccessfully
contested by the Stockholders' Representative (as finally determined by the
6
<PAGE> 13
Independent Accounting Firm) bear to the total of the Disputed Amounts so
submitted to the Independent Accounting Firm. Pending resolution of any such
dispute by the Independent Accounting Firm, no such Disputed Amount shall be due
to UniCapital. Once any such Disputed Amount is finally determined to be due to
UniCapital, UniCapital may proceed to recover such amount in the manner set
forth in Section 3.1.
3.3 STOCKHOLDERS' REPRESENTATIVE. (a) Each Stockholder, by signing this
Agreement, designates Fred R. Cornwall (or, in the event that Fred R. Cornwall
is unable or unwilling to serve, or resigns, James E. Craft) to be such
Stockholders' representative for purposes of this Agreement (the "Stockholders'
Representative"). The Stockholders shall be bound by any and all actions taken
by the Stockholders' Representative on their behalf.
(b) UniCapital and Newco shall be entitled to rely upon any
communication or writing given or executed by the Stockholders' Representative.
All communications or writings to be sent to Stockholders pursuant to this
Agreement may be addressed to the Stockholders' Representative and any
communication or writing so sent shall be deemed notice to all of the
Stockholders hereunder. The Stockholders hereby consent and agree that the
Stockholders' Representative is authorized to accept deliveries, including any
notice, on behalf of the Stockholders pursuant hereto.
(c) The Stockholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Stockholder, with full
power in his or her name and on his or her behalf to act according to the terms
of this Agreement in the absolute discretion of the Stockholders'
Representative, and in general to do all things and to perform all acts
including, without limitation, executing and delivering all agreements,
certificates, receipts, instructions and other instruments contemplated by or
deemed advisable in connection with Article 12 of this Agreement. This power of
attorney and all authority hereby conferred is granted subject to and coupled
with the interest of such Stockholder and the other Stockholders hereunder and
in consideration of the mutual covenants and agreements made herein, and shall
be irrevocable and shall not be terminated by any act of any Stockholder, by
operation of law, whether by such Stockholder's death or any other event.
(d) Notwithstanding the foregoing, the Stockholders'
Representative shall inform each Stockholder of all notices received, and of all
actions, decisions, notices and exercises of any rights, power or authority
proposed to be done, given, or taken by such Stockholders' Representative or
taken by such Stockholders' Representative, and shall act as directed by the
Stockholders.
4. INDEMNITY ESCROW
4.1 CREATION OF ESCROW.
7
<PAGE> 14
(a) At the Closing, as collateral security for the payment of
any indemnification obligations of the Stockholders pursuant to Sections 12.1
and 12.2 hereof and for the payment of amounts due pursuant to Article 3 hereof,
the following shall be delivered to [UniCapital's Transfer Agent] as indemnity
escrow agent (the "Indemnity Escrow Agent"):
(i) ten percent (10%) of the number of shares of
UniCapital Stock issuable to each Stockholder as part of the Effective Date
Consideration in accordance with Annex II, rounded up to the nearest whole share
(the "Escrow Shares"); and
(ii) ten percent (10%) of the cash portion of the
Effective Date Consideration payable to each Stockholder in accordance with
Annex II, rounded up to the nearest whole cent (the "Escrow Cash").
(b) The Escrow Shares and the Escrow Cash are referred to
together as the "Escrow Property." In addition, the Escrow Property shall
include all cash and non-cash dividends and other property at any time received
or otherwise distributed in respect of or in exchange for any or all of the
Escrow Property, all securities hereafter issued in substitution for any of the
foregoing, all certificates and instruments representing or evidencing such
securities, all cash and non-cash proceeds of all of the foregoing property and,
except as provided in Section 4.3, all rights, titles, interests, privileges and
preferences appertaining or incident to the foregoing property.
4.2 DURATION AND TERMS. The Escrow Property shall be held and disbursed
by the Indemnity Escrow Agent in accordance with the terms of an Indemnity
Escrow Agreement substantially in the form attached hereto as Annex III. The
Indemnity Escrow Agent shall hold the Escrow Property pursuant to the Indemnity
Escrow Agreement until the later of: (a) the first anniversary of the Merger
Effective Date; and (b) the resolution of any claim for indemnification or
payment that is pending on the first anniversary of the Merger Effective Date,
but only to the extent of the amount of such pending claim.
4.3 VOTING AND INVESTMENT. The Stockholders shall be entitled to
exercise all voting powers incident to the Escrow Shares held by the Indemnity
Escrow Agent as their nominee, but shall not be entitled to exercise any
investment or dispositive powers over such Escrow Shares. The Escrow Cash shall
be invested from time to time by the Indemnity Escrow Agent as provided in the
Indemnity Escrow Agreement.
5. CLOSING; MERGER EFFECTIVE DATE
5.1 CLOSING. Within two business days following the date on which the
underwriting agreement relating to the offer and sale of shares of UniCapital
Stock in the IPO (the "Underwriting Agreement") shall have been executed, the
parties shall take all actions necessary to effect the Merger (other than the
filing with the appropriate state authorities of the Articles of Merger, which
shall be filed and become effective on the Merger Effective Date) and to effect
8
<PAGE> 15
the conversion and delivery of shares referred to in Article 2 hereof
(hereinafter referred to as the "Closing"); provided, that such actions shall
not include the actual completion of the Merger or the actual conversion and
delivery of the shares referred to in Article 2 hereof, which actions shall only
be taken on the Merger Effective Date as herein provided.
5.2 CLOSING DATE; LOCATION. The Closing shall take place at the offices
of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178. The date on
which the Closing shall occur shall be referred to as the "Closing Date."
5.3 EFFECTIVENESS OF MERGER. Concurrently with the consummation of the
sale of the shares of UniCapital Stock pursuant to the Underwriting Agreement,
the Merger shall become effective and all transactions contemplated by this
Agreement, including the conversion and delivery of shares and the delivery by
federal wire transfer of unencumbered and immediately available fundsin an
amount equal to the cash which the Stockholders shall be entitled to receive
pursuant to the Merger referred to in Article 2 hereof, shall occur and be
deemed to be completed. The date on which the Merger is effected shall be
referred to as the "Merger Effective Date."
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, each Stockholder, jointly and severally, represents and warrants
to UniCapital and Newco, as follows:
6.1 CORPORATE EXISTENCE. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation. The Company has the requisite corporate power and authorize to
carry on its business as described in the business plan (the "Business Plan")
submitted to the National Association of Securities Dealers, Inc. ("NASD") in
connection with the Company's application for membership therein. The Company is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction where the conduct of its business requires it to be so
qualified, all of which jurisdictions are listed on Schedule 6.1.
6.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
Company has the corporate power, authority and legal right to execute, deliver
and perform this Agreement. The execution, delivery and performance of this
Agreement by the Company has been duly authorized by the Board of Directors and
Stockholders of the Company and no further corporate action on the part of the
Company or its stockholders is necessary to authorize this Agreement and the
performance of the transactions contemplated hereby. This Agreement has been,
and the other agreements, documents and instruments required to be delivered by
the Company in accordance with the provisions hereof (the "Company Documents")
will be, duly executed and delivered on behalf of the Company by duly authorized
officers, and this Agreement constitutes, and the Company Documents when
executed and delivered will constitute, the legal, valid and
9
<PAGE> 16
binding obligations of the Company, enforceable against it in accordance with
their respective terms.
6.3 AUTHORITY; OWNERSHIP. Each Stockholder has the full legal right,
power and legal capacity to enter into this Agreement. Upon the date of this
Agreement and immediately prior to the Closing Date, each Stockholder owns and
will own beneficially and of record all of the shares of capital stock of the
Company identified on Annex II as being owned by such Stockholder. The
conversion of Company Stock into UniCapital Stock and cash pursuant to the
provisions of this Agreement will transfer to UniCapital valid title in the
shares of Company Stock owned by such Stockholder, free and clear of all liens,
security interests, pledges, charges, voting trusts, equities, restrictions,
encumbrances and claims of every kind.
6.4 VALIDITY OF CONTEMPLATED TRANSACTIONS. The execution, delivery and
performance of this Agreement by the Company and each Stockholder does not and
will not violate, conflict with or result in the breach of any term, condition
or provision of, or require the consent of any other person under (a) any
existing law, ordinance, or governmental rule or regulation to which the Company
or any Stockholder is subject, (b) any judgment, order, writ, injunction, decree
or award of any Governmental Entity which is applicable to the Company or any
Stockholder, (c) the charter documents of the Company or any securities issued
by the Company, or (d) any mortgage, indenture, agreement, contract, commitment,
lease, plan, Authorization, or other instrument, document or understanding, oral
or written, to which the Company or any Stockholder is a party, by which the
Company or any Stockholder may have rights or by which any of the properties or
assets of the Company may be bound or affected, or give any party with rights
thereunder the right to terminate, modify, accelerate or otherwise change the
existing rights or obligations of the Company thereunder. Except for filing the
Articles of Merger with the Secretary of State and filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, and except as aforesaid,
no authorization, approval or consent of, and no registration or filing with any
Governmental Entity is required in connection with the execution, delivery or
performance of this Agreement by the Company or any Stockholder.
6.5 CAPITAL STOCK OF EACH COMPANY. The authorized capital stock of the
Company consists solely of the shares shown on Schedule 6.5, of which only the
shares shown on such Schedule 6.5 to be issued and outstanding are issued and
outstanding. All of the issued and outstanding shares of the capital stock of
the Company are owned by the Stockholders as set forth on Annex II, and are free
and clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. All of the issued and
outstanding shares of Company Stock to be outstanding on the Merger Effective
Date will have been duly authorized and validly issued, fully paid and
nonassessable, will be owned of record and beneficially by the Stockholders and
in the amounts set forth in Annex II, and will have been offered, issued, sold
and delivered by the Company in compliance with all applicable state and federal
laws concerning the offering, sale or issuance of securities. None of such
shares will have been, and none of the shares from which they will have derived
were, issued in violation of the preemptive rights of any past or present
stockholder, whether contractual or statutory.
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6.6 TRANSACTIONS IN CAPITAL STOCK. The Company has not acquired any
treasury stock since December 31, 1995. No option, warrant, call, conversion
right or commitment of any kind exists which obligates the Company to issue any
of its authorized but unissued capital stock. The Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof.
6.7 NO BONUS SHARES. None of the shares of capital stock of the Company
was issued pursuant to awards, grants or bonuses, whether of stock or of options
or other rights.
6.8 SUBSIDIARIES. Schedule 6.8 lists the name of each subsidiary of the
Company (the "Subsidiary"). Except as set forth in Schedule 6.8, the Company
does not currently own, of record or beneficially, or control, directly or
indirectly, any capital stock, any securities convertible into capital stock or
any other equity interest in any corporation, association or other business
entity. Except as set forth on Schedule 6.8, the Company is not, directly or
indirectly, a participant in any joint venture, partnership or other
noncorporate entity.
6.9 PREDECESSOR STATUS; ETC. Schedule 6.9 lists all names of all
predecessor companies of the Company, including the names of all entities from
whom the Company previously acquired assets representing all or substantially
all of the assets of such entity. Except as set forth on Schedule 6.9, the
Company has never been a subsidiary or division of another corporation or been a
part of an acquisition which was later rescinded.
6.10 SPIN-OFFS BY COMPANIES. Since December 31, 1995, there has not
been any sale or spin-off of significant assets of the other than in the
ordinary course of business.
6.11 NO THIRD-PARTY OPTIONS. There are no existing agreements, options,
commitments or rights with, of or to any person to acquire any properties,
assets or rights of the Company or any interest therein.
6.12 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.12 are copies
of the balance sheet of the Company at December 31, 1997 (the "Balance Sheet
Date") and December 31, 1996, and the related statements of income, cash flows
and changes in stockholders' equity for the fiscal years then ended, certified
by Grant Thornton, the Company's independent public accountants, together with
the report of such independent public accountants thereon (the "Financial
Statements").
All of the Financial Statements have been prepared in accordance with GAAP
consistently applied throughout the periods involved. All of the balance sheets
included in the Financial Statements, including the related notes, fairly
present the financial position, assets and liabilities (whether accrued,
absolute, contingent or otherwise) of the Company at the dates indicated and
such statements of income, cash flows and changes in stockholders' equity fairly
present the
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results of operations, cash flows and changes in stockholders' equity of the
Company for the periods indicated.
6.13 LIABILITIES AND OBLIGATIONS.
(a) Attached hereto as Schedule 6.13 is an accurate list, as
of a date not more than two days prior to the date of this Agreement, of: (i)
all liabilities of the Company which are reflected on the balance sheet as of
the Balance Sheet Date included in the Financial Statements; (ii) all
liabilities incurred thereafter other than in the ordinary course of business;
(iii) all material liabilities incurred thereafter in the ordinary course of
business; and (iv) all liabilities as of the Balance Sheet Date or incurred
thereafter that are not reflected on such balance sheet. Each of the foregoing
liabilities that has not heretofore been paid or discharged is so noted on
Schedule 6.13. For purposes of this Agreement, "liabilities" means liabilities
of any kind, character or description, whether accrued, absolute, secured or
unsecured, contingent or otherwise.
(b) For each such liability for which the amount is not fixed
or is contested, Schedule 6.13 shall include a summary description of the
liability, together with copies of all relevant non-privileged documentation
relating thereto, detail of all amounts claimed and any other action or relief
sought, the names of the claimant and all other parties to the claim, suit or
proceeding, the name of each court or agency before which such claim, suit or
proceeding is pending, the date such claim, suit or proceeding was instituted,
and a best estimate of the maximum amount, if any, which is likely to become
payable with respect to each such liability. If no estimate is provided, the
best estimate shall for purposes of this Agreement be deemed to be zero. On the
Closing Date, the Company shall deliver, and shall cause its accountants,
outside counsel and other representatives or agents to deliver, copies of all
privileged documents related to liabilities as listed on Schedule 6.13.
(c) All of the liabilities reflected on the unaudited
consolidated balance sheet included in the Financial Statements arose only out
of or were incurred only in connection with the conduct of the business of the
Company. Except as set forth on Schedule 6.13 and except for liabilities not
required to be set forth thereon pursuant to Section 6.13(a), the Company has no
liabilities or obligations with respect to its business, whether direct or
indirect, matured or unmatured, absolute, contingent or otherwise, and there is
no condition, situation or set of circumstances which would reasonably be
expected to result in any such liability.
6.14 ACCOUNTS AND NOTES RECEIVABLE. Attached hereto as Schedule 6.14 is
a complete and accurate list, as of a date not more than two days prior to the
date of this Agreement, of the accounts and notes receivable of the Company
(including, without limitation, receivables from and advances to employees and
Stockholders) other than those arising out of Leases (collectively, the
"Accounts Receivable"). Schedule 6.14 includes an aging of all Accounts
Receivable showing amounts due in 30-day aging categories. On the Closing Date,
the Stockholders will deliver to UniCapital a complete and accurate list, as of
a date not more than two days prior to the Closing Date, of the Accounts
Receivable. All Accounts Receivable
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represent valid obligations arising from bona fide business transactions in the
ordinary course of business consistent with past practice. The Accounts
Receivable are, and as of the Closing Date and the Merger Effective Date will
be, current and collectible net of any respective reserves shown on the
Company's books and records (which reserves are adequate and calculated
consistent with past practice). Subject in the case of Accounts Receivable
reflected on the Company's balance sheet to such reserves reflected on such
balance sheet, each of the Accounts Receivable will be collected in full within
ninety (90) days after the day on which it first became due and payable. There
is no contest, claim, counterclaim, defense or right of set-off, other than
rebates and returns in the ordinary course of business, under any contract with
any obligor of any Account Receivable relating to the amount or validity of such
Account Receivable. The allowance for collection losses on the Balance Sheet has
been determined in accordance with GAAP consistent with past practice.
6.15 PERMITS. Each material Permit, together with the name of the
Governmental Entity issuing such Permit is set forth on Schedule 6.15. Such
Permits are valid and in full force and effect and none of such Permits will be
terminated or impaired or become terminable as a result of the transactions
contemplated by this Agreement. Upon consummation of such transactions, each
Surviving Corporation will have all of the Company's right, title and interest
in the Permits.
6.16 REAL AND PERSONAL PROPERTY. Attached hereto as Schedule 6.16 is an
accurate list, including substantially complete descriptions as of the Balance
Sheet Date, of all the real and personal property (which in the case of personal
property had an original cost in excess of $25,000) owned or leased by the
Company, where the Company is a lessee or sublessee, including true and correct
copies of leases for equipment and properties on which are situated buildings,
warehouses and other structures used in the operation of the business of the
Company and including an indication as to which assets were formerly owned by
any Stockholder or affiliate (which term, as used herein, shall have the meaning
ascribed thereto in Rule 144(a)(1) promulgated under the Securities Act of 1933,
as amended (the "Securities Act")) of the Company. Except as set forth on
Schedule 6.16, all of the Company's buildings, leasehold improvements,
structures, facilities, equipment and other material items of tangible property
and assets are in good operating condition and repair, subject to normal wear
and maintenance, are usable in the regular and ordinary course of business and
conform to all applicable laws, ordinances, codes, rules and regulations, and
Authorizations relating to their construction, use and operation. All leases set
forth on Schedule 6.16 have been duly authorized, executed and delivered and
constitute the legal, valid and binding obligations of the Company (or its
Company Subsidiaries) and, to the knowledge of the Stockholders, no other party
to any such lease is in default thereunder and such leases constitute the legal,
valid and binding obligations of such other parties. All fixed assets used by
the Company in the operation of its business are either owned by the Company or
leased under an agreement set forth on Schedule 6.16. The Company and the
Stockholders have heretofore delivered to UniCapital copies of all title reports
and title insurance policies received or held by the Company (including its
Company). The Company and the Stockholders have indicated on Schedule 6.16 a
summary description of all plans or projects
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involving the opening of new operations, expansion of any existing operations or
the acquisition of any real property or existing business to which management of
the Company has devoted any significant effort or expenditure in the two-year
period prior to the date of this Agreement which, if pursued by the Company
would require additional expenditures of significant efforts or capital.
6.17 CONTRACTS AND COMMITMENTS. Schedule 6.17 sets forth an accurate,
correct and complete list of all agreements, contracts, commitments,
arrangements and understandings, written or oral, including all amendments and
supplements thereto, of the Company other than Leases (the "Contracts"), to
which the Company is a party or is bound, or by which any of its respective
assets are bound, and which involve any:
(a) agreement, contract, commitment, arrangement or
understanding with any present or former employee or consultant or for the
employment of any person, including any consultant;
(b) agreement, contract, commitment, arrangement or
understanding for the future purchase of, or payment for, supplies or products,
or for the performance of services by a third party involving in any one case
$25,000 or more;
(c) agreement, contract, commitment, arrangement or
understanding to sell or supply products or to perform services involving in any
one case $25,000 or more;
(d) agreement, contract, commitment, arrangement or
understanding containing requirements or "take or pay" provisions;
(e) agreement, contract, commitment, arrangement or
understanding not otherwise listed on Schedule 6.17 and continuing over a period
of more than six months from the date hereof or exceeding $10,000 in value;
(f) distribution, dealer, representative or sales agency
agreement, contract, commitment, arrangement or understanding;
(g) agreement, contract, commitment, arrangement or
understanding containing a provision to indemnify any person or entity or assume
any tax, environmental or other liability;
(h) agreement, contract, commitment, arrangement or
understanding with federal, state, local, regulatory or other governmental
entities;
(i) note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement or other contract or commitment for the
borrowing or lending of money or agreement or arrangement for a line of credit
or guarantee, pledge or undertaking of the indebtedness of any other person;
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(j) agreement, contract, commitment, arrangement or
understanding for any charitable or political contribution;
(k) agreement, contract, commitment, arrangement or
understanding for any capital expenditure or leasehold improvement in excess of
$25,000;
(l) agreement, contract, commitment, arrangement or
understanding limiting or restraining the Company or any successor thereto, or
to the knowledge of the Company and each Stockholder, any employee of the
Company or any successor thereto, from engaging or competing in any manner or in
any business;
(m) license, franchise, distributorship or other agreement
which relates in whole or in part to any software, patent, trademark, trade
name, service mark or copyright or to any ideas, technical assistance or other
know-how of or used by the Company;
(n) agreement, contract, commitment, arrangement or
understanding to which the Company, on the one hand, and any affiliate, officer,
director or stockholder of the Company, on the other hand, are parties; or
(o) material agreement, contract, commitment, arrangement or
understanding not made in the ordinary course of business.
Each of the Contracts listed on Schedule 6.17, or not required to be listed
thereon because of the amount thereof, is valid and enforceable in accordance
with its terms; the Company is, and to the knowledge of the Company and each
Stockholder, all other parties thereto are, in compliance with the provisions
thereof. The Company is not, and to the knowledge of the Company and each
Stockholder, no other party thereto is, in default in the performance,
observance or fulfillment of any material obligation, covenant or condition
contained therein; and no event has occurred which with or without the giving of
notice or lapse of time, or both, would constitute a default thereunder. None of
the rights of the Company under any Contract will be impaired by the
consummation of the transactions contemplated hereby, and all such rights will
be enforceable by the applicable Surviving Corporation after the Merger
Effective Date without the consent or agreement of any other party. The Company
has delivered accurate and complete copies of each written Contract and complete
and accurate summaries of all other Contracts to UniCapital. No Contract
obligates any party to obtain any consent in connection with the transactions
contemplated hereby.
6.18 GOVERNMENT CONTRACTS. The Company is not now nor ever has been a
party to any contract with any Governmental Entity subject to price
redetermination or renegotiation.
6.19 TITLE TO REAL PROPERTY. The Company has good and insurable title
to all real property owned and used in its business, subject to no mortgage,
pledge, lien, conditional sales agreement, encumbrance or charge, except for:
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(a) liens, if any, reflected on Schedules 6.13 and 6.16 as
securing specified liabilities (with respect to which no material default
exists);
(b) liens for current taxes and assessments not yet due or in
default;
(c) easements for utilities serving the property only; and
(d) easements, covenants and restrictions and other exceptions
to title shown of record in the offices of the county clerks in which the
properties, assets and leasehold estates are located which, in UniCapital's sole
judgment, do not adversely affect UniCapital's intended use of such properties.
6.20 INSURANCE. The assets, properties and operations of the Company is
insured under various policies of general liability and other forms of
insurance, all of which are described on Schedule 6.20, which discloses for each
policy the risks insured against, coverage limits, deductible amounts, all
outstanding claims thereunder, and whether the terms of such policy provide for
retrospective premium adjustments. All such policies are in full force and
effect in accordance with their terms, no notice of cancellation has been
received, and there is no existing default or event which, with the giving of
notice or lapse of time or both, would constitute a default thereunder. Such
policies are in amounts which, in relation to the business and assets of the
Company, are consistent with the normal or customary industry practice and all
premiums due to date have been paid in full. The Company has not been refused
any insurance, nor has the Company's coverage been limited, by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the past five years. Schedule 6.20 also contains a true and
complete description of all outstanding bonds and other surety arrangements
issued or entered into in connection with the business, assets and liabilities
of the Company.
6.21 EMPLOYEES. Schedule 6.21 contains the following with respect to
the Company:
(a) a list of all employees of the Company (including name,
title and position);
(b) each such employee's length of service; and
(c) the compensation (including terms of payment, bonuses,
commissions and deferred compensation, as well as any benefits) of each such
employee.
Except as disclosed on Schedule 6.21: (i) there have not been in the past five
years and, to the knowledge of the Company and the Stockholders, there are not
pending, any labor disputes, work stoppages, requests for representation,
pickets or work slow-downs due to labor disagreements; (ii) there are and have
been no unresolved violations of any Laws of any Governmental Entity respecting
the employment of any employees; (iii) there is no unfair labor practice, charge
or complaint pending, unresolved or, to the knowledge of the Company and the
Stockholders,
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threatened before the National Labor Relations Board or similar body in any
foreign country; (iv) there is no employment handbook, personnel policy manual,
or similar document that creates prospective employment rights or obligations;
(v) the employees of the Company are not covered by any collective bargaining
agreement; (vi) the Company has provided or will timely provide prior to Closing
all notices required by law to be given prior to Closing to all local, state,
federal or national labor, wage-payment, equal employment opportunity,
unemployment insurance and related agencies; (vii) the Company has paid or
properly accrued in the ordinary course of business all wages and compensation
due to employees, including all vacations or vacation pay, holidays or holiday
pay, sick days or sick pay, and bonuses; and (viii) the transactions
contemplated by this Agreement will not create liability under any Laws of any
Governmental Entity respecting reductions in force or the impact on employees on
plant closing or sales of businesses. All employees of the Company are legally
able to work in the United States.
6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. Schedule 6.22 sets forth
a complete and accurate list of each Benefit Plan covering any present or former
officers, employees or directors of the Companies. "Benefit Plan" means each
"employee pension benefit plan" (as defined in Section 3(3) of ERISA,
hereinafter a "Pension Plan"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA, hereinafter a "Welfare Plan") and each other plan or
arrangement (written or oral) relating to deferred compensation, bonus,
performance compensation, stock purchase, stock option, stock appreciation,
severance, vacation, sick leave, holiday pay, fringe benefits, personnel policy,
reimbursement program, incentive, insurance, welfare or similar plan, program,
policy or arrangement, in each case maintained or contributed to, or required to
be maintained or contributed to, by the Company or its respective affiliates or
any other person or entity that, together with the Company, is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Code (each,
together with the Company, a "Commonly Controlled Entity") for the benefit of
any present or former officer, employee or director. The Company has no intent
or commitment to create any additional Benefit Plan or amend any Benefit Plan so
as to increase benefits thereunder. The Company has not created any Benefit Plan
or declared or paid any bonus compensation in contemplation of the transactions
contemplated by this Agreement. A current, accurate and complete copy of each
Benefit Plan has been made available to UniCapital. Except as disclosed on
Schedule 6.22:
(a) each Benefit Plan is in substantial compliance with all
reporting, disclosure and other requirements of ERISA applicable to such Benefit
Plan;
(b) each Pension Plan which is intended to be qualified under
Section 401(a) of the Code, has been determined by the Internal Revenue Service
to be so qualified and, to the knowledge of the Companies and the Stockholders,
no condition exists that would adversely affect any such determination;
(c) neither any Benefit Plan, nor the Company, nor any
Commonly Controlled Entity, nor any trustee or agent has been or is presently
engaged in any prohibited transactions as defined by Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not
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applicable which could subject the Company to the tax or penalty imposed by
Section 4975 of the Code or Section 502 of ERISA;
(d) there is no event or condition existing which could be
deemed a "reportable event" (within the meaning of Section 4043 of ERISA) with
respect to which the thirty-day notice requirement has not been waived; to the
knowledge of the Company and the Stockholders, no condition exists which could
subject the Company to a penalty under Section 4071 of ERISA;
(e) neither the Company nor any Commonly Controlled Entity is
or has ever been party to any "multi-employer plan," as that term is defined in
Section 3(37) of ERISA;
(f) true and correct copies of the most recent annual report
on Form 5500 and any attached schedules for each Benefit Plan (if any such
report was required by applicable law) and a true and correct copy of the most
recent determination letter issued by the Internal Revenue Service for each
Pension Plan have been provided to UniCapital;
(g) with respect to each Benefit Plan, there are no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
pending or, to the knowledge of the Company and the Stockholders, threatened
against any Benefit Plan, the Company, any Commonly Controlled Entity or any
trustee or agent of any Benefit Plan; and
(h) with respect to each Benefit Plan to which the Company or
any Commonly Controlled Entity is a party which constitutes a group health plan
subject to Section 4980B of the Code, each such Benefit Plan substantially
complies, and in each case has substantially complied, with all applicable
requirements of Section 4980B of the Code.
(i) Except as set forth in Schedule 6.22:
(i) there is no outstanding liability (except for
premiums due) under Title IV of ERISA with respect to any Pension Plan;
(ii) neither the Pension Benefit Guaranty Corporation
nor the Company nor any Commonly Controlled Entity has instituted proceedings to
terminate any Pension Plan and the Pension Benefit Guaranty Corporation has
informed the Company of its intent to institute proceedings to terminate any
Pension Plan;
(iii) full payment has been made of all amounts which
the Company or any Commonly Controlled Entity was required to have paid as a
contribution to the Pension Plans as of the last day of the most recent fiscal
year of each of the Pension Plans ended prior to the date of this Agreement, and
none of the Pension Plans has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code), whether
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or not waived, as of the last day of the most recent fiscal year of each such
Pension Plan ended prior to the date of this Agreement;
(iv) to the knowledge of the Company and the
Stockholders, the actuarial assumptions utilized, where appropriate, in
connection with determining the funding of each Pension Plan which is a defined
benefit pension plan (as set forth in the actuarial report for such Pension
Plan) are reasonable. Copies of the most recent actuarial reports have been
furnished to UniCapital. Based on such actuarial assumptions, as of the Balance
Sheet Date, the fair market value of the assets or properties held under each
such Pension Plan exceeds the actuarially determined present value of all
accrued benefits of such Pension Plan (whether or not vested) determined on an
ongoing Pension Plan basis;
(v) each of the Benefit Plans is, and its
administration is and has been during the six-year period preceding the date of
this Agreement, in substantial compliance with, and the Company has not received
any claim or notice that any such Benefit Plan is not in compliance with, all
applicable laws and orders and prohibited transaction exemptions, including
without limitation, to the extent applicable, the requirements of ERISA;
(vi) Neither the Company nor any Commonly Controlled
Entity is in default in performing any of its contractual obligations under any
of the Benefit Plans or any related trust agreement or insurance contract;
(vii) there are no material outstanding liabilities
of any Benefit Plan other than liabilities for benefits to be paid to
participants in Benefit Plan and their beneficiaries in accordance with the
terms of Benefit Plan;
(viii) each Benefit Plan may be amended or modified
by the applicable Company or Commonly Controlled Entity at any time without
liability except under any defined pension benefit plan;
(ix) no Benefit Plan other than a Pension Plan,
retiree medical plan or severance plan provides benefits to any individual after
termination of employment;
(x) the consummation of the transactions contemplated
by this Agreement will not (in and of itself): (A) entitle any employee of the
Company to severance pay, unemployment compensation or any other payment; (B)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee; (C) result in any liability under Title
IV of ERISA; (D) result in any prohibited transaction described in Section 406
of ERISA or Section 4975 of the Code for which an exemption is not available; or
(E) result (either alone or in conjunction with any other event) in the payment
or series of payments by the Company or any of its affiliates to any person of
an "excess parachute payment" within the meaning of Section 280G of the Code;
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(xi) with respect to each Benefit Plan that is funded
wholly or partially through an insurance policy, all premiums required to have
been paid to date under the insurance policy have been paid, all premiums
required to be paid under the insurance policy through the Merger Effective Date
will have been paid on or before the Merger Effective Date and, as of the Merger
Effective Date, there will be no liability of the Company or any Commonly
Controlled Entity under any insurance policy or ancillary agreement with respect
to such insurance policy in the nature of a retroactive rate adjustment, loss
sharing arrangement or other actual or contingent liability arising wholly or
partially out of events occurring prior to the Merger Effective Date;
(xii) (A) each Benefit Plan that constitutes a
"Welfare Plan," and for which contributions are claimed by the Company or any
Commonly Controlled Entity as deductions under any provision of the Code, is in
material compliance with all applicable requirements pertaining to such
deduction;
(B) with respect to any welfare benefit fund
(within the meaning of Section 419 of the Code) related to a welfare benefit
plan, there is no disqualified benefit (within the meaning of Section 4976(b) of
the Code) that would result in the imposition of a tax under Section 4976(a) of
the Code; and
(C) all welfare benefit funds intended to be
exempt from tax under Section 501(a) of the Code have been determined by the
Internal Revenue Service to be so exempt and no event or condition exists which
would adversely affect any such determination; and
(xiii) all benefit plans outside of the United
States, if any (the "Foreign Plans"), are in compliance with all applicable laws
and regulations and have been operated in accordance with the plans' respective
terms. There are no material unfunded liabilities under or in respect of the
Foreign Plans, and all contributions or other payments required to be made to or
in respect of the Foreign Plans prior to the Merger Effective Date have been
made or will be made prior to the Merger Effective Date.
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS. The Company has complied with
each, and is not in violation of any, law, ordinance, or governmental or
regulatory rule or regulation, whether federal, state, local or foreign
("Regulations"), to which the Company's business, operations, assets or
properties is subject. The Company owns, holds, possesses or lawfully uses in
the operation of its business all franchises, licenses, permits, easements,
rights, applications, filings, registrations and other authorizations
("Authorizations") which are in any manner necessary for it to conduct its
business as now or previously conducted or for the ownership and use of the
assets owned or used by the Company in the conduct of the business of the
Company, free and clear of all liens, charges, restrictions and encumbrances and
in compliance with all Regulations. All such Authorizations are listed and
described in Schedule 6.23. The Company is not in default, nor has the Company
received any notice of any claim of default, with respect to any such
Authorization. All such Authorizations are renewable by their terms or in the
ordinary
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course of business without the need to comply with any special qualification
procedures or to pay any amounts other than routine filing fees. None of such
Authorizations (including, but not limited to, any Authorizations of the NASD
and the Municipal Securities Rulemaking Board) will be adversely affected by
consummation of the transactions contemplated hereby. No Stockholder and no
director, officer, employee or former employee of the Company or any affiliates
of the Company, or any other person, firm or corporation, owns or has any
proprietary, financial or other interest (direct or indirect) in any
Authorization which the Company owns, possesses or uses in the operation of the
business of the Company as now or previously conducted. The Company has timely
filed all registrations, reports, statements, notices and other filings required
to be filed with the Securities and Exchange Commission and the NASD by the
Company, and all amendments or supplements to any of the above (the "Filings").
Each of the Filings, as of their respective filing dates, complied in all
material respects, where applicable, with the Exchange Act (as defined in
Section 12.1) and the Securities Act. The Company holds all requisite
securities-related approvals, licenses and registrations in each jurisdiction in
which the Business Plan contemplates it will conduct business, except where the
failure to hold any such approvals, licenses and registrations would not
reasonably be expected to have an adverse effect. The Company has provided to
UniCapital true and correct copies of the Company's current Form BD which has
been completed in accordance with applicable law.
6.24 TRANSACTIONS WITH AFFILIATES. No Stockholder and no director,
officer or employee of the Company, or any member of his or her immediate family
or any other of its, his or her affiliates, owns or has a 5% or more ownership
interest in any corporation or other entity that is or was during the last three
years a party to, or in any property which is or was during the last three years
the subject of, any contract, agreement or understanding, business arrangement
or relationship with the Company.
6.25 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of the Company and the Stockholders, threatened against the Company or
which relates to the transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 6.25, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of the Company and the Stockholders, threatened
against the Company or which relates to the Company
(c) Neither the Company nor any Stockholder knows of any
reasonably likely basis for any litigation, arbitration, investigation or
proceeding referred to in Sections 6.25(a) or (b).
(d) The Company is not a party to or subject to the provisions
of any judgment, order, writ, injunction, decree or award of any court,
arbitrator or governmental or regulatory official, body or authority.
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6.26 RESTRICTIONS. The Company is not a party to any indenture,
agreement, contract, commitment, lease, plan, license, permit, authorization or
other instrument, document or understanding, oral or written, or subject to any
charter or other corporate restriction or any judgment, order, writ, injunction,
decree or award which materially adversely affects or materially restricts or,
so far as the Company or any of the Stockholders can now reasonably foresee, may
in the future materially adversely affect or materially restrict, the business,
operations, assets, properties, prospects or condition (financial or otherwise)
of the Company after consummation of the transactions contemplated hereby.
6.27 TAXES. All federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by the Company (the
"Tax Returns") with respect to any federal, state, local or foreign taxes,
assessments, interest, penalties, deficiencies, fees and other governmental
charges or impositions (including without limitation all income tax,
unemployment compensation, social security, payroll, sales and use, excise,
privilege, property, ad valorem, franchise, license, school and any other tax or
similar governmental charge or imposition under laws of the United States or any
state or municipal or political subdivision thereof or any foreign country or
political subdivision thereof) (the "Taxes") have been timely filed with the
appropriate governmental agencies in all jurisdictions in which such Tax Returns
are required to be filed, and all such Tax Returns properly reflect the
liabilities of the Company for Taxes for the periods, property or events covered
thereby. All Taxes, including without limitation those which are called for by
the Tax Returns, required to be paid, withheld or accrued by the Company and any
deficiency assessments, penalties and interest have been timely paid, withheld
or accrued. The accruals for Taxes contained in the Balance Sheet are adequate
to cover the Tax liabilities of the Company as of that date and include adequate
provision for all deferred Taxes, and nothing has occurred subsequent to that
date to make any of such accruals inadequate. The Company's Tax basis in its
assets for purposes of determining its future amortization, depreciation and
other federal income tax deductions is accurately reflected on the Company's Tax
books and records. The Company is not or has not at any time ever been a party
to a Tax sharing, Tax indemnity or Tax allocation agreement, and the Company has
not assumed any Tax liability of any other person or entity under contract. The
Company has not received any notice of assessment or proposed assessment in
connection with any Tax Returns and there are not pending tax examinations of or
tax claims asserted against the Company or any of its assets or properties. The
Company has not extended, or waived the application of, any statute of
limitations of any jurisdiction regarding the assessment or collection of any
Taxes. There are now (and as of immediately following the Closing there will be)
no Liens (other than any Lien for current Taxes not yet due and payable) on any
of the assets or properties of the Company relating to or attributable to Taxes.
To the knowledge of the Company and the Stockholders, there is no basis for the
assertion of any claim relating to or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company or otherwise
have an adverse effect on the Company or its business, operations, assets,
properties, prospects or condition (financial or otherwise). Neither the Company
nor the Stockholders have any knowledge of any basis for any additional
assessment of any Taxes. All Tax payments related to employees, including income
tax withholding, FICA, FUTA, unemployment and worker's
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compensation, required to be made by the Company have been fully and properly
paid, withheld, accrued or recorded. There are no contracts, agreements, plans
or arrangements, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Company that, individually or
collectively, could give rise to any payment (or portion thereof) that would not
be deductible pursuant to Sections 280G, 404 or 162 of the Code. Two correct and
complete copies of (a) all Tax examinations, (b) all extensions of statutory
limitations and (c) all federal, state and local income tax returns and
franchise tax returns of the Company (including, if filed separately, its
Subsidiaries) for the last five fiscal years, or such shorter period of time as
any of them shall have existed, have heretofore been delivered by the Company
and the Stockholders to UniCapital. The Company made an election to be taxed
under the provisions of Subchapter S of the Code within 75 days of its original
organization and has at no time been taxed under the provisions of Subchapter C
of the Code. The Company has a taxable year ended December 31 and no the Company
has made an election to retain a fiscal year other than December 31 under
Section 444 of the Code. The Company does not have any net recognized built-in
gain within the meaning of Section 1374 of the Code. Each the Company currently
utilizes the accrual method of accounting for income tax purposes and has not
changed its method of accounting for income tax purposes in the past five years.
6.28 INTELLECTUAL PROPERTY MATTERS. (a) The Company has not utilized or
currently does not utilize any patent, trademark, trade name, service mark,
copyright, software, trade secret or know-how except for those listed on
Schedule 6.28 (the "Intellectual Property"), all of which are owned by the
Company free and clear of any liens, claims, charges or encumbrances. The
Intellectual Property constitutes all such assets, properties and rights which
are used or held for use in, or are necessary for, the conduct of the business
of the Company.
(b) There are no royalty, commission or similar arrangements,
and no licenses, sublicenses or agreements, pertaining to any of the
Intellectual Property or products or services of the Company.
(c) The Company does not infringe upon or unlawfully or
wrongfully use any patent, trademark, trade name, service mark, copyright or
trade secret owned or claimed by another. No action, suit, proceeding or
investigation has been instituted or, to the knowledge of the Company and the
Stockholders, threatened relating to any, patent, trademark, trade name, service
mark, copyright or trade secret formerly or currently used by the Company. None
of the Intellectual Property is subject to any outstanding order, decree or
judgment. The Company has not agreed to indemnify any person or entity for or
against any infringement of or by the Intellectual Property.
(d) No present or former employee of the Company and no other
person or entity owns or has any proprietary, financial or other interest,
direct or indirect, in whole or in part, in any patent, trademark, trade name,
service mark or copyright, or in any application therefor, or in any trade
secret, which the Company owns, possesses or uses in its operations as
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now or heretofore conducted. Schedule 6.28 lists all confidentiality or
non-disclosure agreements to which the Company or any of its employees is a
party.
(e) Schedule 6.28(e) sets forth a complete and accurate list
of all items of Intellectual Property, including, without limitation,
unregistered and duly registered in, filed in or issued by the United States
Copyright Office or the United States Patent and Trademark Office, any offices
in the various states of the United States and any offices in other
jurisdictions and information related to such registration.
(f) All rights of the Company in the Intellectual Property
shall vest in the applicable Surviving Corporation pursuant to the transactions
contemplated hereby without any consent or other approval.
(g) All Intellectual Property in the form of computer software
that is utilized by the Company in the operation of its business is capable of
processing date data between and within the twentieth and twenty-first
centuries, or can be rendered capable of processing such data within two (2)
months by the expenditure of no more than $10,000.
6.29 COMPLETENESS; NO VIOLATIONS. The certified copies of the
Certificate of Incorporation and Bylaws, both as amended to date, of the
Company, and the copies of all leases, instruments, agreements, licenses,
permits, certificates or other documents which are included on schedules
attached hereto or which have been delivered to UniCapital in connection with
the transactions contemplated hereby, are complete and correct; neither the
Company nor, to the knowledge of the Stockholders, any other party to any of the
foregoing is in material default thereunder; and, except as set forth in the
schedules and documents attached to this Agreement, the rights and benefits of
the Company thereunder will not be materially and adversely affected by the
transactions contemplated hereby, and the execution of this Agreement and the
performance of the obligations hereunder will not result in a material violation
or breach or constitute a material default under any of the terms or provisions
thereof. Except as set forth on Schedule 6.29, none of such leases, instruments,
agreements, contracts, licenses, permits, certificates or other documents
requires notice to, or the consent or approval of, any governmental agency or
other third party to any of the transactions contemplated hereby to remain in
full force and effect. The consummation of the transactions contemplated hereby
will not give rise to any right of termination, cancellation or acceleration or
result in the loss of any right or benefit thereunder.
6.30 EXISTING CONDITION. Since the Balance Sheet Date, the Company has
not:
(a) incurred any liabilities, other than liabilities incurred
in the ordinary course of business consistent with past practice, or discharged
or satisfied any lien or encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice, or failed to pay or
discharge when due any liabilities of which the failure to pay or
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discharge has caused or will cause any material damage or risk of material loss
to it or any of its assets or properties;
(b) sold, encumbered, assigned or transferred any assets,
properties or rights or any interest therein, except for the sales in the
ordinary course of business consistent with past practice, or made any agreement
or commitment or granted any option or right with, of or to any person to
acquire any assets, properties or rights of the Company or any interest therein;
(c) created, incurred, assumed or guaranteed any indebtedness
for money borrowed, or mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract or other
encumbrance of any nature whatsoever, except in the ordinary course of business
consistent with past practice;
(d) made or suffered any amendment or termination of any
material agreement, contract, commitment, lease or plan to which it is a party
or by which it is bound, or canceled, modified or waived any substantial debts
or claims held by it or waived any rights of substantial value, except in the
ordinary course of business consistent with past practice;
(e) except as set forth on Schedule 6.30(e), declared, set
aside or paid any dividend or made or agreed to make any other distribution or
payment in respect of its capital shares or redeemed, purchased or otherwise
acquired or agreed to redeem, purchase or acquire any of its shares of capital
stock or other ownership interests;
(f) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting its business,
operations, assets, properties or prospects or (ii) of any item or items carried
on its books of account individually or in the aggregate at more than $25,000,
or suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;
(g) suffered any material adverse change in its business,
operations, assets, properties, prospects or condition (financial or otherwise),
other than as directly caused by adverse economic conditions not specific to, or
having an extraordinary impact upon, the Company;
(h) received notice or had knowledge of any actual or
threatened labor trouble, strike or other occurrence, event or condition of any
similar character which has had or might have an adverse effect on its business,
operations, assets, properties or prospects;
(i) made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $25,000, except such
as may be involved in ordinary repair, maintenance or replacement of its assets;
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(j) increased the salaries or other compensation of, or made
any advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its employees or made any increase in, or any addition to, other
benefits to which any of its employees may be entitled;
(k) changed any of the accounting principles followed by it or
the methods of applying such principles;
(l) entered into any transaction other than in the ordinary
course of business consistent with past practice;
(m) changed its authorized capital or its securities
outstanding or otherwise changed its ownership interests, or granted any
options, warrants, calls, conversion rights or commitments with respect to any
of its capital stock or other ownership interests; or
(n) agreed to take any of the actions referred to above.
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Attached hereto as
Schedule 6.31 is an accurate list, as of the date of this Agreement, of:
(a) the name of each financial institution in which the
Company (including its Company Subsidiaries) has accounts or safe deposit boxes;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have
access thereto; and
(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Company and a
description of the terms of such power.
6.32 BOOKS OF ACCOUNT. The books, records and accounts of the Company
accurately and fairly reflect, in reasonable detail, the transactions and the
assets and liabilities of the Company. The Company has not engaged in any
transaction, maintained any bank account or used any of the funds of the Company
except for transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of the business.
6.33 ENVIRONMENTAL MATTERS. (a) The Company has secured, and is in
compliance with, all Environmental Permits, with respect to any premises on
which its business is operated, all of which Environmental Permits shall vest in
the applicable Surviving Corporation upon
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consummation of the transactions contemplated hereby. The Company is in
compliance with all Environmental Laws.
(b) Neither the Company nor any Stockholder has received any
communication from any Governmental Entity that alleges that the Company is not
in compliance with any Environmental Laws or Environmental Permits.
(c) The Company has not entered into or agreed to any court
decree or order, and the Company is not subject to any judgment, decree or
order, relating to compliance with any Environmental Law or to investigation or
cleanup of a Hazardous Substance under any Environmental Law.
(d) No lien, charge, interest or encumbrance has been
attached, asserted, or to the knowledge of the Company and the Stockholders,
threatened to or against any assets or properties of the Company pursuant to any
Environmental Law.
(e) There has been no treatment, storage, disposal or release
of any Hazardous Substance on any property owned, operated or leased by the
Company.
(f) The Company has not received a CERCLA 104(e) information
request or has been named a potentially responsible party for any National
Priorities List site under CERCLA or any site under analogous state law or
received an analogous notice or request from any non-U.S. Governmental Entity,
which notice, request or any resulting inquiry or litigation has not been fully
and finally resolved without possibility of reopening.
(g) There are no aboveground tanks or underground storage
tanks on, under or about any property owned, operated or leased by the Company
and any former aboveground or underground tanks on any property owned, operated
or leased by the Company have been removed in accordance with all Environmental
Laws and no residual contamination, if any, remains at such sites in excess of
applicable standards.
(h) There are no polychlorinated biphenyls ("PCBs") leaking
from any article, container or equipment on, under or about any property owned,
operated or leased by the Company and there are no such articles, containers or
equipment containing PCBs, and there is no asbestos containing material in a
condition or location currently constituting a violation of any Environmental
Law at, on, under or within any property owned, operated or leased by the
Company.
(i) The Company and the Stockholders have provided to
UniCapital true and complete copies of, or access to, all written environmental
assessment materials and reports in their possession that have been prepared by
or on behalf of the Company during the past five years.
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6.34 NO ILLEGAL PAYMENTS. The Company and, to the knowledge of the
Company and the Stockholders, any affiliate, officer, agent or employee thereof,
directly or indirectly, has not, during the past five years, on behalf of or
with respect to the Company or any affiliate thereof, (a) made any unlawful
domestic or foreign political contributions, (b) made any payment or provided
services which were not legal to make or provide or which the Company or any
affiliate thereof or any such officer, agent or employee should have known were
not legal for the payee or the recipient of such services to receive, (c)
received any payment or any services which were not legal for the payer or the
provider of such services to make or provide, (d) made any payment to any person
or entity, or agent or employee thereof, in connection with any Lease (as
hereinafter defined) to induce such person or entity to enter into a Lease
transaction, (e) had any transactions or payments related to the Company which
are not recorded in their accounting books and records or (f) had any off-book
bank or cash accounts or "slush funds" related to the Company.
6.35 INTENTIONALLY OMITTED.
6.36 INTENTIONALLY OMITTED.
6.37 DISCLOSURE. The Company has delivered to UniCapital true and
complete copies of each agreement, contract, commitment or other document (or,
in the case of any such document not in the possession of reasonably available
to a Company or a Stockholder, accurate and complete summaries thereof) that is
referred to in the schedules to this Agreement or that has been requested by
UniCapital or its representatives. Without limiting any exclusion, exception or
other limitation contained in any of the representations and warranties made
herein, this Agreement and the schedules hereto and all other documents and
information prepared or certified by the Stockholders to the Company and
provided to UniCapital and its representatives pursuant hereto do not and will
not include any untrue statement of a material fact or omit to state a material
fact necessary to make the statements herein and therein not misleading. If any
Stockholders become aware of any fact or circumstance that would change a
representation or warranty of any Stockholder in this Agreement or any
representation made on behalf of the Company, then the Stockholders shall
immediately give notice of such fact or circumstance to UniCapital. However,
such notification shall not relieve the Company or any of the Stockholders of
their respective obligations under this Agreement, and at the sole option of
UniCapital, the truth and accuracy of any and all warranties and representations
of the Stockholders, at the date of this Agreement and at the Closing, shall be
a precondition to the consummation of this transaction.
7. REPRESENTATIONS AND WARRANTIES OF UNICAPITAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, UniCapital and Newco, jointly and severally, represent and
warrant as follows:
7.1 CORPORATE EXISTENCE. UniCapital is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Newco is a corporation
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duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Immediately prior to the effectiveness of the
Merger, each of UniCapital and Newco is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where the conduct of
its business requires it to be so qualified.
7.2 UNICAPITAL STOCK. The shares of UniCapital Stock to be issued and
delivered to the Stockholders on the Merger Effective Date, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable shares, and except for restrictions upon
resale will be legally equivalent in all respects to the UniCapital Stock issued
and outstanding as of the date hereof. The UniCapital Stock to be issued upon
the conversion of Company Stock pursuant to the terms of this Agreement will be
free and clear of all liens, encumbrances and claims of every kind, other than
restrictions upon transfer contained herein and other than any liens,
encumbrances or claims arising other than by the actions of UniCapital or Newco.
7.3 CORPORATE POWER AND AUTHORIZATION. UniCapital and Newco have the
corporate power, authority and legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance of this Agreement and all
related documents and agreements required to be executed and delivered by
UniCapital and Newco in accordance with the provisions hereof (the "UniCapital
Documents") have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by UniCapital and Newco and
constitutes, and the UniCapital Documents when executed and delivered will
constitute, the legal, valid and binding obligations of UniCapital and Newco
enforceable against UniCapital and Newco in accordance with their terms.
7.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement by UniCapital and Newco will not violate, conflict with or result in
the breach of any term, condition or provision of, or require the consent of any
other person under (a) any existing law, ordinance, or governmental rule or
regulation to which UniCapital or Newco is subject, (b) any judgment, order,
writ, injunction, decree or award of any Governmental Entity that is applicable
to UniCapital or Newco, (c) the charter documents of UniCapital or Newco, or (d)
any mortgage, indenture, agreement, contract, commitment, lease, plan,
Authorization, or other instrument, document or understanding, oral or written,
to which UniCapital or Newco is a party, by which UniCapital or Newco may have
rights or by which any of the properties or assets of UniCapital or Newco may be
bound or affected, or give any party with rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of UniCapital or Newco thereunder. Except for filing the Articles of
Merger and except as aforesaid, no authorization, approval or consent of, and no
registration or filing and filings under the Hart- Scott-Rodino Antitrust
Improvements Act of 1976, with, any Governmental Entity is required in
connection with the execution, delivery or performance of this Agreement by
UniCapital or Newco.
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7.5 CAPITALIZATION OF UNICAPITAL. The IPO will result in an aggregate
market capitalization of UniCapital that will exceed Three Hundred Million
Dollars ($300,000,000), as determined by multiplying the outstanding shares of
UniCapital immediately following the closing of the IPO Price.
7.6 COMPLIANCE WITH LAW; AUTHORIZATIONS. Each of UniCapital and Newco
have complied with each, and is not in violation of Regulations to which
UniCapital's and Newco's respective business, operations, assets or properties
is subject. Each of UniCapital and Newco owns, holds, possesses or lawfully uses
in the operation of its business all Authorizations which are in any manner
necessary for it to conduct its business as now or previously conducted or for
the ownership and use of the assets owned or used by UniCapital and Newco,
respectively, in the conduct of the business of the Company, free and clear of
all liens, charges, restrictions and encumbrances and in compliance with all
Regulations. Neither UniCapital nor Newco is in default, nor has UniCapital or
Newco received any notice of any claim of default, with respect to any such
Authorization. All such Authorizations are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
None of such Authorizations will be adversely affected by consummation of the
transactions contemplated hereby. No stockholder and no director, officer,
employee or former employee of UniCapital of Newco any of their affiliates, or
any other person, firm or corporation, owns or has any proprietary, financial or
other interest (direct or indirect) in any Authorization which UniCapital or
Newco owns, possesses or uses in the operation of the business of UniCapital and
Newco as now or previously conducted.
7.7 TRANSACTIONS WITH AFFILIATES. Except as described in the
Registration Statement, no stockholder and no director, officer or employee of
UniCapital or Newco, or any member of his or her immediate family or any other
of its, his or her affiliates, owns or has a 5% or more ownership interest in
any corporation or other entity that is or was during the last three years a
party to, or in any property which is or was during the last three years the
subject of, any contract, agreement or understanding, business arrangement or
relationship with UniCapital or Newco.
7.8 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of UniCapital and Newco, threatened against UniCapital or Newco which
relates to the transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 7.8, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of UniCapital or Newco, threatened against
UniCapital or Newco or which relates to UniCapital or Newco.
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(c) Neither UniCapital nor Newco is not a party to or subject
to the provisions of any judgment, order, writ, injunction, decree or award of
any court, arbitrator or governmental or regulatory official, body or authority.
7.9. REGISTRATION RIGHTS. As of the date hereof and as of the Merger
Effective Date, no officer, director or shareholder of UniCapital will have been
granted any registration rights with respect to the registration of any shares
of capital stock of UniCapital.
7.10 MISCELLANEOUS. Prior to the consummation of the Merger, UniCapital
and Newco have no material properties or assets and are not party to any
contracts other than this Agreement, the letter of intent among the parties to
this Agreement, certain employment agreements with officers of UniCapital,
certain real property leases relating to the principal executive offices of
UniCapital, and those agreements and letters of intent listed on Schedule 7.10
hereto.
8. COVENANTS OF STOCKHOLDERS AND THE COMPANY
The following covenants shall apply during the period from and after
the date hereof through the Closing Date.
8.1 BUSINESS IN THE ORDINARY COURSE. The Company shall, and the
Stockholders shall cause the Company to, conduct its business solely in the
ordinary course and consistent with past practice.
8.2 EXISTING CONDITION. The Company shall not, and no Stockholder shall
suffer the Company to, cause or permit to occur any of the events or occurrences
described in Section 6.30 hereof.
8.3 MAINTENANCE OF PROPERTIES AND ASSETS. The Company shall, and the
Stockholders shall cause the Company to, maintain and service its properties and
assets in order to preserve their value and usefulness in the conduct of its
respective business.
8.4 EMPLOYEES AND BUSINESS RELATIONS. The Company shall, and the
Stockholders shall cause the Company to, use commercially reasonable efforts to
keep available the services of its current employees and agents and to maintain
its relations and goodwill with its suppliers, customers, distributors and any
others with whom or with which it has business relations.
8.5 MAINTENANCE OF INSURANCE. The Company shall, and the Stockholders
shall cause the Company to, notify UniCapital of any material changes in the
terms of the insurance policies and binders referred to on Schedule 6.20 hereto.
8.6 COMPLIANCE WITH LAWS, ETC. The Company shall, and the Stockholders
shall cause the Company to, comply with all laws, ordinances, rules, regulations
and orders applicable
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to the Company or its business, operations, properties or assets, noncompliance
with which might materially affect the Company.
8.7 CONDUCT OF BUSINESS. The Company shall, and the Stockholders shall
cause the Company to, use its reasonable commercial efforts to conduct its
business in such a manner that on the Closing Date and on the Merger Effective
Date the representations and warranties of the Stockholders contained in this
Agreement shall be true, as though such representations and warranties were made
on and as of each such date (except to the extent such representations or
warranties expressly speak as of a specific date), and each company shall, and
the Stockholders shall cause the Company and each of its Subsidiaries to use
commercially reasonable efforts to cause all of the conditions to the
obligations of the Company and the Stockholders under this Agreement to be
satisfied on or prior to the Closing Date.
8.8 ACCESS. Upon prior reasonable notice, the Stockholders shall cause
the Company to, give to UniCapital's officers, employees, counsel, accountants
and other representatives free and full access to and the right to inspect,
during normal business hours, all of the premises, properties, assets, records,
contracts and other documents relating to the Company and shall permit them to
consult with the officers, employees, accountants, counsel and agents of the
Company for the purpose of making such investigation of the Company as
UniCapital shall desire to make, provided that such investigation shall not
unreasonably interfere with the Company's business operations, and provided
further that UniCapital shall not contact or consult with any non-officer
employees of the Company without the Company's prior consent, which shall not be
unreasonably withheld. Furthermore, the Company shall, and the Stockholders
shall cause the Company to, furnish to UniCapital all such documents and copies
of documents and records and information with respect to the affairs of the
Company and copies of any working papers relating thereto as UniCapital shall
from time to time reasonably request. No information or knowledge obtained in
any investigation pursuant to this Section 8.8 or otherwise shall affect or be
deemed to modify any representation or warranty contained in this Agreement or
the conditions to the obligations of the parties to consummate the Merger.
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS. Neither the Company nor
any Stockholder shall give notice to third parties or otherwise make any press
release or other public statement concerning this Agreement or the transactions
contemplated hereby. Neither the Company nor any Stockholder shall grant any
interview, publish any article, report or statement, or respond to any press
inquiry or other inquiry of any third party relating to this Agreement, the
business of the Company, the business (current and proposed) of UniCapital, the
Registration Statement (as defined below), the IPO or any other matter connected
with any of the foregoing without the express prior written approval of
UniCapital, and all inquiries and questions with respect to any of the foregoing
shall be coordinated through Robert New, Chief Executive Officer of UniCapital.
The Company and each Stockholder shall coordinate all communications with the
employees and agents of the Company through UniCapital prior to making any such
communication. Notwithstanding the foregoing, this Section 8.9 shall not be
interpreted to prevent the Company or any Stockholder from disclosing
information as compelled by a court
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order, provided however, that prior to disclosing any information concerning
this Agreement or the transaction contemplated hereby in response to any such
court order, the Company or Stockholder, as applicable, shall provide UniCapital
with prompt notice of the court order so that UniCapital may take whatever
action it deems appropriate to prohibit such disclosure.
8.10 EXCLUSIVITY. Except with respect to this Agreement and the
transactions contemplated hereby, neither the Company, nor any Stockholder and
nor any of their affiliates shall, and each of them shall not cause its
respective employees, agents and representatives (including, without limitation,
any investment banking, legal or accounting firm retained by it or them and any
individual member or employee of the foregoing) (each, an "Agent") to, (a)
initiate, solicit or seek, directly or indirectly, any inquiries or the making
or implementation of any proposal or offer (including, without limitation, any
proposal or offer to its shareholders or any of them) with respect to a merger,
acquisition, consolidation, recapitalization, liquidation, dissolution or
similar transaction involving, or any purchase of all or any portion of the
assets or any equity securities of, the Company (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal"), or (b) engage in
any negotiations concerning, or provide any confidential information or data to,
or have any substantive discussions with, any person relating to an Acquisition
Proposal, (c) otherwise cooperate in any effort or attempt to make, implement or
accept an Acquisition Proposal, or (d) enter into or consummate any agreement or
understanding with any person or entity relating to an Acquisition Proposal,
except for the merger of the Company with and into the Company and the Merger
contemplated hereby. If the Company or Stockholder, or any of their respective
Agents, have provided any person or entity (other than UniCapital) with any
confidential information or data relating to an Acquisition Proposal, then they
shall request the immediate return thereof. The Company and the Stockholders
shall notify UniCapital immediately if any inquiries, proposals or offers
related to an Acquisition Proposal are received by, any confidential information
or data is requested from, or any negotiations or discussions related to an
Acquisition Proposal are sought to be initiated or continued with, it or any
individual or entity referred to in the first sentence of this Section 8.10. The
covenant contained in this Section 8.10 shall not survive any termination of
this Agreement pursuant to Sections 13.1, 13.2 or 13.3.
8.11 THIRD-PARTY SUPPLIER APPROVALS. Prior to the Closing Date, the
Company shall satisfy any requirement for notice and approval of the
transactions contemplated by this Agreement under applicable agreements with
third parties, and shall provide UniCapital with satisfactory evidence of such
third-party approvals.
8.12 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
Company shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under any applicable collective bargaining
agreement, and shall provide UniCapital with proof that any required notice has
been provided.
8.13 NOTIFICATION OF CERTAIN MATTERS. (a) The Company and the
Stockholders shall give prompt notice to UniCapital of (i) the occurrence or
non-occurrence of any event known to
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any Stockholder or the Company the occurrence or non-occurrence of which would
be likely to cause any representation or warranty contained in Article 6 to be
untrue or inaccurate in any material respect at or prior to the Closing Date or
the Merger Effective Date and (ii) any material failure of any Stockholder or
the Company to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by such person hereunder.
(b) The delivery of any notice pursuant to this Section 8.13
shall not be deemed to (i) modify the representations or warranties hereunder of
the party delivering such notice, which modification may only be made pursuant
to Section 8.14, (ii) modify the conditions set forth in Sections 9 and 10 or
(iii) limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
8.14 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Merger
Effective Date to supplement or amend promptly the schedules hereto with respect
to any matter hereafter arising or discovered which, if existing or known at the
date of this Agreement, would have been required to be set forth or described in
the schedules, provided, that no amendment or supplement that constitutes or
reflects a material adverse change in the business, operations, assets,
properties, prospects or condition (financial or otherwise) of the Company (a
"Material Adverse Amendment") may be made unless UniCapital consents to such
Material Adverse Amendment; provided, further, however, that if the amendment or
supplement relates to changes in facts or circumstances occurring subsequent to
the date of this Agreement and such amendment or supplement constitutes or
reflects a Material Adverse Amendment, then such amendment or supplement shall
be accepted by UniCapital subject to the provisions of Section 12.2 and 12.5
hereof. No amendment of or supplement to a schedule shall be made later than 48
hours prior to the anticipated effectiveness of the Registration Statement
defined in Section 9.4. Only (i) the Schedules attached to this Agreement at the
time of its execution and (ii) amended Schedules as accepted under the standard
and provisions of this Section 18.4, shall be deemed to be a part of this
Agreement in accordance with Section 19.3 hereof.
8.15 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, the Company shall use its reasonable best efforts to (a) file all
information required to be filed by it pursuant to such act and (b) provide
UniCapital with all information reasonably requested and required by it to
satisfy any filing requirements it may have under such act.
8.16 COOPERATION WITH NASD APPROVAL PROCESS. From the date hereof to
the Closing Date, and thereafter to the extent necessary or appropriate, the
Stockholders and/or the Company, as required, shall, from time to time, execute
and deliver such additional instruments, documents, conveyances or assurances
and take such other actions as reasonably requested by UniCapital in order to
obtain the consent of any regulatory or self-regulatory bodies whose consent is
necessary or appropriate to complete the transactions contemplated hereby,
including
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but not limited to participating in any pre-membership interview or similar
proceeding before the NASD to obtain its consent to the change of control of the
Company pursuant to Rule 1018(f)(2) of the NASD Conduct Rules.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND
THE STOCKHOLDERS
The obligations of the Company and the Stockholders hereunder are
subject to the satisfaction on or prior to the Closing Date (or such earlier
date specified below) of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representations and warranties of UniCapital and Newco contained in Article 7
shall be accurate as of the Closing Date and as of the Merger Effective Date as
though such representations and warranties had been made as of such times; all
of the terms, covenants and conditions of this Agreement to be complied with and
performed by UniCapital and Newco on or before the Closing Date shall have been
duly complied with and performed; and a certificate to the foregoing effect
dated the Merger Effective Date and signed by a duly authorized agent, the
President or any Vice President of UniCapital shall have been delivered to the
Stockholders.
9.2 EMPLOYMENT AGREEMENTS. The Surviving Corporation shall have
executed and delivered Employment Agreements, in the form of Annex IV attached
hereto, to each of the persons listed on Schedule 9.2 hereto.
9.3 OPINION OF COUNSEL. The Stockholders shall have received an opinion
from counsel for UniCapital, dated the Merger Effective Date, to the effect
that:
(a) UniCapital and Newco have been duly organized and are
validly existing in good standing under the laws of their respective states of
incorporation;
(b) this Agreement has been duly authorized, executed and
delivered by UniCapital and Newco and constitutes a valid and binding agreement
of UniCapital and Newco enforceable in accordance with its terms, except (i) as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting the
rights of creditors, (ii) as the same may be subject to the effect of general
principles of equity and (iii) that no opinion need be expressed as to the
enforceability of indemnification provisions included herein; and
(c) the execution, delivery and performance of this Agreement
and the consummation of any transactions contemplated hereby will not conflict
with, or result in a breach or violation of, the Certificate of Incorporation of
Bylaws of UniCapital or Newco;
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(d) the shares of UniCapital Stock to be received by the
Stockholders on the Merger Effective Date shall be duly authorized, validly
issued, fully paid and nonassessable.
9.4 REGISTRATION STATEMENT. UniCapital shall have filed with the
Securities and Exchange Commission ("SEC") a registration statement on Form S-1
covering the offer and sale of shares of UniCapital Stock in the IPO (the
"Registration Statement"). The Registration Statement shall have been declared
effective by the SEC not later than June 30, 1998, UniCapital and the
underwriters named therein shall have executed the Underwriting Agreement and
the underwriters named therein shall have agreed to acquire, subject to the
conditions set forth in the Underwriting Agreement, the shares of UniCapital
Stock covered by the Registration Statement. There shall have been no stop-order
issued (that remains in effect) by the Securities and Exchange Commission with
respect to the Registration Statement.
9.5 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND
NEWCO
The obligations of UniCapital and Newco hereunder are subject to the
satisfaction, on or prior to the Closing Date (or such earlier date specified
below), of the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
Stockholders shall have delivered to UniCapital a certificate dated the Merger
Effective Date and signed by them to the effect that all of the representations
and warranties of the Stockholders contained in this Agreement shall be true on
and as of the Closing Date and as of the Merger Effective Date with the same
effect as though such representations and warranties had been made on and as of
such dates, except for matters expressly disclosed in the certificate or a
schedule thereto (which shall not serve to modify any representation or warranty
made herein or in any other document or otherwise in information supplied by the
Company or any Stockholder); and each and all of the agreements of the
Stockholders and the Company to be performed on or before the Closing Date
pursuant to the terms hereof shall have been performed.
10.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by UniCapital of the Company Stock and no
governmental agency or body shall have taken any other action or made any
request of UniCapital as a result of which the management of UniCapital deems it
inadvisable to proceed with the transactions hereunder.
10.3 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the Closing Date,
UniCapital shall have had sufficient time to review the unaudited balance sheets
of the Company as of the end of the most recently completed calendar month, and
the unaudited statements of income,
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cash flows and stockholders' equity of the Company for the periods then ended,
which statements shall have disclosed no material adverse change in the
financial condition of the Company or the results of its respective operations
from the financial statements originally furnished by the Company as set forth
in Schedule 6.12.
10.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, operations, assets, properties, prospects or condition (financial or
otherwise) of the Company shall have occurred, and the Company shall not have
suffered any material loss or damage to any of its properties or assets, whether
or not covered by insurance, since the Balance Sheet Date, which change, loss or
damage materially affects or impairs the ability of the Company to conduct its
business as now conducted or as proposed to be conducted; and UniCapital shall
have received on the Closing Date a certificate signed by the Stockholders and
dated the Merger Effective Date to such effect.
10.5 REGULATORY REVIEW. UniCapital, through its authorized
representatives, shall have completed a satisfactory review of the practices and
procedures of the Company including, but not limited to, environmental and land
use practices, import and export laws, compliance with contracts and federal,
state and local laws and regulations governing the respective operations of
Companies, which review reflects compliance with all applicable laws governing
the Company, disclosing no material actual or probable violations, compliance
problems, required capital expenditures or other substantive environmental, real
estate and land use related concerns and which review is otherwise satisfactory
in all respects to UniCapital, in its sole discretion.
10.6 STOCKHOLDERS' RELEASE. At the Closing Date, the Stockholders shall
have delivered to UniCapital an instrument dated the Merger Effective Date
releasing the Company from any and all claims of the Stockholders against the
Company, except for claims for benefits accrued by the Stockholders pursuant to
any Benefit Plan.
10.7 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.2
shall have executed and delivered an Employment Agreement in the form of Annex
IV attached hereto.
10.8 OPINION OF COUNSEL. UniCapital shall have received an opinion from
Glast, Phillips & Murray, a professional corporation, counsel to the Company and
the Stockholders, dated the Merger Effective Date, in form and substance
satisfactory to UniCapital, to the effect that, with respect to the Company
(including, without limitation, the Company):
(a) the Company has been duly organized and is validly
existing and in good standing under the laws of the state of its incorporation;
(b) to the knowledge of such counsel, the Company is duly
authorized, qualified and licensed under all applicable laws, regulations,
ordinances or orders of public authorities to carry on its business in the
places and in the manner now conducted;
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(c) the authorized and outstanding capital stock of the
Company is as represented by the Stockholders in this Agreement and each share
of such stock has been duly and validly authorized and issued, is fully paid and
nonassessable and was not issued in violation of the preemptive rights of any
stockholder;
(d) the Company does not have any outstanding options,
warrants, calls, conversion rights or other commitments of any kind to issue or
sell any of its capital stock;
(e) this Agreement has been duly authorized, executed and
delivered by the Company and the Stockholders and constitutes a valid and
binding agreement of the Company and the Stockholders enforceable in accordance
with its terms, except as such enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement and other similar laws
relating to or affecting the rights of creditors and except (i) as the same may
be subject to the effect of general principles of equity and (ii) that no
opinion need be expressed as to the enforceability of indemnification provisions
included herein;
(f) upon consummation of the Merger contemplated by this
Agreement, UniCapital will receive good title to the Company Stock, free and
clear of all liens, security interests, pledges, charges, voting trusts,
equities, restrictions, encumbrances and claims of every kind;
(g) to the knowledge of such counsel, except to the extent set
forth on Schedule 6.23, the Company is not in violation of or default under any
law or regulation, or under any order of any court, commission, board, bureau,
agency or instrumentality wherever located and there are no claims, actions,
suits or proceedings pending, or threatened against or affecting the Company, at
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality
wherever located;
(h) to the knowledge of such counsel, except to the extent set
forth on Schedule 6.17, the Company is not in default under any of its material
contracts or agreements or has received notice of such default;
(i) no notice to, consent, authorization, approval or order of
any court or governmental agency or body or of any other third party is required
(which has not been obtained) in connection with the execution, delivery or
consummation of this Agreement by the Company or any Stockholders or for the
transfer to UniCapital of the Company Stock; and
(j) the execution of this Agreement and the performance of the
obligations hereunder will not violate or result in a breach or constitute a
default under any of the terms or provisions of the Company's charter documents
or the bylaws or any Contract or Lease listed on Schedules 6.17 and 6.35.
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Such opinion shall include any other matters incident to the matters set forth
herein as agreed to by the parties and their respective counsel.
10.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
10.10 GOOD STANDING CERTIFICATES. Stockholders shall have delivered to
UniCapital certificates, dated as of a date no earlier than five days prior to
the Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by UniCapital, in each state
in which the Company is authorized to do business, showing that the Company is
in good standing and authorized to do business and that all state franchise
and/or income tax returns and taxes for the Company for all periods prior to the
dates of such certificates have been filed and paid.
10.11 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC, and UniCapital and the representatives of
the underwriters named in the Registration Statement shall have executed the
Underwriting Agreement. There shall have been no stop-order issued (that remains
in effect) by the Securities and Exchange Commission with respect to the
Registration Statement.
10.12 REPAYMENT OF INDEBTEDNESS. Prior to the Closing Date, the
Stockholders shall have repaid to the Company in full all amounts owing by the
Stockholders to such entities.
10.13 NET INCOME. The Company shall have aggregate after tax net income
for the twelve months ended December 31, 1997 as is included in UniCapital's
unaudited pro forma combined (prior to the pro forma and offering adjustments)
income statement for the twelve months ended December 31, 1997 included in the
Registration Statement.
10.14 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
10.15 NASD CONSENT. The NASD shall have given its written consent to
the change of control of the Company pursuant to Rule 1018(f)(2) of the NASD
Conduct Rules.
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11. COVENANTS OF UNICAPITAL
11.1 LEASES. At the Merger Effective Date, the Surviving Corporation
shall enter into lease arrangements with each of the persons or entities listed
in Schedule 11.1 with respect to the corresponding properties or assets listed
on Schedule 11.1.
11.2 UNICAPITAL STOCK OPTIONS. Upon the effective date of the
Registration Statement (but subject in all events to the consummation of the
Merger), UniCapital shall make available options to purchase that number of
shares of UniCapital Stock having a fair market value on the effective date of
the Registration Statement, based upon the IPO Price per share set forth in the
Underwriting Agreement, equal to 6.25% of the Effective Date Consideration
(valuing the UniCapital Stock to be issued as part of the Effective Date
Consideration at the IPO price per share for the purposes of this Section 11.2)
to be granted to those non-Stockholder key employees of the Surviving
Corporation after the Closing as are designated by the principal executive
officer of the Surviving Corporation who is entering into an Employment
Agreement pursuant to Section 9.2 hereof (or such other officer designated by
the Surviving Corporation and acceptable to UniCapital). Not later than seven
days prior to the effective date of the Registration Statement, the officer
designating the recipients of such options shall provide to UniCapital a written
list of the names of those designated recipients who will receive options
exercisable at the IPO price and the relative percentages of the 6.25% option
pool provided under this Section 11.2 to be awarded to each recipient, as well
as the percentage of options, if any, to be reserved for future issuance. Any
options reserved for future issuance shall be granted at an exercise price equal
to the fair market value of UniCapital Stock as of the date of grant. All
options shall be granted in accordance with UniCapital's policies, and
authorized and issued under the terms of UniCapital's principal stock option
plan for the benefit of employees of UniCapital and its subsidiaries.
11.3 INFORMATION FILING. To the extent the Unified Transaction is a
transaction that falls within Section 351 of the Code, UniCapital shall file all
information required to be filed by it pursuant to Treasury Regulation
Section 1.351-3(b).
11.4 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, UniCapital shall use its reasonable best efforts to (a) file all
information required to be filed by it pursuant to such act and (b) provide the
Company with all information reasonably requested and required by it to satisfy
any filing requirements it may have under such act.
11.5 NOTIFICATION OF CERTAIN MATTERS. (a) UniCapital shall give prompt
notice to each Stockholder of (i) the occurrence or non-occurrence of any event
known to UniCapital the occurrence or non-occurrence of which would be likely to
cause any representation or warranty contained in Article 7 to be untrue or
inaccurate in any material respect at or prior to the Closing Date or the Merger
Effective Date and (ii) any material failure of UniCapital to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder.
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(b) The delivery of any notice pursuant to this Section 11.4
shall not be deemed to (i) modify the representations or warranties hereunder of
the party delivering such notice, (ii) modify the conditions set forth in
Sections 9 and 10 or (iii) limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
11.6 RELEASE FROM GUARANTEES; INDEBTEDNESS. Not later than 120 days
following the Merger Effective Date, UniCapital shall cause the Stockholders to
be released from any and all personal guarantees of the indebtedness of the
Company at the Closing Date set forth on Schedule 11.6; provided, that, in the
event that the beneficiary of any such guarantee is unwilling to permit the
substitution of UniCapital's guarantee for the Stockholder's guarantee or the
assumption by UniCapital of the indebtedness, or in the event that the lender
with respect to the indebtedness to which such guarantee relates accelerates
such indebtedness whether or not prior to such 120 day period because of the
consummation of the transactions contemplated hereby, UniCapital shall repay up
to that amount of recourse indebtedness set forth on Schedule 11.6. The failure
of the Company to obtain the consent of its lenders to the change of control of
the Company or the substitution of a UniCapital guaranty or the assumption by
UniCapital of the indebtedness set forth on Schedule 11.6 shall not be deemed a
breach hereunder.
12. INDEMNIFICATION; SURVIVAL
12.1 GENERAL INDEMNIFICATION BY STOCKHOLDERS. Subject to the
limitations contained in Section 12.5 hereof, each Stockholder, jointly and
severally, covenants and agrees that such Stockholder will indemnify, defend,
protect and hold harmless UniCapital, Newco and the Surviving Corporation and
their respective officers, stockholders, directors, divisions, subdivisions,
affiliates, subsidiaries, parents, agents, employees, successors and assigns at
all times from and after the date of this Agreement until the Expiration Date
(as defined in Section 12.6) from and against all claims, damages, losses,
liabilities, actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) (collectively, "Losses") incurred
by UniCapital, Newco or the Surviving Corporation as a result of or arising from
(a) any breach of the representations and warranties made by the Stockholders
set forth herein or on the schedules or certificates delivered in connection
herewith, (b) any nonfulfillment of any covenant or agreement on the part of the
Stockholders or the Company under this Agreement, (c) the business, operations
or assets of the Company prior to the Merger Effective Date or the actions or
omissions of the Company's directors, officers, stockholders, employees or
agents prior to the Merger Effective Date, other than Losses arising from
matters expressly disclosed in the Financial Statements, this Agreement or the
Schedules to this Agreement, or (d) any liability under the Securities Act, the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or other
federal or state law or regulation, at common law or otherwise, arising out of
or based upon (i) any untrue statement or alleged untrue statement of a material
fact relating to the Company or the Stockholders contained in any preliminary
prospectus, the Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement
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thereto (including any additional registration statement filed pursuant to Rule
462(b) under the Securities Act), which statement was provided or was based upon
information or documents provided to UniCapital or its counsel by the Company or
the Stockholders, or (ii) any omission or alleged omission to state therein a
material fact relating to the Company or the Stockholders required to be stated
therein or necessary to make the statements therein not misleading, which
information was not provided to UniCapital or its counsel by the Company or the
Stockholders; provided, however, that such indemnity shall not inure to the
benefit of UniCapital, Newco or the Surviving Corporation to the extent that
such untrue statement (or alleged untrue statement) was made in, or such
omission (or alleged omission) occurred in, any preliminary prospectus and the
Stockholders provided, in writing, corrected information to UniCapital for
inclusion in the final prospectus, and such information was not so included.
12.2 SPECIFIC INDEMNIFICATION BY STOCKHOLDERS. Subject to the
limitations contained in Section 12.5 hereof, notwithstanding any disclosure
made in this Agreement or in the schedules or exhibits hereto, and
notwithstanding any investigation by UniCapital or Newco, each Stockholder,
jointly and severally, covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless UniCapital, Newco and the Surviving
Corporation and their respective officers, stockholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parents, agents, employees, successors
and assigns at all times from and after the date of this Agreement, from and
against all Losses incurred by UniCapital, Newco or the Surviving Corporation as
a result of or incident to: (a) the existence of liabilities of the Company in
excess of the liabilities set forth on Schedule 6.13, to the extent of such
excess; (b) the failure of the Company or the Stockholders to file all required
Form 5500's prior to the Merger Effective Date; (c) the litigation matters
listed on Schedule 6.25; and (d) any Material Adverse Amendments pursuant to
Section 8.14 hereof.
12.3 INDEMNIFICATION BY UNICAPITAL AND NEWCO. Subject to the
limitations contained in Section 12.5 hereof, UniCapital and Newco, jointly and
severally, covenant and agree that they will indemnify, defend, protect and hold
harmless the Stockholders at all times from and after the date of this Agreement
from and against all Losses incurred by the Stockholders as a result of or
arising from (a) any breach of the representations and warranties made by
UniCapital and Newco set forth herein or on the schedules or certificates
attached hereto, (b) any nonfulfillment of any agreement on the part of
UniCapital under this Agreement, or (c) any liability under the Securities Act,
the Exchange Act or other federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating to UniCapital (including all of the
companies, other than the Company, acquired by UniCapital as part of the Unified
Transaction, but only to the extent that UniCapital is actually indemnified by
such other companies for such liability) contained in any preliminary
prospectus, the Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement thereto (including any registration
statement filed pursuant to Rule 462(b) under the Securities Act), or arising
out of or based upon any omission or alleged omission to state therein a
material fact relating to UniCapital (including all of the companies, other than
the Company, acquired by UniCapital as part of the Unified Transaction,
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but only to the extent that UniCapital is actually indemnified by such other
companies for such liability) required to be stated therein or necessary to make
the statements therein not misleading, which liability is not the subject of
indemnification of UniCapital, Newco and the Surviving Corporation pursuant to
Section 12.1(c) above.
12.4 THIRD-PARTY CLAIMS. (a) In order for a party hereto eligible to be
indemnified hereunder (an "Indemnified Party") to be entitled to any
indemnification provided for under this Agreement in respect of, arising out of
or involving a claim or demand made by any person or entity against the
Indemnified Party (a "Third-Party Claim"), such Indemnified Party must notify
the parties obligated to provide indemnification pursuant to Section 12.1, 12.2,
or 12.3 hereof (each, an "Indemnifying Party") in writing, and in reasonable
detail, of the Third-Party Claim within 30 business days after receipt by such
Indemnified Party of written notice of the Third-Party Claim; provided,
however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the Indemnifying Party
shall have been actually prejudiced as a result of such failure. Such notice
shall state the nature and the basis of such claim and a reasonable estimate of
the amount thereof. Thereafter, the Indemnified Party shall deliver to the
Indemnifying Party, within five business days after the Indemnified Party's
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnified Party relating to the Third-Party Claim. To the
extent the Indemnifying Party has actually paid any amount to the Indemnified
Party in respect of any Loss in connection with such Third-Party Claim, the
Indemnifying Party shall have a right of subrogation with respect to such
Third-Party Claim to the extent of such payment.
(b) The Indemnifying Party shall have right to defend and
settle, at its own expense and by its own counsel (provided that such counsel is
not reasonably objected to by the Indemnified Party), and provided further that
selection for these purposes of Glast, Phillips & Murray, a professional
corporation, absent any actual or reasonably likely conflict of interest with
respect to parties or defenses, shall not be objected to by UniCapital), any
Third-Party Claim as the Indemnifying Party pursues the same in good faith and
diligently and so long as the Third-Party Claim does not relate to an actual or
potential Loss to which Section 12.4(e) applies in which the Indemnified Party
is UniCapital, Newco or the Surviving Corporation. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified Party
of its intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. Notwithstanding the foregoing, the Indemnified Party
shall have the right to participate in any matter through counsel of its own
choosing at its own expense (unless there is a conflict of interest that
prevents counsel for the Indemnifying Party from representing the Indemnified
Party, in which case the Indemnifying Party will reimburse the Indemnified Party
for the expenses of its counsel). After the Indemnifying Party has notified the
Indemnified Party of its intention to undertake to defend or settle any such
asserted liability, and for so long as the Indemnifying Party diligently pursues
such defense, the Indemnifying Party shall not be liable
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for any additional legal expenses incurred by the Indemnified Party in
connection with any defense or settlement of such asserted liability, except to
the extent such participation is requested by the Indemnifying Party, in which
event the Indemnified Party shall be reimbursed by the Indemnifying Party for
reasonable additional legal expenses and out-of-pocket expenses, and except in
the case of a Third-Party Claim relating to an actual or potential Loss to which
Section 12.4(e) applies in which the Indemnified Party is UniCapital, Newco or
the Surviving Corporation.
(c) No Indemnifying Party shall, in the defense of any
Third-Party Claim, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) or enter into any settlement, except with
the written consent of the Indemnified Party, which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim or
matter.
(d) If the Indemnifying Party does not assume the defense of
any Third-Party Claim, then the Indemnified Party may defend against such
Third-Party Claim in such manner as it deems appropriate at the expense of the
Indemnifying Party.
(e) Notwithstanding anything to the contrary in this Article
12, if at any time, in the reasonable opinion of UniCapital, Newco or the
Surviving Corporation as the Indemnified Party (notice of which opinion shall be
given in writing to the Indemnifying Party), any Third- Party Claim seeks
material prospective relief which could have a material adverse effect on any
such Indemnified Party or any subsidiary, then such Indemnified Party shall have
the right to control or assume (as the case may be) the defense of any such
Third-Party Claim and the amount of any judgment or settlement and the
reasonable costs and expenses of defense (including, but not limited to, fees
and disbursements of counsel and experts, as well as any sampling, testing,
investigation, removal, treatment or remediation undertaken by UniCapital, Newco
or the Surviving Corporation and all counseling or engineering fees and expenses
related thereto) shall be included as part of the indemnification obligations of
the Indemnifying Party hereunder. If the Indemnified Party elects to exercise
such right, then the Indemnifying Party shall have the right to participate in,
but not control, the defense of such Third-Party Claim at the sole cost and
expense of the Indemnifying Party.
12.5 LIMITATIONS ON INDEMNIFICATION. (a) To the extent of any amount
that UniCapital actually receives as a result of a Net Worth Deficiency that is
directly attributable to an Indemnifiable Decrease, UniCapital shall not be
entitled to any indemnity under Article 12. An "Indemnifiable Decrease" shall be
equal to the amount of any Net Worth Deficiency that consists of a liability for
which UniCapital would otherwise be entitled to indemnity under Article 12 but
that has been (a) accrued or (b) actually paid (so long as it was not previously
accrued on or before December 31, 1997) during the Interim Net Worth Period. The
"Interim Net Worth Period" shall mean the period beginning on January 1, 1998
and ending on the Closing Date. No amounts under (a) or (b) that have not been
reflected on the Company's
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financial statements under generally accepted accounting principles applied
consistently with previous practice shall be deemed to be an Indemnifiable
Decrease.
(b) No Indemnified Party shall assert any claim (other than a
Third-Party Claim) for indemnification hereunder until such time as the
aggregate of all claims which such Indemnified Party may have against an
Indemnifying Party plus any Indemnifiable Decrease shall exceed $140,850 (the
"Basket Limitation") at which time an Indemnified Party shall be entitled to
seek indemnification for all claims pursuant to this Article 12, but only to the
extent such claims, in the aggregate, exceed $140,850. For purposes of the
preceding sentence, UniCapital, Newco and the Surviving Corporation shall be
considered to be a single Indemnifying and Indemnified Party and Stockholders
shall be considered to be a single Indemnifying and Indemnified Party.
Notwithstanding the foregoing, on each date on which any Earn-Out Consideration
is paid, the Basket Limitation shall be increased by that amount (the "Basket
Adjustment") equal to 1% of any such Earn-Out Consideration, without prejudice
to UniCapital's receipt of or right to received indemnification for claims
exceeding the amount of the Basket Limitation in effect at the time of such
claims were brought. If the Basket Limitation is adjusted pursuant to the
preceding sentence after such time as any Indemnified Party, pursuant to this
Article 12, has collected an amount in excess (such excess amount is referred to
as the "Excess Indemnity") of the Basket Limitation (prior to giving effect to
the applicable Basket Adjustment), then such Indemnified Party, within 10
business days after the final determination of such Earn-Out Consideration,
shall pay to the Indemnifying Party an amount equal to the lesser of applicable
Basket Adjustment or the Excess Indemnity. In addition, notwithstanding any
provision of this Agreement to the contrary, for the purposes of preventing a
double recovery the Stockholders shall not be obligated to indemnify UniCapital
or any other indemnified party pursuant to Section 12.1 or 12.2 with respect to
any particular act, omission, condition or event if and to the extent that the
loss resulting or arising from such act, omission, condition or event has,
directly or indirectly, been taken into account in the computation of any Net
Worth Deficiency provided for in Section 3.1. Notwithstanding any other term of
this Agreement, in no event shall any Stockholder be liable under this Article
12 for an amount which exceeds the aggregate value (determined at the Merger
Effective Date) of the Merger Consideration received by such Stockholder under
this Agreement. Notwithstanding anything to the contrary contained in this
Agreement, the limitations upon indemnification contained in this Section 12.5
shall not apply to Losses arising out of any of the following: (i) any breach of
the representations and warranties of the Stockholders contained in Sections
6.3, 6.5, 6.14, 6.27 and 6.33 hereof; (ii) litigation net of applicable reserves
reflected on balance sheets of the Company at the Balance Sheet Date; or (iii)
any Material Adverse Amendment pursuant to Section 8.14 hereof.
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The parties agree that
representations and warranties made by the parties in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive for a period of one year from the Merger Effective Date (which date is
hereinafter called the "Expiration Date"), except that:
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(a) the representations and warranties contained in Section
6.27 hereof shall survive until such time as the limitations period has run for
all tax periods ended prior to the Merger Effective Date, which shall be deemed
to be the Expiration Date for purposes of this clause (a) and claims arising
from a breach of the representations and warranties contained in such Section
6.27;
(b) the representations and warranties contained in Section
6.28(g) hereof shall survive until such time as one full fiscal year's cycle of
transactions occurring entirely within the twenty-first century shall have been
processed and UniCapital's consolidated financial statements for the fiscal year
in which the last such transaction to be processed occurred have been audited,
which shall be deemed to be the Expiration Date for purposes of this clause (b)
and claims arising from a breach of the representations and warranties contained
in such Section 6.28(g);
(c) the representations and warranties contained in Section
6.33 hereof shall survive for a period of five years from the Merger Effective
Date, which shall be deemed the Expiration Date for purposes of this clause (c)
and claims arising from a breach of the representations and warranties contained
in such Section 6.33;
(d) solely for purposes of Section 12.1(d) hereof, and solely
to the extent that UniCapital actually incurs liability under the Securities
Act, the Exchange Act, or any other federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for purposes of this clause (d) and claims arising under such
laws;
(e) the representations and warranties of the Stockholders
contained in Section 6.5 hereof shall survive the Merger Effective Date without
time limitation; and
(f) any representations and warranties which serve as a basis
of the indemnity obligations of the Stockholders under Section 12.2 shall
survive the Merger Effective Date without time limitation.
13. TERMINATION OF AGREEMENT
13.1 TERMINATION BY UNICAPITAL. UniCapital may, by notice in the manner
hereinafter provided on or before the Closing Date, terminate this Agreement (a)
if a material default shall be made by the Stockholders in the observance or due
and timely performance of any of the covenants, agreements or conditions
contained herein, and the curing of such default shall not have been made on or
before the Closing Date and shall not reasonably be expected to occur, (b) if
UniCapital in its sole judgment determines that any condition exists which has
made or could reasonably be expected to make any of the representations or
warranties contained in Article 6 hereof untrue in any material respect, or (c)
if UniCapital in its sole judgment determines that information disclosed on the
schedules to the Agreement delivered pursuant to
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Section 8.14 has or could reasonably be expected to have a material adverse
effect on the business, operations, assets, properties, prospects or condition
(financial or otherwise) of the Company.
13.2 TERMINATION BY THE STOCKHOLDERS. Prior to the initial filing of
the Registration Statement with the SEC, the Stockholders may, by notice in the
manner hereinafter provided on or before such initial filing, terminate this
Agreement (a) in accordance with Section 17.4(b) or (b) if a material default
shall be made by UniCapital in the observance or due and timely performance of
any of the covenants, agreements or conditions contained herein, and the curing
of such default shall not have been made on or before such initial filing. From
and after the initial filing of the Registration Statement with the SEC, the
Stockholders shall have no right to terminate this Agreement.
13.3 AUTOMATIC TERMINATION. This Agreement shall terminate
automatically:
(a) if the Registration Statement has not been declared
effective by June 30, 1998;
(b) if, between the Closing Date and the Merger Effective
Date, the Underwriting Agreement is terminated pursuant to the terms thereof; or
(c) if the Merger Effective Date has not occurred within 10
business days after the Closing Date.
(d) upon the date that the number of shares of UniCapital
Stock to be issued (other than as Earn-Out Consideration) to the persons who
will transfer property to UniCapital in the Unified Transaction can be
determined as a fixed number of shares, unless those same persons shall own
immediately after the Unified Transaction eighty percent (80%) or more of the
UniCapital Stock that will be issued and outstanding immediately after the
Unified Transaction.
13.4 LIQUIDATED DAMAGES. If the Merger fails to occur because of the
default of the Company or the Stockholders, then, in addition to the other
remedies available to UniCapital at law for fraud, in equity or pursuant to this
Agreement, the Stockholders shall pay to UniCapital the sum of $500,000 as
liquidated damages. It is hereby agreed that UniCapital's damages in the event
of a termination or default by Company hereunder are uncertain and impossible to
ascertain and that the foregoing constitutes a reasonable liquidation of such
damages and is intended not as penalty but as liquidated damages.
14. NONCOMPETITION AND NONSOLICITATION
14.1 NONCOMPETITION. (a) In order to protect the value and goodwill of
the Company and their respective businesses, each Stockholder covenants that,
for the period ending two years after the Closing Date, such Stockholder will
not, directly or indirectly, own, manage, operate,
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join, control, finance or participate in the ownership, management, operation,
control or financing of, or be connected as a partner, principal, agent,
representative, consultant or otherwise with, or use or permit such
Stockholder's name to be used in connection with, any business or enterprise
which is engaged directly or indirectly in competition anywhere in the United
States with the business conducted by UniCapital, the Surviving Corporation or
any of its or their respective subsidiaries or affiliates or with any business
engaged in originating, servicing or securitizing leases or other specialty
financing products or services (the "Restricted Business"). Each Stockholder
recognizes that the Restricted Business is expected to be conducted throughout
the United States and that more narrow geographical limitations of any nature on
this non-competition covenant (and the non-solicitation covenant set forth in
subsection (b)) are therefore not appropriate. The foregoing restriction shall
not be construed to prohibit the ownership by a Stockholder as a passive
investment of not more than five percent of any class of securities of any
corporation which is engaged in any of the foregoing businesses having a class
of securities registered pursuant to Section 12 of the Exchange Act.
(b) Each Stockholder further covenants that for the period
ending two years after the Closing Date, such Stockholder will not, either
directly or indirectly, (i) call on or solicit any customers or prospective
customers of the Restricted Business, or (ii) solicit the employment of any
person who is employed by UniCapital, the Surviving Corporation or any of its or
their respective subsidiaries or affiliates in the Restricted Business during
such period.
(c) Each Stockholder recognizes and acknowledges that by
reason of such Stockholder's relationship to the Company, such Stockholder has
had access to confidential information relating to the Restricted Business. Each
Stockholder acknowledges that such confidential information is a valuable and
unique asset and covenants that such Stockholder will not disclose any such
confidential information after the Closing Date to any person for any reason
whatsoever.
14.2 DAMAGES. Each Stockholder acknowledges and agrees that measuring
economic losses to UniCapital and the Surviving Corporation as a result of the
breach of the foregoing covenants in this Article 14 would be impossible, and
that any breach of the foregoing covenants would result in immediate and
irreparable damage to UniCapital and the Surviving Corporation for which they
would have no other adequate remedy. Accordingly, the Stockholders agree that,
in the event of a breach by them of any of the foregoing covenants, such
covenants may be enforced by UniCapital or the Surviving Corporation by, without
limitation, injunctions and restraining orders.
14.3 REASONABLE RESTRAINT. The Parties agree that the foregoing
covenants in this Article 14 impose a reasonable restraint upon the Stockholders
in light of the activities and business of UniCapital on the date of the
execution of this Agreement and the current and future plans of UniCapital and
the Surviving Corporation (as successors to the businesses of the Company), and
that any violation will result in irreparable injury to UniCapital.
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14.4 SEVERABILITY; REFORMATION. The covenants in this Article 14 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, if any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
14.5 INDEPENDENT COVENANT. All of the covenants in this Article 14
shall be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of any Stockholder
against the Company, the Surviving Corporation or UniCapital, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement of such covenants. The parties specifically agree that the period of
two years stated above shall be computed by excluding from such computation any
time during which any Stockholder is in violation of any provision of this
Article 14 and any time during which there is pending in any court of competent
jurisdiction any action (including any appeal from any judgment) brought by any
person, whether or not a party to this Agreement, in which action UniCapital or
the Surviving Corporation seek to enforce the agreements and covenants of the
Stockholders or in which any person contests the validity of such agreements and
covenants or their enforceability or seeks to avoid their performance or
enforcement.
14.6 MATERIALITY. The Stockholders hereby acknowledge and agree that
the covenants contained in this Article 14 are a material and substantial part
of this transaction and are entered into in connection with and as an inducement
to the acquisition by UniCapital and Newco of the businesses of the Company.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that they
have in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Company and the Company' respective businesses. The
Stockholders agree that they will not disclose any confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except to authorized representatives of UniCapital, or as may
be required by law or order of a court of competent jurisdiction unless the
Stockholders can show that such information has become known to the public
generally through no fault of the Stockholders. Prior to disclosing any
confidential information required by law or order of a court of competent
jurisdiction, the Stockholders shall provide UniCapital with prompt notice of
the disclosure requirement so that UniCapital may take whatever action it deems
appropriate to prohibit such disclosure. In the event of a breach or threatened
breach by the Stockholders of the provisions of this Section 15.1, UniCapital
and the Surviving Corporation shall be entitled to an injunction restraining
Stockholders from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting UniCapital and the
Surviving Corporation from
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pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages.
15.2 UNICAPITAL. UniCapital recognizes and acknowledges that it has in
the past, currently has, and prior to the Closing Date will have, access to
certain confidential information solely of the Company in connection with their
respective businesses. UniCapital agrees that, prior to the Closing Date, it
will not disclose any such confidential information to any person, firm,
corporation, association, or other entity for any purpose or reason whatsoever
without prior written consent of the Stockholders, except as may be required by
law or order of a court of competent jurisdiction, unless UniCapital can show
that such information has become known to the public generally through no fault
of the UniCapital. Prior to disclosing any confidential information required by
law or order of a court of competent jurisdiction, UniCapital shall provide
Stockholders with prompt notice of the disclosure requirement so that
Stockholders may take whatever action it deems appropriate to prohibit such
disclosure.. In the event of a breach or threatened breach by UniCapital of the
provisions of this Section 15.2, the Stockholders shall be entitled to an
injunction restraining UniCapital from disclosing, in whole or in part, such
confidential information. Nothing contained herein shall be construed as
prohibiting the Stockholders from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages.
15.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, UniCapital, the Surviving Corporation and the Stockholders
agree that, in the event of a breach by any of them of the foregoing covenant,
the covenant may be enforced against them by injunctions and restraining orders.
16. LOCK-UP AGREEMENTS
16.1 AGREEMENT. In connection with the IPO, for good and valuable
consideration, and to induce the underwriters that may participate in the IPO to
continue their efforts in connection with the IPO, each Stockholder hereby
agrees that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of such underwriters, it will not, during the period
commencing on the date of this Agreement and ending 180 days after the date of
the final prospectus contained in the Registration Statement relating to the IPO
(the "Prospectus"), (a) offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of UniCapital Stock or any securities
convertible into or exercisable or exchangeable for UniCapital Stock or (b)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of UniCapital Stock,
whether any such transaction described in clause (a) or (b) above is to be
settled by delivery of UniCapital Stock or such other securities, in cash or
otherwise. In addition, each Stockholder agrees that, without the prior written
consent of Morgan Stanley &
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Co. Incorporated on behalf of the underwriters that may participate in the IPO,
it will not, during the period commencing on the date of this Agreement and
ending 180 days after the date of the Prospectus, make any demand for or
exercise any right with respect to, the registration of any shares of UniCapital
Stock or any security convertible into or exercisable or exchangeable for Common
Stock.
16.2 INTENDED THIRD-PARTY BENEFICIARIES. Each Stockholder agrees that
the foregoing shall be binding upon their transferees, successors, assigns,
heirs, and personal representatives and shall benefit and be enforceable by the
underwriters in the IPO. Each Stockholder acknowledges and agrees that such
underwriters and Morgan Stanley & Co. Incorporated are intended third-party
beneficiaries of the provisions of this Article 16, and that Morgan Stanley &
Co. Incorporated on behalf of such underwriters shall be entitled to enforce the
covenants contained in this Article 16. In furtherance of the foregoing,
UniCapital and its transfer agent are hereby authorized to decline to make any
transfer of securities if such transfer would constitute a violation or breach
of this Article 16. The Stockholders acknowledge and agree that none of the
companies to be acquired as part of the Unified Transaction shall have any
rights as intended third-party beneficiaries under this Agreement.
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK
17.1 INVESTMENT INTENT. The Stockholders acknowledge and agree that the
shares of UniCapital Stock to be delivered to the Stockholders pursuant to this
Agreement have not been and will not be registered under the Securities Act and
therefore may not be resold without compliance with the Securities Act. The
Stockholders represent and warrant that the shares of UniCapital Stock to be
acquired by the Stockholders pursuant to this Agreement are being acquired
solely for their own account, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution.
17.2 COMPLIANCE WITH LAW. The Stockholders covenant, warrant and
represent that none of the shares of UniCapital Stock issued to such
Stockholders will be offered, sold, assigned, pledged, hypothecated, transferred
or otherwise disposed of except after full compliance with all of the applicable
provisions of the Securities Act and the rules and regulations of the SEC
thereunder, and except after full compliance with any applicable state
securities laws.
17.3 ECONOMIC RISK; SOPHISTICATION. The Stockholders represent and
warrant that they are able to bear the economic risk of an investment in
UniCapital Stock acquired pursuant to this Agreement and can afford to sustain a
total loss of such investment. The Stockholders further represent and warrant
that they (a) fully understand the nature, scope and duration of the limitations
on transfer contained in this Agreement and (b) have such knowledge and
experience in financial and business matters that they are capable of evaluating
the merits and risks of the
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proposed investment and therefore have the capacity to protect their own
interests in connection with the acquisition of the UniCapital Stock.
17.4 INFORMATION SUPPLIED. (a) The Stockholders represent and warrant
that they have had an adequate opportunity to ask questions and receive answers
from the officers of UniCapital concerning UniCapital, its business, operations,
plans and strategy, and the background and experience of its officers and
directors. The Stockholders represent and warrant that they have asked any and
all questions that they may have in the nature described in the preceding
sentence and that all such questions have been answered to their satisfaction.
(b) Each Stockholder represents and warrants that such
Stockholder has received the draft Registration Statement (without exhibits),
including the draft preliminary prospectus that forms a part thereof, delivered
to such Stockholder on or about February 14, 1998 that describes, among other
things, UniCapital, the Merger, the other acquisitions proposed to be undertaken
by UniCapital simultaneously with the Merger and the target companies of such
other acquisitions. Each Stockholder represents and warrants that such
Stockholder has reviewed such draft Registration Statement (without exhibits)
and draft preliminary prospectus and has had adequate opportunity to ask
questions of and receive answers to such Stockholder's satisfaction from the
officers of UniCapital concerning the matters described therein.
18. SECURITIES LEGENDS
The certificates evidencing the UniCapital Stock to be received by the
Stockholders hereunder will bear a legend substantially in the form set forth
below and containing such other information as UniCapital may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES OR BLUE SKY LAWS.
SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
SECURITIES ACT AND ANY STATE SECURITIES OR BLUE SKY LAWS,
UNLESS, IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION) OF COUNSEL SATISFACTORY TO
THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
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In addition, such certificates shall also bear (a) a legend reflecting the
restrictions contained in Article 16 and (b) such other legends as counsel for
UniCapital reasonably determines are required under the applicable laws of any
state.
19. GENERAL
19.1 COOPERATION. The Stockholders and UniCapital shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement. The
Stockholders will cooperate and use their best efforts to have the officers,
directors and employees of Company prior to the Closing Date cooperate with
UniCapital on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the Company,
the successors of UniCapital, and the heirs and legal representatives of the
Stockholders.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company, UniCapital and Newco and supersedes any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the Stockholders (subject to the limitations
set forth below), the Company, UniCapital and Newco acting through their
respective officers, duly authorized by their respective Boards of Directors;
provided that no Stockholder shall have any power or authority to modify or
amend this Agreement in any respect from and after the initial filing of the
Registration Statement with the SEC.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
19.5 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with the transactions contemplated
hereby, and each of UniCapital and Newco, on the one hand, and the Stockholders,
on the other hand, agrees to indemnify the other against all loss, liability,
cost damages or expense arising out of or related to claims for fees or
commissions of brokers employed or alleged to have been employed by such
indemnifying party.
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19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consum mated, UniCapital will pay the fees, expenses and disbursements
of UniCapital and Newco and their respective agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto. Whether or not the transactions herein
contemplated shall be consummated, the Stockholders will pay the fees, expenses
and disbursements of the Stockholders and the Company and their respective
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments hereto and all other costs
and expenses incurred in the performance of this Agreement by the Stockholders
and the Company and in compliance with all conditions to be performed by the
Stockholders and the Company under this Agreement.
19.7 NOTICES. All notices and other communications hereunder shall be
in writing (including wire, telefax or similar writing) and shall be sent,
delivered or mailed, addressed, or telefaxed:
(a) If to UniCapital or Newco, addressed to them at:
UniCapital Corporation
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Telephone: (305) 861-0603
Telefax: (305) 866-8449
with a copy to:
David A. Gerson
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
301 Grant Street
Pittsburgh, PA 15219
Telephone: (412) 560-3330
Telefax: (412) 560-3399
(b) If to the Stockholders, addressed to them in care of
the Stockholders' Representative at:
Fred R. Cornwall
Municipal Capital Market Group, Inc.
5429 LBJ Freeway, Suite 650
Dallas, TX 75240
54
<PAGE> 61
with a copy to:
John J. Stasney, Esquire
Glast, Phillips & Murray
2200 One Galleria Tower
13355 Noel Road
Dallas, TX 75240
Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telefax, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 19.7 (or in accordance with the latest
unrevoked written direction from such party) and (ii) if given by telefax, when
such telefax is transmitted to the telefax number specified in this Section 19.7
(or in accordance with the latest unrevoked written direction from such party),
and the appropriate confirmation is received.
19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York, without giving effect to any of the
provisions thereof that would require the application of the substantive laws of
any other jurisdiction. Each party to this Agreement: (a) agrees that any legal
action or proceeding under this Agreement shall be brought in the courts of the
State of New York or in the United States District Court for the Southern
District of New York; (b) irrevocably submits to the jurisdiction of such
courts; (c) agrees not to assert any claim or defense that it is not personally
subject to the jurisdiction of such courts, that any such forum is not
convenient or the venue thereof is improper, or that this Agreement or the
subject matter hereof may not be enforced in such courts; and (d) agrees to
accept service of process on it by certified or registered mail or by any other
method authorized by law.
19.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.10 TIME. Time is of the essence with respect to this Agreement.
19.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
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19.12 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
20. DEFINITIONS
20.1 "Accounts Receivable" is defined in Section 6.14.
20.2 "Acquisition Proposal" is defined in Section 8.10.
20.3 "Adjusted EBT" is defined in Section 2.5(a).
20.4 "Agent" is defined in Section 8.10.
20.5 "Agreement" is defined in the preamble to this Agreement.
20.6 "Articles of Merger" is defined in Section 1.1.
20.7 "Authorizations" are defined in Section 6.23.
20.8 "Balance Sheet Date" is defined in Section 6.12(b).
20.9 "Basket Adjustment" is defined in Section 12.5(b).
20.10 "Basket Limitation" is defined in Section 12.5(b).
20.11 "Benefit Plan" is defined in Section 6.22.
20.12 "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq.
20.13 "Certificates" are defined in Section 2.2.
20.14 "Closing" is defined in Section 5.1(b).
20.15 "Closing Date" is defined in Section 5.2.
20.16 "Closing Date Balance Sheets" are defined in Section 3.1.
56
<PAGE> 63
20.17 "Code" is defined in the recitals to this Agreement.
20.18 "Commonly Controlled Entity" is defined in Section 6.22.
20.19 "Company" is defined in the preamble to this Agreement.
20.20 "Company Documents" are defined in Section 6.2.
20.21 "Company EBT" is defined in Section 2.5(b).
20.22 "Company Stock" is defined in Section 2.1(a).
20.23 "Constituent Corporations" are defined in the recitals to this
Agreement.
20.24 "Contracts" are defined in Section 6.17.
20.25 "Disputed Amounts" are defined in Section 3.2.
20.26 "Earn-Out Consideration" is defined in Section 2.5(c).
20.27 "Earn-Out Escrow Cash" is defined in Section 4.1(b).
20.28 "Earn-Out Escrow Shares" are defined in Section 4.1(b).
20.29 "EBT" is defined in Section 2.5(a).
20.30 "Effective Date Consideration" is defined in Section 2.1(a).
20.31 "Environmental Laws" mean any and all applicable treaties, laws,
regulations, ordinances, enforceable requirements, binding determinations,
orders, decrees, judgments, injunctions, permits, approvals, authorizations,
licenses or binding agreements issued, promulgated or entered into by any
Governmental Entity, relating to the environment, preservation or reclamation of
natural resources, or to the management, Release or threatened Release of or
exposure to Hazardous Substances, including CERCLA, the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.,
the Emergency Planning and Community Right-to- Know Act of 1986, 42 U.S.C.
Section 11001 et. seq., the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq., and any similar or implementing state or local law and all amendments or
regulations promulgated thereunder.
57
<PAGE> 64
20.32 "Environmental Liabilities" mean any and all Losses arising from
or related to any claim, proceeding, investigation, response or removal action,
remediation or other clean-up brought, prosecuted or undertaken by UniCapital,
Newco, the Surviving Corporation, any Governmental Entity or any other person or
entity on the basis of any violation of any Environmental Laws or pursuant to
any requirement imposed under any Environmental Laws (including any sampling,
testing, investigation, removal, treatment or remediation undertaken by
UniCapital, Newco or the Surviving Corporation so as to avoid any claim or
violation or to comply with any requirement and all counseling or engineering
fees and expenses related thereto), and arising from pre-Closing operations,
events, circumstances or conditions at, on, under or emanating from, or as a
result of any pre-Closing off-site disposal of Hazardous Substances from, any
property currently or formerly owned, operated or leased by the Company.
20.33 "Environmental Permits" mean all permits, licenses, approvals or
authorizations from any Governmental Entity required under Environmental Laws
for the operation of the business of the Company.
20.34 "Equipment" is defined in Section 6.35.
20.35 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
20.36 "Escrow Cash" is defined in Section 4.1(c).
20.37 "Escrow Property" is defined in Section 4.1(c).
20.38 "Escrow Shares" are defined in Section 4.1(c).
20.39 "Exchange Act" is defined in Section 12.1.
20.40 "Expiration Date" is defined in Section 12.6.
20.41 "Financial Statements" are defined in Section 6.12.
20.42 "Foreign Plans" are defined in Section 6.22(i)(xiii).
20.43 "GAAP" is defined in Section 3.1.
20.44 "Governmental Entity" means any court, administrative or
regulatory agency or commission, or other governmental authority or
instrumentality, domestic, foreign or supranational including, but not limited
to the National Association of Securities Dealers and the Municipal Securities
Rulemaking Board.
58
<PAGE> 65
20.45 "Hazardous Substances" mean all explosive or regulated
radioactive materials or substances, hazardous or toxic materials, wastes or
chemicals, petroleum and petroleum products (including crude oil or any fraction
thereof), asbestos or asbestos containing materials, and all other materials or
chemicals regulated pursuant to any Environmental Law, including materials
listed in 49 C.F.R. Section 172.101 and materials defined as hazardous pursuant
to Section 101(14) of CERCLA.
20.46 "Indemnifiable Decrease" is defined in Section 12.5(a).
20.47 "Indemnified Party" is defined in Section 12.4(a).
20.48 "Indemnifying Party" is defined in Section 12.4(a).
20.49 "Indemnity Escrow Agent" is defined in Section 4.1(a).
20.50 "Independent Accounting Firm" is defined in Section 3.2.
20.51 "Intellectual Property" is defined in Section 6.28(a).
20.52 "Interim Net Worth Period" is defined in Section 12.5(a).
20.53 "IPO" is defined in the recitals to this Agreement.
20.54 "IPO Price" means the per share price that the Company Stock is
sold to the Underwriters in the IPO prior to the deduction of any discounts or
expenses.
20.55 "Lease Documents" are defined in Section 6.35.
20.56 "Leases" are defined in Section 6.35.
20.57 "Liabilities" are defined in Section 6.13(a).
20.58 "Losses" are defined in Section 12.1.
20.59 "Material Adverse Amendment" is defined in Section 8.14.
20.60 "Merger" is defined in the recitals to this Agreement.
20.61 "Merger Consideration" is defined in Section 2.1(c).
20.62 "Merger Effective Date" is defined in Section 5.3.
20.63 "Net Worth Deficiency" is defined in Section 3.1.
59
<PAGE> 66
20.64 "Newco" is defined in the preamble to this Agreement.
20.65 "1999 EBT" is defined in Section 2.5(b).
20.66 "Obligor" is defined in Section 6.35.
20.67 "Ordinary course" or "ordinary course of business" means the
conduct of business as conducted by the Company prior to the date of this
Agreement consistent in nature and, where relevant, amount with past practices.
20.68 "PCBs" are defined in Section 6.33(h).
20.69 "Pension Plan" is defined in Section 6.22.
20.70 "Permits" mean all permits, licenses, franchises, approvals and
authorizations from any Governmental Entity that are owned or held by any
Company, or held by any Stockholder that relate to the operations of any
Company.
20.71 "Prospectus" is defined in Section 16.1.
20.72 "Registration Statement" is defined in Section 9.4.
20.73 "Regulations" are defined in Section 6.23.
20.74 "Release" means any spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, emanation or migration of any
Hazardous Substance in, into, onto or through the environment (including ambient
air, surface water, ground water, soils, land surface, subsurface strata,
workplace or structure).
20.75 "Restricted Business" is defined in Section 14.1(a).
20.76 "SEC" is defined in Section 9.4.
20.77 "Securities Act" is defined in Section 6.16.
20.78 "Stockholders" are defined in the preamble to this Agreement.
20.79 "Stockholders' Representative" is defined in Section 3.3.
20.80 "Subsidiary" is defined in Section 6.8.
20.81 "Surviving Corporation" is defined in Section 1.2.
60
<PAGE> 67
20.82 "Tax Returns" are defined in Section 6.27.
20.83 "Taxes" are defined in Section 6.27.
20.84 "Third-Party Claim" is defined in Section 12.4(a).
20.85 "Unaudited Financial Statements" are defined in Section 6.12(b).
20.86 "Underwriting Agreement" is defined in Section 5.1(a).
20.87 "UniCapital" is defined in the preamble to this Agreement.
20.88 "UniCapital Documents" are defined in Section 7.3.
20.89 "UniCapital Stock" is defined in Section 2.1(a).
20.90 "Unified Transaction" is defined in the recitals to this
Agreement.
20.91 "Welfare Plan" is defined in Section 6.22.
61
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNICAPITAL CORPORATION
By:/s/ ROBERT NEW
--------------
Name: Robert New
Title: President
MCMG ACQUISITION CORP.
By:/s/ ROBERT NEW
--------------
Name: Robert New
Title: President
MUNICIPAL CAPITAL MARKETS GROUP, INC.
By:/s/ FRED R.CORNWALL
-------------------
Name: Fred R. Cornwall
Title: President
/s/ FRED R.CORNWALL
-------------------
FRED R. CORNWALL
/s/ JAMES E.CRAFT
-----------------
JAMES E. CRAFT
/s/ MICHAEL W. HARLING
----------------------
MICHAEL W. HARLING
62
<PAGE> 69
ANNEXES
ANNEX I [Form of Certificate of Merger]
ANNEX II [Calculation and Composition of Consideration]
ANNEX III [Form of Indemnity Escrow Agreement]
ANNEX IV [Form of Employment Agreement]
ANNEX V [Form of Stockholder Release]
SCHEDULES
SCHEDULE 2.5 [Add-Backs]
SCHEDULE 6.1 [Jurisdictions in which Company and Subsidiaries Are
Qualified to do Business]
SCHEDULE 6.5 [Issued and Outstanding Stock of the Company and
Subsidiaries]
SCHEDULE 6.8 [Subsidiaries]
SCHEDULE 6.9 [Predecessor Companies]
SCHEDULE 6.12 [Company Financial Statements]
SCHEDULE 6.13 [Liabilities and Obligations]
SCHEDULE 6.14 [Accounts and Notes Receivable Aging]
SCHEDULE 6.15 [Permits]
SCHEDULE 6.16 [Real and Personal Property]
SCHEDULE 6.17 [Contracts and Commitments]
SCHEDULE 6.20 [Insurance Policies and Surety Arrangements]
SCHEDULE 6.21 [Employee Information]
SCHEDULE 6.22 [Employee Benefit Plans]
SCHEDULE 6.23 [Authorizations]
SCHEDULE 6.24 [Transactions with Affiliates]
SCHEDULE 6.25 [Litigation]
SCHEDULE 6.28 [Intellectual Property]
SCHEDULE 6.28(d) [Confidentiality or Non-Disclosure Agreements]
SCHEDULE 6.28(e) [Registered Intellectual Property]
SCHEDULE 6.29 [Notice and Consents]
SCHEDULE 6.30 [Absence of Changes]
SCHEDULE 6.31 [Deposit Accounts; Powers of Attorney]
SCHEDULE 7.8 [UniCapital and Newco Litigation]
SCHEDULE 7.10 [UniCapital and Newco Agreements]
SCHEDULE 9.2 [Employment Agreements]
SCHEDULE 11.1 [Leases]
SCHEDULE 11.6 [Personal Guarantees of the Indebtedness of the
Company]
The registrant agrees to furnish a copy of each omitted schedule, exhibit or
annex to this Exhibit 2.08 to the Commission supplementally upon request
therefor.
<PAGE> 1
Exhibit 2.09
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
UNICAPITAL CORPORATION,
(a Delaware corporation),
NSJ ACQUISITION CORP.
(a Delaware corporation),
and
W. Jeptha Thornton, Richard C. Giles, Samuel J. Thornton,
The 1998 Giles Family Trust and The 1998 Thornton Family Trust.
Dated as of February 14, 1998.
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
Table Of Contents
-----------------
Page
----
<S> <C> <C> <C>
1. THE MERGER...............................................................................................2
1.1 DELIVERY AND FILING OF CERTIFICATE OF MERGER....................................................2
1.2 MERGER EFFECTIVE DATE...........................................................................2
1.3 CERTIFICATE OF INCORPORATION, BYLAWS, BOARD OF DIRECTORS AND OFFICERS OF THE
SURVIVING CORPORATION...........................................................................2
2. MERGER CONSIDERATION.....................................................................................3
2.1 CONVERSION OF CAPITAL STOCK; MERGER CONSIDERATION...............................................3
2.2 EXCHANGE PROCEDURES.............................................................................3
2.3 NO FRACTIONAL SHARES............................................................................4
3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS' REPRESENTATIVE
7
3.1 COMPUTATION.....................................................................................7
3.2 DISPUTES........................................................................................8
3.3 STOCKHOLDERS' REPRESENTATIVE....................................................................8
4. INDEMNITY ESCROW.........................................................................................9
4.1 CREATION OF ESCROW..............................................................................9
4.2 DURATION AND TERMS.............................................................................10
4.3 VOTING AND INVESTMENT..........................................................................10
5. CLOSING; MERGER EFFECTIVE DATE..........................................................................10
5.1 CLOSING........................................................................................10
5.2 CLOSING DATE; LOCATION.........................................................................10
5.3 EFFECTIVENESS OF MERGER........................................................................10
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS..........................................................11
6.1 CORPORATE EXISTENCE............................................................................11
6.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS........................................11
6.3 AUTHORITY; VALIDITY OF CONTEMPLATED TRANSACTIONS...............................................11
6.4 CAPITAL STOCK AND OWNERSHIP AS OF THE DATE OF THIS AGREEMENT...................................12
6.5 CAPITAL STOCK AND OWNERSHIP AS OF THE EFFECTIVE TIME...........................................12
6.6 TRANSACTIONS IN CAPITAL STOCK..................................................................12
6.7 NO BONUS SHARES................................................................................13
6.8 SUBSIDIARIES...................................................................................13
6.9 PREDECESSOR STATUS; ETC........................................................................13
6.10 SPIN-OFFS BY COMPANIES.........................................................................13
6.11 NO THIRD PARTY OPTIONS.........................................................................13
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C> <C>
6.12 FINANCIAL STATEMENTS...........................................................................13
6.13 LIABILITIES AND OBLIGATIONS....................................................................14
6.14 ACCOUNTS AND NOTES RECEIVABLE..................................................................15
6.15 PERMITS........................................................................................15
6.16 REAL AND PERSONAL PROPERTY.....................................................................15
6.17 CONTRACTS AND COMMITMENTS......................................................................16
6.18 GOVERNMENT CONTRACTS...........................................................................18
6.19 REAL PROPERTY..................................................................................18
6.20 INSURANCE......................................................................................18
6.21 EMPLOYEES......................................................................................18
6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS........................................................19
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS............................................................23
6.24 TRANSACTIONS WITH AFFILIATES...................................................................23
6.25 LITIGATION.....................................................................................23
6.26 RESTRICTIONS...................................................................................24
6.27 TAXES..........................................................................................24
6.28 INTELLECTUAL PROPERTY MATTERS..................................................................25
6.29 COMPLETENESS...................................................................................26
6.30 EXISTING CONDITION.............................................................................27
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY...........................................................28
6.32 BOOKS OF ACCOUNT...............................................................................29
6.33 ENVIRONMENTAL MATTERS..........................................................................29
6.34 NO ILLEGAL PAYMENTS............................................................................30
6.35 LEASES.........................................................................................30
6.36 LEASE FUNDING..................................................................................33
6.37 DISCLOSURE.....................................................................................33
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO.................................................................34
7.1 CORPORATE EXISTENCE............................................................................34
7.2 UNICAPITAL STOCK...............................................................................34
7.3 CORPORATE POWER AND AUTHORIZATION..............................................................34
7.4 NO CONFLICTS...................................................................................35
7.6 COMPLIANCE WITH LAW; AUTHORIZATIONS............................................................35
7.7 TRANSACTIONS WITH AFFILIATES...................................................................35
7.8 LITIGATION.....................................................................................36
7.9 REGISTRATION RIGHTS............................................................................36
7.10 MISCELLANEOUS..................................................................................36
8. COVENANTS OF STOCKHOLDERS...............................................................................36
8.1 BUSINESS IN THE ORDINARY COURSE................................................................36
8.2 EXISTING CONDITION.............................................................................36
8.3 MAINTENANCE OF PROPERTIES AND ASSETS...........................................................37
8.4 EMPLOYEES AND BUSINESS RELATIONS...............................................................37
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C> <C>
8.5 MAINTENANCE OF INSURANCE.......................................................................37
8.6 COMPLIANCE WITH LAWS, ETC......................................................................37
8.7 CONDUCT OF BUSINESS............................................................................37
8.8 ACCESS.........................................................................................37
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS........................................................38
8.10 EXCLUSIVITY....................................................................................38
8.11 SUPPLIER.......................................................................................39
8.12 NOTICE TO BARGAINING AGENTS....................................................................39
8.13 NOTIFICATION OF CERTAIN MATTERS................................................................39
8.14 AMENDMENT OF SCHEDULES.........................................................................40
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS.....................................................40
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.....................................40
9.2 EMPLOYMENT AGREEMENTS..........................................................................41
9.3 OPINION OF COUNSEL.............................................................................41
9.4 REGISTRATION STATEMENT.........................................................................41
9.5 HSR ACT........................................................................................41
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF
UNICAPITAL AND NEWCO....................................................................................41
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.....................................42
10.2 NO LITIGATION..................................................................................42
10.3 EXAMINATION OF FINANCIAL STATEMENTS............................................................42
10.4 NO MATERIAL ADVERSE CHANGE.....................................................................42
10.5 REGULATORY REVIEW..............................................................................42
10.6 STOCKHOLDERS' RELEASE..........................................................................43
10.7 EMPLOYMENT AGREEMENTS..........................................................................43
10.8 OPINION OF COUNSEL.............................................................................43
10.9 CONSENTS AND APPROVALS.........................................................................44
10.10 GOOD STANDING CERTIFICATES.....................................................................44
10.11 REGISTRATION STATEMENT.........................................................................44
10.12 REPAYMENT OF INDEBTEDNESS......................................................................45
10.13 HSR ACT........................................................................................45
11. COVENANTS OF UNICAPITAL.................................................................................45
11.1 UNICAPITAL STOCK OPTIONS.......................................................................45
11.2 INFORMATION FILING.............................................................................45
11.3 HSR FILING.....................................................................................45
11.4 RELEASE FROM GUARANTEES; INDEBTEDNESS..........................................................45
12. INDEMNIFICATION; SURVIVAL...............................................................................46
12.1 GENERAL INDEMNIFICATION BY STOCKHOLDERS........................................................46
12.2 SPECIFIC INDEMNIFICATION BY STOCKHOLDERS.......................................................47
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C> <C>
12.3 INDEMNIFICATION BY UNICAPITAL AND NEWCO........................................................47
12.4 THIRD PARTY CLAIMS.............................................................................48
12.5 LIMITATIONS ON INDEMNIFICATION.................................................................49
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.....................................................50
13. TERMINATION OF AGREEMENT................................................................................51
13.1 TERMINATION BY UNICAPITAL......................................................................51
13.2 TERMINATION BY THE STOCKHOLDERS................................................................51
13.3 AUTOMATIC TERMINATION..........................................................................51
13.4 LIQUIDATED DAMAGES.............................................................................52
14. NONCOMPETITION AND NONSOLICITATION......................................................................52
14.1 NONCOMPETITION.................................................................................52
14.2 DAMAGES........................................................................................53
14.3 REASONABLE RESTRAINT...........................................................................53
14.4 SEVERABILITY; REFORMATION......................................................................53
14.5 INDEPENDENT COVENANT...........................................................................53
14.6 MATERIALITY....................................................................................53
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................53
15.1 STOCKHOLDERS...................................................................................53
15.2 UNICAPITAL.....................................................................................54
15.3 DAMAGES........................................................................................54
16. LOCK-UP AGREEMENTS......................................................................................54
16.1 AGREEMENT......................................................................................54
16.2 INTENDED THIRD PARTY BENEFICIARIES.............................................................55
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK........................................................................................55
17.1 INVESTMENT INTENT..............................................................................55
17.2 COMPLIANCE WITH LAW............................................................................55
17.3 ECONOMIC RISK; SOPHISTICATION..................................................................56
17.4 INFORMATION SUPPLIED...........................................................................56
18. SECURITIES LEGENDS......................................................................................56
19. STOCKHOLDER REPAYMENT OBLIGATION
19.1 ...............................................................................................57
19.2 DISPUTES.......................................................................................57
20. GENERAL.................................................................................................58
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C> <C> <C>
20.1 COOPERATION....................................................................................58
20.2 SUCCESSORS AND ASSIGNS.........................................................................58
20.3 ENTIRE AGREEMENT...............................................................................58
20.4 COUNTERPARTS...................................................................................58
20.5 BROKERS AND AGENTS.............................................................................58
20.6 EXPENSES.......................................................................................59
20.7 NOTICES........................................................................................59
20.8 GOVERNING LAW..................................................................................60
20.9 EXERCISE OF RIGHTS AND REMEDIES; FURTHER ASSURANCES............................................60
20.10 TIME...........................................................................................61
20.11 REFORMATION AND SEVERABILITY...................................................................61
20.12 REMEDIES CUMULATIVE............................................................................61
20.13 CAPTIONS, INTERPRETATION.......................................................................61
21. DEFINITIONS.............................................................................................61
</TABLE>
v
<PAGE> 7
AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF
CONTRIBUTION (this "Agreement") is made as of the 14th day of February, 1998
among UNICAPITAL CORPORATION, a Delaware corporation ("UniCapital"); NSJ
ACQUISITION CORP., a Delaware corporation ("Newco"); and W. Jeptha Thornton,
Richard C. Giles, Samuel J. Thornton, The 1998 Thornton Family Trust (the
"Thornton Trust"), and The 1998 Giles Family Trust (the "Giles Trust"). Messrs.
Thornton, Giles and Thornton are sometimes collectively referred to herein as
the "Individual Stockholders," the Thornton Trust and the Giles Trust are
sometimes collectively referred herein to as the "Trust Stockholders" and the
Individual Stockholders and the Trust Stockholders are sometimes collectively
referred to herein as the "Stockholders." Certain other capitalized terms used
herein are defined in Article 21 hereof.
WHEREAS, UniCapital was incorporated on October 9, 1997 under the laws
of the State of Delaware for the purpose of acquiring a number of equipment
leasing businesses in different locations;
WHEREAS, UniCapital intends to undertake an initial public offering of
its Common Stock (the "IPO") and in connection therewith intends to file a
Registration Statement on Form S-1 with the U.S. Securities and Exchange
Commission within 90 days of the execution and delivery of this Agreement;
WHEREAS, the Stockholders own 1,000 shares of common stock, no par
value, of The NSJ Group, Inc., a Delaware corporation (the "Company"),
constituting all issued and outstanding shares of capital stock of the Company;
WHEREAS, Newco was incorporated on January 26, 1998 under the laws of
the State of Delaware solely for the purpose of completing this transaction, and
is a wholly-owned subsidiary of UniCapital;
WHEREAS, the respective Boards of Directors of UniCapital, Newco and
the Company deem it advisable and in the best interests of each such
corporations and their respective stockholders that the Company merge with and
into Newco pursuant to this Agreement and the applicable provisions of the laws
of the State of Delaware; and
WHEREAS, the parties hereto intend that the transactions contemplated
in this Agreement constitute part of a single transaction involving the
simultaneous consummation of a number of similar agreements between UniCapital
and certain other corporations and partnerships and the IPO and that such single
transaction (the "Unified Transaction") shall fall within the provisions of
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code").
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NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 DELIVERY AND FILING OF CERTIFICATE OF MERGER. Newco and the Company
(sometimes collectively referred to herein as the "Constituent Corporations")
shall cause a Certificate of Merger, in substantially the form of Annex I
attached hereto, with such changes therein as may be required by Delaware law
(the "Certificate of Merger"), to be executed and delivered to the Secretary of
State of the State of Delaware on or before the "Merger Effective Date" (as
specified in Section 5.3).
1.2 MERGER EFFECTIVE DATE. At the Merger Effective Date, the
Certificate of Merger shall either be filed for immediate effectiveness with the
Secretary of State of the State of Delaware or become effective if filed with
such Secretary of State prior to such date. On the Merger Effective Date upon
the effectiveness of the merger of Newco and the Company (the "Merger"), the
Company shall be merged with and into Newco, in accordance with the Certificate
of Merger, and the separate existence of Newco shall cease. The Company, as the
entity surviving the Merger, is hereinafter sometimes referred to as the
"Surviving Corporation." The Merger shall have the effects specified in the laws
of the State of Delaware.
1.3 CERTIFICATE OF INCORPORATION, BYLAWS, BOARD OF DIRECTORS AND
OFFICERS OF THE SURVIVING CORPORATION. Upon the effectiveness of the Merger:
(a) the Certificate of Incorporation of the Company, as
amended and restated as set forth in the Certificate of Merger, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law;
(b) the Bylaws of Newco, as amended and restated in
substantially the form attached as Annex II hereto, shall become the Bylaws of
the Surviving Corporation and shall remain so until thereafter duly amended, and
the bylaws of each NSJ Company shall be amended and restated in substantially
the form attached as Annex II hereto, subject to any exceptions imposed by the
laws of the respective states of incorporation of the NSJ Companies;
(c) in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation, the Surviving Corporation and each NSJ
Company shall have a Board of Directors consisting of one member, who shall be
Robert New commencing upon the effectiveness of the Merger and who shall hold
office subject to the laws of the State of Delaware and the Certificate of
Incorporation and Bylaws of the Surviving Corporation; and
(d) the officers of the Company immediately prior to the
Merger Effective Date shall continue as the officers of the Surviving
Corporation in the same capacity or
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capacities, each of such officers to serve, subject to the provisions of the
Certificate of Incorporation and Bylaws of the Surviving Corporation, until his
successor is elected and qualified; provided, that the Chairman of the Board (if
any), the Treasurer and the Secretary of the Company and each NSJ Company shall
not succeed to the corresponding offices of the Surviving Corporation and each
NSJ Company, but instead (i) the sole director of the Surviving Corporation and
each NSJ Company shall be the Chairman of the Board of the Surviving Corporation
and each NSJ Company, (ii) the Treasurer of Newco shall remain the Treasurer of
the Surviving Corporation and each NSJ Company and (iii) the Secretary of Newco
shall remain the Secretary of the Surviving Corporation and each NSJ Company.
2. MERGER CONSIDERATION
2.1 CONVERSION OF CAPITAL STOCK; MERGER CONSIDERATION.
(a) Upon the effectiveness of the Merger, all of the shares of
capital stock of the Company which are issued and outstanding immediately prior
to the effectiveness of the Merger ("Company Stock") shall, by virtue of the
Merger and without any action on the part of the holder thereof but subject to
the effectiveness of the Merger, automatically be converted into the right to
receive in the aggregate, without interest,
(i) $16,016,410 in cash,
(ii) 561,979 shares of the common stock, par value
$.001 per share, of UniCapital ("UniCapital Stock") (the consideration referred
to in clauses (i) and (ii) of this Section 2.1(a), is referred to in this
Agreement as the "Effective Date Consideration"); provided, however, in the
event that the aggregate value (based on the IPO Price) of the 561,979 shares of
UniCapital Stock is less than $10,677,607, then the Company shall issue
additional shares to the Stockholders so that the aggregate value of the shares
of the UniCapital Stock included in the Effective Date Consideration equals
$10,677,607, with appropriate adjustment to the cash and stock components of the
Effective Date Consideration so as to eliminate fractional shares (the shares of
UniCapital Stock which is to be distributed to the Stockholders on the Merger
Effective Date, subject to Article 4 hereof, are referred to in this Agreement
as the "Merger Consideration Shares"), and
(iii) any Earn-Out Consideration as described in
Section 2.5 to be distributed to the Stockholders within five business days
after each date of determination of a portion of the Earn-Out Consideration with
respect to a given calendar year (if any), all as finally determined in
accordance with Section 2.5, in the percentages set forth on Annex III.
(b) The Effective Date Consideration and the Earn-Out
Consideration are sometimes collectively referred to in this Agreement as the
"Merger Consideration."
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2.2 EXCHANGE PROCEDURES. On the Merger Effective Date, upon surrender
to UniCapital of certificates representing all of the issued and outstanding
shares of Company Stock (the "Certificates"), the Stockholders shall, subject to
Article 4 and in such proportion as is set forth on Annex III, be entitled to
receive, in exchange therefor, $14,414,769, which shall be paid via wire
transfers or the delivery of certified bank checks pursuant to the instructions
received by UniCapital from such Stockholders), and certificates representing
90%of that number of whole Merger Consideration Shares in respect of the
Certificates surrendered and each Certificate so surrendered shall forthwith be
canceled. On the Merger Effective Date, and subject to and in accordance with
the provisions of Article 4, UniCapital shall cause to be distributed to the
Indemnity Escrow Agent (as defined in Article 4(a) (a) a certificate or
certificates representing the Escrow Shares (as defined in Article 4), which
shall be registered in the name of the Indemnity Escrow Agent as nominee for the
Stockholders and shall be held in accordance with the provisions of Article 4
and the Indemnity Escrow Agreement referred to therein and (b) cash representing
the Escrow Cash (as defined in Article 4).
2.3 NO FRACTIONAL SHARES. Notwithstanding any other provision of this
Article 2, no fractional shares of UniCapital Stock will be issued and the
Stockholders shall instead each receive in lieu of any such fractional share a
cash payment equal to such fraction multiplied by the IPO Price.
2.4 ALLOCATION OF MERGER CONSIDERATION. The parties hereto shall not
take a position on any income tax return, before any governmental agency charged
with the collection of any income tax, or in any judicial proceeding that is in
any way inconsistent with the allocation (if any) of the Merger Consideration
among the Company and the NSJ Companies as set forth on Annex III, as such Annex
shall be amended by mutual agreement among the parties hereto prior to the
Closing Date.
2.5 EARN-OUT CONSIDERATION.
(a) If the earnings before taxes (the "EBT") of the
"Big-Ticket Leasing Division" (defined below) for the twelve months ending
December 31, 1998 equals or exceeds $18,981,700, the Stockholders collectively
shall be entitled to receive an aggregate amount equal to $4,446,192.
(b) If the EBT of the Big-Ticket Leasing Division for the year
ending December 31, 1999, plus the amount by which the EBT of the Big-Ticket
Leasing Division for the twelve months ending December 31, 1998 exceeded
$26,669,288 (such sum is referred to as the "Adjusted 1999 EBT"), equals or
exceeds $18,981,700, then the Stockholders collectively shall be entitled to
receive an aggregate amount equal to $4,446,192.
(c) If the EBT of the Big-Ticket Leasing Division for the year
ending December 31, 2000, plus the amount by which the EBT of the Big-Ticket
Leasing Division for the twelve months ending December 31, 1999 exceeded
$26,669,288 (such sum is referred to as the
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"Adjusted 2000 EBT"), equals or exceeds $18,981,700, then the Stockholders
collectively shall be entitled to receive an aggregate amount equal to
$4,446,192, provided, however, that in lieu of the foregoing, if the amount paid
to the Stockholders pursuant to Sections 2.5(a) and (b) was less than $8,892,384
and the aggregate EBT of the Big-Ticket Leasing Division for the thirty-six
months ending December 31, 2000 equals or exceeds $56,945,100, then the
Stockholders collectively shall instead be entitled to receive an aggregate
amount equal to the difference between $13,338,576 and the aggregate amounts
paid to the Stockholders pursuant to Sections 2.5(a) and (b). Notwithstanding
anything to the contrary set forth herein, the maximum aggregate amount which
the Stockholders collectively shall be entitled to receive pursuant to Sections
2.5 (a), (b) and (c) shall be limited to $13,338,576.
(d) The amounts (if any) that the Stockholders become entitled
to receive pursuant to Sections 2.5(a) , (b) and (c) are referred to herein as
the "Earn-Out Consideration." The Earn-Out Consideration shall be paid 60% in
cash and 40% in fully paid and non-assessable shares of UniCapital Stock, valued
at the average of the closing prices per share of UniCapital Stock for the 20
trading days preceding December 31 of the year to which the portion of Earn- Out
Consideration in questions applies. The allocation of any Earn-Out Consideration
among the Shareholders shall be in such proportion as set forth on Annex III.
(e) Subject to Section 2.5(g), the EBT of the Big-Ticket
Leasing Division for each of the years ending December 31, 1998, 1999 and 2000
shall be computed within 45 days following December 31 of the applicable year
and by Price Waterhouse LLP in accordance with GAAP applied on a basis
consistent in all material respects with the Audited Financial Statements.
(f) For purposes hereof, the "Big Ticket Leasing Division"
means (i) after the Closing Date, the operating subsidiaries and other business
units of UniCapital that conduct businesses conducted by the Company and the NSJ
Companies and the CLA Companies prior to the Closing Date and (ii) for the
period beginning on January 1, 1998 through the Closing Date, the Company, the
NSJ Companies and the CLA Companies.
(g) Except as set forth in Schedule 2.5(g), the EBT of the
Big-Ticket Leasing Division shall be calculated in accordance with GAAP,
consistently applied as it relates to each of the Company, each NSJ Company and
each CLA Company.
(h) Notwithstanding anything in this Section 2.5 to the
contrary, if the Stockholders dispute the determination of EBT, then the
Stockholders' Representative shall notify UniCapital in writing of such dispute
and specify the amount thereof within 20 business days after notification of the
determination of EBT for any year. If UniCapital and the Stockholders'
Representative cannot resolve any such dispute which would affect the Earn-Out
Consideration, then such dispute shall be resolved by an Independent Accounting
Firm (as defined in Section 3.2). The determination of the Independent
Accounting Firm shall be made as promptly as practicable and shall be final and
binding upon the parties, absent manifest error
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which error may only be corrected by such Independent Accounting Firm. The costs
of the Independent Accounting Firm shall be borne by the party (either
UniCapital or the Stockholders as a group) whose determination of EBT was
further from the determination of the Independent Accounting Firm. Once EBT is
finally determined, the Earn-Out Consideration attendant thereto shall be paid
in accordance with this Section 2.5; provided that in the event the
Stockholders' determination of EBT was closer to the determination of the
Independent Accounting Firm than UniCapital's determination of EBT, the
Stockholders shall receive such Earn-Out Consideration plus interest which shall
accrue at the rate of 10% per annum on any such Earn-Out Consideration that is
resolved in the Stockholders favor from the date the Earn-Out Consideration was
first payable and to the date on which the Earn-Out Consideration is received by
the Stockholders. Pending resolution of any such dispute by the Independent
Accounting Firm, only the amount of the Earn-Out Consideration as determined by
Price Waterhouse LLP shall be paid by UniCapital. Once EBT is finally
determined, the Earn-Out Consideration attendant thereto not previously paid, if
any, shall be paid in accordance with this Section 2.5.
(i) Any Earn-Out Consideration paid by UniCapital shall be
treated as additional consideration paid by UniCapital for the shares of Company
Stock.
(j) In the event that the employment of any Individual
Stockholder under his respective Employment Agreement is terminated by the
employer thereunder without "cause"(as defined in his Employment Agreement) at
any time on or prior to December 31, 2000, UniCapital shall pay such terminated
Stockholder (and with respect to W. Jeptha Thornton, the Thornton Trust, and
with respect to Richard C. Giles, the Giles Trust), such amounts set forth on
Annex III hereto), less any amount theretofore paid or to become payable to any
such Stockholder (and with respect to W. Jeptha Thornton, the Thornton Trust,
and with respect to Richard C. Giles, the Giles Trust) pursuant to Sections
2.5(a), (b) and (c), whereupon all further obligations of UniCapital to such
terminated Stockholder (and with respect to W. Jeptha Thornton, the Thornton
Trust, and with respect to Richard C. Giles, the Giles Trust) under this Section
2.5 shall cease.
3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS' REPRESENTATIVE
3.1 COMPUTATION. As soon as practicable, but in any event within 30
days after the Closing, UniCapital shall engage Price Waterhouse LLP to prepare,
in accordance with generally accepted accounting principles ("GAAP") in a manner
consistent in all material respects with the preparation of the combined audited
balance sheets of the NSJ Companies at December 31, 1997 that was certified by
Price Waterhouse LLP, a balance sheet of the Company (the "Closing Date Balance
Sheet") as of the end of business on the day prior to the Closing Date (as
defined in Section 5). If the combined stockholders' equity of the Company and
the NSJ Companies as shown on the Closing Date Balance Sheet is less than the
combined stockholders equity at October 31, 1997 (to be determined in accordance
with GAAP in a manner consistent in all material respects with the preparation
of the combined audited balance sheets of the NSJ Companies at December 31, 1997
that was certified by Price Waterhouse LLP), plus any income
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earned by the Company and the NSJ Companies during the period (the "1998
Period") beginning on January 1, 1998 and ending on the day prior to the Merger
Effective Date, minus any cash distributions to the Stockholders made for the
purposes of enabling the Stockholders to satisfy their respective income tax
liabilities on any income of the Company or any NSJ Company earned during the
1998 Period, then, subject to Section 3.2, commencing 20 business days after
delivery of the Closing Date Balance Sheets to UniCapital, the aggregate Merger
Consideration shall be adjusted downward, dollar-for-dollar in the amount of any
such deficiency (the "Net Worth Deficiency"). After the 20th business day after
the delivery of the Closing Date Balance Sheets to UniCapital (or if applicable,
after the final determination of any Disputed Amount in accordance with Section
3.2), UniCapital shall be entitled to recover from the Indemnity Escrow pursuant
to Article 4 that portion of any Net Worth Deficiency which does not exceed
one-half of the initial balance of the Indemnity Escrow. For any amount by which
any Net Worth Deficiency exceeds one-half of the initial balance of the
Indemnity Escrow, such portion of the Net Worth Deficiency shall be paid by the
Stockholders not later than the 25th business day after the delivery of the
Closing Date Balance Sheet (or if applicable, not later than the 5th business
day after the final determination of any Disputed Amount in accordance with
Section 3.2). At its sole and exclusive option, and at any time after such 25th
business day (or if applicable, not later than the 5th business day after the
final determination of any Disputed Amount in accordance with Section 3.2),
UniCapital shall be entitled to recover from the Indemnity Escrow pursuant to
Article 4 all or any portion of the amount of the Net Worth Deficiency not paid
by the Stockholders as required by this Article 3. Notwithstanding any provision
of this Agreement to the contrary, it is understood that the Company or any of
the NSJ Companies may make distributions of cash or promissory notes to the
Stockholders or otherwise in respect of the capital stock of the Company or such
NSJ Companies at any time prior to the close of business on the day prior to the
Closing Date, provided that the foregoing shall not be deemed to modify or
constitute a waiver of UniCapital's rights under this Section 3.
3.2 DISPUTES. Notwithstanding anything in this Article 3 to the
contrary, if there is any Net Worth Deficiency and the Stockholders dispute any
item contained on the Closing Date Balance Sheets, then the Stockholders'
Representative shall notify UniCapital in writing of each disputed item
(collectively, the "Disputed Amounts") and specify the amount thereof in dispute
within 20 business days after the delivery of the Closing Date Balance Sheets.
If UniCapital and the Stockholders' Representative cannot resolve any such
dispute which would eliminate or otherwise mutually resolve the calculation of
the Net Worth Deficiency, then such dispute shall be resolved by an independent
nationally recognized accounting firm which is reasonably acceptable to
UniCapital and the Stockholders' Representative (the "Independent Accounting
Firm"). The determination of the Independent Accounting Firm shall be made as
promptly as practical and shall be final and binding on the parties, absent
manifest error which error may only be corrected by such Independent Accounting
Firm. Any expenses relating to the engagement of the Independent Accounting Firm
shall be allocated between UniCapital and the Stockholders so that the
Stockholders' aggregate share of such costs shall bear the same proportion to
the total costs that the Disputed Amounts unsuccessfully contested by the
Stockholders' Representative (as finally determined by the Independent
Accounting Firm) bear to the total of the Disputed
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Amounts so submitted to the Independent Accounting Firm. Pending resolution of
any such dispute by the Independent Accounting Firm, no such Disputed Amount
shall be due to or by UniCapital. Once any such Disputed Amount is finally
determined to be due to or by UniCapital, UniCapital may proceed to recover such
amount in the manner set forth in Section 3.1.
3.3 STOCKHOLDERS' REPRESENTATIVE. (a) Each Stockholder, by signing this
Agreement, designates Richard C. Giles (or, in the event that he is unable or
unwilling to serve or resigns, W. Jeptha Thornton) to be such Stockholders'
representative for purposes of this Agreement (the "Stockholders'
Representative"). The Stockholders shall be bound by any and all actions taken
by the Stockholders' Representative on their behalf.
(b) UniCapital and Newco shall be entitled to rely upon any
communication or writing given or executed by the Stockholders' Representative.
All communications or writings to be sent to Stockholders pursuant to this
Agreement may be addressed to the Stockholders' Representative and any
communication or writing so sent shall be deemed notice to all of the
Stockholders hereunder. The Stockholders hereby consent and agree that the
Stockholders' Representative is authorized to accept deliveries, including any
notice, on behalf of the Stockholders pursuant hereto.
(c) The Stockholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Stockholder, with full
power in his or her name and on his or her behalf to act according to the terms
of this Agreement in the absolute discretion of the Stockholders'
Representative, and in general to do all things and to perform all acts
including, executing and delivering all agreements, certificates, receipts,
instructions and other instruments contemplated by or deemed advisable in
connection with Article 12 of this Agreement. This power of attorney and all
authority hereby conferred is granted subject to and coupled with the interest
of such Stockholder and the other Stockholders hereunder and in consideration of
the mutual covenants and agreements made herein, and shall be irrevocable and
shall not be terminated by any act of any Stockholder, by operation of law,
whether by such Stockholder's death or any other event.
(d) Notwithstanding the foregoing, the Stockholder
Representative shall inform the other Stockholder of all notices received, and
of all actions, decisions, notices and exercises of any rights, power or
authority proposed to be done, given or taken by such Stockholder Representative
4. INDEMNITY ESCROW
4.1 CREATION OF ESCROW.
(a) At the Closing, as collateral security for the payment of
any indemnification obligations of the Stockholders pursuant to Sections 12.1
and 12.2 hereof and for
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the payment of amounts due pursuant to Article 3 hereof, the following shall be
delivered to American Stock Transfer as indemnity escrow agent (the "Indemnity
Escrow Agent"):
(i) ten percent (10%) of the number of shares of
UniCapital Stock issuable to each Stockholder as part of the Effective Date
Consideration in accordance with Annex III, rounded up to the nearest whole
share (the "Escrow Shares"); and
(ii) ten percent (10%) of the cash portion of the
Effective Date Consideration payable to each Stockholder in accordance with
Annex III, rounded up to the nearest whole cent (the "Escrow Cash").
(b) The Escrow Shares and the Escrow Cash are referred to
together as the "Escrow Property." In addition, the Escrow Property shall
include all interest, cash and non-cash dividends and other property at any time
received or otherwise distributed on, in respect of or in exchange for any or
all of the Escrow Property, all securities hereafter issued in substitution for
any of the foregoing, all certificates and instruments representing or
evidencing such securities, all cash and non-cash proceeds of all of the
foregoing property and all rights, titles, interests, privileges and preferences
appertaining or incident to the foregoing property, except as provided in
Section 4.3.
4.2 DURATION AND TERMS. The Escrow Property shall be held and disbursed
by the Indemnity Escrow Agent in accordance with the terms of an Indemnity
Escrow Agreement substantially in the form attached hereto as Annex IV. The
Indemnity Escrow Agent shall hold the Escrow Property pursuant to the Indemnity
Escrow Agreement until the later of: (a) the first anniversary of the Merger
Effective Date; and (b) the resolution of any claim for indemnification or
payment that is pending on the first anniversary of the Merger Effective Date,
but only to the extent of the amount of such pending claim.
4.3 VOTING AND INVESTMENT. The Stockholders shall be entitled to
exercise all voting powers incident to the Escrow Shares held by the Indemnity
Escrow Agent as their nominee, but shall not be entitled to exercise any
investment or dispositive powers over such Escrow Shares. The Escrow Cash shall
be invested from time to time by the Indemnity Escrow Agent as provided in the
Indemnity Escrow Agreement.
5. CLOSING; MERGER EFFECTIVE DATE
5.1 CLOSING. Within two business days following the date on which the
Underwriting Agreement shall have been executed, the parties shall take all
actions necessary to effect the Merger (other than the filing with the
appropriate state authorities of the Certificate of Merger, which shall be filed
and become effective on the Merger Effective Date) and to effect the conversion
and delivery of shares and cash referred to in Article 2 hereof (hereinafter
referred to as the "Closing"); provided, that such actions shall not include the
actual completion of the
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Merger or the actual conversion and delivery of the shares referred to in
Article 2 hereof, which actions shall only be taken on the Merger Effective Date
as herein provided.
5.2 CLOSING DATE; LOCATION. The Closing shall take place at the offices
of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178. The date on
which the Closing shall occur shall be referred to as the "Closing Date."
5.3 EFFECTIVENESS OF MERGER. Concurrently with the consummation of the
sale of the shares of UniCapital Stock pursuant to the Underwriting Agreement,
the Merger shall become effective and all transactions contemplated by this
Agreement, including the conversion and delivery of shares and by the delivery
by checks or via wire transfers of an aggregate amount equal to the cash which
the Stockholders shall be entitled to receive pursuant to the Merger referred to
in Article 2 hereof, shall occur and be deemed to be completed. The date on
which the Merger is effected shall be referred to as the "Merger Effective Date"
and the time on which the Merger is effected shall be referred to as the
"Effective Time"
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
As of the date hereof and as of the Merger Effective Date, each
Individual Stockholder jointly and severally represents and warrants to
UniCapital as follows:
6.1 CORPORATE EXISTENCE. The Company and each NSJ Company is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation. The Company and each NSJ Company is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction where the conduct of its business requires it to be so
qualified, all of which jurisdictions are listed on Schedule 6.1.
6.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
agreements, documents and instruments required to be delivered by the Company or
any NSJ Company in accordance with the provisions hereof (collectively, the
"Company Documents") will be duly executed and delivered on behalf of the
Company and such NSJ Company, as applicable, in each case by duly authorized
officers of such corporation. The Company Documents, when executed and delivered
by the Company and the NSJ Companies, will constitute, the legal, valid and
binding obligations of the Company and such NSJ Company, as applicable,
enforceable against it in accordance with their respective terms.
6.3 AUTHORITY; VALIDITY OF CONTEMPLATED TRANSACTIONS. Each Stockholder
has the full legal right, capacity and authority to enter into this Agreement.
Except as set forth in Schedule 6.3, the execution, delivery and performance of
this Agreement by each Stockholder does not and will not violate, conflict with
or result in the breach of any term, condition or provision of, or require the
consent of any other person under (a) any existing law, ordinance, or
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governmental rule or regulation to which the Company, any NSJ Company or any
Stockholder is subject, (b) any judgment, order, writ, injunction, decree or
award of any Governmental Entity which is applicable to the Company, any NSJ
Company or any Stockholder, (c) the charter documents of the Company or any NSJ
Company or any securities issued by the Company or any NSJ Company, or (d) any
mortgage, indenture, agreement, contract, commitment, lease, plan,
Authorization, or other instrument, document or understanding, oral or written,
to which the Company, any NSJ Company or any Stockholder is a party, by which
the Company, any NSJ Company or any Stockholder may have rights or by which any
of the properties or assets of the Company or any NSJ Company may be bound or
affected, or give any party with rights thereunder the right to terminate,
modify, accelerate or otherwise change the existing rights or obligations of the
Company or any NSJ Company thereunder. Except for the filing of the Certificate
of Merger with the Secretary of the State of Delaware, filings under the
Hart-Scott- Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), and as
aforesaid, no authorization, approval or consent of, and no registration or
filing with, any Governmental Entity is required in connection with the
execution, delivery or performance of this Agreement by any Stockholder.
6.4 CAPITAL STOCK AND OWNERSHIP AS OF THE DATE OF THIS AGREEMENT. As of
the date of this Agreement (i) the Stockholders own beneficially and of record
all of the outstanding capital stock of the Company and (ii) the Stockholders
each own beneficially and of record that portion of the outstanding capital
stock of each NSJ Company as is identified as so owned on Exhibit A, in each
case, free and clear of all liens, security interests, pledges, charges, voting
trusts, equities, restrictions, encumbrances and claims of every kind except as
otherwise set forth on Schedule 6.4. As of the date of this Agreement, the
record ownership of the capital stock of each NSJ Company is as set forth on
Exhibit A. All of the issued and outstanding capital stock of the Company and
each NSJ Company as of the date of this Agreement has been duly authorized and
validly issued, fully paid and nonassessable and have been offered, issued, sold
and delivered by the Company or the applicable NSJ Company in compliance with
all applicable state and federal laws concerning the offering, sale or issuance
of securities. None of such shares have been issued in violation of the
preemptive rights of any past or present stockholder, whether contractual or
statutory.
6.5 CAPITAL STOCK AND OWNERSHIP AS OF THE EFFECTIVE TIME. The
authorized capital stock of the Company and each NSJ Company immediately prior
to the Effective Time shall consist solely of the shares shown on Schedule 6.5.
Immediately prior to the Effective Time, the Stockholders shall own beneficially
and of record all of the issued and outstanding shares of capital stock of the
Company, in each case, free and clear of all liens, security interests, pledges,
charges, voting trusts, equities, restrictions, encumbrances and claims of every
kind. Immediately prior to the Effective Time, the Company shall own
beneficially and of record all of the issued and outstanding capital stock of
each NSJ Company, in each case, free and clear of all liens, security interests,
pledges, charges, voting trusts, equities, restrictions, encumbrances and claims
of every kind, except as set forth in Schedule 6.5. All of the issued and
outstanding shares of the Company and each NSJ Company to be outstanding
immediately prior to the Effective Time will have been duly authorized and
validly issued, fully paid and nonassessable
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and will have been offered, issued, sold and delivered by the Company and each
NSJ Company in compliance with all applicable state and federal laws concerning
the offering, sale or issuance of securities. As of the Effective Time, none of
such shares will have been, and none of the shares of the Company or any of the
NSJ Companies shall have been, issued in violation of the preemptive rights of
any past or present stockholder, whether contractual or statutory. As of the
Effective Time, UniCapital shall have acquired valid title to all of the issued
and outstanding capital stock of the Company, free and clear of all liens,
security interests, pledges, charges, voting trusts, equities, restrictions,
encumbrances and claims of every kind.
6.6 TRANSACTIONS IN CAPITAL STOCK. Except as set forth on Schedule 6.6,
neither the Company nor any NSJ Company has acquired any treasury stock since
December 31, 1995. Except as set forth on Schedule 6.6, as of the date of this
Agreement there is no, and immediately prior to the Effective Time there shall
be no, existing option, warrant, call, conversion right or commitment of any
kind which obligates the Company or any NSJ Company to issue any of its
authorized but unissued capital stock. Except as set forth on Schedule 6.6,
neither the Company nor any NSJ Company has any obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof.
6.7 NO BONUS SHARES. As of the date of this Agreement, none of the
shares of capital stock of the Company or any NSJ Company were, and immediately
prior to the Effective Time, none of the shares of capital stock of the Company
stock will be, issued pursuant to any awards, grants or bonuses, whether of
stock or of options or other rights.
6.8 SUBSIDIARIES. As of the date hereof, no NSJ Company has any
subsidiaries, and except for the NSJ Companies, the Company has no subsidiaries.
Except as set forth in Schedule 6.8, neither the Company nor any NSJ Company
owns, of record or beneficially, or controls, directly or indirectly, any
capital stock, any securities convertible into capital stock or any other equity
interest in any corporation, association or other business entity. Except as set
forth on Schedule 6.8, neither the Company nor any NSJ Company is, directly or
indirectly, a participant in any joint venture, partnership or other
noncorporate entity.
6.9 PREDECESSOR STATUS; ETC. Schedule 6.9 lists all of the names of all
entities from whom the Company or any NSJ Company previously acquired assets
representing all or substantially all of the assets of such entity. Except as
set forth on Schedule 6.9, neither the Company nor any NSJ Company has ever been
a subsidiary of another corporation or been a part of an acquisition which was
later rescinded.
6.10 SPIN-OFFS BY COMPANIES. Except as set forth on Schedule 6.10,
since December 31, 1995 through the date of this Agreement, neither the Company
nor any NSJ Company has effected a sale or distribution of all or substantially
all of its assets.
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6.11 NO THIRD PARTY OPTIONS. Except as set forth in Schedule 6.11,
there are no existing agreements, options, commitments or rights with, of or to
any person to acquire any material assets or rights of the Company or any NSJ
Company or any interest therein.
6.12 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.12 are copies
of the audited combined balance sheet of the NSJ Companies at December 31, 1997
and related combined statements of income, cash flows and stockholders' equity
for the fiscal year then ended, certified by Price Waterhouse LLP, together with
the reports of such independent public accountants thereon (collectively the
"Audited Financial Statements").
The Audited Financial Statements have been prepared in accordance with GAAP
consistently applied throughout the periods involved. The balance sheet included
in the Audited Financial Statements, including the related notes, fairly
presents in all material respects the combined financial position, assets and
liabilities (whether accrued, absolute, contingent or otherwise) of the NSJ
Companies as of the date indicated and the statements of income, cash flows and
changes in stockholders' equity included in the Audited Financial Statements
fairly present in all material respects the combined results of operations, cash
flows and changes in stockholders' equity of the Company and the NSJ Companies
for the period indicated, in each case in accordance with GAAP consistently
applied.
6.13 LIABILITIES AND OBLIGATIONS.
(a) Except as reflected or reserved against in the balance
sheet (the "Audited Balance Sheet Date") as at December 31, 1997 included in the
Audited Financial Statements or in the notes to the Audited Financial
Statements, there are no liabilities against, relating to or affecting any NSJ
Company as of such date that would otherwise have been required to be reflected
or reserved against on such Audited Financial Statements. As promptly as is
practicable after the date of this Agreement, the Company and the Stockholders
shall cause Price Waterhouse LLP to prepare and deliver to the Company and the
Stockholders, who shall in turn deliver to UniCapital, a schedule detailing each
and every liability reflected on the balance sheet included in the Audited
Financial Statements, which schedule shall be true, correct and complete in all
material respects. Attached hereto as Schedule 6.13(a) is an accurate list, as
of a date not more than two days prior to the date of this Agreement and as
amended as of a date not more than two days prior to the Closing Date, of all
liabilities incurred by the Company or any NSJ Company after the Audited Balance
Sheet Date (i) not in the ordinary course of business and (ii) in the ordinary
course of business that exceeds $10,000. Each of the foregoing liabilities that
has not heretofore been paid or discharged is so noted on Schedule 6.13(a). For
purposes of this Agreement, "liabilities" means liabilities of any kind,
character or description, whether accrued, absolute, secured or unsecured,
contingent or otherwise. For purposes of determining whether any contingent or
other liability exceeds $10,000 for the purposes of being included on Schedule
6.13(a) as required by this Section 6.13, such amount shall be determined on a
basis that assumes the ultimate assessment against the Company or the applicable
NSJ Company of the full amount of such contingent or other liability.
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(b) For each such liability for which, to the knowledge of the
Individual Stockholders, the amount is contested, Schedule 6.13(b) includes a
summary description of the liability, together with copies of all relevant
documentation relating thereto, detail of all amounts claimed and any other
action or relief sought, the names of the claimant and all other parties to the
claim, suit or proceeding, the name of each court or agency before which such
claim, suit or proceeding is pending, the date such claim, suit or proceeding
was instituted, and a best estimate of the maximum amount, if any, which is
likely to become payable with respect to each such liability. If no estimate is
provided, the best estimate shall for purposes of this Agreement be deemed to be
zero.
(c) As of the date of this Agreement and as of a date not more
than two days prior to the Closing Date, except as set forth on Schedules 6.13
(a) or (b) and except for liabilities not required to be set forth thereon
pursuant to Section 6.13(a) or liabilities reflected on the Audited Financial
Statements, the Company and the NSJ Companies have no material liabilities or
obligations, whether direct or indirect, matured or unmatured, absolute
contingent or otherwise, and there is no condition, situation or set of
circumstances which are reasonably be expected to result in any such material
liability.
6.14 ACCOUNTS AND NOTES RECEIVABLE. Attached hereto as Schedule 6.14 is
a complete and accurate list, as of a date not more than two days prior to the
date of this Agreement, of the accounts and notes receivable of the Company and
each NSJ Company with an amount due that exceeds $1,000, (including receivables
from and advances to any employees or any Stockholder (including the spouses of
either Individual Stockholder)) excluding those arising out of Leases
(collectively, the "Accounts Receivable"). Schedule 6.14 includes an aging of
all Accounts Receivable showing amounts due in 30-day aging categories. On the
Closing Date, the Stockholders will deliver to UniCapital a complete and
accurate list, as of a date not more than two days prior to the Closing Date, of
the Accounts Receivable. Except as set forth on Schedule 6.14 (as such Schedule
shall be updated and delivered with the aging of Accounts Receivable not more
than two days prior to the Closing Date), all Accounts Receivable represent
valid obligations arising from bona fide business transactions in the ordinary
course of business. The Accounts Receivable are, and as of the Merger Effective
Date will be, collectible or actually collected, in each case net of any
respective reserves shown on the Company's or any NSJ Company's books and
records as of their respective dates (which reserves are adequate and calculated
in accordance with GAAP, consistent with past practice). Subject in the case of
Accounts Receivable reflected on the combined balance sheet of the Company and
the NSJ Companies to such reserves reflected on such balance sheet and except as
set forth in Schedule 6.14, each of the Accounts Receivable included in Schedule
6.14 as of the date this Agreement will be collected in full within ninety (90)
days after the day on which it first became due and payable. Except as set forth
on Schedule 6.14, there is no contest, claim, counterclaim, defense or right of
set-off, other than rebates and returns in the ordinary course of business,
under any contract with any obligor of any Account Receivable relating to the
amount or validity of such Account Receivable. The allowance for collection
losses on the balance sheet included in the
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Audited Financial Statement has been determined in accordance with GAAP,
consistent with past practice.
6.15 PERMITS. Each material Permit held by the Company and any NSJ
Company, together with the name of the Governmental Entity issuing such Permit,
is set forth on Schedule 6.15. Except as set forth on Schedule 6.15, such
Permits are valid and in full force and effect and none of such Permits will be
terminated or impaired or become terminable as a result of the transactions
contemplated by this Agreement. Upon consummation of such transactions, the
Surviving Corporation will have all of the Company's right, title and interest
in its Permits.
6.16 REAL AND PERSONAL PROPERTY. Attached hereto as Schedule 6.16 is an
accurate list, including substantially complete descriptions as of the Audited
Balance Sheet Date, of all the real and personal property excluding aircrafts or
aircraft parts (which in the case of personal property had an original cost in
excess of $25,000) owned or where the Company or any NSJ Company is a lessee,
including true and correct copies of leases for equipment and properties on
which are situated buildings, warehouses and other structures used in the
operation of the busi ness of the Company or any NSJ Company and including an
indication as to which assets were formerly owned by any Stockholder or
affiliate (which term, as used herein, shall have the meaning ascribed thereto
in Rule 144(a)(1) promulgated under the Securities Act of 1933, as amended (the
"Securities Act")) of the Company or any NSJ Company. Except as set forth on
Schedule 6.16, all of the Company's and each NSJ Company's leasehold
improvements, facilities, equipment and other material items of tangible
property and assets are in good operating condition and repair, subject to
normal wear and maintenance, are usable in the regular and ordinary course of
business and conform to all applicable laws, ordinances, codes, rules and
regulations, and Authorizations relating to their construction, use and
operation. All leases set forth on Schedule 6.16 have been duly authorized,
executed and delivered and constitute the legal, valid and binding obligations
of the Company and each NSJ Company, as applicable, and, to the knowledge of any
Individual Stockholder, no other party to any such lease is in default
thereunder and such leases constitute the legal, valid and binding obligations
of such other parties. All fixed assets used by the Company or any NSJ Company
in the operation of its business are either owned by the Company or such NSJ
Company or leased under an agreement set forth on Schedule 6.16. The Company,
the NSJ Companies or the Stockholders have heretofore delivered to UniCapital
copies of any title reports and title insurance policies received or held by the
Company or any NSJ Company. The Company and the Stockholders have indicated on
Schedule 6.16 a summary description of all plans or projects involving the
opening of new operations, expansion of any existing operations or the
acquisition of any real property or existing business to which management of the
Company or any NSJ Company has devoted any significant effort or expenditure in
the two-year period prior to the date of this Agreement which have not been
terminated or abandoned and which, if pursued by the Company or such NSJ
Company, would require additional expenditures of significant efforts or capital
other than with respect to the acquisition of aircraft or aircraft parts.
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6.17 CONTRACTS AND COMMITMENTS. Schedule 6.17 sets forth an accurate,
correct and complete list of all agreements, contracts, commitments,
arrangements and understandings, written or oral, including all amendments and
supplements thereto, of the Company or any NSJ Company other than Leases (the
"Contracts"), to which the Company or any NSJ Company is a party or is bound, or
by which any of their respective assets are bound, and which involve any:
(a) agreement, contract, commitment, arrangement or
understanding with any present or former employee or consultant or for the
employment of any person, including any consultant;
(b) agreement, contract, commitment, arrangement or
understanding for the future purchase of, or payment for, supplies or products,
or for the performance of services by a third party involving in any one case
$25,000 or more;
(c) agreement, contract, commitment, arrangement or
understanding to sell or supply products or to perform services involving in any
one case $25,000 or more;
(d) agreement, contract, commitment, arrangement or
understanding containing minimum requirements or "take or pay" provisions;
(e) agreement, contract, commitment, arrangement or
understanding not otherwise listed on Schedule 6.17 and continuing over a period
of more than six months from the date hereof and exceeding $25,000 in value;
(f) distribution, dealer, representative or sales agency
agreement, contract, commitment, arrangement or understanding exceeding $10,000
in value;
(g) agreement, contract, commitment, arrangement or
understanding containing a provision to indemnify any person or entity with
respect to, or to assume, any tax or environmental liability;
(h) agreement, contract, commitment, arrangement or
understanding with federal, state, local, regulatory or other governmental
entities;
(i) note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement or other contract or commitment for the
borrowing or lending of money or agreement or arrangement for a line of credit
or guarantee, pledge or undertaking of the indebtedness for money borrowed of
any other person;
(j) agreement, contract, commitment, arrangement or
understanding for any charitable or political contribution;
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(k) agreement, contract, commitment, arrangement or
understanding for any capital expenditure or leasehold improvement in excess of
$25,000;
(l) agreement, contract, commitment, arrangement or
understanding limiting or restraining the Company or any NSJ Company or any
successor thereto, or to the knowledge of any Individual Stockholder, any
employee of the Company or any NSJ Company or any successor thereto, from
engaging or competing in any manner or in any business;
(m) license, franchise, distributorship or other agreement
which relates in whole or in part to any software, patent, trademark, trade
name, service mark or copyright or to any ideas, technical assistance or other
know-how of or used by, and material to, the Company or any NSJ Company;
(n) agreement, contract, commitment, arrangement or
understanding to which the Company or any NSJ Company, on the one hand, and any
affiliate, officer, director or stockholder of the Company or any NSJ Company,
on the other hand, are parties.
Each of the Contracts listed on Schedule 6.17, except as set forth on Schedule
6.17, is valid and enforceable in accordance with its terms; the Company and
each applicable NSJ Company is, and to the knowledge of any Individual
Stockholder, all other parties thereto are, in compliance with the provisions
thereof. Except as set forth on Schedule 6.17, neither the Company nor any NSJ
Company is, and to the knowledge of any Individual Stockholder, no other party
thereto is, in default in the performance, observance or fulfillment of any
material obligation, covenant or condition contained therein; and no event has
occurred which with or without the giving of notice or lapse of time, or both,
would constitute a default thereunder. Except as set forth on Schedule 6.17,
none of the rights of the Company or any NSJ Company under any Contract will be
impaired by the consummation of the transactions contemplated hereby, and all
such rights will be enforceable by the applicable Surviving Corporation after
the Merger Effective Date without the consent or agreement of any other party.
The Company, the NSJ Companies or the Stockholders have delivered accurate and
complete copies or provided direct access to each Contract to UniCapital.
6.18 GOVERNMENT CONTRACTS. Except as set forth on Schedule 6.18,
neither the Company nor any NSJ Company is now or has ever been a party to any
contract with any Governmental Entity subject to price redetermination or
renegotiation.
6.19 REAL PROPERTY. Neither the Company nor any of the NSJ Companies
own any real property.
6.20 INSURANCE. The assets, properties and operations of the Company
and each NSJ Company are insured under various policies of general liability and
other forms of insurance as listed on Schedule 6.20, all of which are described
in the insurance policies attached to the Disclosure Schedules, which discloses
for each policy the risks insured against, coverage limits,
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deductible amounts, all outstanding claims thereunder, and whether the terms of
such policy provide for retrospective premium adjustments. All such policies are
in full force and effect in accordance with their terms, no notice of
cancellation has been received, and there is no existing default or event which,
with the giving of notice or lapse of time or both, would constitute a default
thereunder. Such policies are in amounts which, in relation to the business and
assets of the Company and the NSJ Companies, are consistent with the normal or
customary industry practice and all premiums due to date have been paid in full.
Neither the Company nor any NSJ Company has been refused any insurance, nor has
the Company's nor any NSJ Company's coverage been limited, by any insurance
carrier to which it has applied for insurance or with which it has carried
insurance during the past five years. Schedule 6.20 also contains a true and
complete description of all outstanding bonds and other surety arrangements
issued or entered into in connection with the business, assets and liabilities
of the Company and the NSJ Companies.
6.21 EMPLOYEES. Schedule 6.21 contains the following with respect to
the Company and each NSJ Company:
(a) a list of all employees of the Company and each NSJ
Company (including organization, name, title and position);
(b) each such employee's length of service; and
(c) the compensation (including terms of payment, bonuses,
commissions and deferred compensation, as well as any benefits) of each such
employee.
Except as disclosed on Schedule 6.21: (i) there have not been in the past five
years and, to the knowledge of any Individual Stockholder, there are not
pending, any labor disputes, work stoppages, requests for representation,
pickets or work slow-downs due to labor disagreements; (ii) there are and have
been no unresolved violations of any Laws of any Governmental Entity respecting
the employment of any employees; (iii) there is no unfair labor practice, charge
or complaint pending, unresolved or, to the knowledge of any Individual
Stockholder, threatened before the National Labor Relations Board or similar
body in any foreign country; (iv) there is no employment handbook, personnel
policy manual, or similar document that creates prospective employment rights or
obligations; (v) the employees of the Company and the NSJ Companies are not
covered by any collective bargaining agreement; (vi) the Company and each NSJ
Company has provided or will timely provide prior to Closing all notices
required by law to be given prior to Closing to all local, state, federal or
national labor, wage-payment, equal employment opportunity, unemployment
insurance and related agencies; (vii) the Company and each NSJ Company has paid
or properly accrued in the ordinary course of business all wages and
compensation due to employees, including all vacations or vacation pay, holidays
or holiday pay, sick days or sick pay, and bonuses; and (viii) the transactions
contemplated by this Agreement will not create liability under any Laws of any
Governmental Entity respecting reductions in
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force or the impact on employees on plant closing or sales of businesses. All
employees of the Company and each NSJ Company are legally able to work in the
United States.
6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. Schedule 6.22 sets forth
a complete and accurate list of each Benefit Plan covering any present or former
officers, employees or directors of the Company or any NSJ Company. "Benefit
Plan" means each "employee pension benefit plan" (as defined in Section 3(3) of
ERISA, hereinafter a "Pension Plan"), "employee welfare benefit plan" (as
defined in Section 3(2) of ERISA, hereinafter a "Welfare Plan") and each other
plan or arrangement (written or oral) relating to deferred compensation, bonus,
performance compensation, stock purchase, stock option, stock appreciation,
severance, vacation, sick leave, holiday pay, fringe benefits, personnel policy,
reimbursement program, incentive, insurance, welfare or similar plan, program,
policy or arrangement, in each case maintained or contributed to, or required to
be maintained or contributed to, by the Company or any NSJ Company or their
respective affiliates or any other person or entity that, together with the
Company and the NSJ Companies, is treated as a single employer under Section
414(b), (c), (m) or (o) of the Code (each, together with the Company and the NSJ
Companies, a "Commonly Controlled Entity") for the benefit of any present or
former officer, employee or director. Neither the Company nor any NSJ Company
has any to intent or commitment to create any additional Benefit Plan or amend
any Benefit Plan so as to increase benefits thereunder. Neither the Company nor
any NSJ Company has created any Benefit Plan or declared or paid any bonus
compensation in contemplation of the transactions contemplated by this
Agreement. A current, accurate and complete copy of each Benefit Plan has been
made available to UniCapital. Except as disclosed on Schedule 6.22:
(a) each Benefit Plan is in substantial compliance with all
reporting, disclosure and other requirements of ERISA applicable to such Benefit
Plan;
(b) each Pension Plan which is intended to be qualified under
Section 401(a) of the Code, has been determined by the Internal Revenue Service
to be so qualified and, to the knowledge of any Individual Stockholder, no
condition exists that would adversely affect any such determination;
(c) neither any Benefit Plan, nor the Company or any NSJ
Company, nor any Commonly Controlled Entity, nor any trustee or agent has been
or is presently engaged in any prohibited transactions as defined by Section 406
of ERISA or Section 4975 of the Code for which an exemption is not applicable
which could subject the Company or any NSJ Company to the tax or penalty imposed
by Section 4975 of the Code or Section 502 of ERISA;
(d) there is no event or condition existing which could be
deemed a "reportable event" (within the meaning of Section 4043 of ERISA) with
respect to which the thirty-day notice requirement has not been waived; to the
knowledge of any Individual Stockholder, no condition exists which could subject
the Company or any NSJ Company to a penalty under Section 4071 of ERISA;
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(e) neither the Company, any NSJ Company nor any Commonly
Controlled Entity is or has ever been party to any "multi-employer plan," as
that term is defined in Section 3(37) of ERISA;
(f) true and correct copies of the most recent annual report
on Form 5500 and any attached schedules for each Benefit Plan (if any such
report was required by applicable law) and a true and correct copy of the most
recent determination letter issued by the Internal Revenue Service for each
Pension Plan have been provided to UniCapital;
(g) with respect to each Benefit Plan, there are no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
pending or, to the knowledge of any Individual Stockholder, threatened against
any Benefit Plan, the Company, any NSJ Company, any Commonly Controlled Entity
or any trustee or agent of any Benefit Plan; and
(h) with respect to each Benefit Plan to which the Company,
any NSJ Company or any Commonly Controlled Entity is a party which constitutes a
group health plan subject to Section 4980B of the Code, each such Benefit Plan
substantially complies, and in each case has substantially complied, with all
applicable requirements of Section 4980B of the Code.
(i) Except as set forth in Schedule 6.22:
(i) there is no outstanding liability (except for
premiums due) under Title IV of ERISA with respect to any Pension Plan;
(ii) neither the Pension Benefit Guaranty
Corporation, the Company, any NSJ Company nor any Commonly Controlled Entity has
instituted proceedings to terminate any Pension Plan and the Pension Benefit
Guaranty Corporation has not informed the Company or any NSJ Company of its
intent to institute proceedings to terminate any Pension Plan;
(iii) full payment has been made of all amounts which
the Company, any NSJ Company or any Commonly Controlled Entity was required to
have paid as a contribution to the Pension Plans as of the last day of the most
recent fiscal year of each of the Pension Plans ended prior to the date of this
Agreement, and none of the Pension Plans has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of each
such Pension Plan ended prior to the date of this Agreement;
(iv) to the knowledge of any Individual Stockholder,
the actuarial assumptions utilized, where appropriate, in connection with
determining the funding of each Pension Plan which is a defined benefit pension
plan (as set forth in the actuarial report for such Pension Plan) are
reasonable. Copies of the most recent actuarial reports have been furnished to
UniCapital. Based on such actuarial assumptions, as of the Interim Balance Sheet
Date, the fair market value of the assets or properties held under each such
Pension Plan exceeds the
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actuarially determined present value of all accrued benefits of such Pension
Plan (whether or not vested) determined on an ongoing Pension Plan basis;
(v) each of the Benefit Plans is, and its
administration is and has been during the six-year period preceding the date of
this Agreement, in substantial compliance with, and neither the Company nor any
NSJ Company has received any claim or notice that any such Benefit Plan is not
in compliance with, all applicable laws and orders and prohibited transaction
exemptions, including to the extent applicable, the requirements of ERISA;
(vi) neither the Company, any NSJ Company nor any
Commonly Controlled Entity is in default in performing any of its contractual
obligations under any of the Benefit Plans or any related trust agreement or
insurance contract;
(vii) there are no material outstanding liabilities
of any Benefit Plan other than liabilities for benefits to be paid to
participants in Benefit Plan and their beneficiaries in accordance with the
terms of Benefit Plan;
(viii) each Benefit Plan may be amended or modified
by the Company, each NSJ Company or Commonly Controlled Entity, as applicable,
at any time without liability except under any defined pension benefit plan;
(ix) no Benefit Plan other than a Pension Plan,
retiree medical plan or severance plan provides benefits to any individual after
termination of employment;
(x) the consummation of the transactions contemplated
by this Agreement will not (in and of itself): (A) entitle any employee of the
Company or any NSJ Company to severance pay, unemployment compensation or any
other payment; (B) accelerate the time of payment or vesting, or increase the
amount of compensation due to any such employee; (C) result in any liability
under Title IV of ERISA; (D) result in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
available; or (E) result (either alone or in conjunction with any other event)
in the payment or series of payments by the Company, any NSJ Company or any of
their respective affiliates to any person of an "excess parachute payment@
within the meaning of Section 280G of the Code;
(xi) with respect to each Benefit Plan that is funded
wholly or partially through an insurance policy, all premiums required to have
been paid to date under the insurance policy have been paid, all premiums
required to be paid under the insurance policy through the Merger Effective Date
will have been paid on or before the Merger Effective Date and, as of the Merger
Effective Date, there will be no liability of the Company, any NSJ Company or
any Commonly Controlled Entity under any insurance policy or ancillary agreement
with respect to such insurance policy in the nature of a retroactive rate
adjustment, loss sharing arrangement or
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other actual or contingent liability arising wholly or partially out of events
occurring prior to the Merger Effective Date;
(xii) (A) each Benefit Plan that constitutes a
"welfare benefit plan," within the meaning of Section 3(1) of ERISA, and for
which contributions are claimed by the Company, any NSJ Company or any Commonly
Controlled Entity as deductions under any provision of the Code, is in material
compliance with all applicable requirements pertaining to such deduction;
(B) with respect to any welfare benefit fund
(within the meaning of Section 419 of the Code) related to a welfare benefit
plan, there is no disqualified benefit (within the meaning of Section 4976(b) of
the Code) that would result in the imposition of a tax under Section 4976(a) of
the Code; and
(C) all welfare benefit funds intended to be
exempt from tax under Section 501(a) of the Code have been determined by the
Internal Revenue Service to be so exempt and no event or condition exists which
would adversely affect any such determination; and
(xiii) all benefit plans outside of the United
States, if any (the "Foreign Plans"), are in compliance with all applicable laws
and regulations and have been operated in accordance with the plans' respective
terms. There are no material unfunded liabilities under or in respect of the
Foreign Plans, and all contributions or other payments required to be made to or
in respect of the Foreign Plans prior to the Merger Effective Date have been
made or will be made prior to the Merger Effective Date.
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS. The Company and each NSJ
Company has complied with each, and is not in violation in any material respect
of any, law, ordinance, or governmental or regulatory rule or regulation,
whether federal, state, local or foreign ("Regulations"), to which such
Company's business, operations, assets or properties is subject, except for
immaterial failures to comply of which none of the Individual Stockholders has
no knowledge. The Company and each NSJ Company owns, holds, possesses or
lawfully uses in the operation of its business all franchises, licenses,
permits, easements, rights, applications, filings, registrations and other
authorizations ("Authorizations") which are in any manner necessary for it to
conduct its business as now or previously conducted or for the ownership and use
of the assets owned or used by such Company in the conduct of the business of
such Company, free and clear of all liens, charges, restrictions and
encumbrances and in compliance with all Regulations. All such Authorizations are
listed and described in Schedule 6.23. Neither the Company nor any NSJ Company
in default, except for immaterail defaults of which none of the Individual
Stockholders has any knowledge, nor has the Company or any NSJ Company received
any notice of any claim of such a default, with respect to any such
Authorization. All such Authorizations are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
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None of such Authorizations will be adversely affected by consummation of the
transactions contemplated hereby. No Stockholder and no director, officer,
employee or former employee of the Company or any NSJ Company or any affiliates
of the Company or any NSJ Company, or any other person, firm or corporation,
owns or has any proprietary, financial or other interest (direct or indirect) in
any Authorization which the Company or any NSJ Company owns, possesses or uses
in the operation of the business the Company or any NSJ Company as now or
previously conducted.
6.24 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
6.24, no Stockholder and no director, officer or employee of the Company or any
NSJ Company, or any member of his or her immediate family or any other of its,
his or her affiliates, owns or has a 5% or more ownership interest in any
corporation or other entity (other than another NSJ Company) that is or was
during the last three years a party to, or in any property which is or was
during the last three years the subject of, any contract, agreement or
understanding, business arrangement or relationship with the Company or any NSJ
Company.
6.25 LITIGATION. (a) Except as set forth on Schedule 6.25, no
litigation, including any arbitration, investigation or other proceeding of or
before any court, arbitrator or governmental or regulatory official, body or
authority is pending or, to the knowledge of any Individual Stockholder,
threatened against the Company or any NSJ Company or which relates to the
transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 6.25, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of any Individual Stockholder, threatened against
the Company or any NSJ Company or which relates to such Company.
(c) No Individual Stockholder knows of any reasonably likely
basis for any litigation, arbitration, investigation or proceeding referred to
in Sections 6.25(a) or (b).
(d) Except as set forth on Schedule 6.25, neither the Company
nor any NSJ Company is a party to or subject to the provisions of any judgment,
order, writ, injunction, decree or award of any court, arbitrator or
governmental or regulatory official, body or authority.
6.26 RESTRICTIONS. Except as set forth on Schedule 6.26, neither the
Company nor any NSJ Company is a party to any indenture, agreement, contract,
commitment, lease, plan, license, permit, authorization or other instrument,
document or understanding, oral or written, or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree or award
which materially adversely affects or materially restricts or, so far as any of
the Individual Stockholders can now reasonably foresee, may in the future
materially adversely affect or materially restrict, the consolidated business,
operations, assets, properties, prospects or
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condition (financial or otherwise) of the Company after consummation of the
transactions contemplated hereby.
6.27 TAXES. All federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by the Company or any
NSJ Company (the "Tax Returns") with respect to any federal, state, local or
foreign taxes, assessments, interest, penalties, deficiencies, fees and other
governmental charges or impositions (including all income tax, unemployment
compensation, social security, payroll, sales and use, excise, privilege,
property, ad valorem, franchise, license, school and any other tax or similar
governmental charge or imposition under laws of the United States or any state
or municipal or political subdivision thereof or any foreign country or
political subdivision thereof) (the "Taxes") have been timely filed with the
appropriate governmental agencies in all jurisdictions in which such Tax Returns
are required to be filed, and all such Tax Returns properly reflect the
liabilities of the Companies for Taxes for the periods, property or events
covered thereby. All Taxes, including those which are called for by the Tax
Returns, required to be paid, withheld or accrued by the Company and the NSJ
Companies and any deficiency assessments, penalties and interest have been
timely paid, withheld or accrued. The accruals for Taxes contained in the
Audited Balance Sheet are adequate to cover the Tax liabilities of the Company
and the NSJ Companies as of that date and include adequate provision for all
deferred Taxes, and nothing has occurred subsequent to that date to make any of
such accruals inadequate. The Company's and each NSJ Company's tax basis in its
assets for purposes of determining its future amortization, depreciation and
other federal income tax deductions is accurately reflected on such Company's
Tax books and records. Except as set forth on Schedules 6.17 or 6.35, neither
the Company nor any NSJ Company is or has at any time ever been a party to a Tax
sharing, Tax indemnity or Tax allocation agreement, and no such Company has
assumed any Tax liability of any other person or entity under contract. Neither
the Company nor any NSJ Company has received any notice of assessment or
proposed assessment in connection with any Tax Returns and there are not pending
tax examinations of or tax claims asserted against the Company or any NSJ
Company or any of its assets or properties. Neither the Company nor any NSJ
Company has extended, or waived the application of, any statute of limitations
of any jurisdiction regarding the assessment or collection of any Taxes. There
are now (and as of immediately following the Closing there will be) no Liens
(other than any Lien for current Taxes not yet due and payable) on any of the
assets or properties of the Company or any NSJ Company relating to or
attributable to Taxes. To the knowledge of any Individual Stockholder, there is
no basis for the assertion of any claim relating to or attributable to Taxes
which, if adversely determined, would result in any Lien on the assets of the
Company or any NSJ Company or otherwise have an adverse effect on the Company or
any NSJ Company or its business, operations, assets, properties, prospects or
condition (financial or otherwise). No Stockholder has any knowledge of any
basis for any additional assessment of any Taxes. All Tax payments related to
employees, including income tax withholding, FICA, FUTA, unemployment and
worker's compensation, required to be made by the Company and the NSJ Companies
have been fully and properly paid, withheld, accrued or recorded. There are no
contracts, agreements, plans or arrangements, including the provisions of this
Agreement, covering any employee or former employee of the Company or any NSJ
Company that,
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individually or collectively, could give rise to any payment (or portion
thereof) that would not be deductible pursuant to Sections 280G, 404 or 162 of
the Code. Two correct and complete copies of (a) all Tax examinations, (b) all
extensions of statutory limitations and (c) all federal, state and local income
tax returns and franchise tax returns of the Company and each NSJ Company
(including, if filed separately, any of their respective Subsidiaries) for the
last five fiscal years, or such shorter period of time as any of them shall have
existed, have heretofore been delivered by the Company and the Stockholders to
UniCapital. The Company and each NSJ Company made an election to be taxed under
the provisions of Subchapter S of the Code within 75 days of its original
organization and has at no time been taxed under the provisions of Subchapter C
of the Code. Each of the Company and each NSJ Company has a taxable year ended
December 31 and no such Company has made an election to retain a fiscal year
other than December 31 under Section 444 of the Code. Neither the Company nor
any NSJ Company has any net recognized built-in gain within the meaning of
Section 1374 of the Code. Each of the Company and each NSJ Company currently
utilizes the accrual method of accounting for income tax purposes and has not
changed its method of accounting for income tax purposes in the past five years.
6.28 INTELLECTUAL PROPERTY MATTERS.
(a) Neither the Company nor any NSJ Company has utilized or
currently utilizes any patent, trademark, trade name, service mark, copyright,
software, trade secret or know-how material to the business of such entity,
except for those listed on Schedule 6.28 (the "Intellectual Property"), all of
which are owned by such entity free and clear of any liens, claims, charges or
encumbrances. The Intellectual Property constitutes all such assets, properties
and rights which are used or held for use in, or are necessary for, the conduct
of the business of the Company and the NSJ Companies.
(b) Except as set forth in Schedule 6.28, there are no
royalty, commission or similar arrangements, and no licenses, sublicenses or
agreements, pertaining to any of the Intellectual Property.
(c) Except as set forth in Schedule 6.28, neither the Company
nor any NSJ Company infringes upon or unlawfully or wrongfully uses any patent,
trademark, trade name, service mark, copyright or trade secret owned or claimed
by another. No action, suit, proceeding or investigation has been instituted or
threatened relating to any, patent, trademark, trade name, service mark,
copyright or trade secret formerly or currently used by the Company or any NSJ
Company. Except as set forth in Schedule 6.28, none of the Intellectual Property
is subject to any outstanding order, decree or judgment. Neither the Company nor
any NSJ Company has agreed to indemnify any person or entity for or against any
infringement of or by the Intellectual Property.
(d) Except as set forth in Schedule 6.28, no present or former
employee of the Company or any NSJ Company and no other person or entity owns or
has any proprietary, financial or other interest, direct or indirect, in whole
or in part, in any of the Intellectual
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Property. Schedule 6.28(d) lists all confidentiality or non-disclosure
agreements currently in force and effect in connection with the Intellectual
Property to which the Company and each NSJ Company or any of its employees is a
party.
(e) Schedule 6.28(e) sets forth a complete and accurate list
of all items of Intellectual Property duly registered in, filed in or issued by
the United States Copyright Office or the United States Patent and Trademark
Office, any offices in the various states of the United States and any offices
in other jurisdictions.
(f) Except as set forth in Schedule 6.28, all Intellectual
Property in the form of computer software that is utilized by the Company or any
NSJ Company in the operations of its business is capable of processing date data
between and within the twentieth and twenty-first centuries.
(g) All Intellectual Property in the form of computer software
that is utilized by the Company or any NSJ Company in the operations of its
business is capable of processing date data between and within the twentieth and
twenty-first centuries, or can be rendered capable of processing such data
within 30 days by the expenditure of no more than $10,000 in the aggregate.
6.29 COMPLETENESS. The certified copies of the Certificate of
Incorporation and Bylaws, both as amended to date, of the Company and each NSJ
Company, and the copies of all material leases, instruments, agreements,
licenses, permits, certificates or other documents which are included on
schedules attached hereto or which have been delivered or have been made
available to UniCapital to the extent required by the terms of this Agreement,
are complete and correct; neither the Company nor any NSJ Company nor, to the
knowledge of any Individual Stockholder, any other party to any of the foregoing
is in material default thereunder; and, except as set forth in the schedules and
documents attached to this Agreement, the rights and benefits of each of the
Company and each NSJ Company) thereunder will not be materially and adversely
affected by the transactions contemplated hereby, and the execution of this
Agreement and the performance of the obligations hereunder will not result in a
material violation or breach or constitute a material default under any of the
terms or provisions thereof. Except as set forth on Schedule 6.29, none of such
leases, instruments, agreements, contracts, licenses, permits, certificates or
other documents requires notice to, or the consent or approval of, any
governmental agency or other third party to any of the transactions contemplated
hereby to remain in full force and effect. The consummation of the transactions
contemplated hereby will not give rise to any right of termination, cancellation
or acceleration or result in the loss of any right or benefit thereunder.
6.30 EXISTING CONDITION. Except as set forth in Schedule 6.30, between
the Audited Balance Sheet Date and the date of this Agreement, neither the
Company nor any NSJ Company has:
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(a) incurred any liabilities, other than liabilities incurred
in the ordinary course of business consistent with past practice, or discharged
or satisfied any lien or encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice, or failed to pay or
discharge when due any liabilities of which the failure to pay or discharge has
caused or will cause any material damage or risk of material loss to it or any
of its assets or properties;
(b) sold, encumbered, assigned or transferred any assets,
properties or rights or any interest therein, except for the sales in the
ordinary course of business consistent with past practice, or made any agreement
or commitment or granted any option or right with, of or to any person to
acquire any assets, properties or rights of the Company or any NSJ Company or
any interest therein;
(c) created, incurred, assumed or guaranteed any indebtedness
for money borrowed, or mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract or other
encumbrance other than in the ordinary course of business consistent with past
practice.
(d) except in the ordinary course of business consistent with
past practice, made or suffered any material amendment or termination of any
material agreement, contract, commitment, lease or plan to which it is a party
or by which it is bound, or canceled, materially modified or waived any
substantial debts or claims held by it or waived any rights of substantial
value, where such amendments, terminations, cancellations, modifications and
waivers in the aggregate do not or could not reasonably be expected to have a
material adverse effect on the business, operations, assets, properties,
prospects or condition (financial or otherwise) of the Company or the NSJ
Company, taken as a whole;
(e) except in the ordinary course of business consistent with
past practice during the period beginning on January 1, 1998 and ending on the
day prior to the Closing Date and for any dividends in such amounts necessary to
pay taxes on account of any income of the Company or any NSJ Company, declared,
set aside or paid any dividend or made or agreed to make any other distribution
or payment in respect of its capital shares or redeemed, purchased or otherwise
acquired or agreed to redeem, purchase or acquire any of its shares of capital
stock or other ownership interests;
(f) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting its business,
operations, assets, properties or prospects or (ii) of any item or items carried
on its books of account individually or in the aggregate at more than $25,000,
or suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;
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(g) suffered any material adverse change in its business,
operations, assets, properties, prospects or condition (financial or otherwise),
other than as directly caused by adverse economic conditions not specific to, or
having an extraordinary impact upon, the Company and the NSJ Companies;
(h) received notice or had knowledge of any actual or
threatened labor trouble, strike or other occurrence, event or condition of any
similar character which has had or might have an adverse effect on its business,
operations, assets, properties or prospects;
(i) made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $25,000, except in
the ordinary course of business consistent with past practice or such as may be
involved in ordinary repair, maintenance or replacement of its assets;
(j) increased the salaries or other compensation of, or made
any advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its non- Stockholder employees or made any increase in, or any
addition to, other benefits to which any of its non-Stockholder employees may be
entitled;
(k) materially changed any of the accounting principles
followed by it or the methods of applying such principles;
(l) changed its authorized capital or its securities
outstanding or otherwise changed its ownership interests, or granted any
options, warrants, calls, conversion rights or commitments with respect to any
of its capital stock or other ownership interests; or
(m) agreed to take any of the actions referred to above.
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Attached hereto as
Schedule 6.31 is an accurate list, as of the date of this Agreement, of:
(a) the name of each financial institution in which the
Company or any NSJ Company has accounts or safe deposit boxes;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have
access thereto; and
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(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Company or any NSJ
Company and a description of the terms of such power.
6.32 BOOKS OF ACCOUNT. The books, records and accounts of the Company
and each NSJ Company accurately and fairly reflect, in reasonable detail, the
transactions and the assets and liabilities of such Company. Neither the Company
nor any NSJ Company has engaged in any transaction, maintained any bank account
or used any material funds of entity except for transactions, bank accounts and
funds which have been and are reflected in the normally maintained books and
records of the business.
6.33 ENVIRONMENTAL MATTERS. (a) The Company and each NSJ Company has
secured, and is in compliance with, all Environmental Permits, with respect to
any premises on which its business is operated, all of which Environmental
Permits shall vest in the applicable Surviving Corporation upon consummation of
the transactions contemplated hereby. The Company and each NSJ Company is in
compliance with all Environmental Laws.
(b) Neither the Company, any NSJ Company nor Stockholder has
received any communication from any Governmental Entity that alleges that any
Company is not in compliance with any Environmental Laws or Environmental
Permits.
(c) Neither the Company nor any NSJ Company has entered into
or agreed to any court decree or order, and no such entity is subject to any
judgment, decree or order, relating to compliance with any Environmental Law or
to investigation or cleanup of a Hazardous Substance under any Environmental
Law.
(d) No lien, charge, interest or encumbrance has been
attached, asserted, or to the knowledge of any Individual Stockholder,
threatened to or against any assets or properties of the Company or any NSJ
Company pursuant to any Environmental Law.
(e) There has been no treatment, storage, disposal or release
of any Hazardous Substance on any property owned, operated or leased by the
Company or any NSJ Company.
(f) Neither the Company nor any NSJ Company has received a
CERCLA 104(e) information request or has been named a potentially responsible
party for any National Priorities List site under CERCLA or any site under
analogous state law or received an analogous notice or request from any non-U.S.
Governmental Entity, which notice, request or any resulting inquiry or
litigation has not been fully and finally resolved without possibility of
reopening.
(g) There are no aboveground tanks or underground storage
tanks on, under or about any property owned, operated or leased by the Company
or any NSJ Company and any former aboveground or underground tanks on any
property owned, operated or leased by the
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Company or any NSJ Company have been removed in accordance with all
Environmental Laws and no residual contamination, if any, remains at such sites
in excess of applicable standards.
(h) There are no polychlorinated biphenyls ("PCBs") leaking
from any article, container or equipment on, under or about any property owned,
operated or leased by the Company or any NSJ Company and there are no such
articles, containers or equipment containing PCBs, and there is no asbestos
containing material in a condition or location currently constituting a
violation of any Environmental Law at, on, under or within any property owned,
operated or leased by the Company or any NSJ Company.
(i) The Company, the NSJ Companies and the Stockholders have
collectively provided to UniCapital true and complete copies of, or access to,
all written environmental assessment materials and reports in their possession
that have been prepared by or on behalf of the Company or the NSJ Companies
during the past five years.
6.34 NO ILLEGAL PAYMENTS. Neither the Company nor any NSJ Company and,
to the knowledge of any Individual Stockholder, no affiliate, officer, agent or
employee thereof, directly or indirectly, has, during the past five years, on
behalf of or with respect to any Company or any affiliate thereof, (a) made any
unlawful domestic or foreign political contributions, (b) made any payment or
provided any services which were not legal to make or provide or which the
Company or any NSJ Company or any affiliate thereof or any such officer, agent
or employee should have known were not legal for the payee or the recipient of
such services to receive, (c) received any payment or any services which were
not legal for the payer or the provider of such services to make or provide, (d)
made any payment to any person or entity, or agent or employee thereof, in
connection with any Lease (as hereinafter defined) to induce such person or
entity to enter into a Lease transaction, (e) had any material transactions or
material payments related to the Companies which are not recorded in their
accounting books and records or (f) had any off- book bank or cash accounts or
"slush funds" related to the Company or any NSJ Company.
6.35 LEASES. Schedule 6.35 hereto sets forth the Company's and each NSJ
Company's lease/financing arrangements as of the Audited Balance Sheet Date
(which, together with all other lease/financing arrangements entered into by the
Company or any NSJ Company between such date and the Closing Date, are referred
to herein as the "Leases"). The term "Lease Documents" means the lease
arrangements and financing contracts evidencing the Leases described on Schedule
6.35, together with all related documents and agreements including master lease
agreements, schedules or other addenda to such Leases, certificates of delivery
and acceptance, UCC financing statements, remarketing agreements, residual
guaranty agreements, insurance policies, guaranty agreements and other credit
supports. The term "Equipment" means all equipment, inventory and other property
described as being leased pursuant to a Lease, or in which the Company or any
NSJ Company is granted a security interest pursuant to a Lease. The term
"Obligor" means any lessee party or other party obligated to pay or perform any
obligations under or in respect of a Lease or the Equipment covered by a Lease
(excluding the lessor party thereunder, but otherwise including any guarantor of
a Lease or any vendor, manufacturer or
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similar party under a remarketing agreement, residual guaranty or similar
agreement). The term "Scheduled Payments" means the monthly or periodic rental
payments or installments of principal and interest under the terms of the
Leases. Except as set forth in Schedule 6.35:
(a) There is no restriction or limitation in any of the Lease
Documents or otherwise, restricting the Company or any NSJ Company from
executing this Agreement or entering into the transactions contemplated by this
Agreement, other than consents which have been, or prior to the Closing will
have been, obtained.
(b) The Company or applicable NSJ Company owns or validly
leases the Equipment covered by each Lease.
(c) Each Lease is in full force and effect in accordance with
its terms, and, to the knowledge of any Individual Stockholder, there has been
no occurrence which would or might permit any Obligor to terminate such Lease or
suspend or reduce any payments or obligations due or to become due in respect of
such Lease or the related Lease Documents by reason of default by the lessor
party under such Lease. To the knowledge of any Individual Stockholder, none of
the Obligors in respect of a Lease or the related Lease Documents is the subject
of a bankruptcy, insolvency or similar proceeding.
(d) Except for the delinquency in the payment of any Scheduled
Payment that is not more than 90 days past due, there does not exist any default
in the payment of any Scheduled Payments due under any Lease or the related
Lease Documents, and there does not exist any other default, breach, violation
or event permitting acceleration, termination or repossession under any Lease or
the related Lease Documents or any event which, to the knowledge of any
Stockholder, with notice and the expiration of any applicable grace or cure
period, would constitute such a default, breach, violation or event permitting
acceleration, termination or repossession under such Lease or the related Lease
Documents.
(e) Neither the Company nor any NSJ Company has acted in a
manner which (nor has the Company nor any NSJ Company failed to act where such
failure to act) would alter or reduce any of such entity's rights or benefits
under any manufacturer's or vendors' warranties or guarantees with respect to
any Equipment.
(f) The Company and each NSJ Company has complied with all
requirements of any federal, state or local law, including usury laws,
applicable to each Lease.
(g) Except as set forth in Schedule 6.35, each Lease has the
following characteristics:
(i) such Lease was originated in the United States
and the Scheduled Payments thereunder are payable in U.S. dollars by Obligors
domiciled in the United States;
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(ii) the lessee party under such Lease has
unconditionally accepted the Equipment covered by such Lease ;
(iii) at least one Scheduled Payment has been made by
the Obligor under each such Lease; and
(iv) no Obligor in respect of such Lease is an
affiliate of the Company or any NSJ Company.
(h) Each Lease and the related Lease Documents are valid,
binding, legally enforceable and non-cancelable obligations of the applicable
Company, and to the knowledge of any Individual Stockholder, the other parties
thereto, enforceable in accordance with their respective terms. Each Lease is a
business obligation of the lessee thereunder and is not a "consumer transaction"
under any applicable federal or state regulation.
(i) To the knowledge of any Individual Stockholder, no Lease
or related Lease Document is the subject of a fraudulent scheme by any Obligor
or any supplier of Equipment.
(j) Each item of Equipment is subject to a Lease.
(k) Each Lease is a fixed rate lease contract.
(l) No Lease or related Lease Document is subject to any right
of rescission, set-off, counterclaim, abatement or defense, including any
defense of usury, nor will the operation of any of the terms of any Lease or any
related Lease Document or the exercise of any right or remedy thereunder render
such Lease or any related Lease Document or the obligations thereunder
unenforceable, or subject the same to any right of rescission, set-off,
counterclaim, abatement or defense. No Obligor has asserted any right of
rescission, set-off, counterclaim, abatement or defense to its obligations under
a Lease or any related Lease Document.
(m) As to the Leases and the related Lease Documents, (i) none
has been amended or modified (a) to extend the maturity date for a period of
more than one year, or (b) to alter the amount or time of payment of any amount
due thereunder; unless as to (a) and (b) such extension or alteration is
reasonably expected to result in a net economic benefit to the Company and the
NSJ Companies, (ii) no indulgences or waivers have been granted in respect of
the obligations of any Obligor under any Lease, and (iv) neither the Company nor
any NSJ Company has advanced any monies on behalf of any Obligor.
(n) Each Lease requires the Obligor thereunder at its own cost
and expense to maintain the Equipment leased thereunder in good repair,
condition and working order, and to the knowledge of any Individual Stockholder,
each Obligor under a Lease is currently in compliance with such requirement.
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(o) Each Lease requires the Obligor thereunder (i) to pay all
fees, taxes (except income taxes), and other charges or liabilities arising with
respect to the Equipment leased thereunder or the use thereof, (ii) to keep the
Equipment free and clear of any and all liens, security interests and other
encumbrances, other than security interests of the applicable Company, (iii) to
hold harmless the lessor thereunder and its successors and assigns against the
imposition of any fees, charges, liabilities and encumbrances, (iv) to bear all
risk of loss associated with the Equipment covered by or securing the
obligations under such Lease during the term of such Lease and (v) to maintain
at the cost of the Obligor public liability and casualty insurance in respect of
such Equipment covered by such Lease.
(p) Except as set forth on Schedule 6.35, each Lease involves
either the lease of tangible personal property owned, either beneficially or
legally, or leased by the Company or the applicable NSJ Company or the loan of
money secured by a security interest in tangible personal property owned by the
Obligor thereunder.
(q) Neither the Company nor any NSJ Company has received any
notice challenging its ownership or the priority of its security interest in the
Equipment covered by each Lease, and there are no proceedings pending before any
court or governmental entity or, to the knowledge of the Stockholders,
threatened by any Obligor or other party, (i) asserting the invalidity of any
Lease or the related Lease Documents, (ii) seeking to prevent payment or
performance by any Obligor of any Lease or any of the terms of the related Lease
Documents, or (iii) seeking any determination or ruling that might adversely
affect the validity or enforceability of any Lease or any of the terms or
provisions of the related Lease Documents.
(r) As to each Lease, there are no material agreements or
understandings between the Company or any NSJ Company and the Obligors in
respect of such Lease or otherwise binding on the Company or any NSJ Company
other than as expressly set forth in the Lease and the related Lease Documents.
6.36 LEASE FUNDING. Except as set forth on Schedule 6.36, the Company
and each NSJ Company is in compliance with all of the material terms and
covenants of, and is not in material default or breach under, each agreement,
contract, understanding or arrangement with any funding source for the Leases.
6.37 DISCLOSURE. The Company and the NSJ Companies have delivered, or
in the case of the Leases, Lease Documents and loan documents made available to,
UniCapital true and complete copies of each agreement, contract, commitment or
other document (or, in the case of any such document not in the possession of
reasonably available to the Company or a NSJ Company or a Stockholder, accurate
and complete summaries thereof) that is referred to in the schedules to this
Agreement or that has been requested by UniCapital or its representatives.
Without limiting any exclusion, exception or other limitation contained in any
of the representations and warranties made herein, this Agreement and the
schedules hereto do not and will not include any untrue statement of a material
fact or omit to state a material fact necessary
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to make the statements herein and therein not misleading. If any Individual
Stockholder become aware of any fact or circumstance that would materially
change a representation or warranty of the Stockholders in this Agreement or any
representation made on behalf of the Company or any NSJ Company, then such
Stockholder shall as promptly as practical give notice of such fact or
circumstance to UniCapital. However, such notification shall not relieve the
Company or any NSJ Company or any of the Stockholders of their respective
obligations under this Agreement, and at the sole option of UniCapital, the
truth and accuracy of any and all warranties and representations of the
Stockholders, at the date of this Agreement and at the Closing, shall be a
precondition to the consummation of this transaction.
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, UniCapital and Newco, jointly and severally, represent and
warrant as follows:
7.1 CORPORATE EXISTENCE. UniCapital is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Newco is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. Immediately prior to the
Effective Time, each of UniCapital and Newco will be duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction
where the conduct of its business requires it to be so qualified.
7.2 UNICAPITAL STOCK. The shares of UniCapital Stock to be issued and
delivered to the Stockholders on the Merger Effective Date, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable shares, and except for restrictions upon
resale, will be legally equivalent in all respects to the majority of UniCapital
Stock issued and outstanding as of the date hereof. The UniCapital Stock to be
issued upon the conversion of Company Stock pursuant to the terms of this
Agreement will be free and clear of all liens, encumbrances and claims of every
kind, other than restrictions upon transfer contained herein and other than any
liens, encumbrances or claims arising other than by the actions of UniCapital or
Newco.
7.3 CORPORATE POWER AND AUTHORIZATION. UniCapital and Newco have the
corporate power, authority and legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance of this Agreement and all
related documents and agreements required to be executed and delivered by
UniCapital and Newco in accordance with the provisions hereof (the "UniCapital
Documents") have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by UniCapital and Newco and
constitutes, and the UniCapital Documents when executed and delivered will
constitute, the legal, valid and binding obligations of UniCapital and Newco
enforceable against UniCapital and Newco in accordance with its terms.
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7.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement by UniCapital and Newco will not violate, conflict with or result in
the breach of any term, condition or provision of, or require the consent of any
other person under (a) any existing law, ordinance, or governmental rule or
regulation to which UniCapital or Newco is subject, (b) any judgment, order,
writ, injunction, decree or award of any Governmental Entity which is applicable
to UniCapital or Newco, (c) the charter documents of UniCapital or Newco, or (d)
any mortgage, indenture, agreement, contract, commitment, lease, plan,
Authorization, or other instrument, document or understanding, oral or written,
to which UniCapital or Newco is a party, by which UniCapital or Newco may have
rights or by which any of the properties or assets of UniCapital or Newco may be
bound or affected, or give any party with rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of UniCapital or Newco thereunder. Except for filing the Articles of
Merger, filings under the HSR Act and except as aforesaid, no authorization,
approval or consent of, and no registration or filing, provided that with
respect to such Act the representation set forth in this sentence shall be
limited to those facts of which UniCapital or Newco has knowledge) with, any
Governmental Entity is required in connection with the execution, delivery or
performance of this Agreement by UniCapital or Newco.
7.5 CAPITALIZATION OF UNICAPITAL. The IPO will result in an aggregate
market capitalization of UniCapital that will exceed Three Hundred Million
Dollars ($300,000,000), as determined by multiplying the outstanding shares of
UniCapital immediately following the closing by the IPO Price.
7.6 COMPLIANCE WITH LAW; AUTHORIZATIONS. Each of UniCapital and Newco
has complied with each, and is not in violation of Regulations to which
UniCapital's and Newco's respective business, operations, assets or properties
is subject. Each of UniCapital and Newco owns, holds, possesses or lawfully uses
in the operation of its business all Authorizations which are in any manner
necessary for it to conduct its business as now or previously conducted or for
the ownership and use of the assets owned or used by UniCapital and Newco,
respectively, in the conduct of the business of such company, free and clear of
all liens, charges, restrictions and encumbrances and in compliance with all
Regulations. Neither UniCapital nor Newco is in default, nor has UniCapital or
Newco received any notice of any claim of default, with respect to any such
Authorization. All such Authorizations are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
None of such Authorizations will be adversely affected by consummation of the
transactions contemplated hereby. No stockholder and no director, officer,
employee or former employee of UniCapital of Newco any of their affiliates, or
any other person, firm or corporation, owns or has any proprietary, financial or
other interest (direct or indirect) in any Authorization which UniCapital or
Newco owns, possesses or uses in the operation of the business of UniCapital and
Newco as now or previously conducted.
7.7 TRANSACTIONS WITH AFFILIATES. Except as described in the
Registration Statement, no stockholder and no director, officer or employee of
UniCapital or Newco, or any member of
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his or her immediate family or any other of its, his or her affiliates, owns or
has a 5% or more ownership interest in any corporation or other entity that is
or was during the last three years a party to, or in any property which is or
was during the last three years the subject of, any contract, agreement or
understanding, business arrangement or relationship with UniCapital or Newco.
7.8 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of UniCapital and Newco, threatened against UniCapital or Newco which
relates to the transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 7.8, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of UniCapital or Newco, threatened against
UniCapital or Newco or which relates to UniCapital or Newco.
(c) Neither UniCapital nor Newco is a party to or subject to
the provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority."
7.9 REGISTRATION RIGHTS As of the date hereof and as of the Merger
Effective Date, no officer, director or shareholder of UniCapital will have been
granted any registration rights with respect to the registration of any shares
of capital stock of UniCapital.
7.10 MISCELLANEOUS. Prior to the consummation of the Merger, UniCapital
and Newco will have no material properties or assets and are not party to any
contracts other than this Agreement, the letter of intent among the parties to
this Agreement, certain employment agreements with officers of UniCapital,
certain real property leases relating to the principal executive offices of
UniCapital, and those agreements and letters of intent listed on Schedule 7.10
hereto.
8. COVENANTS OF STOCKHOLDERS
The following covenants shall apply during the period from and after
the date hereof through the Closing Date.
8.1 BUSINESS IN THE ORDINARY COURSE. Except as otherwise expressly
contemplated by this Agreement, the Stockholders shall cause the Company and
each NSJ Company to conduct its respective business solely in the ordinary
course and consistent with past practice.
8.2 EXISTING CONDITION. To the extent within the reasonable control of
the Stockholders, no Stockholder shall suffer the Company or any NSJ Company to
cause or permit to occur any of the events or occurrences described in Section
6.30 hereof. Notwithstanding
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anything in this Agreement to the contrary, at any time or from time to time
between the date hereof and the Closing Date, the Company and the NSJ Companies
shall be able to make distributions to the Stockholders either in the form of
cash or promissory notes for the purpose of enabling the Stockholders to satisfy
their respective tax liabilities for the 1997 and the 1998 Period.
8.3 MAINTENANCE OF PROPERTIES AND ASSETS. Except as otherwise expressly
contemplated by this Agreement, the Stockholders shall cause the Company and
each NSJ Company to use its reasonable commercial efforts to, maintain and
service its properties and assets in order to preserve their value and
usefulness in the conduct of their respective businesses.
8.4 EMPLOYEES AND BUSINESS RELATIONS. The Stockholders shall cause the
Company and each NSJ Company to use its reasonable commercial efforts to keep
available the services of its current employees and agents and to maintain its
relations and goodwill with its suppliers, customers, distributors and any
others with whom or with which it has business relations.
8.5 MAINTENANCE OF INSURANCE. The Stockholders shall cause the Company
and each NSJ Company to notify UniCapital of any material changes in the terms
of the insurance policies and binders referred to on Schedule 6.20 hereto.
8.6 COMPLIANCE WITH LAWS, ETC. The Stockholders shall cause the Company
and each NSJ Company to comply with all laws, ordinances, rules, regulations and
orders applicable to the Company and each NSJ Company or its business,
operations, properties or assets, except where the noncompliance with which
could not reasonable be expected to materially adversely affect the Company or
such NSJ Company.
8.7 CONDUCT OF BUSINESS. The Stockholders shall cause the Company and
each NSJ Company to use its reasonable commercial efforts to conduct its
business in such a manner that on the Closing Date and on the Merger Effective
Date the representations and warranties of the Stockholders contained in this
Agreement shall be true, as though such representations and warranties were made
on and as of each such date (except to the extent such representations or
warranties expressly speak as of a specific date), and the Stockholders shall
cause the Company and each NSJ Company to use its reasonable commercial efforts
to cause all of the conditions to the obligations of UniCapital and the
Stockholders under this Agreement to be satisfied on or prior to the Closing
Date. The Stockholders shall cause the Company and each NSJ Company to, maintain
credit underwriting standards consistent with past practices.
8.8 ACCESS. Upon prior reasonable notice, the Stockholders shall cause
the Company and each NSJ Company to give to UniCapital's officers, employees,
counsel, accountants and other representatives free and full access to and the
right to inspect, during normal business hours, all of the premises, properties,
assets, records, contracts and other documents relating to the Company and the
NSJ Companies and shall permit them to consult with the officers,
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employees, accountants, counsel and agents of the Company and the NSJ Companies
for the purpose of making such investigation of such entities as UniCapital
shall reasonably request; provided that such investigation shall not
unreasonably interfere with such entities business operations, and provided,
further, that UniCapital shall not contact or consult with any non-officer
employees of the Company without the Company's prior consent, which consent
shall not be unreasonably withheld. Furthermore, the Stockholders shall cause
the Company and each NSJ Company to furnish to UniCapital all such documents and
copies of documents and records and information with respect to the affairs of
such entity and copies of any working papers relating thereto as UniCapital
shall from time to time reasonably request. No information or knowledge obtained
in any investigation pursuant to this Section 8.8 or otherwise shall affect or
be deemed to modify any representation or warranty contained in this Agreement
or the conditions to the obligations of the parties to consummate the Merger.
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS. The Stockholders shall
cause the Company and each NSJ Company to refrain from giving notice to third
parties or otherwise make any press release or other public statement concerning
this Agreement or the transactions contemplated hereby. No Stockholder shall,
and the Stockholders shall cause the Company and each NSJ Company not to, grant
any interview, publish any article, report or statement, or respond to any press
inquiry or other inquiry of any third party relating to this Agreement, the
business of the Company or the NSJ Companies, the business (current and
proposed) of UniCapital, the Registration Statement (as defined below), the IPO
or any other matter connected with any of the foregoing without the express
prior written approval of UniCapital, and all inquiries and questions with
respect to any of the foregoing shall be coordinated through Robert New, Chief
Executive Officer of UniCapital. Each Stockholder shall, and shall cause the
Company and the NSJ Companies to, coordinate all communications with the
employees and agents of the Company or any NSJ Company concerning this Agreement
or the transactions contemplated hereby through UniCapital prior to making any
such communication. Notwithstanding the above, the Stockholders may communicate,
whether oral or in writing, with any lenders, lessors, customers, suppliers or
any other parties from whom any consents, approvals or waivers are necessary or
advisable, or to whom notice is necessary or advisable, as well as with any
professional advisors with respect to the transactions contemplated by this
Agreement and related matters. Notwithstanding the foregoing, this Section 8.9
shall not be interpreted to prevent the Company, any NSJ Company or any
Stockholder from disclosing information as compelled by a court order, provided,
however, that prior to disclosing any information concerning this Agreement or
the transaction contemplated hereby in response to any such court order, the
Stockholders shall, or shall cause the Company or the applicable NSJ Company to,
provide UniCapital with prompt notice of the court order so that UniCapital may
take whatever action it deems appropriate to prohibit such disclosure.
8.10 EXCLUSIVITY. Except with respect to this Agreement and the
transactions contemplated hereby, no Stockholder and none of their affiliates
shall, and each of them shall cause the Company and each NSJ Company and their
respective employees, agents and representatives (including any investment
banking, legal or accounting firm retained by it or
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them and any individual member or employee of the foregoing) (each, an "Agent")
not to, (a) initiate, solicit or seek, directly or indirectly, any inquiries or
the making or implementation of any proposal or offer (including any proposal or
offer to the Stockholders or any of them) with respect to a merger, acquisition,
consolidation, recapitalization, liquidation, dissolution or similar transaction
involving, or any purchase of all or any portion of the assets or any equity
securities of, the Company or any NSJ Company other than any such transaction
effected or to be effected in the ordinary course of business (any such proposal
or offer being hereinafter referred to as an "Acquisition Proposal"), or (b)
engage in any negotiations concerning, or provide any confidential information
or data to, or have any substantive discussions with, any person relating to an
Acquisition Proposal, (c) otherwise cooperate in any effort or attempt to make,
implement or accept an Acquisition Proposal, or (d) enter into or consummate any
agreement or understanding with any person or entity relating to an Acquisition
Proposal, and the Merger contemplated hereby. If the Company, any NSJ Company or
any Stockholder, or any of their respective Agents, have provided any person or
entity (other than UniCapital) with any confidential information or data
relating to an Acquisition Proposal, then the Stockholders shall request the
immediate return thereof. The Stockholders shall notify UniCapital immediately
if any inquiries, proposals or offers related to an Acquisition Proposal are
received by, any confidential information or data is requested from, or any
negotiations or discussions related to an Acquisition Proposal are sought to be
initiated or continued with, it or any individual or entity referred to in the
first sentence of this Section 8.10. The covenant contained in this Section 8.10
shall not survive any termination of this Agreement pursuant to Sections 13.1,
13.2 or 13.3.
8.11 SUPPLIER APPROVAL. Prior to the Closing Date, the Stockholders
will cause the Company and each NSJ Company to satisfy any requirement for
notice and approval of the transactions contemplated by this Agreement under
applicable supplier agreements, and shall provide UniCapital with satisfactory
evidence of such approvals.
8.12 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
Stockholders will cause the Company and each NSJ Company to satisfy any
requirement for notice of the transactions contemplated by this Agreement under
any applicable collective bargaining agreement, and shall provide UniCapital
with proof that any required notice has been provided.
8.13 NOTIFICATION OF CERTAIN MATTERS. (a) The Stockholders shall give
prompt notice to UniCapital of (i) the occurrence or non-occurrence of any event
known to any Individual Stockholder the occurrence or non-occurrence of which
would be likely to cause any representation or warranty contained in Article 6
to be untrue or inaccurate in any material respect at or prior to the Closing
Date and (ii) any material failure of any Stockholder to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by such
person hereunder.
(b) UniCapital shall give prompt notice to each Stockholder of
(i) the occurrence or non-occurrence of any event known to UniCapital the
occurrence of non-
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occurrence of which would be likely to cause any representation or warranty
contained in Article 7 to be untrue or inaccurate in any material respect at or
prior to the Closing Date and (ii) any material failure of UniCapital to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder.
(c) The delivery of any notice pursuant to this Section 8.13
shall not be deemed to (i) modify the representations or warranties hereunder of
the party delivering such notice, which modification may only be made pursuant
to Section 8.14, (ii) modify the conditions set forth in Sections 9 and 10 or
(iii) limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
8.14 AMENDMENT OF SCHEDULES. Each party shall have, with respect to the
representations and warranties of such party contained in this Agreement, an
obligation until the Merger Effective Date to supplement or amend the schedules
hereto within two days of each filing with the SEC of an amendment to the
Registration Statement with respect to any matter hereafter arising or
discovered which, if existing or known at the date of this Agreement, would have
been required to be set forth or described in the schedules, provided that no
amendment or supplement to a Schedule that constitutes or reflects a material
adverse change in the business, operations, assets, properties, prospects or
condition (financial or otherwise) of the Company or the NSJ Companies, taken as
a whole (a "Material Adverse Amendment"), may be made unless UniCapital consents
to such amendment or supplement; and provided further, however, that UniCapital
may not withhold consent to such Material Adverse Amendment if the same relates
to (i) changes in facts or circumstances occurring subsequent to the date
hereof, or (ii) facts and circumstances existing as of the date hereof that were
not disclosed by the Stockholders because they did not have knowledge of them
(but, with respect to facts and circumstances described in (ii) only to the
extent that the omission thereof from Schedules attached hereto as of the date
hereof was not the result of a lack of good faith diligence on the part of the
Stockholders). Notwithstanding the foregoing, (i) if any such amendment or
supplement relates to changes in facts or circumstances occurring subsequent to
the date of this Agreement and such amendment or supplement constitutes or
reflects a Material Adverse Amendment, then such amendment or supplement shall
be accepted by UniCapital subject to the provisions of Section 12.2 hereof and
(ii) no amendment of or supplement to a schedule shall be made later than 48
hours prior to the anticipated effectiveness of the Registration Statement
defined in Section 9.4. Only (i) the schedules attached to this Agreement at the
time of its execution and (ii) amended schedules as accepted under the standards
and provisions of this Section 8.14, shall be deemed to be part of this
Agreement in accordance with Section 19.3 hereof. UniCapital shall provide the
Individual Stockholders with no less than five days notice of the filing of any
amendment of the Registration Statement for the purposes of the first sentence
of this Section 8.14, and in the absence of the provision of such notice,
UniCapital will be deemed to have waived the requirement of the Individual
Stockholders to have updated the Schedules to this Agreement with respect to
that specific filing with the SEC.
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9. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS
The obligations of the Stockholders hereunder are subject to the
satisfaction on or prior to the Closing Date (or such earlier date specified
below) of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representations and warranties of UniCapital and Newco contained in Article 7
shall be accurate as of the Closing Date and (except to the extent
representations and warranties expressly speak as of an earlier date) as of the
Merger Effective Date as though such representations and warranties had been
made as of such times; all of the terms, covenants and conditions of this
Agreement to be complied with and performed by UniCapital and Newco on or before
the Closing Date shall have been duly complied with and performed; and a
certificate to the foregoing effect dated the Merger Effective Date and signed
by a duly authorized agent, the President or any Vice President of UniCapital
shall have been delivered to the Stockholders.
9.2 EMPLOYMENT AGREEMENTS. The Surviving Corporation shall have
executed and delivered Employment Agreements, in the form of Annex V attached
hereto, to each of the persons listed on Schedule 9.2 hereto.
9.3 OPINION OF COUNSEL. The Stockholders shall have received an opinion
from counsel for UniCapital, dated the Merger Effective Date, to the effect
that:
(a) UniCapital and Newco have been duly organized and are
validly existing in good standing under the laws of their respective states of
incorporation;
(b) this Agreement has been duly authorized, executed and
delivered by UniCapital and Newco and constitutes a valid and binding agreement
of UniCapital and Newco enforceable in accordance with its terms, except (i) as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting the
rights of creditors, (ii) as the same may be subject to the effect of general
principles of equity and (iii) that no opinion need be expressed as to the
enforceability of indemnification provisions included herein;
(c) the shares of UniCapital Stock to be received by the
Stockholders on the Merger Effective Date shall be duly authorized, fully paid
and nonassessable; and
(d) the execution, delivery and performance of this Agreement
and the consummation of any transactions contemplated hereby will not conflict
with, or result in a breach or violation of, the Certificate of Incorporation or
Bylaws of UniCapital or Newco.
9.4 REGISTRATION STATEMENT. UniCapital shall have filed with the
Securities and Exchange Commission ("SEC") a registration statement on Form S-1
covering the offer and sale of shares of UniCapital Stock in the IPO (the
"Registration Statement"). The Registration
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Statement shall have been declared effective by the SEC not later than June 30,
1998, UniCapital and the underwriters named therein shall have executed the
Underwriting Agreement and the underwriters named therein shall have agreed to
acquire, subject to the conditions set forth in the Underwriting Agreement, the
shares of UniCapital Stock covered by the Registration Statement. There shall
have been no stop-order issued (that remains in effect) by the Securities and
Exchange Commission with respect to the Registration Statement.
9.5 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the HSR Act shall have expired or been terminated.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND
NEWCO
The obligations of UniCapital and Newco hereunder are subject to the
satisfaction, on or prior to the Closing Date (or such earlier date specified
below), of the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
Stockholders shall have delivered to UniCapital a certificate dated the Merger
Effective Date and signed by them to the effect that all of the representations
and warranties of the Stockholders contained in this Agreement shall be true on
and as of the Closing Date and (except to the extent the representations and
warranties expressly speak as of an earlier date) as of the Merger Effective
Date with the same effect as though such representations and warranties had been
made on and as of such dates, except for matters expressly disclosed pursuant to
Section 8.14; and each and all of the agreements of the Stockholders, the
Company or any NSJ Company to be performed on or before the Closing Date
pursuant to the terms hereof shall have been performed.
10.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by UniCapital of the Company Stock and no
governmental agency or body shall have taken any other action or made any
request of UniCapital as a result of which the management of UniCapital deems it
inadvisable to proceed with the transactions hereunder.
10.3 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the Closing Date,
UniCapital shall have had sufficient time to review the unaudited combined
balance sheets of the Company and the NSJ Companies as of the end of the most
recently completed calendar month, and the unaudited combined statements of
income, cash flows and stockholders' equity of the Company and the NSJ Companies
for the periods then ended, which statements shall have disclosed no material
adverse change in the financial condition of the Company and the NSJ Companies
taken as a whole or the results of their combined operations from the financial
statements originally furnished as set forth in Schedule 6.12.
10.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, operations, assets, properties, prospects or condition (financial or
otherwise) of the Company and
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the NSJ Companies, taken as a whole, shall have occurred, and neither the
Company nor any NSJ Company shall have suffered any material loss or damage to
any of its properties or assets, whether or not covered by insurance, since the
Audited Balance Sheet Date, which change, loss or damage materially affects or
impairs the ability of such entity to conduct its business as now conducted or
as proposed to be conducted; and UniCapital shall have received on the Closing
Date a certificate signed by the Stockholders and dated the Merger Effective
Date to such effect.
10.5 REGULATORY REVIEW. UniCapital, through its authorized
representatives, shall have completed a satisfactory review of the practices and
procedures of the Company and each NSJ Company including environmental and land
use practices, import and export laws, compliance with contracts and federal,
state and local laws and regulations governing the respective operations of the
Company and the NSJ Companies, which review reflects compliance with all
applicable laws governing the Company and each NSJ Company, disclosing no
material actual or probable violations, compliance problems, required capital
expenditures or other substantive environmental, real estate and land use
related concerns and which review is otherwise satisfactory in all respects to
UniCapital, in its sole discretion.
10.6 STOCKHOLDERS' RELEASE. Except as set forth on Schedule 10.6, at
the Closing Date, the Stockholders shall have delivered to UniCapital an
instrument dated the Merger Effective Date releasing the Company and each NSJ
Company from any and all claims of the Stockholders against the Company and each
NSJ Company.
10.7 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.2
shall have executed and delivered an Employment Agreement in the form of Annex V
attached hereto.
10.8 OPINION OF COUNSEL. UniCapital shall have received an opinion from
Feltman, Karesh, Major & Farbman L.L.P., counsel to the Stockholders, dated the
Merger Effective Date, in form and substance satisfactory to UniCapital, to the
effect that the Merger is effective under all applicable state laws and that,
with respect to the Company and the NSJ Companies (including the Resulting
Company):
(a) the Company and each NSJ Company has been duly
incorporated and is validly existing and in good standing under the laws of the
state of its incorporation;
(b) to the knowledge of such counsel, the Company and each NSJ
Company is duly authorized, qualified and licensed under all applicable laws,
regulations, ordinances or orders of public authorities to carry on its business
in the places and in the manner now conducted;
(c) the authorized and outstanding capital stock of the
Company and each NSJ Company is as represented by the Stockholders in this
Agreement and each share of such stock has been duly and validly authorized and
issued, is fully paid and nonassessable and was not
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issued in violation of any statutory, or such counsel's knowledge, contractual,
preemptive rights of any stockholder;
(d) to the knowledge of such counsel, neither the Company or
any NSJ Company has any outstanding options, warrants, calls, conversion rights
or other commitments of any kind to issue or sell any of its capital stock;
(e) this Agreement has been duly executed and delivered by
each Stockholder and constitutes a valid and binding agreement of such
Stockholder, enforceable in accordance with its terms, except as such
enforceability may be subject to bankruptcy, moratorium, insolvency and other
similar laws relating to or affecting the rights of creditors and except (i) as
the same may be subject to the effect of general principles of equity and (ii)
that no opinion need be expressed as to the enforceability of indemnification
provisions included herein;
(f) each other document or agreement contemplated by this
Agreement to be executed by the Company or any NSJ Company has been duly
authorized, executed and delivered by each such entity and constitutes a valid
and binding agreement of such entity, enforceable in accordance with its terms,
except as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement and other similar laws relating to or
affecting the rights of creditors and except as the same may be subject to the
effect of general principles of equity;
(g) upon consummation of the Merger contemplated by this
Agreement, UniCapital will receive valid title to the Company Stock, free and
clear of all "adverse claims" (as defined in the Uniform Commercial Code
applicable in the state of New York) known to such counsel;
(h) no notice to, consent, authorization, approval or order of
any court or governmental agency or body is required in connection with the
execution, delivery or consummation of this Agreement by any Stockholders or for
the transfer to UniCapital of the Company Stock; and
(i) the execution of this Agreement and the performance of the
obligations hereunder will not violate or result in a breach or constitute a
default under any of the terms or provisions of the Company's or any NSJ
Company's charter documents or the bylaws or any Contract or Lease listed on
Schedule 6.17 and 6.35.
Such opinion shall include any other matters incident to the matters set forth
herein as agreed to by the parties and their respective counsel.
10.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
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10.10 GOOD STANDING CERTIFICATES. Stockholders shall have delivered to
UniCapital certificates, dated as of a date no earlier than five days prior to
the Closing Date, duly issued by the appropriate governmental authority in the
Company's and each NSJ Company's state of incorporation and, unless waived by
UniCapital, in each state in which the Company or any NSJ Company is authorized
to do business, showing that each such entity is in good standing and authorized
to do business and that all state franchise and/or income tax returns and taxes
for such entity for all periods prior to the dates of such certificates have
been filed and paid.
10.11 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC, and UniCapital and the representatives of
the underwriters named in the Registration Statement shall have executed the
Underwriting Agreement. There shall have been no stop-order issued (that remains
in effect) by the Securities and Exchange Commission with respect to the
Registration Statement.
10.12 REPAYMENT OF INDEBTEDNESS. Prior to the Closing Date, the
Stockholders shall have repaid to the Company and each NSJ Company in full all
amounts owing by the Stockholders to any such entity.
10.13 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the HSR Act shall have expired or been terminated.
11. COVENANTS OF UNICAPITAL
11.1 UNICAPITAL STOCK OPTIONS. Upon the effective date of the
Registration Statement (but subject in all events to the consummation of the
Merger), UniCapital shall make available options to purchase that number of
shares of UniCapital Stock having a fair market value on the effective date of
the Registration Statement, based upon the IPO price per share set forth in the
Underwriting Agreement, equal to 6.25% of the Effective Date Consideration
(valuing the UniCapital Stock to be issued as part of the Effective Date
Consideration at the IPO price per share for the purposes of this Section 11.1)
to be granted to those non-Stockholder key employees of the Surviving
Corporation after the Closing as are designated by the principal executive
officer of the Surviving Corporation who is entering into an Employment
Agreement pursuant to Section 9.2 hereof (or such other officer designated by
the Surviving Corporation and acceptable to UniCapital). Not later than seven
days prior to the effective date of the Registration Statement, the officer
designating the recipients of such options shall provide to UniCapital a written
list of the names of those designated recipients who will receive options
exercisable at the IPO price and the relative percentages of the 6.25% option
pool provided under this Section 11.1 to be awarded to each recipient, as well
as the percentage of options, if any, to be reserved for future issuance. Any
options reserved for future issuance shall be granted at an exercise price equal
to the fair market value of UniCapital Stock as of the date of grant. All
options shall be granted in accordance with UniCapital's policies, and
authorized and issued under the terms of UniCapital's principal stock option
plan for the benefit of employees of UniCapital and its subsidiaries.
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11.2 INFORMATION FILING. To the extent the Unified Transaction is a
transaction that falls within Section 351 of the Code, UniCapital shall file all
information required to be filed by it pursuant to Treasury Regulation Section
1.351-3(b).
11.3 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the HSR Act, UniCapital shall use its reasonable best
efforts to (a) file all information required to be filed by it pursuant to such
act and (b) provide the Stockholders with all information reasonably requested
and required by it to satisfy any filing requirements it may have under such
Act.
11.4 RELEASE FROM GUARANTEES; INDEBTEDNESS.. Not later than 120 days
following the Merger Effective Date, UniCapital shall cause the Stockholders to
be released from any and all personal guarantees of the indebtedness of the
Company at the Closing Date set forth on Schedule 11.4; provided, that, in the
event that the beneficiary of any such guarantee is unwilling to permit the
substitution of UniCapital's guarantee for the Stockholder's guarantee or the
assumption by UniCapital of the indebtedness, or in the event that the lender
with respect to the indebtedness to which such guarantee relates accelerates
such indebtedness whether or not prior to such 120 day period because of the
consummation of the transactions contemplated hereby, UniCapital shall repay up
to that amount of recourse indebtedness set forth on Schedule 11.4. The failure
of the Company to obtain the consent of its lenders to the change of control of
the Company or the NSJ Companies or the substitution of a UniCapital guaranty or
the assumption by UniCapital of the indebtedness set forth on Schedule 11.4
shall not be deemed a breach hereunder.
12. INDEMNIFICATION; SURVIVAL
12.1 GENERAL INDEMNIFICATION BY STOCKHOLDERS. After the Effective Time,
subject to the limitations contained in Section 12.5 hereof, each Stockholder
shall indemnify, defend, protect and hold harmless UniCapital and its officers,
stockholders, directors, divisions, subdivisions, affiliates, subsidiaries,
parents, agents, employees, successors and assigns at all times from and after
the date of this Agreement until the Expiration Date (as defined in Section
12.6) from and against all claims, damages, losses, liabilities, actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses (including
reasonable attorneys' fees and expenses of investigation) (collectively,
"Losses") incurred by UniCapital as a result of or arising from (a) any breach
of the representations and warranties made by the Individual Stockholders set
forth herein or on the schedules or certificates delivered in connection
herewith, (b) any nonfulfillment of any covenant or agreement on the part of any
Stockholder under this Agreement, or (c) any liability under the Securities Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act") or other
federal or state law or regulation, at common law or otherwise, arising out of
or based upon (i) any untrue statement or alleged untrue statement of a material
fact relating to the Company, any NSJ Company or any Stockholder contained under
the "Identified Disclosure" (as defined below) or (ii) any omission or alleged
omission to state in the
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Identified Disclosure of a material fact relating to the Company, any NSJ
Company or any Stockholder required to be stated therein or necessary to make
the statements therein not misleading, which information was provided to
UniCapital or its counsel by the Company, any NSJ Company or any Stockholder;
provided, however, that such indemnity shall not inure to the benefit of
UniCapital or any other indemnified person, Newco or the Surviving Corporation
to the extent that such untrue statement (or alleged untrue statement) was made
in, or such omission (or alleged omission) occurred in, any preliminary
prospectus and the Company, any NSJ Company or the Stockholders provided, in
writing, corrected information to UniCapital for inclusion in the final
prospectus, and such information was not so included. For purposes hereof, the
term "Identified Disclosure" means (i) the disclosure contained under the
captions "PROSPECTUS SUMMARY--The Founding Companies--The NSJ Group,
Inc.("NSJ")," MANAGEMENT'S ANALYSIS AND DISCUSSION OF FINANCIAL CONDITION AND
OPERATION RESULTS--The Founding Companies--The NSJ Group, Inc." and BUSINESS--
The Founding Companies--The NSJ Group, Inc." or (ii) under any other caption
identified in writing by UniCapital to the Stockholders as being included in the
Identified Captions in any preliminary prospectus or the final prospectus
forming a part the Registration Statement, or any amendment thereof or
supplement thereto (including any additional registration statement filed
pursuant to Rule 462(b) under the Securities Act), which disclosure was provided
or was based upon information or documents provided to UniCapital or its counsel
by the Company, any NSJ Company or any Stockholder.
12.2 SPECIFIC INDEMNIFICATION BY STOCKHOLDERS. Subject to the
limitations contained in Section 12.5 hereof, notwithstanding any disclosure
made in this Agreement or in the schedules or exhibits hereto, and
notwithstanding any investigation by UniCapital or Newco, each Stockholder,
jointly and severally, shall indemnify, defend, protect and hold harmless
UniCapital and its respective officers, stockholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parents, agents, employees, successors
and assigns at all times from and after the date of this Agreement, from and
against all Losses as a result of or incident to: (a) the existence of
liabilities of the Company or any NSJ Company (i) that are required to be set
forth on Schedules 6.13(a) or (b) that have not been so set forth or (ii) the
ultimate assessment of any liability in excess of any amount set forth on
Schedule 6.13(b), to the extent of such excess; (b) the failure of the Company,
any NSJ Company or any Stockholder to file all required Form 5500's prior to the
Merger Effective Date; and (c) any Material Adverse Amendments.
12.3 INDEMNIFICATION BY UNICAPITAL AND NEWCO. Subject to the
limitations contained in Section 12.5 hereof, UniCapital and Newco, jointly and
severally, shall indemnify, defend, protect and hold harmless the Stockholders
at all times from and after the date of this Agreement from and against all
Losses incurred by the Stockholders as a result of or arising from (a) any
breach of the representations and warranties made by UniCapital and Newco set
forth herein or on the schedules or certificates attached hereto, (b) any
nonfulfillment of any covenant or agreement on the part of UniCapital under this
Agreement, or (c) any liability under the Securities Act, the Exchange Act or
other federal or state law or regulation, at common law or otherwise, arising
out of or based upon any untrue statement or alleged untrue statement of a
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material fact relating to UniCapital (including all of the companies (other than
the Company or any NSJ Company) acquired by UniCapital as part of the Unified
Transaction, but with respect to such untrue statement or alleged untrue
statements made by any such other company, only to the extent that UniCapital is
actually indemnified by such other company) contained in any preliminary
prospectus, the Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement thereto (including any registration
statement filed pursuant to Rule 462(b) under the Securities Act), or arising
out of or based upon any omission or alleged omission to state therein a
material fact relating to UniCapital (including all of the companies (other than
the Company or any NSJ Company) acquired by UniCapital as part of the Unified
Transaction, but with respect to such omission or alleged omission of any such
other company, only to the extent that UniCapital is actually indemnified by
such other company) required to be stated therein or necessary to make the
statements therein not misleading, which liability is not the subject of
indemnification of UniCapital pursuant to Section 12.1(c) above, or any personal
liability imposed on or asserted against any Stockholder (exclusively in their
capacity as a former stockholder of the Company or any NSJ Company) as a result
of any act or omission that occurs after the Effective Time by UniCapital or any
of its officers, directors, affiliates, subsidiaries, agents or employees.
12.4 THIRD PARTY CLAIMS.
(a) In order for a party hereto eligible to be indemnified
hereunder (an "Indemnified Party") to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of or involving a
claim or demand made by any person or entity against the Indemnified Party (a
"Third Party Claim"), such Indemnified Party must notify the parties obligated
to provide indemnification pursuant to Section 12.1, 12.2, or 12.3 hereof (each,
an "Indemnifying Party") in writing, and in reasonable detail, of the Third
Party Claim within 30 business days after receipt by such Indemnified Party of
written notice of the Third Party Claim; provided, however, that failure to give
such notification shall not affect the indemnification provided hereunder except
to the extent the Indemnifying Party shall have been actually prejudiced as a
result of such failure. Such notice shall state the nature and the basis of such
claim and a reasonable estimate of the amount thereof. Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, within five business
days after the Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnified Party relating to
the Third Party Claim. To the extent the Indemnifying Party has actually paid
any amount to the Indemnified Party in respect of any Loss in connection with
such Third Party Claim, the Indemnifying Party shall have a right of subrogation
with respect to such Third Party Claim to the extent of such payment.
(b) The Indemnifying Party shall have right to defend and
settle, at its own expense and by its own counsel (provided that such counsel is
not reasonably objected to by the Indemnified Party), any Third Party Claim as
the Indemnifying Party pursues the same in good faith and diligently and so long
as the Third Party Claim does not relate to an actual or potential Loss to which
Section 12.4(e) applies in which the Indemnified Party is UniCapital, Newco or
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the Surviving Corporation. If the Indemnifying Party undertakes to defend or
settle, it shall promptly notify the Indemnified Party of its intention to do
so, and the Indemnified Party shall cooperate with the Indemnifying Party and
its counsel in the defense thereof and in any settlement thereof. Such
cooperation shall include, but shall not be limited to, furnishing the
Indemnifying Party with any books, records or information reasonably requested
by the Indemnifying Party that are in the Indemnified Party's possession or
control. Notwithstanding the foregoing, the Indemnified Party shall have the
right to participate in any matter through counsel of its own choosing at its
own expense (unless there is a conflict of interest that prevents counsel for
the Indemnifying Party from representing the Indemnified Party, in which case
the Indemnifying Party will reimburse the Indemnified Party for the expenses of
its counsel). After the Indemnifying Party has notified the Indemnified Party of
its intention to undertake to defend or settle any such asserted liability, and
for so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except to the extent such participation is requested
by the Indemnifying Party, in which event the Indemnified Party shall be
reimbursed by the Indemnifying Party for reasonable additional legal expenses
and out-of-pocket expenses, and except in the case of a Third Party Claim
relating to an actual or potential Loss to which Section 12.4(e) applies in
which the Indemnified Party is UniCapital, Newco or the Surviving Corporation.
(c) No Indemnifying Party shall, in the defense of any Third
Party Claim, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) or enter into any settlement, except with
the written consent of the Indemnified Party, which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim or
matter.
(d) If the Indemnifying Party does not assume the defense of
any Third Party Claim, then the Indemnified Party may defend against such Third
Party Claim in such manner as it deems appropriate at the expense of the
Indemnifying Party.
(e) Notwithstanding anything to the contrary in this Article
12, if at any time, in the reasonable opinion of UniCapital, as the Indemnified
Party (notice of which opinion shall be given in writing to the Indemnifying
Party), any Third Party Claim seeks material prospective relief which could have
a material adverse effect on any such Indemnified Party or any subsidiary, then
such Indemnified Party shall have the right to control or assume (as the case
may be) the defense of any such Third Party Claim and the amount of any judgment
or settlement and the reasonable costs and expenses of defense (including fees
and disbursements of counsel and experts, as well as any sampling, testing,
investigation, removal, treatment or remediation undertaken by UniCapital and
all counseling or engineering fees and expenses related thereto) shall be
included as part of the indemnification obligations of the Indemnifying Party
hereunder. If the Indemnified Party elects to exercise such right, then the
Indemnifying Party shall have the right to participate in, but not control, the
defense of such Third Party Claim at the sole cost and expense of the
Indemnifying Party.
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12.5 LIMITATIONS ON INDEMNIFICATION. No Indemnified Party shall assert
any claim (other than a Third Party Claim) for indemnification hereunder until
such time as the aggregate of all claims which such Indemnified Party may have
against an Indemnifying Party shall exceed $270,000 (the "Basket Amount"), at
which time an Indemnified Party shall be entitled to seek indemnification
pursuant to this Article 12, but only to the extent that such claims, in the
aggregate, exceed the Basket Amount. For purposes of this Section 12.5, the
Stockholders shall be considered to be a single Indemnifying and Indemnified
Party and UniCapital and Newco shall be considered to be a single Indemnifying
and Indemnified Party. Notwithstanding any other term of this Agreement, in no
event shall any Stockholder be liable under this Article 12 for an amount which
exceeds the aggregate value (determined at the Merger Effective Date) of the
Merger Consideration received by such Stockholder under this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, the
limitations upon indemnification contained in this Section 12.5 shall not apply
to Losses arising out of (i) any breach of the representations and warranties of
the Individual Stockholders contained in Sections 6.4, 6.5, 6.14, 6.25, 6.27 and
6.33 hereof or (ii) any breach by UniCapital of any of its covenants under this
Agreement. Notwithstanding the foregoing, the Basket Amount shall automatically
increase by an amount (such amount is referred to as the "Basket Adjustment")
equal to one percent of any Earn-Out Consideration that is finally determined to
be due to the Stockholders pursuant to Section 2.5 hereof. If the Basket Amount
is adjusted pursuant to the preceding sentence after such time as any
Indemnified Party, pursuant to this Article 12, has collected an amount in
excess (such excess amount is referred to as the "Excess Indemnity") of the
Basket Amount (prior to giving effect to the applicable Basket Adjustment), then
such Indemnified Party, within 10 business days after the final determination of
such Earn-Out Consideration, shall pay to the Indemnifying Party an amount equal
to the lesser of applicable Basket Adjustment or the Excess Indemnity. In
addition, notwithstanding any provision of this Agreement to the contrary, for
the purposes of preventing a double recovery the Stockholders shall not be
obligated to indemnify UniCapital or any other indemnified party pursuant to
Section 12.1 or 12.2 with respect to any particular act, omission, condition or
event if and to the extent that the loss resulting or arising from such act,
omission, condition or event has, directly or indirectly, been taken into
account in the computation of any Net Worth Deficiency provided for in Section
3.1.
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warran ties made by the parties in this Agreement, or in any certificate or
other instrument delivered pursuant to this Agreement, shall survive for a
period of one year from the Merger Effective Date (which date is hereinafter
called the "Expiration Date"), except that:
(a) the representations and warranties contained in Section
6.27 hereof shall survive until such time as the limitations period has run for
all tax periods ended prior to the Merger Effective Date, which shall be deemed
to be the Expiration Date for purposes of this clause (a) and claims arising
from a breach of the representations and warranties contained in such Section
6.27;
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(b) the representations and warranties contained in Section
6.28(g) hereof shall survive until such time as one full fiscal year's cycle of
transactions occurring entirely within the twenty-first century shall have been
processed and UniCapital's consolidated financial statements for the fiscal year
in which the last such transaction to be processed occurred have been audited,
which shall be deemed to be the Expiration Date for purposes of this clause (b)
and claims arising from a breach of the representations and warranties contained
in such Section 6.28(g);
(c) the representations and warranties contained in Section
6.33 hereof shall survive for a period of five years from the Merger Effective
Date, which shall be deemed the Expiration Date for purposes of this clause (c)
and claims arising from a breach of the representations and warranties contained
in such Section 6.33;
(d) solely for purposes of Section 12.1(c) hereof, and solely
to the extent that UniCapital actually incurs liability under the Securities
Act, the Exchange Act, or any other federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for purposes of this clause (d) and claims arising under such
laws;
(e) the representations and warranties of the Stockholders
contained in Sections 6.4 and 6.5 hereof shall survive the Merger Effective Date
without time limitation; and
(f) any representations and warranties which serve as a basis
of the indemnity obligations of the Stockholders under Section 12.2 shall
survive the Merger Effective Date without time limitation; provided, however,
that the representations and warranties contained in Section 6.35(d) regarding
delinquent accounts identified on Schedule 6.35(d) shall survive until the final
resolution of such delinquent accounts.
13. TERMINATION OF AGREEMENT
13.1 TERMINATION BY UNICAPITAL. UniCapital may, by notice in the manner
hereinafter provided on or before the Closing Date, terminate this Agreement if
a material default shall be made by the Stockholders in the observance or due
and timely performance of any of the covenants, agreements or conditions
contained herein, and the curing of such default shall not have been
substantially made on or before the Closing Date and shall not reasonably be
expected to occur, (b) if UniCapital in its sole judgment determines that any
condition exists which has made or could reasonably be expected to make any of
the representations or warranties contained in Article 6 hereof untrue in any
material respect or (c) if UniCapital in its sole judgment determines that
information disclosed on the schedules to the Agreement delivered pursuant to
Section 8.14 has or could reasonably be expected to have a material adverse
effect on the
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business, operations, assets, properties, prospects or condition (financial or
otherwise) of the Company or any material NSJ Company.
13.2 TERMINATION BY THE STOCKHOLDERS. Prior to the initial filing of
the Registration Statement with the SEC, the Stockholders may, by notice in the
manner hereinafter provided on or before such initial filing, terminate this
Agreement (a) in accordance with Sections 17.4(a) or (b) if a material default
shall be made by UniCapital in the observance or due and timely performance of
any of the material covenants, agreements or conditions contained herein, and
the curing of such default shall not have been substantially made on or before
such initial filing. From and after the initial filing of the Registration
Statement with the SEC, the Stockholders shall have no right to terminate this
Agreement.
13.3 AUTOMATIC TERMINATION. This Agreement shall terminate
automatically:
(a) if the Registration Statement has not been declared
effective by June 30, 1998;
(b) if, after its execution and delivery by the parties
thereto and prior to the Effective Time, the Underwriting Agreement is
terminated pursuant to the terms thereof;
(c) if the Effective Time has not occurred within 10 business
days after the Closing Date; or
(d) upon the date that the number of shares of UniCapital
Stock (other than shares included in any Earn-Out Consideration) to be issued to
the persons who will transfer property to UniCapital in the Unified Transaction
can be determined as a fixed number of shares, unless those same persons shall
own immediately after the Unified Transaction 80% or more of the UniCapital
Stock that will be issued and outstanding immediately after the Unified
Transaction.
13.4 LIQUIDATED DAMAGES. If the Merger fails to occur because of the
default of any Stockholder, then, in addition to the other remedies available to
UniCapital at law for fraud, in equity or pursuant to this Agreement, the
Individual Stockholders shall pay to UniCapital an aggregate amount of $500,000
as liquidated damages. It is hereby agreed that UniCapital's damages in the
event of a termination or default by any Stockholder hereunder are uncertain and
impossible to ascertain and that the foregoing constitutes a reasonable
liquidation of such damages and is intended not as penalty but as liquidated
damages.
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14. NONCOMPETITION AND NONSOLICITATION
14.1 NONCOMPETITION.
(a) In order to protect the value and goodwill of UniCapital,
the Company and the NSJ Companies and their respective businesses, each
Stockholder covenants that, for the period ending two years after the Closing
Date, such Stockholder will not, directly or indirectly, own, manage, operate,
join, control, finance or participate in the ownership, management, operation,
control or financing of, or be connected as a partner, principal, agent,
representative, consultant or otherwise with, or use or permit such
Stockholder's name to be used in connection with, any business or enterprise
which is engaged directly or indirectly in competition anywhere in the United
States with the business conducted by UniCapital, the Surviving Corporation or
any of its or their respective subsidiaries or affiliates (the "Restricted
Business"). Each Stockholder recognizes that the Restricted Business is expected
to be conducted throughout the United States and that more narrow geographical
limitations of any nature on this non-competition covenant (and the
non-solicitation covenant set forth in subsection (b)) are therefore not
appropriate. The foregoing restrictions shall not be construed to prohibit the
ownership by a Stockholder as a passive investment (i) of not more than five
percent of any class of securities of any corporation which is engaged in any of
the foregoing businesses having a class of securities registered pursuant to
Section 12 of the Exchange Act, (ii) with respect to those activities identified
on Schedule 14.1 hereto, or (iii) in any business or enterprise that is not so
directly or indirectly in competition with the Restricted Business as it exists
on the date of this Agreement.
(b) Each Stockholder further covenants that for the period
ending two years after the Closing Date, such Stockholder will not, either
directly or indirectly, (i) call on or solicit any customers or prospective
customers who were actually solicited by the Company or any NSJ Company prior to
the Effective Time of the Restricted Business, or (ii) solicit the employment of
any person who is employed by UniCapital, the Surviving Corporation or any of
its or their respective subsidiaries or affiliates in the Restricted Business
during such period.
(c) Each Stockholder recognizes and acknowledges that by
reason of such Stockholder's relationship to the Company and the NSJ Companies,
such Stockholder has had access to confidential information relating to the
Restricted Business. Each Stockholder acknowledges that such confidential
information is a valuable and unique asset and covenants that such Stockholder
will not disclose any such confidential information after the Closing Date to
any person for any reason whatsoever.
14.2 DAMAGES. Each Stockholder acknowledges and agrees that measuring
economic losses to UniCapital and the Surviving Corporation as a result of the
breach of the foregoing covenants in this Article 14 would be impossible, and
that any breach of the foregoing covenants would result in immediate and
irreparable damage to UniCapital and the Surviving Corporation for which they
would have no other adequate remedy. Accordingly, the Stockholders agree that,
in the event of a breach by a Stockholder of the foregoing covenants, such
covenants may be
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enforced by UniCapital or the Surviving Corporation by, without limitation,
injunctions and restraining orders against such Stockholder.
14.3 REASONABLE RESTRAINT. The Parties agree that the foregoing
covenants in this Article 14 impose a reasonable restraint upon the Stockholders
in light of the activities and business of UniCapital on the date of the
execution of this Agreement and the current and future plans of UniCapital and
the Surviving Corporation (as successors to the businesses of the Company and
the NSJ Companies), and that any violation will result in irreparable injury to
UniCapital.
14.4 SEVERABILITY; REFORMATION. The covenants in this Article 14 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, if any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
14.5 INDEPENDENT COVENANT. All of the covenants in this Article 14
shall be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of any Stockholder
against the Company, any NSJ Company or UniCapital, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement of
such covenants. The parties specifically agree that the period of two years
stated above shall be computed by excluding from such computation any time
during which any Stockholder is in violation of any provision of this Article
14.
14.6 MATERIALITY. The Stockholders hereby acknowledge and agree that
the covenants contained in this Article 14 are a material and substantial part
of this transaction and are entered into in connection with and as an inducement
to the acquisition by UniCapital of the Company and the NSJ Companies.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that they
have in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company and the NSJ Companies, such as
lists of customers, operational policies, and pricing and cost policies that are
valuable, special and unique assets of such corporations and their respective
businesses. Neither the Company nor any Stockholder shall disclose, and they
shall cause each NSJ Company from disclosing, any confidential information to
any person, firm, corporation, association or other entity for any purpose or
reason whatsoever, except to authorized representatives of UniCapital, unless
the Stockholders can show that such information has become known to the public
generally through no fault of the Stockholders. In the event of a breach or
threatened breach by the Stockholders of the provisions
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of this Section 15.1, UniCapital and the Surviving Corporation shall be entitled
to an injunction restraining Stockholders from disclosing, in whole or in part,
such confidential information. Nothing herein shall be construed as prohibiting
UniCapital and the Surviving Corporation from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
15.2 UNICAPITAL. UniCapital recognizes and acknowledges that it has in
the past, currently has, and prior to the Closing Date will have, access to (i)
certain confidential information solely of the Company and the NSJ Companies in
connection with their respective businesses ("Company Information") and (ii)
certain confidential information concerning the Stockholders and certain
business and activities of the Stockholders that are not a part of the
transactions contemplated by this Agreement ("Stockholder Information"). Prior
to the Closing Date with respect to Company Information and at any time with
respect to Stockholder Information, UniCapital shall not disclose any such
confidential information to any person, firm, corporation, association, or other
entity for any purpose or reason whatsoever without prior written consent of the
Stockholders. In the event of a breach or threatened breach by UniCapital of the
provisions of this Section 15.2, the Stockholders shall be entitled to an
injunction restraining UniCapital from disclosing, in whole or in part, such
confidential information. Nothing contained herein shall be construed as
prohibiting the Stockholders from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages.
15.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, UniCapital, the Surviving Corporation and the Stockholders
agree that, in the event of a breach by any of them of the foregoing covenant,
the covenant may be enforced against them by injunctions and restraining orders.
16. LOCK-UP AGREEMENTS
16.1 AGREEMENT. In connection with the IPO, for good and valuable
consideration, and to induce the underwriters that may participate in the IPO to
continue their efforts in connection with the IPO, each Stockholder hereby
agrees that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of such underwriters, it will not, during the period
commencing on the date of this Agreement and ending 180 days after the date of
the final prospectus contained in the Registration Statement relating to the IPO
(the "Prospectus"), (a) offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of UniCapital Stock or any securities
convertible into or exercisable or exchangeable for UniCapital Stock or (b)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of UniCapital Stock,
whether any such transaction described in clause (a) or (b) above
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<PAGE> 62
is to be settled by delivery of UniCapital Stock or such other securities, in
cash or otherwise. In addition, each Stockholder agrees that, without the prior
written consent of Morgan Stanley & Co. Incorporated on behalf of the
underwriters that may participate in the IPO, it will not, during the period
commencing on the date of this Agreement and ending 180 days after the date of
the Prospectus, make any demand for or exercise any right with respect to, the
registration of any shares of UniCapital Stock or any security convertible into
or exercisable or exchangeable for Common Stock.
16.2 INTENDED THIRD PARTY BENEFICIARIES. Each Stockholder agrees that
the foregoing shall be binding upon their transferees, successors, assigns,
heirs, and personal representatives and shall benefit and be enforceable by the
underwriters in the IPO. Each Stockholder acknowledges and agrees that such
underwriters and Morgan Stanley & Co. Incorporated are intended third party
beneficiaries of the provisions of this Article 16, and that Morgan Stanley &
Co. Incorporated on behalf of such underwriters shall be entitled to enforce the
covenants contained in this Article 16. In furtherance of the foregoing,
UniCapital and its transfer agent are hereby authorized to decline to make any
transfer of securities if such transfer would constitute a violation or breach
of this Article 16. The Stockholders also acknowledge and agree that neither the
Company nor any NSJ Company shall have any rights as intended third-party
beneficiaries under this Agreement.
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK
17.1 INVESTMENT INTENT. The Stockholders acknowledge and agree that the
shares of UniCapital Stock to be delivered to the Stockholders pursuant to this
Agreement have not been and will not be registered under the Securities Act and
therefore may not be resold without compliance with the Securities Act. The
Stockholders represent and warrant that the shares of UniCapital Stock to be
acquired by the Stockholders pursuant to this Agreement are being acquired
solely for their own account, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution.
17.2 COMPLIANCE WITH LAW. The Stockholders covenant, warrant and
represent that none of the shares of UniCapital Stock issued to such
Stockholders will be offered, sold, assigned, pledged, hypothecated, transferred
or otherwise disposed of except after full compliance with all of the applicable
provisions of the Securities Act and the rules and regulations of the SEC
thereunder, and except after full compliance with any applicable state
securities laws.
17.3 ECONOMIC RISK; SOPHISTICATION. The Stockholders represent and
warrant that they are able to bear the economic risk of an investment in
UniCapital Stock acquired pursuant to this Agreement and can afford to sustain a
total loss of such investment. The Stockholders further represent and warrant
that they (a) fully understand the nature, scope and duration of the
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limitations on transfer contained in this Agreement and (b) have such knowledge
and experience in financial and business matters that they are capable of
evaluating the merits and risks of the proposed investment and therefore have
the capacity to protect their own interests in connection with the acquisition
of the UniCapital Stock.
17.4 INFORMATION SUPPLIED.
(a) The Stockholders represent and warrant that, as of the
date of this Agreement, they have had an adequate opportunity to ask questions
and receive answers from the officers of UniCapital concerning UniCapital, its
business, operations, plans and strategy, and the background and experience of
its officers (other than the Chief Operating Officer of UniCapital, which office
had not been filled as of the date of this Agreement) and directors. The
Stockholders represent and warrant that they have asked any and all questions
that they may have in the nature described in the preceding sentence and that
all such questions have been answered to their satisfaction.
(b) Each Stockholder represents and warrants that he has
received the draft Registration Statement, including the draft preliminary
prospectus that forms a part thereof, delivered to him on or about February 14,
1998 that describes, among other things, UniCapital, the Merger, the other
acquisitions proposed to be undertaken by UniCapital simultaneously with the
Merger and the target companies of such other acquisitions. Each Stockholder
represents and warrants that he has reviewed such draft Registration Statement
and draft preliminary prospectus and has had adequate opportunity to ask
questions of and receive answers to his satisfaction from the officers of
UniCapital concerning the matters described therein.
18. SECURITIES LEGENDS
The certificates evidencing the UniCapital Stock to be received by the
Stockholders hereunder will bear a legend substantially in the form set forth
below and containing such other information as UniCapital may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES OR BLUE SKY LAWS.
SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
SECURITIES ACT AND ANY STATE SECURITIES OR BLUE SKY LAWS,
UNLESS, IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY
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TO THE CORPORATION) OF COUNSEL SATISFACTORY TO THE
CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
In addition, such certificates shall also bear (a) a legend reflecting the
restrictions contained in Article 16 and (b) such other legends as counsel for
UniCapital reasonably determines are required under the applicable laws of any
state.
19. STOCKHOLDER REPAYMENT OBLIGATION
19.1 If (a) the revenue recorded by the B & A Leasing Corporation from
the lease of the Boeing 737-301 to Southwest Airlines or U.S. Airways (or
another third-party lessor reasonably acceptable to UniCapital) for the year
ending December 31, 1998 is less than $1,710,000 (such shortfall is referred to
as the "Revenue Deficiency") or (b) the consolidated net income of the Company
and the NSJ Companies for the year ending December 31, 1998 is less than
$4,800,000 (such shortfall is referred to as the "Income Shortfall"), then the
Stockholders shall pay to UniCapital an amount (the "NSJ Deficiency") equal to
the lesser of (x) the Income Shortfall or the (y) the Revenue Deficiency. As
soon as practicable, but in any event by March 31, 1997, UniCapital shall engage
Price Waterhouse LLP to prepare, in accordance with GAAP in a manner consistent
in all material respects with the Closing Date Balance Sheet, a statement of the
revenues of B & A Leasing Corporation and net income of the Company and the NSJ
Companies (the "NSJ Statement"). After the 20th business day after the delivery
of the NSJ Statement to UniCapital (or if applicable, after the final
determination of any Disputed NSJ Amount), the Stockholders shall pay
UniCapital, by wire transfer, an amount equal to the NSJ Deficiency. At sole and
exclusive option, and at any time after such 25th business day, UniCapital shall
be entitled to recover from the Indemnity Escrow pursuant to Article 4 all or
any portion of the amount of the NSJ Deficiency not paid by the Stockholders as
required by this Article 19.
19.2 DISPUTES. Notwithstanding anything in this Article 19 to the
contrary, if there is any NSJ Deficiency and the Stockholders dispute any item
contained on the NSJ Statement, the effect of which would be to reduce the
amount of the NSJ Deficiency by an aggregate amount in excess of $10,000, then
the Stockholders' Representative shall notify UniCapital in writing of each
disputed item (collectively, the "NSJ Disputed Amounts") and specify the amount
thereof in dispute within 20 business days after the delivery of the NSJ
Statement. If UniCapital and the Stockholders' Representative cannot resolve any
such dispute which would eliminate or otherwise mutually resolve the calculation
of the NSJ Deficiency, then such dispute shall be resolved by an independent
nationally recognized accounting firm which is reasonably acceptable to
UniCapital and the Stockholders' Representative (the "Independent Accounting
Firm"). The determination of the Independent Accounting Firm shall be made as
promptly as practical and shall be final and binding on the parties, absent
manifest error which error may only be corrected by such Independent Accounting
Firm. Any expenses relating to the engagement of the Independent Accounting Firm
shall be allocated between UniCapital and the Stockholders so that the
Stockholders' aggregate share of such costs shall bear the same proportion to
the total
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costs that the NSJ Disputed Amounts unsuccessfully contested by the
Stockholders' Representative (as finally determined by the Independent
Accounting Firm) bear to the total of the NSJ Disputed Amounts so submitted to
the Independent Accounting Firm. Pending resolution of any such dispute by the
Independent Accounting Firm, no such NSJ Disputed Amount shall be due to or by
UniCapital. Once any such NSJ Disputed Amount is finally determined to be due to
or by UniCapital, UniCapital may proceed to recover such amount in the manner
set forth in Section 19.1
20. GENERAL
20.1 COOPERATION. The Stockholders and UniCapital shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement. The
Stockholders will cooperate and use their reasonable commercial efforts to have
the officers, directors and employees of Company prior to the Closing Date
cooperate with UniCapital on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
actions, proceedings, arrangements or disputes of any nature with respect to
matters pertaining to all periods prior to the Closing Date.
20.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the Resulting
Company, the successors of UniCapital, and the heirs and legal representatives
of the Stockholders.
20.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company, UniCapital and Newco and supersedes any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the Stockholders (subject to the limitations
set forth below), and the Company, UniCapital and Newco acting through their
respective officers, duly authorized by their respective Boards of Directors.
20.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
20.5 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with the transactions contemplated
hereby, and each of UniCapital and Newco, on the one hand, and the Stockholders,
on the other hand, agrees to indemnify the other against all loss, liability,
cost damages or expense arising out of or related to claims for fees
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or commissions of brokers employed or alleged to have been employed by such
indemnifying party.
20.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, UniCapital will pay the fees, expenses and disbursements
of UniCapital and Newco and their respective agents, representatives,
accountants (including all fees, disbursements and expenses of Price Waterhouse
LLP) and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto. Whether or not the transactions herein
contemplated shall be consummated, the Stockholders will pay the fees, expenses
and disbursements of the Stockholders, the Company and the NSJ Companies and
their respective agents, representatives, accountants and counsel incurred in
connection with the subject matter of this Agreement and any amendments hereto
and all other costs and expenses incurred in the performance of this Agreement
by the Stockholders and the Company and in compliance with all conditions to be
performed by the Stockholders and the Company under this Agreement.
20.7 NOTICES. All notices and other communications hereunder shall be
in writing (including wire, telefax or similar writing) and shall be sent,
delivered or mailed, addressed, or telefaxed:
(a) If to UniCapital or Newco, addressed to them at:
UniCapital Corporation
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Telephone: (305) 861-0603
Telefax: (305) 866-8449
with a copy to:
David A. Gerson
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
301 Grant Street
Pittsburgh, PA 15219
Telephone: (412) 560-3330
Telefax: (412) 560-3399
(b) If to the Stockholders, addressed to them in care
of the Stockholders' Representative at:
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Richard C. Giles
The NSJ Group, Inc.
9025 Boggy Creek Road
Orlando, FL 32824
Telephone: (407) 856-1036
Telefax: (407) 856-1038
with a copy to:
David M. Farbman
Feltman, Karesh, Major & Farbman
Carnegie Hall Tower
152 West 57th Street
New York, NY 10019
Telephone: (212) 586-3800
Telefax: (212) 586-0951
Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telefax, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 19.7 (or in accordance with the latest
unrevoked written direction from such party) and (ii) if given by telefax, when
such telefax is transmitted to the telefax number specified in this Section 19.7
(or in accordance with the latest unrevoked written direction from such party),
and the appropriate confirmation is received.
20.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York, without giving effect to any of the
provisions thereof that would require the application of the substantive laws of
any other jurisdiction. Each party to this Agreement: (a) agrees that any legal
action or proceeding under this Agreement shall be brought in the courts of the
State of New York or in the United States District Court for the Southern
District of New York; (b) irrevocably submits to the jurisdiction of such
courts; (c) agrees not to assert any claim or defense that it is not personally
subject to the jurisdiction of such courts, that any such forum is not
convenient or the venue thereof is improper, or that this Agreement or the
subject matter hereof may not be enforced in such courts; and (d) agrees to
accept service of process on it by certified or registered mail or by any other
method authorized by law.
20.9 EXERCISE OF RIGHTS AND REMEDIES; FURTHER ASSURANCES. Except as
otherwise provided herein, no delay of or omission in the exercise of any right,
power or remedy accruing to any party as a result of any breach or default by
any other party under this Agreement shall impair any such right, power or
remedy, nor shall it be construed as a waiver of or acquiescence in any such
breach or default, or of any similar breach or default occurring later; nor
shall any
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waiver of any single breach or default be deemed a waiver of any other breach or
default occurring before or after that waiver.
After the Closing, each party will afford the other party, its counsel
and accountants, during normal business, hours, reasonable access to the books,
records and other data relating to the Company and the NSJ Companies in its
possession with respect to periods prior to the Merger Effective Date and the
right to make copies and extracts therefrom, to the extent that such access may
be reasonably required by the requesting party in connection (i) the preparation
of tax returns, (ii) the determination or enforcement of rights under this
Agreement, (iii) compliance with any governmental or regulatory authority or
(iv) in connection with any actual or threatened action or proceeding.
20.10 TIME. At all times after the execution of the Underwriting
Agreement, time shall be of the essence with respect to all matters under this
Agreement.
20.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
20.12 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
20.13 CAPTIONS, INTERPRETATION.. The headings of this Agreement are
inserted for convenience only and shall not constitute a part of this Agreement
or be used to construe or interpret any provision hereof. Section, subsection,
schedule and exhibit references are to this Agreement unless otherwise
specified. Unless the context of this Agreement clearly requires otherwise, (a)
references to the plural include the singular, the singular the plural, and the
part the whole, (b) "or" has the inclusive meaning frequently identified with
the phrase "and/or" and (c) "including" has the inclusive meaning frequently
identified with the phrase "but not limited to."Each accounting term used herein
that is not specifically defined herein shall have the meaning given to it under
GAAP.
21. DEFINITIONS
21.1 "1998 Period" is defined in Section 3.1.
21.2 "Accounts Receivable" is defined in Section 6.14.
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21.3 "Acquisition Proposal" is defined in Section 8.10.
21.4 "Adjusted EBT" is defined in Section 2.5(a).
21.5 "Agent" is defined in Section 8.10.
21.6 "Agreement" is defined in the preamble to this Agreement.
21.7 "Audited Balance Sheet Date" is defined in Section 6.13(a).
21.8 "Audited Financial Statements" are defined in Section 6.13(a).
21.9 "Authorizations" are defined in Section 6.23.
21.10 "Benefit Plan" is defined in Section 6.22.
21.11 "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq.
21.12 "CLA Companies" means CLA Holdings, Inc. and the "CLA Companies,"
as defined in the Agreement and Plan of Contribution dated as of the date of
this Agreement by and among UniCapital; CLA Acquisition Corp., a Florida
corporation, Stuart L. Cauff, The 1998 Cauff Family Trust, Wayne D. Lippman and
The 1998 Lippman Family Trust.
21.13 "Certificates" are defined in Section 2.2.
21.14 "Certificate of Merger" is defined in Section 1.1.
21.15 "Closing" is defined in Section 5.1(b).
21.16 "Closing Date" is defined in Section 5.2.
21.17 "Closing Date Balance Sheets" are defined in Section 3.1.
21.18 "Code" is defined in the recitals to this Agreement.
21.19 "Commonly Controlled Entity" is defined in Section 6.22.
21.20 "Company" is defined in the preamble to this Agreement.
21.21 "Company Documents" are defined in Section 6.2.
21.22 "Company Stock" is defined in Section 2.1(a).
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21.23 "Constituent Corporations" are defined in Section 1.1.
21.24 "Contracts" are defined in Section 6.17.
21.25 "Disputed Amounts" are defined in Section 3.2.
21.26 "EBT" is defined in Section 2.5(a).
21.27 "Earn-Out Consideration" is defined in Section 2.5(c).
21.28 "Earn-Out Escrow Cash" is defined in Section 4.1(b).
21.29 "Earn-Out Escrow Shares" are defined in Section 4.1(b).
21.30 "Effective Date Consideration" is defined in Section 2.1(a).
21.31 "Effective Time" is defined in Section 5.3.
21.32 "Environmental Laws" mean any and all applicable treaties, laws,
regulations, ordinances, enforceable requirements, binding determinations,
orders, decrees, judgments, injunctions, permits, approvals, authorizations,
licenses or binding agreements issued, promulgated or entered into by any
Governmental Entity, relating to the environment, preservation or reclamation of
natural resources, or to the management, Release or threatened Release of or
exposure to Hazardous Substances, including CERCLA, the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.,
the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et. seq., the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq., and any similar or implementing state or local law and all amendments or
regulations promulgated thereunder.
21.33 "Environmental Liabilities" mean any and all Losses arising from
or related to any claim, proceeding, investigation, response or removal action,
remediation or other clean-up brought, prosecuted or undertaken by UniCapital,
Newco, the Surviving Corporation, any Governmental Entity or any other person or
entity on the basis of any violation of any Environmental Laws or pursuant to
any requirement imposed under any Environmental Laws (including any sampling,
testing, investigation, removal, treatment or remediation undertaken by
UniCapital, Newco or the Surviving Corporation so as to avoid any claim or
violation or to comply with any requirement and all counseling or engineering
fees and expenses related thereto), and arising from pre-Closing operations,
events, circumstances or conditions at, on, under or emanating from, or as a
result of any pre-Closing off-site disposal of Hazardous
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Substances from, any property currently or formerly owned, operated or leased by
the Companies.
21.34 "Environmental Permits" mean all permits, licenses, approvals or
authorizations from any Governmental Entity required under Environmental Laws
for the operation of the business of the applicable Company.
21.35 "Equipment" is defined in Section 6.35.
21.36 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
21.37 "Escrow Cash" is defined in Section 4.1(a).
21.38 "Escrow Property" is defined in Section 4.1(b).
21.39 "Escrow Shares" are defined in Section 4.1(a).
21.40 "Exchange Act" is defined in Section 12.1.
21.41 "Expiration Date" is defined in Section 12.6.
21.42 "Financial Statements" are defined in Section 6.12(b).
21.43 "Foreign Plans" are defined in Section 6.22(i)(xiii).
21.44 "Giles Trust" is defined in the preamble to this Agreement.
21.45 "GAAP" is defined in Section 3.1.
21.46 "Governmental Entity" means any court, administrative or
regulatory agency or commission, or other governmental authority or
instrumentality, domestic, foreign or supranational.
21.47 "HSR Act" is defined in Section 6.3.
21.48 "Indemnified Party" is defined in Section 12.4(a).
21.49 "Indemnifying Party" is defined in Section 12.4(a).
21.50 "Indemnity Escrow Agent" is defined in Section 4.1(a).
21.51 "Independent Accounting Firm" is defined in Section 3.2.
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21.52 "Individual Stockholders" are defined in the preamble to this
Agreement.
21.53 "Intellectual Property" is defined in Section 6.28(a).
21.54 "Interim Balance Sheet Date" is defined in Section 6.12(b).
21.55 "IPO" is defined in the recitals to this Agreement.
21.56 "IPO Price" means the per share price that the Company Stock is
sold to the Underwriters in the IPO prior to the deduction of any discounts or
expenses.
21.57 "Lease Documents" are defined in Section 6.35.
21.58 "Leases" are defined in Section 6.35.
21.59 "Liabilities" are defined in Section 6.13(a).
21.60 "Losses" are defined in Section 12.1.
21.61 "Material Adverse Amendment" is defined in Section 8.14.
21.62 "Merger Consideration" is defined in Section 2.1(b).
21.63 "Merger Effective Date" is defined in Section 5.3.
21.64 "Merger Consideration Shares" are defined in Section 2.1(a).
21.65 "Merger Effective Date" is defined in Section 5.3.
21.66 "Merger" is defined in the recitals to this Agreement.
21.67 "NSJ Companies" is defined in Exhibit A hereto.
21.68 "Net Worth Deficiency" is defined in Section 3.1.
21.69 "Newco" is defined in the preamble to this Agreement.
21.70 "Obligor" is defined in Section 6.35.
21.71 "Ordinary course" or "ordinary course of business" means the
leasing, acquisition, sale and/or trading of commercial jet aircraft and
aircraft parts, providing financial structures and similar products or services
relating to the aircraft and/or aviation industry, and providing consulting
and/or advisory services with respect to any of the foregoing.
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21.72 "PCBs" are defined in Section 6.33(h).
21.73 "Pension Plan" is defined in Section 6.22.
21.74 "Prospectus" is defined in Section 16.1.
21.75 "Registration Statement" is defined in Section 9.4.
21.76 "Regulations" are defined in Section 6.23.
21.77 "Release" means any spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, emanation or migration of any
Hazardous Substance in, into, onto or through the environment (including ambient
air, surface water, ground water, soils, land surface, subsurface strata,
workplace or structure).
21.78 "Restricted Business" is defined in Section 14.1(a).
21.79 "Scheduled Payments" are defined in Section 6.35.
21.80 "SEC" is defined in Section 9.4.
21.81 "Securities Act" is defined in Section 6.16.
21.82 "Stockholders" are defined in the preamble to this Agreement.
21.83 "Stockholders' Representative" is defined in Section 3.3.
21.84 "Subsidiary" is defined in Section 6.1.
21.85 "Surviving Corporation" is defined in Section 1.2.
21.86 "Tax Returns" are defined in Section 6.27.
21.87 "Taxes" are defined in Section 6.27.
21.88 "Third Party Claim" is defined in Section 12.4(a).
21.89 "Thornton Trust" is defined in the preamble to this Agreement.
21.90 "Unaudited Financial Statements" are defined in Section 6.12(b).
21.91 "Underwriting Agreement" is defined in Section 5.1(a).
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21.92 "UniCapital" is defined in the preamble to this Agreement.
21.93 "UniCapital Documents" are defined in Section 7.3.
21.94 "UniCapital Stock" is defined in Section 2.1(a).
21.95 "Unified Transaction" is defined in the recitals to this
Agreement.
21.96 "Welfare Plan" is defined in Section 6.22.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNICAPITAL CORPORATION
By: /s/ Robert New
--------------
Name: Robert New
Title: Chairman and Chief Executive Officer
NSJ ACQUISITION CORP.
By: /s/ Robert New
--------------
Name: Robert New
Title: President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
/s/ W. Jeptha Thornton
-----------------------
W. Jeptha Thornton
/s/ Richard C. Giles
--------------------
Richard C. Giles
/s/ Samuel J. Thornton
----------------------
Samuel J. Thornton
/s/ Ingrid M. Thornton, Trustee
-------------------------------
The 1998 Thornton Family Trust
By: Ingrid M. Thornton, Trustee
/s/ Amy Giles, Trustee
----------------------
The 1998 Giles Family Trust
By: Amy Giles, Trustee
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EXHIBITS
EXHIBIT A [Ownership of the Company and the NSJ Companies]
ANNEXES
ANNEX I [Form of Certificate of Merger]
ANNEX II [Form of Bylaws]
ANNEX III [Allocation of Merger Consideration and Earn-Out
Consideration]
ANNEX IV [Allocation of Purchase Price]
ANNEX V [Form of Indemnity Escrow Agreement]
ANNEX VI [Form of Employment Agreement]
SCHEDULES
SCHEDULE 2.5 [Add-Backs]
SCHEDULE 6.1 [Jurisdictions in which Company and Subsidiaries
Are Qualified to do Business]
SCHEDULE 6.3 [Authority]
SCHEDULE 6.4 [Stockholders of Company]
SCHEDULE 6.5 [Issued and Outstanding Stock of the Company and
Subsidiaries]
SCHEDULE 6.6 [Transactions in Capital Stock]
SCHEDULE 6.8 [Subsidiaries]
SCHEDULE 6.9 [Predecessor Companies]
SCHEDULE 6.10 [Spin-offs by Company]
SCHEDULE 6.11 [Third Party Options]
SCHEDULE 6.12 [Company Financial Statements]
SCHEDULE 6.13(a) [Liabilities and Obligations]
SCHEDULE 6.13(b) [Contested Liabilities]
SCHEDULE 6.14 [Accounts and Notes Receivable Aging]
SCHEDULE 6.15 [Permits]
SCHEDULE 6.16 [Real and Personal Property]
SCHEDULE 6.17 [Contracts and Commitments]
SCHEDULE 6.18 [Government Contracts]
SCHEDULE 6.20 [Insurance Policies and Surety Arrangements]
SCHEDULE 6.21 [Employee Information]
71
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SCHEDULE 6.22 [Employee Benefit Plans]
SCHEDULE 6.23 [Authorizations]
SCHEDULE 6.24 [Transactions with Affiliates]
SCHEDULE 6.25 [Litigation]
SCHEDULE 6.26 [Restrictions]
SCHEDULE 6.28 [Intellectual Property]
SCHEDULE 6.28(d) [Confidentiality and Non-Disclosure Agreements]
SCHEDULE 6.29 [Notice and Consents]
SCHEDULE 6.30 [Absence of Changes]
SCHEDULE 6.31 [Deposit Accounts; Powers of Attorney]
SCHEDULE 6.35 [Leases]
SCHEDULE 6.36 [Lease Funding]
SCHEDULE 7.8 [UniCapital and Newco Litigation]
SCHEDULE 7.10 [UniCapital and Newco Agreements]
SCHEDULE 9.2 [Employment Agreements]
SCHEDULE 10.6 [Stockholders Claims]
SCHEDULE 11.4 [Personal Guarantees of the Indebtedness of the
Company]
SCHEDULE 14.1 [Non-Competition]
The registrant agrees to furnish a copy of each omitted schedule, exhibit or
annex to this Exhibit 2.09 to the Commission supplementally upon request
therefor.
72
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Exhibit 2.10
- --------------------------------------------------------------------------------
AMENDED AND RESTATED PURCHASE AGREEMENT
by and among
UNICAPITAL CORPORATION
(a Delaware corporation),
PFSC ACQUISITION CORP.
(a Delaware corporation),
PFSC LIMITED ACQUISITION CORP.
(a Delaware corporation),
PORTFOLIO FINANCIAL SERVICING COMPANY, L.P.
and
THE PARTNERS
LISTED ON THE SIGNATURE PAGE HEREOF
Dated as of February 14, 1998
- --------------------------------------------------------------------------------
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1. SALE AND PURCHASE........................................................................................2
1.1 Agreement to Sell...............................................................................2
1.2 Agreement to Purchase...........................................................................2
2. CONSIDERATION AND EXCHANGE...............................................................................2
2.1 Consideration...................................................................................2
2.2 Exchange Procedures.............................................................................2
2.3 No Fractional Shares............................................................................3
3. POST-CLOSING ADJUSTMENT; PARTNERS' REPRESENTATIVE........................................................3
3.1 Computation.....................................................................................3
3.2 Disputes........................................................................................4
3.3 Partners' Representative........................................................................4
4. INDEMNITY ESCROW.........................................................................................5
4.1 Creation of Escrow..............................................................................5
4.2 Duration and Terms..............................................................................5
4.3 Voting and Investment...........................................................................5
5. CLOSING; CLOSING DATE....................................................................................5
5.1 Closing.........................................................................................5
5.2 Closing Date; Location..........................................................................6
6. REPRESENTATIONS AND WARRANTIES OF THE PARTNERS...........................................................6
6.1 Existence.......................................................................................6
6.2 Authorization; Enforceable Obligations..........................................................6
6.3 Authority; Ownership............................................................................6
6.4 Validity of Contemplated Transactions...........................................................7
6.5 Partnership Interests...........................................................................7
6.6 No Bonus Interest...............................................................................7
6.7 Books of Account................................................................................7
6.8 Subsidiaries....................................................................................7
6.9 Predecessor Status; etc.........................................................................7
6.10 Spin-offs.......................................................................................7
6.11 No Third Party Options..........................................................................8
6.12 Financial Statements............................................................................8
6.13 Liabilities and Obligations.....................................................................8
6.14 Accounts and Notes Receivable...................................................................9
6.15 Permits.........................................................................................9
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6.16 Real and Personal Property.....................................................................10
6.17 Contracts and Commitments......................................................................10
6.18 Government Contracts...........................................................................12
6.19 Title to Real Property.........................................................................12
6.20 Insurance......................................................................................12
6.21 Employees......................................................................................13
6.22 Employee Benefit Plans and Arrangements........................................................13
6.23 Compliance with Law; Authorizations............................................................17
6.24 Transactions With Affiliates...................................................................17
6.25 Litigation.....................................................................................17
6.26 Restrictions...................................................................................18
6.27 Taxes..........................................................................................18
6.28 Intellectual Property Matters..................................................................19
6.29 Completeness; No Violations....................................................................20
6.30 Existing Condition.............................................................................20
6.31 Deposit Accounts; Powers of Attorney...........................................................22
6.32 Environmental Matters..........................................................................22
6.33 No Illegal Payments............................................................................23
6.34 Disclosure.....................................................................................24
7. REPRESENTATIONS OF UNICAPITAL AND THE NEWCOS............................................................24
7.1 Corporate Existence............................................................................24
7.2 UniCapital Stock...............................................................................24
7.3 Corporate Power and Authorization..............................................................25
7.4 No Conflicts...................................................................................25
7.5 Capitalization of UniCapital...................................................................25
7.6 Compliance with Law; Authorizations............................................................25
7.7 Transactions With Affiliates...................................................................26
7.8 Litigation.....................................................................................26
7.9 Liquidated Damages.............................................................................26
7.10 Registration Rights............................................................................26
7.11 Miscellaneous..................................................................................26
8. COVENANTS OF THE PARTNERS AND THE PARTNERSHIP...........................................................27
8.1 Business in the Ordinary Course................................................................27
8.2 Existing Condition.............................................................................27
8.3 Maintenance of Properties and Assets...........................................................27
8.4 Employees and Business Relations...............................................................27
8.5 Maintenance of Insurance.......................................................................27
</TABLE>
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8.6 Compliance with Laws, etc......................................................................27
8.7 Conduct of Business............................................................................27
8.8 Access.........................................................................................28
8.9 Press Releases and Other Communications........................................................28
8.10 Exclusivity....................................................................................28
8.11 Third Party Approvals..........................................................................29
8.12 Notice to Bargaining Agents....................................................................29
8.13 Notification of Certain Matters................................................................29
8.14 Amendment of Schedules.........................................................................30
8.15 HSR Filing.....................................................................................30
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTNERSHIP AND THE PARTNERS.................................30
9.1 Representations and Warranties; Performance of Obligations.....................................30
9.2 Employment Agreements..........................................................................30
9.3 Opinion of Counsel.............................................................................31
9.4 Registration Statement.........................................................................31
9.5 HSR Act........................................................................................31
9.6 Injunction.....................................................................................31
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND THE NEWCOS........................................32
10.1 Representations and Warranties; Performance of Obligations.....................................32
10.2 No Litigation..................................................................................32
10.3 Examination of Financial Statements............................................................32
10.4 No Material Adverse Change.....................................................................32
10.5 Regulatory Review..............................................................................33
10.6 Partners' Release..............................................................................33
10.7 Employment Agreements..........................................................................33
10.8 Opinion of Counsel.............................................................................33
10.9 Consents and Approvals.........................................................................34
10.10 Good Standing Certificates.....................................................................34
10.11 Registration Statement.........................................................................34
10.12 Repayment of Indebtedness......................................................................35
10.13 Net Income.....................................................................................35
10.14 HSR Act........................................................................................35
11. COVENANTS OF UNICAPITAL.................................................................................35
11.1 UniCapital Stock Options.......................................................................35
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11.2 HSR Filing.....................................................................................35
11.3 Release From Guarantees; Indebtedness..........................................................36
12. INDEMNIFICATION; SURVIVAL...............................................................................36
12.1 General Indemnification by Partners............................................................36
12.2 Specific Indemnification by Partners...........................................................37
12.3 Indemnification by UniCapital and the Newcos...................................................37
12.4 Third Party Claims.............................................................................38
12.5 Limitations on Indemnification.................................................................39
12.6 Survival of Representations and Warranties.....................................................39
13. TERMINATION OF AGREEMENT................................................................................40
13.1 Termination by UniCapital......................................................................40
13.2 Termination by the Partners....................................................................41
13.3 Automatic Termination..........................................................................41
13.4 Liquidated Damages.............................................................................41
14. NONCOMPETITION AND NONSOLICITATION......................................................................42
14.1 Noncompetition.................................................................................42
14.2 Damages........................................................................................42
14.3 Reasonable Restraint...........................................................................43
14.4 Severability; Reformation......................................................................43
14.5 Independent Covenant...........................................................................43
14.6 Materiality....................................................................................43
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................43
15.1 Partners.......................................................................................43
15.2 UniCapital.....................................................................................44
15.3 Damages........................................................................................44
16. LOCK-UP AGREEMENTS......................................................................................44
16.1 Agreement......................................................................................44
16.2 Intended Third Party Beneficiaries.............................................................45
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON UNICAPITAL STOCK.................................45
17.1 Investment Intent..............................................................................45
17.2 Compliance with Law............................................................................45
17.3 Economic Risk; Sophistication..................................................................46
</TABLE>
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17.4 Information Supplied...........................................................................46
18. SECURITIES LEGENDS......................................................................................46
19. GENERAL.................................................................................................47
19.1 Cooperation....................................................................................47
19.2 Successors and Assigns.........................................................................47
19.3 Entire Agreement...............................................................................47
19.4 Counterparts...................................................................................48
19.5 Brokers and Agents.............................................................................48
19.6 Expenses.......................................................................................48
19.7 Notices........................................................................................48
19.8 Governing Law..................................................................................49
19.9 Exercise of Rights and Remedies................................................................49
19.10 Time...........................................................................................50
19.11 Reformation and Severability...................................................................50
19.12 Remedies Cumulative............................................................................50
19.13 Captions.......................................................................................50
20. DEFINITIONS.............................................................................................50
</TABLE>
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AMENDED AND RESTATED PURCHASE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AGREEMENT (the "Agreement") is made
as of the 14th day of February, 1998, between UNICAPITAL CORPORATION, a Delaware
corporation ("UniCapital"); PFSC ACQUISITION CORP. and PFSC LIMITED ACQUISITION
CORP., each a newly-formed, wholly-owned subsidiary of UniCapital and each a
Delaware corporation (hereinafter referred to individually as "Newco" and
collectively as the "Newcos"); PORTFOLIO FINANCIAL SERVICING COMPANY, L.P., a
Delaware limited partnership (the "Partnership") and the holders of the
partnership interests (the "Partnership Interests") in the Partnership listed as
partners on the signature page hereto (collectively referred to as the
"Partners"), who are all of the partners of the Partnership. Certain capitalized
terms used herein are defined in Article 20 hereof.
WHEREAS, UniCapital was incorporated on October 9, 1997 under the laws
of the State of Delaware for the purpose of acquiring a number of equipment
leasing businesses in different locations; and
WHEREAS, UniCapital intends to undertake an initial public offering of
its Common Stock (the "IPO") and in connection therewith intends to file a
Registration Statement on Form S-1 with the Securities and Exchange Commission
within 90 days of the execution and delivery of this Agreement; and
WHEREAS, the Newcos were duly incorporated on January 23, 1998 under
the laws of the State of Delaware solely for the purpose of completing this
transaction, and are wholly-owned subsidiaries of UniCapital; and
WHEREAS, the Partners desire to sell to the Newcos all of the Partners'
right, title and interest in and to the Partnership Interests pursuant to this
Agreement; and
WHEREAS, the respective Boards of Directors of UniCapital and the
Newcos deem it advisable and in the best interests of such corporations and
their respective stockholders that the Newcos purchase from the Partners' all of
the Partners' right, title and interest in and to the applicable Partnership
Interests pursuant to this Agreement; and
WHEREAS, the parties hereto intend that the transactions contemplated
in this Agreement constitute part of a single transaction (the "Unified
Transaction") involving the simultaneous consummation of a number of similar
agreements between UniCapital and certain other corporations and partnerships
and the IPO.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1
<PAGE> 8
1. SALE AND PURCHASE
1.1 AGREEMENT TO SELL. On the Closing Date hereunder (as defined in
Section 5.2), the Partners shall sell, assign and transfer to the Newcos all of
the Partnership Interests in the Partnership upon and subject to the terms and
conditions of this Agreement, such that, upon such sale, assignment and
transfer, PFSC Acquisition Corp. shall be the holder of 100% of the Partnership
Interests of Equipment Servicing Corp., the sole general Partner (the "General
Partner"), free and clear of all liens, pledges, security interests, charges,
claims, restrictions and other encumbrances of any nature whatsoever, and PFSC
Limited Acquisition Corp. shall be the holder of 100% of the Partnership
Interests of ILC Acquisition Partners, L.P., the sole limited Partner (the
"Limited Partner"), free and clear of all liens, pledges, security interests,
charges, claims, restrictions and other encumbrances of any nature whatsoever.
1.2 AGREEMENT TO PURCHASE. On the Closing Date hereunder, the Newcos
shall purchase the Partnership Interests from the Partners, as aforesaid, upon
and subject to the terms and conditions of this Agreement and upon the
representations and warranties contained herein, and the Newcos will deliver the
Consideration defined in Section 2.1.
2. CONSIDERATION AND EXCHANGE
2.1 CONSIDERATION. Upon the Closing Date, an aggregate of 184,210
shares of common stock, par value $.001 per share, of UniCapital ("UniCapital
Stock") shall be paid to the Partners by Newco (or by UniCapital, on behalf of
and at the direction of the Newcos); provided, however, in the event that the
aggregate value (based on the IPO price of the UniCapital Stock) of the 184,210
shares of UniCapital Stock is less than $2,763,165, then UniCapital, on behalf
of and at the direction of the Newcos, shall issue additional shares to the
Partners so that the aggregate value of the shares of UniCapital Stock equals
$2,763,165 (the "Effective Date Consideration").
2.2 EXCHANGE PROCEDURES.
(a) In exchange for the Partnership Interests, Newco, or
UniCapital, on behalf of and at the direction of Newco, shall cause to be made
available to the Partners the Consideration. On the Closing Date, each Partner
shall, subject to Article 4, be entitled to receive a certificate representing
that number of whole shares of UniCapital Stock which such Partner has the right
to receive, based on such Partners' pro rata interest in the Partnership, as
calculated in accordance with Annex I. The certificates evidencing the
UniCapital Stock shall bear appropriate legends pursuant to the terms of this
Agreement, and UniCapital shall be entitled to issue appropriate stop transfer
instructions to its transfer agent consistent with the terms of this Agreement.
2
<PAGE> 9
(b) On the Closing Date or as promptly thereafter as is
practicable, and subject to and in accordance with the provisions of Article 4,
Newco, or UniCapital, on behalf of and at the direction of Newco, shall cause to
be distributed to the Indemnity Escrow Agent (as defined in Article 4) a
certificate or certificates representing the Escrow Shares (as defined in
Article 4), which shall be registered in the name of the Indemnity Escrow Agent
as nominee for the Partners and shall be held in accordance with the provisions
of Article 4 and the Indemnity Escrow Agreement referred to therein.
(c) All UniCapital Stock to be delivered on the Closing Date
in accordance with the terms hereof shall be deemed to have been delivered in
full satisfaction of and as full payment for all Partnership Interests, and
following the Closing Date the Partners shall have no further rights to, or
ownership in, the Partnership Interests. The Partners shall jointly and
severally indemnify and hold harmless UniCapital and the Newcos from and against
any and all loss, liability, cost, damage and/or expense suffered or incurred by
UniCapital or the Newcos as a result of the allocation of Consideration among or
between the Partners in any manner other than pro rata among all Partnership
Interests.
2.3 NO FRACTIONAL SHARES. Notwithstanding any other provision of this
Article 2, no fractional shares of UniCapital Stock will be issued and any
Partner entitled hereunder to receive a fractional share of UniCapital Stock but
for this Section 2.3 will be entitled hereunder to receive no such fractional
share but a cash payment in lieu thereof in an amount equal to such fraction
multiplied by $19.00.
3. POST-CLOSING ADJUSTMENT; PARTNERS' REPRESENTATIVE
3.1 COMPUTATION. As soon as practicable, but in any event within 30
days after the Closing, UniCapital shall engage Price Waterhouse LLP to prepare,
in accordance with generally accepted accounting principles ("GAAP"), and
consistent with previous practice, a balance sheet of the Partnership (the
"Closing Date Balance Sheet") as of the end of business on the day prior to the
Closing Date (as defined in Section 5). If the Partnership's net worth as shown
on the Closing Date Balance Sheet is less than $400,000, then, subject to
Section 3.2, commencing 20 business days after delivery of the Closing Date
Balance Sheet to UniCapital, the aggregate Consideration shall be adjusted
downward dollar-for-dollar in the amount of any such deficiency (the "Net Worth
Deficiency"). Upon determination of the Net Worth Deficiency, UniCapital shall
be entitled to recover from the Indemnity Escrow pursuant to Article 4 that
portion of the Net Worth Deficiency which does not exceed one-half of the
balance of the Escrow Property. For any amount by which any Net Worth Deficiency
exceeds one-half of the initial balance of the Escrow Property, such portion of
the Net Worth Deficiency shall be paid by the Partners not later than the 25th
business day after the delivery of the Closing Date Balance Sheet (or if
applicable, not later than the 5th business day after the final determination of
any Disputed Amount in accordance with Section 3.2). At its sole and exclusive
option, and at any time after such 25th business day (or if applicable, not
later than the fifth business day after the final
3
<PAGE> 10
determination of any Disputed Amount in accordance with Section 3.2), UniCapital
shall be entitled to recover from the Escrow Property pursuant to Article 4 all
or any portion of the amount of the Net Worth Deficiency not paid by the
Partners as required by this Article 3.
3.2 DISPUTES. Notwithstanding anything in this Article 3 to the
contrary, if there is any Net Worth Deficiency and the Partners dispute any item
contained on the Closing Date Balance Sheet, then the Partners' Representative
shall notify UniCapital in writing of each disputed item (collectively, the
"Disputed Amounts") and specify the amount thereof in dispute within 20 business
days after the delivery of the Closing Date Balance Sheet to the Partners. If
UniCapital and the Partners' Representative cannot resolve any such dispute
relating to the Net Worth Deficiency, then such dispute shall be resolved by an
independent nationally recognized accounting firm which is reasonably acceptable
to UniCapital and the Partners' Representative (the "Independent Accounting
Firm"). The determination of the Independent Accounting Firm shall be made as
promptly as practical and shall be final and binding on the parties, absent
manifest error which error may only be corrected by such Independent Accounting
Firm. Any expenses relating to the engagement of the Independent Accounting Firm
shall be allocated between UniCapital and the Partners so that the Partners'
aggregate share of such costs shall bear the same proportion to the total costs
that the Disputed Amounts unsuccessfully contested by the Partners'
Representative (as finally determined by the Independent Accounting Firm) bear
to the total of the Disputed Amounts so submitted to the Independent Accounting
Firm. Pending resolution of any such dispute by the Independent Accounting Firm,
no such Disputed Amount shall be due to UniCapital. Once any such Disputed
Amount is finally determined to be due to UniCapital, UniCapital may proceed to
recover such amount in the manner set forth in Section 3.1.
3.3 PARTNERS' REPRESENTATIVE. (a) Each Partner, by signing this
Agreement, designates Mary B. Strong (or, in the event that Mary B. Strong is
unable or unwilling to serve or resigns, Craig H. Farnsworth) to be such
Partners' representative for purposes of this Agreement (the "Partners'
Representative"). The Partners shall be bound by any and all actions taken by
the Partners' Representative on their behalf.
(b) UniCapital and the Newcos shall be entitled to rely upon
any communication or writing given or executed by the Partners' Representative.
All communications or writings to be sent to Partners pursuant to this Agreement
may be addressed to the Partners' Representative and any communication or
writing so sent shall be deemed notice to all of the Partners hereunder. The
Partners hereby consent and agree that the Partners' Representative is
authorized to accept deliveries, including any notice, on behalf of the Partners
pursuant hereto.
(c) The Partners' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Partner, with full
power in his or her name and on his or her behalf to act according to the terms
of this Agreement in the absolute discretion of the Partners' Representative,
and in general to do all things and to perform all acts including, without
4
<PAGE> 11
limitation, executing and delivering all agreements, certificates, receipts,
instructions and other instruments contemplated by or deemed advisable in
connection with Article 12 of this Agreement. This power of attorney and all
authority hereby conferred is granted subject to and coupled with the interest
of such Partner and the other Partners hereunder and in consideration of the
mutual covenants and agreements made herein, and shall be irrevocable and shall
not be terminated by any act of any Partner, by operation of law, by such
Partner's death or any other event.
(d) Notwithstanding the foregoing, the Partners'
Representative shall inform each Partner of all notices received, and of all
actions, decisions, notices and exercise of any rights, power or authority
proposed to be done, given or taken by such Partners' Representative, and shall
act as directed by the Partners holding a majority interest in the Escrow
Property (as defined in Section 4.1(a)).
4. INDEMNITY ESCROW
4.1 CREATION OF ESCROW.
(a) At the Closing, as collateral security for the payment of
any indemnification obligations of the Partners pursuant to Sections 12.1 and
12.2 hereof and for the payment of amounts due pursuant to Article 3 hereof, ten
percent (10%) of the number of shares of UniCapital Stock issuable to each
Partner as part of the Effective Date Consideration in accordance with Annex I,
rounded up to the nearest whole share (the "Escrow Property") shall be delivered
to [American Stock Transfer and Trust Company] as indemnity escrow agent (the
"Indemnity Escrow Agent")
(b) The Escrow Property shall include all cash and non-cash
dividends and other property at any time received or otherwise distributed in
respect of or in exchange for any or all of the Escrow Property, all securities
hereafter issued in substitution for any of the foregoing, all certificates and
instruments representing or evidencing such securities, all cash and non-cash
proceeds of all of the foregoing property and, except as provided in Section
4.3, all rights, titles, interests, privileges and preferences appertaining or
incident to the foregoing property.
4.2 DURATION AND TERMS. The Escrow Property shall be held and disbursed
by the Indemnity Escrow Agent in accordance with the terms of an Indemnity
Escrow Agreement substantially in the form attached hereto as Annex II. The
Indemnity Escrow Agent shall hold the Escrow Property pursuant to the Indemnity
Escrow Agreement until the later of: (a) the first anniversary of the Closing
Date; and (b) the resolution of any claim for indemnification or payment that is
pending on the first anniversary of the Closing Date, but only to the extent of
the amount of such pending claim.
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<PAGE> 12
4.3 VOTING AND INVESTMENT. The Partners shall be entitled to exercise
all voting powers incident to the Escrow Property held by the Indemnity Escrow
Agent as their nominee, but shall not be entitled to exercise any investment or
dispositive powers over such Escrow Property.
5. CLOSING; CLOSING DATE
5.1 CLOSING. Concurrently with the consummation of the sale of the
shares of UniCapital Stock pursuant to the underwriting agreement relating to
the offer and sale of shares of UniCapital Stock in the IPO (the "Underwriting
Agreement"), the parties shall take all actions necessary to effect the sale of
Partnership Interests and to effect the conversion and delivery of shares
referred to in Article 2 hereof (hereinafter referred to as the "Closing").
5.2 CLOSING DATE; LOCATION. The Closing shall take place at the offices
of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178. The date on
which the Closing shall occur shall be referred to as the "Closing Date."
6. REPRESENTATIONS AND WARRANTIES OF THE PARTNERS
As of the date hereof and as of the Closing Date each Partner, jointly
and severally, represents and warrants to UniCapital and the Newcos as follows:
6.1 EXISTENCE. The Partnership is a limited partnership duly organized,
validly existing and in good standing under the laws of Delaware and is duly
qualified to do business and is in good standing in each jurisdiction where the
conduct of its business requires it to be so qualified, all of which
jurisdictions are listed on Schedule 6.1. The Partnership has delivered to
UniCapital true, complete and correct copies of its limited partnership
agreement. The Partnership is not in violation of its limited partnership
agreement. Each subsidiary of the Partnership listed on Schedule 6.8 (each, a
"Subsidiary"), is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation. Each
Subsidiary is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the conduct of its business requires it
to be so qualified, all of which jurisdictions are listed on Schedule 6.1.
6.2 AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The Partnership has the
full legal right, requisite power and authority to execute, deliver and perform
this Agreement. The execution, delivery and performance of this Agreement by the
Partnership has been duly authorized by the Partners and no further action is
necessary to authorize this Agreement and the performance of the transactions
contemplated hereby. This Agreement has been, and the other agreements,
documents and instruments required to be delivered by the Partnership in
accordance with the provisions hereof (the "Partnership Documents") will be,
duly executed and delivered on
6
<PAGE> 13
behalf of the Partnership, and this Agreement constitutes, and the Partnership
Documents when executed and delivered will constitute, the legal, valid and
binding obligations of the Partnership, enforceable against it in accordance
with their respective terms.
6.3 AUTHORITY; OWNERSHIP. Each Partner has the full legal right, power
and authority to enter into this Agreement. Upon the date of this Agreement and
as of the Closing Date, each Partner owns and will own the Partnership Interest
identified on Annex I as being held by such Partner. As a result of the
transactions contemplated hereby, the Newcos will be the record and beneficial
owner of 100% of the Partnership Interests, free and clear of all liens,
security interests, pledges, charges, voting trusts, equities, restrictions,
encumbrances and claims of every kind.
6.4 VALIDITY OF CONTEMPLATED TRANSACTIONS. The execution, delivery and
performance of this Agreement by the Partnership and each Partner does not and
will not violate, conflict with or result in the breach of any term, condition
or provision of, or require the consent of any other person under (a) any
existing law, ordinance, or governmental rule or regulation to which the
Partnership or any Partner is subject, (b) any judgment, order, writ,
injunction, decree or award of any Governmental Entity which is applicable to
the Partnership or any Partner, or (c) any mortgage, indenture, agreement,
contract, commitment, lease, plan, Authorization, or other instrument, document
or understanding, oral or written, to which the Partnership or any Partner is a
party, by which the Partnership or any Partner may have rights or by which any
of the properties or assets of the Partnership may be bound or affected, or give
any party with rights thereunder the right to terminate, modify, accelerate or
otherwise change the existing rights or obligations of the Partnership
thereunder. Except as aforesaid and for filings under the Hart- Scott-Rodino
Antitrust Improvements Act of 1976, no authorization, approval or consent of,
and no registration or filing with, any Governmental Entity is required in
connection with the execution, delivery or performance of this Agreement by the
Partnership or any Partner.
6.5 PARTNERSHIP INTERESTS. Schedule 6.5 sets forth all of the
outstanding Partnership Interests of the Partnership and the holders thereof.
6.6 NO BONUS INTEREST. No portion of any Partnership Interest was
issued pursuant to any awards, grants or bonuses.
6.7 BOOKS OF ACCOUNT. The books, records and accounts of the
Partnership accurately and fairly reflect, in reasonable detail, the
transactions and the assets and liabilities of the Partnership. The Partnership
has not engaged in any transaction, maintained any bank account or used any of
the funds of the Partnership except for transactions, bank accounts and funds
which have been and are reflected in the normally maintained books and records
of the business.
6.8 SUBSIDIARIES. Schedule 6.8 lists the name of each Subsidiary.
Except as set forth in Schedule 6.8, neither the Partnership nor any Subsidiary
currently owns, of record or beneficially, or controls, directly or indirectly,
any capital stock, any securities convertible into
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capital stock or any other equity interest in any corporation, association or
other business entity. Except as set forth on Schedule 6.8, neither the
Partnership nor any Subsidiary is, directly or indirectly, a participant in any
joint venture, partnership or other non-corporate entity.
6.9 PREDECESSOR STATUS; ETC. Schedule 6.9 lists all names of all
predecessor companies of the Partnership and each Subsidiary, including the
names of all entities from whom the Partnership previously acquired assets
representing all or substantially all of the assets of that entity. Except as
set forth on Schedule 6.9, the Partnership has not ever been a subsidiary or
division of another corporation or been a part of an acquisition which was later
rescinded.
6.10 SPIN-OFFS. Since December 31, 1995, there has not been any sale or
spin-off of significant assets of the Partnership or any Subsidiary other than
in the ordinary course of business.
6.11 NO THIRD PARTY OPTIONS. There are no existing agreements, options,
commitments or rights with, of or to any person to acquire any properties,
assets or rights of the Partnership or any interest therein.
6.12 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.12 are copies
of the following audited financial statements of the Partnership:
(a) the balance sheets of the Partnership at December 31, 1997
(the "Audited Balance Sheet Date") and December 31, 1996, and the related
statements of income, cash flows and changes in partners' equity for the fiscal
years then ended, certified by Arthur Anderson, the Partnership's independent
public accountants, together with the report of such independent public
accountants thereon (the "Audited Financial Statements"); and
(b) the unaudited balance sheet of the Partnership at December
31, 1995, and the related statements of income and cash flows for the fiscal
year then ended (the "Unaudited Financial Statements," and together with the
Audited Financial Statements, the "Financial Statements").
All of the Audited Financial Statements have been prepared in accordance with
GAAP consistently applied throughout the periods involved. All of the balance
sheets included in the Financial Statements, including the related notes, fairly
present the financial position, assets and liabilities (whether accrued,
absolute, contingent or otherwise) of the Partnership at the dates indicated and
such statements of income, cash flows and changes in partners' equity fairly
present the results of operations, cash flows and changes in partners' equity of
the Partnership for the periods indicated. The Unaudited Financial Statements
fairly present the financial position of the applicable Partnership at the dates
indicated, and such statements of income, cash flows and changes in the
Partners' equity fairly present the results of operations, cash flows and
changes in Partners' equity for the periods indicated, except for normal
recurring year-end adjustments
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which are not expected to be material in amount and except for the addition of
required footnotes thereto.
6.13 LIABILITIES AND OBLIGATIONS.
(a) Attached hereto as Schedule 6.13 is an accurate list, as
of a date not more than two days prior to the date of this Agreement, of: (i)
all liabilities of the Partnership and each of its Subsidiaries which are
reflected on the audited consolidated balance sheet as of the Audited Balance
Sheet Date included in the Audited Financial Statements; (ii) all liabilities
incurred thereafter other than in the ordinary course of business; (iii) all
material liabilities incurred thereafter in the ordinary course of business; and
(iv) all liabilities (A) incurred as of the Audited Balance Sheet Date that are
not reflected on the audited balance sheet as of the Audited Balance Sheet Date
and (B) all liabilities incurred thereafter that would not have been so
reflected had such liabilities been incurred as of the Audited Balance Sheet
Date. Each of the foregoing liabilities that has not heretofore been paid or
discharged is so noted on Schedule 6.13. For purposes of this Agreement,
"liabilities" means liabilities of any kind, character or description, whether
accrued, absolute, secured or unsecured, contingent or otherwise.
(b) For each such liability for which the amount is not fixed
or is contested, Schedule 6.13 shall include a summary description of the
liability, together with copies of all relevant non-privileged documentation
relating thereto, detail of all amounts claimed and any other action or relief
sought, the names of the claimant and all other parties to the claim, suit or
proceeding, the name of each court or agency before which such claim, suit or
proceeding is pending, the date such claim, suit or proceeding was instituted,
and a best estimate of the maximum amount, if any, which is likely to become
payable with respect to each such liability. If no estimate is provided, the
best estimate shall for purposes of this Agreement be deemed to be zero. On the
Closing Date, the Partnership shall deliver, and shall cause its accountants,
outside counsel and other representatives or agents to deliver, copies of all
privileged documents related to liabilities as listed on Schedule 6.13.
(c) All of the liabilities reflected on the unaudited
consolidated balance sheet included in the Interim Financial Statements arose
only out of or were incurred only in connection with the conduct of the business
of the Partnership. Except as set forth on Schedule 6.13 and except for
liabilities not required to be set forth thereon pursuant to Section 6.13(a),
the Partnership has no liabilities or obligations with respect to their
respective businesses, whether direct or indirect, matured or unmatured,
absolute contingent or otherwise, and there is no condition, situation or set of
circumstances which would reasonably be expected to result in any such
liability.
6.14 ACCOUNTS AND NOTES RECEIVABLE. Attached hereto as Schedule 6.14 is
a complete and accurate list, as of a date not more than two days prior to the
date of this Agreement, of the accounts and notes receivable of the Partnership
(including, without limitation, receivables from and advances to employees and
Partners) (collectively, the "Accounts Receivable"). Schedule
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6.14 includes an aging of all Accounts Receivable showing amounts due in 30-day
aging categories. On the Closing Date, the Partners will deliver to UniCapital a
complete and accurate list, as of a date not more than two days prior to the
Closing Date, of the Accounts Receivable. All Accounts Receivable represent
valid obligations arising from bona fide business transactions in the ordinary
course of business consistent with past practice. The Accounts Receivable are,
and as of the Closing Date will be, collectible net of any respective reserves
shown on the Partnership's books and records (which reserves are adequate and
calculated consistent with past practice). Subject in the case of Accounts
Receivable reflected on the Partnership's balance sheet to such reserves
reflected on such balance sheet, each of the Accounts Receivable will be
collected in full within ninety (90) days after the day on which it first became
due and payable. There is no contest, claim, counterclaim, defense or right of
set-off, other than rebates and returns in the ordinary course of business,
under any contract with any obligor of any Account Receivable relating to the
amount or validity of such Account Receivable. The allowance for collection
losses on the audited balance sheet as of the Audited Balance Sheet Date has
been determined in accordance with GAAP consistent with past practice.
6.15 PERMITS. Each material Permit, together with the name of the
Governmental Entity issuing such Permit is set forth on Schedule 6.15. Such
Permits are valid and in full force and effect and none of such Permits will be
terminated or impaired or become terminable as a result of the transactions
contemplated by this Agreement. Upon consummation of such transactions, the
Newcos will have all of the Partnership's right, title and interest in the
Permits.
6.16 REAL AND PERSONAL PROPERTY. Attached hereto as Schedule 6.16 is an
accurate list, including substantially complete descriptions as of the Audited
Balance Sheet Date, of all the real and personal property (which in the case of
personal property had an original cost in excess of $25,000) owned or leased by
the Partnership (including the Subsidiaries), where the Partnership or its
Subsidiary is a lessee or sublessee, including true and correct copies of leases
for equipment and properties on which are situated buildings, warehouses and
other structures used in the operation of the business of the Partnership
(including the Subsidiaries) and including an indication as to which assets were
formerly owned by any Partner or affiliate (which term, as used herein, shall
have the meaning ascribed thereto in Rule 144(a)(1) promulgated under the
Securities Act of 1933, as amended (the "Securities Act")) of the Partnership.
Except as set forth on Schedule 6.16, all of the Partnership's buildings,
leasehold improvements, structures, facilities, equipment and other material
items of tangible property and assets are in good operating condition and
repair, subject to normal wear and maintenance, are usable in the regular and
ordinary course of business and conform to all applicable laws, ordinances,
codes, rules and regulations, and Authorizations relating to their construction,
use and operation. All leases set forth on Schedule 6.16 have been duly
authorized, executed and delivered and constitute the legal, valid and binding
obligations of the Partnership (or the Subsidiaries) and, to the knowledge of
the Partners, no other party to any such lease is in default thereunder and such
leases constitute the legal, valid and binding obligations of such other
parties. All fixed assets used by the Partnership (including the Subsidiaries)
in the operation of its business are either owned by the Partnership (or the
Subsidiaries) or leased under an agreement set forth on Schedule 6.16. The
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Partnership and the Partners have heretofore delivered to UniCapital copies of
all title reports and title insurance policies received or held by the
Partnership (including the Subsidiaries). The Partnership and the Partners have
indicated on Schedule 6.16 a summary description of all plans or projects
involving the opening of new operations, expansion of any existing operations or
the acquisition of any real property or existing business to which management of
the Partnership (or the Subsidiaries) has devoted any significant effort or
expenditure in the two-year period prior to the date of this Agreement which, if
pursued by the Partnership (or the Subsidiaries) would require additional
expenditures of significant efforts or capital.
6.17 CONTRACTS AND COMMITMENTS. Schedule 6.17 sets forth an accurate,
correct and complete list of all agreements, contracts, commitments,
arrangements and understandings, written or oral, including all amendments and
supplements thereto, of the Partnership other than Leases (the "Contracts"), to
which the Partnership is a party or is bound, or by which any of its assets are
bound, and which involve any:
(a) agreement, contract, commitment, arrangement or
understanding with any present or former employee or consultant or for the
employment of any person, including any consultant;
(b) agreement, contract, commitment, arrangement or
understanding for the future purchase of, or payment for, supplies or products,
or for the performance of services by a third party involving in any one case
$10,000 or more;
(c) agreement, contract, commitment, arrangement or
understanding to sell or supply products or to perform services involving in any
one case $10,000 or more;
(d) agreement, contract, commitment, arrangement or
understanding containing requirements or "take or pay" provisions;
(e) agreement, contract, commitment, arrangement or
understanding not otherwise listed on Schedule 6.17 and continuing over a period
of more than six months from the date hereof or exceeding $10,000 in value;
(f) distribution, dealer, representative or sales agency
agreement, contract, commitment, arrangement or understanding;
(g) agreement, contract, commitment, arrangement or
understanding containing a provision to indemnify any person or entity or assume
any tax, environmental or other liability;
(h) agreement, contract, commitment, arrangement or
understanding with federal, state, local, regulatory or other governmental
entities;
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(i) note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement or other contract or commitment for the
borrowing or lending of money or agreement or arrangement for a line of credit
or guarantee, pledge or undertaking of the indebtedness of any other person;
(j) agreement, contract, commitment, arrangement or
understanding for any charitable or political contribution;
(k) agreement, contract, commitment, arrangement or
understanding for any capital expenditure or leasehold improvement in excess of
$10,000;
(l) agreement, contract, commitment, arrangement or
understanding limiting or restraining the Partnership or any successor thereto,
or to the knowledge of the Partnership and each Partner, any employee of the
Partnership or any successor thereto, from engaging or competing in any manner
or in any business;
(m) license, franchise, distributorship or other agreement
which relates in whole or in part to any software, patent, trademark, trade
name, service mark or copyright or to any ideas, technical assistance or other
know-how of or used by the Partnership;
(n) agreement, contract, commitment, arrangement or
understanding to which the Partnership, on the one hand, and any affiliate,
officer, director or partner of the Partnership, on the other hand, are parties;
or
(o) material agreement, contract, commitment, arrangement or
understanding not made in the ordinary course of business.
Each of the Contracts listed on Schedule 6.17, or not required to be listed
therein because of the amount thereof, is valid and enforceable in accordance
with its terms; the Partnership is, and to the knowledge of the Partnership and
each Partner, all other parties thereto are, in compliance with the provisions
thereof. The Partnership is not, and to the knowledge of the Partnership and
each Partner, no other party thereto is, in default in the performance,
observance or fulfillment of any material obligation, covenant or condition
contained therein; and no event has occurred which with or without the giving of
notice or lapse of time, or both, would constitute a default thereunder. None of
the rights of the Partnership under any Contract will be impaired by the
consummation of the transactions contemplated hereby, and all such rights will
be enforceable by the Newcos after the Closing Date without the consent or
agreement of any other party. The Partnership has delivered accurate and
complete copies of each Contract to UniCapital. No Contract obligates any party
to obtain any consent in connection with the transactions contemplated hereby.
6.18 GOVERNMENT CONTRACTS. The Partnership is not now nor has it ever
been a party to any contract with any Governmental Entity subject to price
redetermination or renegotiation.
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6.19 TITLE TO REAL PROPERTY. The Partnership has good and insurable
title to all real property owned and used in its business, subject to no
mortgage, pledge, lien, conditional sales agreement, encumbrance or charge,
except for:
(a) liens, if any, reflected on Schedules 6.13 and 6.16 as
securing specified liabilities (with respect to which no material default
exists);
(b) liens for current taxes and assessments not yet due or in
default;
(c) easements for utilities serving the property only; and
(d) easements, covenants and restrictions and other exceptions
to title shown of record in the offices of the county clerks in which the
properties, assets and leasehold estates are located which, in UniCapital's sole
judgment, do not adversely affect UniCapital's intended use of such properties.
6.20 INSURANCE. The assets, properties and operations of the
Partnership are insured under various policies of general liability and other
forms of insurance, all of which are described in Schedule 6.20, which discloses
for each policy the risks insured against, coverage limits, deductible amounts,
all outstanding claims thereunder, and whether the terms of such policy provide
for retrospective premium adjustments. All such policies are in full force and
effect in accordance with their terms, no notice of cancellation has been
received, and there is no existing default or event which, with the giving of
notice or lapse of time or both, would constitute a default thereunder. Such
policies are in amounts which, in relation to the business and assets of the
Partnership, are consistent with the normal or customary industry practice and
all premiums due to date have been paid in full. The Partnership has not been
refused any insurance, nor has the Partnership's coverage been limited, by any
insurance carrier to which it has applied for insurance or with which it has
carried insurance during the past five years. Schedule 6.20 also contains a true
and complete description of all outstanding bonds and other surety arrangements
issued or entered into in connection with the business, assets and liabilities
of the Partnership.
6.21 EMPLOYEES. Schedule 6.21 contains the following with respect
to the Partnership:
(a) a list of all employees of the Partnership (including
name, title and position);
(b) each such employee's length of service; and
(c) the compensation (including terms of payment, bonuses,
commissions and deferred compensation, as well as any benefits) of each such
employee.
Except as disclosed on Schedule 6.21: (i) there have not been in the past five
years and, to the knowledge of the Partnership and the Partners, there are not
pending, any labor disputes, work
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stoppages, requests for representation, pickets or work slow-downs due to labor
disagreements; (ii) there are and have been no unresolved violations of any
Laws, as defined in Section 8.6, of any Governmental Entity respecting the
employment of any employees; (iii) there is no unfair labor practice, charge or
complaint pending, unresolved or, to the knowledge of the Partnership and the
Partners, threatened before the National Labor Relations Board or similar body
in any foreign country; (iv) there is no employment handbook, personnel policy
manual, or similar document that creates prospective employment rights or
obligations; (v) the employees of the Partnership are not covered by any
collective bargaining agreement; (vi) the Partnership has provided or will
timely provide prior to Closing all notices required by law to be given prior to
Closing to all local, state, federal or national labor, wage-payment, equal
employment opportunity, unemployment insurance and related agencies; (vii) the
Partnership has paid or properly accrued in the ordinary course of business all
wages and compensation due to employees, including all vacations or vacation
pay, holidays or holiday pay, sick days or sick pay, and bonuses; and (viii) the
transactions contemplated by this Agreement will not create liability under any
Laws of any Governmental Entity respecting reductions in force or the impact of
employees on plant closing or sales of businesses. All employees of the
Partnership are legally able to work in the United States.
6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. Schedule 6.22 sets forth
a complete and accurate list of each Benefit Plan covering any present or former
officers, employees or directors of the Partnership. "Benefit Plan" means each
"employee pension benefit plan" (as defined in Section 3(2) of ERISA,
hereinafter a "Pension Plan"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA, hereinafter a "Welfare Plan") and each other plan or
arrangement (written or oral) relating to deferred compensation, bonus,
performance compensation, stock purchase, stock option, stock appreciation,
severance, vacation, sick leave, holiday pay, fringe benefits, personnel policy,
reimbursement program, incentive, insurance, welfare or similar plan, program,
policy or arrangement, in each case maintained or contributed to, or required to
be maintained or contributed to, by the Partnership or its affiliates or any
other person or entity that, together with the Partnership, is treated as a
single employer under Section 414(b), (c), (m) or (o) of the Internal Revenue
Code of 1986, as amended (the "Code") (each, together with the Partnership, a
"Commonly Controlled Entity") for the benefit of any present or former officer,
employee or director. The Partnership has no intent or commitment to create any
additional Benefit Plan or amend any Benefit Plan so as to increase benefits
thereunder. The Partnership has not created any Benefit Plan or declared or paid
any bonus compensation in contemplation of the transactions contemplated by this
Agreement. A current, accurate and complete copy of each Benefit Plan has been
made available to UniCapital. Except as disclosed on Schedule 6.22:
(a) each Benefit Plan is in substantial compliance with all
reporting, disclosure and other requirements of ERISA applicable to such Benefit
Plan;
(b) each Pension Plan which is intended to be qualified under
Section 401(a) of the Code has been determined by the Internal Revenue Service
to be so qualified and, to the
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knowledge of the Partnership and the Partners, no condition exists that would
adversely affect any such determination;
(c) neither any Benefit Plan, nor the Partnership, nor any
Commonly Controlled Entity, nor any trustee or agent has been or is presently
engaged in any prohibited transactions as defined by Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not applicable which could
subject the Partnership to the tax or penalty imposed by Section 4975 of the
Code or Section 502 of ERISA;
(d) there is no event or condition existing which could be
deemed a "reportable event" (within the meaning of Section 4043 of ERISA) with
respect to which the thirty-day notice requirement has not been waived; to the
knowledge of the Partnership and the Partners, no condition exists which could
subject the Partnership to a penalty under Section 4071 of ERISA;
(e) neither the Partnership nor any Commonly Controlled Entity
is or has ever been party to any "multi-employer plan," as that term is defined
in Section 3(37) of ERISA;
(f) true and correct copies of the most recent annual report
on Form 5500 and any attached schedules for each Benefit Plan (if any such
report was required by applicable law) and a true and correct copy of the most
recent determination letter issued by the Internal Revenue Service for each
Pension Plan have been provided to UniCapital;
(g) with respect to each Benefit Plan, there are no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
pending or, to the knowledge of the Partnership and the Partners, threatened
against any Benefit Plan, the Partnership, any Commonly Controlled Entity or any
trustee or agent of any Benefit Plan; and
(h) with respect to each Benefit Plan to which the Partnership
or any Commonly Controlled Entity is a party which constitutes a group health
plan subject to Section 4980B of the Code, each such Benefit Plan substantially
complies, and in each case has substantially complied, with all applicable
requirements of Section 4980B of the Code.
(i) Except as set forth in Schedule 6.22:
(i) there is no outstanding liability (except for
premiums due) under Title IV of ERISA with respect to any Pension Plan;
(ii) neither the Pension Benefit Guaranty Corporation
nor the Partnership nor any Commonly Controlled Entity has instituted
proceedings to terminate any Pension Plan and the Pension Benefit Guaranty
Corporation has not informed the Partnership of its intent to institute
proceedings to terminate any Pension Plan;
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(iii) full payment has been made of all amounts which
the Partnership or any Commonly Controlled Entity was required to have paid as a
contribution to the Pension Plans as of the last day of the most recent fiscal
year of each of the Pension Plans ended prior to the date of this Agreement, and
none of the Pension Plans has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of each such Pension
Plan ended prior to the date of this Agreement;
(iv) to the knowledge of the Partnership and the
Partners, the actuarial assumptions utilized, where appropriate, in connection
with determining the funding of each Pension Plan which is a defined benefit
pension plan (as set forth in the actuarial report for such Pension Plan) are
reasonable. Copies of the most recent actuarial reports have been furnished to
UniCapital. Based on such actuarial assumptions, as of the Audited Balance Sheet
Date, the fair market value of the assets or properties held under each such
Pension Plan exceeds the actuarially determined present value of all accrued
benefits of such Pension Plan (whether or not vested) determined on an ongoing
Pension Plan basis;
(v) each of the Benefit Plans is, and its
administration is and has been during the six-year period preceding the date of
this Agreement, in substantial compliance with, and the Partnership has not
received any claim or notice that any such Benefit Plan is not in compliance
with, all applicable laws and orders and prohibited transaction exemptions,
including without limitation, to the extent applicable, the requirements of
ERISA;
(vi) neither the Partnership nor any Commonly
Controlled Entity is in default in performing any of its contractual obligations
under any of the Benefit Plans or any related trust agreement or insurance
contract;
(vii) there are no material outstanding liabilities
of any Benefit Plan other than liabilities for benefits to be paid to
participants in the Benefit Plans and their beneficiaries in accordance with the
terms of the Benefit Plans;
(viii) each Benefit Plan may be amended or modified
by the Partnership or the applicable Commonly Controlled Entity at any time
without liability except under any defined pension benefit plan;
(ix) no Benefit Plan other than a Pension Plan,
retiree medical plan or severance plan provides benefits to any individual after
termination of employment;
(x) the consummation of the transactions contemplated
by this Agreement will not (in and of itself): (A) entitle any employee of the
Partnership to severance pay, unemployment compensation or any other payment;
(B) accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee; (C) result in any liability under Title
IV of ERISA; (D) result in any prohibited transaction described in Section
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406 of ERISA or Section 4975 of the Code for which an exemption is not
available; or (E) result (either alone or in conjunction with any other event)
in the payment or series of payments by the Partnership or any of its affiliates
to any person of an "excess parachute payment@ within the meaning of Section
280G of the Code;
(xi) with respect to each Benefit Plan that is funded
wholly or partially through an insurance policy, all premiums required to have
been paid to date under the insurance policy have been paid, all premiums
required to be paid under the insurance policy through the Closing Date will
have been paid on or before the Closing Date and, as of the Closing Date, there
will be no liability of the Partnership or any Commonly Controlled Entity under
any insurance policy or ancillary agreement with respect to such insurance
policy in the nature of a retroactive rate adjustment, loss sharing arrangement
or other actual or contingent liability arising wholly or partially out of
events occurring prior to the Closing Date;
(xii) (A) each Benefit Plan that constitutes a
Welfare Plan, as defined in Section 6.22, and for which contributions are
claimed by the Partnership or any Commonly Controlled Entity as deductions under
any provision of the Code is in material compliance with all applicable
requirements pertaining to such deduction;
(B) with respect to any Welfare Plan fund
(within the meaning of Section 419 of the Code) related to a Welfare Plan, there
is no disqualified benefit (within the meaning of Section 4976(b) of the Code)
that would result in the imposition of a tax under Section 4976(a) of the Code;
and
(C) all welfare benefit funds intended to be
exempt from tax under Section 501(a) of the Code have been determined by the
Internal Revenue Service to be so exempt and no event or condition exists which
would adversely affect any such determination; and
(xiii) all benefit plans outside of the United
States, if any (the "Foreign Plans"), are in compliance with all applicable laws
and regulations and have been operated in accordance with the plans' respective
terms. There are no material unfunded liabilities under or in respect of the
Foreign Plans, and all contributions or other payments required to be made to or
in respect of the Foreign Plans prior to the Closing Date have been made or will
be made prior to the Closing Date.
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS. The Partnership has complied
with each, and is not in violation of any, law, ordinance, or governmental or
regulatory rule or regulation, whether federal, state, local or foreign
("Regulations"), to which the Partnership's business, operations, assets or
properties is subject. The Partnership owns, holds, possesses or lawfully uses
in the operation of its business all franchises, licenses, permits, easements,
rights, applications, filings, registrations and other authorizations
("Authorizations") which are in any manner necessary for it to conduct its
business as now or previously conducted or for the
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ownership and use of the assets owned or used by the Partnership in the conduct
of the business of the Partnership, free and clear of all liens, charges,
restrictions and encumbrances and in compliance with all Regulations. All such
Authorizations are listed and described in Schedule 6.23. The Partnership is not
in default, nor has the Partnership received any notice of any claim of default,
with respect to any such Authorization. All such Authorizations are renewable by
their terms or in the ordinary course of business without the need to comply
with any special qualification procedures or to pay any amounts other than
routine filing fees. None of such Authorizations will be adversely affected by
consummation of the transactions contemplated hereby. No Partner and no
director, officer, employee or former employee of the Partnership or any
affiliates of the Partnership, or any other person, firm or corporation, owns or
has any proprietary, financial or other interest (direct or indirect) in any
Authorization which the Partnership owns, possesses or uses in the operation of
the business of the Partnership as now or previously conducted.
6.24 TRANSACTIONS WITH AFFILIATES. No Partner and no director, officer
or employee of the Partnership, or any member of his or her immediate family or
any other of its, his or her affiliates, owns or has a 5% or more ownership
interest in any corporation or other entity that is or was during the last three
years a party to, or in any property which is or was during the last three years
the subject of, any contract, agreement or understanding, business arrangement
or relationship with the Partnership.
6.25 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of the Partnership and the Partners, threatened against the
Partnership or which relates to the transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 6.25, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of the Partnership and the Partners, threatened
against the Partnership or which relates to the Partnership
(c) Neither the Partnership nor any Partner knows of any
reasonably likely basis for any litigation, arbitration, investigation or
proceeding referred to in Sections 6.25(a) or (b).
(d) The Partnership is not a party to or subject to the
provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority.
6.26 RESTRICTIONS. The Partnership is not a party to any indenture,
agreement, contract, commitment, lease, plan, license, permit, authorization or
other instrument, document or understanding, oral or written, or subject to any
charter or other corporate restriction or any judgment, order, writ, injunction,
decree or award which materially adversely affects or
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materially restricts or, so far as the Partnership or any of the Partners can
now reasonably foresee, may in the future materially adversely affect or
materially restrict, the business, operations, assets, properties, prospects or
condition (financial or otherwise) of the Partnership after consummation of the
transactions contemplated hereby.
6.27 TAXES. All federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by the Partnership
(the "Tax Returns") with respect to any federal, state, local or foreign taxes,
assessments, interest, penalties, deficiencies, fees and other governmental
charges or impositions (including without limitation all income tax,
unemployment compensation, social security, payroll, sales and use, excise,
privilege, property, ad valorem, franchise, license, school and any other tax or
similar governmental charge or imposition under laws of the United States or any
state or municipal or political subdivision thereof or any foreign country or
political subdivision thereof) (singly, a "Tax" and collectively, the "Taxes")
have been timely filed with the appropriate governmental agencies in all
jurisdictions in which such Tax Returns are required to be filed, and all such
Tax Returns properly reflect the liabilities of the Partnership for Taxes for
the periods, property or events covered thereby. All Taxes, including without
limitation those which are called for by the Tax Returns, required to be paid,
withheld or accrued by the Partnership and any deficiency assessments, penalties
and interest have been timely paid, withheld or accrued. The accruals for Taxes
contained in the audited balance sheet are adequate to cover the Tax liabilities
of the Partnership as of that date and include adequate provision for all
deferred Taxes, and nothing has occurred subsequent to that date to make any of
such accruals inadequate. The Partnership's Tax basis in its assets for purposes
of determining its future amortization, depreciation and other federal income
tax deductions is accurately reflected on the Partnership's Tax books and
records. The Partnership is not nor has it at any time ever been a party to a
Tax sharing, Tax indemnity or Tax allocation agreement, and the Partnership has
not assumed any Tax liability of any other person or entity under contract. The
Partnership has not received any notice of assessment or proposed assessment in
connection with any Tax Returns and there are not pending tax examinations of or
tax claims asserted against the Partnership or any of its assets or properties.
The Partnership has not extended, or waived the application of, any statute of
limitations of any jurisdiction regarding the assessment or collection of any
Taxes. There are now (and as of immediately following the Closing there will be)
no liens (other than any lien for current Taxes not yet due and payable) on any
of the assets or properties of the Partnership relating to or attributable to
Taxes. To the knowledge of the Partnership and the Partners, there is no basis
for the assertion of any claim relating to or attributable to Taxes which, if
adversely determined, would result in any lien on the assets of the Partnership
or otherwise have an adverse effect on the Partnership or its business,
operations, assets, properties, prospects or condition (financial or otherwise).
Neither the Partnership nor the Partners have any knowledge of any basis for any
additional assessment of any Taxes. All Tax payments related to employees,
including income tax withholding, FICA, FUTA, unemployment and worker's
compensation, required to be made by the Partnership have been fully and
properly paid, withheld, accrued or recorded. All Taxes required to be withheld
by the Partnership or any Subsidiary, including, but not limited to, Taxes
arising as a result of payments (or amounts allocable) to foreign partners or
foreign persons, have
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been fully and properly paid, withheld, accrued or recorded. There are no
contracts, agreements, plans or arrangements, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Partnership that, individually or collectively, could give rise to any payment
(or portion thereof) that would not be deductible pursuant to Sections 280G, 404
or 162 of the Code. Two correct and complete copies of (a) all Tax examinations,
(b) all extensions of statutory limitations and (c) all federal, state and local
income tax returns and franchise tax returns of the Partnership (including, if
filed separately, its Subsidiaries) for the last five fiscal years, or such
shorter period of time as any of them shall have existed, have heretofore been
delivered by the Partnership and the Partners to UniCapital. The Partnership
currently utilizes the accrual method of accounting for income tax purposes and
has not changed its method of accounting for income tax purposes in the past
five years. The Partnership qualifies (and has since the date of its formation
qualified) to be treated as a partnership for federal income tax purposes and
none of the Partnership, or any Partner or any taxing authority has taken a
position inconsistent with such treatment. No partner is a "foreign person"
within the meaning of Section 1445 of the Code.
6.28 INTELLECTUAL PROPERTY MATTERS.
(a) The Partnership has not utilized or does not currently
utilize any patent, trademark, trade name, service mark, copyright, software,
trade secret or know-how except for those listed on Schedule 6.28 (the
"Intellectual Property"), all of which are owned by the Partnership free and
clear of any liens, claims, charges or encumbrances. The Intellectual Property
constitutes all such assets, properties and rights which are used or held for
use in, or are necessary for, the conduct of the business of the Partnership.
(b) There are no royalty, commission or similar arrangements,
and no licenses, sublicenses or agreements, pertaining to any of the
Intellectual Property or products or services of the Partnership.
(c) The Partnership does not infringe upon or unlawfully or
wrongfully use any patent, trademark, trade name, service mark, copyright or
trade secret owned or claimed by another. No action, suit, proceeding or
investigation has been instituted or, to the knowledge of the Partnership and
the Partners, threatened relating to any patent, trademark, trade name, service
mark, copyright or trade secret formerly or currently used by the Partnership.
None of the Intellectual Property is subject to any outstanding order, decree or
judgment. The Partnership has not agreed to indemnify any person or entity for
or against any infringement of or by the Intellectual Property.
(d) No present or former employee of the Partnership and no
other person or entity owns or has any proprietary, financial or other interest,
direct or indirect, in whole or in part, in any patent, trademark, trade name,
service mark or copyright, or in any application therefor, or in any trade
secret, which the Partnership owns, possesses or uses in its operations as
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now or heretofore conducted. Schedule 6.28 lists all confidentiality or
non-disclosure agreements currently in force and effect to which the Partnership
or any of its employees is a party.
(e) Schedule 6.28(e) sets forth a complete and accurate list
of all items of Intellectual Property duly registered in, filed in or issued by
the United States Copyright Office or the United States Patent and Trademark
Office, any offices in the various states of the United States and any offices
in other jurisdictions.
(f) All rights of the Partnership in the Intellectual Property
prior to Closing shall remain vested in the Partnership after Closing without
any consent or other approval.
(g) All Intellectual Property in the form of computer software
that is utilized by the Partnership in the operations of its business is capable
of processing date data between and within the twentieth and twenty-first
centuries, or can be rendered capable of processing such data on or before June
30, 1998 by the expenditure of no more than $150,000.
6.29 COMPLETENESS; NO VIOLATIONS. The certified copies of the
Partnership Agreement, as amended to date, of the Partnership, and the copies of
all leases, instruments, agreements, licenses, permits, certificates or other
documents which are included on schedules attached hereto or which have been
delivered or which have been made available to UniCapital in connection with the
transactions contemplated hereby, are complete and correct; neither the
Partnership (including the Subsidiaries) nor, to the knowledge of the Partners,
any other party to any of the foregoing is in material default thereunder; and,
except as set forth in the schedules and documents attached to this Agreement,
the rights and benefits of the Partnership (including the Subsidiaries)
thereunder will not be materially and adversely affected by the transactions
contemplated hereby, and the execution of this Agreement and the performance of
the obligations hereunder will not result in a material violation or breach or
constitute a material default under any of the terms or provisions thereof.
Except as set forth on Schedule 6.29, none of such leases, instruments,
agreements, contracts, licenses, permits, certificates or other documents
requires notice to, or the consent or approval of, any governmental agency or
other third party to any of the transactions contemplated hereby to remain in
full force and effect. The consummation of the transactions contemplated hereby
will not give rise to any right of termination, cancellation or acceleration or
result in the loss of any right or benefit thereunder.
6.30 EXISTING CONDITION. Since the Audited Balance Sheet Date, the
Partnership has not:
(a) incurred any liabilities, other than liabilities incurred
in the ordinary course of business consistent with past practice, or discharged
or satisfied any lien or encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice, or failed to pay or
discharge when due any liabilities of which the failure to pay or discharge has
caused or will cause any material damage or risk of material loss to it or any
of its assets or properties;
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(b) sold, encumbered, assigned or transferred any assets,
properties or rights or any interest therein, except for the sales in the
ordinary course of business consistent with past practice, or made any agreement
or commitment or granted any option or right with, of or to any person to
acquire any assets, properties or rights of the Partnership or any interest
therein;
(c) created, incurred, assumed or guaranteed any indebtedness
for money borrowed, or mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract or other
encumbrance of any nature whatsoever, except in the ordinary course of business
consistent with past practice;
(d) made or suffered any amendment or termination of any
material agreement, contract, commitment, lease or plan to which it is a party
or by which it is bound, or canceled, modified or waived any substantial debts
or claims held by it or waived any rights of substantial value, except as set
forth on Schedule 6.30 or in the ordinary course of business consistent with
past practice;
(e) declared, set aside or paid any dividend or made or agreed
to make any other distribution or payment in respect of its capital shares or
redeemed, purchased or otherwise acquired or agreed to redeem, purchase or
acquire any of its shares of capital stock or other ownership interests;
(f) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting its business,
operations, assets, properties or prospects or (ii) of any item or items carried
on its books of account individually or in the aggregate at more than $25,000,
or suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;
(g) except as set forth on Schedule 6.30, suffered any
material adverse change in its business, operations, assets, properties,
prospects or condition (financial or otherwise), other than as directly caused
by adverse economic conditions not specific to, or having an extraordinary
impact upon, the Partnership;
(h) received notice or had knowledge of any actual or
threatened labor trouble, strike or other occurrence, event or condition of any
similar character which has had or might have an adverse effect on its business,
operations, assets, properties or prospects;
(i) made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $25,000, except such
as may be involved in ordinary repair, maintenance or replacement of its assets;
(j) increased the salaries or other compensation of, or made
any advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its
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employees or made any increase in, or any addition to, other benefits to which
any of its employees may be entitled;
(k) changed any of the accounting principles followed by it or
the methods of applying such principles;
(l) entered into any transaction other than in the ordinary
course of business consistent with past practice;
(m) changed its authorized capital or its securities
outstanding or otherwise changed its ownership interests, or granted any
options, warrants, calls, conversion rights or commitments with respect to any
of its capital stock or other ownership interests; or
(n) agreed to take any of the actions referred to above.
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Attached hereto as Schedule
6.31 is an accurate list, as of the date of this Agreement, of:
(a) the name of each financial institution in which the
Partnership (including the Subsidiaries) has accounts or safe deposit boxes;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have
access thereto; and
(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Partnership and a
description of the terms of such power.
6.32 ENVIRONMENTAL MATTERS. (a) The Partnership has secured, and is in
compliance with, all Environmental Permits, with respect to any premises on
which its business is operated, all of which Environmental Permits shall vest in
the Newcos upon consummation of the transactions contemplated hereby. The
Partnership is in compliance with all Environmental Laws.
(b) Neither the Partnership nor any Partner has received any
communication from any Governmental Entity that alleges that the Partnership is
not in compliance with any Environmental Laws or Environmental Permits.
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(c) The Partnership has not entered into or agreed to any
court decree or order, and the Partnership is not subject to any judgment,
decree or order, relating to compliance with any Environmental Law or to
investigation or cleanup of any Hazardous Substance under any Environmental Law.
(d) No lien, charge, interest or encumbrance has been
attached, asserted, or to the knowledge of the Partnership and the Partners,
threatened to or against any assets or properties of the Partnership pursuant to
any Environmental Law.
(e) There has been no treatment, storage, disposal or release
of any Hazardous Substance on any property owned, operated or leased by the
Partnership.
(f) The Partnership has not received a CERCLA 104(e)
information request nor has it been named a potentially responsible party for
any National Priorities List site under CERCLA or any site under analogous state
law or received an analogous notice or request from any non-U.S. Governmental
Entity, which notice, request or any resulting inquiry or litigation has not
been fully and finally resolved without possibility of reopening.
(g) There are no aboveground tanks or underground storage
tanks on, under or about any property owned, operated or leased by the
Partnership and any former aboveground or underground tanks on any property
owned, operated or leased by the Partnership have been removed in accordance
with all Environmental Laws and no residual contamination, if any, remains at
such sites in excess of applicable standards.
(h) There are no polychlorinated biphenyls ("PCBs") leaking
from any article, container or equipment on, under or about any property owned,
operated or leased by the Partnership and there are no such articles, containers
or equipment containing PCBs, and there is no asbestos containing material in a
condition or location currently constituting a violation of any Environmental
Law at, on, under or within any property owned, operated or leased by the
Partnership.
(i) The Partnership and the Partners have provided to
UniCapital true and complete copies of, or access to, all written environmental
assessment materials and reports in their possession that have been prepared by
or on behalf of the Partnership during the past five years.
6.33 NO ILLEGAL PAYMENTS. The Partnership has not and, to the knowledge
of the Partnership and the Partners, no affiliate, officer, agent or employee
thereof, directly or indirectly, has, during the past five years, on behalf of
or with respect to the Partnership or any affiliate thereof, (a) made any
unlawful domestic or foreign political contributions, (b) made any payment or
provided services which were not legal to make or provide or which the
Partnership or any affiliate thereof or any such officer, agent or employee
should have known were not legal for the payee or the recipient of such services
to receive, (c) received any payment or any
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services which were not legal for the payer or the provider of such services to
make or provide, (d) made any payment to any person or entity, or agent or
employee thereof, in connection with any Lease (as hereinafter defined) to
induce such person or entity to enter into a Lease transaction, (e) had any
transactions or payments related to the Partnership which are not recorded in
their accounting books and records or (f) had any off-book bank or cash accounts
or "slush funds" related to the Partnership.
6.34 DISCLOSURE. The Partnership has delivered or made available to
UniCapital true and complete copies of each agreement, contract, commitment or
other document (or, in the case of any such document not in the possession of or
reasonably available to the Partnership or a Partner, accurate and complete
summaries thereof) that is referred to in the schedules to this Agreement or
that has been requested by UniCapital or its representatives. Without limiting
any exclusion, exception or other limitation contained in any of the
representations and warranties made herein, this Agreement and the schedules
hereto and all other documents and information prepared or certified by the
Partners and provided to UniCapital and its representatives pursuant hereto do
not and will not include any untrue statement of a material fact or omit to
state a material fact necessary to make the statements herein and therein not
misleading. If any Partners become aware of any fact or circumstance that would
change a representation or warranty of any Partner in this Agreement or any
representation made on behalf of the Partnership (including the Subsidiaries),
then the Partners shall immediately give notice of such fact or circumstance to
UniCapital. However, such notification shall not relieve the Partnership or any
of the Partners of their respective obligations under this Agreement, and at the
sole option of UniCapital, the truth and accuracy of any and all warranties and
representations of the Partners, at the date of this Agreement and at the
Closing, shall be a precondition to the consummation of this transaction.
7. REPRESENTATIONS OF UNICAPITAL AND THE NEWCOS
As of the date hereof and as of the Closing Date, UniCapital and the
Newcos, jointly and severally, represent and warrant as follows:
7.1 CORPORATE EXISTENCE. UniCapital is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Each Newco is a corporation duly organized, validly existing and in good
standing under the laws of Delaware. Immediately prior to the Closing, each of
UniCapital and the Newcos is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the conduct of its
business requires it to be so qualified.
7.2 UNICAPITAL STOCK. The shares of UniCapital Stock to be issued and
delivered to the Partners on the Closing Date, when issued and delivered in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable shares, and except for restrictions upon resale, will be
legally equivalent in all respects to the UniCapital Stock issued and
outstanding as of the date hereof. The UniCapital Stock to be issued and
delivered pursuant to
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this Agreement will be free and clear of all liens, encumbrances and claims of
every kind, other than restrictions upon transfer contained herein and other
than any liens, encumbrances or claims arising other than by the actions of
UniCapital or Newco.
7.3 CORPORATE POWER AND AUTHORIZATION. UniCapital and the Newcos have
the corporate power, authority and legal right to execute, deliver and perform
this Agreement. The execution, delivery and performance of this Agreement and
all related documents and agreements required to be executed and delivered by
UniCapital and the Newcos in accordance with the provisions hereof (the
"UniCapital Documents") have been duly authorized by all necessary corporate
action. This Agreement has been duly executed and delivered by UniCapital and
the Newcos and constitutes, and the UniCapital Documents when executed and
delivered will constitute, the legal, valid and binding obligation of UniCapital
and the Newcos enforceable against UniCapital and the Newcos in accordance with
their terms.
7.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement by UniCapital and the Newcos will not violate, conflict with or result
in the breach of any term, condition or provision of, or require the consent of
any other person under (a) any existing law, ordinance, or governmental rule or
regulation to which UniCapital or the Newcos is subject, (b) any judgment,
order, writ, injunction, decree or award of any Governmental Entity that is
applicable to UniCapital or the Newcos, (c) the charter documents of UniCapital
or the Newcos, or (d) any mortgage, indenture, agreement, contract, commitment,
lease, plan, Authorization, or other instrument, document or understanding, oral
or written, to which UniCapital or the Newcos is a party, by which UniCapital or
the Newcos may have rights or by which any of the properties or assets of
UniCapital or the Newcos may be bound or affected, or give any party with rights
thereunder the right to terminate, modify, accelerate or otherwise change the
existing rights or obligations of UniCapital or the Newcos thereunder. Except
for filing under the Hart-Scott- Rodino Antitrust Improvements Act of 1976 and
except as aforesaid, no authorization, approval or consent of, and no
registration or filing with, any Governmental Entity is required in connection
with the execution, delivery or performance of this Agreement by UniCapital or
the Newcos.
7.5 CAPITALIZATION OF UNICAPITAL. The IPO will result in an aggregate
market capitalization of UniCapital that will exceed Three Hundred Million
Dollars ($300,000,000), as determined by multiplying the outstanding shares of
UniCapital immediately following the closing of the IPO by the offering price.
7.6 COMPLIANCE WITH LAW; AUTHORIZATIONS. Each of UniCapital and the
Newcos have complied with each, and is not in violation of, Regulations to which
UniCapital's and the Newcos' respective business, operations, assets or
properties is subject. Each of UniCapital and the Newcos owns, holds, possesses
or lawfully uses in the operation of its business all Authorizations which are
in any manner necessary for it to conduct its business as now or previously
conducted or for the ownership and use of the assets owned or used by UniCapital
and the Newcos, respectively, in the conduct of the business of the Partnership,
free and clear of all
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liens, charges, restrictions and encumbrances and in compliance with all
Regulations. Neither UniCapital nor the Newcos is in default, nor has UniCapital
or the Newcos received any notice of any claim of default, with respect to any
such Authorization. All such Authorizations are renewable by their terms or in
the ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
None of such Authorizations will be adversely affected by consummation of the
transactions contemplated hereby. No stockholder and no director, officer,
employee or former employee of UniCapital or the Newcos or any of their
affiliates, or any other person, firm or corporation, owns or has any
proprietary, financial or other interest (direct or indirect) in any
Authorization which UniCapital or the Newcos owns, possesses or uses in the
operation of the business of UniCapital and the Newcos as now or previously
conducted.
7.7 TRANSACTIONS WITH AFFILIATES. Except as described in the
Registration Statement, no stockholder and no director, officer or employee of
UniCapital or the Newcos, or any member of his or her immediate family or any
other of its, his or her affiliates, owns or has a 5% or more ownership interest
in any corporation or other entity that is or was during the last three years a
party to, or in any property which is or was during the last three years the
subject of, any contract, agreement or understanding, business arrangement or
relationship with UniCapital or the Newcos.
7.8 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of UniCapital and Newco, threatened against UniCapital or Newco which
relates to the transactions contemplated by this Agreement.
(b) Except as set forth on Schedule 7.8, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of UniCapital or Newco, threatened against
UniCapital or Newco or which relates to UniCapital or Newco.
(c) Neither UniCapital nor Newco is a party to or subject to
the provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority.
7.9 LIQUIDATED DAMAGES. UniCapital has sufficient funds to cover any
liquidated damages set forth in Section 13.4(b).
7.10 REGISTRATION RIGHTS. As of the date hereof and as of the Closing
Date, no officer, director or shareholder of UniCapital will have been granted
any registration rights with respect to the registration of any shares of
capital stock of UniCapital.
7.11 MISCELLANEOUS. Prior to the consummation of the transactions
contemplated hereby, UniCapital and the Newcos have no material properties or
assets and are not party to any
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contracts other than this Agreement, the letter of intent among the parties to
this Agreement, certain employment agreements with officers of UniCapital,
certain real property leases relating to the principal executive offices of
UniCapital, and those agreements and letters of intent listed on Schedule 7.11
hereto.
8. COVENANTS OF THE PARTNERS AND THE PARTNERSHIP
For purposes of this Article 8, each reference to the "Partnership"
shall be deemed to refer as well to each and all of its Subsidiaries unless the
context otherwise specifically requires. The following covenants shall apply
during the period from and after the date hereof through the Closing Date.
8.1 BUSINESS IN THE ORDINARY COURSE. The Partnership shall, and the
Partners shall cause the Partnership to, conduct its business solely in the
ordinary course and consistent with past practice.
8.2 EXISTING CONDITION. The Partnership shall not, and no Partner shall
suffer the Partnership to, cause or permit to occur any of the events or
occurrences described in Section 6.30 hereof.
8.3 MAINTENANCE OF PROPERTIES AND ASSETS. The Partnership shall, and
the Partners shall cause the Partnership to, maintain and service its properties
and assets in order to preserve their value and usefulness in the conduct of its
respective business.
8.4 EMPLOYEES AND BUSINESS RELATIONS. The Partnership shall, and the
Partners shall cause the Partnership to, use commercially reasonable efforts to
keep available the services of its current employees and agents and to maintain
its relations and goodwill with its suppliers, customers, distributors and any
others with whom or with which it has business relations.
8.5 MAINTENANCE OF INSURANCE. The Partnership shall, and the Partners
shall cause the Partnership to, notify UniCapital of any material changes in the
terms of the insurance policies and binders referred to on Schedule 6.20 hereto.
8.6 COMPLIANCE WITH LAWS, ETC. The Partnership shall, and the Partners
shall cause the Partnership to, comply with all laws, ordinances, rules,
regulations and orders applicable to the Partnership or its business,
operations, properties or assets, noncompliance with which might materially
affect the Partnership (collectively, the "Laws").
8.7 CONDUCT OF BUSINESS. The Partnership shall, and the Partners shall
cause the Partnership to, use its reasonable commercial efforts to conduct its
business in such a manner that on the Closing Date the representations and
warranties of the Partners contained in this Agreement shall be true, as though
such representations and warranties were made on and as of
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such date (except to the extent such representations or warranties expressly
speak as of a specific date), and the Partnership shall, and the Partners shall
cause the Partnership to, use commercially reasonable efforts to cause all of
the conditions to the obligations of UniCapital and the Partners under this
Agreement to be satisfied on or prior to the Closing Date.
8.8 ACCESS. Upon prior reasonable notice, the Partners shall cause the
Partnership to, give to UniCapital's officers, employees, counsel, accountants
and other representatives free and full access to and the right to inspect,
during normal business hours, all of the premises, properties, assets, records,
contracts and other documents relating to the Partnership and shall permit them
to consult with the officers, employees, accountants, counsel and agents of the
Partnership for the purpose of making such investigation of the Partnership as
UniCapital shall desire to make, provided that such investigation shall not
unreasonably interfere with the Partnership's business operations and provided
further that UniCapital shall not contact or consult with any non-officer
employees of the Partnership without the Partnership's prior consent, which
shall not be unreasonably withheld. Furthermore, the Partnership shall, and the
Partners shall cause the Partnership to, furnish to UniCapital all such
documents and copies of documents and records and information with respect to
the affairs of the Partnership and copies of any working papers relating thereto
as UniCapital shall from time to time reasonably request. No information or
knowledge obtained in any investigation pursuant to this Section 8.8 or
otherwise shall affect or be deemed to modify any representation or warranty
contained in this Agreement or the conditions to the obligations of the parties
to consummate the transactions contemplated hereby.
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS. Neither the Partnership
nor any Partner shall give notice to third parties or otherwise make any press
release or other public statement concerning this Agreement or the transactions
contemplated hereby. Neither the Partnership nor any Partner shall grant any
interview, publish any article, report or statement, or respond to any press
inquiry or other inquiry of any third party relating to this Agreement, the
business of the Partnership, the business (current and proposed) of UniCapital,
the Registration Statement (as defined below), the IPO or any other matter
connected with any of the foregoing without the express prior written approval
of UniCapital, and all inquiries and questions with respect to any of the
foregoing shall be coordinated through Robert New, Chief Executive Officer of
UniCapital. The Partnership and each Partner shall coordinate all communications
with the employees and agents of the Partnership through UniCapital prior to
making any such communication. Notwithstanding the foregoing, this Section 8.9
shall not be interpreted to prevent the Partnership or any Partner from
disclosing (i) that the Partners have entered into an agreement to sell the
Partnership Interests, (ii) information to their attorneys under the
attorney-client privilege or (iii) information as compelled by a court order,
provided however, that prior to disclosing any information concerning this
Agreement or the transaction contemplated hereby in response to any such court
order, the Partnership or Partners, as applicable, shall provide UniCapital with
prompt notice of the court order so that UniCapital may take whatever action it
deems appropriate to prohibit such disclosure.
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8.10 EXCLUSIVITY. Except with respect to this Agreement and the
transactions contemplated hereby, neither the Partnership nor any Partner and
none of their affiliates shall, and each of them shall cause its respective
employees, agents and representatives (including, without limitation, any
investment banking, legal or accounting firm retained by it or them and any
individual member or employee of the foregoing) (each, an "Agent") not to, (a)
initiate, solicit or seek, directly or indirectly, any inquiries or the making
or implementation of any proposal or offer (including, without limitation, any
proposal or offer to its shareholders or any of them) with respect to a merger,
acquisition, consolidation, recapitalization, liquidation, dissolution or
similar transaction involving, or any purchase of all or any portion of the
assets or any equity securities of, the Partnership (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal"), or (b) engage in
any negotiations concerning, or provide any confidential information or data to,
or have any substantive discussions with, any person relating to an Acquisition
Proposal, (c) otherwise cooperate in any effort or attempt to make, implement or
accept an Acquisition Proposal, or (d) enter into or consummate any agreement or
understanding with any person or entity relating to an Acquisition Proposal,
except for the acquisition contemplated hereby. If the Partnership or any
Partner, or any of their respective Agents, have provided any person or entity
(other than UniCapital) with any confidential information or data relating to an
Acquisition Proposal, then they shall request the immediate return thereof. The
Partnership and the Partners shall notify UniCapital immediately if any
inquiries, proposals or offers related to an Acquisition Proposal are received
by, any confidential information or data is requested from, or any negotiations
or discussions related to an Acquisition Proposal are sought to be initiated or
continued with, it or any individual or entity referred to in the first sentence
of this Section 8.10. The covenant contained in this Section 8.10 shall not
survive any termination of this Agreement pursuant to Sections 13.1, 13.2 or
13.3.
8.11 THIRD PARTY APPROVALS. Prior to the Closing Date, the Partnership
shall satisfy any requirement for notice and approval of the transactions
contemplated by this Agreement under applicable agreements with third parties,
and shall provide UniCapital with satisfactory evidence of such third party
approvals.
8.12 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
Partnership shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under any applicable collective bargaining
agreement, and shall provide UniCapital with proof that any required notice has
been provided.
8.13 NOTIFICATION OF CERTAIN MATTERS. (a) The Partnership and the
Partners shall give prompt notice to UniCapital of (i) the occurrence or
non-occurrence of any event known to any Partner or the Partnership the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty contained in Article 6 to be untrue or inaccurate in
any material respect at or prior to the Closing Date and (ii) any material
failure of any Partner or the Partnership to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by such person
hereunder.
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(b) The delivery of any notice pursuant to this Section 8.13
shall not be deemed to (i) modify the representations or warranties hereunder of
the party delivering such notice, which modification may only be made pursuant
to Section 8.14, (ii) modify the conditions set forth in Sections 9 and 10 or
(iii) limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
8.14 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing
Date to supplement or amend promptly the schedules hereto with respect to any
matter hereafter arising or discovered which, if existing or known at the date
of this Agreement, would have been required to be set forth or described in the
schedules, provided, that no amendment or supplement to a schedule that
constitutes or reflects a material adverse change in the business, operations,
assets, properties, prospects or condition (financial or otherwise) of the
Partnership or any Subsidiary (a "Material Adverse Amendment"), may be made
unless UniCapital consents to such Material Adverse Amendment; provided,
further, however, that if the amendment or supplement relates to changes in
facts or circumstances occurring subsequent to the date of this Agreement and
such amendment or supplement constitutes or reflects a Material Adverse
Amendment, then such amendment or supplement shall be accepted by UniCapital
subject to the provisions of Section 12.2 and 12.5 hereof. No amendment of or
supplement to a schedule shall be made later than 48 hours prior to the
anticipated effectiveness of the Registration Statement defined in Section 9.4.
Only (i) the schedules attached to this Agreement at the time of its execution
and (ii) amended schedules as accepted under the standards and provisions of
this Section 8.14, shall be deemed to be a part of this Agreement in accordance
with Section 19.3 hereof.
8.15 HSR FILING. To the extent the transaction contemplated by this
Agreement is a transaction subject to the filing requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, the Partnership shall use
its reasonable best efforts to (a) file all information required to be filed by
it pursuant to such act and (b) provide UniCapital with all information
reasonably requested and required by it to satisfy any filing requirements it
may have under such act.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE PARTNERSHIP AND
THE PARTNERS
The obligations of the Partnership and the Partners hereunder are
subject to the satisfaction on or prior to the Closing Date (or such earlier
date specified below) of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representations and warranties of UniCapital and the Newcos contained in Article
7 shall be accurate as of the Closing Date as though such representations and
warranties had been made as
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of such times; all of the terms, covenants and conditions of this Agreement to
be complied with and performed by UniCapital and the Newcos on or before the
Closing Date shall have been duly complied with and performed; and a certificate
to the foregoing effect dated the Closing Date and signed by a duly authorized
agent, the President or any Vice President of UniCapital shall have been
delivered to the Partners.
9.2 EMPLOYMENT AGREEMENTS. The Newcos shall have executed and delivered
Employment Agreements, in the form of Annex III attached hereto, to each of the
persons listed on Schedule 9.2 hereto.
9.3 OPINION OF COUNSEL. The Partners shall have received an opinion
from counsel for UniCapital, dated the Closing Date, to the effect that:
(a) UniCapital and the Newcos have been duly organized and are
validly existing in good standing under the laws of their respective states of
incorporation;
(b) this Agreement has been duly authorized, executed and
delivered by UniCapital and the Newcos and constitutes a valid and binding
agreement of UniCapital and the Newcos enforceable in accordance with its terms,
except (i) as such enforceability may be subject to bankruptcy, moratorium,
insolvency, reorganization, arrangement and other similar laws relating to or
affecting the rights of creditors, (ii) as the same may be subject to the effect
of general principles of equity and (iii) that no opinion need be expressed as
to the enforceability of indemnification provisions included herein;
(c) the execution, delivery and performance of this Agreement
and the consummation of any transactions contemplated hereby will not conflict
with, or result in a breach or violation of, the Certificate of Incorporation or
Bylaws of UniCapital or the Newcos;
(d) the shares of UniCapital Stock to be received by the
Partners on the Closing Date shall be duly authorized, fully paid and
nonassessable; and
(e) the execution, delivery and performance of this Agreement
and the consummation of any transactions contemplated hereby will not conflict
with, or result in a breach or violation of, the Certificate of Incorporation or
Bylaws of UniCapital or the Newcos.
9.4 REGISTRATION STATEMENT. UniCapital shall have filed with the
Securities and Exchange Commission ("SEC") a registration statement on Form S-1
covering the offer and sale of shares of UniCapital Stock in the IPO (the
"Registration Statement"). The Registration Statement shall have been declared
effective by the SEC not later than June 30, 1998, UniCapital and the
underwriters named therein shall have executed the Underwriting Agreement and
the underwriters named therein shall have agreed to acquire, subject to the
conditions set forth in the Underwriting Agreement, the shares of UniCapital
Stock covered by the Registration Statement.
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There shall have been no stop-order issued (that remains in effect) by the
Securities and Exchange Commission with respect to the Registration Statement.
9.5 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
9.6 INJUNCTION. No court ordered injunction that was brought by a third
party and opposed by the Partners and the Partnership shall have been issued
directly prohibiting the Partners from fulfilling their obligations hereunder.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND THE
NEWCOS
The obligations of UniCapital and the Newcos hereunder are subject to
the satisfaction, on or prior to the Closing Date (or such earlier date
specified below), of the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
Partners shall have delivered to UniCapital a certificate dated the Closing Date
and signed by them to the effect that all of the representations and warranties
of the Partners contained in this Agreement shall be true on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of such dates, except for matters expressly disclosed in
the certificate or a schedule thereto (which shall not serve to modify any
representation or warranty made herein or in any other document or otherwise in
information supplied by the Partnership or any Partner); and each and all of the
agreements of the Partners and the Partnership to be performed on or before the
Closing Date pursuant to the terms hereof shall have been performed.
10.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened which, in
the reasonable judgment of counsel for UniCapital, could have a material adverse
impact on the Partnership or could restrain or prohibit the acquisition by
UniCapital of the Partnership Interests, and no governmental agency or body
shall have taken any other action or made any request of UniCapital as a result
of which the management of UniCapital deems it inadvisable to proceed with the
transactions hereunder.
10.3 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the Closing Date,
UniCapital shall have had sufficient time to review the unaudited balance sheets
of the Partnership as of the end of the most recently completed calendar month,
and the unaudited statements of income, cash flows and partners' equity of the
Partnership for the periods then ended, which statements shall have disclosed no
material adverse change in the financial condition of the Partnership or the
results of its respective operations from the financial statements originally
furnished by the
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Partnership as set forth in Schedule 6.12. Matters disclosed in Schedule 6.30
shall not be deemed a material adverse change for purposes of this Section 10.3.
10.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, operations, assets, properties, prospects or condition (financial or
otherwise) of the Partnership shall have occurred, and the Partnership shall not
have suffered any material loss or damage to any of its properties or assets,
whether or not covered by insurance, since the Audited Balance Sheet Date, which
change, loss or damage materially affects or impairs the ability of the
Partnership to conduct its business as now conducted or as proposed to be
conducted; and UniCapital shall have received on the Closing Date a certificate
signed by the Partners and dated the Closing Date to such effect. Matters
disclosed in Schedule 6.30 shall not be deemed a material adverse change for
purposes of this Section 10.4.
10.5 REGULATORY REVIEW. UniCapital, through its authorized
representatives, shall have completed a satisfactory review of the practices and
procedures of the Partnership including, but not limited to, environmental and
land use practices, import and export laws, compliance with contracts and
federal, state and local laws and regulations governing the operations of the
Partnership, which review reflects compliance with all applicable laws governing
the Partnership, disclosing no material actual or probable violations,
compliance problems, required capital expenditures or other substantive
environmental, real estate and land use related concerns and which review is
otherwise satisfactory in all respects to UniCapital, in its sole discretion.
10.6 PARTNERS' RELEASE. At the Closing Date, the Partners shall have
delivered to UniCapital an instrument dated the Closing Date releasing the
Partnership and its Subsidiaries from any and all claims of Partners against the
Partnership or any of its Subsidiaries, except claims for benefits accrued by
the Partners pursuant to any Benefit Plan.
10.7 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.2
shall have executed and delivered an Employment Agreement in the form of Annex
III attached hereto.
10.8 OPINION OF COUNSEL. UniCapital shall have received an opinion from
Black Helterline, counsel to the Partners, dated the Closing Date, in form and
substance satisfactory to UniCapital, to the effect that:
(a) the Partnership is validly existing and in good standing
under the laws of the state of its organization;
(b) to the knowledge of such counsel, the Partnership is duly
authorized, qualified and licensed under all applicable laws, regulations,
ordinances or orders of public authorities to carry on its business in the
places and in the manner now conducted;
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(c) the Partnership Interests are held by the Partners as
represented by the Partners in this Agreement;
(d) the Partnership does not have any outstanding options,
warrants, calls, conversion rights or other commitments of any kind to issue or
sell any interests in the Partnership;
(e) this Agreement has been duly authorized, executed and
delivered by the Partnership and the Partners and constitutes a valid and
binding agreement of the Partnership and the Partners enforceable in accordance
with its terms, except as such enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement and other similar laws
relating to or affecting the rights of creditors and except (i) as the same may
be subject to the effect of general principles of equity and (ii) that no
opinion need be expressed as to the enforceability of indemnification provisions
included herein;
(f) upon consummation of the acquisition contemplated by this
Agreement, UniCapital will receive good title to the Partnership Interests, free
and clear of all liens, security interests, pledges, charges, voting trusts,
equities, restrictions, encumbrances and claims of every kind;
(g) to the knowledge of such counsel, except to the extent set
forth on Schedule 6.23, the Partnership is not in violation of or default under
any law or regulation, or under any order of any court, commission, board,
bureau, agency or instrumentality wherever located and there are no claims,
actions, suits or proceedings pending, or threatened against or affecting the
Partnership, at law or in equity, or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality wherever located;
(h) to the knowledge of such counsel, except to the extent set
forth on Schedule 6.17, the Partnership is not in default under any of its
material contracts or agreements or has received notice of such default;
(i) no notice to, consent, authorization, approval or order of
any court or governmental agency or body or of any other third party is required
in connection with the execution, delivery or consummation of this Agreement by
any Partners or for the transfer to UniCapital of the Partnership Interests; and
(j) the execution of this Agreement and the performance of the
obligations hereunder will not violate or result in a breach or constitute a
default under any of the terms or provisions of the Partnership Agreement or any
Contract listed on Schedules 6.17.
Such opinion shall include any other matters incident to the matters set forth
herein as agreed to by the parties and their respective counsel.
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10.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
10.10 GOOD STANDING CERTIFICATES. The Partners shall have delivered to
UniCapital certificates, dated as of a date no earlier than five days prior to
the Closing Date, duly issued by the appropriate governmental authority in the
Partnership's state of incorporation and, unless waived by UniCapital, in each
state in which the Partnership is authorized to do business, showing that the
Partnership is in good standing and authorized to do business and that all state
franchise and/or income tax returns and taxes for the Partnership for all
periods prior to the dates of such certificates have been filed and paid.
10.11 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC, and UniCapital and the representatives of
the underwriters named in the Registration Statement shall have executed the
Underwriting Agreement. There shall have been no stop-order issued (that remains
in effect) by the Securities and Exchange Commission with respect to the
Registration Statement.
10.12 REPAYMENT OF INDEBTEDNESS. Prior to the Closing Date, the
Partners shall have repaid to the Partnership (including its Subsidiaries) in
full all amounts owing by the Partners to such entities.
10.13 NET INCOME. The Partnership shall have aggregate after tax net
losses for the twelve months ended December 31, 1997 as included in UniCapital's
unaudited pro forma combined (prior to pro forma and offering adjustments)
income statement for the twelve months ended December 31, 1997 included in the
Registration Statement.
10.14 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
11. COVENANTS OF UNICAPITAL
11.1 UNICAPITAL STOCK OPTIONS. Upon the effective date of the
Registration Statement (but subject in all events to the consummation of the
transaction contemplated hereby), UniCapital shall make available options to
purchase that number of shares of UniCapital Stock having a fair market value on
the effective date of the Registration Statement, based upon the IPO price per
share set forth in the Underwriting Agreement, equal to 6.25% of the Effective
Date Consideration (valuing the UniCapital Stock to be issued as part of the
Effective Date Consideration at the IPO price per share for the purposes of this
Section 11.2) to be granted to those non-Partner key employees of the
Partnership or the Newcos after the Closing as are designated by the principal
executive officer of the Partnership or the Newcos who is entering
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into an Employment Agreement pursuant to Section 9.2 hereof (or such other
officer designated by the Newcos and acceptable to UniCapital). Not later than
seven days prior to the effective date of the Registration Statement, the
officer designating the recipients of such options shall provide to UniCapital a
written list of the names of those designated recipients who will receive
options exercisable at the IPO price and the relative percentages of the 6.25%
option pool provided under this Section 11.2 to be awarded to each recipient, as
well as the percentage of options, if any, to be reserved for future issuance.
Any options reserved for future issuance shall be granted at an exercise price
equal to the fair market value of UniCapital Stock as of the date of grant. All
options shall be granted in accordance with UniCapital's policies, and
authorized and issued under the terms of UniCapital's principal stock option
plan for the benefit of employees of UniCapital and its subsidiaries.
11.2 HSR FILING. To the extent the transaction contemplated by this
Agreement is a transaction subject to the filing requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, UniCapital shall use its
reasonable best efforts to (a) file all information required to be filed by it
pursuant to such act and (b) provide the Partnership with all information
reasonably requested and required by it to satisfy any filing requirements it
may have under such act.
11.3 RELEASE FROM GUARANTEES; INDEBTEDNESS. Not later than 120 days
following the Closing Date, UniCapital shall cause the Partners to be released
from any and all personal guarantees of the indebtedness of the Partnership at
the Closing Date set forth on Schedule 11.3; provided, that, in the event that
the beneficiary of any such guarantee is unwilling to permit the substitution of
UniCapital's guarantee for the Partners's guarantee or the assumption by
UniCapital of the indebtedness, or in the event that the lender with respect to
the indebtedness to which such guarantee relates accelerates such indebtedness
whether or not prior to such 120 day period because of the consummation of the
transactions contemplated hereby, UniCapital shall repay up to that amount of
recourse indebtedness set forth on Schedule 11.3. The failure of the Partnership
to obtain the consent of its lenders to the change of control of the Partnership
or the substitution of a UniCapital guaranty or the assumption by UniCapital of
the indebtedness set forth on Schedule 11.3 shall not be deemed a breach
hereunder.
12. INDEMNIFICATION; SURVIVAL
12.1 GENERAL INDEMNIFICATION BY PARTNERS. Subject to the limitations
contained in Section 12.5 hereof, each Partner, jointly and severally, covenants
and agrees that such Partner will indemnify, defend, protect and hold harmless
UniCapital and the Newcos and their respective officers, stockholders,
directors, divisions, subdivisions, affiliates, subsidiaries, parents, agents,
employees, successors and assigns at all times from and after the date of this
Agreement until the Expiration Date (as defined in Section 12.6) from and
against all claims, damages, losses, liabilities, actions, suits, proceedings,
demands, assessments, adjustments, costs and expenses (including specifically,
but without limitation, reasonable attorneys' fees and expenses of
investigation) (collectively, "Losses") incurred by UniCapital or the Newcos as
a result of or arising from (a) any breach of the representations and warranties
made by the
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Partners set forth herein or on the schedules or certificates delivered in
connection herewith, (b) any nonfulfillment of any covenant or agreement on the
part of the Partners or the Partnership under this Agreement, (c) the business,
operations or assets of the Partnership prior to the Closing Date or the actions
or omissions of the Partnership's directors, officers, stockholders, employees
or agents prior to the Closing Date, other than Losses arising from matters
expressly disclosed in the Financial Statements, this Agreement or the Schedules
to this Agreement, or (d) any liability under the Securities Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or other federal or state
law or regulation, at common law or otherwise, arising out of or based upon (i)
any untrue statement or alleged untrue statement of a material fact relating to
the Partnership (including its Subsidiaries) or the Partners contained in any
preliminary prospectus, the Registration Statement or any prospectus forming a
part thereof, or any amendment thereof or supplement thereto (including any
additional registration statement filed pursuant to Rule 462(b) under the
Securities Act), which statement was provided or was based upon information or
documents provided to UniCapital or its counsel by the Partnership (including
its Subsidiaries) or the Partners, or (ii) any omission or alleged omission to
state therein a material fact relating to the Partnership (including its
Subsidiaries) or the Partners required to be stated therein or necessary to make
the statements therein not misleading, which information was not provided to
UniCapital or its counsel by the Partnership (including its Subsidiaries) or the
Partners; provided, however, that such indemnity shall not inure to the benefit
of UniCapital or the Newcos to the extent that such untrue statement (or alleged
untrue statement) was made in, or such omission (or alleged omission) occurred
in, any preliminary prospectus and the Partners provided, in writing, corrected
information to UniCapital for inclusion in the final prospectus, and such
information was not so included.
12.2 SPECIFIC INDEMNIFICATION BY PARTNERS. Subject to the limitations
contained in Section 12.5 hereof, notwithstanding any disclosure made in this
Agreement or in the schedules or exhibits hereto, and notwithstanding any
investigation by UniCapital or the Newcos, each Partner, jointly and severally,
covenants and agrees that such Partner will indemnify, defend, protect and hold
harmless UniCapital and the Newcos and their respective officers, stockholders,
directors, divisions, subdivisions, affiliates, subsidiaries, parents, agents,
employees, successors and assigns at all times from and after the date of this
Agreement, from and against all Losses incurred by UniCapital or the Newcos as a
result of or incident to: (a) the existence of liabilities of the Partnership
(including its Subsidiaries) in excess of the liabilities set forth on Schedule
6.13, to the extent of such excess; (b) the failure of the Partnership or the
Partners to file all required Form 5500's prior to the Closing Date; (c) the
litigation matters listed on Schedule 6.25 and (d) any Material Adverse
Amendments pursuant to Section 8.14 hereof.
12.3 INDEMNIFICATION BY UNICAPITAL AND THE NEWCOS. Subject to the
limitations contained in Section 12.5 hereof, UniCapital and the Newcos, jointly
and severally, covenant and agree that they will indemnify, defend, protect and
hold harmless the Partners at all times from and after the date of this
Agreement from and against all Losses incurred by the Partners as a result of or
arising from (a) any breach of the representations and warranties made by
UniCapital and the Newcos set forth herein or on the schedules or certificates
attached hereto, (b) any
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nonfulfillment of any agreement on the part of UniCapital under this Agreement,
or (c) any liability under the Securities Act, the Exchange Act or other federal
or state law or regulation, at common law or otherwise, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
relating to UniCapital (including all of the entities, other than the
Partnership, acquired by UniCapital as part of the Unified Transaction, but only
to the extent that UniCapital is actually indemnified by such other companies
for such liability) contained in any preliminary prospectus, the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto (including any registration statement filed pursuant to Rule
462(b) under the Securities Act), or arising out of or based upon any omission
or alleged omission to state therein a material fact relating to UniCapital
(including all of the entities, other than the Partnership, acquired by
UniCapital as part of the Unified Transaction, but only to the extent that
UniCapital is actually indemnified by such other companies for such liability)
required to be stated therein or necessary to make the statements therein not
misleading, which liability is not the subject of indemnification of UniCapital
and the Newcos pursuant to Section 12.1(c) above.
12.4 THIRD PARTY CLAIMS.
(a) In order for a party hereto eligible to be indemnified
hereunder (an "Indemnified Party") to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of or involving a
claim or demand made by any person or entity against the Indemnified Party (a
"Third Party Claim"), such Indemnified Party must notify the parties obligated
to provide indemnification pursuant to Section 12.1, 12.2, or 12.3 hereof (each,
an "Indemnifying Party") in writing, and in reasonable detail, of the Third
Party Claim within 30 business days after receipt by such Indemnified Party of
written notice of the Third Party Claim; provided, however, that failure to give
such notification shall not affect the indemnification provided hereunder except
to the extent the Indemnifying Party shall have been actually prejudiced as a
result of such failure. Such notice shall state the nature and the basis of such
claim and a reasonable estimate of the amount thereof. Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, within five business
days after the Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnified Party relating to
the Third Party Claim. To the extent the Indemnifying Party has actually paid
any amount to the Indemnified Party in respect of any Loss in connection with
such Third Party Claim, the Indemnifying Party shall have a right of subrogation
with respect to such Third Party Claim to the extent of such payment.
(b) The Indemnifying Party shall have right to defend and
settle, at its own expense and by its own counsel (provided that such counsel is
not reasonably objected to by the Indemnified Party), any Third Party Claim as
the Indemnifying Party pursues the same in good faith and diligently and so long
as the Third Party Claim does not relate to an actual or potential Loss to which
Section 12.4(e) applies in which the Indemnified Party is UniCapital or the
Newcos. If the Indemnifying Party undertakes to defend or settle, it shall
promptly notify the
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Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. Notwithstanding the foregoing, the
Indemnified Party shall have the right to participate in any matter through
counsel of its own choosing at its own expense (unless there is a conflict of
interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, in which case the Indemnifying Party will reimburse the
Indemnified Party for the expenses of its counsel). After the Indemnifying Party
has notified the Indemnified Party of its intention to undertake to defend or
settle any such asserted liability, and for so long as the Indemnifying Party
diligently pursues such defense, the Indemnifying Party shall not be liable for
any additional legal expenses incurred by the Indemnified Party in connection
with any defense or settlement of such asserted liability, except to the extent
such participation is requested by the Indemnifying Party, in which event the
Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable
additional legal expenses and out-of-pocket expenses, and except in the case of
a Third Party Claim relating to an actual or potential Loss to which Section
12.4(e) applies in which the Indemnified Party is UniCapital or the Newcos.
(c) No Indemnifying Party shall, in the defense of any Third
Party Claim, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) or enter into any settlement, except with
the written consent of the Indemnified Party, which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim or
matter.
(d) If the Indemnifying Party does not assume the defense of
any Third Party Claim, then the Indemnified Party may defend against such Third
Party Claim in such manner as it deems appropriate at the expense of the
Indemnifying Party.
(e) Notwithstanding anything to the contrary in this Article
12, if at any time, in the reasonable opinion of UniCapital or the Newcos as the
Indemnified Party (notice of which opinion shall be given in writing to the
Indemnifying Party), any Third Party Claim seeks material prospective relief
which could have a material adverse effect on any such Indemnified Party or any
subsidiary, then such Indemnified Party shall have the right to control or
assume (as the case may be) the defense of any such Third Party Claim and the
amount of any judgment or settlement and the reasonable costs and expenses of
defense (including, but not limited to, fees and disbursements of counsel and
experts, as well as any sampling, testing, investigation, removal, treatment or
remediation undertaken by UniCapital or the Newcos and all counseling or
engineering fees and expenses related thereto) shall be included as part of the
indemnification obligations of the Indemnifying Party hereunder. If the
Indemnified Party elects to exercise such right, then the Indemnifying Party
shall have the right to participate in, but not control, the defense of such
Third Party Claim at the sole cost and expense of the Indemnifying Party.
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12.5 LIMITATIONS ON INDEMNIFICATION. No Indemnified Party shall assert
any claim (other than a Third Party Claim) for indemnification hereunder until
such time as the aggregate of all claims which such Indemnified Party may have
against an Indemnifying Party shall exceed $17,500, at which time an Indemnified
Party shall be entitled to seek indemnification for all claims pursuant to this
Article 12, but only to the extent such claims, in the aggregate, exceed
$17,500. For purposes of the preceding sentence, UniCapital and the Newcos shall
be considered to be a single Indemnifying and Indemnified Party and the Partners
shall be considered to be a single Indemnifying and Indemnified Party.
Notwithstanding any other term of this Agreement, in no event shall any Partner
be liable under this Article 12 for an amount which exceeds the aggregate value
(determined at the Closing Date) of the Consideration received by such Partner
under this Agreement. Notwithstanding anything to the contrary contained in this
Agreement, the limitations upon indemnification contained in this Section 12.5
shall not apply to Losses arising out of (i) any breach of the representations
and warranties of the Partners contained in Sections 6.3, 6.5, 6.14, 6.27 and
6.33 hereof, (ii) litigation expenses net of applicable reserves reflected on
the balance sheets of the Partnership at the Audited Balance Sheet Date and
(iii) any Material Adverse Amendments pursuant to Section 8.14 hereof.
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The parties agree that
representations and warranties made by the parties in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive for a period of one year from the Closing Date (which date is
hereinafter called the "Expiration Date"), except that:
(a) the representations and warranties contained in Section
6.27 hereof shall survive until such time as the limitations period has run for
all tax periods ended prior to the Closing Date, which shall be deemed to be the
Expiration Date for purposes of this clause (a) and claims arising from a breach
of the representations and warranties contained in such Section 6.27;
(b) the representations and warranties contained in Section
6.28(g) hereof shall survive until such time as one full fiscal year's cycle of
transactions occurring entirely after December 31, 1999, shall have been
processed and UniCapital's consolidated financial statements for the fiscal year
in which the last such transaction to be processed occurred have been audited,
which shall be deemed to be the Expiration Date for purposes of this clause (b)
and claims arising from a breach of the representations and warranties contained
in such Section 6.28(g);
(c) the representations and warranties contained in Section
6.33 hereof shall survive for a period of five years from the Closing Date,
which shall be deemed the Expiration Date for purposes of this clause (c) and
claims arising from a breach of the representations and warranties contained in
such Section 6.33;
(d) solely for purposes of Section 12.1(c) hereof, and solely
to the extent that UniCapital actually incurs liability under the Securities
Act, the Exchange Act, or any other
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federal or state securities laws, the representations and warranties set forth
herein shall survive until the expiration of any applicable limitations period,
which shall be deemed to be the Expiration Date for purposes of this clause (d)
and claims arising under such laws;
(e) the representations and warranties of the Partners
contained in Section 6.5 hereof shall survive the Closing Date without time
limitation; and
(f) any representations and warranties which serve as a basis
of the indemnity obligations of the Partners under Section 12.2 shall survive
the Closing Date without time limitation.
13. TERMINATION OF AGREEMENT
13.1 TERMINATION BY UNICAPITAL. UniCapital may, by notice in the manner
hereinafter provided on or before the Closing Date, terminate this Agreement (a)
if a material default shall be made by the Partners in the observance or due and
timely performance of any of the covenants, agreements or conditions contained
herein, and the curing of such default shall not have been made on or before the
Closing Date and shall not reasonably be expected to occur, (b) if UniCapital in
its sole judgment determines that any condition exists which has made or could
reasonably be expected to make any of the representations or warranties
contained in Article 6 hereof untrue in any material respect or (c) if
UniCapital in its sole judgment determines that information disclosed on the
schedules to the Agreement delivered pursuant to Section 8.14 has or could
reasonably be expected to have a material adverse effect on the business,
operations, assets, properties, prospects or condition (financial or otherwise)
of the Partnership.
13.2 TERMINATION BY THE PARTNERS. Prior to the initial filing of the
Registration Statement with the SEC, the Partners may, by notice in the manner
hereinafter provided on or before such initial filing, terminate this Agreement
(a) in accordance with Section 17.4(b) or (b) if a material default shall be
made by UniCapital in the observance or due and timely performance of any of the
covenants, agreements or conditions contained herein, and the curing of such
default shall not have been made on or before such initial filing. From and
after the initial filing of the Registration Statement with the SEC, the
Partners shall have no right to terminate this Agreement.
13.3 AUTOMATIC TERMINATION. This Agreement shall terminate
automatically:
(a) if the Registration Statement has not been declared
effective by June 30, 1998 or if the Closing has not occurred on or before July
15, 1998; or
(b) if, between the date of the execution of the Underwriting
Agreement and the Closing Date, the Underwriting Agreement is terminated
pursuant to the terms thereof.
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13.4 LIQUIDATED DAMAGES. (a) If the Closing fails to occur because of
the default of the Partnership or the Partners, then, in addition to the other
remedies available to UniCapital at law for fraud, in equity or pursuant to this
Agreement, the Partners shall pay to UniCapital the sum of $500,000 as
liquidated damages. It is hereby agreed that UniCapital's damages in the event
of a termination or default by the Partnership hereunder are uncertain and
impossible to ascertain and that the foregoing constitutes a reasonable
liquidation of such damages and is intended not as penalty but as liquidated
damages.
(b) If the Closing does not occur on or before April 30, 1998
and such failure is not the result of a default of the Partnership or the
Partners, then UniCapital shall reimburse the Partners at the rate of $140,000
per month for each month (prorated for any portion of a month) between April 30,
1998 and the Closing, provided, that if Closing does not occur on or before June
30, 1998 then this Agreement shall terminate and the amount to be so paid shall
not exceed $280,000. If Closing occurs before termination of this Agreement,
then any payment under this Section shall be paid in shares of UniCapital common
stock valued at the IPO price of the UniCapital Stock; otherwise, any payment
under this Section shall be paid in cash.
14. NONCOMPETITION AND NONSOLICITATION
14.1 NONCOMPETITION.
(a) In order to protect the value and goodwill of the
Partnership and its business, each Partner covenants that, for the period ending
two years after the Closing Date, such Partner will not, directly or indirectly,
own, manage, operate, join, control, finance or participate in the ownership,
management, operation, control or financing of, or be connected as a partner,
principal, agent, representative, consultant or otherwise with, or use or permit
such Partner's name to be used in connection with, any business or enterprise
which is engaged directly or indirectly in competition anywhere in the United
States with the business conducted by UniCapital, the Newcos or any of its or
their respective subsidiaries or affiliates or with any business engaged in
originating, servicing or securitizing leases or other specialty financing
products or services (the "Restricted Business"). Each Partner recognizes that
the Restricted Business is expected to be conducted throughout the United States
and that more narrow geographical limitations of any nature on this
non-competition covenant (and the non-solicitation covenant set forth in
subsection (b)) are therefore not appropriate. The foregoing restriction shall
not be construed to prohibit the ownership by a Partner as a passive investment
of not more than five percent of any class of securities of any corporation
which is engaged in any of the foregoing businesses having a class of securities
registered pursuant to Section 12 of the Exchange Act.
(b) Each Partner further covenants that for the period ending
two years after the Closing Date, such Partner will not, either directly or
indirectly, (i) call on or solicit any customers or prospective customers of the
Restricted Business, or (ii) solicit the employment of
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any person who is employed by UniCapital, the Newcos or any of its or their
respective subsidiaries or affiliates in the Restricted Business during such
period.
(c) Each Partner recognizes and acknowledges that by reason of
such Partner's relationship to the Partnership, such Partner has had access to
confidential information relating to the Restricted Business. Each Partner
acknowledges that such confidential information is a valuable and unique asset
and covenants that such Partner will not disclose any such confidential
information after the Closing Date to any person for any reason whatsoever.
(d) Notwithstanding the provisions of this Section 14.1,
affiliates of the Partners may continue to own, manage and dispose of their
interests in the PLC Lease Receivables 1993-A Trust and the 1995 Pendulum
Investment Trust and the assets owned or controlled by such Trusts.
14.2 DAMAGES. Each Partner acknowledges and agrees that measuring
economic losses to UniCapital and the Newcos as a result of the breach of the
foregoing covenants in this Article 14 would be impossible, and that any breach
of the foregoing covenants would result in immediate and irreparable damage to
UniCapital and the Newcos for which they would have no other adequate remedy.
Accordingly, the Partners agree that, in the event of a breach by them of any of
the foregoing covenants, such covenants may be enforced by UniCapital or the
Newcos by, without limitation, injunctions and restraining orders.
14.3 REASONABLE RESTRAINT. The Parties agree that the foregoing
covenants in this Article 14 impose a reasonable restraint upon the Partners in
light of the activities and business of UniCapital on the date of the execution
of this Agreement and the current and future plans of UniCapital and the Newcos
(as successors to the businesses of the Partnership), and that any violation
will result in irreparable injury to UniCapital.
14.4 SEVERABILITY; REFORMATION. The covenants in this Article 14 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, if any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
14.5 INDEPENDENT COVENANT. All of the covenants in this Article 14
shall be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of any Partner
against the Partnership, the Partnership's Subsidiaries, the Newcos or
UniCapital, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement of such covenants. The parties
specifically agree that the period of two years stated above shall be computed
by excluding from such computation any time during which any Partner is in
violation of any provision of this Article 14 and any time during which there is
pending in any court of competent jurisdiction any action
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(including any appeal from any judgment) brought by any person, whether or not a
party to this Agreement, in which action UniCapital or the Newcos seek to
enforce the agreements and covenants of the Partners or in which any person
contests the validity of such agreements and covenants or their enforceability
or seeks to avoid their performance or enforcement.
14.6 MATERIALITY. The Partners hereby acknowledge and agree that the
covenants contained in this Article 14 are a material and substantial part of
this transaction and are entered into in connection with and as an inducement to
the acquisition by UniCapital and the Newcos of the businesses of the
Partnership.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 PARTNERS. The Partners recognize and acknowledge that they have in
the past, currently have, and in the future may possibly have, access to certain
confidential information of the Partnership, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Partnership and the Partnership's business. The
Partners agree that they will not disclose any confidential information to any
person, firm, corporation, association or other entity for any purpose or reason
whatsoever, except (i) to authorized representatives of UniCapital, (ii) upon
the written consent of an authorized representative of UniCapital or (iii) as
may be required by law or order of a court of competent jurisdiction, unless the
Partners can show that such information has become known to the public generally
through no fault of the Partners. Prior to disclosing any confidential
information required by law or order of a court of competent jurisdiction, the
Partners shall provide UniCapital with prompt notice of the disclosure
requirement so that UniCapital may take whatever action it deems appropriate to
prohibit such disclosure. In the event of a breach or threatened breach by the
Partners of the provisions of this Section 15.1, UniCapital and the Newcos shall
be entitled to an injunction restraining Partners from disclosing, in whole or
in part, such confidential information. Nothing herein shall be construed as
prohibiting UniCapital and the Newcos from pursuing any other available remedy
for such breach or threatened breach, including the recovery of damages.
15.2 UNICAPITAL. UniCapital recognizes and acknowledges that it has in
the past, currently has, and prior to the Closing Date will have, access to
certain confidential information solely of the Partnership in connection with
their respective businesses. UniCapital agrees that, prior to the Closing Date,
it will not disclose any such confidential information to any person, firm,
corporation, association, or other entity for any purpose or reason whatsoever
without prior written consent of the Partners or except to authorized
representatives of UniCapital or as may be required by law or order of a court
of competent jurisdiction, unless UniCapital can show that such information has
become known to the public generally through no fault of UniCapital. Prior to
disclosing any confidential information required by law or order of a court of
competent jurisdiction, UniCapital shall provide the Partners with prompt notice
of the disclosure requirement so that the Partners may take whatever action they
deem appropriate to prohibit such
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disclosure. In the event of a breach or threatened breach by UniCapital of the
provisions of this Section 15.2, the Partners shall be entitled to an injunction
restraining UniCapital from disclosing, in whole or in part, such confidential
information. Nothing contained herein shall be construed as prohibiting the
Partners from pursuing any other available remedy for such breach or threatened
breach, including the recovery of damages.
15.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, UniCapital, the Newcos and the Partners agree that, in the
event of a breach by any of them of the foregoing covenant, the covenant may be
enforced against them by injunctions and restraining orders.
16. LOCK-UP AGREEMENTS
16.1 AGREEMENT. In connection with the IPO, for good and valuable
consideration, and to induce the underwriters that may participate in the IPO to
continue their efforts in connection with the IPO, each Partner hereby agrees
that, without the prior written consent of Morgan Stanley & Co. Incorporated on
behalf of such underwriters, it will not, during the period commencing on the
date of this Agreement and ending 180 days after the date of the final
prospectus contained in the Registration Statement relating to the IPO (the
"Prospectus"), (a) offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of UniCapital Stock or any securities
convertible into or exercisable or exchangeable for UniCapital Stock or (b)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of UniCapital Stock,
whether any such transaction described in clause (a) or (b) above is to be
settled by delivery of UniCapital Stock or such other securities, in cash or
otherwise. In addition, each Partner agrees that, without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of the underwriters that
may participate in the IPO, it will not, during the period commencing on the
date of this Agreement and ending 180 days after the date of the Prospectus,
make any demand for or exercise any right with respect to, the registration of
any shares of UniCapital Stock or any security convertible into or exercisable
or exchangeable for Common Stock.
16.2 INTENDED THIRD PARTY BENEFICIARIES. Each Partner agrees that the
foregoing shall be binding upon their transferees, successors, assigns, heirs,
and personal representatives and shall benefit and be enforceable by the
underwriters in the IPO. Each Partner acknowledges and agrees that such
underwriters and Morgan Stanley & Co. Incorporated are intended third party
beneficiaries of the provisions of this Article 16, and that Morgan Stanley &
Co. Incorporated on behalf of such underwriters shall be entitled to enforce the
covenants contained in this Article 16. In furtherance of the foregoing,
UniCapital and its transfer agent are hereby authorized to decline to make any
transfer of securities if such transfer would constitute a violation or breach
of this Article 16. The Partners also acknowledge and agree that none of the
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companies or partnerships to be acquired as part of the Unified Transaction
shall have any rights as intended third-party beneficiaries under this
Agreement.
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK
17.1 INVESTMENT INTENT. The Partners acknowledge and agree that the
shares of UniCapital Stock to be delivered to the Partners pursuant to this
Agreement have not been and will not be registered under the Securities Act and
therefore may not be resold without compliance with the Securities Act. The
Partners represent and warrant that the shares of UniCapital Stock to be
acquired by the Partners pursuant to this Agreement are being acquired solely
for their own account, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution.
17.2 COMPLIANCE WITH LAW. The Partners covenant, warrant and represent
that none of the shares of UniCapital Stock distributed to such Partners
pursuant to this Agreement will be offered, sold, assigned, pledged,
hypothecated, transferred or otherwise disposed of except after full compliance
with all of the applicable provisions of the Securities Act and the rules and
regulations of the SEC thereunder, and except after full compliance with any
applicable state securities laws.
17.3 ECONOMIC RISK; SOPHISTICATION. The Partners represent and warrant
that they are able to bear the economic risk of an investment in UniCapital
Stock acquired pursuant to this Agreement and can afford to sustain a total loss
of such investment. The Partners further represent and warrant that they (a)
fully understand the nature, scope and duration of the limitations on transfer
contained in this Agreement and (b) have such knowledge and experience in
financial and business matters that they are capable of evaluating the merits
and risks of the proposed investment and therefore have the capacity to protect
their own interests in connection with the acquisition of the UniCapital Stock.
17.4 INFORMATION SUPPLIED.
(a) The Partners represent and warrant that they have had an
adequate opportunity to ask questions and receive answers from the officers of
UniCapital concerning UniCapital, its business, operations, plans and strategy,
and the background and experience of its officers and directors. The Partners
represent and warrant that they have asked any and all questions that they may
have in the nature described in the preceding sentence and that all such
questions have been answered to their satisfaction.
(b) "Each Partner represents and warrants that such Partner
has received the draft Registration Statement, including the draft preliminary
prospectus that forms a part thereof, delivered to such Partner on or about
February 14, 1998 that describes, among other things,
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UniCapital, the transaction contemplated hereby, the other acquisitions proposed
to be undertaken by UniCapital simultaneously with the transaction contemplated
hereby and the target companies of such other acquisitions. Each Partner
represents and warrants that such Partner has reviewed such draft Registration
Statement and draft preliminary prospectus and has had adequate opportunity to
ask questions of and receive answers to such Partner's satisfaction from the
officers of UniCapital concerning the matters described therein."
18. SECURITIES LEGENDS
The certificates evidencing the UniCapital Stock to be received by the
Partners hereunder will bear a legend substantially in the form set forth below
and containing such other information as UniCapital may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES OR BLUE SKY LAWS.
SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
SECURITIES ACT AND ANY STATE SECURITIES OR BLUE SKY LAWS,
UNLESS, IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION) OF COUNSEL SATISFACTORY TO
THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
In addition, such certificates shall also bear (a) a legend reflecting the
restrictions contained in Article 16 and (b) such other legends as counsel for
UniCapital reasonably determines are required under the applicable laws of any
state.
19. GENERAL
19.1 COOPERATION. The Partners and UniCapital shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement. The
Partners will cooperate and use their best efforts to have the officers,
directors and employees of the Partnership prior to the Closing Date cooperate
with UniCapital on and after the Closing Date in furnishing information,
evidence, testimony and other assistance in connection with any actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Closing Date.
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19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of UniCapital, and the heirs and legal representatives of the
Partners.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Partners, the
Partnership, UniCapital and the Newcos and supersedes any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the Partners (subject to the limitations set
forth below), the Partnership, UniCapital and the Newcos acting through their
respective officers, duly authorized by their respective Boards of Directors;
provided, that the General Partner shall have the authority to approve and
execute any amendment to this Agreement on behalf of all of the Partners and
without the necessity of such General Partner obtaining consent or authorization
from any other Partner, unless such amendment relates to any representation or
warranty made by a Partner other than such General Partner which may only be
amended by the written agreement of such person; and provided further, that no
Partner shall have any power or authority to modify or amend this Agreement in
any respect from and after the initial filing of the Registration Statement with
the SEC.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
19.5 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with the transactions contemplated
hereby, and each of UniCapital and the Newcos, on the one hand, and the
Partners, on the other hand, agrees to indemnify the other against all loss,
liability, cost damages or expense arising out of or related to claims for fees
or commissions of brokers employed or alleged to have been employed by such
indemnifying party.
19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, UniCapital will pay the fees, expenses and disbursements
of UniCapital and the Newcos and their respective agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto. Whether or not the transactions herein
contemplated shall be consummated, the Partners will pay the fees, expenses and
disbursements of the Partners and the Partnership and their respective agents,
representatives, accountants and counsel incurred in connection with the subject
matter of this Agreement and any amendments hereto and all other costs and
expenses incurred in the performance of this Agreement by the Partners and the
Partnership and in compliance with all conditions to be performed by the
Partners and the Partnership under this Agreement.
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19.7 NOTICES. All notices and other communications hereunder shall be
in writing (including wire, telefax or similar writing) and shall be sent,
delivered or mailed, addressed, or telefaxed:
(a) If to UniCapital or the Newcos, addressed to them at:
UniCapital Corporation
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Telephone: (305) 861-0603
Telefax: (305) 866-8449
with a copy to:
David A. Gerson
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
301 Grant Street
Pittsburgh, PA 15219
Telephone: (412) 560-3330
Telefax: (412) 560-3399
(b) If to the Partners, addressed to them in care of
the Partners' Representative at:
Mary B. Strong
1900 Grant Building
Pittsburgh, PA 15219
Telephone: (412) 338-3616
Telefax: (412) 560-3613
with a copy to:
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Daniel B. Kenney
The Travelers Insurance Company
Securities 9PB
One Tower Square
Hartford, CT 06183-2030
Telephone: (860) 277-5254
Telefax: (860) 954-3730
Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telefax, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 19.7 (or in accordance with the latest
unrevoked written direction from such party) and (ii) if given by telefax, when
such telefax is transmitted to the telefax number specified in this Section 19.7
(or in accordance with the latest unrevoked written direction from such party),
and the appropriate confirmation is received.
19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York, without giving effect to any of the
provisions thereof that would require the application of the substantive laws of
any other jurisdiction. Each party to this Agreement: (a) agrees that any legal
action or proceeding under this Agreement shall be brought in the courts of the
State of New York or in the United States District Court for the Southern
District of New York; (b) irrevocably submits to the jurisdiction of such
courts; (c) agrees not to assert any claim or defense that it is not personally
subject to the jurisdiction of such courts, that any such forum is not
convenient or the venue thereof is improper, or that this Agreement or the
subject matter hereof may not be enforced in such courts; and (d) agrees to
accept service of process on it by certified or registered mail or by any other
method authorized by law.
19.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.10 TIME. Time is of the essence with respect to this Agreement.
19.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
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either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
19.12 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
20. DEFINITIONS
20.1 "Accounts Receivable" is defined in Section 6.14.
20.2 "Acquisition Proposal" is defined in Section 8.10.
20.3 "Agent" is defined in Section 8.10.
20.4 "Agreement" is defined in the preamble to this Agreement.
20.5 "Audited Balance Sheet Date" is defined in Section 6.12(a).
20.6 "Audited Financial Statements" are defined in Section 6.12(a).
20.7 "Authorizations" are defined in Section 6.23.
20.8 "Benefit Plan" is defined in Section 6.22.
20.9 "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq.
20.10 "Closing" is defined in Section 5.1.
20.11 "Closing Date" is defined in Section 5.2.
20.12 "Closing Date Balance Sheet" is defined in Section 3.1.
20.13 "Code" is defined in Section 6.22.
20.14 "Commonly Controlled Entity" is defined in Section 6.22.
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20.15 "Consideration" is defined in Section 2.1.
20.16 "Contracts" are defined in Section 6.17.
20.17 "Disputed Amounts" are defined in Section 3.2.
20.18 "Environmental Laws" mean any and all applicable treaties, laws,
regulations, ordinances, enforceable requirements, binding determinations,
orders, decrees, judgments, injunctions, permits, approvals, authorizations,
licenses or binding agreements issued, promulgated or entered into by any
Governmental Entity, relating to the environment, preservation or reclamation of
natural resources, or to the management, Release or threatened Release of or
exposure to Hazardous Substances, including CERCLA, the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.,
the Emergency Planning and Community Right-to- Know Act of 1986, 42 U.S.C.
Section 11001 et. seq., the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq., and any similar or implementing state or local law and all amendments or
regulations promulgated thereunder.
20.19 "Environmental Liabilities" mean any and all Losses arising from
or related to any claim, proceeding, investigation, response or removal action,
remediation or other clean-up brought, prosecuted or undertaken by UniCapital,
the Newcos, any Governmental Entity or any other person or entity on the basis
of any violation of any Environmental Laws or pursuant to any requirement
imposed under any Environmental Laws (including any sampling, testing,
investigation, removal, treatment or remediation undertaken by UniCapital or the
Newcos so as to avoid any claim or violation or to comply with any requirement
and all counseling or engineering fees and expenses related thereto), and
arising from pre-Closing operations, events, circumstances or conditions at, on,
under or emanating from, or as a result of any pre-Closing off-site disposal of
Hazardous Substances from, any property currently or formerly owned, operated or
leased by the Partnership.
20.20 "Environmental Permits" mean all permits, licenses, approvals or
authorizations from any Governmental Entity required under Environmental Laws
for the operation of the business of the Partnership.
20.21 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
20.22 "Escrow Property" is defined in Section 4.1(a).
20.23 "Exchange Act" is defined in Section 12.1.
53
<PAGE> 60
20.24 "Expiration Date" is defined in Section 12.6.
20.25 "Financial Statements" are defined in Section 6.12(b).
20.26 "Foreign Plans" are defined in Section 6.22(i)(xiii).
20.27 "GAAP" is defined in Section 3.1.
20.28 "General Partner" is defined in Section 1.1.
20.29 "Governmental Entity" means any court, administrative or
regulatory agency or commission, or other governmental authority or
instrumentality, domestic, foreign or supranational.
20.30 "Hazardous Substance" mean all explosive or regulated radioactive
materials or substances, hazardous or toxic materials, wastes or chemicals,
petroleum and petroleum products (including crude oil or any fraction thereof),
asbestos or asbestos containing materials, and all other materials or chemicals
regulated pursuant to any Environmental Law, including materials listed in 49
C.F.R. ss. 172.101 and materials defined as hazardous pursuant to Section
101(14) of CERCLA.
20.31 "Indemnified Party" is defined in Section 12.4(a).
20.32 "Indemnifying Party" is defined in Section 12.4(a).
20.33 "Indemnity Escrow Agent" is defined in Section 4.1(a).
20.34 "Independent Accounting Firm" is defined in Section 3.2.
20.35 "Intellectual Property" is defined in Section 6.28(a).
20.36 "IPO" is defined in the recitals to this Agreement.
20.37 "Laws" is defined in Section 8.6.
20.38 "Lease Documents" are defined in Section 6.35.
20.39 "Leases" are defined in Section 6.35.
20.40 "Liabilities" are defined in Section 6.13(a).
20.41 "Limited Partner" is defined in Section 1.1.
54
<PAGE> 61
20.42 "Losses" are defined in Section 12.1.
20.43 "Material Adverse Amendment" is defined in Section 8.14.
20.44 "Net Worth Deficiency" is defined in Section 3.1.
20.45 "Newco" is defined in the preamble to this Agreement.
20.46 "Newcos" is defined in the preamble to this Agreement.
20.47 AOrdinary course@ or Aordinary course of business@ means the
conduct of business as conducted by the Partnership prior to the date of this
Agreement consistent in nature and, where relevant, amount with past practices.
20.48 "Partners" are defined in the preamble to this Agreement.
20.49 "Partnership" is defined in the preamble to this Agreement.
20.50 "Partnership Interest" is defined in the preamble to this
Agreement.
20.51 "Partnership Documents" is defined in Section 6.2.
20.52 "Partners' Representative" is defined in Section 3.3.
20.53 "PCBs" are defined in Section 6.32(h).
20.54 "Pension Plan" is defined in Section 6.22.
20.55 "Permits" mean all permits, licenses, franchises, approvals and
authorizations from any Governmental Entity that are owned or held by the
Partnership, or held by any Partners that relate to the operations of the
Partnership.
20.56 "Prospectus" is defined in Section 16.1.
20.57 "Registration Statement" is defined in Section 9.4.
20.58 "Regulations" are defined in Section 6.23.
20.59 "Release" means any spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, emanation or migration of any
Hazardous Substance in, into, onto or through the environment (including ambient
air, surface water, ground water, soils, land surface, subsurface strata,
workplace or structure).
55
<PAGE> 62
20.60 "Restricted Business" is defined in Section 14.1(a).
20.61 "SEC" is defined in Section 9.4.
20.62 "Securities Act" is defined in Section 6.16.
20.63 "Subsidiary" is defined in Section 6.1.
20.64 "Taxes" are defined in Section 6.27.
20.65 "Tax Returns" are defined in Section 6.27.
20.66 "Third Party Claim" is defined in Section 12.4(a).
20.67 "Unaudited Financial Statements" are defined in Section 6.12(b).
20.68 "Underwriting Agreement" is defined in Section 5.1.
20.69 "UniCapital" is defined in the preamble to this Agreement.
20.70 "UniCapital Documents" are defined in Section 7.3.
20.71 "UniCapital Stock" is defined in Section 2.1(a).
20.72 "Welfare Plan" is defined in Section 6.22.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
56
<PAGE> 63
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNICAPITAL CORPORATION
By: /s/ Robert J. New
------------------
Name: Robert J. New
Title: Chairman and Chief Executive Officer
PFSC ACQUISITION CORP.
By: /s/ Robert J. New
------------------
Name: Robert J. New
Title: President
PFSC LIMITED ACQUISITION CORP.
By: /s/ Robert J. New
------------------
Name: Robert J. New
Title: President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
57
<PAGE> 64
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
PORTFOLIO FINANCIAL SERVICING
COMPANY, L.P.
By: Equipment Servicing Corp.
Its Sole General Partner
By: /s/ Mary B. Strong
------------------
Name: Mary B. Strong
Title: Treasurer
EQUIPMENT SERVICING CORP.
By: /s/ Mary B. Strong
------------------
Name: Mary B. Strong
Title: Treasurer
ILC ACQUISITION PARTNERS, L.P.
By: IAP Corp.
Its Sole General Partner
By: /s/ Mary B. Strong
------------------
Name: Mary B. Strong
Title: Treasurer
58
<PAGE> 65
ANNEXES
ANNEX I [Calculation and Composition of Consideration]
ANNEX II [Form of Indemnity Escrow Agreement]
ANNEX III [Form of Employment Agreement]
SCHEDULES
SCHEDULE 6.1 [Qualified Jurisdictions]
SCHEDULE 6.5 [Partnership Interests]
SCHEDULE 6.8 [Subsidiaries]
SCHEDULE 6.9 [Predecessor Status]
SCHEDULE 6.12 [Financial Statements]
SCHEDULE 6.13 [Liabilities and Obligations]
SCHEDULE 6.14 [Accounts and Notes Receivables]
SCHEDULE 6.15 [Permits]
SCHEDULE 6.16 [Real and Personal Property]
SCHEDULE 6.17 [Contracts and Commitments]
SCHEDULE 6.20 [Insurance]
SCHEDULE 6.21 [Employees]
SCHEDULE 6.22 [Employee Benefit Plans]
SCHEDULE 6.23 [Compliance w/ Law; Authorizations]
SCHEDULE 6.25 [Litigation]
SCHEDULE 6.28 [Intellectual Property]
SCHEDULE 6.28(e) [Registered Intellectual Property]
SCHEDULE 6.29 [Approvals]
SCHEDULE 6.30 [Amended or Terminated Contracts]
SCHEDULE 6.31 [Deposit Accounts; Powers of Attorney]
SCHEDULE 7.8 [Pending Litigation]
SCHEDULE 7.11 [Other Contracts and Agreements]
SCHEDULE 9.2 [List of Employment Agreements]
The registrant agrees to furnish a copy of each omitted schedule, exhibit or
annex to this Exhibit 2.10 to the Commission supplementally upon request
therefor.
<PAGE> 1
Exhibit 2.11
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
UNICAPITAL CORPORATION
(a Delaware corporation),
VC ACQUISITION CORP.
(a Delaware corporation),
VARILEASE CORPORATION
and
THE STOCKHOLDERS OF SUCH COMPANY
LISTED ON THE SIGNATURE PAGE HEREOF
Dated as of February 14, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<CAPTION>
Table Of Contents
-----------------
Page
----
<S> <C> <C> <C>
1. THE MERGER...............................................................................................2
1.1 DELIVERY AND FILING OF CERTIFICATE OF MERGER....................................................2
1.2 MERGER EFFECTIVE DATE...........................................................................2
1.3 CERTIFICATE OF INCORPORATION, BYLAWS, BOARD OF DIRECTORS AND OFFICERS OF THE
SURVIVING CORPORATION...........................................................................2
2. MERGER CONSIDERATION.....................................................................................3
2.1 CONVERSION OF CAPITAL STOCK; MERGER CONSIDERATION...............................................3
2.2 EXCHANGE PROCEDURES.............................................................................4
2.3 NO FRACTIONAL SHARES............................................................................4
2.4 ALLOCATION OF MERGER CONSIDERATION..............................................................4
2.5 EARN-OUT CONSIDERATION..........................................................................4
3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS' REPRESENTATIVE....................................................6
3.1 COMPUTATION.....................................................................................6
3.2 DISPUTES........................................................................................6
3.3 STOCKHOLDERS' REPRESENTATIVE....................................................................7
4. INDEMNITY ESCROW.........................................................................................8
4.1 CREATION OF ESCROW..............................................................................8
4.2 DURATION AND TERMS..............................................................................8
4.3 VOTING AND INVESTMENT...........................................................................9
5. CLOSING; MERGER EFFECTIVE DATE...........................................................................9
5.1 CLOSING.........................................................................................9
5.2 CLOSING DATE; LOCATION..........................................................................9
5.3 EFFECTIVENESS OF MERGER.........................................................................9
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS...........................................................9
6.1 CORPORATE EXISTENCE.............................................................................9
6.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS........................................10
6.3 AUTHORITY; OWNERSHIP...........................................................................10
6.4 VALIDITY OF CONTEMPLATED TRANSACTIONS..........................................................10
6.5 CAPITAL STOCK OF THE COMPANY...................................................................11
6.6 TRANSACTIONS IN CAPITAL STOCK..................................................................11
6.7 NO BONUS SHARES................................................................................11
6.8 SUBSIDIARIES...................................................................................11
6.9 PREDECESSOR STATUS; ETC........................................................................12
6.10 SPIN-OFFS BY COMPANY...........................................................................12
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C> <C>
6.11 NO THIRD PARTY OPTIONS.........................................................................12
6.12 FINANCIAL STATEMENTS...........................................................................12
6.13 LIABILITIES AND OBLIGATIONS....................................................................13
6.14 ACCOUNTS AND NOTES RECEIVABLE..................................................................13
6.15 PERMITS........................................................................................14
6.16 REAL AND PERSONAL PROPERTY.....................................................................14
6.17 CONTRACTS AND COMMITMENTS......................................................................15
6.18 GOVERNMENT CONTRACTS...........................................................................17
6.19 TITLE TO REAL PROPERTY.........................................................................17
6.20 INSURANCE......................................................................................17
6.21 EMPLOYEES......................................................................................18
6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS........................................................18
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS............................................................22
6.24 TRANSACTIONS WITH AFFILIATES...................................................................22
6.25 LITIGATION.....................................................................................22
6.26 RESTRICTIONS...................................................................................23
6.27 TAXES..........................................................................................23
6.28 INTELLECTUAL PROPERTY MATTERS..................................................................25
6.29 COMPLETENESS; NO VIOLATIONS....................................................................26
6.30 EXISTING CONDITION.............................................................................26
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY...........................................................28
6.32 BOOKS OF ACCOUNT...............................................................................28
6.33 ENVIRONMENTAL MATTERS..........................................................................28
6.34 NO ILLEGAL PAYMENTS............................................................................29
6.35 LEASES.........................................................................................30
6.36 LEASE FUNDING..................................................................................33
6.37 DISCLOSURE.....................................................................................33
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO.................................................................34
7.1 CORPORATE EXISTENCE............................................................................34
7.2 UNICAPITAL STOCK...............................................................................34
7.3 CORPORATE POWER AND AUTHORIZATION..............................................................34
7.4 NO CONFLICTS...................................................................................35
7.5 CAPITALIZATION OF UNICAPITAL...................................................................35
7.6 COMPLIANCE WITH LAW; AUTHORIZATION.............................................................35
7.7 TRANSACTION WITH AFFILIATES....................................................................35
7.8 LITIGATION.....................................................................................36
7.9 REGISTRATION RIGHTS............................................................................36
7.10 MISCELLANEOUS..................................................................................36
8. COVENANTS OF STOCKHOLDERS AND COMPANY...................................................................36
8.1 BUSINESS IN THE ORDINARY COURSE................................................................36
8.2 EXISTING CONDITION.............................................................................37
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C> <C>
8.3 MAINTENANCE OF PROPERTIES AND ASSETS...........................................................37
8.4 EMPLOYEES AND BUSINESS RELATIONS...............................................................37
8.5 MAINTENANCE OF INSURANCE.......................................................................37
8.6 COMPLIANCE WITH LAWS, ETC......................................................................37
8.7 CONDUCT OF BUSINESS............................................................................37
8.8 ACCESS.........................................................................................37
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS........................................................38
8.10 EXCLUSIVITY....................................................................................38
8.11 THIRD PARTY ...................................................................................39
8.12 NOTICE TO BARGAINING AGENTS....................................................................39
8.13 NOTIFICATION OF CERTAIN MATTERS................................................................39
8.14 AMENDMENT OF SCHEDULES.........................................................................40
8.15 HSR FILING.....................................................................................40
8.16 AGREEMENT WITH CONSULTANTS.....................................................................40
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS.................................40
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.....................................41
9.2 EMPLOYMENT AGREEMENTS..........................................................................41
9.3 OPINION OF COUNSEL.............................................................................41
9.4 REGISTRATION STATEMENT.........................................................................41
9.5 HSR ACT........................................................................................42
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND NEWCO.............................................42
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS.....................................42
10.2 NO LITIGATION..................................................................................42
10.3 EXAMINATION OF FINANCIAL STATEMENTS............................................................42
10.4 NO MATERIAL ADVERSE CHANGE.....................................................................42
10.5 REGULATORY REVIEW..............................................................................43
10.6 STOCKHOLDERS' RELEASE..........................................................................43
10.7 EMPLOYMENT AGREEMENTS..........................................................................43
10.8 OPINION OF COUNSEL.............................................................................43
10.9 CONSENTS AND APPROVALS.........................................................................44
10.10 GOOD STANDING CERTIFICATES.....................................................................44
10.11 REGISTRATION STATEMENT.........................................................................45
10.12 REPAYMENT OF OBLIGATIONS.......................................................................45
10.13 NET INCOME.....................................................................................45
10.14 HSR ACT........................................................................................45
11. COVENANTS OF UNICAPITAL........................................................................45
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C> <C>
11.1 UNICAPITAL STOCK OPTIONS.......................................................................45
11.2 INFORMATION FILING.............................................................................46
11.3 RELEASE FROM GUARANTEES; INDEBTEDNESS..........................................................46
11.4 HSR FILING.....................................................................................46
11.5 REAL ESTATE TRANSACTIONS.......................................................................46
11.6 COMPANY OPTIONS................................................................................47
12. INDEMNIFICATION; SURVIVAL...............................................................................47
12.1 GENERAL INDEMNIFICATION BY STOCKHOLDERS........................................................47
12.2 SPECIFIC INDEMNIFICATION BY STOCKHOLDERS.......................................................48
12.3 INDEMNIFICATION BY UNICAPITAL AND NEWCO........................................................49
12.4 THIRD PARTY CLAIMS.............................................................................49
12.5 LIMITATIONS ON INDEMNIFICATION.................................................................51
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.....................................................52
13. TERMINATION OF AGREEMENT................................................................................53
13.1 TERMINATION BY UNICAPITAL......................................................................53
13.2 TERMINATION BY THE STOCKHOLDERS................................................................54
13.3 AUTOMATIC TERMINATION..........................................................................54
13.4 LIQUIDATED DAMAGES.............................................................................54
14. NONCOMPETITION AND NONSOLICITATION......................................................................55
14.1 NONCOMPETITION.................................................................................55
14.2 DAMAGES........................................................................................55
14.3 REASONABLE RESTRAINT...........................................................................56
14.4 SEVERABILITY; REFORMATION......................................................................56
14.5 INDEPENDENT COVENANT...........................................................................56
14.6 MATERIALITY....................................................................................56
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION...............................................................56
15.1 STOCKHOLDERS...................................................................................56
15.2 UNICAPITAL.....................................................................................57
15.3 DAMAGES........................................................................................57
16. LOCK-UP AGREEMENTS......................................................................................58
16.1 AGREEMENT......................................................................................58
16.2 INTENDED THIRD PARTY BENEFICIARIES.............................................................58
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON UNICAPITAL STOCK.................................58
17.1 INVESTMENT INTENT..............................................................................58
17.2 COMPLIANCE WITH LAW............................................................................59
17.3 ECONOMIC RISK; SOPHISTICATION..................................................................59
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C> <C> <C>
17.4 INFORMATION SUPPLIED...........................................................................59
18. SECURITIES LEGENDS......................................................................................60
19. UNICAPITAL OPTION.......................................................................................60
19.1 PURCHASE OPTIONS...............................................................................60
19.2 OPTION EXERCISE PRICE..........................................................................61
19.3 REPRESENTATIONS AND WARRANTIES REGARDING THE OPTION COMPANIES..................................61
19.4 NEGATIVE COVENANT..............................................................................61
19.5 ACCESS.........................................................................................62
19.8 TERMINATION OF OPTION..........................................................................63
20. GENERAL.................................................................................................63
20.1 COOPERATION....................................................................................63
20.2 SUCCESSORS AND ASSIGNS.........................................................................63
20.3 ENTIRE AGREEMENT...............................................................................63
20.4 COUNTERPARTS...................................................................................64
20.5 BROKERS AND AGENTS.............................................................................64
20.6 EXPENSES.......................................................................................64
20.7 NOTICES........................................................................................64
20.8 GOVERNING LAW..................................................................................65
20.9 EXERCISE OF RIGHTS AND REMEDIES................................................................66
20.10 TIME...........................................................................................66
20.11 REFORMATION AND SEVERABILITY...................................................................66
20.12 REMEDIES CUMULATIVE............................................................................66
20.13 CAPTIONS.......................................................................................66
21. DEFINITIONS.............................................................................................66
</TABLE>
v
<PAGE> 7
AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF
CONTRIBUTION (the "Agreement") is made as of the 14th day of February, 1998,
between UNICAPITAL CORPORATION, a Delaware corporation ("UniCapital"); VC
ACQUISITION CORP., a Delaware corporation ("Newco"); VARILEASE CORPORATION, a
Michigan corporation (the "Company"), and Robert W. VanHellemont, Gary Miller
and Michael McCormick (collectively referred to as the "Stockholders"), who are
all of the stockholders of the Company. Certain capitalized terms used herein
are defined in Article 20 hereof.
WHEREAS, UniCapital was incorporated on October 9, 1997 under the laws
of the State of Delaware for the purpose of acquiring a number of equipment
leasing businesses in different locations; and
WHEREAS, UniCapital intends to undertake an initial public offering of
its Common Stock (the "IPO") and in connection therewith intends to file a
Registration Statement on Form S-1 with the Securities and Exchange Commission
within 90 days of the execution and delivery of this Agreement; and
WHEREAS, Newco was duly incorporated on January 23, 1998 under the laws
of the State of Delaware solely for the purpose of completing this transaction,
and is a wholly-owned subsidiary of UniCapital; and
WHEREAS, the Company is a corporation organized and existing under the
laws of the State of Michigan; and
WHEREAS, the respective Boards of Directors of UniCapital, Newco and
the Company deem it advisable and in the best interests of such corporations and
their respective stockholders that Newco merge with and into the Company
pursuant to this Agreement and the applicable pro visions of the laws of the
respective states of incorporation of Newco and the Company (such transaction
being herein called the "Merger" and the Company, Newco and UniCapital being
hereinafter collectively referred to as the "Constituent Corporations"); and
WHEREAS, the parties hereto intend that the transactions contemplated
in this Agreement constitute part of a single transaction involving the
simultaneous consummation of a number of similar agreements between UniCapital
and certain other corporations and partnerships and the IPO and that such single
transaction (the "Unified Transaction") shall fall within the provisions of
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1
<PAGE> 8
1. THE MERGER
1.1 DELIVERY AND FILING OF CERTIFICATE OF MERGER. The Constituent
Corporations will cause a Certificate (or Articles) of Merger, in substantially
the form of Annex I attached hereto with such changes therein as may be required
by applicable state laws (the "Certificate of Merger"), to be executed and
delivered to the Secretary of State of the state of incorporation of Newco and
the Company on or before the Merger Effective Date.
1.2 MERGER EFFECTIVE DATE. The "Merger Effective Date" shall be the
date specified in Section 5.3. At the Merger Effective Date, the Certificate of
Merger shall either be filed for immediate effectiveness with the Secretary of
State of the applicable state of incorporation of Newco and the Company or
become effective if filed with such Secretary of State prior to such date. On
the Merger Effective Date upon the effectiveness of the Merger, Newco shall be
merged with and into the Company Newco, in accordance with the Certificate of
Merger, and the separate existence of Newco shall cease. The Company, as the
entity surviving the Merger, is hereinafter sometimes referred to as the
"Surviving Corporation." The Merger shall have the effects specified in the laws
of the state of incorporation of the Surviving Corporation.
1.3 CERTIFICATE OF INCORPORATION, BYLAWS, BOARD OF DIRECTORS AND
OFFICERS OF THE SURVIVING CORPORATION. Upon the effectiveness of the Merger:
(a) the Certificate of Incorporation of the Company, amended
as set forth in the Certificate of Merger, shall remain the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law;
(b) the Bylaws of the Company shall remain the Bylaws of the
Surviving Corporation and shall remain so until thereafter duly amended;
(c) in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation and each of its Subsidiaries, the Surviving
Corporation (and each of its Subsidiaries) shall have a Board of Directors
consisting of one member, who shall be Robert New commencing upon the
effectiveness of the Merger and who shall hold office subject to the laws of the
state of incorporation and the Certificate of Incorporation and Bylaws of the
Surviving Corporation (and each of its Subsidiaries); and
(d) the officers of the Company (and each of its Subsidiaries)
immediately prior to the Merger Effective Date shall continue as the officers of
the Surviving Corporation (and each of its Subsidiaries) in the same capacity or
capacities, each of such officers to serve, subject to the provisions of the
Certificate of Incorporation and Bylaws of the Surviving Corporation (and each
of its Subsidiaries), until each such officer's successor is elected and
qualified; provided, that the Chairman of the Board (if any), the Treasurer and
the Secretary of the Resulting Company (and each of its Subsidiaries) shall not
succeed to the
2
<PAGE> 9
corresponding offices of the Surviving Corporation (and each of its
Subsidiaries), but instead (i) the sole director of the Surviving Corporation
(and each of its Subsidiaries) shall be the Chairman of the Board of the
Surviving Corporation (and each of its Subsidiaries), (ii) the Treasurer of
Newco shall be the Treasurer of the Surviving Corporation (and each of its
Subsidiaries) and (iii) the Secretary of Newco shall be the Secretary of the
Surviving Corporation (and each of its Subsidiaries).
2. MERGER CONSIDERATION
2.1 CONVERSION OF CAPITAL STOCK; MERGER CONSIDERATION.
(a) Upon the effectiveness of the Merger, all of the shares of
capital stock of the Resulting Company issued and outstanding immediately prior
to the effectiveness of the Merger ("Company Stock") shall, by virtue of the
Merger and without any action on the part of the holder thereof but subject to
the effectiveness of the Merger, automatically be converted into the right to
receive, without interest,
(i) an aggregate of $36,753,000 in cash,
(ii) an aggregate of 1,934,368 shares of common
stock, par value $.001 per share, of UniCapital ("UniCapital Stock") (the
consideration referred to in clauses (i) and (ii), all of which is to be
distributed to the Stockholders on the Merger Effective Date in the percentages
set forth on Annex II, subject to Article 4 hereof, is referred to in this
Agreement as the "Effective Date Consideration"); provided, however, in the
event that the aggregate value (based on the IPO price of the UniCapital Stock)
of the 1,934,368 shares of UniCapital Stock is less than $29,015,520, then the
Company shall issue additional shares to the Stockholders so that the aggregate
value of the shares of UniCapital Stock equals $29,015,520 (with appropriate
adjustment to the cash and stock components of the Effective Date Consideration
so as to eliminate fractional shares), and
(iii) the Earn-Out Consideration as described in
Section 2.5, to be distributed to the Stockholders within five business days
after each date of determination of a portion of the Earn-Out Consideration with
respect to a given calendar year (if any) in the percentages set forth on Annex
II.
(b) Upon the effectiveness of the Merger, each share of
capital stock of Newco issued and outstanding immediately prior to the
effectiveness of the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, automatically be converted into one
fully paid and non-assessable share of common stock of the Surviving
Corporation, all of which converted common stock shall constitute all of the
outstanding shares of capital stock of the Surviving Corporation immediately
after the effectiveness of the Merger.
3
<PAGE> 10
(c) The Effective Date Consideration and the Earn-Out
Consideration are referred to together in this Agreement as the "Merger
Consideration."
2.2 EXCHANGE PROCEDURES. On the Merger Effective Date, upon surrender
to UniCapital of certificates representing all of the outstanding shares of
Company Stock ("Certificates"), each Stockholder shall, subject to Article 4, be
entitled to receive, in exchange therefor, such Stockholder's pro rata share of
the cash portion of the Effective Date Consideration, calculated in accordance
with Annex II, and certificate representing that number of whole shares of
UniCapital Stock which such holder has the right to receive in respect of the
Certificates surrendered, calculated in accordance with Annex II, and each
Certificate so surrendered shall forthwith be canceled. On the Merger Effective
Date or as promptly thereafter as is practicable, and subject to and in
accordance with the provisions of Article 4, UniCapital shall cause to be
distributed to the Indemnity Escrow Agent (as defined in Article 4) a
certificate or certificates representing the Escrow Shares (as defined in
Article 4), which shall be registered in the name of the Indemnity Escrow Agent
as nominee for the Stockholders and shall be held in accordance with the
provisions of Article 4 and the Indemnity Escrow Agreement referred to therein.
2.3 NO FRACTIONAL SHARES. Notwithstanding any other provision of this
Article 2, no fractional shares of UniCapital Stock will be issued and any
holder of Company Stock entitled hereunder to receive a fractional share of
UniCapital Stock but for this Section 2.3 will be entitled hereunder to receive
no such fractional share but a cash payment in lieu thereof in an amount equal
to such fraction multiplied by $19.00.
2.4 ALLOCATION OF MERGER CONSIDERATION. The parties agree that they
will not take a position on any income tax return, before any governmental
agency charged with the collection of any income tax, or in any judicial
proceeding that is in any way inconsistent with the allocation (if any) of the
Merger Consideration among the Company and its Subsidiaries made by UniCapital
following the Closing.
2.5 EARN-OUT CONSIDERATION.
(a) If the consolidated earnings before taxes (the "EBT") of
the Company for the twelve months ending December 31, 1998, increased by amounts
in respect of those items set forth on Schedule 2.5 that affected net income
during the period beginning on January 1, 1998 and ending on the Closing Date,
and decreased by the amount of UniCapital corporate overhead allocated to the
Company for the period beginning on the Closing Date and ending on December 31,
1998 (the "Adjusted 1998 EBT"), exceeds the consolidated EBT of the Company for
the twelve months ending December 31, 1997 inclusive of the add-backs set forth
on Schedule 2.5 (the "Adjusted 1997 EBT"), then the Stockholders shall be
entitled to receive one-half of the difference between the Adjusted 1998 EBT and
the Adjusted 1997 EBT.
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(b) If the consolidated EBT of the Company for the year ending
December 31, 1999, adjusted for the amount of UniCapital corporate overhead
allocated to the Company (the "Adjusted 1999 EBT", and together with Adjusted
1997 EBT and Adjusted 1998 EBT, the "Company EBT"), exceeds the greater of
Adjusted 1998 EBT and Adjusted 1997 EBT, then the Stockholders shall be entitled
to receive one-half of the difference between (i) the Adjusted 1999 EBT and (ii)
the greater of the Adjusted 1998 and the Adjusted 1997 EBT.
(c) The EBT of the Company for the years ending December 31,
1998 and December 31, 1999 shall be computed using generally accepted accounting
principles and practices as applied in the audited financial statements of the
Company included in the Registration Statement. The allocation of UniCapital
overhead shall be made on a pro rata basis applied consistently among UniCapital
subsidiaries. To the extent gain-on-sale treatment was accorded any Lease,
whether in the add-backs set forth on Schedule 2.5 or in any year, income from
the payment stream on such Lease shall not be included in the EBT of the Company
for any subsequent year.
(d) The amounts (if any) that the Stockholders become entitled
to receive pursuant to Sections 2.5(a) and/or 2.5(b) are referred to herein as
the "Earn-Out Consideration." The Earn-Out Consideration shall be paid one-half
in cash and one-half in shares of UniCapital Stock, valued at the average of the
closing prices per share of UniCapital Stock for the 20 trading days preceding
December 31 of the year to which the portion of Earn-Out Consideration in
question applies. UniCapital shall issue certificates for such shares of
UniCapital Stock to a Stockholder in such denominations as reasonably requested
by such Stockholder without changing the allocation of shares issued to
Stockholders (or as may be otherwise provided in Section 11.6 hereof).
(e) Company EBT shall be determined within forty-five days
following December 31 of such year.
(f) Notwithstanding anything in this Section 2.5 to the
contrary, if the Stockholders dispute the determination of Company EBT, then the
Stockholders' Representative shall notify UniCapital in writing of such dispute
and specify the amount thereof within 20 business days after notification of the
determination of Company EBT. If UniCapital and the Stockholders' Representative
cannot resolve any such dispute which would affect the Earn-Out Consideration,
then such dispute shall be resolved by an Independent Accounting Firm (as
defined in Section 3.2). The Independent Accounting Firm shall be directed to
consider only those agreements, contracts, commitments or other documents (or
summaries thereof) that were either (i) delivered or made available to Price
Waterhouse LLP in connection with the transactions contemplated hereby, or (ii)
reviewed by Price Waterhouse LLP during the course of determining Company EBT.
The determination of the Independent Accounting Firm shall be made as promptly
as practicable and shall be final and binding upon the parties, absent manifest
error which error may only be corrected by such Independent Accounting Firm. The
costs of the Independent Accounting Firm shall be borne by the party (either
UniCapital or the Stockholders
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as a group) whose determination of Company EBT was further from the
determination of the Independent Accounting Firm. Pending resolution of any such
dispute by the Independent Accounting Firm, only the amount of the Earn-Out
Consideration as determined by Price Waterhouse LLP shall be paid by UniCapital.
Once Company EBT is finally determined, the Earn-Out Consideration attendant
thereto not previously paid, if any, shall be paid in accordance with this
Section 2.5; provided that in the event the Stockholders' determination of EBT
was closer to the determination of the Independent Accounting Firm than
UniCapital's determination of EBT, the Stockholders shall receive such Earn-Out
Consideration plus interest which shall accrue at the rate of 10% per annum on
any such Earn-Out Consideration that is resolved in the Stockholders favor from
the date the Earn-Out Consideration was first payable until the date on which
the Earn-Out Consideration is received by the Stockholders.
(g) Any Earn-Out Consideration paid by UniCapital shall be
treated as additional consideration paid by UniCapital for the shares of Company
Stock.
3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS' REPRESENTATIVE
3.1 COMPUTATION. As soon as practicable, but in any event within 30
days after the Closing, UniCapital shall engage Price Waterhouse LLP to prepare,
in accordance with generally accepted accounting principles ("GAAP") and
consistent with previous practice, a balance sheet of the Company (the "Closing
Date Balance Sheets") as of the end of business on the day prior to the Closing
Date (as defined in Section 5). If the aggregate stockholders' equity of the
Company as shown on the Closing Date Balance Sheets is less than the aggregate
stockholders' equity as shown on the consolidated balance sheets of the Company
as at December 31, 1997 as reviewed by Price Waterhouse LLP, then, subject to
Section 3.2, commencing 10 business days after delivery of the Closing Date
Balance Sheets to UniCapital, the aggregate Merger Consideration shall be
adjusted downward dollar-for-dollar in the amount of any such deficiency (the
"Net Worth Deficiency"). Upon determination of the Net Worth Deficiency,
UniCapital shall recover from the Indemnity Escrow pursuant to Article 4 that
portion of the Net Worth Deficiency which does not exceed one-half of the
balance of the Indemnity Escrow. For any amount by which any Net Worth
Deficiency exceeds one-half of the initial balance of the Escrow Property, such
portion of the Net Worth Deficiency shall be paid by the Stockholders not later
than the 25th business day after the delivery of the Closing Date Balance Sheet
(or if applicable, not later than the fifth business day after the final
determination of any Disputed Amount in accordance with Section 3.2). At its
sole and exclusive option, and at any time after such 25th business day (or if
applicable, not later than the fifth business day after the final determination
of any Disputed Amount in accordance with Section 3.2), UniCapital shall be
entitled to recover from the Escrow Property pursuant to Article 4 all or any
portion of the amount of the Net Worth Deficiency not paid by the Stockholders
as required by this Article 3.
3.2 DISPUTES. Notwithstanding anything in this Article 3 to the
contrary, if there is any Net Worth Deficiency and the Stockholders dispute any
item contained on the Closing Date
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Balance Sheets, then the Stockholders' Representative shall notify UniCapital in
writing of each disputed item (collectively, the "Disputed Amounts") and specify
the amount thereof in dispute within 10 business days after the delivery of the
Closing Date Balance Sheets to the Stockholders. If UniCapital and the
Stockholders' Representative cannot resolve any such dispute relating to the Net
Worth Deficiency, then such dispute shall be resolved by an independent
nationally recognized accounting firm which is reasonably acceptable to
UniCapital and the Stockholders' Representative (the "Independent Accounting
Firm"). The determination of the Independent Accounting Firm shall be made as
promptly as practical and shall be final and binding on the parties, absent
manifest error which error may only be corrected by such Independent Accounting
Firm. Any expenses relating to the engagement of the Independent Accounting Firm
shall be allocated between UniCapital and the Stockholders so that the
Stockholders' aggregate share of such costs shall bear the same proportion to
the total costs that the Disputed Amounts unsuccessfully contested by the
Stockholders' Representative (as finally determined by the Independent
Accounting Firm) bear to the total of the Disputed Amounts so submitted to the
Independent Accounting Firm. Pending resolution of any such dispute by the
Independent Accounting Firm, no such Disputed Amount shall be due to UniCapital.
Once any such Disputed Amount is finally determined to be due to UniCapital,
UniCapital may proceed to recover such amount in the manner set forth in
Section 3.1.
3.3 STOCKHOLDERS' REPRESENTATIVE. (a) Each Stockholder, by signing this
Agreement, designates Robert VanHellemont (or, in the event that Robert
VanHellemont is unable or unwilling to serve, Gary Miller) to be such
Stockholders' representative for purposes of this Agreement (the "Stockholders'
Representative"). The Stockholders shall be bound by any and all actions taken
by the Stockholders' Representative on their behalf.
(b) UniCapital and Newco shall be entitled to rely upon any
communication or writing given or executed by the Stockholders' Representative.
All communications or writings to be sent to Stockholders pursuant to this
Agreement may be addressed to the Stockholders' Representative and any
communication or writing so sent shall be deemed notice to all of the
Stockholders hereunder. The Stockholders hereby consent and agree that the
Stockholders' Representative is authorized to accept deliveries, including any
notice, on behalf of the Stockholders pursuant hereto.
(c) The Stockholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Stockholder, with full
power in his or her name and on his or her behalf to act according to the terms
of this Agreement in the absolute discretion of the Stockholders'
Representative, and in general to do all things and to perform all acts
including, without limitation, executing and delivering all agreements,
certificates, receipts, instructions and other instruments contemplated by or
deemed advisable in connection with Article 12 of this Agreement. This power of
attorney and all authority hereby conferred is granted subject to and coupled
with the interest of such Stockholder and the other Stockholders hereunder and
in consideration of the mutual covenants and agreements made herein, and shall
be irrevocable and
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shall not be terminated by any act of any Stockholder, by operation of law,
whether by such Stockholder's death or any other event.
(d) Notwithstanding the foregoing, the Stockholder
Representative shall inform each Stockholder of all notices received, and all
actions, decisions, notices and exercises of any rights, power or authority
proposed to be done, given or taken by such Stockholder Representative, and
shall act as directed by the Stockholders holding a majority interest in the
Escrow Property (as defined in Section 4.1(b)).
4. INDEMNITY ESCROW
4.1 CREATION OF ESCROW.
(a) At the Closing, as collateral security for the payment of
any indemnification obligations of the Stockholders pursuant to Sections 12.1
and 12.2 hereof and for the payment of amounts due pursuant to Article 3 hereof,
the following shall be delivered to UniCapital's Transfer Agent as indemnity
escrow agent (the "Indemnity Escrow Agent"):
(i) ten percent (10%) of the number of shares of
UniCapital Stock issuable to each Stockholder as part of the Effective Date
Consideration in accordance with Annex II, rounded up to the nearest whole share
(the "Escrow Shares"); and
(ii) ten percent (10%) of the cash portion of the
Effective Date Consideration payable to each Stockholder in accordance with
Annex II, rounded up to the nearest whole cent (the "Escrow Cash").
(b) The Escrow Shares and the Escrow Cash are referred to
together as the "Escrow Property." In addition, the Escrow Property shall
include all cash and non-cash dividends and other property at any time received
or otherwise distributed in respect of or in exchange for any or all of the
Escrow Property, all securities hereafter issued in substitution for any of the
foregoing, all certificates and instruments representing or evidencing such
securities, all cash and non-cash proceeds of all of the foregoing property and
except as provided in Section 4.3 all rights, titles, interests, privileges and
preferences appertaining or incident to the foregoing property.
4.2 DURATION AND TERMS. The Escrow Property shall be held and disbursed
by the Indemnity Escrow Agent in accordance with the terms of an Indemnity
Escrow Agreement substantially in the form attached hereto as Annex III. The
Indemnity Escrow Agent shall hold the Escrow Property pursuant to the Indemnity
Escrow Agreement until the later of: (a) the first anniversary of the Merger
Effective Date; and (b) the resolution of any claim for indemnification or
payment that is pending on the first anniversary of the Merger Effective Date,
but only to the extent of the amount of such pending claim.
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4.3 VOTING AND INVESTMENT. The Stockholders shall be entitled to
exercise all voting powers incident to the Escrow Shares held by the Indemnity
Escrow Agent as their nominee, but shall not be entitled to exercise any
investment or dispositive powers over such Escrow Shares. The Escrow Cash shall
be invested from time to time by the Indemnity Escrow Agent as provided in the
Indemnity Escrow Agreement.
5. CLOSING; MERGER EFFECTIVE DATE
5.1 CLOSING. Within two business days following the date on which the
underwriting agreement relating to the offer and sale of shares of UniCapital
Stock in the IPO (the "Underwriting Agreement") shall have been executed, the
parties shall take all actions necessary to effect the Merger (other than the
filing with the appropriate state authorities of the Certificate of Merger,
which shall be filed and become effective on the Merger Effective Date) and to
effect the conversion and delivery of shares referred to in Article 2 hereof
(hereinafter referred to as the "Closing"); provided, that such actions shall
not include the actual completion of the Merger or the actual conversion and
delivery of the shares referred to in Article 2 hereof, which actions shall only
be taken on the Merger Effective Date as herein provided.
5.2 CLOSING DATE; LOCATION. The Closing shall take place at the offices
of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178. The date on
which the Closing shall occur shall be referred to as the "Closing Date."
5.3 EFFECTIVENESS OF MERGER. Concurrently with the consummation of the
sale of the shares of UniCapital Stock pursuant to the Underwriting Agreement,
the Merger shall become effective and all transactions contemplated by this
Agreement, including the conversion and delivery of shares and the delivery of a
check or checks in an amount equal to the cash which the Stockholders shall be
entitled to receive pursuant to the Merger referred to in Article 2 hereof,
shall occur and be deemed to be completed. The date on which the Merger is
effected shall be referred to as the "Merger Effective Date."
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
For purposes of this Article 6, each reference to a "Company" shall be
deemed to refer as well to each and all of its Subsidiaries unless the context
otherwise specifically requires. As of the date hereof and as of each of the
Closing Date and the Merger Effective Date, each Stockholder who is a
stockholder of the Company, jointly and severally, represents and warrants to
UniCapital and the Surviving Corporation, as follows:
6.1 CORPORATE EXISTENCE. The Company, and each subsidiary of the
Company listed on Schedule 6.8 (each, a "Subsidiary"), is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. The Company and each
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Subsidiary is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the conduct of its business requires it
to be so qualified, all of which jurisdictions are listed on Schedule 6.1.
6.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
Company has the corporate power, authority and legal right to execute, deliver
and perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement by the Company have been duly authorized by the
Board of Directors and Stockholders of the Company and no further corporate
action on the part of the Company or its Stockholders is necessary to authorize
this Agreement and the performance of the transactions contemplated hereby. This
Agreement has been, and the other agreements, documents and instruments required
to be delivered by the Company in accordance with the provisions hereof (the
"Company Documents") will be, duly executed and delivered on behalf of the
Company by duly authorized officers of the Company, and this Agreement
constitutes, and the Company Documents when executed and delivered will
constitute, the legal, valid and binding obligations of the Company, enforceable
against it in accordance with their respective terms.
6.3 AUTHORITY; OWNERSHIP. Each Stockholder has the full legal right,
power and authority to enter into this Agreement. Upon the date of this
Agreement and immediately prior to the Closing Date, each Stockholder owns and
will own beneficially and of record all of the shares of capital stock of the
Company identified on Annex II as being owned by such Stockholder. The
conversion of Company Stock into UniCapital Stock and cash pursuant to the
provisions of this Agreement will transfer to UniCapital valid title in the
shares of Company Stock owned by such Stockholder, free and clear of all liens,
security interests, pledges, charges, voting trusts, equities, restrictions,
encumbrances and claims of every kind. The Company is the sole stockholder of
each Subsidiary.
6.4 VALIDITY OF CONTEMPLATED TRANSACTIONS. Except as provided on
Schedule 6.4, the execution, delivery and performance of this Agreement by the
Company and each Stockholder does not and will not violate, conflict with or
result in the breach of any term, condition or provision of, or require the
consent of any other person under (a) any existing law, ordinance, or
governmental rule or regulation to which the Company or any Stockholder or
Subsidiary is subject, (b) any judgment, order, writ, injunction, decree or
award of any Governmental Entity which is applicable to the Company or any
Stockholder or Subsidiary, (c) the charter documents of the Company or any
Subsidiary or any securities issued by the Company or any Subsidiary, or (d) any
mortgage, indenture, agreement, contract, commitment, lease, plan,
Authorization, or other instrument, document or understanding, oral or written,
to which the Company or any Stockholder or Subsidiary is a party, by which the
Company or any Stockholder or Subsidiary may have rights or by which any of the
properties or assets of the Company or any Subsidiary may be bound or affected,
or give any party with rights thereunder the right to terminate, modify,
accelerate or otherwise change the existing rights or obligations of the Company
or any Subsidiary thereunder. Except for filing the Certificate of Merger with
the applicable Secretary of States and filings under the Hart-Scott-Rodino
Antitrust Improvements
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Act of 1976 and except as aforesaid, no authorization, approval or consent of,
and no registration or filing with, any Governmental Entity is required in
connection with the execution, delivery or performance of this Agreement by the
Company or any Stockholder.
6.5 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of the shares shown on Schedule 6.5, of which only the
shares shown on such Schedule 6.5 to be issued and outstanding are issued and
outstanding. All of the issued and outstanding shares of the capital stock of
the Company are owned by the Stockholders as set forth on Schedule 6.5, and are
free and clear of all liens, security interests, pledges, charges, voting
trusts, restrictions, encumbrances and claims of every kind (other than those
liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims that will be removed before Closing). Schedule 6.5
attached hereto sets forth the number and class of the authorized capital stock
of each Company Subsidiary and the number of shares of each Company Subsidiary
which are issued and outstanding, all of which shares are owned by the Company
indicated as owning such shares on Schedule 6.5, free and clear of all liens,
security interests, pledges, charges, voting trusts, equities, restrictions,
encumbrances and claims of every kind. All of the issued and outstanding shares
of Company Stock to be outstanding on the Merger Effective Date will have been
duly authorized and validly issued, fully paid and nonassessable, will be owned
of record and beneficially by the Stockholders and in the amounts set forth in
Annex II, and will have been offered, issued, sold and delivered by the Company
in compliance with all applicable state and federal laws concerning the
offering, sale or issuance of securities. None of such shares will have been,
and none of the shares from which they will have derived were, issued in
violation of the preemptive rights of any past or present stockholder, whether
contractual or statutory.
6.6 TRANSACTIONS IN CAPITAL STOCK. Neither the Company nor any
Subsidiary has acquired any treasury stock since December 31, 1995. No option,
warrant, call, conversion right or commitment of any kind exists which obligates
the Company or any Subsidiary to issue any of its authorized but unissued
capital stock, except as set forth on Schedule 6.6. Neither the Company nor any
Subsidiary has an obligation (contingent or otherwise) to purchase, redeem or
otherwise acquire any of its equity securities or any interests therein or to
pay any dividend or make any distribution in respect thereof.
6.7 NO BONUS SHARES. None of the shares of capital stock of the Company
was, and none of the shares of Company Stock will be, issued pursuant to awards,
grants or bonuses, whether of stock or of options or other rights.
6.8 SUBSIDIARIES. Schedule 6.8 lists the name of each Subsidiary.
Except as set forth in Schedule 6.8, neither the Company nor any Subsidiary
currently owns, of record or beneficially, or controls, directly or indirectly,
any capital stock, any securities convertible into capital stock or any other
equity interest in any corporation, association or other business entity. Except
as set forth on Schedule 6.8, neither the Company nor any Subsidiary is,
directly or indirectly, a participant in any joint venture, partnership or other
noncorporate entity.
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6.9 PREDECESSOR STATUS; ETC. Schedule 6.9 lists all names of all
predecessor companies of the Company and each Subsidiary, including the names of
all entities from whom the Company and each Subsidiary previously acquired
assets representing all or substantially all of the assets of that entity.
Except as set forth on Schedule 6.9, neither the Company nor any Subsidiary has
ever been a subsidiary or division of another corporation (other than the
Company) or been a part of an acquisition which was later rescinded.
6.10 SPIN-OFFS BY COMPANY. Since December 31, 1995, there has not been
any sale or spin-off of significant assets of the Company or any Subsidiary
other than in the ordinary course of business.
6.11 NO THIRD PARTY OPTIONS. There are no existing agreements, options,
commitments or rights with, of or to any person to acquire any properties,
assets or rights of the Company or any Subsidiary or any interest therein.
6.12 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.12 are copies
of the following financial statements of the Company:
(a) the consolidated balance sheets of the Company (the
"Audited Balance Sheet") at September 30, 1997 (the "Audited Balance Sheet
Date") and at September 30, 1995 and September 30, 1996, and the related
consolidated statements of income, cash flows and changes in stockholders'
equity for the fiscal years then ended, certified by Price Waterhouse LLP, the
Company's independent public accountants, together with the report of such
independent public accountants thereon (the "Audited Financial Statements"); and
(b) the unaudited consolidated balance sheet of the Company at
December 31, 1997 (the "Interim Balance Sheet Date") and the related
consolidated statement of income and cash flows for the interim period then
ended (the "Unaudited Financial Statements," and together with the Audited
Financial Statements, the "Financial Statements").
All of the Financial Statements have been prepared in accordance with GAAP
consistently applied throughout the periods involved. All of the balance sheets
included in the Financial Statements, including the related notes, fairly
present the financial position, assets and liabilities (whether accrued,
absolute, contingent or otherwise) of the Company on a consolidated basis at the
dates indicated and such statements of income, cash flows and changes in
stockholders' equity fairly present the results of operations, cash flows and
changes in stockholders' equity of the Company on a consolidated basis for the
periods indicated. The Unaudited Financial Statements contain all adjustments,
which are solely of a normal recurring nature, necessary to present fairly the
financial position for the period then ended.
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6.13 LIABILITIES AND OBLIGATIONS.
(a) Attached hereto as Schedule 6.13 is an accurate list, as
of a date not more than two days prior to the date of this Agreement, of: (i)
all liabilities of the Company and each of its Subsidiaries which are reflected
on the audited consolidated balance sheet as of the Audited Balance Sheet Date
included in the Audited Financial Statements; (ii) all liabilities incurred
thereafter other than in the ordinary course of business; (iii) all material
liabilities incurred thereafter in the ordinary course of business; and (iv) all
liabilities (A) incurred as of the Audited Balance Sheet Date that are not
reflected on the Audited Balance Sheet and (B) all liabilities incurred
thereafter that would not have been so reflected had such liabilities been
incurred as of the Audited Balance Sheet Date. Each of the foregoing liabilities
that has not heretofore been paid or discharged is so noted on Schedule 6.13.
For purposes of this Agreement, "liabilities" means liabilities of any kind,
character or description, whether accrued, absolute, secured or unsecured,
contingent or otherwise.
(b) For each such liability for which the amount is not fixed
or is contested, Schedule 6.13 shall include a summary description of the
liability, together with copies of all relevant non-privileged documentation
relating thereto, detail of all amounts claimed and any other action or relief
sought, the names of the claimant and all other parties to the claim, suit or
proceeding, the name of each court or agency before which such claim, suit or
proceeding is pending, the date such claim, suit or proceeding was instituted,
and a best estimate of the maximum amount, if any, which is likely to become
payable with respect to each such liability. If no estimate is provided, the
best estimate shall for purposes of this Agreement be deemed to be zero. On the
Closing Date, the Company shall deliver, and shall cause its accountants,
outside counsel and other representatives or agents to deliver, copies of all
privileged documents related to liabilities as listed on Schedule 6.13.
(c) All of the liabilities reflected on the Audited Balance
Sheet included in the Audited Financial Statements arose only out of or were
incurred only in connection with the conduct of the respective businesses of the
Company and the Subsidiaries. Except as set forth on Schedule 6.13 and except
for liabilities not required to be set forth thereon pursuant to Section
6.13(a), the Company and the Subsidiaries have no liabilities or obligations
with respect to their respective businesses, whether direct or indirect, matured
or unmatured, absolute contingent or otherwise, and there is no condition,
situation or set of circumstances which would reasonably be expected to result
in any such liability.
6.14 ACCOUNTS AND NOTES RECEIVABLE. Attached hereto as Schedule 6.14 is
a complete and accurate list, as of a date not more than two days prior to the
date of this Agreement, of the accounts and notes receivable of the Company and
each Subsidiary (including, without limitation, receivables from and advances to
employees and Stockholders) other than those arising out of Leases
(collectively, the "Accounts Receivable"). Schedule 6.14 includes an aging of
all Accounts Receivable showing amounts due in 30-day aging categories. On the
Closing Date, the Stockholders will deliver to UniCapital a complete and
accurate list, as of a date not more than two days prior to the Closing Date, of
the Accounts Receivable. Except as set forth on Schedule 6.14(b), all Accounts
Receivable represent valid obligations arising from bona fide
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business transactions in the ordinary course of business consistent with past
practice. The Accounts Receivable are, and as of the Closing Date and the Merger
Effective Date will be, collectible net of any respective reserves shown on each
Company's books and records (which reserves are adequate and calculated
consistent with past practice). Subject in the case of Accounts Receivable
reflected on the Company's balance sheet to such reserves reflected on such
balance sheet, 80% of the Accounts Receivable will be collected in full within
ninety (90) days, and 95% will be collected in full within 120 days, after the
day on which it first became due and payable; provided, however, that this shall
not limit the Stockholders' indemnification obligations under this Agreement
with respect to any Accounts Receivable not collected thereafter; provided,
further, to the extent that such indemnification obligations have been satisfied
with respect to such uncollected Accounts Receivable and such Accounts
Receivable are collected thereafter, the Stockholders shall be entitled to the
benefit of such Accounts Receivable. There is no contest, claim, counterclaim,
defense or right of set-off, other than rebates and returns in the ordinary
course of business, under any contract with any obligor of any Account
Receivable relating to the amount or validity of such Account Receivable. The
allowance for collection losses on the audited consolidated balance sheet as of
the Audited Balance Sheet Date has been determined in accordance with GAAP
consistent with past practice.
6.15 PERMITS. Each material Permit, together with the name of the
Governmental Entity issuing such Permit is set forth on Schedule 6.15. Such
Permits are valid and in full force and effect and none of such Permits will be
terminated or impaired or become terminable as a result of the transactions
contemplated by this Agreement. Upon consummation of such transactions, each
Surviving Corporation will have all of its respective Company's right, title and
interest in the Permits.
6.16 REAL AND PERSONAL PROPERTY. Attached hereto as Schedule 6.16 is an
accurate list, including substantially complete descriptions as of the Interim
Balance Sheet Date, of all the real and personal property (which in the case of
personal property had an original cost in excess of $25,000) owned or leased by
the Company (including its Subsidiaries) where the Company or its Subsidiary is
a lessee or sublessee, including an indication as to which assets were formerly
owned by any Stockholder or affiliate (which term, as used herein, shall have
the meaning ascribed thereto in Rule 144(a)(1) promulgated under the Securities
Act of 1933, as amended (the "Securities Act")) of the Company or any Subsidiary
and the Company has delivered true and correct copies of leases for equipment
and properties on which are situated buildings, warehouses and other structures
used in the operation of the business of the Company (including its
Subsidiaries). Except as set forth on Schedule 6.16, all of the Company's and
Subsidiaries' buildings, leasehold improvements, structures, facilities,
equipment and other material items of tangible property and assets are in good
operating condition and repair, subject to normal wear and maintenance, are
usable in the regular and ordinary course of business and conform to all
applicable laws, ordinances, codes, rules and regulations, and Authorizations
relating to their construction, use and operation. All leases set forth on
Schedule 6.16 have been duly authorized, executed and delivered and constitute
the legal, valid and binding obligations of the Company (or its Subsidiaries)
and, to the knowledge of the Stockholders, (i) no other party to any such lease
is
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in default thereunder and (ii) such leases constitute the legal, valid and
binding obligations of such other parties. All fixed assets used by the Company
(including its Subsidiaries) in the operation of its business are either owned
by the Company (or its Subsidiaries) or leased under an agreement set forth on
Schedule 6.16 to the extent required to be set forth on Schedule 6.16. The
Company and the Stockholders have heretofore delivered to UniCapital copies of
all title reports and title insurance policies received or held by the Company
(including its Subsidiaries). The Company and the Stockholders have indicated on
Schedule 6.16 a summary description of all plans or projects involving the
opening of new operations, expansion of any existing operations or the
acquisition of any real property or existing business to which management of the
Company (or its Subsidiaries) has devoted any significant effort or expenditure
in the two-year period prior to the date of this Agreement which, if pursued by
the Company (or its Subsidiaries) would require additional expenditures of
significant efforts or capital.
6.17 CONTRACTS AND COMMITMENTS. Schedule 6.17 sets forth an accurate,
correct and complete list of all agreements, contracts, commitments,
arrangements and understandings, written or oral, including all amendments and
supplements thereto, of the Company and each Subsidiary other than Leases (the
"Contracts"), to which the Company or any Subsidiary is a party or is bound, or
by which any of their respective assets are bound, and which involve any:
(a) agreement, contract, commitment, arrangement or
understanding with any present or former employee or consultant or for the
employment of any person, including any consultant;
(b) agreement, contract, commitment, arrangement or
understanding for the future purchase of, or payment for, supplies or products,
or for the performance of services by a third party involving in any one case
$25,000 or more;
(c) agreement, contract, commitment, arrangement or
understanding to sell or supply products or to perform services involving in any
one case $25,000 or more;
(d) agreement, contract, commitment, arrangement or
understanding containing minimum requirements or "take or pay" provisions;
(e) agreement, contract, commitment, arrangement or
understanding not otherwise listed on Schedule 6.17 and continuing over a period
of more than six months from the date hereof and exceeding $25,000 in value;
(f) distribution, dealer, representative or sales agency
agreement, contract, commitment, arrangement or understanding;
(g) agreement, contract, commitment, arrangement or
understanding containing a provision to indemnify any person or entity or assume
any tax, environmental or other liability;
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(h) agreement, contract, commitment, arrangement or
understanding with federal, state, local, regulatory or other governmental
entities;
(i) note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement or other contract or commitment for the
borrowing or lending of money or agreement or arrangement for a line of credit
or guarantee, pledge or undertaking of the indebtedness of any other person;
(j) agreement, contract, commitment, arrangement or
understanding for any charitable or political contribution;
(k) agreement, contract, commitment, arrangement or
understanding for any capital expenditure or leasehold improvement in excess of
$25,000;
(l) agreement, contract, commitment, arrangement or
understanding limiting or restraining the Company or any Subsidiary or any
successor thereto, or to the knowledge of the Company and each Stockholder, any
employee of the Company, any Subsidiary or any successor thereto, from engaging
or competing in any manner or in any business;
(m) license, franchise, distributorship or other agreement
which relates in whole or in part to any software (other than off-the-shelf
software costing less than $1,000 for any single license ("Off-The-Shelf
Software")), patent, trademark, trade name, service mark or copyright or to any
ideas, technical assistance or other know-how of or used by the Company or any
Subsidiary;
(n) agreement, contract, commitment, arrangement or
understanding to which the Company or any Subsidiary, on the one hand, and any
affiliate, officer, director or stockholder of the Company or Subsidiary, on the
other hand, are parties; or
(o) material agreement, contract, commitment, arrangement or
understanding not made in the ordinary course of business.
Each of the Contracts listed on Schedule 6.17 and each license or contract
related to Off-The- Shelf Software, is valid and enforceable in accordance with
its terms; the Company and each Subsidiary is, and to the knowledge of the
Company and each Stockholder, all other parties thereto are, in compliance with
the provisions thereof. Neither the Company nor any Subsidiary is, and to the
knowledge of the Company and each Stockholder, no other party thereto is, in
default in the performance, observance or fulfillment of any material
obligation, covenant or condition contained therein; and no event has occurred
which with or without the giving of notice or lapse of time, or both, would
constitute a default thereunder. Except as set forth on Schedule 6.17, none of
the rights of the Company or any Subsidiary under any Contract will be impaired
by the consummation of the transactions contemplated hereby, and all such rights
will be enforceable by the applicable Surviving Corporation after the Merger
Effective Date without
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the consent or agreement of any other party. The Company has delivered accurate
and complete copies of each Contract to UniCapital. Except as set forth on
Schedule 6.17, no Contract obligates any party to obtain any consent in
connection with the transactions contemplated hereby.
6.18 GOVERNMENT CONTRACTS. Except as set forth on Schedule 6.18,
neither the Company nor any Subsidiary is now or has ever been a party to any
contract with any Governmental Entity subject to price redetermination or
renegotiation.
6.19 TITLE TO REAL PROPERTY. The Company and each Subsidiary has good
and insurable title to all real property owned and used in its business, subject
to no mortgage, pledge, lien, conditional sales agreement, encumbrance or
charge, except for:
(a) liens, if any, reflected on Schedules 6.13 and 6.16 as
securing specified liabilities (with respect to which no material default
exists);
(b) liens for current taxes and assessments not yet due or in
default;
(c) easements for utilities serving the property only; and
(d) easements, covenants and restrictions and other exceptions
to title shown of record in the offices of the county clerks in which the
properties, assets and leasehold estates are located which do not adversely
affect the current or the currently contemplated use of such properties by the
Company or its Subsidiaries.
6.20 INSURANCE. The assets, properties and operations of the Company
and each Subsidiary are insured under various policies of general liability and
other forms of insurance, all of which are described in Schedule 6.20, which
discloses for each policy the risks insured against, coverage limits, deductible
amounts, all outstanding claims thereunder, and whether the terms of such policy
provide for retrospective premium adjustments. All such policies are in full
force and effect in accordance with their terms, no notice of cancellation has
been received, and there is no existing default or event which, with the giving
of notice or lapse of time or both, would constitute a default thereunder. Such
policies are in amounts which, in relation to the business and assets of the
Company and the Subsidiaries, are consistent with the normal or customary
industry practice and all premiums due to date have been paid in full. Neither
the Company nor any Subsidiary has been refused any insurance, nor has the
Company's or any Subsidiary's coverage been limited, by any insurance carrier to
which it has applied for insurance or with which it has carried insurance during
the past five years. Schedule 6.20 also contains a true and complete description
of all outstanding bonds and other surety arrangements issued or entered into in
connection with the business, assets and liabilities of the Company and its
Subsidiaries.
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6.21 EMPLOYEES. Schedule 6.21 contains the following with respect to
the Company and each Subsidiary:
(a) a list of all employees of the Company and each Subsidiary
(including name, title and position);
(b) each such employee's length of service; and
(c) the compensation (including terms of payment, bonuses,
commissions and deferred compensation, as well as any benefits) of each such
employee.
Except as disclosed on Schedule 6.21: (i) there have not been in the past five
years and, to the knowledge of the Company and the Stockholders, there are not
pending, any labor disputes, work stoppages, requests for representation,
pickets or work slow-downs due to labor disagreements; (ii) there are and have
been no unresolved violations of any Laws of any Governmental Entity respecting
the employment of any employees; (iii) there is no unfair labor practice, charge
or complaint pending, unresolved or, to the knowledge of the Company and the
Stockholders, threatened before the National Labor Relations Board or similar
body in any foreign country; (iv) there is no employment handbook, personnel
policy manual, or similar document that creates prospective employment rights or
obligations; (v) the employees of the Company and its Subsidiaries are not
covered by any collective bargaining agreement; (vi) the Company and each
Subsidiary has provided or will timely provide prior to Closing all notices
required by law to be given prior to Closing to all local, state, federal or
national labor, wage-payment, equal employment opportunity, unemployment
insurance and related agencies; (vii) the Company and each Subsidiary has paid
or properly accrued in the ordinary course of business all wages and
compensation due to employees, including all vacations or vacation pay, holidays
or holiday pay, sick days or sick pay, and bonuses; and (viii) the transactions
contemplated by this Agreement will not create liability under any Laws of any
Governmental Entity respecting reductions in force or the impact on employees on
plant closing or sales of businesses. All employees of the Company and its
Subsidiaries are legally able to work in the United States.
6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. Schedule 6.22 sets forth
a complete and accurate list of each Benefit Plan covering any present or former
officers, employees or directors of the Company or its Subsidiaries. "Benefit
Plan" means each "employee pension benefit plan" (as defined in Section 3(3) of
ERISA, hereinafter a "Pension Plan"), "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA, hereinafter a "Welfare Plan") and each other
plan or arrangement (written or oral) relating to deferred compensation, bonus,
performance compensation, stock purchase, stock option, stock appreciation,
severance, vacation, sick leave, holiday pay, fringe benefits, personnel policy,
reimbursement program, incentive, insurance, welfare or similar plan, program,
policy or arrangement, in each case maintained or contributed to, or required to
be maintained or contributed to, by the Company, its Subsidiaries or their
respective affiliates or any other person or entity that, together with the
Company or its Subsidiaries, is treated as a single employer
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<PAGE> 25
under Section 414(b), (c), (m) or (o) of the Code (each, together with the
Company or its Subsidiaries, a "Commonly Controlled Entity") for the benefit of
any present or former officer, employee or director. The Company and its
Subsidiaries have no intent or commitment to create any additional Benefit Plan
or amend any Benefit Plan so as to increase benefits thereunder. The Company and
its Subsidiaries have not created any Benefit Plan or declared or paid any bonus
compensation in contemplation of the transactions contemplated by this
Agreement. A current, accurate and complete copy of each Benefit Plan has been
made available to UniCapital. Except as disclosed on Schedule 6.22:
(a) each Benefit Plan is in substantial compliance with all
reporting, disclosure and other requirements of ERISA applicable to such Benefit
Plan;
(b) each Pension Plan which is intended to be qualified under
Section 401(a) of the Code, has been determined by the Internal Revenue Service
to be so qualified and, to the knowledge of the Company and the Stockholders, no
condition exists that would adversely affect any such determination;
(c) neither any Benefit Plan, nor the Company or any
Subsidiary, nor any Commonly Controlled Entity, nor any trustee or agent has
been or is presently engaged in any prohibited transactions as defined by
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
applicable which could subject the Company or any Subsidiary to the tax or
penalty imposed by Section 4975 of the Code or Section 502 of ERISA;
(d) there is no event or condition existing which could be
deemed a "reportable event" (within the meaning of Section 4043 of ERISA) with
respect to which the thirty-day notice requirement has not been waived; to the
knowledge of the Company and the Stockholders, no condition exists which could
subject the Company or any Subsidiary to a penalty under Section 4071 of ERISA;
(e) neither the Company or any Subsidiary nor any Commonly
Controlled Entity is or has ever been party to any "multi-employer plan," as
that term is defined in Section 3(37) of ERISA;
(f) true and correct copies of the most recent annual report
on Form 5500 and any attached schedules for each Benefit Plan (if any such
report was required by applicable law) and a true and correct copy of the most
recent determination letter issued by the Internal Revenue Service for each
Pension Plan have been provided to UniCapital;
(g) with respect to each Benefit Plan, there are no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
pending or, to the knowledge of the Company and the Stockholders, threatened
against any Benefit Plan, any Company or Subsidiary, any Commonly Controlled
Entity or any trustee or agent of any Benefit Plan; and
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(h) with respect to each Benefit Plan to which the Company,
any Subsidiary or any Commonly Controlled Entity is a party which constitutes a
group health plan subject to Section 4980B of the Code, each such Benefit Plan
substantially complies, and in each case has substantially complied, with all
applicable requirements of Section 4980B of the Code.
(i) Except as set forth in Schedule 6.22:
(i) there is no outstanding liability (except for
premiums due) under Title IV of ERISA with respect to any Pension Plan;
(ii) neither the Pension Benefit Guaranty Corporation
nor the Company or any Subsidiary nor any Commonly Controlled Entity has
instituted proceedings to terminate any Pension Plan and the Pension Benefit
Guaranty Corporation has not informed the Company or any Subsidiary of its
intent to institute proceedings to terminate any Pension Plan;
(iii) full payment has been made of all amounts which
the Company, its Subsidiaries or any Commonly Controlled Entity was required to
have paid as a contribution to the Pension Plans as of the last day of the most
recent fiscal year of each of the Pension Plans ended prior to the date of this
Agreement, and none of the Pension Plans has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of each
such Pension Plan ended prior to the date of this Agreement;
(iv) to the knowledge of the Company and the
Stockholders, the actuarial assumptions utilized, where appropriate, in
connection with determining the funding of each Pension Plan which is a defined
benefit pension plan (as set forth in the actuarial report for such Pension
Plan) are reasonable. Copies of the most recent actuarial reports have been
furnished to UniCapital. Based on such actuarial assumptions, as of the Audited
Balance Sheet Date, the fair market value of the assets or properties held under
each such Pension Plan exceeds the actuarially determined present value of all
accrued benefits of such Pension Plan (whether or not vested) determined on an
ongoing Pension Plan basis;
(v) each of the Benefit Plans is, and its
administration is and has been during the six-year period preceding the date of
this Agreement, in substantial compliance with, and neither the Company or any
Subsidiary has received any claim or notice that any such Benefit Plan is not in
compliance with, all applicable laws and orders and prohibited transaction
exemptions, including without limitation, to the extent applicable, the
requirements of ERISA;
(vi) neither Company or any Subsidiary and no
Commonly Controlled Entity is in default in performing any of its contractual
obligations under any of the Benefit Plans or any related trust agreement or
insurance contract;
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(vii) there are no material outstanding liabilities
of any Benefit Plan other than liabilities for benefits to be paid to
participants in the Benefit Plans and their beneficiaries in accordance with the
terms of the Benefit Plans;
(viii) each Benefit Plan may be amended or modified
by the Company, its Subsidiary or Commonly Controlled Entity (as applicable) at
any time without liability except under any defined pension benefit plan;
(ix) no Benefit Plan other than a Pension Plan,
retiree medical plan or severance plan provides benefits to any individual after
termination of employment;
(x) the consummation of the transactions contemplated
by this Agreement will not (in and of itself): (A) entitle any employee of the
Company or any Subsidiary to severance pay, unemployment compensation or any
other payment; (B) accelerate the time of payment or vesting, or increase the
amount of compensation due to any such employee; (C) result in any liability
under Title IV of ERISA; (D) result in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which an exemption is not
available; or (E) result (either alone or in conjunction with any other event)
in the payment or series of payments by the Company, its Subsidiaries or any of
their affiliates to any person of an "excess parachute payment@ within the
meaning of Section 280G of the Code;
(xi) with respect to each Benefit Plan that is funded
wholly or partially through an insurance policy, all premiums required to have
been paid to date under the insurance policy have been paid, all premiums
required to be paid under the insurance policy through the Merger Effective Date
will have been paid on or before the Merger Effective Date and, as of the Merger
Effective Date, there will be no liability of the Company or any Subsidiary or
any Commonly Controlled Entity under any insurance policy or ancillary agreement
with respect to such insurance policy in the nature of a retroactive rate
adjustment, loss sharing arrangement or other actual or contingent liability
arising wholly or partially out of events occurring prior to the Merger
Effective Date;
(xii) (A) each Benefit Plan that constitutes a
"Welfare Plan," within the meaning of Section 3(1) of ERISA, and for which
contributions are claimed by the Company or any Subsidiary or any Commonly
Controlled Entity as deductions under any provision of the Code, is in material
compliance with all applicable requirements pertaining to such deduction;
(B) with respect to any welfare benefit fund
(within the meaning of Section 419 of the Code) related to a welfare benefit
plan, there is no disqualified benefit (within the meaning of Section 4976(b) of
the Code) that would result in the imposition of a tax under Section 4976(a) of
the Code; and
(C) all welfare benefit funds intended to be
exempt from tax under Section 501(a) of the Code have been determined by the
Internal Revenue Service to be so
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exempt and no event or condition exists which would adversely affect any such
determination; and
(xiii) all benefit plans outside of the United
States, if any (the "Foreign Plans"), are in compliance with all applicable laws
and regulations and have been operated in accordance with the plans' respective
terms. There are no material unfunded liabilities under or in respect of the
Foreign Plans, and all contributions or other payments required to be made to or
in respect of the Foreign Plans prior to the Merger Effective Date have been
made or will be made prior to the Merger Effective Date.
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS. The Company and each
Subsidiary has complied with each, and is not in violation of any, law,
ordinance, or governmental or regulatory rule or regulation, whether federal,
state, local or foreign ("Regulations"), to which the Company's or each of its
Subsidiary's business, operations, assets or properties is subject. The Company
and each Subsidiary owns, holds, possesses or lawfully uses in the operation of
its business all franchises, licenses, permits, easements, rights, applications,
filings, registrations and other authorizations ("Authorizations") which are in
any manner necessary for it to conduct its business as now or previously
conducted or for the ownership and use of the assets owned or used by the
Company and each Subsidiary in the conduct of the business of the Company and
each Subsidiary, free and clear of all liens, charges, restrictions and
encumbrances and in compliance with all Regulations. All such Authorizations are
listed and described in Schedule 6.23. Neither the Company nor any Subsidiary is
in default, nor has the Company or any Subsidiary received any notice of any
claim of default, with respect to any such Authorization. All such
Authorizations are renewable by their terms or in the ordinary course of
business without the need to comply with any special qualification procedures or
to pay any amounts other than routine filing fees. None of such Authorizations
will be adversely affected by consummation of the transactions contemplated
hereby. No Stockholder and no director, officer, employee or former employee of
the Company or any Subsidiary or any affiliates of the Company or any
Subsidiary, or any other person, firm or corporation, owns or has any
proprietary, financial or other interest (direct or indirect) in any
Authorization which the Company or any Subsidiary owns, possesses or uses in the
operation of the business of the Company or any Subsidiary as now or previously
conducted.
6.24 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
6.24, no Stockholder and no director, officer or employee of the Company or any
Subsidiary, or any member of his or her immediate family or any other of its,
his or her affiliates, owns or has a 5% or more ownership interest in any
corporation or other entity that is or was during the last three years a party
to, or in any property which is or was during the last three years the subject
of, any contract, agreement or understanding, business arrangement or
relationship with such Company.
6.25 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of the Company and the Stockholders, threatened
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against the Company or any Subsidiary which relates to the transactions
contemplated by this Agreement.
(b) Except as set forth on Schedule 6.25, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of the Company and the Stockholders, threatened
against the Company or any Subsidiary or which relates to such Company or any
Subsidiary.
(c) The Company and no Stockholder knows of any reasonably
likely basis for any litigation, arbitration, investigation or proceeding
referred to in Sections 6.25(a) or (b).
(d) No Company or Subsidiary is a party to or subject to the
provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority.
6.26 RESTRICTIONS. No Company or Subsidiary is a party to any
indenture, agreement, contract, commitment, lease, plan, license, permit,
authorization or other instrument, document or understanding, oral or written,
or subject to any charter or other corporate restriction or any judgment, order,
writ, injunction, decree or award which materially adversely affects or
materially restricts or, so far as the Company or any of the Stockholders can
now reasonably foresee, may in the future materially adversely affect or
materially restrict, the business, operations, assets, properties, prospects or
condition (financial or otherwise) of the Company or its Subsidiaries after
consummation of the transactions contemplated hereby.
6.27 TAXES. All federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by the Company and its
Subsidiaries (the "Tax Returns") with respect to any federal, state, local or
foreign taxes, assessments, interest, penalties, deficiencies, fees and other
governmental charges or impositions (including without limitation all income
tax, unemployment compensation, social security, payroll, sales and use, excise,
privilege, property, ad valorem, franchise, license, school and any other tax or
similar governmental charge or imposition under laws of the United States or any
state or municipal or political subdivision thereof or any foreign country or
political subdivision thereof) (singly, a "Tax", and collectively, the "Taxes")
have been timely filed with the appropriate governmental agencies in all
jurisdictions in which such Tax Returns are required to be filed, and all such
Tax Returns properly reflect the liabilities of the Company and its Subsidiaries
for Taxes for the periods, property or events covered thereby. All Taxes,
including without limitation those which are called for by the Tax Returns,
required to be paid, withheld or accrued by the Company and its Subsidiaries and
any deficiency assessments, penalties and interest have been timely paid,
withheld or accrued. The accruals for Taxes contained in the Audited Balance
Sheet are adequate to cover the Tax liabilities of the Company and its
Subsidiaries as of that date and include adequate provision for all deferred
Taxes, and nothing has occurred subsequent to that date to make any of such
accruals inadequate. The Company's and each Subsidiary's Tax basis in its
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assets for purposes of determining its future amortization, depreciation and
other federal income tax deductions is accurately reflected on the Company's and
Subsidiary's Tax books and records. No Company or Subsidiary is or has at any
time ever been a party to a Tax sharing, Tax indemnity or Tax allocation
agreement, and no Company or Subsidiary has assumed any Tax liability of any
other person or entity under contract. No Company or Subsidiary has received any
notice of assessment or proposed assessment in connection with any Tax Returns
and there are not pending tax examinations of or tax claims asserted against the
Company or any Subsidiary or any of their assets or properties. The Company and
its Subsidiaries have not extended, or waived the application of, any statute of
limitations of any jurisdiction regarding the assessment or collection of any
Taxes. There are now (and as of immediately following the Closing there will be)
no Liens (other than any Lien for current Taxes not yet due and payable) on any
of the assets or properties of the Company or its Subsidiaries relating to or
attributable to Taxes. To the knowledge of the Company and the Stockholders,
there is no basis for the assertion of any claim relating to or attributable to
Taxes which, if adversely determined, would result in any Lien on the assets of
the Company or any Subsidiary or otherwise have an adverse effect on the Company
or any Subsidiary or their business, operations, assets, properties, prospects
or condition (financial or otherwise). Neither the Company nor the Stockholders
have any knowledge of any basis for any additional assessment of any Taxes. All
Tax payments related to employees, including income tax withholding, FICA, FUTA,
unemployment and worker's compensation, required to be made by the Company or
any Subsidiary have been fully and properly paid, withheld, accrued or recorded.
There are no contracts, agreements, plans or arrangements, including but not
limited to the provisions of this Agreement, covering any employee or former
employee of the Company or any Subsidiary that, individually or collectively,
could give rise to any payment (or portion thereof) that would not be deductible
pursuant to Sections 280G, 404 or 162 of the Code. Two correct and complete
copies of (a) all Tax examinations, (b) all extensions of statutory limitations
and (c) all federal, state and local income tax returns and franchise tax
returns of the Company (including, if filed separately, its Subsidiaries) for
the last five fiscal years, or such shorter period of time as any of them shall
have existed, have heretofore been delivered by the Company and the Stockholders
to UniCapital. The Company and each Subsidiary that was a corporation taxed
under the provisions of Subchapter S of the Code made an election to be taxed
under Subchapter S of the Code within 75 days of its original organization and,
up to September 30, 1996, was taxed under the provisions of Subchapter S of the
Code. The Company and each Subsidiary has a taxable year ended September 30 and
no Company or Subsidiary has made an election to retain a fiscal year other than
September 30 under Section 444 of the Code. The Company and each Subsidiary
currently utilizes the accrual method of accounting for income tax purposes and
has not changed its method of accounting for income tax purposes in the past
five years except as related to the termination of the Company's status as a
corporation taxed under Subchapter S of the Code as of September 30, 1996.
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6.28 INTELLECTUAL PROPERTY MATTERS.
(a) No Company or Subsidiary has utilized or currently
utilizes any patent, trademark, trade name, service mark, copyright, software
(other than Off-The-Shelf Software), trade secret or know-how except for those
listed on Schedule 6.28 (the "Intellectual Property"), all of which are owned by
the Company or a Subsidiary free and clear of any liens, claims, charges or
encumbrances. The Intellectual Property constitutes all such assets, properties
and rights which are used or held for use in, or are necessary for, the conduct
of the business of the Company and its Subsidiaries.
(b) Except as provided on Schedule 6.28(b), there are no
royalty, commission or similar arrangements, and no licenses, sublicenses or
agreements, pertaining to any of the Intellectual Property or products or
services of the Company or its Subsidiaries.
(c) Neither the Company nor any Subsidiary infringes upon or
unlawfully or wrongfully uses any patent, trademark, trade name, service mark,
copyright or trade secret owned or claimed by another. No action, suit,
proceeding or investigation has been instituted or, to the knowledge of the
Company and the Stockholders, threatened relating to any, patent, trademark,
trade name, service mark, copyright or trade secret formerly or currently used
by the Company or any Subsidiary. None of the Intellectual Property is subject
to any outstanding order, decree or judgment. Neither the Company nor any
Subsidiary has agreed to indemnify any person or entity for or against any
infringement of or by the Intellectual Property.
(d) No present or former employee of the Company or any
Subsidiary and no other person or entity owns or has any proprietary, financial
or other interest, direct or indirect, in whole or in part, in any patent,
trademark, trade name, service mark or copyright, or in any application
therefor, or in any trade secret, which the Company or any Subsidiary owns,
possesses or uses in its operations as now or heretofore conducted. Schedule
6.28(d) lists all confidentiality or non-disclosure agreements currently in
force and effect to which the Company, any Subsidiary or any of their employees
is a party.
(e) Schedule 6.28(e) sets forth a complete and accurate list
of all items of Intellectual Property duly registered in, filed in or issued by
the United States Copyright Office or the United States Patent and Trademark
Office, any offices in the various states of the United States and any offices
in other jurisdictions.
(f) All rights of the Company and its Subsidiaries in the
Intellectual Property shall vest in the applicable Surviving Corporation
pursuant to the transactions contemplated hereby without any consent or other
approval.
(g) All Intellectual Property in the form of computer software
that is utilized by the Company or any Subsidiary in the operations of its
business is capable of processing date
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data between and within the twentieth and twenty-first centuries, or can be
rendered capable of processing such data within three months by the expenditure
of no more than $100,000.
6.29 COMPLETENESS; NO VIOLATIONS. The certified copies of the
Certificate of Incorporation and Bylaws, both as amended to date, of the Company
(and such Company's Subsidiaries), and the copies of all leases, instruments,
agreements, licenses, permits, certificates or other documents which are
included on schedules attached hereto or which have been delivered or which have
been made available to UniCapital in connection with the transactions
contemplated hereby, are complete and correct; neither the Company (including
its Subsidiaries) nor, to the knowledge of the Stockholders, any other party to
any of the foregoing is in material default thereunder; and, except as set forth
in the schedules and documents attached to this Agreement, the rights and
benefits of the Company (including its Subsidiaries) thereunder will not be
materially and adversely affected by the transactions contemplated hereby, and
the execution of this Agreement and the performance of the obligations hereunder
will not result in a material violation or breach or constitute a material
default under any of the terms or provisions thereof. Except as set forth on
Schedule 6.29, none of such leases, instruments, agreements, contracts,
licenses, permits, certificates or other documents requires notice to, or the
consent or approval of, any governmental agency or other third party to any of
the transactions contemplated hereby to remain in full force and effect. The
consummation of the transactions contemplated hereby will not give rise to any
right of termination, cancellation or acceleration or result in the loss of any
right or benefit thereunder.
6.30 EXISTING CONDITION. Except as set forth on Schedule 6.30, since
the Interim Balance Sheet Date, neither the Company nor any Subsidiary has:
(a) incurred any liabilities, other than liabilities incurred
in the ordinary course of business consistent with past practice, or discharged
or satisfied any lien or encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice, or failed to pay or
discharge when due any liabilities of which the failure to pay or discharge has
caused or will cause any material damage or risk of material loss to it or any
of its assets or properties;
(b) sold, encumbered, assigned or transferred any assets,
properties or rights or any interest therein, except for the sales in the
ordinary course of business consistent with past practice, or made any agreement
or commitment or granted any option or right with, of or to any person to
acquire any assets, properties or rights of the Company or any Subsidiary or any
interest therein;
(c) created, incurred, assumed or guaranteed any indebtedness
for money borrowed, or mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract or other
encumbrance of any nature whatsoever, except in the ordinary course of business
consistent with past practice;
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(d) made or suffered any amendment or termination of any
material agreement, contract, commitment, lease or plan to which it is a party
or by which it is bound, or canceled, modified or waived any substantial debts
or claims held by it or waived any rights of substantial value, except in the
ordinary course of business consistent with past practice.
(e) declared, set aside or paid any dividend or made or agreed
to make any other distribution or payment in respect of its capital shares or
redeemed, purchased or otherwise acquired or agreed to redeem, purchase or
acquire any of its shares of capital stock or other ownership interests;
(f) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting its business,
operations, assets, properties or prospects or (ii) of any item or items carried
on its books of account individually or in the aggregate at more than $25,000,
or suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;
(g) suffered any material adverse change in its business,
operations, assets, properties, prospects or condition (financial or otherwise),
other than as directly caused by adverse economic conditions not specific to, or
having an extraordinary impact upon, the Company;
(h) received notice or had knowledge of any actual or
threatened labor trouble, strike or other occurrence, event or condition of any
similar character which has had or might have an adverse effect on its business,
operations, assets, properties or prospects;
(i) made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $25,000, except such
as may be involved in ordinary repair, maintenance or replacement of its assets;
(j) increased the salaries or other compensation of, or made
any advance (excluding advances for ordinary and necessary business expenses) or
loan to, any of its employees or made any increase in, or any addition to, other
benefits to which any of its employees may be entitled;
(k) changed any of the accounting principles followed by it or
the methods of applying such principles;
(l) entered into any transaction other than in the ordinary
course of business consistent with past practice;
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(m) changed its authorized capital or its securities
outstanding or otherwise changed its ownership interests, or granted any
options, warrants, calls, conversion rights or commitments with respect to any
of its capital stock or other ownership interests; or
(n) agreed to take any of the actions referred to above.
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Attached hereto as Schedule
6.31 is an accurate list, as of the date of this Agreement, of:
(a) the name of each financial institution in which the
Company (including its Subsidiaries) has accounts or safe deposit boxes;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have
access thereto; and
(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Company and each
Subsidiary and a description of the terms of such power.
6.32 BOOKS OF ACCOUNT. The books, records and accounts of the Company
and each Subsidiary accurately and fairly reflect, in reasonable detail, the
transactions and the assets and liabilities of the Company and each Subsidiary.
No Company or Subsidiary has engaged in any transaction, maintained any bank
account or used any of the funds of the Company or Subsidiary except for
transactions, bank accounts and funds which have been and are reflected in the
normally maintained books and records of the business.
6.33 ENVIRONMENTAL MATTERS. (a) The Company and each Subsidiary has
secured, and is in compliance with, all Environmental Permits, with respect to
any premises on which its business is operated, all of which Environmental
Permits shall vest in the Surviving Corporation upon consummation of the
transactions contemplated hereby. The Company and each Subsidiary is in
compliance with all Environmental Laws.
(b) No Company, Subsidiary or Stockholder has received any
communication from any Governmental Entity that alleges that the Company or any
Subsidiary is not in compliance with any Environmental Laws or Environmental
Permits.
(c) No Company or Subsidiary has entered into or agreed to any
court decree or order, and no Company or Subsidiary is subject to any judgment,
decree or order, relating to
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compliance with any Environmental Law or to investigation or cleanup of a
Hazardous Substance under any Environmental Law.
(d) No lien, charge, interest or encumbrance has been
attached, asserted, or to the knowledge of the Company and the Stockholders,
threatened to or against any assets or properties of the Company or any
Subsidiary pursuant to any Environmental Law.
(e) There has been no treatment, storage, disposal or release
of any Hazardous Substance on any property owned, operated or leased by the
Company or any Subsidiary.
(f) No Company or Subsidiary has received a CERCLA 104(e)
information request or has been named a potentially responsible party for any
National Priorities List site under CERCLA or any site under analogous state law
or received an analogous notice or request from any non-U.S. Governmental
Entity, which notice, request or any resulting inquiry or litigation has not
been fully and finally resolved without possibility of reopening.
(g) There are no aboveground tanks or underground storage
tanks on, under or about any property owned, operated or leased by the Company
or any Subsidiary and any former aboveground or underground tanks on any
property owned, operated or leased by the Company or any Subsidiary have been
removed in accordance with all Environmental Laws and no residual contamination,
if any, remains at such sites in excess of applicable standards.
(h) There are no polychlorinated biphenyls ("PCBs") leaking
from any article, container or equipment on, under or about any property owned,
operated or leased by the Company or any Subsidiary and there are no such
articles, containers or equipment containing PCBs, and there is no asbestos
containing material in a condition or location currently constituting a
violation of any Environmental Law at, on, under or within any property owned,
operated or leased by the Company or any Subsidiary.
(i) The Company and the Stockholders have provided to
UniCapital true and complete copies of, or access to, all written environmental
assessment materials and reports in their possession that have been prepared by
or on behalf of the Company or its Subsidiaries during the past five years.
6.34 NO ILLEGAL PAYMENTS. Neither the Company nor any Subsidiary and,
to the knowledge of the Company and the Stockholders, no affiliate, officer,
agent or employee thereof, directly or indirectly, has, during the past five
years, on behalf of or with respect to the Company, any Subsidiary or any
affiliate thereof, (a) made any unlawful domestic or foreign political
contributions, (b) made any payment or provided services which were not legal to
make or provide or which the Company, any Subsidiary or any affiliate thereof or
any such officer, agent or employee should have known were not legal for the
payee or the recipient of such services to receive, (c) received any payment or
any services which were not legal for the payer or the provider of such services
to make or provide, (d) made any payment to any person or
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entity, or agent or employee thereof, in connection with any Lease (as
hereinafter defined) to induce such person or entity to enter into a Lease
transaction, (e) had any transactions or payments related to the Company or its
Subsidiaries which are not recorded in their accounting books and records or (f)
had any off-book bank or cash accounts or "slush funds" related to the Company
or its Subsidiaries.
6.35 LEASES. Schedule 6.35 hereto sets forth the Company's and each
Subsidiary's lease financing arrangements as of the Audited Balance Sheet Date
(which, together with all other lease/financing arrangements entered into by the
Company and its Subsidiaries between such date and the Closing Date, are
referred to herein as the "Leases"). The term "Lease Documents" means the lease
arrangements and financing contracts evidencing the Leases described in Schedule
6.35, together with all related documents and agreements including, without
limitations, master lease agreements, schedules or other addenda to such Leases,
certificates of delivery and acceptance, UCC financing statements, remarketing
agreements, residual guaranty agreements, insurance policies, guaranty
agreements and other credit supports. The term "Equipment" means all equipment,
inventory and other property described as being leased or financed pursuant to a
Lease, or in which the Company or Subsidiary is granted a security interest
pursuant to a Lease. The term "Obligor" means any lessee party or other party
obligated to pay or perform any obligations under or in respect of a Lease or
the Equipment covered by a Lease (excluding the lessor party thereunder, but
otherwise including, without limitation, any guarantor of a Lease or any vendor,
manufacturer or similar party under a remarketing agreement, residual guaranty
or similar agreement). The term "Scheduled Payments" means the monthly or
periodic rental payments or installments of principal and interest under the
terms of the Leases.
(a) There is no restriction or limitation in any of the Lease
Documents or otherwise, restricting the Company or any Subsidiary from executing
this Agreement or entering into the transactions contemplated by this Agreement,
other than consents which have been, or prior to the Closing will have been,
obtained.
(b) Except as set forth on Schedule 6.35(b) or except to the
extent that title has been transferred to the Company's or any Subsidiary's
non-recourse lender or non-recourse investor (each, a "Title Transferee") in the
ordinary course of business consistent with past practice, the applicable
Company or Subsidiary holds title to the Equipment covered by each Lease or has
a vested and perfected first priority security interest in the Equipment. All
Equipment is located in the United States other than as set forth on Schedule
6.35(b).
(c) With respect to each Lease, only one chattel paper
original of such Lease exists and is held by the applicable Company or
Subsidiary or, in the case of Leases that were transferred to a Title
Transferee, such Title Transferee.
(d) Each Lease held by the Company or any Subsidiary for its
own account ("Company Leases") is in full force and effect in accordance with
its terms, and, to the
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knowledge of the Company or any Stockholder, there has been no occurrence which
would or might permit any Obligor to terminate such Lease or suspend or reduce
any payments or obligations due or to become due in respect of such Lease or the
related Lease Documents by reason of default by the lessor party under such
Lease. To the knowledge of the Company or any Stockholder, none of the Obligors
in respect of a Company Lease or the related Lease Documents is the subject of a
bankruptcy, insolvency or similar proceeding.
(e) Except for the delinquency in the payment of any Scheduled
Payment under any Company Lease that is not more than 90 days past due, there
does not exist any default in the payment of any such Scheduled Payments due
under any Company Lease or the related Lease Documents, and there does not exist
any other default, breach, violation or event permitting acceleration,
termination or repossession under any Company Lease or the related Lease
Documents or any event which, to the knowledge of the Company and the
Stockholders, with notice and the expiration of any applicable grace or cure
period, would constitute such a default, breach, violation or event permitting
acceleration, termination or repossession under such Lease or the related Lease
Documents.
(f) No Company or Subsidiary has acted in a manner which (nor
has the Company or any Subsidiary failed to act where such failure to act) would
alter or reduce any of such Company's or Subsidiary's rights or benefits under
any manufacturer's or vendors' warranties or guarantees with respect to any
Equipment.
(g) Except as set forth on Schedule 6.35(g), the Company and
each Subsidiary has complied with all requirements of any federal, state or
local law, including without limitation, usury laws, applicable to each Lease.
(h) Each Lease has the following characteristics:
(i) such Lease was originated in the United States
and the Scheduled Payments thereunder are payable in U.S. dollars by Obligors
domiciled in the United States;
(ii) the lessee party under such Lease has
unconditionally accepted the Equipment covered by such Lease ; and
(iii) no Obligor in respect of such Lease is an
affiliate of the Company or any Subsidiary.
(i) Each Lease and the related Lease Documents are valid,
binding, legally enforceable and non-cancelable obligations of the parties
thereto, enforceable in accordance with their respective terms up to the time
such Leases and related Lease Documents are transferred to the Title Transferees
in the ordinary course of business consistent with past practice, except as the
same may be subject to the effect of general principles of equity. Each Lease is
a business
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obligation of the lessee thereunder and is not a "consumer transaction" under
any applicable federal or state regulation.
(j) Except as set forth on Schedule 6.35(j) and to the
knowledge of the Stockholders, no Lease or related Lease Document is the subject
of a fraudulent scheme by any Obligor or any supplier of Equipment.
(k) Each item of Equipment is subject to a Lease.
(l) Each Lease has a predetermined total rental amount.
(m) No Lease or related Lease Document is subject to any
legally enforceable right of rescission, set-off, counterclaim, abatement or
defense, including without limitation any defense of usury, nor will the
operation of any of the terms of any Lease or any related Lease Document or the
exercise of any right or remedy thereunder render such Lease or any related
Lease Document or the obligations thereunder unenforceable, or subject the same
to any right of rescission, set-off, counterclaim, abatement or defense. No
Obligor has asserted any legally enforceable right of rescission, set-off,
counterclaim, abatement or defense to its obligations under a Lease or any
related Lease Document.
(n) As to the Leases and the related Lease Documents, (i) none
has been amended or modified (a) to extend the maturity date for a period of
longer than one year, or (b) to alter the amount or time of payment of any
amount due thereunder, unless as to (a) and (b) such extension or alteration is
anticipated to result in a net economic benefit to the Company or any
Subsidiary; (ii) no indulgences or waivers have been granted in respect of the
obligations of any Obligor under any Lease; and (iii) neither the Company nor
its Subsidiaries have advanced any monies on behalf of any Obligor.
(o) Each Lease requires the Obligor thereunder at its own cost
and expense to maintain the Equipment leased thereunder in good repair,
condition and working order, and, to the knowledge of the Stockholders, each
Obligor under a Lease is currently in compliance with such requirement.
(p) Except as set forth on Schedule 6.35(b), each Lease
requires the Obligor thereunder (i) to pay or be responsible for the payment of
all fees, taxes (except income taxes), and other charges or liabilities arising
with respect to the Equipment leased thereunder or the use thereof, (ii) to keep
the Equipment free and clear of any and all liens, security interests and other
encumbrances, other than security interests of the applicable Company or
Subsidiary or, with respect to Equipment subject to Leases transferred any Title
Transferee in the ordinary course of business consistent with past practice,
such Title Transferee, (iii) to hold harmless the lessor thereunder and its
successors and assigns against the imposition of any fees, charges, liabilities
and encumbrances, (iv) to bear all risk of loss associated with the Equipment
covered by or securing the obligations under such Lease during the term of such
Lease and (v) to maintain at
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the cost of the Obligor liability and casualty insurance in respect of such
Equipment covered by such Lease.
(q) Each Lease prohibits without the lessor's prior written
consent to or notice of any relocation of the Equipment covered by such Lease
and requires the Obligor to execute such agreements and documents as may
reasonably be requested by the lessor in connection with any such relocation.
(r) Each Lease involves either the lease of tangible personal
property, or intangible personal property or the provision of related services
by the Company or its Subsidiaries that the Company or its Subsidiaries has a
right to lease or finance with respect to such tangible personal property, by
the Company or its Subsidiaries or the loan of money secured by a security
interest in tangible personal property owned by the Obligor thereunder.
(s) Except as set forth on Schedule 6.35(s), neither Company
nor any Subsidiary has received any notice challenging its ownership or the
priority of its security interest in the Equipment covered by each Lease, and
there are no proceedings pending before any court or governmental entity or, to
the knowledge of the Company and the Stockholders, threatened by any Obligor or
other party, (i) asserting the invalidity of any Lease or the related Lease
Documents, (ii) seeking to prevent payment or performance by any Obligor of any
Lease or any of the terms of the related Lease Documents, or (iii) seeking any
determination or ruling that might adversely affect the validity or
enforceability of any Lease or any of the terms or provisions of the related
Lease Documents.
(t) As to each Lease, there are no agreements or
understandings between the Company or any Subsidiary and the Obligors in respect
of such Lease or otherwise binding on the Company or any Subsidiary other than
as expressly set forth in the Lease and the related Lease Documents.
6.36 LEASE FUNDING. The Company and each Subsidiary is in compliance
with all of the terms and covenants of, and is not in default or breach under,
each agreement, contract, understanding or arrangement with any funding source
for the Leases.
6.37 DISCLOSURE. The Company and each Subsidiary has delivered, or in
the case of the Leases and Lease Documents, made available to, UniCapital true
and complete copies of each agreement, contract, commitment or other document
(or, in the case of any such document not in the possession of reasonably
available to the Company, its Subsidiaries or a Stockholder, accurate and
complete summaries thereof) that is referred to in the schedules to this
Agreement or that has been requested by UniCapital or its representatives.
Without limiting any exclusion, exception or other limitation contained in any
of the representations and warranties made herein, this Agreement and the
schedules hereto and all other documents and information prepared or certified
by the Stockholders to the Company or any Subsidiary and provided to UniCapital
and its representatives pursuant hereto do not and will not include any untrue
statement of a material
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fact or omit to state a material fact necessary to make the statements herein
and therein not misleading. If any Stockholders become aware of any fact or
circumstance that would change a representation or warranty of any Stockholder
in this Agreement or any representation made on behalf of the Company (including
its Subsidiaries), then the Stockholders shall immediately give notice of such
fact or circumstance to UniCapital. However, such notification shall not relieve
the Company or any of the Stockholders of their respective obligations under
this Agreement, and at the sole option of UniCapital, the truth and accuracy of
any and all warranties and representations of the Stockholders, at the date of
this Agreement and at the Closing, shall be a precondition to the consummation
of this transaction.
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, UniCapital and Newco, jointly and severally, represent and as
follows:
7.1 CORPORATE EXISTENCE. UniCapital is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Newco is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. Immediately prior to the
effectiveness of the Merger, each of UniCapital and Newco will be duly qualified
to do business and will be in good standing as a foreign corporation in each
jurisdiction where the conduct of its business requires it to be so qualified.
7.2 UNICAPITAL STOCK. The shares of UniCapital Stock to be issued and
delivered to the Stockholders on the Merger Effective Date, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable shares, and except for restrictions upon
resale, will be legally equivalent in all respects to the majority of UniCapital
Stock issued and outstanding as of the date hereof. The UniCapital Stock to be
issued upon the conversion of Company Stock pursuant to the terms of this
Agreement will be free and clear of all liens, encumbrances and claims of every
kind, other than restrictions upon transfer contained herein and other than any
liens, encumbrances or claims arising other than by the actions of UniCapital or
Newco.
7.3 CORPORATE POWER AND AUTHORIZATION. UniCapital and Newco have the
corporate power, authority and legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance of this Agreement and all
related documents and agreements required to be executed and delivered by
UniCapital and Newco in accordance with the provisions hereof (the "UniCapital
Documents") have been duly authorized by all necessary corporate action. This
Agreement has been duly executed and delivered by UniCapital and Newco and
constitutes, and the UniCapital Documents when executed and delivered will
constitute, the legal, valid and binding obligations of UniCapital and Newco
enforceable against UniCapital and Newco in accordance with their terms.
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7.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement by UniCapital and Newco will not violate, conflict with or result in
the breach of any term, condition or provision of, or require the consent of any
other person under (a) any existing law, ordinance, or governmental rule or
regulation to which UniCapital or Newco is subject, (b) any judgment, order,
writ, injunction, decree or award of any Governmental Entity that is applicable
to UniCapital or Newco, (c) the charter documents of UniCapital or Newco, or (d)
any mortgage, indenture, agreement, contract, commitment, lease, plan,
Authorization, or other instrument, document or understanding, oral or written,
to which UniCapital or Newco is a party, by which UniCapital or Newco may have
rights or by which any of the properties or assets of UniCapital or Newco may be
bound or affected, or give any party with rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of UniCapital or Newco thereunder. Except for filing the Articles of
Merger and filings under the Hart-Scott- Rodino Antitrust Improvements Act of
1976 and except as aforesaid, no authorization, approval or consent of, and no
registration or filing with, any Governmental Entity is required in connection
with the execution, delivery or performance of this Agreement by UniCapital or
Newco.
7.5 CAPITALIZATION OF UNICAPITAL. The IPO will result in an aggregate
market capitalization of UniCapital that will exceed Three Hundred Million
Dollars ($300,000,000), as determined by multiplying the outstanding shares of
UniCapital immediately following the closing of the IPO by the offering price.
7.6 COMPLIANCE WITH LAW; AUTHORIZATION. Each of UniCapital and Newco
have complied with each, and is not in violation of Regulations to which
UniCapital's and Newco's respective business, operations, assets or properties
is subject. Each of UniCapital and Newco owns, holds, possesses or lawfully uses
in the operation of its business all Authorizations which are in any manner
necessary for it to conduct its business as now or previously conducted or for
the ownership and use of the assets owned or used by UniCapital and Newco,
respectively, in the conduct of the business of the Company, free and clear of
all liens, charges, restrictions and encumbrances and in compliance with all
Regulations. Neither UniCapital nor Newco is in default, nor has UniCapital or
Newco received any notice of any claim of default, with respect to any such
Authorization. All such Authorizations are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
None of such Authorizations will be adversely affected by consummation of the
transactions contemplated hereby. No stockholder and no director, officer,
employee or former employee of UniCapital of Newco any of their affiliates, or
any other person, firm or corporation, owns or has any proprietary, financial or
other interest (direct or indirect) in any Authorization which UniCapital or
Newco owns, possesses or uses in the operation of the business of UniCapital and
Newco as now or previously conducted.
7.7 TRANSACTION WITH AFFILIATES. Except as described in the
Registration Statement, no stockholder and no director, officer or employee of
UniCapital or Newco, or any member of his or her immediate family or any other
of its, his or her affiliates, owns or has a 5% or more
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ownership interest in any corporation or other entity that is or was during the
last three years a party to, or in any property which is or was during the last
three years the subject of, any contract, agreement or understanding, business
arrangement or relationship with UniCapital or Newco.
7.8 LITIGATION.
(a) No litigation, including any arbitration, investigation or
other proceeding of or before any court, arbitrator or governmental or
regulatory official, body or authority is pending or, to the knowledge of
UniCapital and Newco, threatened against UniCapital or Newco which relates to
the transactions contemplated by this Agreement.
(b) No litigation, including any arbitration, investigation or
other proceeding of or before any court, arbitrator or governmental or
regulatory official, body or authority is pending or, to the knowledge of
UniCapital or Newco, threatened against UniCapital or Newco or which relates to
UniCapital or Newco.
(c) Neither UniCapital nor Newco is a party to or subject to
the provisions of any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental or regulatory official, body or authority.
7.9 REGISTRATION RIGHTS. As of the date hereof and as of the
Merger Effective Date, no officer, director or shareholder of UniCapital will
have been granted any registration rights with respect to the registration of
any shares of capital stock of UniCapital.
7.10 MISCELLANEOUS. Prior to the consummation of the Merger, UniCapital
and Newco have no material properties or assets and are not party to any
contracts other than this Agreement, the letter of intent among the parties to
this Agreement, certain employment agreements with officers of UniCapital,
certain real property leases relating to the principal executive offices of
UniCapital, and those agreements and letters of intent listed on Schedule 7.10
hereto.
8. COVENANTS OF STOCKHOLDERS AND COMPANY
For purposes of this Article 8, each reference to "Company" shall be
deemed to refer as well to each and all of its Subsidiaries unless expressly
otherwise stated. The following covenants shall apply during the period from and
after the date hereof through the Closing Date:
8.1 BUSINESS IN THE ORDINARY COURSE. Except as provided on Schedule
8.1, each Company shall, and the Stockholders shall cause each Company to,
conduct its business solely in the ordinary course and consistent with past
practice.
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8.2 EXISTING CONDITION. Neither the Company nor any Subsidiary shall,
and no Stockholder shall suffer the Company or any Subsidiary to, cause or
permit to occur any of the events or occurrences described in Section 6.30
hereof.
8.3 MAINTENANCE OF PROPERTIES AND ASSETS. Except as otherwise
contemplated in Section 8.15, each Company shall, and the Stockholders shall
cause each Company to, maintain and service its properties and assets in order
to preserve their value and usefulness in the conduct of its respective
business.
8.4 EMPLOYEES AND BUSINESS RELATIONS. Each Company shall, and the
Stockholders shall cause each Company to, use its commercially reasonable
efforts to keep available the services of its current employees and agents and
to maintain its relations and goodwill with its suppliers, customers,
distributors and any others with whom or with which it has business relations.
8.5 MAINTENANCE OF INSURANCE. Each Company shall, and the Stockholders
shall cause each Company to, notify UniCapital of any material changes in the
terms of the insurance policies and binders referred to on Schedule 6.20 hereto.
8.6 COMPLIANCE WITH LAWS, ETC. Each Company shall, and the Stockholders
shall cause each Company to, comply with all laws, ordinances, rules,
regulations and orders applicable to such Company or its business, operations,
properties or assets, noncompliance with which might materially affect such
Company.
8.7 CONDUCT OF BUSINESS. Each Company shall, and the Stockholders shall
cause each Company to, use its reasonable commercial efforts to conduct its
business in such a manner that on the Closing Date and on the Merger Effective
Date the representations and warranties of the Stockholders contained in this
Agreement shall be true, as though such representations and warranties were made
on and as of each such date (except to the extent that such representations or
warranties expressly speak as of a specific date), and each Company shall, and
the Stockholders shall cause each Company to, use commercially reasonable
efforts to cause all of the conditions to the obligations of UniCapital and the
Stockholders under this Agreement to be satisfied on or prior to the Closing
Date. The Company and each Subsidiary shall, and the Stockholders shall cause
the Company and each Subsidiary to, maintain credit underwriting standards
consistent with past practice. Furthermore, the Company and each Subsidiary
shall, and the Stockholders shall cause the Company and each Subsidiary to,
maintain a residual value accounting methodology consistent with past practice.
8.8 ACCESS. Upon reasonable prior notice, each Company shall, and the
Stockholders shall cause each Company to, give to UniCapital's officers,
employees, counsel, accountants and other representatives free and full access
to and the right to inspect, during normal business hours, all of the premises,
properties, assets, records, contracts and other documents relating to such
Company and shall permit them to consult with the officers, employees,
accountants,
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counsel and agents of such Company for the purpose of making such investigation
of such Company as UniCapital shall desire to make, provided that such
investigation shall not unreasonably interfere with such Company's business
operations, and provided further that UniCapital shall not contract or consult
with any non-officer employees of any Company without such Company's prior
consent, which shall not be unreasonably withheld. Furthermore, each Company
shall, and the Stockholders shall cause each Company to, furnish to UniCapital
all such documents and copies of documents and records and information with
respect to the affairs of such Company and copies of any working papers relating
thereto as UniCapital shall from time to time reasonably request. No information
or knowledge obtained in any investigation pursuant to this Section 8.8 or
otherwise shall affect or be deemed to modify any representation or warranty
contained in this Agreement or the conditions to the obligations of the parties
to consummate the Merger.
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS. No Company and no
Stockholder shall give notice to third parties or otherwise make any press
release or other public statement concerning this Agreement or the transactions
contemplated hereby. No Company and no Stockholder shall grant any interview,
publish any article, report or statement, or respond to any press inquiry or
other inquiry of any third party relating to this Agreement, the business of the
Company, the business (current and proposed) of UniCapital, the Registration
Statement (as defined below), the IPO or any other matter connected with any of
the foregoing without the express prior written approval of UniCapital, and all
inquiries and questions with respect to any of the foregoing shall be
coordinated through Robert New, Chief Executive Officer of UniCapital. Each
Company and each Stockholder shall coordinate all communications with the
employees and agents of any Company through UniCapital prior to making any such
communication. Notwithstanding the foregoing, this Section 8.9 shall not be
interpreted to prevent the Company or any Stockholder from disclosing
information as compelled by a court order, provided however, that prior to
disclosing any information concerning this Agreement or the transaction
contemplated hereby in response to any such court order, the Company or
Stockholder, as applicable, shall provide UniCapital with prompt notice of the
court order so that UniCapital may take whatever action it deems appropriate to
prohibit such disclosure.
8.10 EXCLUSIVITY. Except with respect to this Agreement and the
transactions contemplated hereby, no Company, no Stockholder and none of their
affiliates shall, and each of them shall cause its respective employees, agents
and representatives (including, without limitation, any investment banking,
legal or accounting firm retained by it or them and any individual member or
employee of the foregoing) (each, an "Agent") not to, (a) initiate, solicit or
seek, directly or indirectly, any inquiries or the making or implementation of
any proposal or offer (including, without limitation, any proposal or offer to
its shareholders or any of them) with respect to a merger, acquisition,
consolidation, recapitalization, liquidation, dissolution or similar transaction
involving, or any purchase of all or any portion of the assets or any equity
securities of, any Company (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal"), or (b) engage in any negotiations
concerning, or provide any confidential information or data to, or have any
substantive discussions with, any person relating to an Acquisition
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Proposal, (c) otherwise cooperate in any effort or attempt to make, implement or
accept an Acquisition Proposal, or (d) enter into or consummate any agreement or
understanding with any person or entity relating to an Acquisition Proposal,
except for the Merger contemplated hereby. If any Company or Stockholder, or any
of their respective Agents, have provided any person or entity (other than
UniCapital) with any confidential information or data relating to an Acquisition
Proposal, then they shall request the immediate return thereof. The Company and
the Stockholders shall notify UniCapital immediately if any inquiries, proposals
or offers related to an Acquisition Proposal are received by, any confidential
information or data is requested from, or any negotiations or discussions
related to an Acquisition Proposal are sought to be initiated or continued with,
it or any individual or entity referred to in the first sentence of this Section
8.10. The covenant contained in this Section 8.10 shall not survive any
termination of this Agreement pursuant to Section 13.1, 13.2 or 13.3.
8.11 THIRD PARTY APPROVALS. Prior to the Closing Date, the Company and
each Subsidiary shall use its reasonable best efforts to satisfy any requirement
for notice and approval of the transactions contemplated by this Agreement under
applicable agreements with third parties, and shall provide UniCapital with
satisfactory evidence of such third party approvals.
8.12 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, each
Company shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under any applicable collective bargaining
agreement, and shall provide UniCapital with proof that any required notice has
been provided.
8.13 NOTIFICATION OF CERTAIN MATTERS. (a) The Company and the
Stockholders shall give prompt notice to UniCapital of (i) the occurrence or
non-occurrence of any event known to any Stockholder or Company the occurrence
or non-occurrence of which would be likely to cause any representation or
warranty contained in Article 6 to be untrue or inaccurate in any material
respect at or prior to the Closing Date or the Merger Effective Date and (ii)
any material failure of any Stockholder or any Company to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by such
person hereunder.
(b) UniCapital shall give prompt notice to each Stockholder of
(i) the occurrence or non-occurrence of any event known to UniCapital the
occurrence of non-occurrence of which would be likely to cause any
representation or warranty contained in Article 7 to be untrue or inaccurate in
any material respect at or prior to the Closing Date or the Merger Effective
Date and (ii) any material failure of UniCapital to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
(c) The delivery of any notice pursuant to this Section 8.13
shall not be deemed to (i) modify the representations or warranties hereunder of
the party delivering such notice, which modification may only be made pursuant
to Section 8.14, (ii) modify the conditions set forth in Sections 9 and 10 or
(iii) limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
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8.14 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Merger
Effective Date to supplement or amend promptly the schedules hereto with respect
to any matter hereafter arising or discovered which, if existing or known at the
date of this Agreement, would have been required to be set forth or described in
the schedules, provided that no amendment or supplement to a schedule that
constitutes or reflects a material adverse change in the business, operations,
assets, properties, prospects or condition (financial or otherwise) of the
Company and its Subsidiaries taken as a whole (a "Material Adverse Amendment")
may be made unless UniCapital consents to such Material Adverse Amendment;
provided further, however, that if the amendment or supplement relates to
changes in facts or circumstances occurring subsequent to the date of this
Agreement and such amendment or supplement constitutes or reflects a Material
Adverse Amendment, then such amendment or supplement shall be accepted by
UniCapital subject to the provisions of Section 12.2 and 12.5 hereof. No
amendment of or supplement to a Schedule shall be made later than 48 hours prior
to the anticipated effectiveness of the Registration Statement defined in
Section 9.4. Only (i) the Schedules attached to this Agreement at the time of
its execution and (ii) amended Schedules as accepted under the standards and
provisions of this Section 8.14 shall be deemed to be a part of this Agreement
in accordance with Section 19.3 hereof.
8.15 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, the Company shall use its reasonable best efforts to (a) file all
information required to be filed by it pursuant to such act and (b) provide
UniCapital with all information reasonably requested and required by it to
satisfy any filing requirements it may have under such act.
8.16 AGREEMENT WITH CONSULTANTS. The Stockholders covenant and agree
that they shall cause each of the persons referenced on Schedule 6.6 hereto to
enter into a non-competition agreement with the Company having terms which are
substantially consistent with the provisions of Section 14.1 hereto. Such
non-competition agreement shall be for a period of two years commencing on July
23, 1999, so long as such person is still employed or providing consulting
services, as the case may be, to the Company, on such date. The non-competition
agreement for Liptok Holdings, Inc. shall contain exceptions consistent with
Section 5(b) of the currently existing consulting agreement between Liptok
Holdings, Inc. and the Company.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND
THE STOCKHOLDERS
The obligations of the Company and the Stockholders hereunder are
subject to the satisfaction on or prior to the Closing Date (or such earlier
date specified below) of the following conditions:
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9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representations and warranties of UniCapital and Newco contained in Article 7
shall be accurate as of the Closing Date and as of the Merger Effective Date as
though such representations and warranties had been made as of such times; all
of the terms, covenants and conditions of this Agreement to be complied with and
performed by UniCapital and Newco on or before the Closing Date shall have been
duly complied with and performed; and a certificate to the foregoing effect
dated the Merger Effective Date and signed by a duly authorized agent, the
President or any Vice President of UniCapital shall have been delivered to the
Stockholders.
9.2 EMPLOYMENT AGREEMENTS. The Surviving Corporation shall have
executed and delivered Employment Agreements, in the form of Annex IV attached
hereto, to each of the persons listed on Schedule 9.2 hereto.
9.3 OPINION OF COUNSEL. The Stockholders shall have received an opinion
from counsel for UniCapital, dated the Merger Effective Date, to the effect
that:
(a) UniCapital and Newco have been duly organized and are
validly existing in good standing under the laws of their respective states of
incorporation;
(b) this Agreement has been duly authorized, executed and
delivered by UniCapital and Newco and constitutes a valid and binding agreement
of UniCapital and Newco enforceable in accordance with its terms, except (i) as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting the
rights of creditors, (ii) as the same may be subject to the effect of general
principles of equity and (iii) that no opinion need be expressed as to the
enforceability of indemnification provisions included herein;
(c) the shares of UniCapital Stock to be received by the
Stockholders on the Merger Effective Date shall be duly authorized, fully paid
and nonassessable; and
(d) the execution, delivery and performance of this Agreement
and the consummation of any of the transactions contemplated hereby will not
conflict with, or result in a breach or violation of, the Certificate of
Incorporation or Bylaws of UniCapital or Newco.
9.4 REGISTRATION STATEMENT. UniCapital shall have filed with the
Securities and Exchange Commission ("SEC") a registration statement on Form S-1
covering the offer and sale of shares of UniCapital Stock in the IPO (the
"Registration Statement"). The Registration Statement shall have been declared
effective by the SEC not later than June 30, 1998, UniCapital and the
underwriters named therein shall have executed the Underwriting Agreement and
the underwriters named therein shall have agreed to acquire, subject to the
conditions set forth in the Underwriting Agreement, the shares of UniCapital
Stock covered by the Registration Statement. There shall have been no stop-order
issued (that remains in effect) by the SEC with respect to the Registration
Statement.
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9.5 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND
NEWCO
The obligations of UniCapital and Newco hereunder are subject to the
satisfaction, on or prior to the Closing Date (or such earlier date specified
below), of the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
Stockholders shall have delivered to UniCapital a certificate dated the Merger
Effective Date and signed by them to the effect that all of the representations
and warranties of the Stockholders contained in this Agreement shall be true on
and as of the Closing Date and as of the Merger Effective Date with the same
effect as though such representations and warranties had been made on and as of
such dates, except for matters expressly disclosed in the certificate or a
schedule thereto (which shall not serve to modify any representation or warranty
made herein or in any other document or otherwise in information supplied by the
Company or any Stockholder); and each and all of the agreements of the
Stockholders and the Company to be performed on or before the Closing Date
pursuant to the terms hereof shall have been performed.
10.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by UniCapital of the Company Stock and no
governmental agency or body shall have taken any other action or made any
request of UniCapital as a result of which the management of UniCapital deems it
inadvisable to proceed with the transactions hereunder.
10.3 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the Closing Date,
UniCapital shall have had at least ten days to review the unaudited consolidated
balance sheets of the Company as of the end of the then most recently completed
calendar month, and the unaudited consolidated statements of income, cash flows
and stockholders' equity of the Company for the periods then ended, which
statements shall have disclosed no material adverse change in the financial
condition of the Company or any Subsidiary or the results of their respective
operations from the financial statements originally furnished by the Company as
set forth in Schedule 6.12.
10.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, operations, assets, properties, prospects or condition (financial or
otherwise) of the Company or any Subsidiary shall have occurred, and neither the
Company nor any Subsidiary shall have suffered any material loss or damage to
any of its properties or assets, whether or not covered by insurance, since the
Interim Balance Sheet Date, which change, loss or damage materially affects or
impairs the ability of such Company to conduct its business as now conducted or
as proposed
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to be conducted; and UniCapital shall have received on the Closing Date a
certificate signed by the Stockholders and dated the Merger Effective Date to
such effect.
10.5 REGULATORY REVIEW. UniCapital, through its authorized
representatives, shall have completed a satisfactory review of the practices and
procedures of each Company including, but not limited to, environmental and land
use practices, import and export laws, compliance with contracts and federal,
state and local laws and regulations governing the respective operations of
Company and its Subsidiaries, which review reflects compliance with all
applicable laws governing each Company, disclosing no material actual or
probable violations, compliance problems, required capital expenditures or other
substantive environmental, real estate and land use related concerns and which
review is otherwise satisfactory in all respects to UniCapital, in its sole
discretion.
10.6 STOCKHOLDERS' RELEASE. At the Closing Date, the Stockholders shall
have delivered to UniCapital an instrument dated the Merger Effective Date
releasing each Company and its Subsidiaries from any and all claims of
Stockholders against such Company or any of its Subsidiaries, except claims for
benefits accrued by the Stockholders pursuant to any Benefit Plan.
10.7 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.2
shall have executed and delivered an Employment Agreement in the form of Annex
IV attached hereto.
10.8 OPINION OF COUNSEL. UniCapital shall have received an opinion from
counsel to the Stockholders, satisfactory to UniCapital, dated the Merger
Effective Date, in form and substance satisfactory to UniCapital stating
substantially that with respect to the Company (and its Subsidiaries):
(a) the Company and each Subsidiary has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as now conducted and
as proposed to be conducted, and is duly qualified to transact business in each
jurisdiction in which it is required to do so by reason of its ownership or
leasing of real property located in such jurisdiction or maintaining an office
in such jurisdiction and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of real property requires it
to be so, except to the extent that the failure to be in good standing would not
have a material adverse effect on the Company and its Subsidiaries, taken as a
whole;
(b) all of the issued shares of capital stock of the Company
have been duly authorized and validly issued, are fully paid and non-assessable,
and all of the issued shares of capital stock of each Subsidiary have been duly
authorized and validly issued, are fully paid and non-assessable and are owned
directly by the Company, free and clear of all liens, encumbrances, equities or
claims;
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(c) the Agreement (including each other agreement contemplated
thereby) has been duly authorized, executed and delivered by each of the parties
thereto other than UniCapital and Newco, constitutes a legally valid and binding
obligation of each such party other than UniCapital and Newco, and is
enforceable against each such party other than UniCapital and Newco in
accordance with its terms, subject to (i) the effect of bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar laws affecting the
rights and remedies of creditors generally and (ii) the effect of general
principles of equity, whether applied by a court of law or equity;
(d) the execution and delivery by each party other than
UniCapital and Newco of, and the performance by each party other than UniCapital
and Newco of its obligations under, the Agreement (including each other
agreement contemplated hereby) will not contravene any provision of applicable
law or the Certificate of Incorporation or Bylaws of the Company or any
Subsidiary, each as amended as of the date of this opinion, or, to the best of
our knowledge, result in a breach or default under any agreement or other
instrument binding upon the Company or any Subsidiary (which default is material
to the Company and its Subsidiaries, taken as a whole), or, to the best of our
knowledge, violate any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Company or any Subsidiary, and no
consent, approval, authorization or order of, or qualification with, any
governmental body or agency of the United States of America or any state thereof
is required for the performance by each party other than UniCapital and Newco of
its obligations under the Agreement or the transactions contemplated therein,
except for the effectiveness of the Registration Statement and except for such
approval as may be required under the HSR Act; and
(e) after due inquiry, we do not know of any legal or
governmental proceedings pending or to our knowledge threatened to which the
Company or any Subsidiary is a party or to which any of the properties of the
Company or any Subsidiary is subject.
Such opinion shall include any other matters incident to the matters set forth
herein as agreed to by the parties and their respective counsel.
10.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
10.10 GOOD STANDING CERTIFICATES. Stockholders shall have delivered to
UniCapital certificates, dated as of a date no earlier than five days prior to
the Closing Date, duly issued by the appropriate governmental authority in the
Company's and each Subsidiary's state of incorporation and, unless waived by
UniCapital, in each state in which the Company and each Subsidiary is authorized
to do business, showing that the Company and each Subsidiary is in good standing
and authorized to do business and that all state franchise and/or income tax
returns
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and taxes for the Company and each Subsidiary for all periods prior to the dates
of such certificates have been filed and paid.
10.11 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC, and UniCapital and the representatives of
the underwriters named in the Registration Statement shall have executed the
Underwriting Agreement. There shall have been no stop-order issued (that remains
in effect) by the SEC with respect to the Registration Statement.
10.12 REPAYMENT OF OBLIGATIONS. Prior to the Closing Date, (a) the
Stockholders shall have (i) repaid to the Company (including its Subsidiaries)
in full all amounts owing by the Stockholders to such entities (including,
without limitation, all amounts owing to the Company with respect to the real
property located at 8451 Boulder, Commerce Township, Michigan) and (ii)
completed all transactions contemplated by Section 8.15; and (b) the Company and
its Subsidiaries shall have paid in full all sales tax obligations of the
Company and its Subsidiaries to the State of Michigan.
10.13 NET INCOME. After taking into account all transactions
contemplated by Section 8.15, the Company shall have aggregate after tax net
income for the twelve months ended December 31, 1997 as is included in
UniCapital's unaudited pro forma combined (prior to pro forma and offering
adjustments) income statement for the twelve months ended December 31, 1997
included in the Registration Statement.
10.14 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
11. COVENANTS OF UNICAPITAL
11.1 UNICAPITAL STOCK OPTIONS. Upon the effective date of the
Registration Statement (but subject in all events to the consummation of the
Merger), UniCapital shall make available options to purchase that number of
shares of UniCapital Stock having a fair market value on the effective date of
the Registration Statement, based upon the IPO price per share set forth in the
Underwriting Agreement, equal to 6.25% of the Effective Date Consideration
(valuing the UniCapital Stock to be issued as part of the Effective Date
Consideration at the IPO price per share for the purposes of this Section 11.1)
to be granted to those non-Stockholder key employees of, and agents and
consultants providing bona fide services to, the Surviving Corporation after the
Closing as are designated by the principal executive officer of the Surviving
Corporation who is entering into an Employment Agreement pursuant to Section 9.2
hereof (or such other officer designated by the Surviving Corporation and
acceptable to UniCapital). Not later than seven days prior to the effective date
of the Registration Statement, the officer designating the recipients of such
options shall provide to UniCapital a written list of
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the names of those designated recipients who will receive options exercisable at
the IPO price and the relative percentages of the 6.25% option pool provided
under this Section 11.1 to be awarded to each recipient, as well as the
percentage of options, if any, to be reserved for future issuance. Any options
reserved for future issuance shall be granted at an exercise price equal to the
fair market value of UniCapital Stock as of the date of grant. All options shall
be granted in accordance with UniCapital's policies, and authorized and issued
under the terms of UniCapital's principal stock option plan for the benefit of
employees of UniCapital and its subsidiaries.
11.2 INFORMATION FILING. UniCapital shall file all information required
to be filed by it pursuant to Treasury Regulation ss.1.351-3(b).
11.3 RELEASE FROM GUARANTEES; INDEBTEDNESS. Not later than 120 days
following the Merger Effective Date, UniCapital shall cause the Stockholders to
be released from any and all guarantees of any indebtedness or other obligations
set forth on Schedule 11.3 that they personally guaranteed for the benefit of
the Company or any Subsidiary, with all such guarantees (a) on indebtedness
being assumed by UniCapital; provided, that, in the event that the beneficiary
of any such guarantee is unwilling to permit the assumption by UniCapital of the
obligations under such guarantee, or in the event that the lender with respect
to the indebtedness to which such guarantee relates accelerates such
indebtedness whether or not prior to such 120 day period because of the
consummation of the transactions contemplated hereby, UniCapital shall repay up
to $15,000,000 of the indebtedness to which such guarantee relates, or (b) with
respect to the Varilease/GATX Limited Partnership I, being assumed by
UniCapital, or, in the event that the beneficiary of such guarantee is unwilling
to permit the assumption by UniCapital of the obligations under such guarantee,
UniCapital shall indemnify such Stockholder from any and all amounts such
Stockholder may be required to personally pay pursuant to such guarantee,
provided that UniCapital shall only be obligated to indemnify such Stockholder
if the event causing the trigger of such guarantee occurs after the Closing Date
and then only to the extent that the guarantee is not triggered by the
commission of fraud by any Stockholder. The failure of the Company or its
Subsidiaries to obtain the consent of its lenders or of the beneficiary of the
aforementioned guarantee to the assignment to UniCapital of the indebtedness or
obligation set forth on Schedule 11.3 shall not be deemed a breach hereunder.
11.4 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, UniCapital shall use its reasonable best efforts to (a) file all
information required to be filed by it pursuant to such act and (b) provide the
Company with all information reasonably required and requested by it to satisfy
any filing requirements it may have under such act.
11.5 REAL ESTATE TRANSACTIONS. UniCapital acknowledges and agrees that
after the date of this Agreement (through and including the Merger Effective
Date and Closing Date) the Company and Surviving Corporation (as the case may
be) shall be permitted to continue to undertake the proposed real estate related
transactions described on Schedule 11.5 substantially and materially in
accordance with the terms set forth on such Schedule and neither the Company
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nor Stockholders shall be in breach of any representation, warranty, covenant or
agreement in this Agreement solely by pursuing and undertaking such transactions
described on Schedule 11.5 substantially and materially in accordance with the
terms set forth on such Schedule.
11.6 COMPANY OPTIONS. The Company, the Stockholders and UniCapital
acknowledge that:
(a) Anything contained in Article 2 hereof to the contrary
notwithstanding, on the Merger Effective Date, 9.72% of the Effective Date
Consideration payable to Robert VanHellemont, the principal stockholder of the
Company (the "Principal Stockholder"), less $1,225,398, shall be deposited into
an escrow account (the "Company Escrow") established by the Company for the
benefit of the Surviving Company, the Principal Stockholder and certain
employees and consultants of the Surviving Company, to be released therefrom in
accordance with the terms of the agreement governing the Company Escrow.
(b) Anything contained in Article 2 hereof to the contrary
notwithstanding, 10.8% of the any Earn-Out Consideration payable by UniCapital
to the Principal Stockholder in accordance with the terms of this Agreement
shall be deposited into to the Company Escrow, to be released therefrom in
accordance with its terms of the agreement governing the Company Escrow.
(c) Nothing contained in this Section 11.6 shall limit or
modify the provisions of Article 4 of this Agreement and, accordingly, 10% of
the Effective Date Consideration payable to the Stockholders shall be placed in
the escrow established for the benefit of the Stockholders and UniCapital under
the terms of the Indemnity Escrow Agreement (the "Indemnity Escrow"); provided,
however, that upon release of any of the Escrow Property to the Stockholders in
accordance with the terms of the Indemnity Escrow Agreement, 1.08% of any of the
Escrow Property payable to the Principal Stockholder shall be deposited into the
Company Escrow to be released therefrom in accordance with its terms. Nothing
contained herein, shall be deemed to have limited or reduced the obligations of
the Principal Stockholder under Article 3, Section 12.1 or Section 12.2 hereof.
(d) UniCapital agrees to, at the Stockholders expense, provide
reasonable cooperation to the Company and the Stockholders in establishing the
arrangement with the Option Holders regarding the matters described in this
Section 11.6, including, without limitation, permitting the Surviving
Corporation to enter into an agreement to establish the Option Escrow.
12. INDEMNIFICATION; SURVIVAL
12.1 GENERAL INDEMNIFICATION BY STOCKHOLDERS. Subject to the
limitations contained in Section 12.5 hereof, each Stockholder who is a
stockholder of the Company, jointly and
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severally, covenants and agrees that such Stockholder will indemnify, defend,
protect and hold harmless UniCapital, Newco and the Surviving Corporation and
their respective officers, stockholders, directors, divisions, subdivisions,
affiliates, subsidiaries, parents, agents, employees, successors and assigns at
all times from and after the date of this Agreement until the Expiration Date
(as defined in Section 12.6) from and against all claims, damages, losses,
liabilities, actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) (collectively, "Losses") incurred
by UniCapital, Newco or the Surviving Corporation as a result of or arising from
(a) any breach of the representations and warranties made by the Stockholders
set forth herein or on the schedules or certificates delivered in connection
herewith, (b) any nonfulfillment of any covenant or agreement on the part of the
Stockholders or the Company under this Agreement, (c) the business, operations
or assets of the Company or any Subsidiary prior to the Merger Effective Date or
the actions or omissions of the Company's or any Subsidiary's directors,
officers, stockholders, employees or agents prior to the Merger Effective Date,
other than Losses arising from matters expressly disclosed in the Audited
Financial Statements, this Agreement or the Schedules to this Agreement, or (d)
any liability under the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or other federal or state law or regulation, at
common law or otherwise, arising out of or based upon (i) any untrue statement
or alleged untrue statement of a material fact relating to the Company
(including its Subsidiaries) or the Stockholders contained in any preliminary
prospectus, the Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement thereto (including any additional
registration statement filed pursuant to Rule 462(b) under the Securities Act),
which statement was provided or was based upon information or documents provided
to UniCapital or its counsel by any Company (including its Subsidiaries) or the
Stockholders, or (ii) any omission or alleged omission to state therein a
material fact relating to the Company (including its Subsidiaries) or the
Stockholders required to be stated therein or necessary to make the statements
therein not misleading, which information was not provided to UniCapital or its
counsel by the Company (including its Subsidiaries) or the Stockholders;
provided, however, that such indemnity shall not inure to the benefit of
UniCapital, Newco or the Surviving Corporation to the extent that such untrue
statement (or alleged untrue statement) was made in, or such omission (or
alleged omission) occurred in, any preliminary prospectus and the Stockholders
provided, in writing, corrected information to UniCapital for inclusion in the
final prospectus, and such information was not so included.
12.2 SPECIFIC INDEMNIFICATION BY STOCKHOLDERS. Subject to the
limitations contained in Section 12.5 hereof, notwithstanding any disclosure
made in this Agreement or in the schedules or exhibits hereto, and
notwithstanding any investigation by UniCapital or Newco, each Stockholder,
jointly and severally, covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless UniCapital, Newco and the Surviving
Corporation and their respective officers, stockholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parents, agents, employees, successors
and assigns at all times from and after the date of this Agreement, from and
against all Losses incurred by UniCapital, Newco or the
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Surviving Corporation as a result of or incident to: (a) the existence of
liabilities of the Company or its Subsidiaries incurred or attributable to
periods prior to the Merger Effective Date in excess of the liabilities set
forth on Schedule 6.13 (excluding liabilities incurred in connection with Leases
in the ordinary course of business consistent with past practice and the
Company's and its Subsidiaries' underwriting standards), to the extent of such
excess; (b) the failure of the Company or the Stockholders to file all required
Form 5500's prior to the Merger Effective Date; (c) the litigation matters
listed on Schedule 6.25; (d) the termination of the Company's status as a
corporation taxed under Subchapter S as disclosed in Section 6.27; (e) any
Material Adverse Amendments pursuant to Section 8.14 hereof; and (f) those
Scheduled Payments delinquent during or with respect to the initial term of a
Lease for 90 days or longer as of the Closing Date net of applicable reserves
reflected on the balance sheet of the Company immediately prior to the
preparation of the Closing Date Balance Sheet; provided, however to the extent
such indemnification obligations have been satisfied with respect to such
Scheduled Payments and such Scheduled Payments are collected thereafter, the
Stockholders shall be entitled to the benefit of such subsequent payments.
12.3 INDEMNIFICATION BY UNICAPITAL AND NEWCO. Subject to the
limitations contained in Section 12.5 hereof, UniCapital and Newco, jointly and
severally, covenant and agree that they will indemnify, defend, protect and hold
harmless the Stockholders at all times from and after the date of this Agreement
from and against all Losses incurred by the Stockholders as a result of or
arising from (a) any breach of the representations and warranties made by
UniCapital and Newco set forth herein or on the schedules or certificates
attached hereto, (b) any nonfulfillment of any agreement on the part of
UniCapital under this Agreement, or (c) any liability under the Securities Act,
the Exchange Act or other federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged untrue
statement of a material fact relating to UniCapital (including all of companies,
other than the Company, acquired as part of the Unified Transaction, but only to
the extent that UniCapital is actually indemnified by such other companies for
such liability) contained in any preliminary prospectus, the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto (including any registration statement filed pursuant to Rule
462(b) under the Securities Act), or arising out of or based upon any omission
or alleged omission to state therein a material fact relating to UniCapital
(including all of companies, other than the Company, acquired as part of the
Unified Transaction) required to be stated therein or necessary to make the
statements therein not misleading, which liability is not the subject of
indemnification of UniCapital, Newco and the Surviving Corporation pursuant to
Section 12.1(c) above.
12.4 THIRD PARTY CLAIMS.
(a) In order for a party hereto eligible to be indemnified
hereunder (an "Indemnified Party") to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of or involving a
claim or demand made by any person or entity against the Indemnified Party (a
"Third Party Claim"), such Indemnified Party must notify the parties
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obligated to provide indemnification pursuant to Section 12.1, 12.2, or 12.3
hereof (each, an "Indemnifying Party") in writing, and in reasonable detail, of
the Third Party Claim within 30 business days after receipt by such Indemnified
Party of written notice of the Third Party Claim; provided, however, that
failure to give such notification shall not affect the indemnification provided
hereunder except to the extent the Indemnifying Party shall have been actually
prejudiced as a result of such failure. Such notice shall state the nature and
the basis of such claim and a reasonable estimate of the amount thereof.
Thereafter, the Indemnified Party shall deliver to the Indemnifying Party,
within five business days after the Indemnified Party's receipt thereof, copies
of all notices and documents (including court papers) received by the
Indemnified Party relating to the Third Party Claim. To the extent that the
Indemnifying Party has actually paid any amount to the Indemnified Party in
respect of any Loss in connection with such Third Party Claim, the Indemnifying
Party shall have a right of subrogation with respect to such Third Party Claim
to the extent of such payment.
(b) The Indemnifying Party shall have right to defend and
settle, at its own expense and by its own counsel (provided that such counsel is
not reasonably objected to by the Indemnified Party, and provided further, that
the selection for these purposes of Gordon, Altman, Butowsky, Weitzen, Shalov &
Wein, absent any actual or reasonably likely conflict of interest with respect
to parties or defenses, shall not be objected to by UniCapital), any Third Party
Claim as the Indemnifying Party pursues the same in good faith and diligently
and so long as the Third Party Claim does not relate to an actual or potential
Loss to which Section 12.4(e) applies in which the Indemnified Party is
UniCapital, Newco or the Surviving Corporation. If the Indemnifying Party
undertakes to defend or settle, it shall promptly notify the Indemnified Party
of its intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. Notwithstanding the foregoing, the Indemnified Party
shall have the right to participate in any matter through counsel of its own
choosing at its own expense (unless there is a conflict of interest that
prevents counsel for the Indemnifying Party from representing the Indemnified
Party, in which case the Indemnifying Party will reimburse the Indemnified Party
for the expenses of its counsel). After the Indemnifying Party has notified the
Indemnified Party of its intention to undertake to defend or settle any such
asserted liability, and for so long as the Indemnifying Party diligently pursues
such defense, the Indemnifying Party shall not be liable for any additional
legal expenses incurred by the Indemnified Party in connection with any defense
or settlement of such asserted liability, except to the extent such
participation is requested by the Indemnifying Party, in which event the
Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable
additional legal expenses and out-of-pocket expenses, and except in the case of
a Third Party Claim relating to an actual or potential Loss to which Section
12.4(e) applies in which the Indemnified Party is UniCapital, Newco or the
Surviving Corporation.
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(c) No Indemnifying Party shall, in the defense of any Third
Party Claim, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) or enter into any settlement, except with
the written consent of the Indemnified Party, which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim or
matter.
(d) If the Indemnifying Party does not assume the defense of
any Third Party Claim, then the Indemnified Party may defend against such Third
Party Claim in such manner as it deems appropriate at the expense of the
Indemnifying Party.
(e) Notwithstanding anything to the contrary in this
Article 12, if at any time, in the reasonable opinion of UniCapital, Newco or
the Surviving Corporation as the Indemnified Party (notice of which opinion
shall be given in writing to the Indemnifying Party), any Third Party Claim
seeks material prospective relief which could have a material adverse effect on
any such Indemnified Party or any subsidiary, then such Indemnified Party shall
have the right to control or assume (as the case may be) the defense of any such
Third Party Claim and the amount of any judgment or settlement and the
reasonable costs and expenses of defense (including, but not limited to, fees
and disbursements of counsel and experts, as well as any sampling, testing,
investigation, removal, treatment or remediation undertaken by UniCapital, Newco
or the Surviving Corporation and all counseling or engineering fees and expenses
related thereto) shall be included as part of the indemnification obligations of
the Indemnifying Party hereunder. If the Indemnified Party elects to exercise
such right, then the Indemnifying Party shall have the right to participate in,
but not control, the defense of such Third Party Claim at the sole cost and
expense of the Indemnifying Party.
12.5 LIMITATIONS ON INDEMNIFICATION.
(a) To the extent of the amount UniCapital actually receives
as a result of a Net Worth Deficiency that is directly attributable to an
Indemnifiable Decrease, UniCapital shall not be entitled to any indemnity under
Article 12. An "Indemnifiable Decrease" shall be equal to the amount of the Net
Worth Deficiency that consists of a liability for which UniCapital would
otherwise be entitled to indemnity under Article 12 but that has been (a)
accrued, or (b) actually paid (so long as it was not previously accrued on or
before December 31, 1997), during the Interim Net Worth Period. The "Interim Net
Worth Period" shall mean the period beginning on January 1, 1998 and ending on
the Closing Date. Any amounts under (a) or (b) that have not been reflected on
the Company's (or its Subsidiaries') financial statements under generally
accepted accounting principles applied consistently with previous practice shall
be deemed to be an Indemnifiable Decrease.
(b) No Indemnified Party shall assert any claim (other than a
Third Party Claim) for indemnification hereunder until such time as the
aggregate of all claims which such Indemnified Party may have against an
Indemnifying Party shall exceed an amount equal to $735,060 (the "Basket
Limitation"), at which time an Indemnified Party shall be
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entitled to seek indemnification for all claims pursuant to this Article 12, but
only to the extent that such claims, in the aggregate, exceed the Basket
Limitation. Notwithstanding the foregoing, on each date on which any Earn-Out
Consideration is paid, the Basket Limitation shall be increased by that amount
(the "Basket Adjustment") equal to one percent (1%) of any such Earn-Out
Consideration, without prejudice to UniCapital's receipt of or right to receive
indemnification for claims exceeding the amount of the Basket Limitation in
effect at the time such claims were brought. If the Basket Limitation is
adjusted pursuant to the preceding sentence after such time as any Indemnified
Party, pursuant to this Article 12, has collected an amount in excess (such
excess amount is referred to as the "Excess Indemnity") of the Basket Limitation
(prior to giving effect to the applicable Basket Adjustment), then such
Indemnified Party, within 10 business days after the final determination of such
Earn-Out Consideration, shall pay to the Indemnifying Party an amount equal to
the lesser of applicable Basket Adjustment or the Excess Indemnity. In addition,
notwithstanding any provision of this Agreement to the contrary, for the
purposes of preventing a double recovery the Stockholders shall not be obligated
to indemnify UniCapital or any other indemnified party pursuant to Section 12.1
or 12.2 with respect to any particular act, omission, condition or event if and
to the extent that the loss resulting or arising from such act, omission,
condition or event has, directly or indirectly, been taken into account in the
computation of any Net Worth Deficiency provided for in Section 3.1.
Notwithstanding any other term of this Agreement, in no event shall any
Stockholder be liable under this Article 12 for an amount which exceeds the
aggregate value (determined at the Merger Effective Date) of the Merger
Consideration received by such Stockholder under this Agreement. Notwithstanding
anything to the contrary contained in this Agreement, the limitations upon
indemnification contained in this Section 12.5 shall not apply to Losses arising
out of (i) any breach of the representations and warranties of the Stockholders
contained in Sections 6.3, 6.5, 6.14, 6.27 and 6.33 hereof, (ii) litigation net
of applicable reserves reflected on balance sheets of the Company at the Audited
Balance Sheet Date and (iii) a Material Adverse Amendment pursuant to Section
8.14 hereof. Anything contained in Section 12.1 to the contrary notwithstanding,
in the event that the Closing occurs, none of UniCapital, Newco and the
Surviving Corporation and their respective officers, stockholders, directors,
divisions, subdivisions, affiliates, subsidiaries, parents, agents, employees,
successors and assigns shall be entitled to indemnification under or pursuant to
Section 12.1(b) as a result of a breach by any one or more of the Company and
the Stockholders of the provisions of Section 8.2 hereof unless and to the
extent that such breach also constitutes a breach of the representations and
warranties contained in Section 6.30 hereof.
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The parties agree that
representations and warranties made by the parties in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive for a period of one year from the Merger Effective Date (which date is
hereinafter called the "Expiration Date"), except that:
(a) the representations and warranties contained in Section
6.27 hereof shall survive until such time as the limitations period has run for
all tax periods ended on or
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prior to the Merger Effective Date, which shall be deemed to be the Expiration
Date for purposes of this clause (a) and claims arising from a breach of the
representations and warranties contained in such Section 6.27;
(b) the representations and warranties contained in Section
6.28(g) hereof shall survive until such time as one full fiscal year's cycle of
transactions occurring entirely within the twenty-first century shall have been
processed and UniCapital's consolidated financial statements for the fiscal year
in which the last such transaction to be processed occurred have been audited,
which shall be deemed to be the Expiration Date for purposes of this clause (b)
and claims arising from a breach of the representations and warranties contained
in such Section 6.28(g);
(c) the representations and warranties contained in Section
6.33 hereof shall survive for a period of five years from the Merger Effective
Date, which shall be deemed the Expiration Date for purposes of this clause (c)
and claims arising from a breach of the representations and warranties contained
in such Section 6.33;
(d) solely for purposes of Section 12.1(c) hereof, and solely
to the extent that UniCapital actually incurs liability under the Securities
Act, the Exchange Act, or any other federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for purposes of this clause (d) and claims arising under such
laws;
(e) the representations and warranties of the Stockholders
contained in Section 6.5 hereof shall survive the Merger Effective Date without
time limitation; and
(f) any representations and warranties which serve as a basis
of the indemnity obligations of the Stockholders under Section 12.2 shall
survive the Merger Effective Date without time limitation.
13. TERMINATION OF AGREEMENT
13.1 TERMINATION BY UNICAPITAL. UniCapital may, by notice in the manner
hereinafter provided on or before the Closing Date, terminate this Agreement (a)
if a material default shall be made by the Stockholders in the observance or due
and timely performance of any of the covenants, agreements or conditions
contained herein, and the curing of such default shall not have been made on or
before the Closing Date and shall not reasonably be expected to occur or (b) if
UniCapital in its sole judgment determines that any condition exists which has
made or could reasonably be expected to make any of the representations or
warranties contained in Article 6 hereof untrue in any material respect or (c)
if UniCapital in its sole judgment determines that information disclosed on the
schedules to the Agreement delivered pursuant to Section 8.14 has or could
reasonably be expected to have a material
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adverse effect on the business, operations, assets, properties, prospects or
condition (financial or otherwise) of the Company.
13.2 TERMINATION BY THE STOCKHOLDERS. Prior to the initial filing of
the Registration Statement with the SEC, the Stockholders may, by notice in the
manner hereinafter provided on or before such initial filing, terminate this
Agreement (a) in accordance with Section 17.4(b) or (b) if a material default
shall be made by UniCapital or Newco in the observance or due and timely
performance of any of the covenants, agreements or conditions contained herein,
and the curing of such default shall not have been made on or before such
initial filing. Notwithstanding the foregoing, from and after the initial filing
of the Registration Statement with the SEC, the Stockholders shall have no right
to terminate this Agreement.
13.3 AUTOMATIC TERMINATION. This Agreement shall terminate
automatically:
(a) if the Registration Statement has not been declared
effective by June 30, 1998;
(b) if, between the Closing Date and the Merger Effective
Date, the Underwriting Agreement is terminated pursuant to the terms thereof;
(c) if the Merger Effective Date has not occurred within 10
business days after the Closing Date; or
(d) upon the date that the number of shares of UniCapital
Stock to be issued (other than as Earn-Out Consideration) to the persons who
will transfer property to UniCapital in the Unified Transaction can be
determined as a fixed number of shares, unless those same persons shall own
immediately after in the Unified Transaction eighty percent (80%) or more of the
UniCapital Stock that will be issued and outstanding immediately after the
Unified Transaction.
13.4 LIQUIDATED DAMAGES. If the Merger fails to occur because of the
default of the Company or the Stockholders, then, in addition to the other
remedies available to UniCapital at law (in the event of fraud) or in equity or
pursuant to this Agreement, the Stockholders shall pay to UniCapital the sum of
$500,000 as liquidated damages. It is hereby agreed that UniCapital's damages in
the event of a termination or default by Company hereunder are uncertain and
impossible to ascertain and that the foregoing constitutes a reasonable
liquidation of such damages and is intended not as penalty but as liquidated
damages.
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14. NONCOMPETITION AND NONSOLICITATION
14.1 NONCOMPETITION.
(a) In order to protect the value and goodwill of the Company
and its Subsidiaries and their respective businesses, each Stockholder covenants
that, for the period ending two years after the Closing Date, except for the
matters disclosed on Schedule 14.1, such Stockholder will not, directly or
indirectly, own, manage, operate, join, control, finance or participate in the
ownership, management, operation, control or financing of, or be connected as a
partner, principal, agent, representative, consultant or otherwise with, or use
or permit such Stockholder's name to be used in connection with, any business or
enterprise which is engaged directly or indirectly in competition anywhere in
the United States with the business conducted by UniCapital, the Surviving
Corporation or any of its or their respective subsidiaries or affiliates or with
any business engaged in originating, servicing or securitizing leases or other
specialty financing products or services (the "Restricted Business"). Each
Stockholder recognizes that the Restricted Business is expected to be conducted
throughout the United States and that more narrow geographical limitations of
any nature on this non-competition covenant (and the non-solicitation covenant
set forth in subsection (b)) are therefore not appropriate. The foregoing
restriction shall not be construed to prohibit the ownership by a Stockholder as
a passive investment of not more than five percent of any class of securities of
any corporation which is engaged in any of the foregoing businesses having a
class of securities registered pursuant to Section 12 of the Exchange Act.
(b) Each Stockholder further covenants that for the period
ending two years after the Closing Date, such Stockholder will not, either
directly or indirectly, (i) call on or solicit any customers or prospective
customers of the Restricted Business, or (ii) solicit the employment of any
person who is employed by UniCapital, the Surviving Corporation or any of its or
their respective subsidiaries or affiliates in the Restricted Business during
such period.
(c) Each Stockholder recognizes and acknowledges that by
reason of such Stockholder's relationship to the Company, such Stockholder has
had access to confidential information relating to the Restricted Business. Each
Stockholder acknowledges that such confidential information is a valuable and
unique asset and covenants that such Stockholder will not disclose any such
confidential information after the Closing Date to any person for any reason
whatsoever.
14.2 DAMAGES. Each Stockholder acknowledges and agrees that measuring
economic losses to UniCapital and the Surviving Corporation as a result of the
breach of the foregoing covenants in this Article 14 would be impossible, and
that any breach of the foregoing covenants would result in immediate and
irreparable damage to UniCapital and the Surviving Corporation for which they
would have no other adequate remedy. Accordingly, the Stockholders agree that,
in the event of a breach by them of any of the foregoing
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covenants, such covenants may be enforced by UniCapital or the Surviving
Corporation by, without limitation, injunctions and restraining orders.
14.3 REASONABLE RESTRAINT. The Parties agree that the foregoing
covenants in this Article 14 impose a reasonable restraint upon the Stockholders
in light of the activities and business of UniCapital on the date of the
execution of this Agreement and the current and future plans of UniCapital and
the Surviving Corporation (as successors to the businesses of the Company and
its Subsidiaries), and that any violation will result in irreparable injury to
UniCapital.
14.4 SEVERABILITY; REFORMATION. The covenants in this Article 14 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, if any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
14.5 INDEPENDENT COVENANT. All of the covenants in this Article 14
shall be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of any Stockholder
against the Company, any of the Company's Subsidiaries, the Surviving
Corporation or UniCapital, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement of such covenants. The parties
specifically agree that the period of two years stated above shall be computed
by excluding from such computation any time during which any Stockholder is in
violation of any provision of this Article 14 and any time during which there is
pending in any court of competent jurisdiction any action (including any appeal
from any judgment) brought by any person, whether or not a party to this
Agreement, in which action UniCapital or the Surviving Corporation seek to
enforce the agreements and covenants of the Stockholders or in which any person
contests the validity of such agreements and covenants or their enforceability
or seeks to avoid their performance or enforcement.
14.6 MATERIALITY. The Stockholders hereby acknowledge and agree that
the covenants contained in this Article 14 are a material and substantial part
of this transaction and are entered into in connection with and as an inducement
to the acquisition by UniCapital and Newco of the businesses of the Company and
its Subsidiaries.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that they
have in the past, currently have, and in the future may possibly have, access to
certain confidential
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information of the Company or its Subsidiaries, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Company and its Subsidiaries and their respective
businesses. The Stockholders agree that they will not disclose any confidential
information to any person, firm, corporation, association or other entity for
any purpose or reason whatsoever, except to authorized representatives of
UniCapital or as may be required by law or order of a court of competent
jurisdiction, unless the Stockholders can show that such information has become
known to the public generally through no fault of the Stockholders. Prior to
disclosing any confidential information required by law or order of a court of
competent jurisdiction, the Stockholders shall provided UniCapital with prompt
notice of the disclosure requirement so that UniCapital may take whatever action
it deems appropriate to prohibit such disclosure. In the event of a breach or
threatened breach by the Stockholders of the provisions of this Section 15.1,
UniCapital and the Surviving Corporation shall be entitled to an injunction
restraining Stockholders from disclosing, in whole or in part, such confidential
information. Nothing herein shall be construed as prohibiting UniCapital and the
Surviving Corporation from pursuing any other available remedy for such breach
or threatened breach, including the recovery of damages.
15.2 UNICAPITAL. UniCapital recognizes and acknowledges that it has in
the past, currently has, and prior to the Closing Date will have, access to
certain confidential information solely of the Company or its Subsidiaries in
connection with their respective businesses. UniCapital agrees that, prior to
the Closing Date, it will not disclose any such confidential information to any
person, firm, corporation, association, or other entity for any purpose or
reason whatsoever without prior written consent of the Stockholders, except as
may be required by law or order of a court of competent jurisdiction, unless
UniCapital can show that such information has become known to the public
generally through no fault of UniCapital. In the event of a breach or threatened
breach by UniCapital of the provisions of this Section 15.2, the Stockholders
shall be entitled to an injunction restraining UniCapital from disclosing, in
whole or in part, such confidential information. Nothing contained herein shall
be construed as prohibiting the Stockholders from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
15.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, UniCapital, the Surviving Corporation and the Stockholders
agree that, in the event of a breach by any of them of the foregoing covenant,
the covenant may be enforced against them by injunctions and restraining orders.
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16. LOCK-UP AGREEMENTS
16.1 AGREEMENT. In connection with the IPO, for good and valuable
consideration, and to induce the underwriters that may participate in the IPO to
continue their efforts in connection with the IPO, each Stockholder hereby
agrees that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of such underwriters, it will not, during the period
commencing on the date of this Agreement and ending 180 days after the date of
the final prospectus contained in the Registration Statement relating to the IPO
(the "Prospectus"), (a) offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of UniCapital Stock or any securities
convertible into or exercisable or exchangeable for UniCapital Stock, except
with respect to the arrangement described in Section 11.6, or (b) enter into any
swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of UniCapital Stock, whether any such
transaction described in clause (a) or (b) above is to be settled by delivery of
UniCapital Stock or such other securities, in cash or otherwise. In addition,
each Stockholder agrees that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the underwriters that may participate in
the IPO, it will not, during the period commencing on the date of this Agreement
and ending 180 days after the date of the Prospectus, make any demand for or
exercise any right with respect to, the registration of any shares of UniCapital
Stock or any security convertible into or exercisable or exchangeable for Common
Stock.
16.2 INTENDED THIRD PARTY BENEFICIARIES. Each Stockholder agrees that
the foregoing shall be binding upon their transferees, successors, assigns,
heirs, and personal representatives and shall benefit and be enforceable by the
underwriters in the IPO. Each Stockholder acknowledges and agrees that such
underwriters and Morgan Stanley & Co. Incorporated are intended third party
beneficiaries of the provisions of this Article 16, and that Morgan Stanley &
Co. Incorporated on behalf of such underwriters shall be entitled to enforce the
covenants contained in this Article 16. In furtherance of the foregoing,
UniCapital and its transfer agent are hereby authorized to decline to make any
transfer of securities if such transfer would constitute a violation or breach
of this Article 16. Except as set forth in this Article 16, there are no
intended third-party beneficiaries under this Agreement.
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK
17.1 INVESTMENT INTENT. The Stockholders acknowledge and agree that the
shares of UniCapital Stock to be delivered to the Stockholders pursuant to this
Agreement have not been and will not be registered under the Securities Act and
therefore may not be resold without compliance with the Securities Act. The
Stockholders represent and warrant that the
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shares of UniCapital Stock to be acquired by the Stockholders pursuant to this
Agreement are being acquired solely for their own account, for investment
purposes only, and with no present intention of distributing, selling or
otherwise disposing of it in connection with a distribution.
17.2 COMPLIANCE WITH LAW. The Stockholders covenant, warrant and
represent that none of the shares of UniCapital Stock issued to such
Stockholders will be offered, sold, assigned, pledged, hypothecated, transferred
or otherwise disposed of except after full compliance with all of the applicable
provisions of the Securities Act and the rules and regulations of the SEC
thereunder, and except after full compliance with any applicable state
securities laws.
17.3 ECONOMIC RISK; SOPHISTICATION. The Stockholders represent and
warrant that they are able to bear the economic risk of an investment in
UniCapital Stock acquired pursuant to this Agreement and can afford to sustain a
total loss of such investment. The Stockholders further represent and warrant
that they (a) fully understand the nature, scope and duration of the limitations
on transfer contained in this Agreement and (b) have such knowledge and
experience in financial and business matters that they are capable of evaluating
the merits and risks of the proposed investment and therefore have the capacity
to protect their own interests in connection with the acquisition of the
UniCapital Stock.
17.4 INFORMATION SUPPLIED.
(a) The Stockholders represent and warrant that they have had
an adequate opportunity to ask questions and receive answers from the officers
of UniCapital concerning UniCapital, its business, operations, plans and
strategy, and the background and experience of its officers and directors. The
Stockholders represent and warrant that they have asked any and all questions
that they may have in the nature described in the preceding sentence and that
all such questions have been answered to their satisfaction.
(b) Each Stockholder represents and warrants that he has
received the draft Registration Statement, including the draft preliminary
prospectus that forms a part thereof, delivered to him on or about February 14,
1998 that describes, among other things, UniCapital, the Merger, the other
acquisitions proposed to be undertaken by UniCapital simultaneously with the
Merger and the target companies of such other acquisitions. Each Stockholder
represents and warrants that he has reviewed such draft Registration Statement
and draft preliminary prospectus and has had adequate opportunity to ask
questions of and receive answers to his satisfaction from the officers of
UniCapital concerning the matters described therein.
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18. SECURITIES LEGENDS
The certificates evidencing the UniCapital Stock to be received by the
Stockholders hereunder will bear a legend substantially in the form set forth
below and containing such other information as UniCapital may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES OR BLUE SKY LAWS.
SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
SECURITIES ACT AND ANY STATE SECURITIES OR BLUE SKY LAWS,
UNLESS, IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION) OF COUNSEL SATISFACTORY TO
THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
In addition, such certificates shall also bear (a) a legend reflecting the
restrictions contained in Article 16 and (b) such other legends as counsel for
UniCapital reasonably determines are required under the applicable laws of any
state.
19. UNICAPITAL OPTION
19.1 PURCHASE OPTIONS. Robert VanHellemont ("VanHellemont") hereby
grants to UniCapital the options (the "Purchase Options") to purchase
VanHellemont's entire equity interests in (a) Worldwide Maintenance Corp. (the
"Worldwide Option"), which shall be exercisable at any time within twelve months
following the date of the IPO, or (b) Summa Leasing, Inc. (the "Summa Option"),
which shall be exercisable at any time within 24 months following the date of
the IPO. Notwithstanding the foregoing, at the option of UniCapital, the
Worldwide Option shall expire in the event that VanHellemont's ownership of the
stock of Worldwide Maintenance Corp. ("Worldwide") is challenged in a court of
competent jurisdiction by a third party plaintiff in which case, VanHellemont,
in good faith, shall negotiate the terms of a new option for the purchase by
UniCapital of the stock of Worldwide then held by VanHellemont.
Upon the exercise by UniCapital of any Purchase Option, UniCapital and
VanHellemont will prepare and negotiate in good faith a mutually satisfactory
definitive agreement (each a "Definitive Purchase Agreement") providing for the
sale of VanHellemont's equity interests of Worldwide Maintenance Corp.
("Worldwide") or Summa
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Leasing, Inc. ("Summa" which together with Worldwide are the "Option Companies")
to UniCapital, which Agreement shall contain those representations and
warranties substantially as contained in Schedule 19 hereto, such other
representations and warranties as are mutually agreeable to UniCapital and
VanHellemont and customary indemnification provisions contained in agreements of
such type regarding the breach of representations, warranties, covenants and
agreements.
19.2 OPTION EXERCISE PRICE. The purchase price to be paid by UniCapital
upon the exercise of the Purchase Options shall be as follows: (a) with respect
to Worldwide, an amount equal to the sum of (i) $1,000,000, (ii) any additional
equity contributions made by VanHellemont to Worldwide after the date of this
Agreement and (iii) any amount which Worldwide owes VanHellemont; and (b) with
respect to Summa, the fair market value of VanHellemont's equity interest in
Summa as agreed to by UniCapital and VanHellemont.
19.3 REPRESENTATIONS AND WARRANTIES REGARDING THE OPTION COMPANIES. As
of the date hereof, VanHellemont owns beneficially and of record all of the
issued and outstanding shares of Worldwide (subject to any claims any third
party may have against such shares resulting from the outcome of litigation
challenging the ownership of such shares) and fifty percent of the issued and
outstanding shares of Summa. To the best knowledge of VanHellemont, all of the
issued and outstanding shares of Worldwide and Summa held by VanHellemont have
been duly authorized and validly issued, fully paid and nonassessable and have
been offered, issued, sold and delivered by the applicable corporation in
compliance with all applicable state and federal laws concerning the offering,
sale or issuance of securities. To the best knowledge of VanHellemont, there are
no existing agreements, options, commitments or rights with, of or to any person
to acquire any material assets or rights of Worldwide or any interest therein or
VanHellemont's interest in the Option Companies (other than as set forth above).
19.4 NEGATIVE COVENANT. To the extent within the reasonable control of
VanHellemont, VanHellemont shall not suffer the Option Companies to cause or
permit to cause any of the following between the date hereof and, in the case of
Worldwide, the period ending 12 months after the date of the IPO, or, in the
case of Summa, the period ending 24 months after the date of the IPO:
(a) declare, set aside or pay any dividend or make or agree to
make any other distribution or payment in respect of its capital shares or
redeem, purchase or otherwise acquire or agree to redeem, purchase or acquire
any of its shares of capital stock or other ownership interests, except for any
dividends in such amounts necessary to pay taxes on account of any income of the
Option Company; or
(b) sell, encumber, assign or transfer any ownership interest of
VanHellemont in either of the Option Companies or grant any options, warrants,
calls, conversion rights or commitments with respect to any such ownership
interests; or
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(c) agree to take any of the actions referred to above.
19.5 ACCESS. Until 12 months after the date of the IPO in the case of
Worldwide and 24 months after the date of the IPO in the case of Summa, upon
prior reasonable notice, to the extent within the reasonable control of
VanHellemont, VanHellemont shall cause the Option Companies to permit
UniCapital's officers, employees, counsel, accountants and other representatives
free and full access to and the right to inspect, during normal business hours,
all of the premises, properties, assets, records, contracts and other documents
relating to the Option Company and shall permit them to consult with the
officers, employees, accountants, counsel and agents of the Option Companies for
the purpose of making such investigation of such entities as UniCapital shall
reasonably request; provided that such investigation shall not unreasonably
interfere with such entities business operations, and provided, further, that
UniCapital shall not contact or consult with any non-officer employees of any
Option Company without its prior consent, which consent shall not be
unreasonably withheld. Furthermore, to the extent within the reasonable control
of VanHellemont, VanHellemont shall cause each Option Company to furnish to
UniCapital all such documents and copies of documents and records and
information with respect to the affairs of such entity and copies of any working
papers relating thereto as UniCapital shall from time to time reasonably
request. No information or knowledge obtained in any investigation pursuant to
this Section 19.5 or otherwise shall affect or be deemed to modify any
representation or warranty contained in this Agreement or the conditions to the
obligations of the parties to consummate the Merger. UniCapital acknowledges
that VanHellemont does not control Summa and, as a result, his ability to
provide access to Summa, its properties and employees may be limited.
19.6 CLOSINGS. UniCapital may exercise the Purchase Option from time to
time and at any time prior to the first anniversary of the IPO in the case of
Worldwide and the second anniversary of the IPO in the case of Summa. The
closing of any such exercise shall occur on the 10th business day after the date
of exercise, or such other date as is mutually agreeable to VanHellemont and
UniCapital, at the offices of Gordon Altman Butowsky Weitzen Shalov & Wein, 114
West 47th Street, New York, NY 10136.
19.7 DELIVERIES AT THE CLOSINGS At any Option Closing, VanHellemont
shall deliver:
(i) certificates representing his respective equity
interest in the applicable Option Company, in each case either duly
endorsed for transfer to UniCapital or accompanied by appropriate
stock powers;
(ii) payment instructions regarding the payment of the
applicable Option Purchase Price; and
(iii) an executed copy of the applicable Definitive
Purchase Agreement; and,
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UniCapital shall deliver:
(i) payment of the applicable Option Exercise Price; and
(iii) an executed copy of the applicable Definitive
Purchase Agreement.
19.8 TERMINATION OF OPTION. Notwithstanding the foregoing, no Purchase
Option shall be exercisable until after the Effective Time and each Purchase
Option shall automatically terminate in the event of a termination of this
Agreement.
20. GENERAL
20.1 COOPERATION. The Stockholders and UniCapital shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement. The
Stockholders will cooperate and use their best efforts to have the officers,
directors and employees of Company prior to the Closing Date cooperate with
UniCapital on and after the Closing Date in furnishing information, evidence,
testimony and other assistance in connection with any actions, proceedings,
arrangements or disputes of any nature with respect to matters pertaining to all
periods prior to the Closing Date.
20.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of UniCapital, and the heirs and legal representatives of the
Stockholders.
20.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Company, UniCapital and Newco and supersedes any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the Stockholders (subject to the limitations
set forth below), the Company, UniCapital and Newco acting through their
respective officers, duly authorized by their respective Boards of Directors;
provided, that the Stockholder who owns a majority of the outstanding shares of
capital stock of the Company shall have the authority to approve and execute any
amendment to this Agreement on behalf of all of the Stockholders and without the
necessity of such majority Stockholder obtaining consent or authorization from
any other Stockholder, unless such amendment relates to any representation or
warranty made by a Stockholder other than such majority Stockholder which may
only be amended by the written agreement of such person; and provided further,
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that no Stockholder shall have any power or authority to modify or amend this
Agreement in any respect from and after the initial filing of the Registration
Statement with the SEC.
20.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
20.5 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with the transactions contemplated
hereby, and each of UniCapital and Newco, on the one hand, and the Stockholders,
on the other hand, agrees to indemnify the other against all loss, liability,
cost damages or expense arising out of or related to claims for fees or
commissions of brokers employed or alleged to have been employed by such
indemnifying party.
20.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, UniCapital will pay the fees, expenses and disbursements
of UniCapital and Newco and their respective agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement and any amendments thereto. Whether or not the transactions herein
contemplated shall be consummated, the Stockholders will pay the fees, expenses
and disbursements of the Stockholders and the Company and their respective
agents, representatives, accountants and counsel incurred in connection with the
subject matter of this Agreement and any amendments hereto and all other costs
and expenses incurred in the performance of this Agreement by the Stockholders
and the Company and in compliance with all conditions to be performed by the
Stockholders and the Company under this Agreement.
20.7 NOTICES. All notices and other communications hereunder shall be
in writing (including wire, telefax or similar writing) and shall be sent,
delivered or mailed, addressed, or telefaxed:
(a) If to UniCapital or Newco, addressed to them at:
UniCapital Corporation
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Telephone: (305) 861-0603
Telefax: (305) 866-8449
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with a copy to:
David A. Gerson, Esq.
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
301 Grant Street
Pittsburgh, PA 15219
Telephone: (412) 560-3330
Telefax: (412) 560-3399
(b) If to the Stockholders, addressed to them in care
of the Stockholders' Representative at:
Varilease Corporation
28525 Orchard Lake Road
Farmington Hills, MI 48334
Telephone: (248) 488-0100
Telefax: (248) 488-0162
with a copy to:
Jonathan Klein, Esq.
Gordon, Altman, Butowsky, Weitzen, Shalov & Wein
114 West 47th Street
New York, NY 10036
Telephone: (212) 626-0800
Telefax: (212) 626-0799
Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telefax, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 20.7 (or in accordance with the latest
unrevoked written direction from such party) and (ii) if given by telefax, when
such telefax is transmitted to the telefax number specified in this Section 20.7
(or in accordance with the latest unrevoked written direction from such party),
and the appropriate confirmation is received.
20.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York, without giving effect to any of the
provisions thereof that would require the application of the substantive laws of
any other jurisdiction. Each party to this Agreement: (a) agrees that any legal
action or proceeding under this Agreement shall be
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brought in the courts of the State of New York or in the United States District
Court for the Southern District of New York; (b) irrevocably submits to the
jurisdiction of such courts; (c) agrees not to assert any claim or defense that
it is not personally subject to the jurisdiction of such courts, that any such
forum is not convenient or the venue thereof is improper, or that this Agreement
or the subject matter hereof may not be enforced in such courts; and (d) agrees
to accept service of process on it by certified or registered mail or by any
other method authorized by law.
20.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
20.10 TIME. Time is of the essence with respect to this Agreement.
20.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
20.12 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
20.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
21. DEFINITIONS
21.1 "Accounts Receivable" is defined in Section 6.14.
21.2 "Acquisition Proposal" is defined in Section 8.10.
21.3 "Adjusted 1997 EBT" is defined in Section 2.5(a).
21.4 "Adjusted 1998 EBT" is defined in Section 2.5(a).
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21.5 "Agent" is defined in Section 8.10.
21.6 "Agreement" is defined in the preamble to this Agreement.
21.7 "Audited Balance Sheet Date" is defined in Section 6.12(a).
21.8 "Audited Financial Statements" are defined in Section 6.12(a).
21.9 "Authorizations" are defined in Section 6.23.
21.10 "Basket Limitation" is defined in Section 12.5(b).
21.11 "Benefit Plan" is defined in Section 6.22.
21.12 "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq.
21.13 "Certificates" are defined in Section 2.2.
21.14 "Certificate of Merger" is defined in Section 1.1.
21.15 "Closing" is defined in Section 5.1(b).
21.16 "Closing Date" is defined in Section 5.2.
21.17 "Closing Date Balance Sheets" are defined in Section 3.1.
21.18 "Code" is defined in the recitals to this Agreement.
21.19 "Commonly Controlled Entity" is defined in Section 6.22.
21.20 "Company" is defined in the preamble to this Agreement.
21.21 "Company Documents" are defined in Section 6.2.
21.22 "Company EBT" is defined in Section 2.5(b).
21.23 "Company Stock" is defined in Section 2.1(a).
21.24 "Constituent Corporations" are defined in the recitals to this
Agreement.
21.25 "Contracts" are defined in Section 6.17.
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21.26 "Disputed Amounts" are defined in Section 3.2.
21.27 "EBT" is defined in Section 2.5(a).
21.28 "Earn-Out Consideration" is defined in Section 2.5(c).
21.29 "Earn-Out Escrow Cash" is defined in Section 4.1(b).
21.30 "Earn-Out Escrow Shares" are defined in Section 4.1(b).
21.31 "Effective Date Consideration" is defined in Section 2.1(a).
21.32 "Environmental Laws" mean any and all applicable treaties, laws,
regulations, ordinances, enforceable requirements, binding determinations,
orders, decrees, judgments, injunctions, permits, approvals, authorizations,
licenses or binding agreements issued, promulgated or entered into by any
Governmental Entity, relating to the environment, preservation or reclamation of
natural resources, or to the management, Release or threatened Release of or
exposure to Hazardous Substances, including CERCLA, the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42 U.S.C.
Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section 2601
et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq.,
the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et. seq., the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq., and any similar or implementing state or local law and all amendments or
regulations promulgated thereunder.
21.33 "Environmental Liabilities" mean any and all Losses arising from
or related to any claim, proceeding, investigation, response or removal action,
remediation or other clean-up brought, prosecuted or undertaken by UniCapital,
Newco, the Surviving Corporation, any Governmental Entity or any other person or
entity on the basis of any violation of any Environmental Laws or pursuant to
any requirement imposed under any Environmental Laws (including any sampling,
testing, investigation, removal, treatment or remediation undertaken by
UniCapital, Newco or the Surviving Corporation so as to avoid any claim or
violation or to comply with any requirement and all counseling or engineering
fees and expenses related thereto), and arising from pre-Closing operations,
events, circumstances or conditions at, on, under or emanating from, or as a
result of any pre-Closing off-site disposal of Hazardous Substances from, any
property currently or formerly owned, operated or leased by the Company or its
Subsidiaries.
21.34 "Environmental Permits" mean all permits, licenses, approvals or
authorizations from any Governmental Entity required under Environmental Laws
for the operation of the business of the applicable Company.
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21.35 "Equipment" is defined in Section 6.35.
21.36 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
21.37 "Escrow Cash" is defined in Section 4.1(a).
21.38 "Escrow Shares" are defined in Section 4.1(a).
21.39 "Escrow Property" is defined in Section 4.1(b).
21.40 "Exchange Act" is defined in Section 12.1.
21.41 "Expiration Date" is defined in Section 12.6.
21.42 "Financial Statements" are defined in Section 6.12(b).
21.43 "Foreign Plans" are defined in Section 6.22(i)(xiii).
21.44 "GAAP" is defined in Section 3.1.
21.45 "Governmental Entity" means any court, administrative or
regulatory agency or commission, or other governmental authority or
instrumentality, domestic, foreign or supranational.
21.46 "Hazardous Substances" mean all explosive or regulated
radioactive materials or substances, hazardous or toxic materials, wastes or
chemicals, petroleum and petroleum products (including crude oil or any fraction
thereof), asbestos or asbestos containing materials, and all other materials or
chemicals regulated pursuant to any Environmental Law, including materials
listed in 49 C.F.R. ss. 172.101 and materials defined as hazardous pursuant to
Section 101(14) of CERCLA.
21.47 "Indemnifiable Decrease" is defined in Section 12.5(a).
21.48 "Indemnified Party" is defined in Section 12.4(a).
21.49 "Indemnifying Party" is defined in Section 12.4(a).
21.50 "Indemnity Escrow Agent" is defined in Section 4.1(a).
21.51 "Independent Accounting Firm" is defined in Section 3.2.
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21.52 "Intellectual Property" is defined in Section 6.28(a).
21.53 "Interim Balance Sheet Date" is defined in Section 6.12(b).
21.54 "Interim Net Worth Period" is defined in Section 12.5(a).
21.55 "IPO" is defined in the recitals to this Agreement.
21.56 "Lease Documents" are defined in Section 6.35.
21.57 "Leases" are defined in Section 6.35.
21.58 "liabilities" are defined in Section 6.13(a).
21.59 "Losses" are defined in Section 12.1.
21.60 "Material Adverse Amendment" is defined in Section 8.4.
21.61 "Merger Consideration" is defined in Section 2.1(c).
21.62 "Merger Effective Date" is defined in Section 5.3.
21.63 "Merger" is defined in the recitals to this Agreement.
21.64 "Net Worth Deficiency" is defined in Section 3.1.
21.65 "Newco" is defined in the preamble to this Agreement.
21.66 "1999 EBT" is defined in Section 2.5(b).
21.67 "Obligor" is defined in Section 6.35.
21.68 "Ordinary course" or "ordinary course of business" means the
conduct of business as conducted by the Company prior to the date of this
Agreement consistent in nature and, where relevant, amount with past practices.
21.69 "PCBs" are defined in Section 6.33(h).
21.70 "Pension Plan" is defined in Section 6.22.
21.71 "Permits" mean all permits, licenses, franchises, approvals and
authorizations from any Governmental Entity that are owned or held by the
Company or any
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Subsidiary, or held by any Stockholder that relate to the operations of the
Company or any Subsidiary.
21.72 "Prospectus" is defined in Section 16.1.
21.73 "Registration Statement" is defined in Section 9.4.
21.74 "Regulations" are defined in Section 6.23.
21.75 "Release" means any spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, emanation or migration of any
Hazardous Substance in, into, onto or through the environment (including ambient
air, surface water, ground water, soils, land surface, subsurface strata,
workplace or structure).
21.76 "Restricted Business" is defined in Section 14.1(a).
21.77 "Scheduled Payments" are defined in Section 6.35.
21.78 "SEC" is defined in Section 9.4.
21.79 "Securities Act" is defined in Section 6.16.
21.80 "Stockholders" are defined in the preamble to this Agreement.
21.81 "Stockholders' Representative" is defined in Section 3.3.
21.82 "Subsidiary" is defined in Section 6.1.
21.83 "Surviving Corporation" is defined in Section 1.2.
21.84 "Tax Returns" are defined in Section 6.27.
21.85 "Taxes" are defined in Section 6.27.
21.86 "Third Party Claim" is defined in Section 12.4(a).
21.87 "Unaudited Financial Statements" are defined in Section 6.12(b).
21.88 "Underwriting Agreement" is defined in Section 5.1(a).
21.89 "UniCapital" is defined in the preamble to this Agreement.
21.90 "UniCapital Documents" is defined in Section 7.3.
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21.91 "UniCapital Stock" is defined in Section 2.1(a).
21.92 "Unified Transaction" is defined in the recitals to this
Agreement.
21.93 "Welfare Plan" is defined in Section 6.22.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNICAPITAL CORPORATION
By: /s/ Robert New
--------------
Name: Robert New
Title: Chairman and Chief Executive Officer
VC ACQUISITION CORP.
By:/s/ Robert New
--------------
Name: Robert New
Title: President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
VARILEASE CORPORATION
By: /s/ Robert W. VanHellemont
--------------------------
Name: Robert W. VanHellemont
Title: President
/s/ Robert W.VanHellemont
-------------------------
Robert W. VanHellemont
/s/ Gary Miller
---------------
Gary Miller
/s/ Michael McCormick
---------------------
Michael McCormick
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EXHIBITS
EXHIBIT A [Companies]
ANNEXES
ANNEX I [Form of Certificate of Merger]
ANNEX II [Calculation and Composition of Consideration]
ANNEX III [Form of Indemnity Escrow Agreement]
ANNEX IV [Form of Employment Agreement]
SCHEDULES
SCHEDULE 2.5 [Add-Backs]
SCHEDULE 6.1 [Jurisdictions in which Company and Subsidiaries
Are Qualified to do Business]
SCHEDULE 6.4 [Violations or Conflicts]
SCHEDULE 6.5 [Issued and Outstanding Stock of the Company and
Subsidiaries]
SCHEDULE 6.6 [Transactions in Capital Stock]
SCHEDULE 6.8 [Subsidiaries]
SCHEDULE 6.9 [Predecessor Companies]
SCHEDULE 6.12 [Company Financial Statements]
SCHEDULE 6.13 [Liabilities and Obligations]
SCHEDULE 6.14 [Accounts and Notes Receivable Aging]
SCHEDULE 6.15 [Permits]
SCHEDULE 6.16 [Real and Personal Property]
SCHEDULE 6.17 [Contracts and Commitments]
SCHEDULE 6.18 [Government Contracts]
SCHEDULE 6.20 [Insurance Policies and Surety Arrangements]
SCHEDULE 6.21 [Employee Information]
SCHEDULE 6.22 [Employee Benefit Plans]
SCHEDULE 6.23 [Authorizations]
SCHEDULE 6.24 [Transactions with Affiliates]
SCHEDULE 6.25 [Litigation]
SCHEDULE 6.27 [Taxes]
SCHEDULE 6.28 [Intellectual Property]
SCHEDULE 6.28(b) [Fee Arrangements]
SCHEDULE 6.28(d) [Confidentiality and Non-Disclosure Agreements]
SCHEDULE 6.28(e) [Registered Intellectual Property]
SCHEDULE 6.29 [Notice and Consents]
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SCHEDULE 6.30 [Absence of Changes]
SCHEDULE 6.31 [Deposit Accounts; Powers of Attorney]
SCHEDULE 6.35 [Leases]
SCHEDULE 7.10 [UniCapital and Newco Agreements]
SCHEDULE 8.1 [Transactions Outside Ordinary Course]
SCHEDULE 9.2 [Employment Agreements]
SCHEDULE 11.3 [Personal Guarantees of the Indebtedness of the
Company]
SCHEDULE 11.5 [Real Estate Transactions]
SCHEDULE 14.1 [Non-Competition]
SCHEDULE 19 [Option Purchase Representations and Warranties]
The registrant agrees to furnish a copy of each omitted schedule, exhibit or
annex to this Exhibit 2.11 to the Commission supplementally upon request
therefor.
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Exhibit 2.12
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AMENDED AND RESTATED
AGREEMENT AND PLAN OF CONTRIBUTION
by and among
UNICAPITAL CORPORATION
(a Delaware corporation),
WAG ACQUISITION CORP.
(a Delaware corporation),
THE WALDEN ASSET GROUP, INC.
(a Massachusetts corporation)
and
THE STOCKHOLDERS OF SUCH COMPANY
LISTED ON THE SIGNATURE PAGE HEREOF
Dated as of February 14, 1998
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Table Of Contents
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1. THE MERGER...............................................................................................2
1.1 Delivery and Filing of Certificate of Merger....................................................2
1.2 Merger Effective Date...........................................................................2
1.3 Certificate of Incorporation, Bylaws, Board of Directors and Officers of the
Surviving Corporation...........................................................................2
2. MERGER CONSIDERATION.....................................................................................3
2.1 Conversion of Capital Stock; Merger Consideration...............................................3
2.2 Exchange Procedures.............................................................................4
2.3 No Fractional Shares............................................................................4
3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS' REPRESENTATIVE....................................................6
3.1 Computation.....................................................................................6
3.2 Disputes........................................................................................6
3.3 Stockholders' Representative....................................................................7
4. INDEMNITY ESCROW.........................................................................................8
4.1 Creation of Escrow..............................................................................8
4.2 Duration and Terms..............................................................................8
4.3 Voting and Investment...........................................................................8
5. CLOSING; MERGER EFFECTIVE DATE...........................................................................8
5.1 Closing.........................................................................................9
5.2 Closing Date; Location..........................................................................9
5.3 Effectiveness of Merger.........................................................................9
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS...........................................................9
6.1 Corporate Existence.............................................................................9
6.2 Corporate Power; Authorization; Enforceable Obligations.........................................9
6.3 Authority; Ownership...........................................................................10
6.4 Validity of Contemplated Transactions..........................................................10
6.5 Capital Stock of The Company...................................................................10
6.6 Transactions in Capital Stock..................................................................11
6.7 No Bonus Shares................................................................................11
6.8 Subsidiaries...................................................................................11
6.9 Predecessor Status; etc........................................................................11
6.10 Spin-offs by Company...........................................................................11
6.11 No Third Party Options.........................................................................11
6.12 Financial Statements...........................................................................11
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6.13 Liabilities and Obligations....................................................................12
6.14 Accounts and Notes Receivable..................................................................13
6.15 Permits........................................................................................13
6.16 Real and Personal Property.....................................................................13
6.17 Contracts and Commitments......................................................................14
6.18 Government Contracts...........................................................................15
6.19 Title to Real Property.........................................................................16
6.20 Insurance......................................................................................16
6.21 Employees......................................................................................16
6.22 Employee Benefit Plans and Arrangements........................................................17
6.23 Compliance with Law; Authorizations............................................................20
6.24 Transactions With Affiliates...................................................................21
6.25 Litigation.....................................................................................21
6.26 Restrictions...................................................................................21
6.27 Taxes..........................................................................................21
6.28 Intellectual Property Matters..................................................................23
6.29 Completeness; No Violations....................................................................24
6.30 Existing Condition.............................................................................24
6.31 Deposit Accounts; Powers of Attorney...........................................................25
6.32 Books of Account...............................................................................26
6.33 Environmental Matters..........................................................................26
6.34 No Illegal Payments............................................................................27
6.35 Leases.........................................................................................27
6.36 Lease Funding..................................................................................30
6.37 Disclosure.....................................................................................31
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO........................................................31
7.1 Corporate Existence............................................................................31
7.2 UniCapital Stock...............................................................................31
7.3 Corporate Power and Authorization..............................................................31
7.4 No Conflicts...................................................................................32
7.5 Capitalization of UniCapital...................................................................32
7.6 Compliance With Law; Authorization.............................................................32
7.7 Transaction with Affiliates....................................................................33
7.8 Litigation.....................................................................................33
7.9 Miscellaneous..................................................................................33
7.10 Registration Rights............................................................................33
8. COVENANTS OF STOCKHOLDERS AND COMPANIES.................................................................33
8.1 Business in the Ordinary Course................................................................34
8.2 Existing Condition.............................................................................34
8.3 Maintenance of Properties and Assets...........................................................34
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8.4 Employees and Business Relations...............................................................34
8.5 Maintenance of Insurance.......................................................................34
8.6 Compliance with Laws, etc......................................................................34
8.7 Conduct of Business............................................................................34
8.8 Access.........................................................................................34
8.9 Press Releases and Other Communications........................................................35
8.10 Exclusivity....................................................................................35
8.11 Third Party ...................................................................................36
8.12 Notice to Bargaining Agents....................................................................36
8.13 Notification of Certain Matters................................................................36
8.14 Amendment of Schedules.........................................................................37
8.15 HSR Filing.....................................................................................37
8.16 Pre-Closing Dispositions.......................................................................37
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE STOCKHOLDERS.................................37
9.1 Representations and Warranties; Performance of Obligations.....................................37
9.2 Employment Agreements..........................................................................38
9.3 Opinion of Counsel.............................................................................38
9.4 Registration Statement.........................................................................38
9.5 HSR Act........................................................................................38
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND NEWCO....................................39
10.1 Representations and Warranties; Performance of Obligations.....................................39
10.2 No Litigation..................................................................................39
10.3 Examination of Financial Statements............................................................39
10.4 No Material Adverse Change.....................................................................39
10.5 Regulatory Review..............................................................................39
10.6 Stockholders' Release..........................................................................40
10.7 Employment Agreements..........................................................................40
10.8 Opinion of Counsel.............................................................................40
10.9 Consents and Approvals.........................................................................41
10.10 Good Standing Certificates.....................................................................41
10.11 Registration Statement.........................................................................41
10.12 Repayment of Indebtedness; Pre-Closing Distributions...........................................41
10.13 Net Income.....................................................................................42
10.14 HSR Act........................................................................................42
11. COVENANTS OF UNICAPITAL........................................................................42
11.1 UniCapital Stock Options.......................................................................42
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11.2 Information Filing.............................................................................42
11.3 Release From Guarantees; Indebtedness..........................................................42
11.4 HSR Filing.....................................................................................43
12. INDEMNIFICATION; SURVIVAL......................................................................43
12.1 General Indemnification by Stockholders........................................................43
12.2 Specific Indemnification by Stockholders.......................................................44
12.3 Indemnification by UniCapital and Newco........................................................44
12.4 Third Party Claims.............................................................................45
12.5 Limitations on Indemnification.................................................................46
12.6 Survival of Representations and Warranties.....................................................47
13. TERMINATION OF AGREEMENT.......................................................................48
13.1 Termination by UniCapital......................................................................48
13.2 Termination by the Stockholders................................................................49
13.3 Automatic Termination..........................................................................49
13.4 Liquidated Damages.............................................................................49
14. NONCOMPETITION AND NONSOLICITATION......................................................................50
14.1 Noncompetition.................................................................................50
14.2 Damages........................................................................................50
14.3 Reasonable Restraint...........................................................................51
14.4 Severability; Reformation......................................................................51
14.5 Independent Covenant...........................................................................51
14.6 Materiality....................................................................................51
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION......................................................51
15.1 Stockholders...................................................................................51
15.2 UniCapital.....................................................................................52
15.3 Damages........................................................................................52
16. LOCK-UP AGREEMENTS.............................................................................52
16.1 Agreement......................................................................................52
16.2 Intended Third Party Beneficiaries.............................................................53
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON UNICAPITAL STOCK.................................53
17.1 Investment Intent..............................................................................53
17.2 Compliance with Law............................................................................53
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17.3 Economic Risk; Sophistication..................................................................54
17.4 Information Supplied...........................................................................54
18. SECURITIES LEGENDS.............................................................................54
19. GENERAL........................................................................................55
19.1 Cooperation....................................................................................55
19.2 Successors and Assigns.........................................................................55
19.3 Entire Agreement...............................................................................55
19.4 Counterparts...................................................................................56
19.5 Brokers and Agents.............................................................................56
19.6 Expenses.......................................................................................56
19.7 Notices........................................................................................56
19.8 Governing Law..................................................................................57
19.9 Exercise of Rights and Remedies................................................................58
19.10 Time...........................................................................................58
19.11 Reformation and Severability...................................................................58
19.12 Remedies Cumulative............................................................................58
19.13 Captions.......................................................................................58
20. DEFINITIONS....................................................................................58
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AMENDED AND RESTATED AGREEMENT AND PLAN OF CONTRIBUTION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF
CONTRIBUTION (the "Agreement") is made as of the 14th day of February, 1998,
between UNICAPITAL CORPORATION, a Delaware corporation ("UniCapital"); WAG
ACQUISITION CORP., a Delaware corporation ("Newco"); THE WALDEN ASSET GROUP,
INC., a Massachusetts corporation (the "Company") and Richard Albertelli, David
Burmon and Robert Kopp (collectively referred to as the "Stockholders"), who are
all of the stockholders of the Company. Certain capitalized terms used herein
are defined in Article 20 hereof.
WHEREAS, UniCapital was incorporated on October 9, 1997 under the laws
of the State of Delaware for the purpose of acquiring a number of equipment
leasing businesses in different locations; and
WHEREAS, UniCapital intends to undertake an initial public offering of
its Common Stock (the "IPO") and in connection therewith intends to file a
Registration Statement on Form S-1 with the Securities and Exchange Commission
within 90 days of the execution and delivery of this Agreement; and
WHEREAS, Newco was duly incorporated on January 23, 1998 under the laws
of the State of Delaware solely for the purpose of completing this transaction,
and is a wholly-owned subsidiary of UniCapital; and
WHEREAS, the Company is a corporation organized and existing under the
laws of the Commonwealth of Massachusetts; and
WHEREAS, the Company is a general partner of The Walden Asset
Associates, a New York general partnership (the "Partnership") whose assets
exceed its liabilities and in which the Company holds a 25% interest; and
WHEREAS, the respective Boards of Directors of UniCapital, Newco and
the Company deem it advisable and in the best interests of such corporations and
their respective stockholders that Newco merge with and into the Company
pursuant to this Agreement and the applicable pro visions of the laws of the
respective states of incorporation of the Company and Newco (such transaction
being herein called the "Merger" and the Company, Newco and UniCapital being
hereinafter collectively referred to as the "Constituent Corporations"); and
WHEREAS, the parties hereto intend that the transactions contemplated
in this Agreement constitute part of a single transaction involving the
simultaneous consummation of a number of similar agreements between UniCapital
and certain other corporations and partnerships and the IPO and that such single
transaction (the "Unified Transaction") shall fall within the provisions of
Section 351 of the Internal Revenue Code of 1986, as amended (the "Code");
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NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. THE MERGER
1.1 DELIVERY AND FILING OF CERTIFICATE OF MERGER. The Constituent
Corporations will cause a Certificate of Merger, in substantially the form of
Annex I attached hereto with such changes therein as may be required by
applicable state laws (the "Certificate of Merger"), to be executed and
delivered to the Secretary of State of the state of incorporation of Newco and
the Company on or before the Merger Effective Date.
1.2 MERGER EFFECTIVE DATE. The "Merger Effective Date" shall be the
date specified in Section 5.3. At the Merger Effective Date, the Certificate of
Merger shall either be filed for immediate effectiveness with the Secretary of
State of the applicable state of incorporation of Newco and the Company or
become effective upon the Merger Effective Date if filed with such Secretary of
State prior to such date. On the Merger Effective Date upon the effectiveness of
the Merger, Newco shall be merged with and into the Company, in accordance with
the Certificate of Merger, and the separate existence of Newco shall cease. The
Company, as the entity surviving the Merger, is hereinafter sometimes referred
to as the "Surviving Corporation." The Merger shall have the effects specified
in the laws of the state of incorporation of the Surviving Corporation.
1.3 CERTIFICATE OF INCORPORATION, BYLAWS, BOARD OF DIRECTORS AND
OFFICERS OF THE SURVIVING CORPORATION. Upon the effectiveness of the Merger:
(a) the Certificate of Incorporation of the Company, amended
as set forth in the Certificate of Merger, shall remain the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law;
(b) the Bylaws of the Company shall remain the Bylaws of the
Surviving Corporation and shall remain so until thereafter duly amended;
(c) in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation, the Surviving Corporation shall have a
Board of Directors consisting of one member, who shall be Robert New commencing
upon the effectiveness of the Merger and who shall hold office subject to the
laws of the state of incorporation and the Certificate of Incorporation and
Bylaws of the Surviving Corporation; and
(d) the officers of the Resulting Company immediately prior to
the Merger Effective Date shall continue as the officers of the Surviving
Corporation in the same capacity or capacities, each of such officers to serve,
subject to the provisions of the Certificate
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of Incorporation and Bylaws of the Surviving Corporation, until his successor is
elected and qualified; provided, that the Chairman of the Board (if any), the
Treasurer and the Secretary of the Resulting Company shall not succeed to the
corresponding offices of the Surviving Corporation, but instead (i) the sole
director of the Surviving Corporation shall be the Chairman of the Board of the
Surviving Corporation, (ii) the Treasurer of Newco shall be Treasurer of the
Surviving Corporation and (iii) the Secretary of Newco shall be the Secretary of
the Surviving Corporation.
2. MERGER CONSIDERATION
2.1 CONVERSION OF CAPITAL STOCK; MERGER CONSIDERATION.
(a) Upon the effectiveness of the Merger, all of the shares of
capital stock of the Resulting Company issued and outstanding immediately prior
to the effectiveness of the Merger ("Company Stock") shall, by virtue of the
Merger and without any action on the part of the holder thereof but subject to
the effectiveness of the Merger, automatically be converted into the right to
receive, without interest,
(i) an aggregate of $20,998,500 in cash,
(ii) an aggregate of 1,105,184 shares of common
stock, par value $.001 per share, of UniCapital ("UniCapital Stock") (the
consideration referred to in clauses (i) and (ii), all of which is to be
distributed to the Stockholders on the Merger Effective Date in the percentages
set forth on Annex II, subject to Article 4 hereof, is referred to in this
Agreement as the "Effective Date Consideration"); provided, however, in the
event that the aggregate value (based on the IPO price of the UniCapital Stock)
of the 1,105,184 shares of UniCapital Stock is less than $16,577,760, then the
Company shall issue additional shares to the Stockholders so that the aggregate
value of the shares of UniCapital Stock equals $16,577,760 (with appropriate
adjustment to the cash and stock components of the Effective Date Consideration
so as to eliminate fractional shares), and
(iii) the Earn-Out Consideration as described in
Section 2.5, to be distributed to the Stockholders within five business days
after each date of determination of a portion of the Earn-Out Consideration with
respect to a given calendar year (if any) in the percentages set forth on Annex
II.
(b) Upon the effectiveness of the Merger, each share of
capital stock of Newco issued and outstanding immediately prior to the
effectiveness of the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, automatically be converted into one
fully paid and non-assessable share of common stock of the Surviving
Corporation, all of which converted common stock shall constitute all of the
outstanding shares of capital stock of the Surviving Corporation immediately
after the effectiveness of the Merger.
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(c) The Effective Date Consideration and the Earn-Out
Consideration are referred to together in this Agreement as the "Merger
Consideration."
2.2 EXCHANGE PROCEDURES. On the Merger Effective Date, upon surrender
to UniCapital of certificates representing all of the outstanding shares of
Company Stock ("Certificates"), each Stockholder shall, subject to Article 4, be
entitled to receive, in exchange therefor, such Stockholder's pro rata share of
the cash portion of the Effective Date Consideration, calculated in accordance
with Annex II, and a certificate representing that number of whole shares of
UniCapital Stock which such holder has the right to receive in respect of the
Certificates surrendered, calculated in accordance with Annex II, and each
Certificate so surrendered shall forthwith be canceled. On the Merger Effective
Date or as promptly thereafter as is practicable, and subject to and in
accordance with the provisions of Article 4, UniCapital shall cause to be
distributed to the Indemnity Escrow Agent (as defined in Article 4) a
certificate or certificates representing the Escrow Shares (as defined in
Article 4), which shall be registered in the name of the Indemnity Escrow Agent
as nominee for the Stockholders and shall be held in accordance with the
provisions of Article 4 and the Indemnity Escrow Agreement referred to therein.
2.3 NO FRACTIONAL SHARES. Notwithstanding any other provision of this
Article 2, no fractional shares of UniCapital Stock will be issued and any
holder of Company Stock entitled hereunder to receive a fractional share of
UniCapital Stock but for this Section 2.3 will be entitled hereunder to receive
no such fractional share but a cash payment in lieu thereof in an amount equal
to such fraction multiplied by $19.00.
2.4 ALLOCATION OF MERGER CONSIDERATION. The parties agree that they
will not take a position on any income tax return, before any governmental
agency charged with the collection of any income tax, or in any judicial
proceeding that is in any way inconsistent with the allocation (if any) of the
Merger Consideration made by UniCapital following the Closing.
2.5 EARN-OUT CONSIDERATION.
(a) If the earnings before taxes (the "EBT") of the Company
for the twelve months ending December 31, 1998, increased by amounts in respect
of those items set forth on Schedule 2.5 that affected net income during the
period beginning on January 1, 1998 and ending on the Closing Date, and
decreased by the amount of UniCapital corporate overhead allocated to the
Company for the period beginning on the Closing Date and ending on December 31,
1998 (the "Adjusted 1998 EBT"), exceeds the EBT of the Company for the twelve
months ending December 31, 1997 inclusive of the add-backs set forth on Schedule
2.5 (the "Adjusted 1997 EBT"), then the Stockholders shall be entitled to
receive one-half of the difference between the Adjusted 1998 EBT and the
Adjusted 1997 EBT.
(b) If the EBT of the Company for the year ending December 31,
1999, adjusted for the amount of UniCapital corporate overhead allocated to the
Company (the
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"Adjusted 1999 EBT", and together with Adjusted 1997 EBT and Adjusted 1998 EBT,
the "Company EBT"), exceeds the greater of Adjusted 1998 EBT and Adjusted 1997
EBT, then the Stockholders shall be entitled to receive one-half of the
difference between (i) the Adjusted 1999 EBT and (ii) the greater of the
Adjusted 1998 and the Adjusted 1997 EBT.
(c) The EBT of the Company for the years ending December 31,
1998 and December 31, 1999 shall be computed using generally accepted accounting
principles and practices as applied in the audited financial statements of the
Company included in the Registration Statement. The allocation of UniCapital
overhead shall be made on a pro rata basis applied consistently among UniCapital
subsidiaries. To the extent gain-on-sale treatment was accorded any Lease,
whether in the add-backs set forth on Schedule 2.5 or in any year, income from
the payment stream on such Lease shall not be included in the EBT of the Company
for any subsequent year.
(d) The amounts (if any) that the Stockholders become entitled
to receive pursuant to Sections 2.5(a) and/or 2.5(b) are referred to herein as
the "Earn-Out Consideration." The Earn-Out Consideration shall be paid one-half
in cash and one-half in shares of UniCapital Stock, valued at the average of the
closing prices per share of UniCapital Stock for the 20 trading days preceding
December 31 of the year to which the portion of Earn-Out Consideration in
question applies.
(e) Company EBT shall be determined within forty-five days
following December 31 of such year.
(f) Notwithstanding anything in this Section 2.5 to the
contrary, if the Stockholders dispute the determination of Company EBT, then the
Stockholders' Representative shall notify UniCapital in writing of such dispute
and specify the amount thereof within 20 business days after notification of the
determination of Company EBT. If UniCapital and the Stockholders' Representative
cannot resolve any such dispute which would affect the Earn-Out Consideration,
then such dispute shall be resolved by an Independent Accounting Firm (as
defined in Section 3.2). The Independent Accounting Firm shall be directed to
consider only those agreements, contracts, commitments or other documents (or
summaries thereof) that were either (i) delivered or made available to Price
Waterhouse LLP in connection with the transactions contemplated hereby, or (ii)
reviewed by Price Waterhouse LLP during the course of determining Company EBT.
The determination of the Independent Accounting Firm shall be made as promptly
as practicable and shall be final and binding upon the parties, absent manifest
error which error may only be corrected by such Independent Accounting Firm. The
costs of the Independent Accounting Firm shall be borne by the party (either
UniCapital or the Stockholders as a group) whose determination of Company EBT
was further from the determination of the Independent Accounting Firm. Pending
resolution of any such dispute by the Independent Accounting Firm, only the
amount of the Earn-Out Consideration as determined by Price Waterhouse LLP shall
be paid by UniCapital. Once Company EBT is finally determined, the Earn-Out
Consideration attendant thereto not previously paid, if any, shall be paid in
accordance
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with this Section 2.5; provided that in the event the Stockholders'
determination of EBT was closer to the determination of the Independent
Accounting Firm than UniCapital's determination of EBT, the Stockholders shall
receive such Earn-Out Consideration plus interest which shall accrue at the rate
of 10% per annum on any such Earn-Out Consideration that is resolved in the
Stockholders favor from the date the Earn-Out Consideration was first payable
until the date on which the Earn-Out Consideration is received by the
Stockholders.
(g) Any Earn-Out Consideration paid by UniCapital shall be
treated as additional consideration paid by UniCapital for the shares of Company
Stock.
3. POST-CLOSING ADJUSTMENT; STOCKHOLDERS' REPRESENTATIVE
3.1 COMPUTATION. As soon as practicable, but in any event within 30
days after the Closing, UniCapital shall engage Price Waterhouse LLP to prepare,
in accordance with generally accepted accounting principles ("GAAP") and
consistent with previous practice, a balance sheet of the Company (the "Closing
Date Balance Sheets") as of the end of business on the day prior to the Closing
Date (as defined in Section 5). If the aggregate stockholders' equity of the
Company as shown on the Closing Date Balance Sheets is less than the aggregate
stockholders' equity as shown on the consolidated balance sheets of the Company
as at December 31, 1997 as audited by Price Waterhouse LLP, then, subject to
Section 3.2, commencing 10 business days after delivery of the Closing Date
Balance Sheets to UniCapital, the aggregate Merger Consideration shall be
adjusted downward dollar-for-dollar in the amount of any such deficiency (the
"Net Worth Deficiency"). Upon determination of the Net Worth Deficiency,
UniCapital shall be entitled to recover from the Indemnity Escrow pursuant to
Article 4 that portion of the Net Worth Deficiency which does not exceed
one-half of the balance of the Indemnity Escrow. For any amount by which any Net
Worth Deficiency exceeds one-half of the initial balance of the Escrow Property,
such portion of the Net Worth Deficiency shall be paid by the Stockholders not
later than the 25th business day after the delivery of the Closing Date Balance
Sheet (or if applicable, not later than the fifth business day after the final
determination of any Disputed Amount in accordance with Section 3.2). At its
sole and exclusive option, and at any time after such 25th business day (or if
applicable, not later than the fifth business day after the final determination
of any Disputed Amount in accordance with Section 3.2), UniCapital shall be
entitled to recover from the Escrow Property pursuant to Article 4 all or any
portion of the amount of the Net Worth Deficiency not paid by the Stockholders
as required by this Article 3.
3.2 DISPUTES. Notwithstanding anything in this Article 3 to the
contrary, if there is any Net Worth Deficiency and the Stockholders dispute any
item contained on the Closing Date Balance Sheets, then the Stockholders'
Representative shall notify UniCapital in writing of each disputed item
(collectively, the "Disputed Amounts") and specify the amount thereof in dispute
within 10 business days after the delivery of the Closing Date Balance Sheets to
the Stockholders. If UniCapital and the Stockholders' Representative cannot
resolve any such dispute relating to the Net Worth Deficiency, then such dispute
shall be resolved by an independent nationally recognized accounting firm which
is reasonably acceptable to UniCapital
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and the Stockholders' Representative (the "Independent Accounting Firm"). The
determination of the Independent Accounting Firm shall be made as promptly as
practical and shall be final and binding on the parties, absent manifest error
which error may only be corrected by such Independent Accounting Firm. Any
expenses relating to the engagement of the Independent Accounting Firm shall be
allocated between UniCapital and the Stockholders so that the Stockholders'
aggregate share of such costs shall bear the same proportion to the total costs
that the Disputed Amounts unsuccessfully contested by the Stockholders'
Representative (as finally determined by the Independent Accounting Firm) bear
to the total of the Disputed Amounts so submitted to the Independent Accounting
Firm. Pending resolution of any such dispute by the Independent Accounting Firm,
no such Disputed Amount shall be due to UniCapital. Once any such Disputed
Amount is finally determined to be due to UniCapital, UniCapital may proceed to
recover such amount in the manner set forth in Section 3.1.
3.3 STOCKHOLDERS' REPRESENTATIVE. (a) Each Stockholder, by signing this
Agreement, designates David Burmon (or, in the event that David Burmon is unable
or unwilling to serve, Richard Albertelli) to be such Stockholders'
representative for purposes of this Agreement (the "Stockholders'
Representative"). The Stockholders shall be bound by any and all actions taken
by the Stockholders' Representative on their behalf.
(b) UniCapital and Newco shall be entitled to rely upon any
communication or writing given or executed by the Stockholders' Representative.
All communications or writings to be sent to Stockholders pursuant to this
Agreement may be addressed to the Stockholders' Representative and any
communication or writing so sent shall be deemed notice to all of the
Stockholders hereunder. The Stockholders hereby consent and agree that the
Stockholders' Representative is authorized to accept deliveries, including any
notice, on behalf of the Stockholders pursuant hereto.
(c) The Stockholders' Representative is hereby appointed and
constituted the true and lawful attorney-in-fact of each Stockholder, with full
power in his or her name and on his or her behalf to act according to the terms
of this Agreement in the absolute discretion of the Stockholders'
Representative, and in general to do all things and to perform all acts
including, without limitation, executing and delivering all agreements,
certificates, receipts, instructions and other instruments contemplated by or
deemed advisable in connection with Article 12 of this Agreement. This power of
attorney and all authority hereby conferred is granted subject to and coupled
with the interest of such Stockholder and the other Stockholders hereunder and
in consideration of the mutual covenants and agreements made herein, and shall
be irrevocable and shall not be terminated by any act of any Stockholder, by
operation of law, whether by such Stockholder's death or any other event.
(d) Notwithstanding the foregoing, the Stockholder
Representative shall inform each Stockholder of all notices received, and all
actions, decisions, notices and exercises
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of any rights, power or authority proposed to be done, given or taken by such
Stockholder Representative, and shall act as directed by the Stockholders
holding a majority interest in the Escrow Property (as defined in Section
4.1(b)).
4. INDEMNITY ESCROW
4.1 CREATION OF ESCROW.
(a) At the Closing, as collateral security for the payment of
any indemnification obligations of the Stockholders pursuant to Sections 12.1
and 12.2 hereof and for the payment of amounts due pursuant to Article 3 hereof,
the following shall be delivered to UniCapital's Transfer Agent as indemnity
escrow agent (the "Indemnity Escrow Agent"):
(i) ten percent (10%) of the number of shares of
UniCapital Stock issuable to each Stockholder as part of the Effective Date
Consideration in accordance with Annex II, rounded up to the nearest whole share
(the "Escrow Shares"); and
(ii) ten percent (10%) of the cash portion of the
Effective Date Consideration payable to each Stockholder in accordance with
Annex II, rounded up to the nearest whole cent (the "Escrow Cash").
(b) The Escrow Shares and the Escrow Cash are referred to
together as the "Escrow Property." In addition, the Escrow Property shall
include all cash and non-cash dividends and other property at any time received
or otherwise distributed in respect of or in exchange for any or all of the
Escrow Property, all securities hereafter issued in substitution for any of the
foregoing, all certificates and instruments representing or evidencing such
securities, all cash and non-cash proceeds of all of the foregoing property and
except as provided in Section 4.3 all rights, titles, interests, privileges and
preferences appertaining or incident to the foregoing property.
4.2 DURATION AND TERMS. The Escrow Property shall be held and disbursed
by the Indemnity Escrow Agent in accordance with the terms of an Indemnity
Escrow Agreement substantially in the form attached hereto as Annex III. The
Indemnity Escrow Agent shall hold the Escrow Property pursuant to the Indemnity
Escrow Agreement until the later of: (a) the first anniversary of the Merger
Effective Date; and (b) the resolution of any claim for indemnification or
payment that is pending on the first anniversary of the Merger Effective Date,
but only to the extent of the amount of such pending claim.
4.3 VOTING AND INVESTMENT. The Stockholders shall be entitled to
exercise all voting powers incident to the Escrow Shares held by the Indemnity
Escrow Agent as their nominee, but shall not be entitled to exercise any
investment or dispositive powers over such Escrow Shares.
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The Escrow Cash shall be invested from time to time by the Indemnity Escrow
Agent as provided in the Indemnity Escrow Agreement.
5. CLOSING; MERGER EFFECTIVE DATE
5.1 CLOSING. Within two business days following the date on which the
underwriting agreement relating to the offer and sale of shares of UniCapital
Stock in the IPO (the "Underwriting Agreement") shall have been executed, the
parties shall take all actions necessary to effect the Merger (other than the
filing with the appropriate state authorities of the Certificate of Merger,
which shall be filed and become effective on the Merger Effective Date) and to
effect the conversion and delivery of shares referred to in Article 2 hereof
(hereinafter referred to as the "Closing"); provided, that such actions shall
not include the actual completion of the Merger or the actual conversion and
delivery of the shares referred to in Article 2 hereof, which actions shall only
be taken on the Merger Effective Date as herein provided.
5.2 CLOSING DATE; LOCATION. The Closing shall take place at the offices
of Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178. The date on
which the Closing shall occur shall be referred to as the "Closing Date."
5.3 EFFECTIVENESS OF MERGER. Concurrently with the consummation of the
sale of the shares of UniCapital Stock pursuant to the Underwriting Agreement,
the Merger shall become effective and all transactions contemplated by this
Agreement, including the conversion and delivery of shares and the wire transfer
or delivery of a check or checks in an amount equal to the cash which the
Stockholders shall be entitled to receive pursuant to the Merger referred to in
Article 2 hereof, shall occur and be deemed to be completed. The date on which
the Merger is effected shall be referred to as the "Merger Effective Date."
6. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, each Stockholder who is a stockholder of the Company, jointly
and severally, represents and warrants to UniCapital and the Surviving
Corporation, as follows:
6.1 CORPORATE EXISTENCE. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation. The Company is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the conduct of its
business requires it to be so qualified, all of which jurisdictions are listed
on Schedule 6.1. The Company has no subsidiaries. Upon the Closing Date, the
dissolution and liquidation of the Partnership shall be effective.
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6.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
Company has the corporate power, authority and legal right to execute, deliver
and perform its obligations under this Agreement. The execution, delivery and
performance of this Agreement by the Company has been duly authorized by the
Board of Directors and Stockholders of such Company and no further corporate
action on the part of the Company or its stockholders is necessary to authorize
this Agreement and the performance of the transactions contemplated hereby. This
Agreement has been, and the other agreements, documents and instruments required
to be delivered by the Company in accordance with the provisions hereof (the
"Company Documents") will be, duly executed and delivered on behalf of the
Company by duly authorized officers of the Company, and this Agreement
constitutes, and the Company Documents when executed and delivered will
constitute, the legal, valid and binding obligations of the Company, enforceable
against it in accordance with their respective terms.
6.3 AUTHORITY; OWNERSHIP. Each Stockholder has the full legal right,
power and authority to enter into this Agreement. Upon the date of this
Agreement and immediately prior to the Closing Date, each Stockholder (or his
heirs or legal representatives upon an assignment by operation of law) owns and
will own beneficially and of record all of the shares of capital stock of each
Company identified on Annex II as being owned by such Stockholder. The
conversion of Company Stock into UniCapital Stock and cash pursuant to the
provisions of this Agreement will transfer to UniCapital valid title in the
shares of Company Stock owned by such Stockholder, free and clear of all liens,
security interests, pledges, charges, voting trusts, equities, restrictions,
encumbrances and claims of every kind.
6.4 VALIDITY OF CONTEMPLATED TRANSACTIONS. The execution, delivery and
performance of this Agreement by the Company and each Stockholder does not and
will not violate, conflict with or result in the breach of any term, condition
or provision of, or require the consent of any other person under (a) any
existing law, ordinance, or governmental rule or regulation to which the Company
or any Stockholder is subject, (b) any judgment, order, writ, injunction, decree
or award of any Governmental Entity which is applicable to the Company or
Stockholder, (c) the charter documents of the Company or any securities issued
by the Company, or (d) any mortgage, indenture, agreement, contract, commitment,
lease, plan, Authorization, or other instrument, document or understanding, oral
or written, to which the Company or Stockholder is a party, by which the Company
or Stockholder may have rights or by which any of the properties or assets of
the Company may be bound or affected, or give any party with rights thereunder
the right to terminate, modify, accelerate or otherwise change the existing
rights or obligations of the Company thereunder. Except for filing the
Certificate of Merger with the applicable Secretary of States and filings under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and except as
aforesaid, no authorization, approval or consent of, and no registration or
filing with, any Governmental Entity is required in connection with the
execution, delivery or performance of this Agreement by the Company or any
Stockholder.
6.5 CAPITAL STOCK OF THE COMPANY. The authorized capital stock of the
Company consists solely of the shares shown on Schedule 6.5, of which only the
shares shown on such
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Schedule 6.5 to be issued and outstanding are issued and outstanding. All of the
issued and outstanding shares of the capital stock of the Company are owned by
the Stockholders as set forth on Schedule 6.5, and are free and clear of all
liens, security interests, pledges, charges, voting trusts, restrictions,
encumbrances and claims of every kind. All of the issued and outstanding shares
of Company Stock to be outstanding on the Merger Effective Date will have been
duly authorized and validly issued, fully paid and nonassessable, will be owned
of record and beneficially by the Stockholders (or his heirs or legal
representatives upon an assignment by operation of law) and in the amounts set
forth in Annex II, and will have been offered, issued, sold and delivered by the
Company in compliance with all applicable state and federal laws concerning the
offering, sale or issuance of securities. None of such shares will have been
issued in violation of the preemptive rights of any past or present stockholder,
whether contractual or statutory.
6.6 TRANSACTIONS IN CAPITAL STOCK. The Company has not acquired any
treasury stock since December 31, 1995. No option, warrant, call, conversion
right or commitment of any kind exists which obligates the Company to issue any
of its authorized but unissued capital stock. The Company has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof.
6.7 NO BONUS SHARES. None of the shares of capital stock of the Company
was, and none of the shares of Company Stock will be, issued pursuant to awards,
grants or bonuses, whether of stock or of options or other rights.
6.8 SUBSIDIARIES. The Company has no subsidiaries. Except as set forth
in Schedule 6.8, the Company currently does not own, of record or beneficially,
or control, directly or indirectly, any capital stock, any securities
convertible into capital stock or any other equity interest in any corporation,
association or other business entity. Except as set forth on Schedule 6.8, the
Company is not, directly or indirectly, a participant in any joint venture,
partnership or other noncorporate entity.
6.9 PREDECESSOR STATUS; ETC. Schedule 6.9 lists all names of all
predecessor companies of the Company, including the names of all entities from
whom the Company previously acquired assets representing all or substantially
all of the assets of such entity. Except as set forth on Schedule 6.9, the
Company has not ever been a subsidiary or division of another corporation or
been a part of an acquisition which was later rescinded.
6.10 SPIN-OFFS BY COMPANY. Since December 31, 1995, there has not been
any sale or spin-off of significant assets of the Company other than in the
ordinary course of business.
6.11 NO THIRD PARTY OPTIONS. There are no existing agreements, options,
commitments or rights with, of or to any person to acquire any properties,
assets or rights of the
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Company or any interest therein, except in the ordinary course of business
consistent with past practice.
6.12 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.12 are copies
of the balance sheets of the Company (the "Audited Balance Sheet") at December
31, 1997 (the "Audited Balance Sheet Date") and at December 31, 1995 and
December 31, 1996, and the related statements of income, cash flows and changes
in stockholders' equity for the fiscal years then ended, certified by Price
Waterhouse LLP, together with the report of such independent public accountants
thereon (the "Audited Financial Statements")
All of the Audited Financial Statements have been prepared in accordance with
GAAP consistently applied throughout the periods involved. All of the balance
sheets included in the Audited Financial Statements, including the related
notes, fairly present the financial position, assets and liabilities (whether
accrued, absolute, contingent or otherwise) of the Company at the dates
indicated and such statements of income, cash flows and changes in stockholders'
equity fairly present the results of operations, cash flows and changes in
stockholders' equity of the Company on a consolidated basis for the periods
indicated.
6.13 LIABILITIES AND OBLIGATIONS.
(a) Attached hereto as Schedule 6.13 is an accurate list, as
of a date not more than two days prior to the date of this Agreement, of: (i)
all liabilities of the Company which are reflected on the audited balance sheet
as of the Audited Balance Sheet Date included in the Audited Financial
Statements; (ii) all liabilities incurred thereafter other than in the ordinary
course of business (including, without limitation, liabilities to be assumed by
the Company upon dissolution and liquidation of the Partnership); (iii) all
material liabilities incurred thereafter in the ordinary course of business; and
(iv) all liabilities (A) incurred as of the Audited Balance Sheet Date that are
not reflected on the Audited Balance Sheet and (B) all liabilities incurred
thereafter that would not have been so reflected had such liabilities been
incurred as of the Audited Balance Sheet Date. Each of the foregoing liabilities
that has not heretofore been paid or discharged is so noted on Schedule 6.13.
For purposes of this Agreement, "liabilities" means liabilities of any kind,
character or description, whether accrued, absolute, secured or unsecured,
contingent or otherwise.
(b) For each such liability for which the amount is not fixed
or is contested, Schedule 6.13 shall include a summary description of the
liability, together with copies of all relevant non-privileged documentation
relating thereto, detail of all amounts claimed and any other action or relief
sought, the names of the claimant and all other parties to the claim, suit or
proceeding, the name of each court or agency before which such claim, suit or
proceeding is pending, the date such claim, suit or proceeding was instituted,
and a best estimate of the maximum amount, if any, which is likely to become
payable with respect to each such liability. If no estimate is provided, the
best estimate shall for purposes of this Agreement be deemed to be zero. On the
Closing Date, the Company shall deliver, and shall cause its accountants,
outside
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counsel and other representatives or agents to deliver, copies of all privileged
documents related to liabilities as listed on Schedule 6.13.
(c) All of the liabilities reflected on the Audited Balance
Sheet arose only out of or were incurred only in connection with the conduct of
the business of the Company. Except as set forth on Schedule 6.13 and except for
liabilities not required to be set forth thereon pursuant to Section 6.13(a),
the Company has no liabilities or obligations with respect to its businesses,
whether direct or indirect, matured or unmatured, absolute contingent or
otherwise, and there is no condition, situation or set of circumstances which
would reasonably be expected to result in any such liability.
6.14 ACCOUNTS AND NOTES RECEIVABLE. Attached hereto as Schedule 6.14 is
a complete and accurate list, as of a date not more than two days prior to the
date of this Agreement, of the accounts and notes receivable of the Company
(including, without limitation, receivables from and advances to employees and
Stockholders) other than those arising out of Leases (collectively, the
"Accounts Receivable"). Schedule 6.14 includes an aging of all Accounts
Receivable showing amounts due in 30-day aging categories. On the Closing Date,
the Stockholders will deliver to UniCapital a complete and accurate list, as of
a date not more than two days prior to the Closing Date, of the Accounts
Receivable. All Accounts Receivable represent valid obligations arising from
bona fide business transactions in the ordinary course of business consistent
with past practice. The Accounts Receivable are, and as of the Closing Date and
the Merger Effective Date will be, collectible net of any respective reserves
shown on the Company's books and records (which reserves are adequate and
calculated consistent with past practice). Subject in the case of Accounts
Receivable reflected on the Company's balance sheet to such reserves reflected
on such balance sheet, each of the Accounts Receivable will be collected in full
within ninety (90) days after the day on which it first became due and payable.
There is no contest, claim, counterclaim, defense or right of set-off, other
than rebates and returns in the ordinary course of business, under any contract
with any obligor of any Account Receivable relating to the amount or validity of
such Account Receivable. The allowance for collection losses on the Audited
Balance Sheet has been determined in accordance with GAAP consistent with past
practice.
6.15 PERMITS. Each material Permit, together with the name of the
Governmental Entity issuing such Permit is set forth on Schedule 6.15. Such
Permits are valid and in full force and effect and none of such Permits will be
terminated or impaired or become terminable as a result of the transactions
contemplated by this Agreement. Upon consummation of such transactions, the
Surviving Corporation will have all of the Company's right, title and interest
in the Permits.
6.16 REAL AND PERSONAL PROPERTY. Attached hereto as Schedule 6.16 is an
accurate list, including substantially complete descriptions as of the Audited
Balance Sheet Date, of all the real and personal property (which in the case of
personal property had an original cost in excess of $25,000) owned or leased by
the Company where the Company is a lessee or sublessee,
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including an indication as to which assets were formerly owned by any
Stockholder or affiliate (which term, as used herein, shall have the meaning
ascribed thereto in Rule 144(a)(1) promulgated under the Securities Act of 1933,
as amended (the "Securities Act")) of the Company and the Company has delivered
true and correct copies of leases, where the Company is a lessee or sublessee,
for equipment and properties on which are situated buildings, warehouses and
other structures used in the operation of the business of the Company. Except as
set forth on Schedule 6.16, where the Company is a lessee or sublessee, all of
the Company's buildings, leasehold improvements, structures, facilities,
equipment and other material items of tangible property and assets are in good
operating condition and repair, subject to normal wear and maintenance, are
usable in the regular and ordinary course of business and conform to all
applicable laws, ordinances, codes, rules and regulations, and Authorizations
relating to their construction, use and operation. All leases set forth on
Schedule 6.16 have been duly authorized, executed and delivered and constitute
the legal, valid and binding obligations of the Company and, to the knowledge of
the Stockholders, no other party to any such lease is in default thereunder and
such leases constitute the legal, valid and binding obligations of such other
parties. All fixed assets used by the Company in the operation of its business
are either owned by the Company or leased under an agreement set forth on
Schedule 6.16. The Company and the Stockholders have heretofore delivered to
UniCapital copies of all title reports and title insurance policies received or
held by the Company. The Company and the Stockholders have indicated on Schedule
6.16 a summary description of all plans or projects involving the opening of new
operations, expansion of any existing operations or the acquisition of any real
property or existing business to which management of the Company has devoted any
significant effort or expenditure in the two-year period prior to the date of
this Agreement which, if pursued by the Company would require additional
expenditures of significant efforts or capital.
6.17 CONTRACTS AND COMMITMENTS. Schedule 6.17 sets forth an accurate,
correct and complete list of all agreements, contracts, commitments,
arrangements and understandings, written or oral, including all amendments and
supplements thereto, of the Company other than Leases (the "Contracts"), to
which the Company is a party or is bound, or by which any of its assets are
bound, and which involve any:
(a) agreement, contract, commitment, arrangement or
understanding with any present or former employee or consultant or for the
employment of any person, including any consultant;
(b) agreement, contract, commitment, arrangement or
understanding for the future purchase of, or payment for, supplies or products,
or for the performance of services by a third party involving in any one case
$25,000 or more;
(c) agreement, contract, commitment, arrangement or
understanding to sell or supply products or to perform services involving in any
one case $25,000 or more;
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(d) agreement, contract, commitment, arrangement or
understanding containing minimum requirements or "take or pay" provisions;
(e) agreement, contract, commitment, arrangement or
understanding not otherwise listed on Schedule 6.17 and continuing over a period
of more than six months from the date hereof and exceeding $25,000 in value;
(f) distribution, dealer, representative or sales agency
agreement, contract, commitment, arrangement or understanding;
(g) agreement, contract, commitment, arrangement or
understanding containing a provision to indemnify any person or entity or assume
any tax, environmental or other liability;
(h) agreement, contract, commitment, arrangement or
understanding with federal, state, local, regulatory or other governmental
entities;
(i) note, debenture, bond, equipment trust agreement, letter
of credit agreement, loan agreement or other contract or commitment for the
borrowing or lending of money or agreement or arrangement for a line of credit
or guarantee, pledge or undertaking of the indebtedness of any other person;
(j) agreement, contract, commitment, arrangement or
understanding for any charitable or political contribution;
(k) agreement, contract, commitment, arrangement or
understanding for any capital expenditure or leasehold improvement in excess of
$25,000;
(l) agreement, contract, commitment, arrangement or
understanding limiting or restraining the Company or any successor thereto, or
to the knowledge of Company and each Stockholder, any employee of the Company or
any successor thereto, from engaging or competing in any manner or in any
business;
(m) license, franchise, distributorship or other agreement
which relates in whole or in part to any software, patent, trademark, trade
name, service mark or copyright or to any ideas, technical assistance or other
know-how of or used by the Company;
(n) agreement, contract, commitment, arrangement or
understanding to which the Company, on the one hand, and any affiliate, officer,
director or stockholder of the Company, on the other hand, are parties; or
(o) material agreement, contract, commitment, arrangement or
understanding not made in the ordinary course of business.
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Each of the Contracts listed in the Schedule 6.17, or not required to be listed
therein because of the amount thereof, is valid and enforceable in accordance
with its terms; the Company is, and to the knowledge of the Company and each
Stockholder, all other parties thereto are, in compliance with the provisions
thereof. The Company is not, and to the knowledge of the Company and each
Stockholder, no other party thereto is, in default in the performance,
observance or fulfillment of any material obligation, covenant or condition
contained therein; and no event has occurred which with or without the giving of
notice or lapse of time, or both, would constitute a default thereunder. None of
the rights of the Company under any Contract will be impaired by the
consummation of the transactions contemplated hereby, and all such rights will
be enforceable by the Surviving Corporation after the Merger Effective Date
without the consent or agreement of any other party. The Company has delivered
accurate and complete copies of each Contract to UniCapital. No Contract
obligates any party to obtain any consent in connection with the transactions
contemplated hereby.
6.18 GOVERNMENT CONTRACTS. The Company is not now or has ever been a
party to any contract with any Governmental Entity subject to price
redetermination or renegotiation.
6.19 TITLE TO REAL PROPERTY. The Company has good and insurable title
to all real property owned and used in its business, subject to no mortgage,
pledge, lien, conditional sales agreement, encumbrance or charge, except for:
(a) liens, if any, reflected on Schedules 6.13 and 6.16 as
securing specified liabilities (with respect to which no material default
exists);
(b) liens for current taxes and assessments not yet due or in
default;
(c) easements for utilities serving the property only; and
(d) easements, covenants and restrictions and other exceptions
to title shown of record in the offices of the county clerks in which the
properties, assets and leasehold estates are located which, in UniCapital's sole
judgment, do not adversely affect UniCapital's intended use of such properties.
6.20 INSURANCE. The assets, properties and operations of the Company
are insured under various policies of general liability and other forms of
insurance, all of which are described in Schedule 6.20, which discloses for each
policy the risks insured against, coverage limits, deductible amounts, all
outstanding claims thereunder, and whether the terms of such policy provide for
retrospective premium adjustments. All such policies are in full force and
effect in accordance with their terms, no notice of cancellation has been
received, and there is no existing default or event which, with the giving of
notice or lapse of time or both, would constitute a default thereunder. Such
policies are in amounts which, in relation to the business and assets of the
Company, are consistent with the normal or customary industry practice and all
premiums due to date have been paid in full. The Company has not been refused
any insurance, nor has the
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Company's coverage been limited, by any insurance carrier to which it has
applied for insurance or with which it has carried insurance during the past
five years. Schedule 6.20 also contains a true and complete description of all
outstanding bonds and other surety arrangements issued or entered into in
connection with the business, assets and liabilities of the Company.
6.21 EMPLOYEES. Schedule 6.21 contains the following with respect to
the Company:
(a) a list of all employees of the Company (including name,
title and position);
(b) each such employee's length of service; and
(c) the compensation (including terms of payment, bonuses,
commissions and deferred compensation, as well as any benefits) of each such
employee.
Except as disclosed on Schedule 6.21: (i) there have not been in the past five
years and, to the knowledge of the Company and the Stockholders, there are not
pending, any labor disputes, work stoppages, requests for representation,
pickets or work slow-downs due to labor disagreements; (ii) there are and have
been no unresolved violations of any Laws of any Governmental Entity respecting
the employment of any employees; (iii) there is no unfair labor practice, charge
or complaint pending, unresolved or, to the knowledge of the Company and the
Stockholders, threatened before the National Labor Relations Board or similar
body in any foreign country; (iv) there is no employment handbook, personnel
policy manual, or similar document that creates prospective employment rights or
obligations; (v) the employees of the Company are not covered by any collective
bargaining agreement; (vi) the Company has provided or will timely provide prior
to Closing all notices required by law to be given prior to Closing to all
local, state, federal or national labor, wage-payment, equal employment
opportunity, unemployment insurance and related agencies; (vii) the Company has
paid or properly accrued in the ordinary course of business all wages and
compensation due to employees, including all vacations or vacation pay, holidays
or holiday pay, sick days or sick pay, and bonuses; and (viii) the transactions
contemplated by this Agreement will not create liability under any Laws of any
Governmental Entity respecting reductions in force or the impact on employees on
plant closing or sales of businesses. All employees of the Company are legally
able to work in the United States.
6.22 EMPLOYEE BENEFIT PLANS AND ARRANGEMENTS. Schedule 6.22 sets forth
a complete and accurate list of each Benefit Plan covering any present or former
officers, employees or directors of the Company. "Benefit Plan" means each
"employee pension benefit plan" (as defined in Section 3(3) of ERISA,
hereinafter a "Pension Plan"), "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA, hereinafter a "Welfare Plan") and each other plan or
arrangement (written or oral) relating to deferred compensation, bonus,
performance compensation, stock purchase, stock option, stock appreciation,
severance, vacation, sick leave, holiday pay, fringe benefits, personnel policy,
reimbursement program, incentive, insurance, welfare or similar plan, program,
policy or arrangement, in each case maintained or contributed
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to, or required to be maintained or contributed to, by the Company or its
affiliates or any other person or entity that, together with the Company, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code
(each, together with the Company, a "Commonly Controlled Entity") for the
benefit of any present or former officer, employee or director. The Company has
no intent or commitment to create any additional Benefit Plan or amend any
Benefit Plan so as to increase benefits thereunder. The Company has not created
any Benefit Plan or declared or paid any bonus compensation in contemplation of
the transactions contemplated by this Agreement. A current, accurate and
complete copy of each Benefit Plan has been made available to UniCapital. Except
as disclosed on Schedule 6.22:
(a) each Benefit Plan is in substantial compliance with all
reporting, disclosure and other requirements of ERISA applicable to such Benefit
Plan;
(b) each Pension Plan which is intended to be qualified under
Section 401(a) of the Code, has been determined by the Internal Revenue Service
to be so qualified and, to the knowledge of the Company and the Stockholders, no
condition exists that would adversely affect any such determination;
(c) neither any Benefit Plan, nor the Company, nor any
Commonly Controlled Entity, nor any trustee or agent has been or is presently
engaged in any prohibited transactions as defined by Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not applicable which could
subject the Company to the tax or penalty imposed by Section 4975 of the Code or
Section 502 of ERISA;
(d) there is no event or condition existing which could be
deemed a "reportable event" (within the meaning of Section 4043 of ERISA) with
respect to which the thirty-day notice requirement has not been waived; to the
knowledge of the Company and the Stockholders, no condition exists which could
subject the Company to a penalty under Section 4071 of ERISA;
(e) neither the Company nor any Commonly Controlled Entity is
or has ever been party to any "multi-employer plan," as that term is defined in
Section 3(37) of ERISA;
(f) true and correct copies of the most recent annual report
on Form 5500 and any attached schedules for each Benefit Plan (if any such
report was required by applicable law) and a true and correct copy of the most
recent determination letter issued by the Internal Revenue Service for each
Pension Plan have been provided to UniCapital;
(g) with respect to each Benefit Plan, there are no actions,
suits or claims (other than routine claims for benefits in the ordinary course)
pending or, to the knowledge of the Company and the Stockholders, threatened
against any Benefit Plan, the Company, any Commonly Controlled Entity or any
trustee or agent of any Benefit Plan; and
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(h) with respect to each Benefit Plan to which the Company or
any Commonly Controlled Entity is a party which constitutes a group health plan
subject to Section 4980B of the Code, each such Benefit Plan substantially
complies, and in each case has substantially complied, with all applicable
requirements of Section 4980B of the Code.
(i) Except as set forth in Schedule 6.22:
(i) there is no outstanding liability (except for
premiums due) under Title IV of ERISA with respect to any Pension Plan;
(ii) neither the Pension Benefit Guaranty Corporation
nor the Company nor any Commonly Controlled Entity has instituted proceedings to
terminate any Pension Plan and the Pension Benefit Guaranty Corporation has not
informed the Company of its intent to institute proceedings to terminate any
Pension Plan;
(iii) full payment has been made of all amounts which
the Company or any Commonly Controlled Entity was required to have paid as a
contribution to the Pension Plans as of the last day of the most recent fiscal
year of each of the Pension Plans ended prior to the date of this Agreement, and
none of the Pension Plans has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of each such Pension
Plan ended prior to the date of this Agreement;
(iv) to the knowledge of the Company and the
Stockholders, the actuarial assumptions utilized, where appropriate, in
connection with determining the funding of each Pension Plan which is a defined
benefit pension plan (as set forth in the actuarial report for such Pension
Plan) are reasonable. Copies of the most recent actuarial reports have been
furnished to UniCapital. Based on such actuarial assumptions, as of the Audited
Balance Sheet Date, the fair market value of the assets or properties held under
each such Pension Plan exceeds the actuarially determined present value of all
accrued benefits of such Pension Plan (whether or not vested) determined on an
ongoing Pension Plan basis;
(v) each of the Benefit Plans is, and its
administration is and has been during the six-year period preceding the date of
this Agreement, in substantial compliance with, and the Company has not received
any claim or notice that any such Benefit Plan is not in compliance with, all
applicable laws and orders and prohibited transaction exemptions, including
without limitation, to the extent applicable, the requirements of ERISA;
(vi) neither the Company nor any Commonly Controlled
Entity is in default in performing any of its contractual obligations under any
of the Benefit Plans or any related trust agreement or insurance contract;
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(vii) there are no material outstanding liabilities
of any Benefit Plan other than liabilities for benefits to be paid to
participants in Benefit Plan and their beneficiaries in accordance with the
terms of Benefit Plan;
(viii) each Benefit Plan may be amended or modified
by the Company or Commonly Controlled Entity at any time without liability
except under any defined pension benefit plan;
(ix) no Benefit Plan other than a Pension Plan,
retiree medical plan or severance plan provides benefits to any individual after
termination of employment;
(x) the consummation of the transactions contemplated
by this Agreement will not (in and of itself): (A) entitle any employee of the
Company to severance pay, unemployment compensation or any other payment; (B)
accelerate the time of payment or vesting, or increase the amount of
compensation due to any such employee; (C) result in any liability under Title
IV of ERISA; (D) result in any prohibited transaction described in Section 406
of ERISA or Section 4975 of the Code for which an exemption is not available; or
(E) result (either alone or in conjunction with any other event) in the payment
or series of payments by the Company or any of its affiliates to any person of
an "excess parachute payment@ within the meaning of Section 280G of the Code;
(xi) with respect to each Benefit Plan that is funded
wholly or partially through an insurance policy, all premiums required to have
been paid to date under the insurance policy have been paid, all premiums
required to be paid under the insurance policy through the Merger Effective Date
will have been paid on or before the Merger Effective Date and, as of the Merger
Effective Date, there will be no liability of the Company or any Commonly
Controlled Entity under any insurance policy or ancillary agreement with respect
to such insurance policy in the nature of a retroactive rate adjustment, loss
sharing arrangement or other actual or contingent liability arising wholly or
partially out of events occurring prior to the Merger Effective Date;
(xii) (A) each Benefit Plan that constitutes a
"Welfare Plan," within the meaning of Section 3(1) of ERISA, and for which
contributions are claimed by the Company or any Commonly Controlled Entity as
deductions under any provision of the Code, is in material compliance with all
applicable requirements pertaining to such deduction;
(B) with respect to any welfare benefit fund
(within the meaning of Section 419 of the Code) related to a welfare benefit
plan, there is no disqualified benefit (within the meaning of Section 4976(b) of
the Code) that would result in the imposition of a tax under Section 4976(a) of
the Code; and
(C) all welfare benefit funds intended to be
exempt from tax under Section 501(a) of the Code have been determined by the
Internal Revenue Service to be so
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exempt and no event or condition exists which would adversely affect any such
determination; and
(xiii) all benefit plans outside of the United
States, if any (the "Foreign Plans"), are in compliance with all applicable laws
and regulations and have been operated in accordance with the plans' respective
terms. There are no material unfunded liabilities under or in respect of the
Foreign Plans, and all contributions or other payments required to be made to or
in respect of the Foreign Plans prior to the Merger Effective Date have been
made or will be made prior to the Merger Effective Date.
6.23 COMPLIANCE WITH LAW; AUTHORIZATIONS. The Company has complied with
each, and is not in violation of any, law, ordinance, or governmental or
regulatory rule or regulation, whether federal, state, local or foreign
("Regulations"), to which the Company's business, operations, assets or
properties is subject. Th Company owns, holds, possesses or lawfully uses in the
operation of its business all franchises, licenses, permits, easements, rights,
applications, filings, registrations and other authorizations ("Authorizations")
which are in any manner necessary for it to conduct its business as now or
previously conducted or for the ownership and use of the assets owned or used by
the Company in the conduct of the business of the Company, free and clear of all
liens, charges, restrictions and encumbrances and in compliance with all
Regulations. All such Authorizations are listed and described in Schedule 6.23.
The Company is not in default, nor has the Company received any notice of any
claim of default, with respect to any such Authorization. All such
Authorizations are renewable by their terms or in the ordinary course of
business without the need to comply with any special qualification procedures or
to pay any amounts other than routine filing fees. None of such Authorizations
will be adversely affected by consummation of the transactions contemplated
hereby. No Stockholder and no director, officer, employee or former employee of
the Company or any affiliates of the Company, or any other person, firm or
corporation, owns or has any proprietary, financial or other interest (direct or
indirect) in any Authorization which the Company owns, possesses or uses in the
operation of the business of the Company as now or previously conducted.
6.24 TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
6.24, no Stockholder and no director, officer or employee of the Company, or any
member of his or her immediate family or any other of its, his or her
affiliates, owns or has a 5% or more ownership interest in any corporation or
other entity that is or was during the last three years a party to, or in any
property which is or was during the last three years the subject of, any
contract, agreement or understanding, business arrangement or relationship with
the Company.
6.25 LITIGATION. (a) No litigation, including any arbitration,
investigation or other proceeding of or before any court, arbitrator or
governmental or regulatory official, body or authority is pending or, to the
knowledge of the Company and the Stockholders, threatened against the Company or
which relates to the transactions contemplated by this Agreement.
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(b) Except as set forth on Schedule 6.25, no litigation,
including any arbitration, investigation or other proceeding of or before any
court, arbitrator or governmental or regulatory official, body or authority is
pending or, to the knowledge of the Company and the Stockholders, threatened
against the Company or which relates to the Company.
(c) Neither the Company nor any Stockholder knows of any
reasonably likely basis for any litigation, arbitration, investigation or
proceeding referred to in Sections 6.25(a) or (b).
(d) The Company is not a party to or subject to the provisions
of any judgment, order, writ, injunction, decree or award of any court,
arbitrator or governmental or regulatory official, body or authority.
6.26 RESTRICTIONS. The Company is not a party to any indenture,
agreement, contract, commitment, lease, plan, license, permit, authorization or
other instrument, document or understanding, oral or written, or subject to any
charter or other corporate restriction or any judgment, order, writ, injunction,
decree or award which materially adversely affects or materially restricts or,
so far as the Company or any of the Stockholders can now reasonably foresee, may
in the future materially adversely affect or materially restrict, the business,
operations, assets, properties, prospects or condition (financial or otherwise)
of the Company after consummation of the transactions contemplated hereby.
6.27 TAXES. All federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by the Company (the
"Tax Returns") with respect to any federal, state, local or foreign taxes,
assessments, interest, penalties, deficiencies, fees and other governmental
charges or impositions (including without limitation all income tax,
unemployment compensation, social security, payroll, sales and use, excise,
privilege, property, ad valorem, franchise, license, school and any other tax or
similar governmental charge or imposition under laws of the United States or any
state or municipal or political subdivision thereof or any foreign country or
political subdivision thereof) (singly a "Tax", and collectively, the "Taxes")
have been timely filed with the appropriate governmental agencies in all
jurisdictions in which such Tax Returns are required to be filed, and all such
Tax Returns properly reflect the liabilities of the Company for Taxes for the
periods, property or events covered thereby. All Taxes, including without
limitation those which are called for by the Tax Returns, required to be paid,
withheld or accrued by the Company and any deficiency assessments, penalties and
interest have been timely paid, withheld or accrued. The accruals for Taxes
contained in the Audited Balance Sheet are adequate to cover the Tax liabilities
of the Company as of that date and include adequate provision for all deferred
Taxes, and nothing has occurred subsequent to that date to make any of such
accruals inadequate. The Company's Tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Company's Tax books and records. The
Company is not nor has at any time ever been a party to a Tax sharing, Tax
indemnity or Tax allocation agreement, and the Company has not assumed any Tax
liability of any other
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person or entity under contract. The Company has not received any notice of
assessment or proposed assessment in connection with any Tax Returns and there
are not pending tax examinations of or tax claims asserted against the Company
or any of its assets or properties. The Company has not extended, or waived the
application of, any statute of limitations of any jurisdiction regarding the
assessment or collection of any Taxes. There are now (and as of immediately
following the Closing there will be) no Liens (other than any Lien for current
Taxes not yet due and payable) on any of the assets or properties of the Company
relating to or attributable to Taxes. To the knowledge of the Company and the
Stockholders, there is no basis for the assertion of any claim relating to or
attributable to Taxes which, if adversely determined, would result in any Lien
on the assets of the Company or otherwise have an adverse effect on the Company
or its business, operations, assets, properties, prospects or condition
(financial or otherwise). Neither the Company nor the Stockholders have any
knowledge of any basis for any additional assessment of any Taxes. All Tax
payments related to employees, including income tax withholding, FICA, FUTA,
unemployment and worker's compensation, required to be made by the Company have
been fully and properly paid, withheld, accrued or recorded. There are no
contracts, agreements, plans or arrangements, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company that, individually or collectively, could give rise to any payment (or
portion thereof) that would not be deductible pursuant to Sections 280G, 404 or
162 of the Code. Two correct and complete copies of (a) all Tax examinations,
(b) all extensions of statutory limitations and (c) all federal, state and local
income tax returns and franchise tax returns of the Company for the last five
fiscal years, or such shorter period of time as any of them shall have existed,
have heretofore been delivered by the Company and the Stockholders to
UniCapital. The Company made an election to be taxed under the provisions of
Subchapter S of the Code within 75 days of its original organization and has at
no time been taxed under the provisions of Subchapter C of the Code. The Company
has a taxable year ended December 31 and the Company has not made an election to
retain a fiscal year other than December 31 under Section 444 of the Code. The
Company does not have any net recognized built-in gain within the meaning of
Section 1374 of the Code. The Company currently utilizes the accrual method of
accounting for income tax purposes and has not changed its method of accounting
for income tax purposes in the past five years.
6.28 INTELLECTUAL PROPERTY MATTERS.
(a) The Company has not utilized or currently utilizes any
patent, trademark, trade name, service mark, copyright, software, trade secret
or know-how except for those listed on Schedule 6.28 (the "Intellectual
Property"), all of which are owned by the Company free and clear of any liens,
claims, charges or encumbrances. The Intellectual Property constitutes all such
assets, properties and rights which are used or held for use in, or are
necessary for, the conduct of the business of the Company.
(b) There are no royalty, commission or similar arrangements,
and no licenses, sublicenses or agreements, pertaining to any of the
Intellectual Property or products or services of the Company.
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(c) The Company does not infringe upon or unlawfully or
wrongfully use any patent, trademark, trade name, service mark, copyright or
trade secret owned or claimed by another. No action, suit, proceeding or
investigation has been instituted or, to the knowledge of the Company and the
Stockholders, threatened relating to any, patent, trademark, trade name, service
mark, copyright or trade secret formerly or currently used by the Company. None
of the Intellectual Property is subject to any outstanding order, decree or
judgment. The Company has not agreed to indemnify any person or entity for or
against any infringement of or by the Intellectual Property.
(d) No present or former employee of the Company and no other
person or entity owns or has any proprietary, financial or other interest,
direct or indirect, in whole or in part, in any patent, trademark, trade name,
service mark or copyright, or in any application therefor, or in any trade
secret, which the Company owns, possesses or uses in its operations as now or
heretofore conducted. Schedule 6.28 lists all confidentiality or non-disclosure
agreements to which the Company or any of its employees is a party.
(e) Schedule 6.28 sets forth a complete and accurate list of
all registrable items of Intellectual Property duly registered in, filed in or
issued by the United States Copyright Office or the United States Patent and
Trademark Office, any appropriate offices in the various states of the United
States and any offices in other jurisdictions.
(f) All rights of the Company in the Intellectual Property
shall vest in the Surviving Corporation pursuant to the transactions
contemplated hereby without any consent or other approval.
(g) All Intellectual Property in the form of computer software
that is utilized by any Company in the operations of its business is capable of
processing date data between and within the twentieth and twenty-first
centuries, or can be rendered capable of processing such data within three
months by the expenditure of no more than $100,000.
6.29 COMPLETENESS; NO VIOLATIONS. The certified copies of the
Certificate of Incorporation and Bylaws, both as amended to date, of the
Company, and the copies of all leases, instruments, agreements, licenses,
permits, certificates or other documents which are included on schedules
attached hereto or which have been delivered or which have been made available
to UniCapital in connection with the transactions contemplated hereby, are
complete and correct; neither the Company nor, to the knowledge of the
Stockholders, any other party to any of the foregoing is in material default
thereunder; and, except as set forth in the schedules and docu ments attached to
this Agreement, the rights and benefits of the Company thereunder will not be
materially and adversely affected by the transactions contemplated hereby, and
the execution of this Agreement and the performance of the obligations hereunder
will not result in a material violation or breach or constitute a material
default under any of the terms or provisions thereof. Except as set forth on
Schedule 6.29, none of such leases, instruments, agreements, contracts,
licenses, permits, certificates or other documents requires notice to, or the
consent or approval of,
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any governmental agency or other third party to any of the transactions
contemplated hereby to remain in full force and effect. The consummation of the
transactions contemplated hereby will not give rise to any right of termination,
cancellation or acceleration or result in the loss of any right or benefit
thereunder.
6.30 EXISTING CONDITION. Since the Audited Balance Sheet Date, the
Company has not:
(a) incurred any liabilities, other than liabilities incurred
in the ordinary course of business consistent with past practice, or discharged
or satisfied any lien or encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice, or failed to pay or
discharge when due any liabilities of which the failure to pay or discharge has
caused or will cause any material damage or risk of material loss to it or any
of its assets or properties;
(b) sold, encumbered, assigned or transferred any assets,
properties or rights or any interest therein, except for the sales in the
ordinary course of business consistent with past practice, or made any agreement
or commitment or granted any option or right with, of or to any person to
acquire any assets, properties or rights of any Company or any interest therein,
except in the ordinary course of business consistent with past practice;
(c) created, incurred, assumed or guaranteed any indebtedness
for money borrowed, or mortgaged, pledged or subjected any of its assets to any
mortgage, lien, pledge, security interest, conditional sales contract or other
encumbrance of any nature whatsoever, except in the ordinary course of business
consistent with past practice;
(d) made or suffered any amendment or termination of any
material agreement, contract, commitment, lease or plan to which it is a party
or by which it is bound, or canceled, modified or waived any substantial debts
or claims held by it or waived any rights of substantial value, except in the
ordinary course of business consistent with past practice;
(e) declared, set aside or paid any dividend or made or agreed
to make any other distribution or payment in respect of its capital shares or
redeemed, purchased or otherwise acquired or agreed to redeem, purchase or
acquire any of its shares of capital stock or other ownership interests;
(f) suffered any damage, destruction or loss, whether or not
covered by insurance, (i) materially and adversely affecting its business,
operations, assets, properties or prospects or (ii) of any item or items carried
on its books of account individually or in the aggregate at more than $25,000,
or suffered any repeated, recurring or prolonged shortage, cessation or
interruption of supplies or utility or other services required to conduct its
business and operations;
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(g) suffered any material adverse change in its business,
operations, assets, properties, prospects or condition (financial or otherwise)
other than as directly caused by adverse economic conditions not specific to, or
having an extraordinary impact upon, the Company;
(h) received notice or had knowledge of any actual or
threatened labor trouble, strike or other occurrence, event or condition of any
similar character which has had or might have an adverse effect on its business,
operations, assets, properties or prospects;
(i) made commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $25,000, except such
as may be involved in ordinary repair, maintenance or replacement of its assets;
(j) except as set forth on Schedule 6.30, increased the
salaries or other compensation of, or made any advance (excluding advances for
ordinary and necessary business expenses) or loan to, any of its employees or
made any increase in, or any addition to, other benefits to which any of its
employees may be entitled;
(k) changed any of the accounting principles followed by it or
the methods of applying such principles;
(l) entered into any transaction other than in the ordinary
course of business consistent with past practice;
(m) changed its authorized capital or its securities
outstanding or otherwise changed its ownership interests, or granted any
options, warrants, calls, conversion rights or commitments with respect to any
of its capital stock or other ownership interests; or
(n) agreed to take any of the actions referred to above.
6.31 DEPOSIT ACCOUNTS; POWERS OF ATTORNEY. Attached hereto as Schedule
6.31 is an accurate list, as of the date of this Agreement, of:
(a) the name of each financial institution in which the
Company has accounts or safe deposit boxes;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have
access thereto; and
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(e) the name of each person, corporation, firm or other entity
holding a general or special power of attorney from the Company and a
description of the terms of such power.
6.32 BOOKS OF ACCOUNT. The books, records and accounts of the Company
accurately and fairly reflect, in reasonable detail, the transactions and the
assets and liabilities of the Company. The Company has not engaged in any
transaction, maintained any bank account or used any of the funds of the Company
except for transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of the business.
6.33 ENVIRONMENTAL MATTERS. (a) The Company has secured, and is in
compliance with, all Environmental Permits, with respect to any premises on
which its business is operated, all of which Environmental Permits shall vest in
the Surviving Corporation upon consummation of the transactions contemplated
hereby. The Company is in compliance with all Environmental Laws.
(b) Neither the Company nor any Stockholder has received any
communication from any Governmental Entity that alleges that the Company is not
in compliance with any Environmental Laws or Environmental Permits.
(c) Th Company has not entered into or agreed to any court
decree or order, and the Company is not subject to any judgment, decree or
order, relating to compliance with any Environmental Law or to investigation or
cleanup of a Hazardous Substance under any Environmental Law.
(d) No lien, charge, interest or encumbrance has been
attached, asserted, or to the knowledge of the Company and the Stockholders,
threatened to or against any assets or properties of the Company pursuant to any
Environmental Law.
(e) There has been no treatment, storage, disposal or release
of any Hazardous Substance on any property owned, operated or leased by the
Company.
(f) The Company has not received a CERCLA 104(e) information
request or has been named a potentially responsible party for any National
Priorities List site under CERCLA or any site under analogous state law or
received an analogous notice or request from any non-U.S. Governmental Entity,
which notice, request or any resulting inquiry or litigation has not been fully
and finally resolved without possibility of reopening.
(g) There are no aboveground tanks or underground storage
tanks on, under or about any property owned, operated or leased by the Company
and any former aboveground or underground tanks on any property owned, operated
or leased by the Company have been removed in accordance with all Environmental
Laws and no residual contamination, if any, remains at such sites in excess of
applicable standards.
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(h) There are no polychlorinated biphenyls ("PCBs") leaking
from any article, container or equipment on, under or about any property owned,
operated or leased by any Company and there are no such articles, containers or
equipment containing PCBs, and there is no asbestos containing material in a
condition or location currently constituting a violation of any Environmental
Law at, on, under or within any property owned, operated or leased by the
Company.
(i) The Company and the Stockholders have provided to
UniCapital true and complete copies of, or access to, all written environmental
assessment materials and reports in their possession that have been prepared by
or on behalf of the Company during the past five years.
6.34 NO ILLEGAL PAYMENTS. Neither the Company nor, to the knowledge of
the Company and the Stockholders, any affiliate, officer, agent or employee
thereof, directly or indirectly, has, during the past five years, on behalf of
or with respect to the Company or any affiliate thereof, (a) made any unlawful
domestic or foreign political contributions, (b) made any payment or provided
services which were not legal to make or provide or which the Company or any
affiliate thereof or any such officer, agent or employee should have known were
not legal for the payee or the recipient of such services to receive, (c)
received any payment or any services which were not legal for the payer or the
provider of such services to make or provide, (d) made any payment to any person
or entity, or agent or employee thereof, in connection with any Lease (as
hereinafter defined) to induce such person or entity to enter into a Lease
transaction, (e) had any transactions or payments related to the Company which
are not recorded in their accounting books and records or (f) had any off-book
bank or cash accounts or "slush funds" related to the Company.
6.35 LEASES. Schedule 6.35 hereto sets forth the Company's lease
financing arrangements as of the Audited Balance Sheet Date (which, together
with all other lease/financing arrangements entered into by the Company between
such date and the Closing Date, are referred to herein as the "Leases"). The
term "Lease Documents" means the lease arrangements and financing contracts
evidencing the Leases arrangements described in Schedule 6.35, together with all
related documents and agreements including, without limitations, master lease
agreements, schedules or other addenda to such Leases, certificates of delivery
and acceptance, UCC financing statements, remarketing agreements, residual
guaranty agreements, insurance policies, guaranty agreements and other credit
supports. The term "Equipment" means all equipment, inventory and other property
described as being leased or financed pursuant to a Lease, or in which the
Company is granted a security interest pursuant to a Lease. The term "Obligor"
means any lessee party or other party obligated to pay or perform any
obligations under or in respect of a Lease or the Equipment covered by a Lease
(excluding the lessor party thereunder, but otherwise including, without
limitation, any guarantor of a Lease or any vendor, manufacturer or similar
party under a remarketing agreement, residual guaranty or similar
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agreement). The term "Scheduled Payments" means the monthly or periodic rental
payments or installments of principal and interest under the terms of the
Leases.
(a) There is no restriction or limitation in any of the Lease
Documents or otherwise, restricting the Company from executing this Agreement or
entering into the transactions contemplated by this Agreement, other than
consents which have been, or prior to the Closing will have been, obtained.
(b) The Company owns the Equipment covered by each Lease or
has a vested and perfected first priority security interest in the Equipment.
Except as set forth on Schedule 6.35(b), all Equipment is located in the United
States.
(c) With respect to each Lease, only one chattel paper
original of such Lease exists and is held by the Company or, in the case of
Leases sold or with respect to which the lease payments thereunder have been
assigned by the Company in the ordinary course of business consistent with past
practice, by such assignee.
(d) Each Lease is in full force and effect in accordance with
its terms, and, to the knowledge of the Company or any Stockholder, there has
been no occurrence which would or might permit any Obligor to terminate such
Lease or suspend or reduce any payments or obligations due or to become due in
respect of such Lease or the related Lease Documents by reason of default by the
lessor party under such Lease. To the knowledge of the Company or any
Stockholder, none of the Obligors in respect of a Lease or the related Lease
Documents is the subject of a bankruptcy, insolvency or similar proceeding.
(e) Except for the delinquency in the payment of any Scheduled
Payment that is not more than 90 days past due, there does not exist any default
in the payment of any Scheduled Payments due under any lease or the related
Lease Documents, and there does not exist any other default, breach, violation
or event permitting acceleration, termination or repossession under any Lease or
the related Lease Documents or any event which, to the knowledge of the Company
and the Stockholders, with notice and the expiration of any applicable grace or
cure period, would constitute such a default, breach, violation or event
permitting acceleration, termination or repossession under such Lease or the
related Lease Documents.
(f) The Company has not acted in a manner which (nor has the
Company failed to act where such failure to act) would alter or reduce any of
the Company's rights or benefits under any manufacturer's or vendors' warranties
or guarantees with respect to any Equipment.
(g) The Company has complied with all requirements of any
federal, state or local law, including without limitation, usury laws,
applicable to each Lease.
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(h) Each Lease has the following characteristics:
(i) such Lease was originated in the United States
and the Scheduled Payments thereunder are payable in U.S. dollars by Obligors
domiciled in the United States;
(ii) the lessee party under such Lease has
unconditionally accepted the Equipment covered by such Lease ;
(iii) at least one Scheduled Payment has been made by
the Obligor under each such Lease; and
(iv) no Obligor in respect of such Lease is an
affiliate of the Company.
(i) Each Lease and the related Lease Documents are valid,
binding, legally enforceable and non-cancelable obligations of the parties
thereto, enforceable in accordance with their respective terms, except as the
same may be subject to the effect of general principles of equity. Each Lease is
a business obligation of the lessee thereunder and is not a "consumer
transaction" under any applicable federal or state regulation.
(j) No Lease or related Lease Document is the subject of a
fraudulent scheme by any Obligor or any supplier of Equipment.
(k) Each item of Equipment is subject to a Lease.
(l) Each Lease is a fixed rate lease contract.
(m) No Lease or related Lease Document is subject to any
legally enforceable right of rescission, set-off, counterclaim, abatement or
defense, including without limitation any defense of usury, nor will the
operation of any of the terms of any Lease or any related Lease Document or the
exercise of any right or remedy thereunder render such Lease or any related
Lease Document or the obligations thereunder unenforceable, or subject the same
to any right of rescission, set-off, counterclaim, abatement or defense. No
Obligor has asserted any legally enforceable right of rescission, set-off,
counterclaim, abatement or defense to its obligations under a Lease or any
related Lease Document.
(n) As to the Leases and the related Lease Documents, (i) none
has been amended or modified (a) to extend the maturity date for a period of
longer than one year, or (b) to alter the amount or time of payment of any
amount due thereunder, unless as to (a) and (b) such extension or alteration is
anticipated to result in a net economic benefit to the Company; (ii) no
indulgences or waivers have been granted in respect of the obligations of any
Obligor under any Lease, and (iii) the Company has not advanced any monies on
behalf of any Obligor.
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(o) Each Lease requires the Obligor thereunder at its own cost
and expense to maintain the Equipment leased thereunder in good repair,
condition and working order, and, to the knowledge of the Stockholders, each
Obligor under a Lease is currently in compliance with such requirement.
(p) Each Lease requires the Obligor thereunder (i) to pay all
fees, taxes (except income taxes), and other charges or liabilities arising with
respect to the Equipment leased thereunder or the use thereof, (ii) to keep the
Equipment free and clear of any and all liens, security interests and other
encumbrances, other than security interests of the applicable Company, (iii) to
hold harmless the lessor thereunder and its successors and assigns against the
imposition of any fees, charges, liabilities and encumbrances, (iv) to bear all
risk of loss associated with the Equipment covered by or securing the
obligations under such Lease during the term of such Lease and (v) to maintain
at the cost of the Obligor public liability and casualty insurance in respect of
such Equipment covered by such Lease.
(q) Each Lease prohibits without the lessor's prior written
consent any relocation of the Equipment covered by such Lease and requires the
Obligor to execute such agreements and documents as may reasonably be requested
by the lessor in connection with any such relocation.
(r) Each Lease involves either the lease of tangible personal
property owned by the Company or the loan of money secured by a security
interest in tangible personal property owned by the Obligor thereunder.
(s) The Company has not received any notice challenging its
ownership or the priority of its security interest in the Equipment covered by
each Lease, and there are no proceedings pending before any court or
governmental entity or, to the knowledge of the Company and the Stockholders,
threatened by any Obligor or other party, (i) asserting the invalidity of any
Lease or the related Lease Documents, (ii) seeking to prevent payment or
performance by any Obligor of any Lease or any of the terms of the related Lease
Documents, or (iii) seeking any determination or ruling that might adversely
affect the validity or enforceability of any Lease or any of the terms or
provisions of the related Lease Documents.
(t) As to each Lease, there are no agreements or
understandings between the Company and the Obligors in respect of such Lease or
otherwise binding on the Company other than as expressly set forth in the Lease
and the related Lease Documents.
6.36 LEASE FUNDING. The Company is in compliance with all of the terms
and covenants of, and is not in default or breach under, each agreement,
contract, understanding or arrangement with any funding source for the Leases.
6.37 DISCLOSURE. The Company has delivered, or in the case of the
Leases and Lease Documents, made available to, UniCapital true and complete
copies of each agreement, contract,
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commitment or other document (or, in the case of any such document not in the
possession of reasonably available to the Company or a Stockholder, accurate and
complete summaries thereof) that is referred to in the schedules to this
Agreement or that has been requested by UniCapital or its representatives.
Without limiting any exclusion, exception or other limitation contained in any
of the representations and warranties made herein, this Agreement and the
schedules hereto and all other documents and information prepared or certified
by the Stockholders to the Company or any Subsidiary and provided to UniCapital
and its representa tives pursuant hereto do not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements herein and therein not misleading. If any Stockholders become
aware of any fact or circumstance that would change a representation or warranty
of any Stockholder in this Agreement or any representation made on behalf of the
Company, then the Stockholders shall immediately give notice of such fact or
circumstance to UniCapital. However, such notification shall not relieve the
Company or any of the Stockholders of their respective obligations under this
Agreement, nor shall it affect UniCapital's rights pursuant to Section 10.1.
7. REPRESENTATIONS OF UNICAPITAL AND NEWCO
As of the date hereof and as of each of the Closing Date and the Merger
Effective Date, UniCapital and Newco, jointly and severally, represent and as
follows:
7.1 CORPORATE EXISTENCE. UniCapital is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Newco is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. Immediately prior to the
effectiveness of the Merger, each of UniCapital and Newco will be duly qualified
to do business and will be in good standing as a foreign corporation in each
jurisdiction where the conduct of its business requires it to be so qualified.
7.2 UNICAPITAL STOCK. The shares of UniCapital Stock to be issued and
delivered to the Stockholders on the Merger Effective Date, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable shares, and except for restrictions upon
resale, will be legally equivalent in all respects to the majority of UniCapital
stock issued and outstanding as of the date hereof. The UniCapital Stock to be
issued upon the conversion of Company Stock pursuant to the terms of this
Agreement will be free and clear of all liens, encumbrances and claims of every
kind, other than restrictions upon transfer contained herein and other than any
liens, encumbrances or claims arising other than by the actions of UniCapital or
Newco.
7.3 CORPORATE POWER AND AUTHORIZATION. UniCapital and Newco have the
corporate power, authority and legal right to execute, deliver and perform this
Agreement. The execution, delivery and performance of this Agreement and all
related documents and agreements required to be executed and delivered by
UniCapital and Newco in accordance with
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the provisions hereof (the "UniCapital Documents") have been duly authorized by
all necessary corporate action. This Agreement has been duly executed and
delivered by UniCapital and Newco and constitutes, and the UniCapital Documents
when executed and delivered will constitute, the legal, valid and binding
obligations of UniCapital and Newco enforceable against UniCapital and Newco in
accordance with their terms.
7.4 NO CONFLICTS. The execution, delivery and performance of this
Agreement by UniCapital and Newco will not violate, conflict with or result in
the breach of any term, condition or provision of, or require the consent of any
other person under (a) any existing law, ordinance, or governmental rule or
regulation to which UniCapital or Newco is subject, (b) any judgment, order,
writ, injunction, decree or award of any Governmental Entity that is applicable
to UniCapital or Newco, (c) the charter documents of UniCapital or Newco, or (d)
any mortgage, indenture, agreement, contract, commitment, lease, plan,
Authorization, or other instrument, document or understanding, oral or written,
to which UniCapital or Newco is a party, by which UniCapital or Newco may have
rights or by which any of the properties or assets of UniCapital or Newco may be
bound or affected, or give any party with rights thereunder the right to
terminate, modify, accelerate or otherwise change the existing rights or
obligations of UniCapital or Newco thereunder. Except for filing the Articles of
Merger and filings under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, and except as aforesaid, no authorization, approval or consent of, and no
registration or filing with, any Governmental Entity is required in connection
with the execution, delivery or performance of this Agreement by UniCapital or
Newco.
7.5 CAPITALIZATION OF UNICAPITAL. The IPO will result in an aggregate
market capitalization of UniCapital that will exceed Three Hundred Million
Dollars ($300,000,000), as determined by multiplying the outstanding shares of
UniCapital immediately following the closing of the IPO by the offering price.
7.6 COMPLIANCE WITH LAW; AUTHORIZATION. Each of UniCapital and Newco
have complied with each, and is not in violation of Regulations to which
UniCapital's and Newco's respective business, operations, assets or properties
is subject. Each of UniCapital and Newco owns, holds, possesses or lawfully uses
in the operation of its business all Authorizations which are in any manner
necessary for it to conduct its business as now or previously conducted or for
the ownership and use of the assets owned or used by UniCapital and Newco,
respectively, in the conduct of the business of the Company, free and clear of
all liens, charges, restrictions and encumbrances and in compliance with all
Regulations. Neither UniCapital nor Newco is in default, nor has UniCapital or
Newco received any notice of any claim of default, with respect to any such
Authorization. All such Authorizations are renewable by their terms or in the
ordinary course of business without the need to comply with any special
qualification procedures or to pay any amounts other than routine filing fees.
None of such Authorizations will be adversely affected by consummation of the
transactions contemplated hereby. No stockholder and no director, officer,
employee or former employee of UniCapital of Newco any of their affiliates, or
any other person, firm or corporation, owns or has any proprietary, financial or
other interest
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8. COVENANTS OF STOCKHOLDERS AND COMPANIES
(direct or indirect) in any Authorization which UniCapital or Newco owns,
possesses or uses in the operation of the business of UniCapital and Newco as
now or previously conducted.
7.7 TRANSACTION WITH AFFILIATES. Except as described in the
Registration Statement, no stockholder and no director, officer or employee of
UniCapital or Newco, or any member of his or her immediate family or any other
of its, his or her affiliates, owns or has a 5% or more ownership interest in
any corporation or other entity that is or was during the last three years a
party to, or in any property which is or was during the last three years the
subject of, any contract, agreement or understanding, business arrangement or
relationship with UniCapital or Newco.
7.8 LITIGATION.
(a) No litigation, including any arbitration, investigation or
other proceeding of or before any court, arbitrator or governmental or
regulatory official, body or authority is pending or, to the knowledge of
UniCapital and Newco, threatened against UniCapital or Newco which relates to
the transactions contemplated by this Agreement.
(b) No litigation, including any arbitration, investigation or
other proceeding of or before any court, arbitrator or governmental or
regulatory official, body or authority is pending or, to the knowledge of
UniCapital or Newco, threatened against UniCapital or Newco or which relates to
UniCapital or Newco.
(c) Neither UniCapital nor Newco is not a party to or subject
to the provisions of any judgment, order, writ, injunction, decree or award of
any court, arbitrator or governmental or regulatory official, body or authority.
7.9 MISCELLANEOUS. Prior to the consummation of the Merger, UniCapital
and Newco have no material properties or assets and are not party to any
contracts other than this Agreement, the letter of intent among the parties to
this Agreement, certain employment agreements with officers of UniCapital,
certain real property leases relating to the principal executive offices of
UniCapital, and those agreements and letters of intent listed on Schedule 7.9
hereto.
7.10 REGISTRATION RIGHTS. As of the date hereof and as of the Merger
Effective Date, no officer, director or shareholder of UniCapital will have been
granted any registration rights with respect to the registration of any shares
of capital stock of UniCapital.
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The following covenants shall apply during the period from and after
the date hereof through the Closing Date:
8.1 BUSINESS IN THE ORDINARY COURSE. Except as contemplated in Section
8.15, the Company shall, and the Stockholders shall cause the Company to,
conduct its business solely in the ordinary course and consistent with past
practice.
8.2 EXISTING CONDITION. The Company shall not nor shall any Stockholder
suffer the Company to, cause or permit to occur any of the events or occurrences
described in Section 6.30 hereof.
8.3 MAINTENANCE OF PROPERTIES AND ASSETS. Except as otherwise
contemplated in Section 8.15, the Company shall, and the Stockholders shall
cause the Company to, maintain and service its properties and assets in order to
preserve their value and usefulness in the conduct of its respective business.
8.4 EMPLOYEES AND BUSINESS RELATIONS. The Company shall, and the
Stockholders shall cause the Company to, use its commercially reasonably efforts
to keep available the services of its current employees and agents and to
maintain its relations and goodwill with its suppliers, customers, distributors
and any others with whom or with which it has business relations.
8.5 MAINTENANCE OF INSURANCE. The Company shall, and the Stockholders
shall cause the Company to, notify UniCapital of any material changes in the
terms of the insurance policies and binders referred to on Schedule 6.20 hereto.
8.6 COMPLIANCE WITH LAWS, ETC. The Company shall, and the Stockholders
shall cause the Company to, comply with all laws, ordinances, rules, regulations
and orders applicable to such Company or its business, operations, properties or
assets, noncompliance with which might materially affect the Company.
8.7 CONDUCT OF BUSINESS. The Company shall, and the Stockholders shall
cause the Company to, use its reasonable commercial efforts to conduct its
business in such a manner that on the Closing Date and on the Merger Effective
Date the representations and warranties of the Stockholders contained in this
Agreement shall be true, as though such representations and warranties were made
on and as of each such date (except to the extent that such representations and
warranties expressly speak as of a specific date), and the Company shall, and
the Stockholders shall cause the Company to, use commercially reasonable efforts
to cause all of the conditions to the obligations of UniCapital and the
Stockholders under this Agreement to be satisfied on or prior to the Closing
Date.
8.8 ACCESS. Upon reasonable prior notice, the Company shall, and the
Stockholders shall cause the Company to, give to UniCapital's officers,
employees, counsel, accountants and
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other representatives free and full access to and the right to inspect, during
normal business hours, all of the premises, properties, assets, records,
contracts and other documents relating to the Company and shall permit them to
consult with the officers, employees, accountants, counsel and agents of the
Company for the purpose of making such investigation of the Company as
UniCapital shall desire to make, provided that such investigation shall not
unreasonably interfere with such Company's business operations, and provided
further that UniCapital shall not contract or consult with any non-officer
employees of the Company without the Company's prior consent, which shall not be
unreasonably withheld. Furthermore, the Company shall, and the Stockholders
shall cause the Company to, furnish to UniCapital all such documents and copies
of documents and records and information with respect to the affairs of the
Company and copies of any working papers relating thereto as UniCapital shall
from time to time reasonably request. No information or knowledge obtained in
any investigation pursuant to this Section 8.8 or otherwise shall affect or be
deemed to modify any representation or warranty contained in this Agreement or
the conditions to the obligations of the parties to consummate the Merger.
8.9 PRESS RELEASES AND OTHER COMMUNICATIONS. Neither the Company nor
any Stockholder shall give notice to third parties or otherwise make any press
release or other public statement concerning this Agreement or the transactions
contemplated hereby. No Company and no Stockholder shall grant any interview,
publish any article, report or statement, or respond to any press inquiry or
other inquiry of any third party relating to this Agreement, the business of the
Company, the business (current and proposed) of UniCapital, the Registration
Statement (as defined below), the IPO or any other matter connected with any of
the foregoing without the express prior written approval of UniCapital, and all
inquiries and questions with respect to any of the foregoing shall be
coordinated through Robert New, Chief Executive Officer of UniCapital. The
Company and each Stockholder shall coordinate all communications with the
employees and agents of the Company through UniCapital prior to making any such
communication. Notwithstanding the foregoing, this Section 8.9 shall not be
interpreted to prevent the Company or any Stockholder from disclosing
information as compelled by a court order, provided however, that prior to
disclosing any information concerning this Agreement or the transaction
contemplated hereby in response to any such court order, the Company or
Stockholder, as applicable, shall provide UniCapital with prompt notice of the
court order so that UniCapital may take whatever action it deems appropriate to
prohibit such disclosure.
8.10 EXCLUSIVITY. Except with respect to this Agreement and the
transactions contemplated hereby, the Company, no Stockholder and none of their
affiliates shall, and each of them shall cause its respective employees, agents
and representatives (including, without limitation, any investment banking,
legal or accounting firm retained by it or them and any individual member or
employee of the foregoing) (each, an "Agent") not to, (a) initiate, solicit or
seek, directly or indirectly, any inquiries or the making or implementation of
any proposal or offer (including, without limitation, any proposal or offer to
its shareholders or any of them) with respect to a merger, acquisition,
consolidation, recapitalization, liquidation, dissolution or similar transaction
involving, or any purchase of all or any portion of the assets or any equity
securities of, the Company (any such proposal or offer being hereinafter
referred to as an "Acquisition
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Proposal"), or (b) engage in any negotiations concerning, or provide any
confidential information or data to, or have any substantive discussions with,
any person relating to an Acquisition Proposal, (c) otherwise cooperate in any
effort or attempt to make, implement or accept an Acquisition Proposal, or (d)
enter into or consummate any agreement or understanding with any person or
entity relating to an Acquisition Proposal, except the Merger contemplated
hereby. If the Company or Stockholder, or any of their respective Agents, have
provided any person or entity (other than UniCapital) with any confidential
information or data relating to an Acquisition Proposal, then they shall request
the immediate return thereof. The Company and the Stockholders shall notify
UniCapital immediately if any inquiries, proposals or offers related to an
Acquisition Proposal are received by, any confidential information or data is
requested from, or any negotiations or discussions related to an Acquisition
Proposal are sought to be initiated or continued with, it or any individual or
entity referred to in the first sentence of this Section 8.10. The covenant
contained in this Section 8.10 shall not survive any termination of this
Agreement pursuant to Section 13.1, 13.2 or 13.3.
8.11 THIRD PARTY APPROVALS. Prior to the Closing Date, the Company
shall satisfy any requirement for notice and approval of the transactions
contemplated by this Agreement under applicable agreements with third parties,
and shall provide UniCapital with satisfactory evidence of such third party
approvals.
8.12 NOTICE TO BARGAINING AGENTS. Prior to the Closing Date, the
Company shall satisfy any requirement for notice of the transactions
contemplated by this Agreement under any applicable collective bargaining
agreement, and shall provide UniCapital with proof that any required notice has
been provided.
8.13 NOTIFICATION OF CERTAIN MATTERS. (a) The Company and the
Stockholders shall give prompt notice to UniCapital of (i) the occurrence or
non-occurrence of any event known to any Stockholder or the Company the
occurrence or non-occurrence of which would be likely to cause any
representation or warranty contained in Article 6 to be untrue or inaccurate in
any material respect at or prior to the Closing Date or the Merger Effective
Date and (ii) any material failure of any Stockholder or the Company to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by such person hereunder.
(b) UniCapital shall give prompt notice to each Stockholder of
(i) the occurrence or non-occurrence of any event known to UniCapital the
occurrence of non-occurrence of which would be likely to cause any
representation or warranty contained in Article 7 to be untrue or inaccurate in
any material respect at or prior to the Closing Date or the Merger Effective
Date and (ii) any material failure of UniCapital to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder.
(c) The delivery of any notice pursuant to this Section 8.13
shall not be deemed to (i) modify the representations or warranties hereunder of
the party delivering such
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notice, which modification may only be made pursuant to Section 8.14, (ii)
modify the conditions set forth in Sections 9 and 10 or (iii) limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
8.14 AMENDMENT OF SCHEDULES. Each party hereto agrees that, with
respect to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Merger
Effective Date to supplement or amend promptly the schedules with respect to any
matter hereafter arising or discovered which, if existing or known at the date
of this Agreement, would have been required to be set forth or described in the
schedules, which may include supplemental disclosure to a representation or
warranty with respect to which no disclosure was made previously ("New
Disclosure"), provided that no amendment or supplement to a schedule or New
Disclosure that constitutes or reflects a material adverse change in the
business, operations, assets, properties, prospects or condition (financial or
otherwise) of the Company (a "Material Adverse Amendment") may be made unless
UniCapital consents to such Material Adverse Amendment; provided further,
however, that if the amendment, supplement or New Disclosure relates to changes
in facts or circumstances occurring subsequent to the date of this Agreement and
such amendment, supplement or New Disclosure constitutes or reflects a Material
Adverse Amendment, then such amendment, supplement or New Disclosure shall be
accepted by UniCapital subject to the provisions of Section 12.2 and 12.5
hereof. No amendment of or supplement to a Schedule or New Disclosure shall be
made later than 48 hours prior to the anticipated effectiveness of the
Registration Statement defined in Section 9.4. Only (i) the Schedules attached
to this Agreement at the time of its execution and (ii) amended Schedules,
supplements or New Disclosure as accepted under the standards and provisions of
this Section 8.14 shall be deemed to be a part of this Agreement in accordance
with Section 19.3 hereof.
8.15 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, the Company shall use its reasonable best efforts to (a) file all
information required to be filed by it pursuant to such act and (b) provide
UniCapital with all information reasonably requested and required by it to
satisfy any filing requirements it may have under such act.
8.16 PRE-CLOSING DISPOSITIONS. The Company and the Stockholders shall
cause the Partnership to be dissolved and liquidated by or as of the Closing
Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND
THE STOCKHOLDERS
The obligations of the Company and the Stockholders hereunder are
subject to the satisfaction on or prior to the Closing Date (or such earlier
date specified below) of the following conditions:
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9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
representations and warranties of UniCapital and Newco contained in Article 7
shall be accurate as of the Closing Date and as of the Merger Effective Date as
though such representations and warranties had been made as of such times; all
of the terms, covenants and conditions of this Agreement to be complied with and
performed by UniCapital and Newco on or before the Closing Date shall have been
duly complied with and performed; and a certificate to the foregoing effect
dated the Merger Effective Date and signed by a duly authorized agent, the
President or any Vice President of UniCapital shall have been delivered to the
Stockholders.
9.2 EMPLOYMENT AGREEMENTS. The Surviving Corporation shall have
executed and delivered Employment Agreements, in the form of Annex IV attached
hereto, to each of the persons listed on Schedule 9.2 hereto.
9.3 OPINION OF COUNSEL. The Stockholders shall have received an opinion
from counsel for UniCapital, dated the Merger Effective Date, to the effect
that:
(a) UniCapital and Newco have been duly organized and are
validly existing in good standing under the laws of their respective states of
incorporation;
(b) this Agreement has been duly authorized, executed and
delivered by UniCapital and Newco and constitutes a valid and binding agreement
of UniCapital and Newco enforceable in accordance with its terms, except (i) as
such enforceability may be subject to bankruptcy, moratorium, insolvency,
reorganization, arrangement and other similar laws relating to or affecting the
rights of creditors, (ii) as the same may be subject to the effect of general
principles of equity and (iii) that no opinion need be expressed as to the
enforceability of indemnification provisions included herein;
(c) the shares of UniCapital Stock to be received by the
Stockholders on the Merger Effective Date shall be duly authorized, fully paid
and nonassessable; and
(d) the execution, delivery and performance of this Agreement
and the consummation of any of the transactions contemplated hereby will not
conflict with, or result in a breach or violation of, the Certificate of
Incorporation or Bylaws of UniCapital or Newco.
9.4 REGISTRATION STATEMENT. UniCapital shall have filed with the
Securities and Exchange Commission ("SEC") a registration statement on Form S-1
covering the offer and sale of shares of UniCapital Stock in the IPO (the
"Registration Statement"). The Registration Statement shall have been declared
effective by the SEC not later than June 30, 1998, UniCapital and the
underwriters named therein shall have executed the Underwriting Agreement and
the underwriters named therein shall have agreed to acquire, subject to the
conditions set forth in the Underwriting Agreement, the shares of UniCapital
Stock covered by the Registration Statement. There shall have been no stop-order
issued (that remains in effect) by the SEC with respect to the Registration
Statement.
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9.5 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
10. CONDITIONS PRECEDENT TO OBLIGATIONS OF UNICAPITAL AND
NEWCO
The obligations of UniCapital and Newco hereunder are subject to the
satisfaction, on or prior to the Closing Date (or such earlier date specified
below), of the following conditions:
10.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF OBLIGATIONS. The
Stockholders shall have delivered to UniCapital a certificate dated the Merger
Effective Date and signed by them to the effect that all of the representations
and warranties of the Stockholders contained in this Agreement shall be true on
and as of the Closing Date and as of the Merger Effective Date with the same
effect as though such representations and warranties had been made on and as of
such dates, except for matters expressly disclosed in the certificate or a
schedule thereto (which shall not serve to modify any representation or warranty
made herein or in any other document or otherwise in information supplied by the
Company or any Stockholder); and each and all of the agreements of the
Stockholders and the Company to be performed on or before the Closing Date
pursuant to the terms hereof shall have been performed.
10.2 NO LITIGATION. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the acquisition by UniCapital of the Company Stock and no
governmental agency or body shall have taken any other action or made any
request of UniCapital as a result of which the management of UniCapital deems it
inadvisable to proceed with the transactions hereunder.
10.3 EXAMINATION OF FINANCIAL STATEMENTS. Prior to the Closing Date,
UniCapital shall have had sufficient time to review the unaudited balance sheets
of the Company as of the end of the then most recently completed calendar month,
and the unaudited statements of income, cash flows and stockholders' equity of
the Company for the periods then ended, which statements shall have disclosed no
material adverse change in the financial condition of the Company or the results
of its respective operations from the financial statements originally furnished
by the Company as set forth in Schedule 6.12.
10.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
business, operations, assets, properties, prospects or condition (financial or
otherwise) of the Company shall have occurred, and no Company shall have
suffered any material loss or damage to any of its properties or assets, whether
or not covered by insurance, since the Audited Balance Sheet Date, which change,
loss or damage materially affects or impairs the ability of the Company to
conduct its business as now conducted or as proposed to be conducted; and
UniCapital shall have
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received on the Closing Date a certificate signed by the Stockholders and dated
the Merger Effective Date to such effect.
10.5 REGULATORY REVIEW. UniCapital, through its authorized
representatives, shall have completed a satisfactory review of the practices and
procedures of the Company including, but not limited to, environmental and land
use practices, import and export laws, compliance with contracts and federal,
state and local laws and regulations governing the respective operations of the
Company, which review reflects compliance with all applicable laws governing the
Company, disclosing no material actual or probable violations, compliance
problems, required capital expenditures or other substantive environmental, real
estate and land use related concerns and which review is otherwise satisfactory
in all respects to UniCapital, in its sole discretion.
10.6 STOCKHOLDERS' RELEASE. At the Closing Date, the Stockholders shall
have delivered to UniCapital an instrument dated the Merger Effective Date
releasing the Company from any and all claims of Stockholders against the
Company.
10.7 EMPLOYMENT AGREEMENTS. Each of the persons listed on Schedule 9.2
shall have executed and delivered an Employment Agreement in the form of Annex
IV attached hereto.
10.8 OPINION OF COUNSEL. UniCapital shall have received an opinion from
Thacher Proffitt & Wood, counsel to the Stockholders, dated the Merger Effective
Date, in form and substance satisfactory to UniCapital stating substantially
that with respect to the Company:
(a) the Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, has the corporate power and authority to own its property and
to conduct its business as now conducted and, to the knowledge of such counsel,
as proposed to be conducted by the Company, and is duly qualified to transact
business in each jurisdiction in which it is required to do so by reason of its
ownership or leasing of real property located in such jurisdiction or
maintaining an office in such jurisdiction and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or leasing of
real property requires it to be so, except to the extent that the failure to be
duly qualified or in good standing would not have a material adverse effect on
the Company;
(b) all of the issued shares of capital stock of the Company
have been duly authorized and validly issued, are fully paid and non-assessable,
free and clear of all liens, encumbrances, equities or adverse claims;
(c) the Agreement (including each other agreement contemplated
thereby) has been duly authorized, executed and delivered by each of the parties
thereto other than UniCapital and Newco, constitutes a legally valid and binding
obligation of each such party other than UniCapital and Newco, and is
enforceable against each such party other than UniCapital and Newco in
accordance with its terms, subject to (i) the effect of bankruptcy, insolvency,
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reorganization, receivership, moratorium and other similar laws affecting the
rights and remedies of creditors generally and (ii) the effect of general
principles of equity, whether applied by a court of law or equity, and provided
that no opinion is expressed herein with respect to the enforceability of
Article 14 or Section 13.4 hereof or of Section 7 of the Employment Agreement
attached hereto as Annex IV;
(d) the execution and delivery by each party other than
UniCapital and Newco of, and the performance by each party other than UniCapital
and Newco of its obligations under, the Agreement (including each other
agreement contemplated hereby) will not contravene any provision of applicable
law or the Certificate of Incorporation or Bylaws of the Company, each as
amended as of the date of this opinion, or, to the best of our knowledge, result
in a breach or default under any agreement or other instrument binding upon the
Company (which default is material to the Company) or, to the best of our
knowledge, violate any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Company, and no consent, approval,
authorization or order of, or qualification with, any governmental body or
agency of the United States of America or any state thereof is required for the
performance by each party other than UniCapital and Newco of its obligations
under the Agreement or the transactions contemplated therein, except for the
effectiveness of the Registration Statement and except for such approval as may
be required under the HSR Act; and
(e) after due inquiry, we do not know of any legal or
governmental proceedings pending or to our knowledge threatened to which the
Company is a party or to which any of the properties of the Company is subject.
Such opinion shall include any other matters incident to the matters set forth
herein as agreed to by the parties and their respective counsel.
10.9 CONSENTS AND APPROVALS. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made.
10.10 GOOD STANDING CERTIFICATES. Stockholders shall have delivered to
UniCapital certificates, dated as of a date no earlier than five days prior to
the Closing Date, duly issued by the appropriate governmental authority in the
Company's state of incorporation and, unless waived by UniCapital, in each state
in which the Company is authorized to do business, showing that the Company is
in good standing and authorized to do business and that all state franchise
and/or income tax returns and taxes for the Company for all periods prior to the
dates of such certificates have been filed and paid.
10.11 REGISTRATION STATEMENT. The Registration Statement shall have
been declared effective by the SEC, and UniCapital and the representatives of
the underwriters named in the Registration Statement shall have executed the
Underwriting Agreement. There shall have been
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no stop-order issued (that remains in effect) by the SEC with respect to the
Registration Statement.
10.12 REPAYMENT OF INDEBTEDNESS; PRE-CLOSING DISTRIBUTIONS. Prior to
the Closing Date, the Stockholders shall have (i) repaid to the Company
(including its Subsidiaries) in full all amounts owing by the Stockholders to
such entities and (ii) completed all transactions contemplated by Section 8.15.
10.13 NET INCOME. After taking into account all transactions
contemplated by Section 8.15, the Company shall have aggregate after tax net
income for the twelve months ended December 31, 1997 as included in UniCapital's
unaudited pro forma combined (prior to pro forma and offering adjustments)
income statement for the twelve months ended December 31, 1997 included in the
Registration Statement.
10.14 HSR ACT. The waiting period applicable to the consummation of the
Unified Transaction under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 shall have expired or been terminated.
11. COVENANTS OF UNICAPITAL
11.1 UNICAPITAL STOCK OPTIONS. Upon the effective date of the
Registration Statement (but subject in all events to the consummation of the
Merger), UniCapital shall make available options to purchase that number of
shares of UniCapital Stock having a fair market value on the effective date of
the Registration Statement, based upon the IPO price per share set forth in the
Underwriting Agreement, equal to 6.25% of the Effective Date Consideration
(valuing the UniCapital Stock to be issued as part of the Effective Date
Consideration at the IPO price per share for the purposes of this Section 11.1)
to be granted to those non-Stockholder key employees of the Surviving
Corporation after the Closing as are designated by the principal executive
officer of the Surviving Corporation who is entering into an Employment
Agreement pursuant to Section 9.2 hereof (or such other officer designated by
the Surviving Corporation and acceptable to UniCapital). Not later than seven
days prior to the effective date of the Registration Statement, the officer
designating the recipients of such options shall provide to UniCapital a written
list of the names of those designated recipients who will receive options
exercisable at the IPO price and the relative percentages of the 6.25% option
pool provided under this Section 11.1 to be awarded to each recipient, as well
as the percentage of options, if any, to be reserved for future issuance. Any
options reserved for future issuance shall be granted at an exercise price equal
to the fair market value of UniCapital Stock as of the date of grant. All
options shall be granted in accordance with UniCapital's policies, and
authorized and issued under the terms of UniCapital's principal stock option
plan for the benefit of employees of UniCapital and its subsidiaries.
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11.2 INFORMATION FILING. To the extent the Unified Transaction is a
transaction that falls within Section 351 of the Code, UniCapital shall file all
information required to be filed by it pursuant to Treasury Regulation
ss.1.351-3(b).
11.3 RELEASE FROM GUARANTEES; INDEBTEDNESS. Not later than 120 days
following the Merger Effective Date, UniCapital shall cause the Stockholders to
be released from any and all guarantees of any indebtedness or other obligations
set forth on Schedule 11.3 that they personally guaranteed for the benefit of
the Company or any Subsidiary, with all such guarantees (a) on indebtedness
being assumed by UniCapital; provided, that, in the event that the beneficiary
of any such guarantee is unwilling to permit the assumption by UniCapital of the
obligations under such guarantee, or in the event that the lender with respect
to the indebtedness to which such guarantee relates accelerates such
indebtedness whether or not prior to such 120 day period because of the
consummation of the transactions contemplated hereby, UniCapital shall repay up
to that amount of recourse indebtedness set forth on Schedule 11.3. The failure
of the Company or its Subsidiaries to obtain the consent of its lenders or of
the beneficiary of the aforementioned guarantee to the assignment to UniCapital
of the indebtedness or obligation set forth on Schedule 11.3 shall not be deemed
a breach hereunder.
11.4 HSR FILING. To the extent the Merger is a transaction subject to
the filing requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, UniCapital shall use its reasonable best efforts to (a) file all
information required to be filed by it pursuant to such act and (b) provide the
Company with all information reasonably required and requested by it to satisfy
any filing requirements it may have under such act.
12. INDEMNIFICATION; SURVIVAL
12.1 GENERAL INDEMNIFICATION BY STOCKHOLDERS. Subject to the
limitations contained in Section 12.5 hereof, each Stockholder, jointly and
severally, covenants and agrees that such Stockholder will indemnify, defend,
protect and hold harmless UniCapital, Newco and the Surviving Corporation and
their respective officers, stockholders, directors, divisions, subdivisions,
affiliates, subsidiaries, parents, agents, employees, successors and assigns at
all times from and after the date of this Agreement until the Expiration Date
(as defined in Section 12.6) from and against all claims, damages, losses,
liabilities, actions, suits, proceedings, demands, assessments, adjustments,
costs and expenses (including specifically, but without limitation, reasonable
attorneys' fees and expenses of investigation) (collectively, "Losses") incurred
by UniCapital, Newco or the Surviving Corporation as a result of or arising from
(a) any breach of the representations and warranties made by the Stockholders
set forth herein or on the schedules or certificates delivered in connection
herewith, (b) any nonfulfillment of any covenant or agreement on the part of the
Stockholders or the Company under this Agreement, (c) the business, operations
or assets of the Company prior to the Merger Effective Date or the actions or
omissions of the Company's directors, officers, stockholders, employees or
agents prior to the Merger Effective Date, other than Losses arising from
matters expressly disclosed in the
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Financial Statements, this Agreement or the Schedules to this Agreement, or (d)
any liability under the Securities Act, the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or other federal or state law or regulation, at
common law or otherwise, arising out of or based upon (i) any untrue statement
or alleged untrue statement of a material fact relating to the Company or the
Stockholders contained in any preliminary prospectus, the Registration Statement
or any prospectus forming a part thereof, or any amendment thereof or supplement
thereto (including any additional registration statement filed pursuant to Rule
462(b) under the Securities Act), which statement was provided or was based upon
information or documents provided to UniCapital or its counsel by the Company or
the Stockholders, or (ii) any omission or alleged omission to state therein a
material fact relating to the Company or the Stockholders required to be stated
therein or necessary to make the statements therein not misleading, which
information was not provided to UniCapital or its counsel by the Company or the
Stockholders; provided, however, that such indemnity shall not inure to the
benefit of UniCapital, Newco or the Surviving Corporation to the extent that
such untrue statement (or alleged untrue statement) was made in, or such
omission (or alleged omission) occurred in, any preliminary prospectus and the
Stockholders provided, in writing, corrected information to UniCapital for
inclusion in the final prospectus, and such information was not so included.
12.2 SPECIFIC INDEMNIFICATION BY STOCKHOLDERS. Subject to the
applicable limitations contained in Section 12.5 hereof, notwithstanding any
disclosure made in this Agreement or in the schedules or exhibits hereto, and
notwithstanding any investigation by UniCapital or Newco, each Stockholder,
jointly and severally, covenants and agrees that such Stockholder will
indemnify, defend, protect and hold harmless UniCapital, Newco and the Surviving
Corporation and their respective officers, stockholders, directors, divisions,
subdivisions, affiliates, subsidiaries, parents, agents, employees, successors
and assigns at all times from and after the date of this Agreement, from and
against all Losses incurred by UniCapital, Newco or the Surviving Corporation as
a result of or incident to: (a) the existence of liabilities of the Company
incurred or attributable to periods prior to the Merger Effective Date in excess
of the liabilities set forth on Schedule 6.13, to the extent of such excess; (b)
the failure of the Company or the Stockholders to file all required Form 5500's
prior to the Merger Effective Date; (c) the litigation matters listed on
Schedule 6.25; (d) any Material Adverse Amendments or New Disclosure made
pursuant to Section 8.14 hereof; and (e) those Scheduled Payments delinquent for
90 days or longer as of the Closing Date net of applicable reserves reflected on
the balance sheet of the Company immediately prior to the preparation of the
Closing Date Balance Sheet.
12.3 INDEMNIFICATION BY UNICAPITAL AND NEWCO. Subject to the
limitations contained in Section 12.5 hereof, UniCapital and Newco, jointly and
severally, covenant and agree that they will indemnify, defend, protect and hold
harmless the Stockholders at all times from and after the date of this Agreement
from and against all Losses incurred by the Stockholders as a result of or
arising from (a) any breach of the representations and warranties made by
UniCapital and Newco set forth herein or on the schedules or certificates
attached hereto, (b) any nonfulfillment of any agreement on the part of
UniCapital under this Agreement, or (c) any liability under the Securities Act,
the Exchange Act or other federal or state law or regulation, at
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common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact relating to UniCapital (including
all of companies, other than the Company, acquired as part of the Unified
Transaction, but only to the extent that UniCapital is actually indemnified by
such other companies for such liability) contained in any preliminary
prospectus, the Registration Statement or any prospectus forming a part thereof,
or any amendment thereof or supplement thereto (including any registration
statement filed pursuant to Rule 462(b) under the Securities Act), or arising
out of or based upon any omission or alleged omission to state therein a
material fact relating to UniCapital (including all of companies, other than the
Company, acquired as part of the Unified Transaction) required to be stated
therein or necessary to make the statements therein not misleading, which
liability is not the subject of indemnification of UniCapital, Newco and the
Surviving Corporation pursuant to Section 12.1(c) above.
12.4 THIRD PARTY CLAIMS.
(a) In order for a party hereto eligible to be indemnified
hereunder (an "Indemnified Party") to be entitled to any indemnification
provided for under this Agreement in respect of, arising out of or involving a
claim or demand made by any person or entity against the Indemnified Party (a
"Third Party Claim"), such Indemnified Party must notify the parties obligated
to provide indemnification pursuant to Section 12.1, 12.2, or 12.3 hereof (each,
an "Indemnifying Party") in writing, and in reasonable detail, of the Third
Party Claim within 30 business days after receipt by such Indemnified Party of
written notice of the Third Party Claim; provided, however, that failure to give
such notification shall not affect the indemnification provided hereunder except
to the extent the Indemnifying Party shall have been actually prejudiced as a
result of such failure. Such notice shall state the nature and the basis of such
claim and a reasonable estimate of the amount thereof. Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, within five business
days after the Indemnified Party's receipt thereof, copies of all notices and
documents (including court papers) received by the Indemnified Party relating to
the Third Party Claim. To the extent that the Indemnifying Party has actually
paid any amount to the Indemnified Party in respect of any Loss in connection
with such Third Party Claim, the Indemnifying Party shall have a right of
subrogation with respect to such Third Party Claim to the extent of such
payment.
(b) The Indemnifying Party shall have right to defend and
settle, at its own expense and by its own counsel (provided that such counsel is
not reasonably objected to by the Indemnified Party, and provided further, that
the selection for these purposes of Thacher Proffitt & Wood, absent any actual
or reasonably likely conflict of interest with respect to parties or defenses,
shall not be objected to by UniCapital), any Third Party Claim as the
Indemnifying Party pursues the same in good faith and diligently and so long as
the Third Party Claim does not relate to an actual or potential Loss to which
Section 12.4(e) applies in which the Indemnified Party is UniCapital, Newco or
the Surviving Corporation. If the Indemnifying Party undertakes to defend or
settle, it shall promptly notify the Indemnified Party of its intention to do
so, and the Indemnified Party shall cooperate with the Indemnifying Party and
its counsel in the defense
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thereof and in any settlement thereof. Such cooperation shall include, but shall
not be limited to, furnishing the Indemnifying Party with any books, records or
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. Notwithstanding the foregoing, the
Indemnified Party shall have the right to participate in any matter through
counsel of its own choosing at its own expense (unless there is a conflict of
interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, in which case the Indemnifying Party will reimburse the
Indemnified Party for the expenses of its counsel). After the Indemnifying Party
has notified the Indemnified Party of its intention to undertake to defend or
settle any such asserted liability, and for so long as the Indemnifying Party
diligently pursues such defense, the Indemnifying Party shall not be liable for
any additional legal expenses incurred by the Indemnified Party in connection
with any defense or settlement of such asserted liability, except to the extent
such participation is requested by the Indemnifying Party, in which event the
Indemnified Party shall be reimbursed by the Indemnifying Party for reasonable
additional legal expenses and out-of-pocket expenses, and except in the case of
a Third Party Claim relating to an actual or potential Loss to which Section
12.4(e) applies in which the Indemnified Party is UniCapital, Newco or the
Surviving Corporation.
(c) No Indemnifying Party shall, in the defense of any Third
Party Claim, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) or enter into any settlement, except with
the written consent of the Indemnified Party, which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party of a release from all liability in respect of such claim or
matter.
(d) If the Indemnifying Party does not assume the defense of
any Third Party Claim, then the Indemnified Party may defend against such Third
Party Claim in such manner as it deems appropriate at the expense of the
Indemnifying Party.
(e) Notwithstanding anything to the contrary in this Article
12, if at any time, in the reasonable opinion of UniCapital, Newco or the
Surviving Corporation as the Indemnified Party (notice of which opinion shall be
given in writing to the Indemnifying Party), any Third Party Claim seeks
material prospective relief which could have a material adverse effect on any
such Indemnified Party or any subsidiary, then such Indemnified Party shall have
the right to control or assume (as the case may be) the defense of any such
Third Party Claim and the amount of any judgment or settlement and the
reasonable costs and expenses of defense (including, but not limited to, fees
and disbursements of counsel and experts, as well as any sampling, testing,
investigation, removal, treatment or remediation undertaken by UniCapital, Newco
or the Surviving Corporation and all counseling or engineering fees and expenses
related thereto) shall be included as part of the indemnification obligations of
the Indemnifying Party hereunder. If the Indemnified Party elects to exercise
such right, then the Indemnifying Party shall have the right to participate in,
but not control, the defense of such Third Party Claim at the sole cost and
expense of the Indemnifying Party.
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12.5 LIMITATIONS ON INDEMNIFICATION.
(a) To the extent of the amount UniCapital actually receives
as a result of a Net Worth Deficiency that is directly attributable to an
Indemnifiable Decrease, UniCapital shall not be entitled to any indemnity under
Article 12. An "Indemnifiable Decrease" shall be equal to the amount of the Net
Worth Deficiency that consists of a liability for which UniCapital would
otherwise be entitled to indemnity under Article 12 but that has been (a)
accrued, or (b) actually paid (so long as it was not previously accrued on or
before December 31, 1997), during the Interim Net Worth Period. The "Interim Net
Worth Period" shall mean the period beginning on January 1, 1998 and ending on
the Closing Date. Any amounts under (a) or (b) that have not been reflected on
the Company's financial statements under generally accepted accounting
principles applied consistently with previous practice shall be deemed to be an
Indemnifiable Decrease.
(b) No Indemnified Party shall assert any claim (other than a
Third Party Claim) for indemnification hereunder until such time as the
aggregate of all claims which such Indemnified Party may have against an
Indemnifying Party plus any Indemnifiable Decrease shall exceed an amount equal
to $419,970 (the "Basket Limitation"), at which time an Indemnified Party shall
be entitled to seek indemnification for all claims pursuant to this Article 12,
but only to the extent such claims, in the aggregate, exceed the Basket
Limitation. Notwithstanding the foregoing, on each date on which any Earn-Out
Consideration is paid, the Basket Limitation shall be increased by that amount
equal to one percent (1%) of any such Earn-Out Consideration, without prejudice
to UniCapital's receipt of or right to receive indemnification for claims
exceeding the amount of the Basket Limitation in effect at the time such claims
were brought. Notwithstanding the foregoing, on each date on which any Earn-Out
Consideration is paid, the Basket Limitation shall be increased by that amount
(the "Basket Adjustment") equal to one percent (1%) of any such Earn-Out
Consideration, without prejudice to UniCapital's receipt of or right to receive
indemnification for claims exceeding the amount of the Basket Limitation in
effect at the time such claims were brought. If the Basket Limitation is
adjusted pursuant to the preceding sentence after such time as any Indemnified
Party, pursuant to this Article 12, has collected an amount in excess (such
excess amount is referred to as the "Excess Indemnity") of the Basket Limitation
(prior to giving effect to the applicable Basket Adjustment), then such
Indemnified Party, within 10 business days after the final determination of such
Earn-Out Consideration, shall pay to the Indemnifying Party an amount equal to
the lesser of applicable Basket Adjustment or the Excess Indemnity. In addition,
notwithstanding any provision of this Agreement to the contrary, for the
purposes of preventing a double recovery the Stockholders shall not be obligated
to indemnify UniCapital or any other indemnified party pursuant to Section 12.1
or 12.2 with respect to any particular act, omission, condition or event if and
to the extent that the loss resulting or arising from such act, omission,
condition or event has, directly or indirectly, been taken into account in the
computation of any Net Worth Deficiency provided for in Section 3.1.
Notwithstanding any other term of this Agreement, in no event shall any
Stockholder be liable under this Article 12 for an amount which exceeds the
aggregate value
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(determined at the Merger Effective Date) of the Merger Consideration received
by such Stockholder under this Agreement. Notwithstanding anything to the
contrary contained in this Agreement, the limitations upon indemnification
contained in this Section 12.5 shall not apply to Losses arising out of (i) any
breach of the representations and warranties of the Stockholders contained in
Sections 6.3, 6.5, 6.14, 6.27 and 6.33 hereof, (ii) litigation net of applicable
reserves reflected on balance sheets of the Company at the Audited Balance Sheet
Date; and (iii) a Material Adverse Amendment or a New Disclosure made pursuant
to Section 8.14 hereof.
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The parties agree that
representations and warranties made by the parties in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
survive for a period of one year from the Merger Effective Date (which date is
hereinafter called the "Expiration Date"), except that:
(a) the representations and warranties contained in Section
6.27 hereof shall survive until such time as the limitations period has run for
all tax periods ended on or prior to the Merger Effective Date, which shall be
deemed to be the Expiration Date for purposes of this clause (a) and claims
arising from a breach of the representations and warranties contained in such
Section 6.27;
(b) the representations and warranties contained in Section
6.28(g) hereof shall survive until such time as one full fiscal year's cycle of
transactions occurring entirely within the twenty-first century shall have been
processed and UniCapital's consolidated financial statements for the fiscal year
in which the last such transaction to be processed occurred have been audited,
which shall be deemed to be the Expiration Date for purposes of this clause (b)
and claims arising from a breach of the representations and warranties contained
in such Section 6.28(g);
(c) the representations and warranties contained in Section
6.33 hereof shall survive for a period of five years from the Merger Effective
Date, which shall be deemed the Expiration Date for purposes of this clause (c)
and claims arising from a breach of the representations and warranties contained
in such Section 6.33;
(d) solely for purposes of Section 12.1(c) hereof, and solely
to the extent that UniCapital actually incurs liability under the Securities
Act, the Exchange Act, or any other federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for purposes of this clause (d) and claims arising under such
laws;
(e) the representations and warranties of the Stockholders
contained in Section 6.5 hereof shall survive the Merger Effective Date without
time limitation; and
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(f) any representations and warranties which serve as a basis
of the indemnity obligations of the Stockholders under Section 12.2 shall
survive the Merger Effective Date without time limitation.
13. TERMINATION OF AGREEMENT
13.1 TERMINATION BY UNICAPITAL. UniCapital may, by notice in the manner
hereinafter provided on or before the Closing Date, terminate this Agreement (a)
if a material default shall be made by the Stockholders in the observance or due
and timely performance of any of the covenants, agreements or the satisfaction
of conditions contained herein, and the curing of such default shall not have
been made on or before the Closing Date and shall not reasonably be expected to
occur or (b) if UniCapital in its sole judgment determines that any condition
exists which has made or could reasonably be expected to make any of the
representations or warranties contained in Article 6 hereof untrue in any
material respect or (c) if UniCapital in its sole judgment determines that
information disclosed on the schedules to the Agreement delivered pursuant to
Section 8.14 has or could reasonably be expected to have a material adverse
effect on the business, operations, assets, properties, prospects or condition
(financial or otherwise) of the Company.
13.2 TERMINATION BY THE STOCKHOLDERS. Prior to the initial filing of
the Registration Statement with the SEC, the Stockholders may, by notice in the
manner hereinafter provided on or before such initial filing, terminate this
Agreement (a) in accordance with Section 17.4(b) or (b) if a material default
shall be made by UniCapital or Newco in the observance or due and timely
performance of any of the covenants, agreements or the satisfaction of
conditions contained herein, and the curing of such default shall not have been
made on or before such initial filing. Notwithstanding the foregoing, from and
after the initial filing of the Registration Statement with the SEC, the
Stockholders shall have no right to terminate this Agreement.
13.3 AUTOMATIC TERMINATION. This Agreement shall terminate
automatically:
(a) if the Registration Statement has not been declared
effective by June 30, 1998;
(b) if, between the Closing Date and the Merger Effective
Date, the Underwriting Agreement is terminated pursuant to the terms thereof;
(c) if the Merger Effective Date has not occurred within 10
business days after the Closing Date; or
(d) upon the date that the number of shares of UniCapital
Stock to be issued (other than as Earn-Out Consideration) to the persons who
will transfer property to
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UniCapital in the Unified Transaction can be determined as a fixed number of
shares, unless those same persons shall own immediately after in the Unified
Transaction eighty percent (80%) or more of the UniCapital Stock that will be
issued and outstanding immediately after the Unified Transaction.
13.4 LIQUIDATED DAMAGES. If the Merger fails to occur because of the
default of the Company or the Stockholders, then, in addition to the other
remedies available to UniCapital at law for fraud, in equity or pursuant to this
Agreement, the Stockholders shall pay to UniCapital the sum of $500,000 as
liquidated damages. It is hereby agreed that UniCapital's damages in the event
of a termination or default by Company hereunder are uncertain and impossible to
ascertain and that the foregoing constitutes a reasonable liquidation of such
damages and is intended not as penalty but as liquidated damages.
14. NONCOMPETITION AND NONSOLICITATION
14.1 NONCOMPETITION.
(a) In order to protect the value and goodwill of the
Companies and their respective businesses, each Stockholder covenants that, for
the period ending two years after the Closing Date, such Stockholder will not,
directly or indirectly, own, manage, operate, join, control, finance or
participate in the ownership, management, operation, control or financing of, or
be connected as a partner, principal, agent, representative, consultant or
otherwise with, or use or permit such Stockholder's name to be used in
connection with, any business or enterprise which is engaged directly or
indirectly in competition anywhere in the United States with the business
conducted by UniCapital, the Surviving Corporation or any of its or their
respective subsidiaries or affiliates or with any business engaged in
originating, servicing or securitizing leases or other specialty financing
products or services (the "Restricted Business"). Each Stockholder recognizes
that the Restricted Business is expected to be conducted throughout the United
States and that more narrow geographical limitations of any nature on this
non-competition covenant (and the non-solicitation covenant set forth in
subsection (b)) are therefore not appropriate. The foregoing restriction shall
not be construed to prohibit the ownership by a Stockholder as a passive
investment of not more than five percent of any class of securities of any
corporation which is engaged in any of the foregoing businesses having a class
of securities registered pursuant to Section 12 of the Exchange Act.
(b) Each Stockholder further covenants that for the period
ending two years after the Closing Date, such Stockholder will not, either
directly or indirectly, (i) call on or solicit any customers or prospective
customers of the Restricted Business, or (ii) solicit the employment of any
person who is employed by UniCapital, the Surviving Corporation or any of its or
their respective subsidiaries or affiliates in the Restricted Business during
such period.
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(c) Each Stockholder recognizes and acknowledges that by
reason of such Stockholder's relationship to the Companies, such Stockholder has
had access to confidential information relating to the Restricted Business. Each
Stockholder acknowledges that such confidential information is a valuable and
unique asset and covenants that such Stockholder will not disclose any such
confidential information after the Closing Date to any person for any reason
whatsoever, except as may be required by law or order of a court of competent
jurisdiction or unless the Stockholders can show that such information has
become known to the public generally through no fault of the Stockholders
14.2 DAMAGES. Each Stockholder acknowledges and agrees that measuring
economic losses to UniCapital and the Surviving Corporation as a result of the
breach of the foregoing covenants in this Article 14 would be impossible, and
that any breach of the foregoing covenants would result in immediate and
irreparable damage to UniCapital and the Surviving Corporation for which they
would have no other adequate remedy. Accordingly, the Stockholders agree that,
in the event of a breach by them of any of the foregoing covenants, such
covenants may be enforced by UniCapital or the Surviving Corporation by, without
limitation, injunctions and restraining orders.
14.3 REASONABLE RESTRAINT. The Parties agree that the foregoing
covenants in this Article 14 impose a reasonable restraint upon the Stockholders
in light of the activities and business of UniCapital on the date of the
execution of this Agreement and the current and future plans of UniCapital and
the Surviving Corporation (as successors to the businesses of the Companies),
and that any violation will result in irreparable injury to UniCapital.
14.4 SEVERABILITY; REFORMATION. The covenants in this Article 14 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, if any court of
competent jurisdiction shall determine that the scope, time or territorial
restrictions set forth are unreasonable, then it is the intention of the parties
that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed.
14.5 INDEPENDENT COVENANT. All of the covenants in this Article 14
shall be construed as an agreement independent of any other provision of this
Agreement, and the existence of any claim or cause of action of any Stockholder
against any Company, any Company's Subsidiaries, the Surviving Corporation or
UniCapital, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement of such covenants. The parties
specifically agree that the period of two years stated above shall be computed
by excluding from such computation any time during which any Stockholder is in
violation of any provision of this Article 14 and any time during which there is
pending in any court of competent jurisdiction any action (including any appeal
from any judgment) brought by any person, whether or not a party to this
Agreement, in which action UniCapital or the Surviving Corporation seek to
enforce the agreements and covenants of the Stockholders or in which
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any person contests the validity of such agreements and covenants or their
enforceability or seeks to avoid their performance or enforcement.
14.6 MATERIALITY. The Stockholders hereby acknowledge and agree that
the covenants contained in this Article 14 are a material and substantial part
of this transaction and are entered into in connection with and as an inducement
to the acquisition by UniCapital and Newco of the businesses of the Companies.
15. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
15.1 STOCKHOLDERS. The Stockholders recognize and acknowledge that they
have in the past, currently have, and in the future may possibly have, access to
certain confidential information of the Company, such as lists of customers,
operational policies, and pricing and cost policies that are valuable, special
and unique assets of the Company and the Company's business. The Stockholders
agree that, prior to the Closing Date, or following a termination of this
Agreement under Section 13 (notwithstanding such termination), they will not
disclose any confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, except to
authorized representatives of UniCapital or as may be required by law or order
of a court of competent jurisdiction or unless the Stockholders can show that
such information has become known to the public generally through no fault of
the Stockholders. Prior to disclosing any confidential information required by
law or order of a court of competent jurisdiction, the Stockholders shall
provided UniCapital with prompt notice of the disclosure requirement so that
UniCapital may take whatever action it deems appropriate to prohibit such
disclosure. In the event of a breach or threatened breach by the Stockholders of
the provisions of this Section 15.1, UniCapital and the Surviving Corporation
shall be entitled to an injunction restraining Stockholders from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting UniCapital and the Surviving Corporation from pursuing
any other available remedy for such breach or threatened breach, including the
recovery of damages.
15.2 UNICAPITAL. UniCapital recognizes and acknowledges that it has in
the past, currently has, and prior to the Closing Date will have, access to
certain confidential information solely of the Company in connection with its
business. UniCapital agrees that, prior to the Closing Date, or following a
termination of this Agreement under Section 13 (notwithstanding such
termination), it will not disclose any such confidential information to any
person, firm, corporation, association, or other entity for any purpose or
reason whatsoever without prior written consent of the Stockholders, except as
may be required by law or order of a court of competent jurisdiction or unless
UniCapital can show that such information has become known to the public
generally through no fault of UniCapital. In the event of a breach or threatened
breach by UniCapital of the provisions of this Section 15.2, the Stockholders
shall be entitled to an injunction restraining UniCapital from disclosing, in
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whole or in part, such confidential information. Nothing contained herein shall
be construed as prohibiting the Stockholders from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
15.3 DAMAGES. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants, and because of the immediate
and irreparable damage that would be caused for which they would have no other
adequate remedy, UniCapital, the Surviving Corporation and the Stockholders
agree that, in the event of a breach by any of them of the foregoing covenant,
the covenant may be enforced against them by injunctions and restraining orders.
16. LOCK-UP AGREEMENTS
16.1 AGREEMENT. In connection with the IPO, for good and valuable
consideration, and to induce the underwriters that may participate in the IPO to
continue their efforts in connection with the IPO, each Stockholder hereby
agrees that, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of such underwriters, it will not, during the period
commencing on the date of this Agreement and ending 180 days after the date of
the final prospectus contained in the Registration Statement relating to the IPO
(the "Prospectus"), (a) offer, pledge, sell, contract to sell, sell any option
or contract to purchase, purchase any option or contract to sell, grant any
option, right or warrant to purchase, lend, or otherwise transfer (except to
heirs or legal representatives by operation of law) or dispose of, directly or
indirectly, any shares of UniCapital Stock or any securities convertible into or
exercisable or exchangeable for UniCapital Stock or (b) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of UniCapital Stock, whether any such
transaction described in clause (a) or (b) above is to be settled by delivery of
UniCapital Stock or such other securities, in cash or otherwise. In addition,
each Stockholder agrees that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the underwriters that may participate in
the IPO, it will not, during the period commencing on the date of this Agreement
and ending 180 days after the date of the Prospectus, make any demand for or
exercise any right with respect to, the registration of any shares of UniCapital
Stock or any security convertible into or exercisable or exchangeable for Common
Stock.
16.2 INTENDED THIRD PARTY BENEFICIARIES. Each Stockholder agrees that
the foregoing shall be binding upon their transferees, successors, assigns,
heirs, and personal representatives and shall benefit and be enforceable by the
underwriters in the IPO. Each Stockholder acknowledges and agrees that such
underwriters and Morgan Stanley & Co. Incorporated are intended third party
beneficiaries of the provisions of this Article 16, and that Morgan Stanley &
Co. Incorporated on behalf of such underwriters shall be entitled to enforce the
covenants contained in this Article 16. In furtherance of the foregoing,
UniCapital and its transfer agent are hereby authorized to decline to make any
transfer of
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securities if such transfer would constitute a violation or breach of this
Article 16. Except as set forth in this Article 16, there are no intended
third-party beneficiaries under this Agreement.
17. FEDERAL SECURITIES ACT AND CONTRACTUAL RESTRICTIONS ON
UNICAPITAL STOCK
17.1 INVESTMENT INTENT. The Stockholders acknowledge and agree that the
shares of UniCapital Stock to be delivered to the Stockholders pursuant to this
Agreement have not been and will not be registered under the Securities Act and
therefore may not be resold without compliance with the Securities Act. The
Stockholders represent and warrant that the shares of UniCapital Stock to be
acquired by the Stockholders pursuant to this Agreement are being acquired
solely for their own account, for investment purposes only, and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution.
17.2 COMPLIANCE WITH LAW. The Stockholders covenant, warrant and
represent that none of the shares of UniCapital Stock issued to such
Stockholders will be offered, sold, assigned, pledged, hypothecated, transferred
or otherwise disposed of except after full compliance with all of the applicable
provisions of the Securities Act and the rules and regulations of the SEC
thereunder, and except after full compliance with any applicable state
securities laws.
17.3 ECONOMIC RISK; SOPHISTICATION. The Stockholders represent and
warrant that they are able to bear the economic risk of an investment in
UniCapital Stock acquired pursuant to this Agreement and can afford to sustain a
total loss of such investment. The Stockholders further represent and warrant
that they (a) fully understand the nature, scope and duration of the limitations
on transfer contained in this Agreement and (b) have such knowledge and
experience in financial and business matters that they are capable of evaluating
the merits and risks of the proposed investment and therefore have the capacity
to protect their own interests in connection with the acquisition of the
UniCapital Stock.
17.4 INFORMATION SUPPLIED.
(a) The Stockholders represent and warrant that they have had
an adequate opportunity to ask questions and receive answers from the officers
of UniCapital concerning UniCapital, its business, operations, plans and
strategy, and the background and experience of its officers and directors. The
Stockholders represent and warrant that they have asked any and all questions
that they may have in the nature described in the preceding sentence and that
all such questions have been answered to their satisfaction.
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(b) Each Stockholder represents and warrants that he has
received the draft Registration Statement, including the draft preliminary
prospectus that forms a part thereof, delivered to him on or about February 14,
1998, that describes, among other things, UniCapital, the Merger, the other
acquisitions proposed to be undertaken by UniCapital simultaneously with the
Merger and the target companies of such other acquisitions. Each Stockholder
represents and warrants that he has reviewed such draft Registration Statement
and draft preliminary prospectus and has had adequate opportunity to ask
questions of and receive answers to his satisfaction from the officers of
UniCapital concerning the matters described therein.
18. SECURITIES LEGENDS
The certificates evidencing the UniCapital Stock to be received by the
Stockholders hereunder will bear a legend substantially in the form set forth
below and containing such other information as UniCapital may deem appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE SECURITIES OR BLUE SKY LAWS.
SUCH SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE
SECURITIES ACT AND ANY STATE SECURITIES OR BLUE SKY LAWS,
UNLESS, IN THE OPINION (WHICH SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION) OF COUNSEL SATISFACTORY TO
THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
In addition, such certificates shall also bear (a) a legend reflecting the
restrictions contained in Article 16 and (b) such other legends as counsel for
UniCapital reasonably determines are required under the applicable laws of any
state.
19. GENERAL
19.1 COOPERATION. The Stockholders and UniCapital shall each deliver or
cause to be delivered to the other on the Closing Date, and at such other times
and places as shall be reasonably agreed to, such additional instruments as the
other may reasonably request for the purpose of carrying out this Agreement. The
Stockholders will cooperate and use their best efforts to have the officers,
directors and employees of Company prior to the Closing Date
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cooperate with UniCapital on and after the Closing Date in furnishing
information, evidence, testimony and other assistance in connection with any
actions, proceedings, arrangements or disputes of any nature with respect to
matters pertaining to all periods prior to the Closing Date.
19.2 SUCCESSORS AND ASSIGNS. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the Resulting
Company, the successors of UniCapital, and the heirs and legal representatives
of the Stockholders.
19.3 ENTIRE AGREEMENT. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the Stockholders,
the Companies, UniCapital and Newco and supersedes any prior agreement and
understanding relating to the subject matter of this Agreement. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto,
enforceable in accordance with its terms, and may be modified or amended only by
a written instrument executed by the Stockholders (subject to the limitations
set forth below), the Company, UniCapital and Newco acting through their
respective officers, duly authorized by their respective Boards of Directors;
provided, that the Stockholders who own a majority of the outstanding shares of
capital stock of the Company shall have the authority to approve and execute any
amendment to this Agreement on behalf of all of the Stockholders and without the
necessity of such Stockholders holding a majority of the outstanding shares of
capital stock of the Company obtaining consent or authorization from any other
Stockholder, unless such amendment relates to any representation or warranty
made by a Stockholder other than such Stockholders holding a majority of the
outstanding shares of capital stock of the Company which may only be amended by
the written agreement of such person; and provided further, that no Stockholder
shall have any power or authority to modify or amend this Agreement in any
respect from and after the initial filing of the Registration Statement with the
SEC.
19.4 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
19.5 BROKERS AND AGENTS. Each party represents and warrants that it
employed no broker or agent in connection with the transactions contemplated
hereby, and each of UniCapital and Newco, on the one hand, and the Stockholders,
on the other hand, agrees to indemnify the other against all loss, liability,
cost damages or expense arising out of or related to claims for fees or
commissions of brokers employed or alleged to have been employed by such
indemnifying party.
19.6 EXPENSES. Whether or not the transactions herein contemplated
shall be consummated, UniCapital will pay the fees, expenses and disbursements
of UniCapital and
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Newco and their respective agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement and any
amendments thereto. Whether or not the transactions herein contemplated shall be
consummated, the Stockholders will pay the fees, expenses and disbursements of
the Stockholders and the Company and their respective agents, representatives,
accountants and counsel incurred in connection with the subject matter of this
Agreement and any amendments hereto and all other costs and expenses incurred in
the performance of this Agreement by the Stockholders and the Company and in
compliance with all conditions to be performed by the Stockholders and the
Company under this Agreement.
19.7 NOTICES. All notices and other communications hereunder shall be
in writing (including wire, telefax or similar writing) and shall be sent,
delivered or mailed, addressed, or telefaxed:
(a) If to UniCapital or Newco, addressed to them at:
UniCapital Corporation
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Telephone: (305) 861-0603
Telefax: (305) 866-8449
with a copy to:
David A. Gerson, Esq.
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
301 Grant Street
Pittsburgh, PA 15219
Telephone: (412) 560-3330
Telefax: (412) 560-3399
(b) If to the Stockholders, addressed to them in care
of the Stockholders' Representative at:
One Hollis Street, Suite 114
Wellesley, MA 02181
Attention: David Burmon
Telephone: 617-235-5792
Telefax: 617-235-8361
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with a copy to:
Thacher Proffitt & Wood
Two World Trade Center
New York, NY 10021
Attention: Thomas N. Talley, Esq.
Telephone: 212-912-7645
Telefax: 212-912-7751
Each such notice, request or other communication shall be given by hand
delivery, by nationally recognized courier service or by telefax, receipt
confirmed. Each such notice, request or communication shall be effective (i) if
delivered by hand or by nationally recognized courier service, when delivered at
the address specified in this Section 19.7 (or in accordance with the latest
unrevoked written direction from such party) and (ii) if given by telefax, when
such telefax is transmitted to the telefax number specified in this Section 19.7
(or in accordance with the latest unrevoked written direction from such party),
and the appropriate confirmation is received.
19.8 GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York, without giving effect to any of the
provisions thereof that would require the application of the substantive laws of
any other jurisdiction. Each party to this Agreement: (a) agrees that any legal
action or proceeding under this Agreement shall be brought in the courts of the
State of New York or in the United States District Court for the Southern
District of New York; (b) irrevocably submits to the jurisdiction of such
courts; (c) agrees not to assert any claim or defense that it is not personally
subject to the jurisdiction of such courts, that any such forum is not
convenient or the venue thereof is improper, or that this Agreement or the
subject matter hereof may not be enforced in such courts; and (d) agrees to
accept service of process on it by certified or registered mail or by any other
method authorized by law.
19.9 EXERCISE OF RIGHTS AND REMEDIES. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
19.10 TIME. Time is of the essence with respect to this Agreement.
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19.11 REFORMATION AND SEVERABILITY. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
19.12 REMEDIES CUMULATIVE. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
19.13 CAPTIONS. The headings of this Agreement are inserted for
convenience only and shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
20. DEFINITIONS
20.1 "Accounts Receivable" is defined in Section 6.14.
20.2 "Acquisition Proposal" is defined in Section 8.10.
20.3 "Adjusted 1997 EBT" is defined in Section 2.5(a).
20.4 "Adjusted 1998 EBT" is defined in Section 2.5(a).
20.5 "Agent" is defined in Section 8.10.
20.6 "Agreement" is defined in the preamble to this Agreement.
20.7 "Audited Balance Sheet Date" is defined in Section 6.12(a).
20.8 "Audited Financial Statements" are defined in Section 6.12(a).
20.9 "Authorizations" are defined in Section 6.23.
20.10 "Basket Limitation" is defined in Section 12.5(b).
20.11 "Benefit Plan" is defined in Section 6.22.
20.12 "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq.
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20.13 "Certificates" are defined in Section 2.2.
20.14 "Certificate of Merger" is defined in Section 1.1.
20.15 "Closing" is defined in Section 5.1(b).
20.16 "Closing Date" is defined in Section 5.2.
20.17 "Closing Date Balance Sheets" are defined in Section 3.1.
20.18 "Code" is defined in the recitals to this Agreement.
20.19 "Commonly Controlled Entity" is defined in Section 6.22.
20.20 "Company" is defined in the preamble to this Agreement.
20.21 "Company Documents" are defined in Section 6.2.
20.22 "Company EBT" is defined in Section 2.5(b).
20.23 "Company Stock" is defined in Section 2.1(a).
20.24 "Constituent Corporations" are defined in the recitals to this
Agreement.
20.25 "Contracts" are defined in Section 6.17.
20.26 "Disputed Amounts" are defined in Section 3.2.
20.27 "EBT" is defined in Section 2.5(a).
20.28 "Earn-Out Consideration" is defined in Section 2.5(c).
20.29 "Earn-Out Escrow Cash" is defined in Section 4.1(b).
20.30 "Earn-Out Escrow Shares" are defined in Section 4.1(b).
20.31 "Effective Date Consideration" is defined in Section 2.1(a).
20.32 "Environmental Laws" mean any and all applicable treaties, laws,
regulations, ordinances, enforceable requirements, binding determinations,
orders, decrees, judgments, injunctions, permits, approvals, authorizations,
licenses or binding agreements issued, promulgated or entered into by any
Governmental Entity, relating to the environment, preservation or reclamation of
natural resources, or to the management, Release or threatened
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Release of or exposure to Hazardous Substances, including CERCLA, the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. Section 1251 et seq., the Clean Air Act, 42
U.S.C. Section 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. Section
2601 et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651 et
seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C.
Section 11001 et. seq., the Safe Drinking Water Act, 42 U.S.C. Section 300(f) et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801 et
seq., and any similar or implementing state or local law and all amendments or
regulations promulgated thereunder.
20.33 "Environmental Liabilities" mean any and all Losses arising from
or related to any claim, proceeding, investigation, response or removal action,
remediation or other clean-up brought, prosecuted or undertaken by UniCapital,
Newco, the Surviving Corporation, any Governmental Entity or any other person or
entity on the basis of any violation of any Environmental Laws or pursuant to
any requirement imposed under any Environmental Laws (including any sampling,
testing, investigation, removal, treatment or remediation undertaken by
UniCapital, Newco or the Surviving Corporation so as to avoid any claim or
violation or to comply with any requirement and all counseling or engineering
fees and expenses related thereto), and arising from pre-Closing operations,
events, circumstances or conditions at, on, under or emanating from, or as a
result of any pre-Closing off-site disposal of Hazardous Substances from, any
property currently or formerly owned, operated or leased by the Companies.
20.34 "Environmental Permits" mean all permits, licenses, approvals or
authorizations from any Governmental Entity required under Environmental Laws
for the operation of the business of the applicable Company.
20.35 "Equipment" is defined in Section 6.35.
20.36 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
20.37 "Escrow Cash" is defined in Section 4.1(a).
20.38 "Escrow Shares" are defined in Section 4.1(a).
20.39 "Escrow Property" is defined in Section 4.1(b).
20.40 "Exchange Act" is defined in Section 12.1.
20.41 "Expiration Date" is defined in Section 12.6.
20.42 "Financial Statements" are defined in Section 6.12(b).
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20.43 "Foreign Plans" are defined in Section 6.22(i)(xiii).
20.44 "GAAP" is defined in Section 3.1.
20.45 "Governmental Entity" means any court, administrative or
regulatory agency or commission, or other governmental authority or
instrumentality, domestic, foreign or supranational.
20.46 "Hazardous Substances" mean all explosive or regulated
radioactive materials or substances, hazardous or toxic materials, wastes or
chemicals, petroleum and petroleum products (including crude oil or any fraction
thereof), asbestos or asbestos containing materials, and all other materials or
chemicals regulated pursuant to any Environmental Law, including materials
listed in 49 C.F.R. ss. 172.101 and materials defined as hazardous pursuant to
Section 101(14) of CERCLA.
20.47 "Indemnifiable Decrease" is defined in Section 12.5(a).
20.48 "Indemnified Party" is defined in Section 12.4(a).
20.49 "Indemnifying Party" is defined in Section 12.4(a).
20.50 "Indemnity Escrow Agent" is defined in Section 4.1(a).
20.51 "Independent Accounting Firm" is defined in Section 3.2.
20.52 "Intellectual Property" is defined in Section 6.28(a).
20.53 "IPO" is defined in the recitals to this Agreement.
20.54 "Interim Net Worth Period" is defined in Section 12.5(a).
20.55 "Lease Documents" are defined in Section 6.35.
20.56 "Leases" are defined in Section 6.35.
20.57 "liabilities" are defined in Section 6.13(a).
20.58 "Losses" are defined in Section 12.1.
20.59 "Material Adverse Amendment" is defined in Section 8.4.
20.60 "Merger Consideration" is defined in Section 2.1(c).
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20.61 "Merger Effective Date" is defined in Section 5.3.
20.62 "Merger" is defined in the recitals to this Agreement.
20.63 "Net Worth Deficiency" is defined in Section 3.1.
20.64 "Newco" is defined in the preamble to this Agreement.
20.65 "1999 EBT" is defined in Section 2.5(b).
20.66 "Obligor" is defined in Section 6.35.
20.67 "Ordinary course" or "ordinary course of business" means the
conduct of business as conducted by the Company prior to the date of this
Agreement consistent in nature and, where relevant, amount, with past practices.
20.68 "PCBs" are defined in Section 6.33(h).
20.69 "Pension Plan" is defined in Section 6.22.
20.70 "Permits" mean all permits, licenses, franchises, approvals and
authorizations from any Governmental Entity that are owned or held by any
Company, or held by any Stockholder that relate to the operations of any
Company.
20.71 "Prospectus" is defined in Section 16.1.
20.72 "Registration Statement" is defined in Section 9.4.
20.73 "Regulations" are defined in Section 6.23.
20.74 "Release" means any spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, emanation or migration of any
Hazardous Substance in, into, onto or through the environment (including ambient
air, surface water, ground water, soils, land surface, subsurface strata,
workplace or structure).
20.75 "Restricted Business" is defined in Section 14.1(a).
20.76 "Scheduled Payments" are defined in Section 6.35.
20.77 "SEC" is defined in Section 9.4.
20.78 "Securities Act" is defined in Section 6.16.
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20.79 "Stockholders" are defined in the preamble to this Agreement.
20.80 "Stockholders' Representative" is defined in Section 3.3.
20.81 "Subsidiary" is defined in Section 6.1.
20.82 "Surviving Corporation" is defined in Section 1.2.
20.83 "Tax Returns" are defined in Section 6.27.
20.84 "Taxes" are defined in Section 6.27.
20.85 "Third Party Claim" is defined in Section 12.4(a).
20.86 "Underwriting Agreement" is defined in Section 5.1(a).
20.87 "UniCapital" is defined in the preamble to this Agreement.
20.88 "UniCapital Documents" is defined in Section 7.3.
20.89 "UniCapital Stock" is defined in Section 2.1(a).
20.90 "Unified Transaction" is defined in the recitals to this
Agreement.
20.91 "Welfare Plan" is defined in Section 6.22.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
UNICAPITAL CORPORATION
By: /s/ Robert New
--------------
Name: Robert New
Title: Chairman and Chief Executive Officer
WAG ACQUISITION CORP.
By: /s/ Robert New
--------------
Name: Robert New
Title: President
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
66
<PAGE> 73
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
THE WALDEN ASSET GROUP, INC.
By: /s/ David L. Burmon
-------------------
Name: David L. Burmon
Title: President
STOCKHOLDERS:
/s/ Richard Albertelli
----------------------
Richard Albertelli
/s/ David L. Burmon
-------------------
David Burmon
/s/ Robert Kopp
---------------
Robert Kopp
67
<PAGE> 74
ANNEXES
ANNEX I [Form of Certificate of Merger]
ANNEX II [Calculation and Composition of Consideration]
ANNEX III [Form of Indemnity Escrow Agreement]
ANNEX IV [Form of Employment Agreement]
SCHEDULES
SCHEDULE 2.5 [Add-Backs]
SCHEDULE 6.1 [Jurisdictions in which Company and Subsidiaries
Are Qualified to do Business]
SCHEDULE 6.5 [Issued and Outstanding Stock of the Company and
Subsidiaries]
SCHEDULE 6.8 [Subsidiaries]
SCHEDULE 6.9 [Predecessor Companies]
SCHEDULE 6.12 [Company Financial Statements]
SCHEDULE 6.13 [Liabilities and Obligations]
SCHEDULE 6.14 [Accounts and Notes Receivable Aging]
SCHEDULE 6.15 [Permits]
SCHEDULE 6.16 [Real and Personal Property]
SCHEDULE 6.17 [Contracts and Commitments]
SCHEDULE 6.20 [Insurance]
SCHEDULE 6.21 [Employee Information]
SCHEDULE 6.22 [Employee Benefit Plans]
SCHEDULE 6.23 [Authorizations]
SCHEDULE 6.24 [Transactions with Affiliates]
SCHEDULE 6.25 [Litigation]
SCHEDULE 6.28 [Intellectual Property]
SCHEDULE 6.29 [Notice and Consents]
SCHEDULE 6.30 [Absence of Changes]
SCHEDULE 6.31 [Deposit Accounts; Powers of Attorney]
SCHEDULE 6.35 [Leases]
SCHEDULE 7.9 [UniCapital and Newco Agreements]
SCHEDULE 9.2 [Employment Agreements]
SCHEDULE 11.3 [Personal Guarantees of the Indebtedness of the
Company]
The registrant agrees to furnish a copy of each omitted schedule, exhibit or
annex to this Exhibit 2.12 to the Commission supplementally upon request
therefor.
<PAGE> 1
Exhibit 3.01
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
U.S. LEASING, INC.
U.S. Leasing, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), does hereby certify:
FIRST: That the amendment to the Corporation's Certificate of Incorporation
set forth in the following resolution was approved by unanimous written consent
of the Board of Directors of the Corporation on January 26, 1998 and was duly
adopted in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware:
RESOLVED, that the Board of Directors hereby declares it advisable and in
the best interest of the Corporation that the Certificate of Incorporation
of the Corporation be amended (the "Charter Amendment") to (i) change the
name of the Corporation to "UniCapital Corporation, (ii) create 10,000,000
authorized and undesignated shares of Preferred Stock, par value $.001 per
share, (iii) create a staggered Board of Directors, and (iv) eliminate,
effective upon the Corporation becoming subject to the periodic reporting
requirements of the Securities Exchange Act of 1934, as amended, the
ability of the stockholders to act by written consent of less than all of
the stockholders; and
FURTHER RESOLVED, that in order to effect the purposes and intent of the
foregoing resolution, the Charter Amendment shall (i) delete in their
entirety Article I, Article IV and Article V of the Certificate of
Incorporation and substitute therefor the following provisions so that said
Article I, Article IV and Article V shall be amended to read in their
entirety as set forth below, (ii) redesignate the second of the two
articles currently designated to be Article IX as new Article XI so that
said Article XI shall be amended to read in its entirety as set forth below
and (iii) create a new Article X to read in its entirety as set forth
below:
ARTICLE I
NAME
The name of the corporation is UniCapital Corporation (hereinafter
called the "Corporation").
<PAGE> 2
ARTICLE IV
CAPITAL STOCK
The total number of shares of stock, which the Corporation shall have
authority to issue is One Hundred Ten Million (110,000,000) shares, which
shall be divided into two classes as follows:
A. One Hundred Million (100,000,000) shares of Common Stock, the par
value of each of which shares is One-Tenth Cent ($.001), amounting in the
aggregate to One Hundred Thousand Dollars ($100,000.00); and
B. Ten Million (10,000,000) shares of Preferred Stock, the par value
of each of which shares is One-Tenth Cent ($.001), amounting in the
aggregate to Ten Thousand Dollars ($10,000). The Corporation's Board of
Directors is hereby expressly authorized to provide by resolution or
resolutions from time to time for the issue of the Preferred Stock in one
or more series, the shares of each of which series may have such voting
powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special rights,
and qualifications, limitations or restrictions thereof, as shall be
permitted under the General Corporation Law of the State of Delaware and as
shall be stated in the resolution or resolutions providing for the issue of
such stock adopted by the Board of Directors pursuant to the authority
expressly vested in the Board of Directors hereby.
ARTICLE V
DIRECTORS
A. The business and affairs of the Corporation shall be managed by or
under the direction of a Board of Directors consisting of such number of
directors as is determined from time to time by resolution adopted by
affirmative vote of a majority of the entire Board of Directors; provided,
however, that in no event shall the number of directors be less than three
(3). The directors shall be divided into three (3) classes, designated
Class I, Class II and Class III. Each class shall consist, as nearly as may
be possible, of one-third (1/3) of the total number of directors
constituting the entire Board of Directors. Effective January 31, 1998,
Class I directors shall serve for a term ending upon the annual meeting of
stockholders held in 1999, Class II directors shall serve for a term ending
upon the annual meeting of stockholders held in 2000 and Class III
directors shall serve for a term ending upon the annual meeting of
stockholders held in 2001. At each succeeding annual meeting of
stockholders beginning with the annual meeting of stockholders held in
1999, successors to the class of directors whose term expires
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<PAGE> 3
at such annual meeting shall be elected for a three-year term. If the
number of directors is changed, any increase or decrease shall be
apportioned among the classes so as to maintain the number of directors in
each class as nearly equal as possible, and any additional director of any
class elected to fill a vacancy resulting from an increase in such class
shall hold office for a term that shall coincide with the remaining term of
that class, but in no case will a decrease in the number of directors
shorten the Term of any incumbent director. A director shall hold office
until the annual meeting for the year in which his or her term expires and
until his or her successor shall be elected and shall qualify, subject,
however, to prior death, resignation, incapacitation or removal from
office, and except as otherwise required by law. In the event such election
is not held at an annual meeting of stockholders, it shall be held at any
adjournment, thereof or a special meeting.
B. Except as otherwise required by law, any vacancy on the Board of
Directors that results from an increase in the number of directors shall be
filled only by a majority of the Board of Directors then in office,
provided that a quorum is present, and any other vacancy occurring in the
Board of Directors shall be filled by a majority of the directors then in
office, even if less than a quorum, or by a sole remaining director. Any
director elected to fill a vacancy not resulting from an increase in the
number of directors shall have the same remaining term as that of his or
her predecessor. A director may be removed only for cause by the
stockholders.
C. Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such directorships shall be
governed by the term of this certificate of incorporation applicable
thereto and such directors so elected shall not be divided into classes
pursuant to this Article V, in each case unless expressly provided by such
terms.
ARTICLE X
ACTION BY STOCKHOLDERS
Effective immediately upon the Corporation becoming subject to the
periodic reporting requirements of Section 13 of the Securities Exchange
Act of 1934, as amended, with respect to any class of its capital stock:
A. no action required to be taken or which may be taken at any annual
or special meeting of stockholders of the corporation may be taken without
a meeting; and
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<PAGE> 4
B. the power of the stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
ARTICLE XI
AMENDMENTS
Except as provided herein, from time to time any of the provisions of
this Certificate of Incorporation may be amended, altered or repealed, and
other provisions authorized by the laws of the State of Delaware at the
time in force may be added or inserted in the manner and at the time
prescribed by said laws, and all rights at any time conferred upon the
stockholders of the Corporation by this Certificate of Incorporation are
granted subject to the provisions of this Article XI.
SECOND: That said amendment has been authorized by unanimous written
consent of the holders of the issued and outstanding stock of the Corporation
dated January 27, 1998.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
4
<PAGE> 5
IN WITNESS WHEREOF, UniCapital Corporation, formerly known as U.S. Leasing,
Inc. has caused this Certificate to be signed by Robert J. New, its President,
this 27th day of January, 1998.
UniCapital Corporation
/s/ ROBERT J. NEW
--------------------------------------
Robert J. New, President
5
<PAGE> 6
CERTIFICATE OF INCORPORATION
OF
U.S. LEASING, INC.
ARTICLE I.
NAME
The name of the corporation is U.S. LEASING, INC. (hereinafter called the
"Corporation").
ARTICLE II.
REGISTERED AGENT AND OFFICE
The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, City of Wilmington 19805, County of New Castle
and the name of its registered agent at such address is Corporation Service
Company.
ARTICLE III.
PURPOSE
The purpose for which the Corporation is formed is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE IV.
CAPITAL STOCK
The aggregate number of shares of capital stock which the Corporation
shall have the authority to issue is 100,000,000 shares of Common Stock, par
value $0.001 per share.
All shares of Common Stock shall be identical and shall entitle the
holders thereof to the same rights and privileges:
A. Voting Rights. Except as otherwise required by law, all rights to vote
and all voting power shall be vested exclusively in the holders of the
Common Stock.
<PAGE> 7
B. Dividends. The holders of the Common Stock shall be entitled to
receive when, as and if declared by the Board of Directors, out of
funds legally available therefor, dividends payable in cash, stock or
otherwise.
C. Liquidating Distributions. Upon any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary, the
remaining net assets of the Corporation shall be distributed pro rata
to the holders of the Common Stock in accordance with their respective
rights and interests.
ARTICLE V.
DIRECTORS
The Corporation's Board of Directors shall consist of not fewer than one
(1) nor more than five (5) directors, and shall initially consist of two (2)
directors. The number of directors within these limits may be increased or
decreased from time to time as provided in the Bylaws of the Corporation. The
names of the initial Directors of the Corporation are as follows:
Robert New
Jonathan Ledecky
ARTICLE VI.
BYLAWS
In furtherance and not in limitation of the powers conferred by the laws
of the State of Delaware:
A. The Board of Directors of the Corporation is expressly authorized to
adopt, amend or repeal the Bylaws of the Corporation.
B. Elections of Directors need not be by written ballot unless the Bylaws
of the Corporation shall so provide.
C. The books of the Corporation may be kept at such place within or
without the State of Delaware as the Bylaws of the Corporation may
provide or as may be designated from time to time by the Board of
Directors of the Corporation.
D. Any action required or permitted to be taken at any meeting of the
Board of Directors, may be taken without a meeting only if all of the
Directors consent thereto in writing.
- 2 -
<PAGE> 8
ARTICLE VII.
LIMITATION OF LIABILITY
No director shall be personally liable to the Corporation or the holders of
shares of capital stock for monetary damages for breach of fiduciary duty as a
director, except (i) for any breach of the duty of loyalty of such director to
the Corporation or such holders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of Delaware, or (iv) for any
transaction from which such director derives an improper personal benefit. No
amendment to or repeal of this provision shall apply to or have any effect on
the liability or alleged liability of any Director for or with respect to any
acts or omissions of such Directors occurring prior to such amendment or repeal.
If the Law of the Corporation's state of incorporation is hereafter amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a Director of this Corporation
shall be eliminated or limited to the fullest extent then permitted. No repeal
or modification of this Article VII shall adversely affect any right of or
protection afforded to a Director of the Corporation existing immediately prior
to such repeal or modification.
ARTICLE VIII.
INDEMNIFICATION
This Corporation shall indemnify and may advance expenses to its Officers
and Directors to the fullest extent permitted by law in existence either now or
hereafter in effect. Without limiting the generality of the foregoing, the
Bylaws may provide for indemnification and advancement of expenses to the
Corporation's Officers, Directors, employees and agents on such terms and
conditions as the Board of Directors may from time to time deem appropriate or
advisable.
ARTICLE IX.
INCORPORATOR
The name of the Incorporator is C. Deryl Couch and the address of the
Incorporator is 515 East Las Olas Boulevard, Suite 1500, Fort Lauderdale,
Florida 33301.
-3-
<PAGE> 9
ARTICLE IX
AMENDMENTS
Except as provided herein, from time to time any of the provisions of this
Certificate of Incorporation may be amended, altered or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the Corporation by
this Certificate of Incorporation are granted subject to the provisions of this
Article IX.
IN WITNESS WHEREOF, the undersigned, being the Incorporator named above,
for the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Delaware, has signed this Certificate of Incorporation this 8th
day of October, 1997.
/s/ C. DERYL COUCH
-------------------------------
C. DERYL COUCH, Incorporator
<PAGE> 1
Exhibit 3.02
UNICAPITAL CORPORATION
(a Delaware corporation)
----------------------------------
AMENDED AND RESTATED BYLAWS
----------------------------------
As adopted by the Board of Directors as of January 30, 1998.
<PAGE> 2
AMENDED AND RESTATED BYLAWS
OF
UNICAPITAL CORPORATION
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office of the Corporation
shall be at Corporation Service Company, 1013 Centre Road, in the City of
Wilmington, County of New Castle, State of Delaware 19805.
Section 2. ADDITIONAL OFFICES. The Corporation may also have offices at
such other places, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. TIME AND PLACE. A meeting of stockholders for any purpose
may be held at such time and place, within or without the State of Delaware, as
the Board of Directors may fix from time to time and as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. ANNUAL MEETING. Annual meetings of stockholders, commencing
with the year 1999, shall be held on April 15, if not a legal holiday, or, if a
legal holiday, then on the next secular day following, at 2 P.M., or at such
other date and time as shall, from time to time, be designated by the Board of
Directors and stated in the notice of the meeting. At such annual meeting, the
stockholders shall elect a Board of Directors and transact such other business
as may properly be brought before the meeting.
Section 3. NOTICE OF ANNUAL MEETING. Written notice of the annual
meeting, stating the place, date and time thereof, shall be given to each
stockholder entitled to vote at such meeting not less than 10 (unless a longer
period is required by law) nor more than 60 days prior to the meeting.
Section 4. SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the Chairman of the Board, if
any, or the President and shall be called by the President or Secretary at the
request in writing of a majority of the Board of Directors, or at the request in
writing of the stockholders owning a majority of the shares of capital stock of
the Corporation issued and
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outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 5. NOTICE OF SPECIAL MEETING. Written notice of a special
meeting, stating the place, date and time thereof and the purpose or purposes
for which the meeting is called, shall be given to each stockholder entitled to
vote at such meeting not less than 10 (unless a longer period is required by
law) nor more than 60 days prior to the meeting.
Section 6. LIST OF STOCKHOLDERS. The officer in charge of the stock
ledger of the Corporation or the transfer agent shall prepare and make, at least
10 days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least 10 days prior to the meeting, at a
place within the city where the meeting is to be held, which place, if other
than the place of the meeting, shall be specified in the notice of the meeting.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present in person thereat.
Section 7. PRESIDING OFFICER; ORDER OF BUSINESS.
(a) Meetings of stockholders shall be presided over by the
Chairman of the Board, if any, or, if he is not present (or, if there is none),
by the President, or, if he is not present, by a Vice President, or, if he is
not present, by such person who may have been chosen by the Board of Directors,
or, if none of such persons is present, by a chairman to be chosen by the
stockholders owning a majority of the shares of capital stock of the Corporation
issued and outstanding and entitled to vote at the meeting and who are present
in person or represented by proxy. The Secretary of the Corporation, or, if he
is not present, an Assistant Secretary, or, if he is not present, such person as
may be chosen by the Board of Directors, shall act as secretary of meetings of
stockholders, or, if none of such persons is present, the stockholders owning a
majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote at the meeting and who are present in person or
represented by proxy shall choose any person present to act as secretary of the
meeting.
(b) The following order of business, unless otherwise ordered
at the meeting, shall be observed as far as practicable and consistent with the
purposes of the meeting:
1. Call of the meeting to order.
2. Presentation of proof of mailing of the notice of
the meeting and, if the meeting is a special
meeting, the call thereof.
3. Presentation of proxies.
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4. Announcement that a quorum is present.
5. Reading and approval of the minutes of the
previous meeting.
6. Reports, if any, of officers.
7. Election of directors, if the meeting is an annual
meeting or a meeting called for that purpose.
8. Consideration of the specific purpose or purposes
for which the meeting has been called (other than
the election of directors), if the meeting is a
special meeting.
9. Transaction of such other business as may properly
come before the meeting.
10. Adjournment.
Section 8. QUORUM; ADJOURNMENTS. The holders of a majority of the
shares of capital stock of the Corporation issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall be necessary
to, and shall constitute a quorum for, the transaction of business at all
meetings of the stockholders, except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, a quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have the power to
adjourn the meeting from time to time, without notice of the adjourned meeting
if the time and place thereof are announced at the meeting at which the
adjournment is taken, until a quorum shall be present or represented. Even if a
quorum shall be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have the power to adjourn the meeting from time to time for good
cause, without notice of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken, until a date which
is not more than 30 days after the date of the original meeting. At any such
adjourned meeting, at which a quorum shall be present in person or represented
by proxy, any business may be transacted which might have been transacted at the
meeting as originally called. If the adjournment is for more than 30 days, or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote thereat.
Section 9. VOTING.
(a) At any meeting of stockholders, every stockholder having
the right to vote shall be entitled to vote in person or by proxy. Except as
otherwise provided by law or the Certificate of Incorporation, each stockholder
of record shall be entitled to one vote for each share of capital stock
registered in his name on the books of the Corporation.
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<PAGE> 5
(b) All elections shall be determined by a plurality vote,
and, except as otherwise provided by law or the Certificate of Incorporation,
all other matters shall be determined by a vote of a majority of the shares
present in person or represented by proxy and voting on such other matters.
Section 10. ACTION BY CONSENT. Any action required or permitted by law
or the Certificate of Incorporation to be taken at any meeting of stockholders
may be taken without a meeting, without prior notice and without a vote, if a
written consent, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present or represented by proxy and
voted. Such written consent shall be filed with the minutes of meetings of
stockholders. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not so consented in writing thereto.
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS; NUMBER; TENURE. The business of the
Corporation shall be managed by its Board of Directors, which may exercise all
powers of the Corporation and perform all lawful acts and things which are not
by law, the Certificate of Incorporation or these Bylaws directed or required to
be exercised or performed by the stockholders. Within the limits specified in
this Section 1, the number of directors within each Class (as defined in the
Certificate of Incorporation) shall be determined by the Board of Directors,
except that if no such determination is made, the number of directors in each
Class shall, subject to Section 2(b) of this Article, be one (1), but the total
number of directors in all Classes taken together may never be less than the
number otherwise permitted by law. The directors shall be elected at the annual
meeting of the stockholders in accordance with the provisions of the Certificate
of Incorporation, except as provided in Section 2 of this Article, and each
director elected shall hold office until his successor is elected and shall
qualify or as provided in the Certificate of Incorporation. Directors need not
be stockholders.
Section 2. VACANCIES.
(a) If any vacancies occur in the Board of Directors, or if
any new directorships are created, they may be filled by vote of a majority of
the directors then in office, although less than a quorum, or by a sole
remaining director. Each director so chosen shall hold office until the next
annual meeting of stockholders, or as provided in the Certificate of
Incorporation and until his successor is duly elected and shall qualify. If
there are no directors in office, any officer or stockholder may call a special
meeting of stockholders in accordance with the provisions of the Certificate of
Incorporation or these Bylaws, at which meeting such vacancies shall be filled.
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<PAGE> 6
(b) In the event that fewer than three (3) directors are
elected, then Class I will be eliminated and at least two (2) directors shall be
elected, one (1) of whom shall be designated a Class II director and one (1) of
whom shall be designated a Class III director.
Section 3. REMOVAL; RESIGNATION.
(a) Except as otherwise provided by law or the Certificate of
Incorporation, any director, directors or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
(b) Any director may resign at any time by giving written
notice to the Board of Directors, the Chairman of the Board, the President or
the Secretary of the Corporation. Unless otherwise specified in such written
notice, a resignation shall take effect upon delivery thereof to the Board of
Directors or the designated officer. It shall not be necessary for a resignation
to be accepted before it becomes effective.
Section 4. PLACE OF MEETINGS. The Board of Directors may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. ANNUAL MEETING. The annual meeting of each newly elected
Board of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present.
Section 6. REGULAR MEETINGS. Additional regular meetings of the Board
of Directors may be held without notice, at such time and place as may from time
to time be determined by the Board of Directors.
Section 7. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board, the President or by 2 or more
directors on at least 2 days' notice to each director, if such notice is
delivered personally or sent by telegram, or on at least 3 days' notice if sent
by mail. Special meetings shall be called by the Chairman of the Board,
President, Secretary or 2 or more directors in like manner and on like notice on
the written request of one-half or more of the number of directors then in
office. Any such notice need not state the purpose or purposes of such meeting
except as provided in Article XI.
Section 8. QUORUM; ADJOURNMENTS. At all meetings of the Board of
Directors, a majority of the directors then in office shall constitute a quorum
for the transaction of business, and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by law or the
Certificate of Incorporation. If a quorum is not present at any meeting of the
Board of Directors, the directors present may adjourn the meeting, from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
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Section 9. COMPENSATION. Directors shall be entitled to such
compensation for their services as directors and to such reimbursement for any
reasonable expenses incurred in attending directors' meetings as may from time
to time be fixed by the Board of Directors. The compensation of directors may be
on such basis as is determined by the Board of Directors. Any director may waive
compensation for any meeting. Any director receiving compensation under these
provisions shall not be barred from serving the Corporation in any other
capacity and receiving compensation and reimbursement for reasonable expenses
for such other services.
Section 10. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting if
a written consent to such action is signed by all members of the Board of
Directors and such written consent is filed with the minutes of its proceedings.
Section 11. MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATIONS. The Board
of Directors may participate in a meeting by means of conference telephone or
similar communications equipment by means of which all directors participating
in the meeting can hear each other, and participation in such meeting shall
constitute presence in person by such director at such meeting.
ARTICLE IV
COMMITTEES
Section 1. EXECUTIVE COMMITTEE. The Board of Directors, by resolution
adopted by a majority of the whole Board, may appoint an Executive Committee
consisting of not more than 5 directors, one of whom shall be designated as
Chairman of the Executive Committee. Each member of the Executive Committee
shall continue as a member thereof until the expiration of his term as a
director, or his earlier resignation, unless sooner removed as a member or as a
director.
Section 2. POWERS. Unless circumscribed by resolution of the Board
appointing the Executive Committee or except as otherwise provided by law, the
Executive Committee shall have and may exercise all of the powers and authority
of the Board of Directors in the management of the business and affairs of the
Corporation including, without limitation, the power and authority to declare a
dividend in cash, property or its own shares and to authorize the issuance of
any shares of capital stock of the Corporation of any class now or hereafter
authorized, and any options or warrants for, and rights to subscribe to, such
shares, and any securities convertible into or exchangeable for such shares.
Section 3. PROCEDURE; MEETINGS. The Executive Committee shall fix its
own rules of procedure and shall meet at such times and at such place or places
as may be provided by such rules or as the members of the Executive Committee
shall provide. The Executive Committee shall keep regular minutes of its
meetings and deliver such minutes to the Board of Directors.
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The Chairman of the Executive Committee, or, in his absence, a member
of the Executive Committee chosen by a majority of the members present, shall
preside at meetings of the Executive Committee, and another member thereof
chosen by the Executive Committee shall act as secretary of the Executive
Committee.
Section 4. QUORUM. A majority of the Executive Committee shall
constitute a quorum for the transaction of business, and the affirmative vote of
a majority of the members of the Executive Committee shall be required for any
action of the Executive Committee; provided, however, that when an Executive
Committee of one member is authorized under the provisions of Section 1 of this
Article, such one member shall constitute a quorum.
Section 5. OTHER COMMITTEES. The Board of Directors, by resolutions
adopted by a majority of the whole Board, may appoint such other committee or
committees as it shall deem advisable and with such functions and duties as the
Board of Directors shall prescribe.
Section 6. VACANCIES; CHANGES; DISCHARGE. The Board of Directors shall
have the power at any time to fill vacancies in, to change the membership of,
and to discharge any committee.
Section 7. COMPENSATION. Members of any committee shall be entitled to
such compensation for their services as members of any such committee and to
such reimbursement for any reasonable expenses incurred in attending committee
meetings as may from time to time be fixed by the Board of Directors. Any member
may waive compensation for any meeting. Any committee member receiving
compensation under these provisions shall not be barred from serving the
Corporation in any other capacity and from receiving compensation and
reimbursement of reasonable expenses for such other services.
Section 8. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if a written consent to such action is signed by all members
of the committee and such written consent is filed with the minutes of its
proceedings.
Section 9. MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATIONS. The
members of any committee designated by the Board of Directors may participate in
a meeting of such committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in such
meeting can hear each other and participation in such meeting shall constitute
presence in person at such meeting.
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ARTICLE V
NOTICES
Section 1. FORM; DELIVERY. Whenever, under the provisions of law, the
Certificate of Incorporation or these Bylaws, notice is required to be given to
any director or stockholder, it shall not be construed to mean personal notice
unless otherwise specifically provided, but such notice may be given in writing,
by mail, addressed to such director or stockholder, at his address as it appears
on the records of the Corporation, with postage thereon prepaid. Such notices
shall be deemed to be given at the time they are deposited in the United States
mail. Notice to a director may also be given personally or by telegram sent to
his address as it appears on the records of the Corporation.
Section 2. WAIVER. Whenever any notice is required to be given under
the provisions of law, the Certificate of Incorporation or these Bylaws, a
written waiver thereof, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed to be
equivalent to such notice. In addition, any stockholder who attends a meeting of
stockholders in person, or is represented at such meeting by proxy, without
protesting at the commencement of the meeting the lack of notice thereof to him,
or any director who attends a meeting of the Board of Directors without
protesting, at the commencement of the meeting, such lack of notice, shall be
conclusively deemed to have waived notice of such meeting.
ARTICLE VI
OFFICERS
Section 1. DESIGNATIONS. The officers of the Corporation shall be
chosen by the Board of Directors. The Board of Directors may choose a Chairman
of the Board, a Chief Executive Officer, a President, a Chief Operating Officer,
a Chief Financial Officer, a Vice President or Vice Presidents, a Secretary, a
Treasurer, one or more Assistant Secretaries and/or Assistant Treasurers and
other officers and agents as it shall deem necessary or appropriate. All
officers of the Corporation shall exercise such powers and perform such duties
as shall from time to time be determined by the Board of Directors. Any number
of offices may be held by the same person, unless the Certificate of
Incorporation or these Bylaws otherwise provide.
Section 2. TERM OF OFFICE; REMOVAL. The Board of Directors at its
annual meeting after each annual meeting of stockholders shall choose a
President, a Secretary and a Treasurer. The Board of Directors may also choose a
Chairman of the Board, a Chief Executive Officer, a Chief Operating Officer, a
Chief Financial Officer, a Vice President or Vice Presidents, one or more
Assistant Secretaries and/or Assistant Treasurers, and such other officers and
agents as it shall deem necessary or appropriate. Each officer of the
Corporation shall hold office until his successor is chosen and shall qualify.
Any officer elected or appointed by the Board of Directors may be removed, with
or without cause, at any time by the affirmative vote of a majority of the
directors then
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in office. Such removal shall not prejudice the contract rights, if any, of the
person so removed. Any vacancy occurring in any office of the Corporation may be
filled for the unexpired portion of the term by the Board of Directors.
Section 3. COMPENSATION. The salaries of all officers of the
Corporation shall be fixed from time to time by the Board of Directors and no
officer shall be prevented from receiving such salary by reason of the fact that
he is also a director of the Corporation.
Section 4. THE CHAIRMAN OF THE BOARD; NON-EXECUTIVE CHAIRMAN OF
THE BOARD
(a) The Chairman of the Board, if any, shall be an officer of
the Corporation and, subject to the direction of the Board of Directors, shall
perform such executive, supervisory and management functions and duties as may
be assigned to him or her from time to time by the Board of Directors. The
Chairman of the Board shall, if present and if no Non-Executive Chairman of the
Board is present, preside at all meetings of stockholders and of the Board of
Directors.
(b) The Board of Directors may, but need not, designate a
Non-Executive Chairman of the Board, who may serve in addition to, or in lieu
of, the Chairman of the Board, as the Board of Directors may determine in its
discretion. The Non-Executive Chairman of the Board, if any, shall not be an
officer of the Corporation, and shall not by virtue of his or her title as such
be entitled or authorized to perform any executive, supervisory or management
functions or duties separate and apart from his or her role as a director of the
Corporation. The Non-Executive Chairman of the Board shall, if present, preside
at all meetings of stockholders and of the Board of Directors.
Section 5. THE PRESIDENT.
(a) The President shall be the chief executive officer of the
Corporation and, subject to the direction of the Board of Directors, shall have
general charge of the business, affairs and property of the Corporation and
general supervision over its other officers and agents. In general, he shall
perform all duties incident to the office of President and shall see that all
orders and resolutions of the Board of Directors are carried into effect. In
addition to and not in limitation of the foregoing, the President shall be
empowered to authorize any change of the registered office or registered agent
(or both) of the Corporation in the State of Delaware.
(b) Unless otherwise prescribed by the Board of Directors, the
President shall have full power and authority on behalf of the Corporation to
attend, act and vote at any meeting of security holders of other corporations in
which the Corporation may hold securities. At such meeting the President shall
possess and may exercise any and all rights and powers incident to the ownership
of such securities which the Corporation might have possessed and exercised if
it had been present. The Board of Directors may from time to time confer like
powers upon any other person or persons.
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Section 6. THE VICE PRESIDENTS. The Vice President, if any (or in the
event there be more than one, the Vice Presidents in the order designated, or in
the absence of any designation, in the order of their election), shall, in the
absence of the President or in the event of his disability, perform the duties
and exercise the powers of the President and shall generally assist the
President and perform such other duties and have such other powers as may from
time to time be prescribed by the Board of Directors.
Section 7. THE SECRETARY. The Secretary shall attend all meetings of
the Board of Directors and all meetings of stockholders and record all votes and
the proceedings of the meetings in a book to be kept for that purpose and shall
perform like duties for the Executive Committee or other committees, if
required. He shall give, or cause to be given, notice of all meetings of
stockholders and special meetings of the Board of Directors, and shall perform
such other duties as may from time to time be prescribed by the Board of
Directors, the Chairman of the Board or the President, under whose supervision
he shall act. He shall have custody of the seal of the Corporation, and he, or
an Assistant Secretary, shall have authority to affix the same to any instrument
requiring it, and, when so affixed, the seal may be attested by his signature or
by the signature of such Assistant Secretary. The Board of Directors may give
general authority to any other officer to affix the seal of the Corporation and
to attest the affixing thereof by his signature.
Section 8. THE ASSISTANT SECRETARY. The Assistant Secretary, if any (or
in the event there be more than one, the Assistant Secretaries in the order
designated, or in the absence of any designation, in the order of their
election), shall, in the absence of the Secretary or in the event of his
disability, perform the duties and exercise the powers of the Secretary and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
Section 9. THE TREASURER. The Treasurer shall have the custody of the
corporate funds and other valuable effects, including securities, and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the Corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may from time
to time be designated by the Board of Directors. He shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Chairman of the Board,
the President and the Board of Directors, at regular meetings of the Board, or
whenever they may require it, an account of all his transactions as Treasurer
and of the financial condition of the Corporation.
Section 10. THE ASSISTANT TREASURER. The Assistant Treasurer, if any
(or in the event there shall be more than one, the Assistant Treasurers in the
order designated, or in the absence of any designation, in the order of their
election), shall, in the absence of the Treasurer or in the event of his
disability, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as may from time to
time be prescribed by the Board of Directors.
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ARTICLE VII
INDEMNIFICATION OF
DIRECTORS AND OFFICERS
Section 1. NATURE OF INDEMNITY. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he is or
was or has agreed to become a Director or officer of the Corporation, or is or
was serving or has agreed to serve at the request of the Corporation as a
Director or officer of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, and may indemnify any person who was or is a party or
is threatened to be made a party to such an action, suit or proceeding by reason
of the fact that he is or was or has agreed to become an employee or agent of
the Corporation, or is or was serving or has agreed to serve at the request of
the Corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such action, suit or
proceeding and any appeal therefrom, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful; except that in the case of
an action or suit by or in the right of the Corporation to procure a judgment in
its favor (a) such indemnification shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the defense
or settlement of such action or suit, and (b) no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. SUCCESSFUL DEFENSE. To the extent that a Director, officer,
employee or agent of the Corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section 1
of this Article VII or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
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Section 3. DETERMINATION THAT INDEMNIFICATION IS PROPER. Any
indemnification of a Director or officer of the Corporation under Section 1 of
this Article VII (unless ordered by a court) shall be made by the Corporation
unless a determination is made that indemnification of the Director or officer
is not proper in the circumstances because he has not met the applicable
standard of conduct set forth in Section 1. Any indemnification of an employee
or agent of the Corporation under Section 1 (unless ordered by a court) may be
made by the Corporation upon a determination that indemnification of the
employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 1. Any such determination
shall be made (a) by the Board of Directors by a majority vote of a quorum
consisting of Directors who were not parties to such action, suit or proceeding,
or (b) if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested Directors so directs, by independent legal counsel in a written
opinion, or (c) by the stockholders.
Section 4. ADVANCE PAYMENT OF EXPENSES. Unless the Board of Directors
otherwise determines in a specific case, expenses incurred by a Director or
officer in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the Director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article VII.
Such expenses incurred by other employees and agents may be so paid upon such
terms and conditions, if any, as the Board of Directors deems appropriate. The
Board of Directors may authorize the Corporation's legal counsel to represent
such Director, officer, employee or agent in any action, suit or proceeding,
whether or not the corporation is a party to such action, suit or proceeding.
Section 5. SURVIVAL; PRESERVATION OF OTHER RIGHTS. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each Director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware General Corporation Law are in effect and any repeal
or modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any action,
suit, or proceeding previously or thereafter brought or threatened based in
whole or in part upon any such state of facts. Such a contract right may not be
modified retroactively without the consent of such Director, officer, employee
or agent.
The indemnification provided by this Article VII shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of stockholders or disinterested Directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such a person. The
corporation may enter into an agreement with any of its Directors, officers,
employees or agents providing for indemnification and advancement of expenses,
including attorneys' fees, that my change, enhance, qualify or limit any right
to indemnification or advancement of expenses created by this Article VII.
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Section 6. SEVERABILITY. If this Article VII or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify each Director or officer and may
indemnify each employee or agent of the Corporation as to costs, charges and
expenses (including attorneys' fees), judgment, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, including an action by or in the
right of the Corporation, to the fullest extent permitted by any applicable
portion of this Article VII that shall not have been invalidated and to the
fullest extent permitted by applicable law.
Section 7. SUBROGATION. In the event of payment of indemnification to a
person described in Section 1 of this Article VII, the Corporation shall be
subrogated to the extent of such payment to any right of recovery such person
may have and such person, as a condition of receiving indemnification from the
Corporation, shall execute all documents and do all things that the Corporation
may deem necessary or desirable to perfect such right of recovery, including the
execution of such documents necessary to enable the Corporation effectively to
enforce any such recovery.
Section 8. NO DUPLICATION OF PAYMENTS. The Corporation shall not be
liable under this Article VII to make any payment in connection with any claim
made against a person described in Section 1 of this Article VII to the extent
such person has otherwise received payment (under any insurance policy, bylaw or
otherwise) of the amounts otherwise indemnifiable hereunder.
ARTICLE VIII
AFFILIATED TRANSACTIONS AND INTERESTED DIRECTORS
Section 1. AFFILIATED TRANSACTIONS. No contract or transaction between
the Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction or solely because his or their votes are
counted for such purpose, if:
(a) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative vote of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or
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(b) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(c) The contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified by the Board of Directors,
a committee thereof, or the stockholders.
Section 2. DETERMINING QUORUM. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee thereof which authorizes the contract or
transaction.
ARTICLE IX
STOCK CERTIFICATES
Section 1. FORM; SIGNATURES.
(a) Every holder of stock in the Corporation shall be entitled
to have a certificate, signed by the Chairman of the Board or the President and
the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation, exhibiting the number and class (and series, if
any) of shares owned by him. Such signatures may be facsimile. A certificate may
be manually signed by a transfer agent or registrar other than the Corporation
or its employee but may be a facsimile. In case any officer who has signed, or
whose facsimile signature was placed on, a certificate shall have ceased to be
such officer before such certificate is issued, it may nevertheless be issued by
the Corporation with the same effect as if he were such officer at the date of
its issue.
(b) All stock certificates representing shares of capital
stock which are subject to restrictions on transfer or to other restrictions may
have imprinted thereon such notation to such effect as may be determined by the
Board of Directors.
Section 2. REGISTRATION OF TRANSFER. Upon surrender to the Corporation
or any transfer agent of the Corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation or its transfer
agent to issue a new certificate to the person entitled thereto, to cancel the
old certificate and to record the transaction upon its books.
Section 3. REGISTERED STOCKHOLDERS.
(a) Except as otherwise provided by law, the Corporation shall
be entitled to recognize the exclusive right of a person who is registered on
its books as the owner of shares of its capital stock to receive dividends or
other distributions, to vote as such owner, and to hold liable for calls and
assessments any person who is registered on its books as the owner of shares of
its capital
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stock. The Corporation shall not be bound to recognize any equitable or legal
claim to or interest in such shares on the part of any other person.
(b) If a stockholder desires that notices and/or dividends
shall be sent to a name or address other than the name or address appearing on
the stock ledger maintained by the Corporation (or by the transfer agent or
registrar, if any), such stockholder shall have the duty to notify the
Corporation (or the transfer agent or registrar, if any) in writing, of such
desire. Such written notice shall specify the alternate name or address to be
used.
Section 4. RECORD DATE. In order that the Corporation may determine the
stockholders of record who are entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution, or to make a determination of the
stockholders of record for any other proper purpose, the Board of Directors may,
in advance, fix a date as the record date for any such determination. Such date
shall not be more than 60 nor less than 10 days before the date of such meeting,
nor more than 60 days prior to the date of any other action. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting taken pursuant to
Section 8 of Article II; provided, however, that the Board of Directors may fix
a new record date for the adjourned meeting.
Section 5. LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of
Directors may direct a new certificate to be issued in place of any certificate
theretofore issued by the Corporation which is claimed to have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate, or his legal
representative, to advertise the same in such manner as it shall require and/or
to give the Corporation a bond in such sum, or other security in such form, as
it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate claimed to have been lost, stolen or
destroyed.
ARTICLE X
GENERAL PROVISIONS
Section 1. DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation, dividends upon the outstanding capital stock of the Corporation
may be declared by the Board of Directors at any regular or special meeting,
pursuant to law, and may be paid in cash, in property or in shares of the
Corporation's capital stock.
Section 2. RESERVES. The Board of Directors shall have full power,
subject to the provisions of law and the Certificate of Incorporation, to
determine whether any, and, if so, what part,
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of the funds legally available for the payment of dividends shall be declared as
dividends and paid to the stockholders of the Corporation. The Board of
Directors, in its sole discretion, may fix a sum which may be set aside or
reserved over and above the paid-in capital of the Corporation for working
capital or as a reserve for any proper purpose, and may, from time to time,
increase, diminish or vary such fund or funds.
Section 3. FISCAL YEAR. The fiscal year of the Corporation shall be as
determined from time to time by the Board of Directors.
Section 4. SEAL. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its incorporation and the words "Corporate
Seal" and "Delaware".
ARTICLE XI
AMENDMENTS
The Board of Directors shall have the power to make, alter and repeal
these Bylaws, and to adopt new bylaws, by an affirmative vote of a majority of
the whole Board, provided that notice of the proposal to make, alter or repeal
these Bylaws, or to adopt new bylaws, must be included in the notice of the
meeting of the Board of Directors at which such action takes place.
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Exhibit 10.01
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into
effective as of February 4, 1998, by and between UniCapital Corporation, a
Delaware corporation (the "Company"), and Theodore J. Rogenski (the
"Consultant").
WHEREAS, the Company desires that the Consultant provide certain
consulting services to the Company consistent with the duties and
responsibilities that would be assigned to a Chief Operating Officer, on the
terms and conditions contained in this Agreement, and the Consultant wishes to
provide such consulting services on the terms and conditions contained in this
Agreement; and
WHEREAS, the Company and the Consultant have agreed that, upon the
terms and conditions contained in this Agreement, the Consultant will not
compete with the Company during the term of this Agreement and for a period of
two years after the end of the Consulting Term (as defined below);
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Company and the Consultant, each intending to be
legally bound hereby, agree as follows:
1. RETENTION OF CONSULTANT. Subject to the terms and conditions of this
Agreement, the Company hereby retains the Consultant to perform consulting
services in accordance with Section 4 hereof, and the Consultant hereby agrees
to render such services.
2. TERM. Unless otherwise terminated in accordance with Section 14
hereof, the Consultant shall perform the duties and services specified herein
for a period commencing on the date hereof (the "Effective Date") and ending on
the earlier of (i) April 1, 2000 or (ii) the commencement date of Consultant's
employment with the Company pursuant to an employment agreement substantially in
the form attached hereto as Exhibit A (the "Employment Agreement"). The period
during which the Consultant is obligated to perform such duties and services, as
the same may be reduced by termination pursuant to Section 14 hereof, is
referred to herein as the "Consulting Term."
3. EMPLOYMENT AGREEMENT. It is understood by the Consultant that the
Company is preparing to undertake an initial public offering of its common stock
(the "IPO"). If the IPO is consummated, then effective upon such consummation
the Company and Consultant shall enter into the Employment Agreement and this
Consulting Agreement shall immediately thereupon terminate in accordance with
Section 2 hereof.
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4. CONSULTING SERVICES. During the Consulting Term, the Consultant
shall perform such consulting services consistent with the duties and
responsibilities that would be assigned to a Chief Operating Officer with
respect to the business and operations of the Company, and such other services
as may be requested of him from time to time by the Chief Executive Officer of
the Company. All of the consulting services rendered by the Consultant to the
Company in accordance with the terms of this Agreement are referred to herein as
"Services."
5. COMPENSATION. (a) As consideration for the Consultant's provision of
Services hereunder, the Company shall pay the Consultant a fee (the "Fee") of
$39,583.33 each month. The Fee shall be paid in installments consistent with the
Company's normal payroll schedule, commencing on either the first or fifteenth
day of the month, as the case may be, following the date of commencement of the
Consulting Term.
(b) The Company agrees to reimburse the Consultant for all
reasonable business expenses (including, without limitation, reasonable travel
and entertainment expenses) incurred by the Consultant in rendering Services
hereunder, subject to the Company's reimbursement policies in effect from time
to time. The Consultant agrees to maintain reasonable records of his business
expenses in such form and detail as the Company may request and to make such
records available to the Company as and when requested.
6. AGREEMENT NOT TO COMPETE.
6.1 As used in this Agreement, "Competing Business" shall mean
any business or enterprise which is engaged in (a) the equipment leasing
business; or (b) any business, business segment or product line engaged in by
the Company on the date of termination of the Consulting Term (clauses (a) and
(b) collectively referred to herein as the "Company's Business").
6.2 The Consultant agrees that, during the Consulting Term and
for two years thereafter (but subject to the proviso contained in this Section
6.2 below), he will not, without the prior written consent of the Company,
either directly or indirectly, on his own behalf or in the service of or on
behalf of others as a shareholder, director, officer, trustee, consultant,
independent contractor or employee, engage in, or be employed by, or provide
services to, any Competing Business within the State of Florida or in any other
state in which the Company or any subsidiary or affiliate thereof is engaged in
business or in which of any of their respective products or services are
marketed or sold at the time of such termination. Notwithstanding the foregoing,
if an Employment Agreement is entered into, then the duration of the restriction
contained in this Section 6.2 following the end of the Consulting Term shall be
solely in accordance with the terms of Section 6.2 of such Employment Agreement.
7. AGREEMENT NOT TO SOLICIT OR SELL TO CUSTOMERS. The Consultant agrees
that, during the Consulting Term and for two years thereafter (but subject to
the proviso contained in this Section 7 below), he will not without the prior
written consent of the Company, either directly or indirectly, call on, solicit,
take away, accept as a client, customer or prospective client, customer or
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<PAGE> 3
attempt to call on, solicit, take away or accept as a client, customer,
prospective client or customer, any person that was a client, customer or
prospective client or customer of the Company or any of its subsidiaries or
affiliates. Notwithstanding the foregoing, if an Employment Agreement is entered
into, then the duration of the restriction contained in this Section 7 following
the end of the Consulting Term shall be solely in accordance with the terms of
Section 7 of such Employment Agreement.
8. AGREEMENT NOT TO SOLICIT OR HIRE EMPLOYEES. The Consultant agrees
that, during the Consulting Term and for two years thereafter (but subject to
the proviso contained in this Section 8 below), he will not, either directly or
indirectly, on his own behalf or in the service or on behalf of others, solicit,
divert or hire, attempt to solicit, divert or hire or induce or attempt to
induce to discontinue employment with the Company or any subsidiary or affiliate
thereof, any person employed by the Company or any subsidiary or affiliate
thereof, whether or not such employee is a full time employee or a temporary
employee of the Company or any subsidiary or affiliate thereof and whether or
not such employment is for a determined period or is at will. Notwithstanding
the foregoing, if an Employment Agreement is entered into, then the duration of
the restriction contained in this Section 8 following the end of the Consulting
Term shall be solely in accordance with the terms of Section 8 of such
Employment Agreement.
9. OWNERSHIP AND NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION
9.1 As used in this Agreement, "Confidential Information"
shall mean all customer sales and marketing information, customer account
records, proprietary receipts and/or processing techniques, information
regarding vendors and products, training and operations memoranda and similar
information, personnel records, pricing information, financial information and
trade secrets concerning or relating to the business, accounts, customers,
employees and affairs of the Company, or any subsidiary or affiliate thereof,
obtained by or furnished, disclosed or disseminated to the Consultant, or
obtained, assembled or compiled by the Consultant or under his supervision
during the course of his rendering Services to the Company, and all physical
embodiments of the foregoing, all of which are hereby agreed to be the property
of and confidential to the Company, but Confidential Information shall not
include any of the foregoing to the extent the same is or becomes publicly known
through no fault or breach of this Agreement by the Consultant.
9.2 The Consultant acknowledges and agrees that all
Confidential Information, and all physical embodiments thereof, are confidential
to and shall be and remain the sole and exclusive property of the Company. Upon
request by the Company, and in any event upon the end of the Consulting Term, as
a prior condition to the Consultant's receipt of any final Fee payments
hereunder, the Consultant shall deliver to the Company all property belonging to
the Company or any of its subsidiaries or affiliates, including, without
limitation, all Confidential Information (and all embodiments thereof), then in
his custody, control or possession, but any forfeiture of such payments shall
not be considered a satisfaction or a release of or liquidated damages for any
claim(s)
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for damages against the Consultant which may accrue to the Company, as a result
of any breach of this Section 9 by the Consultant.
9.3 The Consultant agrees that he will not, either during the
Consulting Term or at any time thereafter, without the prior written consent of
the Company, use, disclose or make available any Confidential Information to any
person or entity, nor shall he use, disclose, make available or cause to be
used, disclosed or made available, or permit or allow, either on his own behalf
or on behalf of others, any use or disclosure of such Confidential Information
other than in the proper performance of the Consultant's duties hereunder.
10. INVENTIONS. The Consultant shall disclose promptly to the Company
any and all conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, that are conceived or made by the
Consultant, solely or jointly with another, during the Consulting Term and that
are directly related to the business or activities of the Company and that the
Consultant conceives as a result of his rendering Services to the Company,
regardless of whether or not such ideas, inventions, or improvements qualify as
"works for hire." The Consultant hereby assigns and agrees to assign all his
interests therein to the Company or its nominee. Whenever requested to do so by
the Company, the Consultant shall execute any and all applications, assignments
or other instruments that the Company shall deem necessary to apply for and
obtain Letters Patent of the United States or any foreign country or to
otherwise protect the Company's interest therein.
11. REASONABLENESS OF RESTRICTIONS. In the event that any provision
relating to time period or geographic area of any restriction set forth in
Sections 6, 7, 8, 9 or 10 shall be declared by a court of competent jurisdiction
to exceed the maximum time period or area of restriction that the court deems
reasonable and enforceable, the time period or area of restriction which the
court finds to be reasonable and enforceable shall be deemed to become, and
thereafter shall be, the maximum time period or geographic area of such
restriction.
12. ENFORCEABILITY. Any provision of Sections 6, 7, 8, 9 or 10 which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, but shall be enforced to the
maximum extent permitted by law, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
13. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Consultant of any of the covenants contained in
Sections 6, 7, 8, 9 or 10 of this Agreement will cause irreparable harm and
damage to the Company, the monetary amount of which may be virtually impossible
to ascertain. As a result, the Consultant recognizes and hereby acknowledges
that the Company shall be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all of the
covenants contained in Sections 6, 7, 8, 9 or 10 of this Agreement by the
Consultant or any of his affiliates, associates,
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partners or agents, either directly or indirectly, and that such right to
injunction shall be cumulative and in addition to whatever other remedies the
Company may possess.
14. TERMINATION; COMPENSATION. Either party shall have the right to
terminate the Consulting Term at any time. If the Consulting Term is terminated
by the Company pursuant to this Section 14 prior to the time at which it would
otherwise have expired under Section 2 hereof, then the Company shall continue
to pay the Consultant the Fee for the remaining portion of the Consulting Term.
15. PRIOR AGREEMENTS. The Consultant represents to the Company that:
(a) other than those set forth in this Agreement, there are no agreements,
arrangements or understandings, written or oral, with the Company with respect
to his retention as a consultant, his employment, payment of compensation or
entitlement to benefits for himself, or his heirs or beneficiaries of any kind;
(b) there are no restrictions, agreements or understandings whatsoever to which
the Consultant is a party or by which he is bound which would prevent or make
unlawful his execution of this Agreement or his retention as a consultant
hereunder; (c) his execution of this Agreement and his retention as a consultant
hereunder do not constitute a breach of any contract, agreement or
understanding, oral or written, to which he is a party or by which he is bound;
and (d) he is free and able to execute this Agreement and to enter into the
consulting arrangement hereunder on the terms and subject to the conditions
hereof.
16. GENERAL PROVISIONS.
16.1 Indulgences, Etc. Any failure or delay on the part of any
party to exercise any right, remedy, power or privilege under this Agreement
will not operate as a waiver thereof, nor will any single or partial exercise of
any right, remedy, power or privilege preclude any other or further exercise of
the same or of any other right, remedy, power or privilege, nor will any waiver
of any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of that right, remedy, power or privilege with respect to
any other occurrence.
16.2 Notices. All notices, requests, demands and other
communications required or permitted under this Agreement must be in writing and
will be deemed to have been duly given, made and received only when delivered
(personally, by facsimile transmission or by courier service such as Federal
Express, or by other messenger) or when deposited in the United States mails,
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:
(i) If to the Consultant:
Theodore J. Rogenski
--------------------
--------------------
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(ii) If to the Company:
UniCapital Corporation
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Attention: Robert J. New
with a copy given in the manner prescribed
above to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
Pittsburgh, PA 15219
Attention: David A. Gerson
Any party may alter the address to which communications or copies are to be sent
by giving notice of any change of address to the other party in conformity with
the provisions of this paragraph for the giving of notice.
16.3 Binding Nature of Agreement; Assignment. This Agreement
shall be binding upon and inure to the benefit of the Company and its successors
and assigns and shall be binding upon the Consultant, his heirs and legal
representatives. The Company may assign this Agreement at any time to any
affiliate, provided that such assignee assumes all of the obligations of the
Company hereunder; the Consultant may not assign this Agreement.
16.4 Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which will be deemed to be an original
and all of which will together constitute one and the same instrument.
16.5 Provisions Separable. The provisions of this Agreement
are independent of and separable from each other, and no provision will be
affected or rendered invalid or unenforceable by virtue of the fact that for any
reason any other or others of them may be invalid or unenforceable in whole or
in part.
16.6 Entire Agreement. This Agreement (including the Exhibit
attached hereto) contains the entire understanding between the parties hereto
with respect to the subject matter of this Agreement, and supersedes all prior
and contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written, with respect to the subject matter of this
Agreement. The express terms of this Agreement control and supersede any course
of performance and/or usage of the trade inconsistent with any of the terms
hereof. This Agreement may not be modified or amended other than by an agreement
in writing.
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16.7 Remedies. The rights conferred upon the Company pursuant
to Section 13 hereof shall not be exclusive of, but shall be in addition to, any
other rights or remedies which the Company may have at law, in equity or
otherwise.
16.8 Section Headings. The section headings in this Agreement
are for convenience only; they form no part of this Agreement and will not
affect its interpretation.
16.9 Governing Law. This Agreement, the rights and obligations
of the parties hereto, and any claims or disputes relating thereto, shall be
governed by and construed in accordance with the laws of the State of Florida,
excluding the choice of law rules thereof. The Company and the Consultant each
hereby irrevocably submit to the jurisdiction of the state or federal courts
located in Dade County, Florida in connection with any suit, action or other
proceeding arising out of or relating to this Agreement and hereby agree not to
assert, by way of motion, as a defense, or otherwise in any such suit, action or
proceeding that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced by such courts.
16.10 Survival. The provisions of Sections 6, 7, 9, 10, 11,
12, 13 and 16 hereof shall survive the termination of this Agreement to the
extent necessary to effectuate the respective purposes of such provisions.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
UNICAPITAL CORPORATION
By: /s/ Robert J. New
-----------------
Name: Robert J. New
Title: Chairman and Chief Executive Officer
CONSULTANT
/s/ Theodore J. Rogenski
------------------------
Theodore J. Rogenski
Exhibit A: Form of Employment Agreement
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EXHIBIT A
FORM OF EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the ____ day of ____________, 1998 by and between UNICAPITAL CORPORATION, a
Delaware corporation (the "Company"), and THEODORE J. ROGENSKI (the "Employee").
R E C I T A L S
---------------
The Company desires to obtain the services of the Employee in the
employment of the Company on the terms and subject to the conditions set forth
in this Agreement, and the Employee desires to make his services available to
the Company on the terms and subject to the conditions set forth in this
Agreement.
A G R E E M E N T
-----------------
NOW, THEREFORE, in consideration of the premises, agreements and mutual
covenants set forth herein, the parties hereto, intending to be bound legally,
hereby agree as follows:
1. DEFINITIONS. The following terms when used herein, unless the
context otherwise requires, shall be defined as follows:
1.1 "Cause" shall have the meaning set forth in Section 5.1
hereof.
1.2 "Company" shall mean UniCapital Corporation, a Delaware
corporation.
1.3 "Competing Business" shall have the meaning set forth in
Section 6.1 hereof.
1.4 "Confidential Information" shall have the meaning set
forth in Section 9.1 hereof.
1.5 "Term" shall have the meaning set forth in Section 3
hereof.
2. EMPLOYMENT
2.1 General. The Company hereby agrees to employ the Employee
as Chief Operating Officer during the Term of this Agreement on the terms and
subject to the conditions contained in this Agreement, and the Employee hereby
agrees to accept such employment on the terms and subject to the conditions
contained in this Agreement.
2.2 Duties of Employee. During the Term of this Agreement, the
Employee shall diligently perform all duties and responsibilities as may be
assigned to him by the Company's Board
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of Directors and shall exercise such power and authority as may from time to
time be delegated to him thereby. The Employee shall devote his full business
time and attention to the business and affairs of the Company as necessary to
perform his duties and responsibilities hereunder, render such services to the
best of his ability, and use his best efforts to promote the interests of the
Company.
3. TERM. Subject to the provisions of Section 5 of this Agreement, the
Company shall employ the Employee for a term commencing on the date first
written above (the "Effective Date"), which shall be the date of consummation of
the initial public offering by the Company of its common stock (the "IPO")
pursuant to a registration statement on Form S-1 filed by the Company with the
Securities and Exchange Commission (the "SEC") relating to such IPO (the
"Registration Statement") and declared effective by the SEC and expiring on
April 1, 2000.
4. COMPENSATION.
4.1 Salary. The Employee shall receive an annual salary of
Four-Hundred- Seventy-Five Thousand Dollars ($475,000.00) during the Term of
this Agreement, and such salary shall be payable in installments consistent with
the Company's normal payroll schedule commencing on either the first or
fifteenth day of the month, as the case may be, following the Effective Date.
4.2 Benefits. During the Term of this Agreement, the Employee
shall be entitled to participate in all plans adopted for the general benefit of
the Company's employees, such as stock option plans, 401(k) plans, pension
plans, profit sharing plans, medical plans, group or other insurance plans and
benefits, to the extent that the Employee is and remains eligible to participate
therein and subject to the eligibility provisions of such plans in effect from
time to time. For each calendar year during the Term of this Agreement, the
Employee shall be entitled to not less than four weeks of paid vacation,
prorated for any period of employment of less than an entire year.
4.3 Withholding. Notwithstanding any provision in this
Agreement to the contrary, all payments required to be made by the Company
hereunder to the Employee in connection with the Employee's employment hereunder
shall be subject to withholding of such amounts relating to taxes as the Company
may reasonably determine it should withhold pursuant to any applicable law or
regulation. In lieu of withholding such amounts, in whole or in part, the
Company may, in its sole discretion, accept other provisions for the payment of
taxes, provided that the Company is satisfied that all requirements of law
affecting its responsibilities to withhold have been satisfied.
4.4 Reimbursement of Expenses. The Company agrees to reimburse
the Employee for all reasonable business expenses (including, without
limitation, reasonable travel and entertainment expenses) incurred by the
Employee in the discharge of his duties hereunder, subject to the Company's
reimbursement policies in effect from time to time. The Employee agrees to
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maintain reasonable records of his business expenses in such form and detail as
the Company may request and to make such records available to the Company as and
when requested.
5. TERMINATION
5.1 Termination for Cause. Notwithstanding any provision in
this Agreement to the contrary, this Agreement may be terminated by the Company
for "Cause" at any time during the Term hereof, and such termination shall be
effective immediately upon written notice to the Employee. For purposes of this
Agreement, "Cause" for the termination of the Employee's employment hereunder
shall be deemed to exist if, in the reasonable judgment of the Company's Board
of Directors: (a) the Employee commits fraud, theft or embezzlement against the
Company; (b) the Employee commits a felony or a crime involving moral turpitude;
(c) the Employee compromises trade secrets or other proprietary information of
the Company; (d) the Employee breaches any non-competition or non-solicitation
agreement with the Company or any subsidiary or affiliate thereof; (e) the
Employee breaches any of the terms of this Agreement (other than those
referenced in clauses (c) and (d) of this Section 5.1) and fails to cure such
breach within 10 days after the receipt of written notice of such breach from
the Company; or (f) the Employee engages in gross negligence or willful
misconduct that causes harm to the business and operations of the Company or a
subsidiary or affiliate thereof. Upon any termination pursuant to this Section
5.1, the Employee shall be entitled to be paid solely the Employee's salary then
in effect through the effective date of termination, and the Company shall have
no further liability or other obligation of any kind whatsoever to the Employee.
5.2 Termination by the Company Without Cause. The Company may,
in its sole and absolute discretion, terminate the employment of the Employee
hereunder, at any time prior to the expiration of the term of this Agreement,
without "Cause" (as such term is defined in Section 5.1 above), or otherwise
without any cause, reason or justification, provided that the Company provides
to the Employee at least sixty (60) days' prior written notice (the "Termination
Notice") of such termination. In the event of any such termination by the
Company, (a) the Employee's employment with the Company shall cease and
terminate on the date specified in the Termination Notice (or, if no date is so
specified, on the date which is 60 days following the date of such notice), and
(b) the Employee shall be entitled to receive and be paid solely the Employee's
salary then in effect for the shorter of (x) the eight-month period following
the Employee's termination or (y) the remaining Term of this Agreement, payable
over such period at the Company's regular and customary intervals for the
payment of salaries as then in effect, and the Company shall have no further
liability or other obligation of any kind whatsoever to the Employee.
5.3 Death of the Employee. In the event that the Employee
shall die during the Term of this Agreement, the Employee's employment with the
Company shall immediately cease and terminate and the Employee's estate, heirs
(at law), devisees, legatees or other proper and legally entitled descendants,
or the personal representative, executor, administrator or other proper legal
representative on behalf of such descendants, shall be entitled to receive and
be paid solely the
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Employee's salary through the date of death, and the Company shall have no
further liability or other obligation of any kind whatsoever to the Employee.
5.4 Disability of the Employee. In the event that the Employee
becomes incapacitated during the Term by reason of sickness, accident or other
mental or physical disability such that he is substantially unable to perform
his duties and responsibilities hereunder for a period of 60 consecutive days,
or for shorter or intermittent periods aggregating 90 days during any 12-month
period (a "Disability"), the Company thereafter shall have the right, in its
sole and absolute discretion, to terminate the Employee's employment under this
Agreement by sending written notice of such termination to the Employee or its
legal guardian or other proper legal representative and thereupon his employment
hereunder shall immediately cease and terminate. In the event of any such
termination, the Employee shall be entitled to receive and be paid solely the
Employee's salary then in effect through the effective date of termination and
the Company shall have no further liability or other obligation of any kind
whatsoever to the Employee.
5.5 Termination by the Employee. Provided that the Company
does not have "Cause" to terminate the Employee pursuant to Section 5.1 above,
the Employee may terminate the Employee's employment with the Company hereunder
at any time and for any reason. Employee must provide to the Company written
notice of such termination not less than 365 days prior to the date such
termination is to be effective. Upon any termination pursuant to this Section
5.5, the Employee shall be entitled to be paid solely the Employee's salary then
in effect through the effective date of termination, and the Company shall have
no further liability or other obligation of any kind whatsoever to the Employee.
6. AGREEMENT NOT TO COMPETE
6.1 As used in this Agreement, "Competing Business" shall mean
any business or enterprise which is engaged in (a) the equipment leasing
business; or (b) any business, business segment or product line engaged in by
the Company on the date of termination of the Employee's employment with the
Company (clauses (a) and (b) collectively referred to herein as the "Company's
Business").
6.2 The Employee agrees that, during the Term of this
Agreement and for two years following the termination or expiration of his
employment for any reason whatsoever, he will not, without the prior written
consent of the Company, either directly or indirectly, on his own behalf or in
the service of or on behalf of others as a shareholder, director, officer,
trustee, consultant, independent contractor or employee, engage in, or be
employed by, or provide services to, any Competing Business within the State of
Florida or in any other state in which the Company or any subsidiary or
affiliate thereof is engaged in business or in which of any of their respective
products or services are marketed or sold at the time of such termination.
7. AGREEMENT NOT TO SOLICIT OR SELL TO CUSTOMERS. The Employee agrees
that, during the Term of this Agreement and for two years following the
termination or expiration of his
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employment for any reason whatsoever, he will not without the prior written
consent of the Company, either directly or indirectly, call on, solicit, take
away, accept as a client, customer or prospective client, customer or attempt to
call on, solicit, take away or accept as a client, customer prospective client
or customer, any person that was a client, customer or prospective client or
customer of the Company or any of its subsidiaries or affiliates.
8. AGREEMENT NOT TO SOLICIT OR HIRE EMPLOYEES. The Employee agrees that
during the Term of this Agreement and for two years following the termination or
expiration of his employment for any reason whatsoever, he will not, either
directly or indirectly, on his own behalf or in the service or on behalf of
others, solicit, divert or hire, attempt to solicit, divert or hire or induce or
attempt to induce to discontinue employment with the Company or any subsidiary
or affiliate thereof, any person employed by the Company or any subsidiary or
affiliate thereof, whether or not such employee is a full time employee or a
temporary employee of the Company or any subsidiary or affiliate thereof and
whether or not such employment is for a determined period or is at will.
9. OWNERSHIP AND NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION
9.1 As used in this Agreement, "Confidential Information"
shall mean all customer sales and marketing information, customer account
records, proprietary receipts and/or processing techniques, information
regarding vendors and products, training and operations memoranda and similar
information, personnel records, pricing information, financial information and
trade secrets concerning or relating to the business, accounts, customers,
employees and affairs of the Company, or any subsidiary or affiliate thereof,
obtained by or furnished, disclosed or disseminated to the Employee, or
obtained, assembled or compiled by the Employee or under his supervision during
the course of his employment by the Company, and all physical embodiments of the
foregoing, all of which are hereby agreed to be the property of and confidential
to the Company, but Confidential Information shall not include any of the
foregoing to the extent the same is or becomes publicly known through no fault
or breach of this Agreement by the Employee.
9.2 The Employee acknowledges and agrees that all Confidential
Information, and all physical embodiments thereof, are confidential to and shall
be and remain the sole and exclusive property of the Company. Upon request by
the Company, and in any event upon termination of the Employee's employment with
the Company for any reason whatsoever, as a prior condition to the Employee's
receipt of any final salary or benefit payments hereunder, the Employee shall
deliver to the Company all property belonging to the Company or any of its
subsidiaries or affiliates, including, without limitation, all Confidential
Information (and all embodiments thereof), then in his custody, control or
possession, but any forfeiture of such salary or benefit shall not be considered
a satisfaction or a release of or liquidated damages for any claim(s) for
damages against the Employee which may accrue to the Company, as a result of any
breach of this Section 9 by the Employee.
9.3 The Employee agrees that he will not, either during the
Term of this Agreement or at any time thereafter, without the prior written
consent of the Company, use, disclose or make available any Confidential
Information to any person or entity, nor shall he use, disclose,
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make available or cause to be used, disclosed or made available, or permit or
allow, either on his own behalf or on behalf of others, any use or disclosure of
such Confidential Information other than in the proper performance of the
Employee's duties hereunder.
10. INVENTIONS. The Employee shall disclose promptly to the Company any
and all conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, that are conceived or made by the
Employee, solely or jointly with another, during the Term of this Agreement and
that are directly related to the business or activities of the Company and that
the Employee conceives as a result of his employment by the Company, regardless
of whether or not such ideas, inventions, or improvements qualify as "works for
hire." The 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, the Employee shall execute any and all applications, assignments or
other instruments that the Company shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect the Company's interest therein.
11. REASONABLENESS OF RESTRICTIONS. In the event that any provision
relating to time period or geographic area of any restriction set forth in
Sections 6, 7, 8, 9 or 10 shall be declared by a court of competent jurisdiction
to exceed the maximum time period or area of restriction that the court deems
reasonable and enforceable, the time period or area of restriction which the
court finds to be reasonable and enforceable shall be deemed to become, and
thereafter shall be, the maximum time period or geographic area of such
restriction.
12. ENFORCEABILITY. Any provision of Sections 6, 7, 8, 9 or 10 which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, but shall be enforced to the
maximum extent permitted by law, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
13. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Employee of any of the covenants contained in
Sections 6, 7, 8, 9 or 10 of this Agreement will cause irreparable harm and
damage to the Company, the monetary amount of which may be virtually impossible
to ascertain. As a result, the Employee recognizes and hereby acknowledges that
the Company shall be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all of the
covenants contained in Sections 6, 7, 8, 9 or 10 of this Agreement by the
Employee or any of his affiliates, associates, partners or agents, either
directly or indirectly, and that such right to injunction shall be cumulative
and in addition to whatever other remedies the Company may possess.
14. ASSIGNMENT. The Employee shall not delegate his employment
obligations pursuant to this Agreement to any other person.
15. EMPLOYER'S AUTHORITY. The relationship between the parties hereto
is that of employer and employee. The Employee agrees to observe and comply with
the rules and regulations
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of the Company, as adopted by the Company from time to time with respect to the
performance of the duties of the Employee. The Employee acknowledges that he has
no authority to enter into any contracts or other obligations that are binding
upon the Company unless such contracts or obligations are authorized by the
Board of Directors of the Company. The Company shall have the power to direct,
control and supervise the duties to be performed by the Employee, the manner of
performing said duties, and the time of performing said duties.
16. GOVERNING LAW. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of Florida, excluding
the choice of law rules thereof. The Company and the Employee each hereby
irrevocably submit to the jurisdiction of the state or federal courts located in
Dade County, Florida in connection with any suit, action or other proceeding
arising out of or relating to this Agreement and hereby agree not to assert, by
way of motion, as a defense, or otherwise in any such suit, action or proceeding
that the suit, action or proceeding is brought in an inconvenient forum, that
the venue of the suit, action or proceeding is improper or that this Agreement
or the subject matter hereof may not be enforced by such courts.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, understandings and arrangements, both oral and
written, between the parties hereto with respect to such subject matter. This
Agreement may not be modified in any way, unless by a written instrument signed
by both the Company and the Employee.
18. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or three (3) days after sent by registered or certified United
States mail, return receipt requested, postage prepaid, or the next business day
following dispatch by a reputable overnight courier service, addressed as
follows:
(i) If to the Employee:
Theodore J. Rogenski
--------------------
--------------------
(ii) If to the Company:
UniCapital Corporation
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Attention: Robert J. New
A-7
<PAGE> 16
with a copy given in the manner prescribed
above to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
Pittsburgh, PA 15219
Attention: David A. Gerson
or to such other addresses as either party hereto may from time to time give
notice of to the other party hereto in the aforesaid manner.
19. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns.
20. SEVERABILITY. Except as otherwise provided in Sections 11 and 12,
the invalidity of any one or more of the words, phrases, sentences, clauses,
sections or subsections contained in this Agreement shall not affect the
enforceability of the remaining portions of this Agreement or any part thereof,
all of which are inserted conditionally on their being valid in law, and, in the
event that any one or more of the words, phrases, sentences, clauses, sections
or subsections contained in this Agreement or any part thereof shall be declared
invalid, this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, section or sections
or subsection or subsections had not been inserted. If such invalidity is caused
by length of time or size of area, or both, the otherwise invalid provision will
be considered to be reduced to a period or area which would cure such
invalidity.
21. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Employee from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings
suit for the collection of any damages resulting from, or the injunction of any
action constituting, a breach of any of the terms or provisions of this
Agreement, then the non-prevailing party shall pay all reasonable court costs
and attorneys' fees of the other party.
22. SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
23. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the parties hereto and their respective heirs, personal
representative, legal representative, successors and assigns, any rights or
remedies under or by reason of this Agreement.
24. AMENDMENT; MODIFICATION; WAIVER. No amendment, modification or
waiver of the terms of this Agreement shall be valid unless made in writing and
duly executed by the Company
A-8
<PAGE> 17
and the Employee. No delay or failure at any time on the part of the Company in
exercising any right, power or privilege under this Agreement, or in enforcing
any provision of this Agreement, shall impair any such right, power or
privilege, or be construed as a waiver of any default or as any acquiescence
therein, or shall affect the right of the Company thereafter to enforce each and
every provision of this Agreement in accordance with its terms. The waiver by
either party hereto of a breach or violation of any term or provision of this
Agreement shall neither operate nor be construed as a waiver of any subsequent
breach or violation.
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A-9
<PAGE> 18
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
UNICAPITAL CORPORATION
By: /s/ ROBERT J. NEW
---------------------------------------------
Name: Robert J. New
Title: President
EMPLOYEE
/s/ THEODORE J. ROGENSKI
---------------------------------------------
Theodore J. Rogenski
A-10
<PAGE> 1
Exhibit 10.02
FORM OF EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
the ____ day of ____________, 1998 by and between U.S. LEASING, INC., a Delaware
corporation (the "Company"), and BRUCE E. KROPSCHOT (the "Employee").
R E C I T A L S
The Company desires to obtain the services of the Employee in the
employment of the Company on the terms and subject to the conditions set forth
in this Agreement, and the Employee desires to make his services available to
the Company on the terms and subject to the conditions set forth in this
Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises, agreements and mutual
covenants set forth herein, the parties hereto, intending to be bound legally,
hereby agree as follows:
1. DEFINITIONS. The following terms when used herein, unless the context
otherwise requires, shall be defined as follows:
1.1 "Cause" shall have the meaning set forth in Section 5.1 hereof.
1.2 "Company" shall mean U.S. Leasing, Inc., a Delaware corporation.
1.3 "Competing Business" shall have the meaning set forth in
Section 6.1 hereof.
1.4 "Confidential Information" shall have the meaning set forth in
Section 9.1 hereof.
1.5 "Term" shall have the meaning set forth in Section 3 hereof.
2. EMPLOYMENT
2.1 General. The Company hereby agrees to employ the Employee as Vice
Chairman -- Mergers & Acquisitions during the Term of this Agreement on the
terms and subject to the conditions contained in this Agreement, and the
Employee hereby agrees to accept such employment on the terms and subject to the
conditions contained in this Agreement.
2.2 Duties of Employee. During the Term of this Agreement, the Employee
shall diligently perform all duties and responsibilities as may be assigned to
him by the Company's Board
<PAGE> 2
of Directors and shall exercise such power and authority as may from time to
time be delegated to him thereby. The Employee shall devote his full business
time and attention to the business and affairs of the Company as necessary to
perform his duties and responsibilities hereunder, render such services to the
best of his ability, and use his best efforts to promote the interests of the
Company.
3. TERM. Subject to the provisions of Section 5 of this Agreement, the
Company shall employ the Employee for a term commencing on the date first
written above (the "Effective Date"), which shall be the date of consummation of
the initial public offering by the Company of its common stock (the "IPO")
pursuant to a registration statement on Form S-1 filed by the Company with the
Securities and Exchange Commission (the "SEC") relating to such IPO (the
"Registration Statement") and declared effective by the SEC and expiring on the
date which is the second (2nd) anniversary of the earlier of (i) April 1, 1998
or (ii) the date of initial filing of the Registration Statement with the SEC.
4. COMPENSATION.
4.1 Salary. The Employee shall receive an annual salary of
Four-Hundred-Fifty Thousand Dollars ($450,000.00) during the Term of this
Agreement, and such salary shall be payable in installments consistent with the
Company's normal payroll schedule commencing on either the first or fifteenth
day of the month, as the case may be, following the Effective Date.
4.2 Benefits. During the Term of this Agreement, the Employee shall be
entitled to participate in all plans adopted for the general benefit of the
Company's employees, such as stock option plans, 401(k) plans, pension plans,
profit sharing plans, medical plans, group or other insurance plans and
benefits, to the extent that the Employee is and remains eligible to participate
therein and subject to the eligibility provisions of such plans in effect from
time to time. For each calendar year during the Term of this Agreement, the
Employee shall be entitled to not less than four weeks of paid vacation,
prorated for any period of employment of less than an entire year.
4.3 Withholding. Notwithstanding any provision in this Agreement to the
contrary, all payments required to be made by the Company hereunder to the
Employee in connection with the Employee's employment hereunder shall be subject
to withholding of such amounts relating to taxes as the Company may reasonably
determine it should withhold pursuant to any applicable law or regulation. In
lieu of withholding such amounts, in whole or in part, the Company may, in its
sole discretion, accept other provisions for the payment of taxes, provided that
the Company is satisfied that all requirements of law affecting its
responsibilities to withhold have been satisfied.
4.4 Reimbursement of Expenses. The Company agrees to reimburse the Employee
for all reasonable business expenses (including, without limitation, reasonable
travel and entertainment expenses) incurred by the Employee in the discharge of
his duties hereunder, subject to the Company's reimbursement policies in effect
from time to time. The Employee agrees to maintain
2
<PAGE> 3
reasonable records of his business expenses in such form and detail as the
Company may request and to make such records available to the Company as and
when requested.
5. TERMINATION
5.1 Termination for Cause. Notwithstanding any provision in this Agreement
to the contrary, this Agreement may be terminated by the Company for "Cause" at
any time during the Term hereof, and such termination shall be effective
immediately upon written notice to the Employee. For purposes of this Agreement,
"Cause" for the termination of the Employee's employment hereunder shall be
deemed to exist if, in the reasonable judgment of the Company's Board of
Directors: (a) the Employee commits fraud, theft or embezzlement against the
Company; (b) the Employee commits a felony or a crime involving moral turpitude;
(c) the Employee compromises trade secrets or other proprietary information of
the Company; (d) the Employee breaches any non-competition or non-solicitation
agreement with the Company or any subsidiary or affiliate thereof; (e) the
Employee breaches any of the terms of this Agreement (other than those
referenced in clauses (c) and (d) of this Section 5.1) and fails to cure such
breach within 10 days after the receipt of written notice of such breach from
the Company; or (f) the Employee engages in gross negligence or willful
misconduct that causes harm to the business and operations of the Company or a
subsidiary or affiliate thereof. Upon any termination pursuant to this Section
5.1, the Employee shall be entitled to be paid solely the Employee's salary then
in effect through the effective date of termination, and the Company shall have
no further liability or other obligation of any kind whatsoever to the Employee.
5.2 Termination by the Company Without Cause. The Company may, in its sole
and absolute discretion, terminate the employment of the Employee hereunder, at
any time prior to the expiration of the term of this Agreement, without "Cause"
(as such term is defined in Section 5.1 above), or otherwise without any cause,
reason or justification, provided that the Company provides to the Employee at
least sixty (60) days' prior written notice (the "Termination Notice") of such
termination. In the event of any such termination by the Company, (a) the
Employee's employment with the Company shall cease and terminate on the date
specified in the Termination Notice (or, if no date is so specified, on the date
which is 60 days following the date of such notice), and (b) the Employee shall
be entitled to receive and be paid solely the Employee's salary then in effect
for the shorter of (x) the 12-month period following the Employee's termination
or (y) the remaining Term of this Agreement, payable over such period at the
Company's regular and customary intervals for the payment of salaries as then in
effect, and the Company shall have no further liability or other obligation of
any kind whatsoever to the Employee.
5.3 Death of the Employee. In the event that the Employee shall die during
the Term of this Agreement, the Employee's employment with the Company shall
immediately cease and terminate and the Employee's estate, heirs (at law),
devisees, legatees or other proper and legally entitled descendants, or the
personal representative, executor, administrator or other proper legal
representative on behalf of such descendants, shall be entitled to receive and
be paid solely the
3
<PAGE> 4
Employee's salary through the date of death, and the Company shall have no
further liability or other obligation of any kind whatsoever to the Employee.
5.4 Disability of the Employee. In the event that the Employee becomes
incapacitated during the Term by reason of sickness, accident or other mental or
physical disability such that he is substantially unable to perform his duties
and responsibilities hereunder for a period of 60 consecutive days, or for
shorter or intermittent periods aggregating 90 days during any 12-month period
(a "Disability"), the Company thereafter shall have the right, in its sole and
absolute discretion, to terminate the Employee's employment under this Agreement
by sending written notice of such termination to the Employee or its legal
guardian or other proper legal representative and thereupon his employment
hereunder shall immediately cease and terminate. In the event of any such
termination, the Employee shall be entitled to receive and be paid solely the
Employee's salary then in effect through the effective date of termination and
the Company shall have no further liability or other obligation of any kind
whatsoever to the Employee.
5.5 Termination by the Employee. Provided that the Company does not have
"Cause" to terminate the Employee pursuant to Section 5.1 above, the Employee
may terminate the Employee's employment with the Company hereunder at any time
and for any reason. Employee must provide to the Company written notice of such
termination not less than 365 days prior to the date such termination is to be
effective. Upon any termination pursuant to this Section 5.5, the Employee shall
be entitled to be paid solely the Employee's salary then in effect through the
effective date of termination, and the Company shall have no further liability
or other obligation of any kind whatsoever to the Employee.
6. AGREEMENT NOT TO COMPETE
6.1 As used in this Agreement, "Competing Business" shall mean any business
or enterprise which is engaged in (a) the equipment leasing business; or (b) any
business, business segment or product line engaged in by the Company on the date
of termination of the Employee's employment with the Company (clauses (a) and
(b) collectively referred to herein as the "Company's Business").
6.2 The Employee agrees that, during the Term of this Agreement and for two
years following the termination or expiration of his employment for any reason
whatsoever, he will not, without the prior written consent of the Company,
either directly or indirectly, on his own behalf or in the service of or on
behalf of others as a shareholder, director, officer, trustee, consultant,
independent contractor or employee, engage in, or be employed by, or provide
services to, any Competing Business within the State of Florida or in any other
state in which the Company or any subsidiary or affiliate thereof is engaged in
business or in which of any of their respective products or services are
marketed or sold at the time of such termination (except that the Company
acknowledges and agrees that, notwithstanding the foregoing provisions of this
Section 6.2, the Employee may provide investment advisory services to a
Competing Business following the date
4
<PAGE> 5
which is six months after the termination or expiration of the Employee's
employment with the Company for any reason whatsoever).
7. AGREEMENT NOT TO SOLICIT OR SELL TO CUSTOMERS. The Employee agrees that,
during the Term of this Agreement and for two years following the termination or
expiration of his employment for any reason whatsoever, he will not without the
prior written consent of the Company, either directly or indirectly, call on,
solicit, take away, accept as a client, customer or prospective client, customer
or attempt to call on, solicit, take away or accept as a client, customer
prospective client or customer, any person that was a client, customer or
prospective client or customer of the Company or any of its subsidiaries or
affiliates.
8. AGREEMENT NOT TO SOLICIT OR HIRE EMPLOYEES. The Employee agrees that
during the Term of this Agreement and for two years following the termination or
expiration of his employment for any reason whatsoever, he will not, either
directly or indirectly, on his own behalf or in the service or on behalf of
others, solicit, divert or hire, attempt to solicit, divert or hire or induce or
attempt to induce to discontinue employment with the Company or any subsidiary
or affiliate thereof, any person employed by the Company or any subsidiary or
affiliate thereof, whether or not such employee is a full time employee or a
temporary employee of the Company or any subsidiary or affiliate thereof and
whether or not such employment is for a determined period or is at will.
9. OWNERSHIP AND NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION
9.1 As used in this Agreement, "Confidential Information" shall mean all
customer sales and marketing information, customer account records, proprietary
receipts and/or processing techniques, information regarding vendors and
products, training and operations memoranda and similar information, personnel
records, pricing information, financial information and trade secrets concerning
or relating to the business, accounts, customers, employees and affairs of the
Company, or any subsidiary or affiliate thereof, obtained by or furnished,
disclosed or disseminated to the Employee, or obtained, assembled or compiled by
the Employee or under his supervision during the course of his employment by the
Company, and all physical embodiments of the foregoing, all of which are hereby
agreed to be the property of and confidential to the Company, but Confidential
Information shall not include any of the foregoing to the extent the same is or
becomes publicly known through no fault or breach of this Agreement by the
Employee.
9.2 The Employee acknowledges and agrees that all Confidential Information,
and all physical embodiments thereof, are confidential to and shall be and
remain the sole and exclusive property of the Company. Upon request by the
Company, and in any event upon termination of the Employee's employment with the
Company for any reason whatsoever, as a prior condition to the Employee's
receipt of any final salary or benefit payments hereunder, the Employee shall
deliver to the Company all property belonging to the Company or any of its
subsidiaries or affiliates, including, without limitation, all Confidential
Information (and all embodiments thereof), then in his custody, control or
possession, but any forfeiture of such salary or benefit shall not be considered
a satisfaction
5
<PAGE> 6
or a release of or liquidated damages for any claim(s) for damages against the
Employee which may accrue to the Company, as a result of any breach of this
Section 9 by the Employee.
9.3 The Employee agrees that he will not, either during the Term of this
Agreement or at any time thereafter, without the prior written consent of the
Company, use, disclose or make available any Confidential Information to any
person or entity, nor shall he use, disclose, make available or cause to be
used, disclosed or made available, or permit or allow, either on his own behalf
or on behalf of others, any use or disclosure of such Confidential Information
other than in the proper performance of the Employee's duties hereunder.
10. INVENTIONS. The Employee shall disclose promptly to the Company any and
all conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, that are conceived or made by the
Employee, solely or jointly with another, during the Term of this Agreement and
that are directly related to the business or activities of the Company and that
the Employee conceives as a result of his employment by the Company, regardless
of whether or not such ideas, inventions, or improvements qualify as "works for
hire." The 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, the Employee shall execute any and all applications, assignments or
other instruments that the Company shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect the Company's interest therein.
11. REASONABLENESS OF RESTRICTIONS. In the event that any provision
relating to time period or geographic area of any restriction set forth in
Sections 6, 7, 8, 9 or 10 shall be declared by a court of competent jurisdiction
to exceed the maximum time period or area of restriction that the court deems
reasonable and enforceable, the time period or area of restriction which the
court finds to be reasonable and enforceable shall be deemed to become, and
thereafter shall be, the maximum time period or geographic area of such
restriction.
12. ENFORCEABILITY. Any provision of Sections 6, 7, 8, 9 or 10 which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, but shall be enforced to the
maximum extent permitted by law, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
13. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Employee of any of the covenants contained in
Sections 6, 7, 8, 9 or 10 of this Agreement will cause irreparable harm and
damage to the Company, the monetary amount of which may be virtually impossible
to ascertain. As a result, the Employee recognizes and hereby acknowledges that
the Company shall be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all of the
covenants contained in Sections 6, 7, 8, 9 or 10 of this Agreement by the
Employee or any of his affiliates, associates, partners or agents, either
directly or indirectly, and that such right to injunction shall be cumulative
and in addition to whatever other remedies the Company may possess.
6
<PAGE> 7
14. ASSIGNMENT. The Employee shall not delegate his employment obligations
pursuant to this Agreement to any other person.
15. EMPLOYER'S AUTHORITY. The relationship between the parties hereto is
that of employer and employee. The Employee agrees to observe and comply with
the rules and regulations of the Company, as adopted by the Company from time to
time with respect to the performance of the duties of the Employee. The Employee
acknowledges that he has no authority to enter into any contracts or other
obligations that are binding upon the Company unless such contracts or
obligations are authorized by the Board of Directors of the Company. The Company
shall have the power to direct, control and supervise the duties to be performed
by the Employee, the manner of performing said duties, and the time of
performing said duties.
16. GOVERNING LAW. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of Florida, excluding
the choice of law rules thereof. The Company and the Employee each hereby
irrevocably submit to the jurisdiction of the state or federal courts located in
Dade County, Florida in connection with any suit, action or other proceeding
arising out of or relating to this Agreement and hereby agree not to assert, by
way of motion, as a defense, or otherwise in any such suit, action or proceeding
that the suit, action or proceeding is brought in an inconvenient forum, that
the venue of the suit, action or proceeding is improper or that this Agreement
or the subject matter hereof may not be enforced by such courts.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, understandings and arrangements, both oral and
written, between the parties hereto with respect to such subject matter. This
Agreement may not be modified in any way, unless by a written instrument signed
by both the Company and the Employee.
18. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or three (3) days after sent by registered or certified United
States mail, return receipt requested, postage prepaid, or the next business day
following dispatch by a reputable overnight courier service, addressed as
follows:
(i) If to the Employee:
Bruce E. Kropschot
7035 S.E. Harbor Circle
Stuart, FL 34996
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<PAGE> 8
(ii) If to the Company:
U.S. Leasing, Inc.
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Attention: Robert J. New
with a copy given in the manner prescribed above to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
Pittsburgh, PA 15219
Attention: David A. Gerson
or to such other addresses as either party hereto may from time to time give
notice of to the other party hereto in the aforesaid manner.
19. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit of
and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns.
20. SEVERABILITY. Except as otherwise provided in Sections 11 and 12, the
invalidity of any one or more of the words, phrases, sentences, clauses,
sections or subsections contained in this Agreement shall not affect the
enforceability of the remaining portions of this Agreement or any part thereof,
all of which are inserted conditionally on their being valid in law, and, in the
event that any one or more of the words, phrases, sentences, clauses, sections
or subsections contained in this Agreement or any part thereof shall be declared
invalid, this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, section or sections
or subsection or subsections had not been inserted. If such invalidity is caused
by length of time or size of area, or both, the otherwise invalid provision will
be considered to be reduced to a period or area which would cure such
invalidity.
21. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Employee from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings
suit for the collection of any damages resulting from, or the injunction of any
action constituting, a breach of any of the terms or provisions of this
Agreement, then the non- prevailing party shall pay all reasonable court costs
and attorneys' fees of the other party.
22. SECTION HEADINGS. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8
<PAGE> 9
23. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the parties hereto and their respective heirs, personal
representative, legal representative, successors and assigns, any rights or
remedies under or by reason of this Agreement.
24. AMENDMENT; MODIFICATION; WAIVER. No amendment, modification or waiver
of the terms of this Agreement shall be valid unless made in writing and duly
executed by the Company and the Employee. No delay or failure at any time on the
part of the Company in exercising any right, power or privilege under this
Agreement, or in enforcing any provision of this Agreement, shall impair any
such right, power or privilege, or be construed as a waiver of any default or as
any acquiescence therein, or shall affect the right of the Company thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
The waiver by either party hereto of a breach or violation of any term or
provision of this Agreement shall neither operate nor be construed as a waiver
of any subsequent breach or violation.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
U.S. LEASING, INC.
By:
--------------------------------------
Name:
Title:
EMPLOYEE
-----------------------------------------
Bruce E. Kropschot
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<PAGE> 1
Exhibit 10.03
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into
effective as of November 1, 1997, by and between U.S. Leasing, Inc., a Delaware
corporation (the "Company"), and Martin Kalb (the "Consultant").
WHEREAS, the Company desires that the Consultant provide certain
consulting services to the Company consistent with the duties and
responsibilities that would be assigned to an Executive Vice President and
General Counsel, on the terms and conditions contained in this Agreement, and
the Consultant wishes to provide such consulting services on the terms and
conditions contained in this Agreement; and
WHEREAS, the Company and the Consultant have agreed that, upon the
terms and conditions contained in this Agreement, the Consultant will not
compete with the Company during the term of this Agreement and for a period of
two (2) years after the end of the Consulting Term (as defined below);
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Company and the Consultant, each intending to be
legally bound hereby, agree as follows:
1. RETENTION OF CONSULTANT. Subject to the terms and conditions of this
Agreement, the Company hereby retains the Consultant to perform consulting
services in accordance with Section 4 hereof, and the Consultant hereby agrees
to render such services.
2. TERM. Unless otherwise terminated in accordance with Section 14
hereof, the Consultant shall perform the duties and services specified herein
for a period commencing on the date hereof (the "Effective Date") and ending on
the earlier of (i) April 1, 2000 or (ii) the commencement date of Consultant's
employment with the Company pursuant to an employment agreement substantially in
the form attached hereto as Exhibit A (the "Employment Agreement"). The period
during which the Consultant is obligated to perform such duties and services, as
the same may be reduced by termination pursuant to Section 14 hereof, is
referred to herein as the "Consulting Term."
3. EMPLOYMENT AGREEMENT. It is understood by the Consultant that the
Company is preparing to undertake an initial public offering of its common stock
(the "IPO"). If the IPO is consummated, then effective upon such consummation
the Company and Consultant shall enter into the Employment Agreement and this
Consulting Agreement shall immediately thereupon terminate in accordance with
Section 2 hereof.
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4. CONSULTING SERVICES. During the Consulting Term, the Consultant
shall perform such consulting services consistent with the duties and
responsibilities that would be assigned to an Executive Vice President and
General Counsel with respect to the business and operations of the Company, and
such other services as may be requested of him from time to time by the Chief
Executive Officer of the Company. All of the consulting services rendered by the
Consultant to the Company in accordance with the terms of this Agreement are
referred to herein as "Services."
5. COMPENSATION. (a) As consideration for the Consultant's provision of
Services hereunder, the Company shall pay the Consultant a fee (the "Fee") of
$37,500.00 each month, of which $16,666.66 per month shall be paid in cash and
the balance of $20,833.34 per month is accrued for payment upon consummation of
the IPO (net of any amounts then receivable by the Company from the Consultant).
The cash portion of the Fee shall be paid in installments consistent with the
Company's normal payroll schedule, commencing on either the first or fifteenth
day of the month, as the case may be, following the date of commencement of the
Consulting Term.
(b) The Company agrees to reimburse the Consultant for all
reasonable business expenses (including, without limitation, reasonable travel
and entertainment expenses) incurred by the Consultant in rendering Services
hereunder, subject to the Company's reimbursement policies in effect from time
to time. The Consultant agrees to maintain reasonable records of his business
expenses in such form and detail as the Company may request and to make such
records available to the Company as and when requested.
6. AGREEMENT NOT TO COMPETE.
6.1 As used in this Agreement, "Competing Business" shall mean
any business or enterprise which is engaged in (a) the equipment leasing
business; or (b) any business, business segment or product line engaged in by
the Company on the date of termination of the Consulting Term (clauses (a) and
(b) collectively referred to herein as the "Company's Business").
6.2 The Consultant agrees that, during the Consulting Term and
for two years thereafter (but subject to the proviso contained in this Section
6.2 below), he will not, without the prior written consent of the Company,
either directly or indirectly, on his own behalf or in the service of or on
behalf of others as a shareholder, director, officer, trustee, consultant,
independent contractor or employee, engage in, or be employed by, or provide
services to, any Competing Business within the State of Florida or in any other
state in which the Company or any subsidiary or affiliate thereof is engaged in
business or in which of any of their respective products or services are
marketed or sold at the time of such termination. Notwithstanding the foregoing,
if an Employment Agreement is entered into, then the duration of the restriction
contained in this Section 6.2 following the end of the Consulting Term shall be
solely in accordance with the terms of Section 6.2 of such Employment Agreement.
7. AGREEMENT NOT TO SOLICIT OR SELL TO CUSTOMERS. The Consultant agrees
that, during the Consulting Term and for two years thereafter (but subject to
the proviso contained in this
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Section 7 below), he will not without the prior written consent of the Company,
either directly or indirectly, call on, solicit, take away, accept as a client,
customer or prospective client, customer or attempt to call on, solicit, take
away or accept as a client, customer, prospective client or customer, any person
that was a client, customer or prospective client or customer of the Company or
any of its subsidiaries or affiliates. Notwithstanding the foregoing, if an
Employment Agreement is entered into, then the duration of the restriction
contained in this Section 7 following the end of the Consulting Term shall be
solely in accordance with the terms of Section 7 of such Employment Agreement.
8. AGREEMENT NOT TO SOLICIT OR HIRE EMPLOYEES. The Consultant agrees
that, during the Consulting Term and for two years thereafter (but subject to
the proviso contained in this Section 8 below), he will not, either directly or
indirectly, on his own behalf or in the service or on behalf of others, solicit,
divert or hire, attempt to solicit, divert or hire or induce or attempt to
induce to discontinue employment with the Company or any subsidiary or affiliate
thereof, any person employed by the Company or any subsidiary or affiliate
thereof, whether or not such employee is a full time employee or a temporary
employee of the Company or any subsidiary or affiliate thereof and whether or
not such employment is for a determined period or is at will. Notwithstanding
the foregoing, if an Employment Agreement is entered into, then the duration of
the restriction contained in this Section 8 following the end of the Consulting
Term shall be solely in accordance with the terms of Section 8 of such
Employment Agreement.
9. OWNERSHIP AND NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION
9.1 As used in this Agreement, "Confidential Information"
shall mean all customer sales and marketing information, customer account
records, proprietary receipts and/or processing techniques, information
regarding vendors and products, training and operations memoranda and similar
information, personnel records, pricing information, financial information and
trade secrets concerning or relating to the business, accounts, customers,
employees and affairs of the Company, or any subsidiary or affiliate thereof,
obtained by or furnished, disclosed or disseminated to the Consultant, or
obtained, assembled or compiled by the Consultant or under his supervision
during the course of his rendering Services to the Company, and all physical
embodiments of the foregoing, all of which are hereby agreed to be the property
of and confidential to the Company, but Confidential Information shall not
include any of the foregoing to the extent the same is or becomes publicly known
through no fault or breach of this Agreement by the Consultant.
9.2 The Consultant acknowledges and agrees that all
Confidential Information, and all physical embodiments thereof, are confidential
to and shall be and remain the sole and exclusive property of the Company. Upon
request by the Company, and in any event upon the end of the Consulting Term, as
a prior condition to the Consultant's receipt of any final Fee payments
hereunder, the Consultant shall deliver to the Company all property belonging to
the Company or any of its subsidiaries or affiliates, including, without
limitation, all Confidential Information (and all embodiments thereof), then in
his custody, control or possession, but any forfeiture of such
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payments shall not be considered a satisfaction or a release of or liquidated
damages for any claim(s) for damages against the Consultant which may accrue to
the Company, as a result of any breach of this Section 9 by the Consultant.
9.3 The Consultant agrees that he will not, either during the
Consulting Term or at any time thereafter, without the prior written consent of
the Company, use, disclose or make available any Confidential Information to any
person or entity, nor shall he use, disclose, make available or cause to be
used, disclosed or made available, or permit or allow, either on his own behalf
or on behalf of others, any use or disclosure of such Confidential Information
other than in the proper performance of the Consultant's duties hereunder.
10. INVENTIONS. The Consultant shall disclose promptly to the Company
any and all conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, that are conceived or made by the
Consultant, solely or jointly with another, during the Consulting Term and that
are directly related to the business or activities of the Company and that the
Consultant conceives as a result of his rendering Services to the Company,
regardless of whether or not such ideas, inventions, or improvements qualify as
"works for hire." The Consultant hereby assigns and agrees to assign all his
interests therein to the Company or its nominee. Whenever requested to do so by
the Company, the Consultant shall execute any and all applications, assignments
or other instruments that the Company shall deem necessary to apply for and
obtain Letters Patent of the United States or any foreign country or to
otherwise protect the Company's interest therein.
11. REASONABLENESS OF RESTRICTIONS. In the event that any provision
relating to time period or geographic area of any restriction set forth in
Sections 6, 7, 8, 9 or 10 shall be declared by a court of competent jurisdiction
to exceed the maximum time period or area of restriction that the court deems
reasonable and enforceable, the time period or area of restriction which the
court finds to be reasonable and enforceable shall be deemed to become, and
thereafter shall be, the maximum time period or geographic area of such
restriction.
12. ENFORCEABILITY. Any provision of Sections 6, 7, 8, 9 or 10 which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, but shall be enforced to the
maximum extent permitted by law, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
13. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Consultant of any of the covenants contained in
Sections 6, 7, 8, 9 or 10 of this Agreement will cause irreparable harm and
damage to the Company, the monetary amount of which may be virtually impossible
to ascertain. As a result, the Consultant recognizes and hereby acknowledges
that the Company shall be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all of the
covenants contained in Sections 6, 7, 8, 9 or 10 of this Agreement by the
Consultant or any of his affiliates, associates,
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partners or agents, either directly or indirectly, and that such right to
injunction shall be cumulative and in addition to whatever other remedies the
Company may possess.
14. TERMINATION; COMPENSATION. Either party shall have the right to
terminate the Consulting Term at any time. If the Consulting Term is terminated
by the Company pursuant to this Section 14 prior to the time at which it would
otherwise have expired under Section 2 hereof, then the Company shall continue
to pay the Consultant the Fee for the remaining portion of the Consulting Term.
15. PRIOR AGREEMENTS. The Consultant represents to the Company that:
(a) other than those set forth in this Agreement, there are no agreements,
arrangements or understandings, written or oral, with the Company with respect
to his retention as a consultant, his employment, payment of compensation or
entitlement to benefits for himself, or his heirs or beneficiaries of any kind;
(b) there are no restrictions, agreements or understandings whatsoever to which
the Consultant is a party or by which he is bound which would prevent or make
unlawful his execution of this Agreement or his retention as a consultant
hereunder; (c) his execution of this Agreement and his retention as a consultant
hereunder do not constitute a breach of any contract, agreement or
understanding, oral or written, to which he is a party or by which he is bound;
and (d) he is free and able to execute this Agreement and to enter into the
consulting arrangement hereunder on the terms and subject to the conditions
hereof.
16. GENERAL PROVISIONS.
16.1 Indulgences, Etc. Any failure or delay on the part of any
party to exercise any right, remedy, power or privilege under this Agreement
will not operate as a waiver thereof, nor will any single or partial exercise of
any right, remedy, power or privilege preclude any other or further exercise of
the same or of any other right, remedy, power or privilege, nor will any waiver
of any right, remedy, power or privilege with respect to any occurrence be
construed as a waiver of that right, remedy, power or privilege with respect to
any other occurrence.
16.2 Notices. All notices, requests, demands and other
communications required or permitted under this Agreement must be in writing and
will be deemed to have been duly given, made and received only when delivered
(personally, by facsimile transmission or by courier service such as Federal
Express, or by other messenger) or when deposited in the United States mails,
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:
(i) If to the Consultant:
Martin Kalb
701 NW 141 Avenue
Apartment 101
Pembroke Pines, FL 33028
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(ii) If to the Company:
U.S. Leasing, Inc.
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Attention: Robert J. New
with a copy given in the manner prescribed
above to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
Pittsburgh, PA 15219
Attention: David A. Gerson
Any party may alter the address to which communications or copies are to be sent
by giving notice of any change of address to the other party in conformity with
the provisions of this paragraph for the giving of notice.
16.3 Binding Nature of Agreement; Assignment. This Agreement
shall be binding upon and inure to the benefit of the Company and its successors
and assigns and shall be binding upon the Consultant, his heirs and legal
representatives. The Company may assign this Agreement at any time to any
affiliate, provided that such assignee assumes all of the obligations of the
Company hereunder; the Consultant may not assign this Agreement.
16.4 Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which will be deemed to be an original
and all of which will together constitute one and the same instrument.
16.5 Provisions Separable. The provisions of this Agreement
are independent of and separable from each other, and no provision will be
affected or rendered invalid or unenforceable by virtue of the fact that for any
reason any other or others of them may be invalid or unenforceable in whole or
in part.
16.6 Entire Agreement. This Agreement (including the Exhibit
attached hereto) contains the entire understanding between the parties hereto
with respect to the subject matter of this Agreement, and supersedes all prior
and contemporaneous agreements and understandings, inducements or conditions,
express or implied, oral or written, with respect to the subject matter of this
Agreement. The express terms of this Agreement control and supersede any course
of performance and/or usage of the trade inconsistent with any of the terms
hereof. This Agreement may not be modified or amended other than by an agreement
in writing.
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16.7 Remedies. The rights conferred upon the Company pursuant
to Section 13 hereof shall not be exclusive of, but shall be in addition to, any
other rights or remedies which the Company may have at law, in equity or
otherwise.
16.8 Section Headings. The section headings in this Agreement
are for convenience only; they form no part of this Agreement and will not
affect its interpretation.
16.9 Governing Law. This Agreement, the rights and obligations
of the parties hereto, and any claims or disputes relating thereto, shall be
governed by and construed in accordance with the laws of the State of Florida,
excluding the choice of law rules thereof. The Company and the Consultant each
hereby irrevocably submit to the jurisdiction of the state or federal courts
located in Dade County, Florida in connection with any suit, action or other
proceeding arising out of or relating to this Agreement and hereby agree not to
assert, by way of motion, as a defense, or otherwise in any such suit, action or
proceeding that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced by such courts.
16.10 Survival. The provisions of Sections 6, 7, 9, 10, 11,
12, 13 and 16 hereof shall survive the termination of this Agreement to the
extent necessary to effectuate the respective purposes of such provisions.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first set forth above.
U.S. LEASING, INC.
By: /s/ Robert J. New
-----------------
Name: Robert J. New
Title: Chairman and Chief Executive Officer
CONSULTANT
/s/ Martin Kalb
---------------
Martin Kalb
Exhibit A: Form of Employment Agreement
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EXHIBIT A
FORM OF EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the ____ day of ____________, 1998 by and between U.S. LEASING, INC., a
Delaware corporation (the "Company"), and MARTIN KALB (the "Employee").
R E C I T A L S
---------------
The Company desires to obtain the services of the Employee in the
employment of the Company on the terms and subject to the conditions set forth
in this Agreement, and the Employee desires to make his services available to
the Company on the terms and subject to the conditions set forth in this
Agreement.
A G R E E M E N T
-----------------
NOW, THEREFORE, in consideration of the premises, agreements and mutual
covenants set forth herein, the parties hereto, intending to be bound legally,
hereby agree as follows:
1. DEFINITIONS. The following terms when used herein, unless the
context otherwise requires, shall be defined as follows:
1.1 "Cause" shall have the meaning set forth in Section 5.1
hereof.
1.2 "Company" shall mean U.S. Leasing, Inc., a Delaware
corporation.
1.3 "Competing Business" shall have the meaning set forth in
Section 6.1 hereof.
1.4 "Confidential Information" shall have the meaning set
forth in Section 9.1 hereof.
1.5 "Term" shall have the meaning set forth in Section 3
hereof.
2. EMPLOYMENT
2.1 General. The Company hereby agrees to employ the Employee
as Executive Vice President and General Counsel during the Term of this
Agreement on the terms and subject to the conditions contained in this
Agreement, and the Employee hereby agrees to accept such employment on the terms
and subject to the conditions contained in this Agreement.
2.2 Duties of Employee. During the Term of this Agreement, the
Employee shall diligently perform all duties and responsibilities as may be
assigned to him by the Company's Board
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of Directors and shall exercise such power and authority as may from time to
time be delegated to him thereby. The Employee shall devote his full business
time and attention to the business and affairs of the Company as necessary to
perform his duties and responsibilities hereunder, render such services to the
best of his ability, and use his best efforts to promote the interests of the
Company.
3. TERM. Subject to the provisions of Section 5 of this Agreement, the
Company shall employ the Employee for a term commencing on the date first
written above (the "Effective Date"), which shall be the date of consummation of
the initial public offering by the Company of its common stock (the "IPO")
pursuant to a registration statement on Form S-1 filed by the Company with the
Securities and Exchange Commission (the "SEC") relating to such IPO (the
"Registration Statement") and declared effective by the SEC and expiring on
April 1, 2000.
4. COMPENSATION.
4.1 Salary. The Employee shall receive an annual salary of
Four-Hundred-Fifty Thousand Dollars ($450,000.00) during the Term of this
Agreement, and such salary shall be payable in installments consistent with the
Company's normal payroll schedule commencing on either the first or fifteenth
day of the month, as the case may be, following the Effective Date.
4.2 Benefits. During the Term of this Agreement, the Employee
shall be entitled to participate in all plans adopted for the general benefit of
the Company's employees, such as stock option plans, 401(k) plans, pension
plans, profit sharing plans, medical plans, group or other insurance plans and
benefits, to the extent that the Employee is and remains eligible to participate
therein and subject to the eligibility provisions of such plans in effect from
time to time. For each calendar year during the Term of this Agreement, the
Employee shall be entitled to not less than four weeks of paid vacation,
prorated for any period of employment of less than an entire year.
4.3 Withholding. Notwithstanding any provision in this
Agreement to the contrary, all payments required to be made by the Company
hereunder to the Employee in connection with the Employee's employment hereunder
shall be subject to withholding of such amounts relating to taxes as the Company
may reasonably determine it should withhold pursuant to any applicable law or
regulation. In lieu of withholding such amounts, in whole or in part, the
Company may, in its sole discretion, accept other provisions for the payment of
taxes, provided that the Company is satisfied that all requirements of law
affecting its responsibilities to withhold have been satisfied.
4.4 Reimbursement of Expenses. The Company agrees to reimburse
the Employee for all reasonable business expenses (including, without
limitation, reasonable travel and entertainment expenses) incurred by the
Employee in the discharge of his duties hereunder, subject to the Company's
reimbursement policies in effect from time to time. The Employee agrees to
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maintain reasonable records of his business expenses in such form and detail as
the Company may request and to make such records available to the Company as and
when requested.
5. TERMINATION
5.1 Termination for Cause. Notwithstanding any provision in
this Agreement to the contrary, this Agreement may be terminated by the Company
for "Cause" at any time during the Term hereof, and such termination shall be
effective immediately upon written notice to the Employee. For purposes of this
Agreement, "Cause" for the termination of the Employee's employment hereunder
shall be deemed to exist if, in the reasonable judgment of the Company's Board
of Directors: (a) the Employee commits fraud, theft or embezzlement against the
Company; (b) the Employee commits a felony or a crime involving moral turpitude;
(c) the Employee compromises trade secrets or other proprietary information of
the Company; (d) the Employee breaches any non-competition or non-solicitation
agreement with the Company or any subsidiary or affiliate thereof; (e) the
Employee breaches any of the terms of this Agreement (other than those
referenced in clauses (c) and (d) of this Section 5.1) and fails to cure such
breach within 10 days after the receipt of written notice of such breach from
the Company; or (f) the Employee engages in gross negligence or willful
misconduct that causes harm to the business and operations of the Company or a
subsidiary or affiliate thereof. Upon any termination pursuant to this Section
5.1, the Employee shall be entitled to be paid solely the Employee's salary then
in effect through the effective date of termination, and the Company shall have
no further liability or other obligation of any kind whatsoever to the Employee.
5.2 Termination by the Company Without Cause. The Company may,
in its sole and absolute discretion, terminate the employment of the Employee
hereunder, at any time prior to the expiration of the term of this Agreement,
without "Cause" (as such term is defined in Section 5.1 above), or otherwise
without any cause, reason or justification, provided that the Company provides
to the Employee at least sixty (60) days' prior written notice (the "Termination
Notice") of such termination. In the event of any such termination by the
Company, (a) the Employee's employment with the Company shall cease and
terminate on the date specified in the Termination Notice (or, if not date is so
specified, on the date which is 60 days following the date of such notice), and
(b) the Employee shall be entitled to receive and be paid solely the Employee's
salary then in effect for the shorter of (x) the eight-month period following
the Employee's termination or (y) the remaining Term of this Agreement, payable
over such period at the Company's regular and customary intervals for the
payment of salaries as then in effect, and the Company shall have no further
liability or other obligation of any kind whatsoever to the Employee.
5.3 Death of the Employee. In the event that the Employee
shall die during the Term of this Agreement, the Employee's employment with the
Company shall immediately cease and terminate and the Employee's estate, heirs
(at law), devisees, legatees or other proper and legally entitled descendants,
or the personal representative, executor, administrator or other proper legal
representative on behalf of such descendants, shall be entitled to receive and
be paid solely the
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Employee's salary through the date of death, and the Company shall have no
further liability or other obligation of any kind whatsoever to the Employee.
5.4 Disability of the Employee. In the event that the Employee
becomes incapacitated during the Term by reason of sickness, accident or other
mental or physical disability such that he is substantially unable to perform
his duties and responsibilities hereunder for a period of 60 consecutive days,
or for shorter or intermittent periods aggregating 90 days during any 12-month
period (a "Disability"), the Company thereafter shall have the right, in its
sole and absolute discretion, to terminate the Employee's employment under this
Agreement by sending written notice of such termination to the Employee or its
legal guardian or other proper legal representative and thereupon his employment
hereunder shall immediately cease and terminate. In the event of any such
termination, the Employee shall be entitled to receive and be paid solely the
Employee's salary then in effect through the effective date of termination and
the Company shall have no further liability or other obligation of any kind
whatsoever to the Employee.
5.5 Termination by the Employee. Provided that the Company
does not have "Cause" to terminate the Employee pursuant to Section 5.1 above,
the Employee may terminate the Employee's employment with the Company hereunder
at any time and for any reason. Employee must provide to the Company written
notice of such termination not less than 365 days prior to the date such
termination is to be effective. Upon any termination pursuant to this Section
5.5, the Employee shall be entitled to be paid solely the Employee's salary then
in effect through the effective date of termination, and the Company shall have
no further liability or other obligation of any kind whatsoever to the Employee.
6. AGREEMENT NOT TO COMPETE
6.1 As used in this Agreement, "Competing Business" shall mean
any business or enterprise which is engaged in (a) the equipment leasing
business; or (b) any business, business segment or product line engaged in by
the Company on the date of termination of the Employee's employment with the
Company (clauses (a) and (b) collectively referred to herein as the "Company's
Business").
6.2 The Employee agrees that, during the Term of this
Agreement and for two years following the termination or expiration of his
employment for any reason whatsoever, he will not, without the prior written
consent of the Company, either directly or indirectly, on his own behalf or in
the service of or on behalf of others as a shareholder, director, officer,
trustee, consultant, independent contractor or employee, engage in, or be
employed by, or provide services to, any Competing Business within the State of
Florida or in any other state in which the Company or any subsidiary or
affiliate thereof is engaged in business or in which of any of their respective
products or services are marketed or sold at the time of such termination.
7. AGREEMENT NOT TO SOLICIT OR SELL TO CUSTOMERS. The Employee agrees
that, during the Term of this Agreement and for two years following the
termination or expiration of his
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employment for any reason whatsoever, he will not without the prior written
consent of the Company, either directly or indirectly, call on, solicit, take
away, accept as a client, customer or prospective client, customer or attempt to
call on, solicit, take away or accept as a client, customer prospective client
or customer, any person that was a client, customer or prospective client or
customer of the Company or any of its subsidiaries or affiliates.
8. AGREEMENT NOT TO SOLICIT OR HIRE EMPLOYEES. The Employee agrees that
during the Term of this Agreement and for two years following the termination or
expiration of his employment for any reason whatsoever, he will not, either
directly or indirectly, on his own behalf or in the service or on behalf of
others, solicit, divert or hire, attempt to solicit, divert or hire or induce or
attempt to induce to discontinue employment with the Company or any subsidiary
or affiliate thereof, any person employed by the Company or any subsidiary or
affiliate thereof, whether or not such employee is a full time employee or a
temporary employee of the Company or any subsidiary or affiliate thereof and
whether or not such employment is for a determined period or is at will.
9. OWNERSHIP AND NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION
9.1 As used in this Agreement, "Confidential Information"
shall mean all customer sales and marketing information, customer account
records, proprietary receipts and/or processing techniques, information
regarding vendors and products, training and operations memoranda and similar
information, personnel records, pricing information, financial information and
trade secrets concerning or relating to the business, accounts, customers,
employees and affairs of the Company, or any subsidiary or affiliate thereof,
obtained by or furnished, disclosed or disseminated to the Employee, or
obtained, assembled or compiled by the Employee or under his supervision during
the course of his employment by the Company, and all physical embodiments of the
foregoing, all of which are hereby agreed to be the property of and confidential
to the Company, but Confidential Information shall not include any of the
foregoing to the extent the same is or becomes publicly known through no fault
or breach of this Agreement by the Employee.
9.2 The Employee acknowledges and agrees that all Confidential
Information, and all physical embodiments thereof, are confidential to and shall
be and remain the sole and exclusive property of the Company. Upon request by
the Company, and in any event upon termination of the Employee's employment with
the Company for any reason whatsoever, as a prior condition to the Employee's
receipt of any final salary or benefit payments hereunder, the Employee shall
deliver to the Company all property belonging to the Company or any of its
subsidiaries or affiliates, including, without limitation, all Confidential
Information (and all embodiments thereof), then in his custody, control or
possession, but any forfeiture of such salary or benefit shall not be considered
a satisfaction or a release of or liquidated damages for any claim(s) for
damages against the Employee which may accrue to the Company, as a result of any
breach of this Section 9 by the Employee.
9.3 The Employee agrees that he will not, either during the
Term of this Agreement or at any time thereafter, without the prior written
consent of the Company, use, disclose or make available any Confidential
Information to any person or entity, nor shall he use, disclose,
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make available or cause to be used, disclosed or made available, or permit or
allow, either on his own behalf or on behalf of others, any use or disclosure of
such Confidential Information other than in the proper performance of the
Employee's duties hereunder.
10. INVENTIONS. The Employee shall disclose promptly to the Company any
and all conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, that are conceived or made by the
Employee, solely or jointly with another, during the Term of this Agreement and
that are directly related to the business or activities of the Company and that
the Employee conceives as a result of his employment by the Company, regardless
of whether or not such ideas, inventions, or improvements qualify as "works for
hire." The 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, the Employee shall execute any and all applications, assignments or
other instruments that the Company shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect the Company's interest therein.
11. REASONABLENESS OF RESTRICTIONS. In the event that any provision
relating to time period or geographic area of any restriction set forth in
Sections 6, 7, 8, 9 or 10 shall be declared by a court of competent jurisdiction
to exceed the maximum time period or area of restriction that the court deems
reasonable and enforceable, the time period or area of restriction which the
court finds to be reasonable and enforceable shall be deemed to become, and
thereafter shall be, the maximum time period or geographic area of such
restriction.
12. ENFORCEABILITY. Any provision of Sections 6, 7, 8, 9 or 10 which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, but shall be enforced to the
maximum extent permitted by law, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
13. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Employee of any of the covenants contained in
Sections 6, 7, 8, 9 or 10 of this Agreement will cause irreparable harm and
damage to the Company, the monetary amount of which may be virtually impossible
to ascertain. As a result, the Employee recognizes and hereby acknowledges that
the Company shall be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all of the
covenants contained in Sections 6, 7, 8, 9 or 10 of this Agreement by the
Employee or any of his affiliates, associates, partners or agents, either
directly or indirectly, and that such right to injunction shall be cumulative
and in addition to whatever other remedies the Company may possess.
14. ASSIGNMENT. The Employee shall not delegate his employment
obligations pursuant to this Agreement to any other person.
15. EMPLOYER'S AUTHORITY. The relationship between the parties hereto
is that of employer and employee. The Employee agrees to observe and comply with
the rules and regulations
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of the Company, as adopted by the Company from time to time with respect to the
performance of the duties of the Employee. The Employee acknowledges that he has
no authority to enter into any contracts or other obligations that are binding
upon the Company unless such contracts or obligations are authorized by the
Board of Directors of the Company. The Company shall have the power to direct,
control and supervise the duties to be performed by the Employee, the manner of
performing said duties, and the time of performing said duties.
16. GOVERNING LAW. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of Florida, excluding
the choice of law rules thereof. The Company and the Employee each hereby
irrevocably submit to the jurisdiction of the state or federal courts located in
Dade County, Florida in connection with any suit, action or other proceeding
arising out of or relating to this Agreement and hereby agree not to assert, by
way of motion, as a defense, or otherwise in any such suit, action or proceeding
that the suit, action or proceeding is brought in an inconvenient forum, that
the venue of the suit, action or proceeding is improper or that this Agreement
or the subject matter hereof may not be enforced by such courts.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, understandings and arrangements, both oral and
written, between the parties hereto with respect to such subject matter. This
Agreement may not be modified in any way, unless by a written instrument signed
by both the Company and the Employee.
18. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or three (3) days after sent by registered or certified United
States mail, return receipt requested, postage prepaid, or the next business day
following dispatch by a reputable overnight courier service, addressed as
follows:
(i) If to the Employee:
Martin Kalb
701 NW 141 Avenue
Apartment 101
Pembroke Pines, FL 33028
(ii) If to the Company:
U.S. Leasing, Inc.
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Attention: Robert J. New
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<PAGE> 16
with a copy given in the manner prescribed
above to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
Pittsburgh, PA 15219
Attention: David A. Gerson
or to such other addresses as either party hereto may from time to time give
notice of to the other party hereto in the aforesaid manner.
19. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns.
20. SEVERABILITY. Except as otherwise provided in Sections 11 and 12,
the invalidity of any one or more of the words, phrases, sentences, clauses,
sections or subsections contained in this Agreement shall not affect the
enforceability of the remaining portions of this Agreement or any part thereof,
all of which are inserted conditionally on their being valid in law, and, in the
event that any one or more of the words, phrases, sentences, clauses, sections
or subsections contained in this Agreement or any part thereof shall be declared
invalid, this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, section or sections
or subsection or subsections had not been inserted. If such invalidity is caused
by length of time or size of area, or both, the otherwise invalid provision will
be considered to be reduced to a period or area which would cure such
invalidity.
21. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Employee from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings
suit for the collection of any damages resulting from, or the injunction of any
action constituting, a breach of any of the terms or provisions of this
Agreement, then the non-prevailing party shall pay all reasonable court costs
and attorneys' fees of the other party.
22. SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
23. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the parties hereto and their respective heirs, personal
representative, legal representative, successors and assigns, any rights or
remedies under or by reason of this Agreement.
24. AMENDMENT; MODIFICATION; WAIVER. No amendment, modification or
waiver of the terms of this Agreement shall be valid unless made in writing and
duly executed by the Company
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and the Employee. No delay or failure at any time on the part of the Company in
exercising any right, power or privilege under this Agreement, or in enforcing
any provision of this Agreement, shall impair any such right, power or
privilege, or be construed as a waiver of any default or as any acquiescence
therein, or shall affect the right of the Company thereafter to enforce each and
every provision of this Agreement in accordance with its terms. The waiver by
either party hereto of a breach or violation of any term or provision of this
Agreement shall neither operate nor be construed as a waiver of any subsequent
breach or violation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
U.S. LEASING, INC.
By:__________________________________________
Name:
Title:
EMPLOYEE
---------------------------------------------
Martin Kalb
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<PAGE> 1
Exhibit 10.05
UNICAPITAL CORPORATION
1997 EXECUTIVE NON-QUALIFIED STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
The purpose of the UniCapital Corporation 1997 Executive Non-Qualified
Stock Option Plan (the "Plan") is to promote the interests of UniCapital
Corporation (the "Company") and its stockholders by (i) attracting and retaining
employees, consultants and advisors of outstanding ability, (ii) motivating such
persons, by means of performance-related incentives, to achieve longer-range
performance goals, and (iii) enabling such persons to participate in the
long-term growth and financial success of the Company. Subject to approval of
the Plan by the stockholders of the Company, the effective date of the Plan (the
"Effective Date") shall be the date on which the Plan is adopted by the Board of
Directors of the Company (the "Board").
2. ADMINISTRATION.
(a) Subject to the following sentence, the Plan shall be administered
by the Board or by the Compensation Committee of the Board. Following the
registration by the Company of its common stock, par value $.001 per share
("Common Stock"), under Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Plan shall be administered by a Compensation
Committee, which shall consist of one or more persons approved by the Board, all
of whom shall be (i) "Non-Employee Directors" as defined under Rule 16b-3 under
the Exchange Act and (ii) "outside directors" as defined under Section 162(m) or
any successor provision of the Internal Revenue Code of 1986, as amended (the
"Code"), and applicable Treasury regulations thereunder, if such qualification
is deemed necessary in order for the grant or the exercise of awards made under
the Plan to qualify for any tax or other material benefit to participants or the
Company under applicable law.
(b) If the Board delegates to the Compensation Committee the authority
to administer the Plan, the Compensation Committee shall be empowered to take
all actions reserved to the Board under the Plan. The Board is authorized to
interpret the Plan, to prescribe, amend and rescind rules and regulations to
further the purposes of the Plan, and to make all other determinations necessary
for the administration of the Plan. All such actions by the Board shall be final
and binding.
3. NONQUALIFIED STOCK OPTIONS.
Awards under the Plan shall be in the form of options which do not and
are not intended to qualify as "incentive stock options" within the meaning of
Section 422 or any successor provision of the Code ("Nonqualified Options").
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4. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 13, awards in respect of
an aggregate of up to 500,000 shares of Common Stock of the Company may be made
under the Plan. The Common Stock to be offered under the Plan shall be
authorized and unissued Common Stock, or issued Common Stock which shall have
been reacquired by the Company and held in its treasury. The Common Stock
covered by any unexercised portion of terminated stock options granted under the
Plan shall not again be subject to new awards under the Plan. If the purchase
price of a stock option is paid in whole or in part through the delivery of
Common Stock, then only the net number of shares of Common Stock issuable in
connection with the exercise of the option shall be counted against the number
of shares remaining available for the grant of awards under the Plan. At any
time following the registration by the Company of its Common Stock under Section
12 of the Exchange Act, no participant shall be granted awards in respect of
more than 100,000 shares of Common Stock in any calendar year (subject to
adjustment as provided in Section 13). Shares of Common Stock issuable upon the
exercise of any option granted under the plan may be subject to such further
restrictions, including but not limited to risk of forfeiture, as may be
determined by the Board and set forth in the stock option agreement evidencing
such option.
5. PARTICIPANTS.
The Board shall determine and designate from time to time those
employees, directors, consultants and advisors of the Company or its
subsidiaries who shall be awarded options under the Plan and the number of
shares of Common Stock to be covered by each such option, provided that any such
consultants or advisors render bona fide services which are not in connection
with the offer or sale of securities in a capital-raising transaction. In making
its determinations, the Board shall take into account the present and potential
contributions of the respective individuals to the success of the Company and
such other factors as the Board shall deem relevant in connection with
accomplishing the purposes of the Plan. Each option award shall be evidenced by
a written stock option agreement in such form as the Board shall approve from
time to time.
6. FAIR MARKET VALUE.
For all purposes under the Plan, the term "Fair Market Value" shall
mean, as of any applicable date: (i) if the principal securities market on which
the Common Stock is traded is a national securities exchange or the Nasdaq
National Market ("NNM"), the closing price of the Common Stock on such exchange
or NNM, as the case may be, or if no sale of the Common Stock shall have
occurred on such date, on the next preceding date on which there was a reported
sale; or (ii) if the Common Stock is not traded on a national securities
exchange or NNM but is traded in the Nasdaq SmallCap Market, the closing price
on such date as reported by the Nasdaq SmallCap Market, or if no sale of the
Common Stock shall have occurred on such date, on the next preceding date on
which there was a reported sale; or (iii) if the principal securities market on
which the Common Stock is traded is not a national securities exchange, NNM or
the Nasdaq SmallCap Market, the average of the bid and asked prices reported by
the National Quotation Bureau, Inc.; or (iv) if the price of the
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<PAGE> 3
Common Stock is not so reported, the fair market value per share of the Common
Stock as determined in good faith by the Board.
7. EXERCISE PRICE.
Nonqualified Options shall be granted at an exercise price determined
in each case by the Board.
8. TERM AND TERMINATION.
(a) The Board shall determine the term within which each option may be
exercised, in whole or in part, provided that such term shall not exceed ten
years from the date of grant.
(b) Unless otherwise determined by the Board, all rights to exercise
options shall terminate on the first to occur of (i) the scheduled expiration
date as set forth in the applicable stock option agreement, (ii) 30 days
following the date of termination of employment for any reason other than the
death or permanent disability (as defined in the Code) of the participant, or
(iii) one year following the date of termination of employment by reason of the
participant's death or permanent disability; provided, however, that if an
employee ceases to be employed by the Company on account of a "termination for
cause" (as defined in Section 8(c)), then all rights to exercise options held by
such employee shall terminate immediately as of the date such employee ceases to
be employed by the Company.
(c) As used in this Plan, the term "termination for cause" shall mean a
finding by the Board that the employee has engaged in conduct that is
fraudulent, disloyal, criminal or injurious to the Company, including, without
limitation, embezzlement, theft, commission of a felony or proven dishonesty in
the course of his or her employment or service, or the disclosure of trade
secrets or confidential information of the Company to persons not entitled to
receive such information provided, however, that in the event of my
inconsistency between the foregoing definition and any corresponding definition
contained in a then-effective employment agreement between the Company and any
employee who holds unexercised options under this Plan, the definition set forth
in such employment agreement shall govern.
9. RIGHT OF FIRST REFUSAL; RIGHT TO REPURCHASE.
(a) At any time prior to the registration by the Company of its Common
Stock under Section 12 of the Exchange Act, the Company shall have a right of
first refusal with respect to any proposed sale or other disposition by
optionees (and their successors in interest by purchase, gift or other mode of
transfer) of any shares of Common Stock issued upon the exercise of options
granted under the Plan. Such right shall be exercisable by the Company in
accordance with the terms and conditions established by the Board and set forth
in the applicable stock option agreement.
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<PAGE> 4
(b) If an employee is terminated for cause (as defined in Section 8(c))
at any time, then the Company shall have the right, exercisable in accordance
with the terms and conditions established by the Board and set forth in the
applicable stock option agreement, to repurchase any shares of Common Stock
issued to such terminated employee under the Plan.
10. CHANGE OF CONTROL.
As used herein, a "Change of Control" shall be deemed to have occurred:
(a) if, as a result of any transaction, any "person" (as such term is
used in Section 13(d) and 14(d) of the Exchange Act) other than an existing
stockholder as of the effective date of the Plan (or his beneficiary or estate)
is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly of securities of the Company representing more than
50% of the combined voting power of the then outstanding securities of the
Company;
(b) upon (i) the merger or consolidation of the Company with another
corporation where the stockholders of the Company, immediately prior to the
merger or consolidation, will not beneficially own, immediately after the merger
or consolidation, shares entitling such stockholders to 50% or more of the all
votes to which all stockholders of the surviving corporation would be entitled
in the election of directors (without consideration of the rights of any class
of stock to elect directors by a separate class vote), or where the members of
the Board, immediately prior to the merger or consolidation, would not,
immediately after the merger or consolidation, constitute a majority of the
board or directors of the surviving corporation, (ii) the sale, lease, exchange
or other transfer of all or substantially all of the assets of the Company,
(iii) a liquidation, dissolution or statutory exchange of the Company, or (iv)
the sale of more than 50% or more of the outstanding voting securities of the
Company in one or a series of transactions other than an initial public offering
of voting securities registered with the Securities and Exchange Commission.
(c) on or after the Effective Date, during any period of two
consecutive years, individuals who constitute the Board at the beginning of such
period cease for any reason to constitute at least a majority of the Board,
unless the election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period.
11. CONSEQUENCES OF A CHANGE OF CONTROL.
(a) Subject to Section 11(b) and 11(d), upon a Change of Control, all
outstanding options granted under this Plan shall automatically accelerate so
that each such option shall, immediately prior to the specified effective date
of the Change of Control, become immediately exercisable and each holder of
outstanding options shall thereupon have the right to exercise in full any or
all of his or her outstanding stock options.
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<PAGE> 5
(b) Notwithstanding Section 11(a), an outstanding option shall not
accelerate if and to the extent that such option is, in connection with the
Change of Control, either assumed by the Acquiring Corporation (as defined
below) or parent thereof or replaced with a comparable option to purchase shares
of the capital stock of the Acquiring Corporation or parent thereof (such
assumed and comparable options, together, the "Replacement Options"); provided,
however, that all Replacement Options held by an employee whose employment with
the Company or the Acquiring Corporation is terminated without cause (as defined
in Section 8(c)) or resigns for "good reason" (as defined in Section 11(e)) in
the period beginning upon the Change of Control and ending 12 months following
the Change of Control shall become immediately exercisable upon the date of such
termination or resignation of employment. The term "Acquiring Corporation" means
the surviving, continuing, successor or purchasing corporation, as the case may
be.
(c) Each outstanding option which is to be assumed in connection with
the Change of Control or is otherwise to continue in effect shall be
appropriately adjusted immediately following such Change of Control to apply and
pertain to the number and class of securities which would have been issuable in
consummation of such Change of Control to an actual holder of the same number of
shares of Common Stock as are subject to such option immediately prior to the
Change of Control. Appropriate adjustments shall also be made to the option
price payable per share, provided that the aggregate option price payable
remains the same.
(d) Notwithstanding anything in this Plan to the contrary, in the event
of a Change of Control, no action described in this Plan shall be taken
(including, without limitation, actions described in subsections (a) and (b)
above) that would make the Change of Control ineligible for "pooling of
interest" accounting treatment or that would make the Change of Control
ineligible for desired tax treatment if, in the absence of such action, the
Change of Control would qualify for such treatment and the Company intends to
use such treatment with respect to such Change of Control.
(e) As used in this Plan, "good reason" means (i) a demotion or
material inconsistency or reduction in the duties or responsibilities of an
individual's position or (ii) a material reduction in an individual's aggregate
compensation and benefits provided, however, that in the event of any
inconsistency between the foregoing definition contained in a then-effective
employment agreement between the Company and any employee who holds unexercised
options under this Plan, the definition set forth in such employment agreement
shall govern.
12. OTHER TERMS AND CONDITIONS.
The Board shall have the discretion to determine terms and conditions
consistent with the Plan that will be applicable to options. Options granted to
the same or different participants, or at the same or different times, need not
contain similar provisions.
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<PAGE> 6
13. ADJUSTMENTS TO REFLECT CAPITAL CHANGES.
Subject to Section 11, the number and kind of shares subject to
outstanding options, the exercise price applicable thereto and the number and
kind of shares available for options subsequently granted under the Plan shall
be appropriately adjusted to reflect any stock dividend, stock split,
combination or exchange of shares or other change in capitalization with a
similar substantive effect upon the Plan or the awards granted under the Plan.
The Board shall have the power and sole discretion to determine the nature and
amount of the adjustment to be made in each case. The adjustment so made shall
be final and binding on all participants.
14. PAYMENT FOR STOCK.
Full payment for shares purchased upon exercise of options granted
under the Plan shall be made at the time the award is exercised in whole or in
part. Payment of the purchase price shall be made in cash or in such other form
as the Board may approve, including, without limitation, (i) by the delivery to
the Company by the participant of a promissory note containing such terms as the
Board may determine, or (ii) by the delivery to the Company by the participant
of shares of Common Stock that have been held by the participant for at least
six months prior to exercise of the award, valued at the Fair Market Value of
such shares on the date of exercise or (iii) if the Company's Common Stock is
publicly traded, pursuant to a cashless exercise arrangement with a broker on
such terms as the Board may determine; provided, however, that if payment is
made pursuant to clause (i), then an amount not less than the then par value of
the purchased shares shall be paid in cash. Until such payment has been made, no
shares of Common Stock shall be issued to the participant and a participant
shall have none of the rights of a stockholder with respect to options held by
such participant.
15. TRANSFERABILITY.
Options granted under the Plan shall be transferable (i) by will or the
laws of descent and distribution and (ii) to the extent determined by the Board
and set forth in the applicable option agreement. Options granted under the Plan
may be exercised by the participant or by any permitted transfer.
16. WITHHOLDING.
The Company shall have the right to deduct from all amounts paid to a
participant in cash as salary, bonus or other compensation any taxes required by
law to be withheld in respect of awards granted under the Plan. In the Board's
discretion, a participant may be permitted to elect to have withheld from the
shares otherwise issuable to the participant, or to tender to the Company, the
number of shares of Common Stock whose Fair Market Value equals the amount
required to be withheld.
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17. CONSTRUCTION OF THE PLAN.
The validity, construction, interpretation, administration and effect
of the Plan and of its rules and regulations, and rights relating to the Plan,
shall be determined solely by the Board. Any determination by the Board shall be
final and binding on all participants. The Plan shall be governed in accordance
with the laws of the State of Delaware, without regard to any conflict of law
provisions of such laws that would compel the application of the substantive
laws of any other jurisdiction.
18. NO RIGHT TO AWARD; NO RIGHT TO EMPLOYMENT.
No person shall have any claim of right to be granted an option under
the Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any employee any right to be retained in the employ of the Company or any
of its subsidiaries or as giving any consultant, adviser or director any right
to continue to serve in such capacity.
19. AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES.
Income recognized by a participant pursuant to the provisions of the
Plan shall not be included in the determination of benefits under any employee
pension benefit plan (as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974) or group insurance or other benefit
plans applicable to the participant which are maintained by the Company or any
of its subsidiaries, except as may be provided under the terms of such plans or
determined by resolution of the Board.
20. NO STRICT CONSTRUCTION.
No rule of strict construction shall be implied against the Company,
the Board or any other person in the interpretation of any of the terms of the
Plan, any award granted under the Plan or any rule or procedure established by
the Board.
21. CAPTIONS.
All Section headings used in the Plan are for convenience only, do not
constitute a part of the Plan and shall not be deemed to limit, characterize or
affect in any way any provisions of the Plan, and all provisions of the Plan
shall be construed as if no captions have been used in the Plan.
22. SEVERABILITY.
Whenever possible, each provision in the Plan and every award at any
time granted under the Plan shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of the Plan or
any award at any time granted under the Plan shall be held to be prohibited by
or invalid under applicable law, then such provision shall be deemed amended to
accomplish the objectives of the provision as originally written to the fullest
extent permitted by law, and all other
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provisions of the Plan and every other award at any time granted under the Plan
shall remain in full force and effect.
23. LEGENDS.
All certificates for Common Stock delivered under the Plan shall be
subject to such transfer and other restrictions as the Board may deem advisable
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange or quotation system upon which the
Common Stock is then listed or quoted and any applicable federal or state
securities law, and the Board may cause a legend or legends to be put on any
such certificates to make appropriate references to such restrictions.
24. AMENDMENT.
The Board may, by resolution, amend or revise the Plan, except that
such action shall not be effective without stockholder approval if such
stockholder approval is required to maintain the compliance of the Plan and/or
awards granted to directors, executive officers or other persons with Rule 16b-3
promulgated under the Exchange Act or any successor rule. The Board may not
modify any options previously granted under the Plan in a manner adverse to the
holders thereof without the consent of such holders, except in accordance with
the provisions of Section 11 or Section 13.
25. EFFECTIVE DATE; TERMINATION OF PLAN.
Subject to approval of the Plan by the stockholders of the Company, the
Plan shall become effective on the date it is adopted by the Board. The Plan
shall terminate on the tenth anniversary of the Effective Date unless it is
earlier terminated by the Board. Termination of the Plan shall not affect awards
previously granted under the Plan.
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Exhibit 10.07
UNICAPITAL CORPORATION
1998 LONG-TERM INCENTIVE PLAN
1. PURPOSE OF THE PLAN
The purpose of the UniCapital Corporation 1998 Long-Term Incentive Plan
(the "Plan") is to promote the interests of UniCapital Corporation (the
"Company") and its stockholders by (i) attracting and retaining employees,
directors (other than non-employee directors who receive options under the
Company's 1998 Non-Employee Directors' Stock Plan), consultants and advisors of
outstanding ability, (ii) motivating such persons, by means of
performance-related incentives, to achieve longer-range performance goals, and
(iii) enabling such persons to participate in the long-term growth and financial
success of the Company.
2. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of the
Board of Directors of the Company (the "Board"). The Committee shall at all
times consist of two or more persons, each of whom qualifies as an "outside
director" within the meaning of Section 162(m) or any successor provision of the
Internal Revenue Code of 1986, as amended (the "Code") and applicable Treasury
regulations thereunder, if such qualification is deemed necessary in order for
the grant or the exercise of awards made under the Plan to qualify for any tax
or other material benefit to participants or the Company under applicable law.
The Committee is authorized to interpret the Plan, to prescribe, amend and
rescind rules and regulations to further the purposes of the Plan, and to make
all other determinations necessary for the administration of the Plan. All such
actions by the Committee shall be final and binding.
3. SHARES
(a) SHARES AVAILABLE. Subject to adjustment as provided in Section 6,
awards in respect of an aggregate of up to 15% of the total number of shares of
the Common Stock of the Company, par value $.001 per share (the "Common Stock"),
from time to time outstanding may be made under the Plan. From and after the
date on which the Securities and Exchange Commission first declares effective a
registration statement of the Company under the Securities Act of 1933, as
amended, relating to an initial public offering of Common Stock by the Company
and for the remainder thereafter of the term of the Plan, no participant shall
be granted awards in respect of more than 500,000 shares of Common Stock in any
calendar year. The Common Stock to be offered under the Plan shall be authorized
and unissued Common Stock, or issued Common Stock which shall have been
reacquired by the Company and held in its treasury.
(b) SHARES SUBJECT TO TERMINATED AWARDS. The Common Stock covered by
any unexercised portion of terminated stock options granted under the Plan may
again be subject to new awards under the Plan. In the event the purchase price
of a stock option is paid in whole or in part
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through the delivery of Common Stock, only the net number of shares of Common
Stock issuable in connection with the exercise of the option shall be counted
against the number of shares remaining available for the grant of awards under
the Plan.
4. FAIR MARKET VALUE
For all purposes under the Plan, the term "Fair Market Value" shall
mean, as of any applicable date: (i) if the principal securities market on which
the Common Stock is traded is the New York Stock Exchange, another national
securities exchange or The Nasdaq National Market ("NNM"), the closing price of
the Common Stock on such exchange or NNM, as the case may be, or if no sale of
the Common Stock shall have occurred on such date, on the next preceding date on
which there was a reported sale; or (ii) if the Common Stock is not traded on a
national securities exchange or NNM, the closing price on such date as reported
by The Nasdaq SmallCap Market, or if no sale of the Common Stock shall have
occurred on such date, on the next preceding date on which there was a reported
sale; or (iii) if the principal securities market on which the Common Stock is
traded is not a national securities exchange, NNM or The Nasdaq SmallCap Market,
the average of the bid and asked prices reported by the National Quotation
Bureau, Inc.; or (iv) if the price of the Common Stock is not so reported, the
Fair Market Value of the Common Stock as determined in good faith by the
Committee.
5. DISCRETIONARY AWARDS OF STOCK OPTIONS
(a) DISCRETIONARY AWARDS. The Committee shall have the discretion to
grant awards of stock options under the Plan to employees, consultants and
advisors of the Company or any of its subsidiaries ("Discretionary Awards"),
provided that such consultants or advisors render bona fide services which are
not in connection with the offer or sale of securities in a capital-raising
transaction. The Committee shall determine and designate from time to time those
individuals who shall receive Discretionary Awards and the number of shares of
Common Stock to be covered by, and the other terms and conditions of, each
Discretionary Award. In making its determinations, the Committee shall take into
account the present and potential contributions of the respective individuals to
the success of the Company, and such other factors as the Committee shall deem
relevant in connection with accomplishing the purposes of the Plan. Each
Discretionary Award shall be evidenced by a written stock option agreement in
such form as the Committee shall approve from time to time.
(b) DESIGNATION OF DISCRETIONARY AWARDS. Discretionary Awards may be in
the form of stock options which qualify as "incentive stock options" ("Incentive
Stock Options") within the meaning of Section 422 or any successor provision of
the Code, or stock options which do not so qualify ("Nonqualified Options"),
provided, however, that Incentive Stock Options cannot be granted under the Plan
with respect to more than five million (5,000,000) shares of Common Stock. Each
Discretionary Award shall be designated in the applicable stock option agreement
as an Incentive Stock Option or a Nonqualified Option, as appropriate.
(c) EXERCISE PRICE. Discretionary Awards shall be granted at an
exercise price of not less than 100% of the Fair Market Value on the date of
grant. Incentive Stock Options granted to a
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participant who at the time of such grant owns (within the meaning of Section
424(d) of the Code) more than ten percent of the voting power of all classes of
stock of the Company (a "10% Holder") shall be granted at an exercise price of
not less than 110% of the Fair Market Value on the date of grant.
(d) TERM AND TERMINATION. The Committee shall determine the term within
which each Discretionary Award may be exercised, in whole or in part, provided
that (i) such term shall not exceed ten years from the date of grant; (ii) the
term of an Incentive Stock Option granted to a 10% Holder shall not exceed five
years from the date of grant; and (iii) the aggregate Fair Market Value
(determined on the date of grant) of Common Stock with respect to which
Incentive Stock Options granted to a participant under the Plan or any other
plan of the Company and its subsidiaries become exercisable for the first time
in any single calendar year shall not exceed $100,000. Unless otherwise
determined by the Committee, all rights to exercise Discretionary Awards shall
terminate on the first to occur of (i) the scheduled expiration date as set
forth in the applicable stock option agreement, or (ii) 30 days following the
date of termination of employment for any reason other than the death or
permanent disability (as defined in the Code) of the participant, or (iii) one
year following the date of termination of employment by reason of the
participant's death or permanent disability.
(e) OTHER TERMS AND CONDITIONS. The Committee shall have the discretion
to determine terms and conditions, consistent with the Plan, that will be
applicable to Discretionary Awards. Discretionary Awards granted to the same or
different participants, or at the same or different times, need not contain
similar provisions.
6. ADJUSTMENTS TO REFLECT CAPITAL CHANGES
The number and kind of shares subject to outstanding Discretionary
Awards, the exercise price applicable thereto, and the number and kind of shares
available for Discretionary Awards subsequently granted under the Plan shall be
appropriately adjusted to reflect any stock dividend, stock split, combination
or exchange of shares, merger, consolidation or other change in capitalization
with a similar substantive effect upon the Plan or the awards granted under the
Plan. The Committee shall have the power and sole discretion to determine the
nature and amount of the adjustment to be made in each case. The adjustment so
made shall be final and binding on all participants.
7. PAYMENT FOR STOCK
Full payment for shares purchased upon exercise of awards granted under
the Plan shall be made at the time the award is exercised in whole or in part.
Payment of the purchase price shall be made in cash or in such other form as the
Committee may approve, including, without limitation, (i) by the delivery to the
Company by the participant of a promissory note containing such terms as the
Committee may determine, or (ii) by the delivery to the Company by the
participant of shares of Common Stock that have been held by the participant for
at least six months prior to exercise of the award, valued at the Fair Market
Value of such shares on the date of exercise or (iii) pursuant to a cashless
exercise arrangement with a broker on such terms as the Committee may determine;
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provided, however, that if payment is made pursuant to clause (i), the par value
of the purchased shares shall be paid in cash. No shares of Common Stock shall
be issued to the participant until such payment has been made, and a participant
shall have none of the rights of a stockholder with respect to options held by
such participant.
8. TRANSFERABILITY
Unless otherwise determined by the Committee with respect to
Nonqualified Options, options granted under the Plan shall not be transferable
other than by will or the laws of descent and distribution and are exercisable
during a participant's lifetime only by the participant.
9. WITHHOLDING
The Company shall have the right to deduct from all amounts paid to a
participant in cash as salary, bonus or other compensation any taxes required by
law to be withheld in respect of awards granted under the Plan. In the
Committee's discretion, a participant may be permitted to elect to have withheld
from the shares otherwise issuable to the participant, or to tender to the
Company, the number of shares of Common Stock whose Fair Market Value equals the
amount required to be withheld.
10. CONSTRUCTION OF THE PLAN
The validity, construction, interpretation, administration and effect
of the Plan and of its rules and regulations, and rights relating to the Plan,
shall be determined solely in accordance with the laws of the State of Florida,
without regard to the conflict of law provisions of such laws that would compel
the application of the substantive laws of any other jurisdiction.
11. NO RIGHT TO AWARD; NO RIGHT TO EMPLOYMENT
No person shall have any claim of right to be granted an award under
the Plan. Neither the Plan nor any action taken hereunder shall be construed as
giving any employee any right to be retained in the employ of the Company or any
of its subsidiaries or as giving any consultant or adviser any right to continue
to serve in such capacity.
12. AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES
Income recognized by a participant pursuant to the provisions of the
Plan shall not be included in the determination of benefits under any employee
pension benefit plan (as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974) or group insurance or other benefit
plans applicable to the participant which are maintained by the Company
or any of its subsidiaries, except as may be provided under the terms of such
plans or determined by resolution of the Board.
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13. NO STRICT CONSTRUCTION
No rule of strict construction shall be implied against the Company,
the Committee, or any other person in the interpretation of any of the terms of
the Plan, any award granted under the Plan or any rule or procedure established
by the Committee.
14. CAPTIONS
All Section headings used in the Plan are for convenience only, do not
constitute a part of the Plan, and shall not be deemed to limit, characterize or
affect in any way any provisions of the Plan, and all provisions of the Plan
shall be construed as if no captions have been used in the Plan.
15. SEVERABILITY
Whenever possible, each provision in the Plan and every award at any
time granted under the Plan shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of the Plan or
any award at any time granted under the Plan shall be held to be prohibited by
or invalid under applicable law, then such provision shall be deemed amended to
accomplish the objectives of the provision as originally written to the fullest
extent permitted by law, and all other provisions of the Plan and every other
award at any time granted under the Plan shall remain in full force and effect.
16. LEGENDS
All certificates for Common Stock delivered under the Plan shall be
subject to such transfer and other restrictions as the Committee may deem
advisable under the rules, regulations and other requirements of the Securities
and Exchange Commission, any stock exchange or quotation system upon which the
Common Stock is then listed or quoted and any applicable federal or state
securities law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate references to such restrictions.
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17. AMENDMENT
The Board may, by resolution, amend or revise the Plan, except that
such action shall not be effective without stockholder approval if such
stockholder approval is required to maintain the compliance of the Plan and/or
awards granted to directors, executive officers or other persons with Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, or any
successor rule. The Board may not modify any options previously granted under
the Plan in a manner adverse to the holders thereof without the consent of such
holders, except in accordance with the provisions of Section 6.
18. EFFECTIVE DATE; TERMINATION OF PLAN
The Plan shall become effective on April 1, 1998, provided it has been
approved by the stockholders of the Company. The Plan shall terminate on March
31, 2008, unless it is earlier terminated by the Board. Termination of the Plan
shall not affect awards previously granted under the Plan.
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Exhibit 10.08
UNICAPITAL CORPORATION
1998 NON-EMPLOYEE DIRECTORS' STOCK PLAN
1. PURPOSE OF THE PLAN
The purpose of the UniCapital Corporation 1998 Non-Employee Directors'
Stock Plan (the "Plan") is to promote the interests of UniCapital Corporation
(the "Company") and its stockholders by enabling non-employee directors of the
Company to participate in the long-term growth and financial success of the
Company (directors who so participate under this Plan being ineligible to
participate in the Company's 1998 Long-Term Incentive Plan).
2. SHARES
(a) SHARES AVAILABLE. Subject to adjustment as provided in Section 5,
awards in respect of an aggregate of up to 500,000 shares of the Common Stock of
the Company, par value $.001 per share (the "Common Stock"), may be made under
the Plan. The Common Stock to be offered under the Plan shall be authorized and
unissued Common Stock, or issued Common Stock which shall have been reacquired
by the Company and held in its treasury.
(b) SHARES SUBJECT TO TERMINATED AWARDS. The Common Stock covered by
any unexercised portion of terminated stock options granted under the Plan may
again be subject to new awards under the Plan. In the event the purchase price
of a stock option is paid in whole or in part through the delivery of Common
Stock, only the net number of shares of Common Stock issuable in connection with
the exercise of the option shall be counted against the number of shares
remaining available for the grant of awards under the Plan.
3. FAIR MARKET VALUE
For all purposes under the Plan, the term "Fair Market Value" shall
mean, as of any applicable date: (i) if the principal securities market on which
the Common Stock is traded is the New York Stock Exchange, another national
securities exchange or The Nasdaq National Market ("NNM"), the closing price of
the Common Stock on such exchange or NNM, as the case may be, or if no sale of
the Common Stock shall have occurred on such date, on the next preceding date on
which there was a reported sale; or (ii) if the Common Stock is not traded on a
national securities exchange or NNM, the closing price on such date as reported
by The Nasdaq SmallCap Market, or if no sale of the Common Stock shall have
occurred on such date, on the next preceding date on which there was a reported
sale; or (iii) if the principal securities market on which the Common Stock is
traded is not a national securities exchange, NNM or The Nasdaq SmallCap Market,
the average of the bid and asked prices reported by the National Quotation
Bureau, Inc.; or (iv) if the price of the Common Stock is not so reported, the
Fair Market Value of the Common Stock as determined in good faith by the
Company's Board of Directors (the "Board").
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4. AUTOMATIC AWARDS OF STOCK OPTIONS
(a) INITIAL AWARD. Each person who is not an employee of the Company or
any subsidiary of the Company and who (i) is a director of the Company on the
date on which the Securities and Exchange Commission first declares effective a
registration statement of the Company under the Securities Act of 1933, as
amended, relating to an initial public offering of Common Stock by the Company,
or (ii) first becomes a member of the Board after such date, shall receive a
Nonqualified Option to purchase 21,000 shares of the Common Stock (an "Initial
Award") on the later of the date referred to in clause (i) and the date referred
to in clause (ii). Each Initial Award shall become immediately exercisable in
full on the date of grant.
(b) ANNUAL AWARDS. Each person who is a member of the Board immediately
preceding the annual meeting of the stockholders of the Company in each year
beginning in 1999 (the "Annual Meeting Date") shall receive a Nonqualified
Option to purchase 6,000 shares of the Common Stock (an "Annual Award") on the
Annual Meeting Date. Each Annual Award shall be immediately exercisable in full
on the date of grant.
(c) EXERCISE PRICE. The exercise price of each Initial Award and each
Annual Award shall be the Fair Market Value on the date of grant.
(d) TERM AND TERMINATION. The term of each Initial Award and each
Annual Award shall be ten years, provided that all rights to exercise options
granted thereunder shall terminate on the first to occur of (i) the scheduled
expiration date of such option, or (ii) one year following the date of
termination of service as a director.
5. ADJUSTMENTS TO REFLECT CAPITAL CHANGES
The number and kind of shares subject to outstanding Discretionary
Awards, Initial Awards and Annual Awards, the exercise price applicable thereto,
and the number and kind of shares available for Discretionary Awards, Initial
Awards and Annual Awards subsequently granted under the Plan shall be
appropriately adjusted to reflect any stock dividend, stock split, combination
or exchange of shares, merger, consolidation or other change in capitalization
with a similar substantive effect upon the Plan or the awards granted under the
Plan. The Committee shall have the power and sole discretion to determine the
nature and amount of the adjustment to be made in each case. The adjustment so
made shall be final and binding on all participants.
6. PAYMENT FOR STOCK
Full payment for shares purchased upon exercise of awards granted under
the Plan shall be made at the time the award is exercised in whole or in part.
Payment of the purchase price shall be made in cash or in such other form as the
Committee may approve, including, without limitation, (i) by the delivery to the
Company by the participant of a promissory note containing such terms as
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the Committee may determine, or (ii) by the delivery to the Company by the
participant of shares of Common Stock that have been held by the participant for
at least six months prior to exercise of the award, valued at the Fair Market
Value of such shares on the date of exercise or (iii) pursuant to a cashless
exercise arrangement with a broker on such terms as the Committee may determine;
provided, however, that if payment is made pursuant to clause (i), the par value
of the purchased shares shall be paid in cash. No shares of Common Stock shall
be issued to the participant until such payment has been made, and a participant
shall have none of the rights of a stockholder with respect to options held by
such participant.
7. TRANSFERABILITY
Unless otherwise determined by the Committee with respect to
Nonqualified Options, options granted under the Plan shall not be transferable
other than by will or the laws of descent and distribution and are exercisable
during a participant's lifetime only by the participant.
8. WITHHOLDING
The Company shall have the right to deduct from all amounts paid to a
participant in cash as salary, bonus or other compensation any taxes required by
law to be withheld in respect of awards granted under the Plan. In the
Committee's discretion, a participant may be permitted to elect to have withheld
from the shares otherwise issuable to the participant, or to tender to the
Company, the number of shares of Common Stock whose Fair Market Value equals the
amount required to be withheld.
9. CONSTRUCTION OF THE PLAN
The validity, construction, interpretation, administration and effect
of the Plan and of its rules and regulations, and rights relating to the Plan,
shall be determined solely in accordance with the laws of the Commonwealth of
Pennsylvania, without regard to the conflict of law provisions of such laws.
10. NO RIGHT TO AWARD; NO RIGHT TO EMPLOYMENT
Except as set forth in Section 4, no person shall have any claim of
right to be granted an award under the Plan. Neither the Plan nor any action
taken hereunder shall be construed as giving any employee any right to be
retained in the employ of the Company or any of its subsidiaries or as giving
any consultant, adviser or director any right to continue to serve in such
capacity.
11. AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES
Income recognized by a participant pursuant to the provisions of the
Plan shall not be included in the determination of benefits under any employee
pension benefit plan (as such term is defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974) or group
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insurance or other benefit plans applicable to the participant which are
maintained by the Company or any of its subsidiaries, except as may be provided
under the terms of such plans or determined by resolution of the Board.
12. NO STRICT CONSTRUCTION
No rule of strict construction shall be implied against the Company,
the Committee, or any other person in the interpretation of any of the terms of
the Plan, any award granted under the Plan or any rule or procedure established
by the Committee.
13. CAPTIONS
All Section headings used in the Plan are for convenience only, do not
constitute a part of the Plan, and shall not be deemed to limit, characterize or
affect in any way any provisions of the Plan, and all provisions of the Plan
shall be construed as if no captions have been used in the Plan.
14. SEVERABILITY
Whenever possible, each provision in the Plan and every award at any
time granted under the Plan shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of the Plan or
any award at any time granted under the Plan shall be held to be prohibited by
or invalid under applicable law, then such provision shall be deemed amended to
accomplish the objectives of the provision as originally written to the fullest
extent permitted by law, and all other provisions of the Plan and every other
award at any time granted under the Plan shall remain in full force and effect.
15. LEGENDS
All certificates for Common Stock delivered under the Plan shall be
subject to such transfer and other restrictions as the Committee may deem
advisable under the rules, regulations and other requirements of the Securities
and Exchange Commission, any stock exchange or quotation system upon which the
Common Stock is then listed or quoted and any applicable federal or state
securities law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate references to such restrictions.
16. AMENDMENT
The Board may, by resolution, amend or revise the Plan, except that
such action shall not be effective without stockholder approval if such
stockholder approval is required to maintain the compliance of the Plan and/or
awards granted to directors, executive officers or other persons with Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, or any
successor rule. The Board may not modify any options previously granted under
the Plan in a manner adverse
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to the holders thereof without the consent of such holders, except in accordance
with the provisions of Section 5.
17. EFFECTIVE DATE; TERMINATION OF PLAN
The Plan shall become effective on April 1, 1998, provided it has been
approved by the stockholders of the Company. The Plan shall terminate on March
31, 2008, unless it is earlier terminated by the Board. Termination of the Plan
shall not affect awards previously granted under the Plan.
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Exhibit 10.09
UNICAPITAL CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE
The UniCapital Corporation 1998 Employee Stock Purchase Plan (the
"Plan") is intended to provide a method whereby employees of UniCapital
Corporation (the "Company") will have an opportunity to acquire a proprietary
interest in the Company through the purchase of shares of the Common Stock of
the Company. It is the intention of the Company that the Plan qualify as an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986, as amended (the "Code"). The provisions of the Plan shall be construed so
as to comply in all respects with the requirements of the Code applicable to
employee stock purchase plans.
2. DEFINITIONS
2.01. "ACCOUNT" shall mean a bookkeeping account to which a
Participant's payroll deductions are credited in accordance with Section 4.02.
2.02. "ADJUSTMENT TRANSACTION" shall have the meaning given to that
term in Section 10.04.
2.03. "BASE PAY" shall mean regular straight-time earnings excluding
payments for overtime, shift premium, bonuses and other special payments,
commissions and other marketing incentive payments.
2.04. "BOARD" shall mean the Board of Directors of the Company.
2.05. "COMMITTEE" shall mean the committee described in Article 9.
2.06. "COMMON STOCK" shall mean the common stock, par value $.001 per
share, of the Company.
2.07. "EMPLOYEE" shall mean any person who is employed on a full-time
or part-time basis by the Company or any subsidiary of the Company and is
regularly scheduled to work more than 20 hours per week.
2.08. "FAIR MARKET VALUE" shall mean, as of any applicable date: (i) if
the principal securities market on which the Common Stock is traded is the New
York Stock Exchange, another
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national securities exchange or The Nasdaq National Market ("NNM"), the closing
price of the Common Stock on such exchange or NNM, as the case may be, or if no
sale of the Common Stock shall have occurred on such date, on the next preceding
date on which there was a reported sale; or (ii) if the Common Stock is not
traded on a national securities exchange or NNM, the closing price on such date
as reported by The Nasdaq SmallCap Market, or if no sale of the Common Stock
shall have occurred on such date, on the next preceding date on which there was
a reported sale; or (iii) if the principal securities market on which the Common
Stock is traded is not a national securities exchange, NNM or The Nasdaq
SmallCap Market, the average of the bid and asked prices reported by the
National Quotation Bureau, Inc.; or (iv) if the price of the Common Stock is not
so reported, the Fair Market Value of the Common Stock as determined in good
faith by the Committee.
2.09. "MAXIMUM CONTRIBUTION" shall mean the maximum amount of Base Pay
which each Employee may deduct for the purpose of purchasing shares of Common
Stock under the Plan. The Maximum Contribution, which shall be stated as a
dollar amount or a percentage (in whole percentages) of Base Pay as in effect
from time to time, shall be determined from time to time by the Committee and
shall be uniform with respect to all Participants.
2.10. "OFFERING COMMENCEMENT DATE" shall mean each January 1, April 1,
July 1 and October 1 during the term of the Plan, or, with respect to the first
Offering Period, the first of the foregoing four dates after the date on which
the Plan becomes effective pursuant to Section 10.06.
2.11. "OFFERING PERIOD" shall mean each three-month period beginning on
an Offering Commencement Date.
2.12. "OFFERING TERMINATION DATE" shall mean the last day of each
Offering Period.
2.13. "OPTION" shall mean an option to acquire shares of Common Stock
deemed to have been granted to a Participant as described in Section 5.02.
2.14. "OPTION PRICE" shall mean the purchase price of shares of Common
Stock subject to an Option as described in Section 5.03.
2.15. "PARTICIPANT" shall mean an Employee who elects to participate in
the Plan in accordance with Article 3.
3. ELIGIBILITY AND PARTICIPATION
3.01. INITIAL ELIGIBILITY. Any Employee is eligible to participate in
the Plan for each Offering Period commencing after the first anniversary of such
Employee's first day of employment with the Company or any subsidiary of the
Company.
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3.02. RESTRICTIONS ON PARTICIPATION. Notwithstanding any provisions of
the Plan to the contrary, no Employee shall be permitted to participate in the
Plan or shall be deemed to have been granted an Option under the Plan:
(a) if, immediately after the grant of such Option, such
Employee would own stock, and/or hold outstanding Options to purchase stock,
possessing in the aggregate 5% or more of the total combined voting power or
value of all classes of stock of the Company (for purposes of this paragraph,
the rules of ss.424(d) of the Code shall apply in determining stock ownership of
any Employee); or
(b) which permits his or her rights to purchase stock under
all employee stock purchase plans (as described in Section 423 of the Code) of
the Company to accrue at a rate which exceeds $25,000 in Fair Market Value of
the stock (determined at the time such Option is granted) for each calendar year
in which such Option is outstanding.
3.03. COMMENCEMENT OF PARTICIPATION. An eligible Employee may become a
Participant by completing an authorization for a payroll deduction on the form
provided by the Company and filing it with the Company on or before the Offering
Commencement Date for the applicable Offering Period. Payroll deductions for a
Participant, as elected in accordance with Article 4, shall commence in the
calendar month in which the Offering Commencement Date for the applicable
Offering Period occurs and shall remain in effect throughout that Offering
Period and each subsequent Offering Period until modified or terminated as
provided in Section 4.03 and Article 7.
4. PAYROLL DEDUCTIONS
4.01. AMOUNT OF DEDUCTION. At the time a Participant files his or her
authorization for payroll deduction, he or she shall elect to have deductions
made from his or her Base Pay on each payday during the time he or she is a
Participant in an amount not in excess of the Maximum Contribution.
4.02. PARTICIPANT'S ACCOUNT. All payroll deductions made for a
Participant shall be credited to his or her Account under the Plan. A
Participant may not make any separate cash payment into such Account.
4.03. CHANGES IN PAYROLL DEDUCTIONS. A Participant may discontinue
participation in the Plan as provided in Article 7, but no other change can be
made during an Offering Period and, specifically, a Participant may not alter
the amount of Base Pay to be taken as a payroll deduction for that Offering
Period. A Participant may elect to change or terminate his or her payroll
deductions for a subsequent Offering Period by providing written notice to the
Committee on or before the Offering Commencement Date for such Offering Period.
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5. OFFERING PERIODS AND GRANTING OF OPTIONS
5.01. OFFERING PERIODS. In each calendar year during the term of the
Plan there shall be four Offering Periods, beginning on each Offering
Commencement Date and ending on the next following Offering Termination Date,
provided, however, that in the calendar year in which the initial Offering
Commencement Date occurs, there shall be only such number of full Offering
Periods as are possible within such calendar year from and after the initial
Offering Commencement Date .
5.02. NUMBER OF OPTION SHARES. Subject to Section 3.02, on the Offering
Commencement Date for each Offering Period, a Participant shall be deemed to
have been granted an Option to purchase the number of whole shares of Common
Stock as can be purchased at the Option Price with the amount credited to such
Participant's Account as of the Offering Termination Date with respect to that
Offering Period; provided, however, that if the number of shares of Common Stock
remaining available for issuance under the Plan is less than the number of
shares to be purchased as of an Offering Termination Date, a pro rata allocation
of the available shares shall be made based upon the respective amounts then
credited to Participants' Accounts, and the cash balance credited to each such
Account shall be returned to the Participant whose Account has been so credited.
No fractional shares will be issued under the Plan.
5.03. OPTION PRICE. The Option Price with respect to an Offering Period
shall be 85%, or such higher percentage (not in excess of 100%) as may be
established by the Committee prior to the Offering Commencement Date of such
Offering Period, of the lower of:
(a) the Fair Market Value of the Common Stock on the Offering
Commencement Date; or
(b) the Fair Market Value of the Common Stock on the Offering
Termination Date.
6. EXERCISE OF OPTION
6.01. AUTOMATIC EXERCISE. Unless a Participant gives written notice of
withdrawal from the Plan to the Company as provided in Article 7 prior to the
Offering Termination Date of an Offering Period, the Option deemed to have been
granted to such Participant under Section 5.02 hereof will be deemed to have
been exercised in full automatically on the Offering Termination Date applicable
to such Offering Period, and any excess amount credited to such Participant's
Account at that time (due to the fact that fractional shares will not be issued
under the Plan) will be carried over into the Participant's Account for the
subsequent Offering Period, or refunded if the Participant is not participating
in the subsequent Offering Period.
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6.02. DELIVERY OF COMMON STOCK. Following the Offering Termination Date
of each Offering Period, the Company will deliver to each Participant, as
appropriate, one or more stock certificates representing the shares of Common
Stock purchased upon exercise of the Option deemed to have been granted to such
Participant in such Offering Period.
7. WITHDRAWAL
7.01. IN GENERAL. A Participant may withdraw payroll deductions
credited to his or her Account during an Offering Period at any time prior to
the Offering Termination Date of such Offering Period by giving written notice
to the Company. All of the Participant's payroll deductions credited to his or
her Account for such Offering Period, without interest, will be paid to such
Participant after receipt of his or her notice of withdrawal, and no further
payroll deductions will be made with respect to such Participant during such
Offering Period or any subsequent Offering Period unless such Participant again
commences participation in accordance with Section 3.03.
7.02. EFFECT ON SUBSEQUENT PARTICIPATION. A Participant who withdraws
from the Plan shall be eligible to participate again in the Plan beginning with
the first Offering Period which commences after the date of withdrawal.
7.03. TERMINATION OF EMPLOYMENT. Upon termination of the Participant's
employment for any reason other than death while in the employ of the Company,
the payroll deductions credited to such Participant's Account for the Offering
Period during which such termination occurs will be returned to him or her, or,
in the case of the death of such Participant subsequent to the termination of
his or her employment, to the person or persons entitled thereto under Section
10.01.
7.04. TERMINATION OF EMPLOYMENT DUE TO DEATH. Upon termination of the
Participant's employment because of death, the Participant's beneficiary (as
defined in Section 10.01) shall have the right to elect, by written notice given
to the Company prior to the earlier of the Offering Termination Date for the
Offering Period during which the Participant died or the date which is 60 days
following the date of the Participant's death, either:
(a) to withdraw all of the payroll deductions credited to the
Participant's Account, or
(b) to exercise the Participant's Option on such Offering
Termination Date for the number of full shares of stock which the accumulated
payroll deductions credited to the Participant's Account at the date of the
Participant's death will purchase at the applicable Option Price, and any excess
in such Account will be returned to said beneficiary, without interest.
In the event that no such written notice of election shall be duly received by
the Company, the beneficiary shall automatically be deemed to have elected,
pursuant to paragraph (a), to withdraw the Participant's payroll deductions.
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8. STOCK
8.01. MAXIMUM SHARES. The maximum number of shares of Common Stock
which shall be issued under the Plan (subject to adjustment pursuant to Section
10.04) shall be 2,000,000 shares. Such shares may be authorized but unissued
shares or treasury shares, as the Committee may determine. If an Option shall
expire or terminate without being exercised in full, any shares not purchased
pursuant to such Option shall again be available for granting Options hereunder.
8.02. PARTICIPANT'S INTEREST IN OPTION STOCK. The Participant will have
no interest in the shares of Common Stock covered by an Option deemed to have
been granted hereunder until such Option has been exercised under Section 6.01
or Section 7.04(b).
8.03. REGISTERED OWNERSHIP OF COMMON STOCK. Shares of Common Stock to
be delivered to a Participant under the Plan will be registered in the name of
the Participant, or, if the Participant so directs by written notice to the
Company prior to the Offering Termination Date applicable thereto, in the names
of the Participant and one such other person as may be designated by the
Participant, as joint tenants with rights of survivorship or as tenants by the
entireties, to the extent permitted by applicable law.
8.04. RESTRICTIONS ON EXERCISE. The Board may, in its discretion,
require as conditions to the exercise of any Option that the shares of Common
Stock reserved for issuance upon the exercise of the Option shall have been duly
listed, upon official notice of issuance, on the New York Stock Exchange,
another national securities exchange or NNM, and that either:
(a) a Registration Statement under the Securities Act of 1933,
as amended, with respect to said shares shall be effective, or
(b) the Participant shall have represented at the time of
purchase, in form and substance satisfactory to the Company, that it is his or
her intention to purchase the shares for investment and not for resale or
distribution.
9. ADMINISTRATION
9.01. APPOINTMENT OF COMMITTEE. The Board shall appoint a Committee to
administer the Plan, which shall consist of no fewer than two members of the
Board. No member of the Committee shall be eligible to purchase Common Stock
under the Plan.
9.02. AUTHORITY OF COMMITTEE. Subject to the express provisions of the
Plan, the Committee shall have plenary authority in its sole and absolute
discretion to interpret and construe any and all provisions of the Plan, to
adopt rules and regulations for administering the Plan, and to
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<PAGE> 7
make all other determinations deemed necessary or advisable for administering
the Plan. The Committee's determination on the foregoing matters shall be
conclusive.
10. MISCELLANEOUS
10.01. DESIGNATION OF BENEFICIARY. A Participant may file a written
designation of a beneficiary for purposes of the Plan. Such designation of
beneficiary may be changed by the Participant at any time by written notice to
the Company. In the event of the death of a Participant and in the absence of a
beneficiary validly designated under the Plan who is living at the time of such
Participant's death, the beneficiary shall be the executor or administrator of
the estate of the Participant, of if no such executor or administrator has been
appointed (to the knowledge of the Company), the beneficiary shall be, in the
sole and absolute discretion of the Company, the spouse or any one or more
dependents of the Participant. No beneficiary shall, prior to the death of the
Participant by whom he or she has been designated, acquire any interest under
the Plan.
10.02. TRANSFERABILITY. Neither payroll deductions credited to a
Participant's Account nor any rights with regard to the exercise of an Option or
to receive Common Stock under the Plan may be assigned, transferred, pledged, or
otherwise disposed of in any way by the Participant other than by will or the
laws of descent and distribution. Any such attempted assignment, transfer,
pledge or other disposition shall be without effect, except that the Company
may, in its sole discretion, treat such act as an election to withdraw funds in
accordance with Section 7.01.
10.03. USE OF FUNDS. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose and
the Company shall not be obligated to segregate such payroll deductions or any
Accounts.
10.04. EQUITABLE ADJUSTMENT. If, while any Options are outstanding, the
outstanding shares of Common Stock of the Company have increased, decreased,
changed into, or been exchanged for a different number or kind of shares or
securities of the Company or any other entity through reorganization, merger,
recapitalization, reclassification, stock split, reverse stock split or other
transaction (an "Adjustment Transaction"), appropriate and proportionate
adjustments may be made by the Committee in the number and/or kind of shares
which are subject to purchase under outstanding Options, and/or the Option Price
applicable to such outstanding Options or the Committee, if it deems it
appropriate, may convert Options into the right to receive cash or other
property pursuant to the Adjustment Transaction. In addition, in any such event,
the number and/or kind of shares which may be offered for purchase under the
Plan may also be proportionately adjusted if deemed appropriate by the
Committee.
10.05. AMENDMENT AND TERMINATION. The Board shall have complete power
and authority to terminate or amend the Plan; provided, however, that the Board
shall not amend the Plan without the approval of the stockholders of the Company
if such approval is required for the continued qualification of the Plan under
Rule 16b-3 under the Securities Exchange Act of 1934, as amended.
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<PAGE> 8
No termination, modification, or amendment of the Plan may, without the consent
of a Participant then having an unexercised Option under the Plan, adversely
affect the rights of such Participant with respect to such Option. The Plan
shall terminate automatically on March 31, 2008 unless sooner terminated by
action of the Board.
10.06. EFFECTIVE DATE. The Plan shall become effective on the date on
which the Company's registration statement on Form S-8 with respect to the Plan
becomes effective under the Securities Act of 1933.
10.07. COSTS AND EXPENSES. No brokerage commissions or fees shall be
charged by the Company in connection with the purchase of shares of Common Stock
by Participants under the Plan. All costs and expenses incurred in administering
the Plan shall be borne by the Company. Any amounts credited to Accounts shall
constitute general assets of the Company and nothing in the Plan shall be
construed to create a trust or fiduciary relationship with respect to such
Accounts. The Company shall not be obligated to pay interest with respect to
such Accounts.
10.08. NO EMPLOYMENT RIGHTS. The Plan does not, directly or indirectly,
create any right for the benefit of any Employee or class of Employees to
purchase any shares under the Plan, or create in any Employee or class of
Employees any right with respect to continuation of employment by the Company
and it shall not be deemed to interfere in any way with the Company's right to
terminate, or otherwise modify, an Employee's employment at any time.
10.09. GOVERNING LAW. The laws of the State of Delaware, other than the
conflicts of laws provisions of such law, will govern all matters relating to
the Plan.
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<PAGE> 1
EXHIBIT 10.10
FORM OF EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
the ____ day of ____________, 1998 by and between UNICAPITAL CORPORATION, a
Delaware corporation (the "Company"), and ROBERT J. NEW (the "Employee").
R E C I T A L S
The Company desires to obtain the services of the Employee in the
employment of the Company on the terms and subject to the conditions set forth
in this Agreement, and the Employee desires to make his services available to
the Company on the terms and subject to the conditions set forth in this
Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises, agreements and mutual
covenants set forth herein, the parties hereto, intending to be bound legally,
hereby agree as follows:
1. DEFINITIONS. The following terms when used herein, unless the context
otherwise requires, shall be defined as follows:
1.1 "Cause" shall have the meaning set forth in Section 5.1 hereof.
1.2 "Company" shall mean UniCapital Corporation, a Delaware
corporation.
1.3 "Competing Business" shall have the meaning set forth in
Section 6.1 hereof.
1.4 "Confidential Information" shall have the meaning set forth in
Section 9.1 hereof.
1.5 "Term" shall have the meaning set forth in Section 3 hereof.
2. EMPLOYMENT
2.1 General. The Company hereby agrees to employ the Employee as
Chairman and Chief Executive Officer during the Term of this Agreement on the
terms and subject to the conditions contained in this Agreement, and the
Employee hereby agrees to accept such employment on the terms and subject to the
conditions contained in this Agreement.
2.2 Duties of Employee. During the Term of this Agreement, the Employee
shall diligently perform all duties and responsibilities as may be assigned to
him by the Company's Board of Directors and shall exercise such power and
authority as may from time to time be delegated to him thereby. The Employee
shall devote his full business time and attention to the business and affairs
<PAGE> 2
of the Company as necessary to perform his duties and responsibilities
hereunder, render such services to the best of his ability, and use his best
efforts to promote the interests of the Company.
3. TERM. Subject to the provisions of Section 5 of this Agreement, the
Company shall employ the Employee for a term commencing on the date first
written above (the "Effective Date"), which shall be the date of consummation of
the initial public offering by the Company of its common stock (the "IPO")
pursuant to a registration statement on Form S-1 filed by the Company with the
Securities and Exchange Commission (the "SEC") relating to such IPO (the
"Registration Statement") and declared effective by the SEC and expiring on
April 1, 2000.
4. COMPENSATION.
4.1 Salary. The Employee shall receive an annual salary of
Six-Hundred-Fifty Thousand Dollars ($650,000.00) during the Term of this
Agreement, and such salary shall be payable in installments consistent with the
Company's normal payroll schedule commencing on either the first or fifteenth
day of the month, as the case may be, following the Effective Date.
4.2 Benefits. During the Term of this Agreement, the Employee shall be
entitled to participate in all plans adopted for the general benefit of the
ZCompany's employees, such as stock option plans, 401(k) plans, pension plans,
profit sharing plans, medical plans, group or other insurance plans and
benefits, to the extent that the Employee is and remains eligible to participate
therein and subject to the eligibility provisions of such plans in effect from
time to time. For each calendar year during the Term of this Agreement, the
Employee shall be entitled to not less than four weeks of paid vacation,
prorated for any period of employment of less than an entire year.
4.3 Withholding. Notwithstanding any provision in this Agreement to the
contrary, all payments required to be made by the Company hereunder to the
Employee in connection with the Employee's employment hereunder shall be subject
to withholding of such amounts relating to taxes as the Company may reasonably
determine it should withhold pursuant to any applicable law or regulation. In
lieu of withholding such amounts, in whole or in part, the Company may, in its
sole discretion, accept other provisions for the payment of taxes, provided that
the Company is satisfied that all requirements of law affecting its
responsibilities to withhold have been satisfied.
4.4 Reimbursement of Expenses. The Company agrees to reimburse the
Employee for all reasonable business expenses (including, without limitation,
reasonable travel and entertainment expenses) incurred by the Employee in the
discharge of his duties hereunder, subject to the Company's reimbursement
policies in effect from time to time. The Employee agrees to maintain reasonable
records of his business expenses in such form and detail as the Company may
request and to make such records available to the Company as and when requested.
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<PAGE> 3
5. TERMINATION
5.1 Termination for Cause. Notwithstanding any provision in this
Agreement to the contrary, this Agreement may be terminated by the Company for
"Cause" at any time during the Term hereof, and such termination shall be
effective immediately upon written notice to the Employee. For purposes of this
Agreement, "Cause" for the termination of the Employee's employment hereunder
shall be deemed to exist if, in the reasonable judgment of the Company's Board
of Directors: (a) the Employee commits fraud, theft or embezzlement against the
Company; (b) the Employee commits a felony or a crime involving moral turpitude;
(c) the Employee compromises trade secrets or other proprietary information of
the Company; (d) the Employee breaches any non-competition or non-solicitation
agreement with the Company or any subsidiary or affiliate thereof; (e) the
Employee breaches any of the terms of this Agreement (other than those
referenced in clauses (c) and (d) of this Section 5.1) and fails to cure such
breach within 10 days after the receipt of written notice of such breach from
the Company; or (f) the Employee engages in gross negligence or willful
misconduct that causes harm to the business and operations of the Company or a
subsidiary or affiliate thereof. Upon any termination pursuant to this Section
5.1, the Employee shall be entitled to be paid solely the Employee's salary then
in effect through the effective date of termination, and the Company shall have
no further liability or other obligation of any kind whatsoever to the Employee.
5.2 Termination by the Company Without Cause. The Company may, in its
sole and absolute discretion, terminate the employment of the Employee
hereunder, at any time prior to the expiration of the term of this Agreement,
without "Cause" (as such term is defined in Section 5.1 above), or otherwise
without any cause, reason or justification, provided that the Company provides
to the Employee at least sixty (60) days' prior written notice (the "Termination
Notice") of such termination. In the event of any such termination by the
Company, (a) the Employee's employment with the Company shall cease and
terminate on the date specified in the Termination Notice (or, if no date is so
specified, on the date which is 60 days following the date of such notice), and
(b) the Employee shall be entitled to receive and be paid solely the Employee's
salary then in effect for the shorter of (x) the three-month period following
the Employee's termination or (y) the remaining Term of this Agreement, payable
over such period at the Company's regular and customary intervals for the
payment of salaries as then in effect, and the Company shall have no further
liability or other obligation of any kind whatsoever to the Employee.
5.3 Death of the Employee. In the event that the Employee shall die
during the Term of this Agreement, the Employee's employment with the Company
shall immediately cease and terminate and the Employee's estate, heirs (at law),
devisees, legatees or other proper and legally entitled descendants, or the
personal representative, executor, administrator or other proper legal
representative on behalf of such descendants, shall be entitled to receive and
be paid solely the Employee's salary through the date of death, and the Company
shall have no further liability or other obligation of any kind whatsoever to
the Employee.
3
<PAGE> 4
5.4 Disability of the Employee. In the event that the Employee becomes
incapacitated during the Term by reason of sickness, accident or other
mental or physical disability such that he is substantially unable to
perform his duties and responsibilities hereunder for a period of 60
consecutive days, or for shorter or intermittent periods aggregating 90
days during any 12-month period (a "Disability"), the Company thereafter
shall have the right, in its sole and absolute discretion, to terminate the
Employee's employment under this Agreement by sending written notice of
such termination to the Employee or its legal guardian or other proper
legal representative and thereupon his employment hereunder shall
immediately cease and terminate. In the event of any such termination, the
Employee shall be entitled to receive and be paid solely the Employee's
salary then in effect through the effective date of termination and the
Company shall have no further liability or other obligation of any kind
whatsoever to the Employee.
5.5 Termination by the Employee. Provided that the Company does not
have "Cause" to terminate the Employee pursuant to Section 5.1 above, the
Employee may terminate the Employee's employment with the Company hereunder
at any time and for any reason. Employee must provide to the Company
written notice of such termination not less than 365 days prior to the date
such termination is to be effective. Upon any termination pursuant to this
Section 5.5, the Employee shall be entitled to be paid solely the
Employee's salary then in effect through the effective date of termination,
and the Company shall have no further liability or other obligation of any
kind whatsoever to the Employee.
6. AGREEMENT NOT TO COMPETE
6.1 As used in this Agreement, "Competing Business" shall mean any
business or enterprise which is engaged in (a) the equipment leasing
business; or (b) any business, business segment or product line engaged in
by the Company on the date of termination of the Employee's employment with
the Company (clauses (a) and (b) collectively referred to herein as the
"Company's Business").
6.2 The Employee agrees that, during the Term of this Agreement and
for two years following the termination or expiration of his employment for
any reason whatsoever, he will not, without the prior written consent of
the Company, either directly or indirectly, on his own behalf or in the
service of or on behalf of others as a shareholder, director, officer,
trustee, consultant, independent contractor or employee, engage in, or be
employed by, or provide services to, any Competing Business within the
State of Florida or in any other state in which the Company or any
subsidiary or affiliate thereof is engaged in business or in which of any
of their respective products or services are marketed or sold at the time
of such termination.
7. AGREEMENT NOT TO SOLICIT OR SELL TO CUSTOMERS. The Employee agrees
that, during the Term of this Agreement and for two years following the
termination or expiration of his employment for any reason whatsoever, he
will not without the prior written consent of the Company, either directly
or indirectly, call on, solicit, take away, accept as a client, customer or
prospective client, customer or attempt to call on, solicit, take away or
accept as a client, customer
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<PAGE> 5
prospective client or customer, any person that was a client, customer or
prospective client or customer of the Company or any of its subsidiaries or
affiliates.
8. AGREEMENT NOT TO SOLICIT OR HIRE EMPLOYEES. The Employee agrees that
during the Term of this Agreement and for two years following the termination or
expiration of his employment for any reason whatsoever, he will not, either
directly or indirectly, on his own behalf or in the service or on behalf of
others, solicit, divert or hire, attempt to solicit, divert or hire or induce or
attempt to induce to discontinue employment with the Company or any subsidiary
or affiliate thereof, any person employed by the Company or any subsidiary or
affiliate thereof, whether or not such employee is a full time employee or a
temporary employee of the Company or any subsidiary or affiliate thereof and
whether or not such employment is for a determined period or is at will.
9. OWNERSHIP AND NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION
9.1 As used in this Agreement, "Confidential Information" shall mean
all customer sales and marketing information, customer account records,
proprietary receipts and/or processing techniques, information regarding
vendors and products, training and operations memoranda and similar
information, personnel records, pricing information, financial information
and trade secrets concerning or relating to the business, accounts,
customers, employees and affairs of the Company, or any subsidiary or
affiliate thereof, obtained by or furnished, disclosed or disseminated to
the Employee, or obtained, assembled or compiled by the Employee or under
his supervision during the course of his employment by the Company, and all
physical embodiments of the foregoing, all of which are hereby agreed to be
the property of and confidential to the Company, but Confidential
Information shall not include any of the foregoing to the extent the same
is or becomes publicly known through no fault or breach of this Agreement
by the Employee.
9.2 The Employee acknowledges and agrees that all Confidential
Information, and all physical embodiments thereof, are confidential to and
shall be and remain the sole and exclusive property of the Company. Upon
request by the Company, and in any event upon termination of the Employee's
employment with the Company for any reason whatsoever, as a prior condition
to the Employee's receipt of any final salary or benefit payments
hereunder, the Employee shall deliver to the Company all property belonging
to the Company or any of its subsidiaries or affiliates, including, without
limitation, all Confidential Information (and all embodiments thereof),
then in his custody, control or possession, but any forfeiture of such
salary or benefit shall not be considered a satisfaction or a release of or
liquidated damages for any claim(s) for damages against the Employee which
may accrue to the Company, as a result of any breach of this Section 9 by
the Employee.
9.3 The Employee agrees that he will not, either during the Term of
this Agreement or at any time thereafter, without the prior written consent
of the Company, use, disclose or make available any Confidential
Information to any person or entity, nor shall he use, disclose, make
available or cause to be used, disclosed or made available, or permit or
allow, either on his own behalf or on behalf of others, any use or
disclosure of such Confidential Information other than in the proper
performance of the Employee's duties hereunder.
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<PAGE> 6
10. INVENTIONS. The Employee shall disclose promptly to the Company any and
all conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, that are conceived or made by the
Employee, solely or jointly with another, during the Term of this Agreement and
that are directly related to the business or activities of the Company and that
the Employee conceives as a result of his employment by the Company, regardless
of whether or not such ideas, inventions, or improvements qualify as "works for
hire." The 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, the Employee shall execute any and all applications, assignments or
other instruments that the Company shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect the Company's interest therein.
11. REASONABLENESS OF RESTRICTIONS. In the event that any provision
relating to time period or geographic area of any restriction set forth in
Sections 6, 7, 8, 9 or 10 shall be declared by a court of competent jurisdiction
to exceed the maximum time period or area of restriction that the court deems
reasonable and enforceable, the time period or area of restriction which the
court finds to be reasonable and enforceable shall be deemed to become, and
thereafter shall be, the maximum time period or geographic area of such
restriction.
12. ENFORCEABILITY. Any provision of Sections 6, 7, 8, 9 or 10 which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, but shall be enforced to the
maximum extent permitted by law, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
13. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Employee of any of the covenants contained in
Sections 6, 7, 8, 9 or 10 of this Agreement will cause irreparable harm and
damage to the Company, the monetary amount of which may be virtually impossible
to ascertain. As a result, the Employee recognizes and hereby acknowledges that
the Company shall be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all of the
covenants contained in Sections 6, 7, 8, 9 or 10 of this Agreement by the
Employee or any of his affiliates, associates, partners or agents, either
directly or indirectly, and that such right to injunction shall be cumulative
and in addition to whatever other remedies the Company may possess.
14. ASSIGNMENT. The Employee shall not delegate his employment obligations
pursuant to this Agreement to any other person.
15. EMPLOYER'S AUTHORITY. The relationship between the parties hereto is
that of employer and employee. The Employee agrees to observe and comply with
the rules and regulations of the Company, as adopted by the Company from time to
time with respect to the performance of the duties of the Employee. The Employee
acknowledges that he has no authority to enter into any contracts or other
obligations that are binding upon the Company unless such contracts or
obligations are authorized by the Board of Directors of the Company. The Company
shall have the power to
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<PAGE> 7
direct, control and supervise the duties to be performed by the Employee, the
manner of performing said duties, and the time of performing said duties.
16. GOVERNING LAW. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of Florida, excluding
the choice of law rules thereof. The Company and the Employee each hereby
irrevocably submit to the jurisdiction of the state or federal courts located in
Dade County, Florida in connection with any suit, action or other proceeding
arising out of or relating to this Agreement and hereby agree not to assert, by
way of motion, as a defense, or otherwise in any such suit, action or proceeding
that the suit, action or proceeding is brought in an inconvenient forum, that
the venue of the suit, action or proceeding is improper or that this Agreement
or the subject matter hereof may not be enforced by such courts.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, understandings and arrangements, both oral and
written, between the parties hereto with respect to such subject matter. This
Agreement may not be modified in any way, unless by a written instrument signed
by both the Company and the Employee.
18. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or three (3) days after sent by registered or certified United
States mail, return receipt requested, postage prepaid, or the next business day
following dispatch by a reputable overnight courier service, addressed as
follows:
(i) If to the Employee:
Robert J. New
11414 North Bayshore Drive
North Miami, FL 33181
(ii) If to the Company:
UniCapital Corporation
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Attention: Martin Kalb
with a copy given in the manner prescribed above to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
Pittsburgh, PA 15219
Attention: David A. Gerson
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<PAGE> 8
or to such other addresses as either party hereto may from time to time give
notice of to the other party hereto in the aforesaid manner.
19. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit of
and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns.
20. SEVERABILITY. Except as otherwise provided in Sections 11 and 12, the
invalidity of any one or more of the words, phrases, sentences, clauses,
sections or subsections contained in this Agreement shall not affect the
enforceability of the remaining portions of this Agreement or any part thereof,
all of which are inserted conditionally on their being valid in law, and, in the
event that any one or more of the words, phrases, sentences, clauses, sections
or subsections contained in this Agreement or any part thereof shall be declared
invalid, this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, section or sections
or subsection or subsections had not been inserted. If such invalidity is caused
by length of time or size of area, or both, the otherwise invalid provision will
be considered to be reduced to a period or area which would cure such
invalidity.
21. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Employee from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings
suit for the collection of any damages resulting from, or the injunction of any
action constituting, a breach of any of the terms or provisions of this
Agreement, then the non- prevailing party shall pay all reasonable court costs
and attorneys' fees of the other party.
22. SECTION HEADINGS. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
23. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the parties hereto and their respective heirs, personal
representative, legal representative, successors and assigns, any rights or
remedies under or by reason of this Agreement.
24. AMENDMENT; MODIFICATION; WAIVER. No amendment, modification or waiver
of the terms of this Agreement shall be valid unless made in writing and duly
executed by the Company and the Employee. No delay or failure at any time on the
part of the Company in exercising any right, power or privilege under this
Agreement, or in enforcing any provision of this Agreement, shall impair any
such right, power or privilege, or be construed as a waiver of any default or as
any acquiescence therein, or shall affect the right of the Company thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
The waiver by either party hereto of a breach or violation of any term or
provision of this Agreement shall neither operate nor be construed as a waiver
of any subsequent breach or violation.
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<PAGE> 9
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
UNICAPITAL CORPORATION
By:
-----------------------------------
Name:
Title:
EMPLOYEE
--------------------------------------
Robert J. New
9
<PAGE> 1
EXHIBIT 10.11
FORM OF EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
the ____ day of ____________, 1998 by and between UNICAPITAL CORPORATION, a
Delaware corporation (the "Company"), and JONATHAN NEW (the "Employee").
R E C I T A L S
The Company desires to obtain the services of the Employee in the
employment of the Company on the terms and subject to the conditions set forth
in this Agreement, and the Employee desires to make his services available to
the Company on the terms and subject to the conditions set forth in this
Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises, agreements and mutual
covenants set forth herein, the parties hereto, intending to be bound legally,
hereby agree as follows:
1. DEFINITIONS. The following terms when used herein, unless the context
otherwise requires, shall be defined as follows:
1.1 "Cause" shall have the meaning set forth in Section 5.1 hereof.
1.2 "Company" shall mean UniCapital Corporation, a Delaware
corporation.
1.3 "Competing Business" shall have the meaning set forth in
Section 6.1 hereof.
1.4 "Confidential Information" shall have the meaning set forth in
Section 9.1 hereof.
1.5 "Term" shall have the meaning set forth in Section 3 hereof.
2. EMPLOYMENT
2.1 General. The Company hereby agrees to employ the Employee as Chief
Financial Officer during the Term of this Agreement on the terms and
subject to the conditions contained in this Agreement, and the Employee
hereby agrees to accept such employment on the terms and subject to the
conditions contained in this Agreement.
2.2 Duties of Employee. During the Term of this Agreement, the
Employee shall diligently perform all duties and responsibilities as may be
assigned to him by the Company's Board of Directors and Chief Executive
Officer and shall exercise such power and authority as may from
<PAGE> 2
time to time be delegated to him thereby. The Employee shall devote his
full business time and attention to the business and affairs of the Company
as necessary to perform his duties and responsibilities hereunder, render
such services to the best of his ability, and use his best efforts to
promote the interests of the Company.
3. TERM. Subject to the provisions of Section 5 of this Agreement, the
Company shall employ the Employee for a term commencing on the date first
written above (the "Effective Date"), which shall be the date of
consummation of the initial public offering by the Company of its common
stock (the "IPO") pursuant to a registration statement on Form S-1 filed by
the Company with the Securities and Exchange Commission (the "SEC")
relating to such IPO (the "Registration Statement") and declared effective
by the SEC and expiring on April 1, 2000.
4. COMPENSATION.
4.1 Salary. The Employee shall receive an annual salary of
Two-Hundred-Fifty Thousand Dollars ($250,000.00) during the Term of this
Agreement, and such salary shall be payable in installments consistent with
the Company's normal payroll schedule commencing on either the first or
fifteenth day of the month, as the case may be, following the Effective
Date.
4.2 Benefits. During the Term of this Agreement, the Employee shall be
entitled to participate in all plans adopted for the general benefit of the
Company's employees, such as stock option plans, 401(k) plans, pension
plans, profit sharing plans, medical plans, group or other insurance plans
and benefits, to the extent that the Employee is and remains eligible to
participate therein and subject to the eligibility provisions of such plans
in effect from time to time. For each calendar year during the Term of this
Agreement, the Employee shall be entitled to not less than four weeks of
paid vacation, prorated for any period of employment of less than an entire
year.
4.3 Withholding. Notwithstanding any provision in this Agreement to
the contrary, all payments required to be made by the Company hereunder to
the Employee in connection with the Employee's employment hereunder shall
be subject to withholding of such amounts relating to taxes as the Company
may reasonably determine it should withhold pursuant to any applicable law
or regulation. In lieu of withholding such amounts, in whole or in part,
the Company may, in its sole discretion, accept other provisions for the
payment of taxes, provided that the Company is satisfied that all
requirements of law affecting its responsibilities to withhold have been
satisfied.
4.4 Reimbursement of Expenses. The Company agrees to reimburse the
Employee for all reasonable business expenses (including, without
limitation, reasonable travel and entertainment expenses) incurred by the
Employee in the discharge of his duties hereunder, subject to the Company's
reimbursement policies in effect from time to time. The Employee agrees to
maintain reasonable records of his business expenses in such form and
detail as the Company may request and to make such records available to the
Company as and when requested.
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5. TERMINATION
5.1 Termination for Cause. Notwithstanding any provision in this
Agreement to the contrary, this Agreement may be terminated by the Company
for "Cause" at any time during the Term hereof, and such termination shall
be effective immediately upon written notice to the Employee. For purposes
of this Agreement, "Cause" for the termination of the Employee's employment
hereunder shall be deemed to exist if, in the reasonable judgment of the
Company's Board of Directors: (a) the Employee commits fraud, theft or
embezzlement against the Company; (b) the Employee commits a felony or a
crime involving moral turpitude; (c) the Employee compromises trade secrets
or other proprietary information of the Company; (d) the Employee breaches
any non-competition or non-solicitation agreement with the Company or any
subsidiary or affiliate thereof; (e) the Employee breaches any of the terms
of this Agreement (other than those referenced in clauses (c) and (d) of
this Section 5.1) and fails to cure such breach within 10 days after the
receipt of written notice of such breach from the Company; or (f) the
Employee engages in gross negligence or willful misconduct that causes harm
to the business and operations of the Company or a subsidiary or affiliate
thereof. Upon any termination pursuant to this Section 5.1, the Employee
shall be entitled to be paid solely the Employee's salary then in effect
through the effective date of termination, and the Company shall have no
further liability or other obligation of any kind whatsoever to the
Employee.
5.2 Termination by the Company Without Cause. The Company may, in its
sole and absolute discretion, terminate the employment of the Employee
hereunder, at any time prior to the expiration of the term of this
Agreement, without "Cause" (as such term is defined in Section 5.1 above),
or otherwise without any cause, reason or justification, provided that the
Company provides to the Employee at least sixty (60) days' prior written
notice (the "Termination Notice") of such termination. In the event of any
such termination by the Company, (a) the Employee's employment with the
Company shall cease and terminate on the date specified in the Termination
Notice (or, if no date is so specified, on the date which is 60 days
following the date of such notice), and (b) the Employee shall be entitled
to receive and be paid solely the Employee's salary then in effect for the
shorter of (x) the eight-month period following the Employee's termination
or (y) the remaining Term of this Agreement, payable over such period at
the Company's regular and customary intervals for the payment of salaries
as then in effect, and the Company shall have no further liability or other
obligation of any kind whatsoever to the Employee.
5.3 Death of the Employee. In the event that the Employee shall die
during the Term of this Agreement, the Employee's employment with the
Company shall immediately cease and terminate and the Employee's estate,
heirs (at law), devisees, legatees or other proper and legally entitled
descendants, or the personal representative, executor, administrator or
other proper legal representative on behalf of such descendants, shall be
entitled to receive and be paid solely the Employee's salary through the
date of death, and the Company shall have no further liability or other
obligation of any kind whatsoever to the Employee.
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5.4 Disability of the Employee. In the event that the Employee becomes
incapacitated during the Term by reason of sickness, accident or other
mental or physical disability such that he is substantially unable to
perform his duties and responsibilities hereunder for a period of 60
consecutive days, or for shorter or intermittent periods aggregating 90
days during any 12-month period (a "Disability"), the Company thereafter
shall have the right, in its sole and absolute discretion, to terminate the
Employee's employment under this Agreement by sending written notice of
such termination to the Employee or its legal guardian or other proper
legal representative and thereupon his employment hereunder shall
immediately cease and terminate. In the event of any such termination, the
Employee shall be entitled to receive and be paid solely the Employee's
salary then in effect through the effective date of termination and the
Company shall have no further liability or other obligation of any kind
whatsoever to the Employee.
5.5 Termination by the Employee. Provided that the Company does not
have "Cause" to terminate the Employee pursuant to Section 5.1 above, the
Employee may terminate the Employee's employment with the Company hereunder
at any time and for any reason. Employee must provide to the Company
written notice of such termination not less than 365 days prior to the date
such termination is to be effective. Upon any termination pursuant to this
Section 5.5, the Employee shall be entitled to be paid solely the
Employee's salary then in effect through the effective date of termination,
and the Company shall have no further liability or other obligation of any
kind whatsoever to the Employee.
6. AGREEMENT NOT TO COMPETE
6.1 As used in this Agreement, "Competing Business" shall mean any
business or enterprise which is engaged in (a) the equipment leasing
business; or (b) any business, business segment or product line engaged in
by the Company on the date of termination of the Employee's employment with
the Company (clauses (a) and (b) collectively referred to herein as the
"Company's Business").
6.2 The Employee agrees that, during the Term of this Agreement and
for two years following the termination or expiration of his employment for
any reason whatsoever, he will not, without the prior written consent of
the Company, either directly or indirectly, on his own behalf or in the
service of or on behalf of others as a shareholder, director, officer,
trustee, consultant, independent contractor or employee, engage in, or be
employed by, or provide services to, any Competing Business within the
State of Florida or in any other state in which the Company or any
subsidiary or affiliate thereof is engaged in business or in which of any
of their respective products or services are marketed or sold at the time
of such termination.
7. AGREEMENT NOT TO SOLICIT OR SELL TO CUSTOMERS. The Employee agrees that,
during the Term of this Agreement and for two years following the termination or
expiration of his employment for any reason whatsoever, he will not without the
prior written consent of the Company, either directly or indirectly, call on,
solicit, take away, accept as a client, customer or prospective client, customer
or attempt to call on, solicit, take away or accept as a client, customer
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prospective client or customer, any person that was a client, customer or
prospective client or customer of the Company or any of its subsidiaries or
affiliates.
8. AGREEMENT NOT TO SOLICIT OR HIRE EMPLOYEES. The Employee agrees that
during the Term of this Agreement and for two years following the termination or
expiration of his employment for any reason whatsoever, he will not, either
directly or indirectly, on his own behalf or in the service or on behalf of
others, solicit, divert or hire, attempt to solicit, divert or hire or induce or
attempt to induce to discontinue employment with the Company or any subsidiary
or affiliate thereof, any person employed by the Company or any subsidiary or
affiliate thereof, whether or not such employee is a full time employee or a
temporary employee of the Company or any subsidiary or affiliate thereof and
whether or not such employment is for a determined period or is at will.
9. OWNERSHIP AND NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION
9.1 As used in this Agreement, "Confidential Information" shall mean
all customer sales and marketing information, customer account records,
proprietary receipts and/or processing techniques, information regarding
vendors and products, training and operations memoranda and similar
information, personnel records, pricing information, financial information
and trade secrets concerning or relating to the business, accounts,
customers, employees and affairs of the Company, or any subsidiary or
affiliate thereof, obtained by or furnished, disclosed or disseminated to
the Employee, or obtained, assembled or compiled by the Employee or under
his supervision during the course of his employment by the Company, and all
physical embodiments of the foregoing, all of which are hereby agreed to be
the property of and confidential to the Company, but Confidential
Information shall not include any of the foregoing to the extent the same
is or becomes publicly known through no fault or breach of this Agreement
by the Employee.
9.2 The Employee acknowledges and agrees that all Confidential
Information, and all physical embodiments thereof, are confidential to and
shall be and remain the sole and exclusive property of the Company. Upon
request by the Company, and in any event upon termination of the Employee's
employment with the Company for any reason whatsoever, as a prior condition
to the Employee's receipt of any final salary or benefit payments
hereunder, the Employee shall deliver to the Company all property belonging
to the Company or any of its subsidiaries or affiliates, including, without
limitation, all Confidential Information (and all embodiments thereof),
then in his custody, control or possession, but any forfeiture of such
salary or benefit shall not be considered a satisfaction or a release of or
liquidated damages for any claim(s) for damages against the Employee which
may accrue to the Company, as a result of any breach of this Section 9 by
the Employee.
9.3 The Employee agrees that he will not, either during the Term of
this Agreement or at any time thereafter, without the prior written consent
of the Company, use, disclose or make available any Confidential
Information to any person or entity, nor shall he use, disclose, make
available or cause to be used, disclosed or made available, or permit or
allow, either on his own behalf or on behalf of others, any use or
disclosure of such Confidential Information other than in the proper
performance of the Employee's duties hereunder.
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10. INVENTIONS. The Employee shall disclose promptly to the Company any and
all conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, that are conceived or made by the
Employee, solely or jointly with another, during the Term of this Agreement and
that are directly related to the business or activities of the Company and that
the Employee conceives as a result of his employment by the Company, regardless
of whether or not such ideas, inventions, or improvements qualify as "works for
hire." The 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, the Employee shall execute any and all applications, assignments or
other instruments that the Company shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect the Company's interest therein.
11. REASONABLENESS OF RESTRICTIONS. In the event that any provision
relating to time period or geographic area of any restriction set forth in
Sections 6, 7, 8, 9 or 10 shall be declared by a court of competent jurisdiction
to exceed the maximum time period or area of restriction that the court deems
reasonable and enforceable, the time period or area of restriction which the
court finds to be reasonable and enforceable shall be deemed to become, and
thereafter shall be, the maximum time period or geographic area of such
restriction.
12. ENFORCEABILITY. Any provision of Sections 6, 7, 8, 9 or 10 which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, but shall be enforced to the
maximum extent permitted by law, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
13. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Employee of any of the covenants contained in
Sections 6, 7, 8, 9 or 10 of this Agreement will cause irreparable harm and
damage to the Company, the monetary amount of which may be virtually impossible
to ascertain. As a result, the Employee recognizes and hereby acknowledges that
the Company shall be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all of the
covenants contained in Sections 6, 7, 8, 9 or 10 of this Agreement by the
Employee or any of his affiliates, associates, partners or agents, either
directly or indirectly, and that such right to injunction shall be cumulative
and in addition to whatever other remedies the Company may possess.
14. ASSIGNMENT. The Employee shall not delegate his employment obligations
pursuant to this Agreement to any other person.
15. EMPLOYER'S AUTHORITY. The relationship between the parties hereto is
that of employer and employee. The Employee agrees to observe and comply with
the rules and regulations of the Company, as adopted by the Company from time to
time with respect to the performance of the duties of the Employee. The Employee
acknowledges that he has no authority to enter into any contracts or other
obligations that are binding upon the Company unless such contracts or
obligations are authorized by the Board of Directors of the Company. The Company
shall have the power to
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<PAGE> 7
direct, control and supervise the duties to be performed by the Employee, the
manner of performing said duties, and the time of performing said duties.
16. GOVERNING LAW. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of Florida, excluding
the choice of law rules thereof. The Company and the Employee each hereby
irrevocably submit to the jurisdiction of the state or federal courts located in
Dade County, Florida in connection with any suit, action or other proceeding
arising out of or relating to this Agreement and hereby agree not to assert, by
way of motion, as a defense, or otherwise in any such suit, action or proceeding
that the suit, action or proceeding is brought in an inconvenient forum, that
the venue of the suit, action or proceeding is improper or that this Agreement
or the subject matter hereof may not be enforced by such courts.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, understandings and arrangements, both oral and
written, between the parties hereto with respect to such subject matter. This
Agreement may not be modified in any way, unless by a written instrument signed
by both the Company and the Employee.
18. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to have been given when
delivered by hand or three (3) days after sent by registered or certified United
States mail, return receipt requested, postage prepaid, or the next business day
following dispatch by a reputable overnight courier service, addressed as
follows:
(i) If to the Employee:
Jonathan New
10023 Bay Harbor Terrace
Bay Harbor, Florida 33154
(ii) If to the Company:
UniCapital Corporation
1111 Kane Concourse, Suite 301
Bay Harbor Island, FL 33154
Attention: Robert J. New
with a copy given in the manner prescribed above to:
Morgan, Lewis & Bockius LLP
One Oxford Centre, Thirty-Second Floor
Pittsburgh, PA 15219
Attention: David A. Gerson
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<PAGE> 8
or to such other addresses as either party hereto may from time to time give
notice of to the other party hereto in the aforesaid manner.
19. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit of
and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns.
20. SEVERABILITY. Except as otherwise provided in Sections 11 and 12, the
invalidity of any one or more of the words, phrases, sentences, clauses,
sections or subsections contained in this Agreement shall not affect the
enforceability of the remaining portions of this Agreement or any part thereof,
all of which are inserted conditionally on their being valid in law, and, in the
event that any one or more of the words, phrases, sentences, clauses, sections
or subsections contained in this Agreement or any part thereof shall be declared
invalid, this Agreement shall be construed as if such invalid word or words,
phrase or phrases, sentence or sentences, clause or clauses, section or sections
or subsection or subsections had not been inserted. If such invalidity is caused
by length of time or size of area, or both, the otherwise invalid provision will
be considered to be reduced to a period or area which would cure such
invalidity.
21. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Employee from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings
suit for the collection of any damages resulting from, or the injunction of any
action constituting, a breach of any of the terms or provisions of this
Agreement, then the non- prevailing party shall pay all reasonable court costs
and attorneys' fees of the other party.
22. SECTION HEADINGS. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
23. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the parties hereto and their respective heirs, personal
representative, legal representative, successors and assigns, any rights or
remedies under or by reason of this Agreement.
24. AMENDMENT; MODIFICATION; WAIVER. No amendment, modification or waiver
of the terms of this Agreement shall be valid unless made in writing and duly
executed by the Company and the Employee. No delay or failure at any time on the
part of the Company in exercising any right, power or privilege under this
Agreement, or in enforcing any provision of this Agreement, shall impair any
such right, power or privilege, or be construed as a waiver of any default or as
any acquiescence therein, or shall affect the right of the Company thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
The waiver by either party hereto of a breach or violation of any term or
provision of this Agreement shall neither operate nor be construed as a waiver
of any subsequent breach or violation.
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<PAGE> 9
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
UNICAPITAL CORPORATION
By:
------------------------------------
Name:
Title:
EMPLOYEE
---------------------------------------
Jonathan New
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<PAGE> 1
Exhibit 23.01
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our reports as of the dates, and related
to the financial statements of the companies, listed below which appear in such
Prospectus:
Company Date
UniCapital Corporation February 19, 1998
Boulder Capital Group, Inc. January 21, 1998, except for
Note 10 which is dated
February 5, 1998
Merrimac Financial Associates January 15, 1998
The NSJ Group January 21, 1998
Varilease Corporation and Subsidiary January 21, 1998
The Walden Asset Group, Inc. January 20, 1998
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
PRICE WATERHOUSE LLP
Ft. Lauderdale, Florida
April 2, 1998
<PAGE> 1
Exhibit 23.02
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
American Capital Resources, Inc.
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the registration statement.
KPMG Peat Marwick LLP
New York, New York
April 2, 1998
<PAGE> 1
EXHIBIT 23.03
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 14, 1998, except for Note 14, as to which the
date is February 7, 1998, with respect to the financial statements of Cauff
Lippman Aviation, Inc. and Certain Affiliates included in Amendment No. 1 to the
Registration Statement (Form S-1 No. 333-46603) and related Prospectus of
UniCapital Corporation for the registration of its common stock.
ERNST & YOUNG LLP
Miami, Florida
March 31, 1998
<PAGE> 1
Exhibit 23.04
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Jacom Computer Services, Inc.
Northvale, N.J.
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated January 28, 1998, relating to the
financial statements of Jacom Computer Services, Inc.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO SEIDMAN, LLP
New York, New York
April 2, 1998
<PAGE> 1
EXHIBIT 23.05
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of our
report dated February 4, 1998, except for Note 9 as to which the date is
February 10, 1998, on our audits of the financial statements of K.L.C., Inc. We
also consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND L.L.P.
Hartford, Connecticut
April 2, 1998
<PAGE> 1
Exhibit 23.06
CONSENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
MATRIX FUNDING CORPORATION
We hereby consent to the use in this Registration Statement of our
report dated August 8, 1997 except for notes 1, 3, 15, and 16, which are dated
January 17, 1998, relating to the consolidated financial statements of Matrix
Funding Corporation and subsidiary, and to the reference to our Firm under the
caption "Experts" in the Prospectus.
TANNER + CO.
Salt Lake City, Utah
April 2, 1998
<PAGE> 1
Exhibit 23.07
Consent of Independent Certified Public Accountants
We have issued our report dated January 9, 1998, accompanying the financial
statements of Municipal Capital Markets Group, Inc. contained in the
Registration Statement and Prospectus. We consent to the use of the
aforementioned report in the Registration Statement and Prospectus, and to the
use of our name as it appears under the caption "Experts."
GRANT THORNTON LLP
Dallas, Texas
March 31, 1998
<PAGE> 1
Exhibit 23.08
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
and to all references to our Firm included in or made a part of the registration
statement to register 27,368,421 shares of UniCapital Corporation common stock.
Arthur Andersen LLP
Portland, Oregon,
April 2, 1998
<PAGE> 1
Exhibit 23.09
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Boulder Capital Group, Inc.
We consent to the use of our report dated March 28, 1997 with respect to the
statements of operations and retained earnings and cash flows of Boulder Capital
Group, Inc. for the year ended December 31, 1996, included herein and to the
reference to our firm under the heading "Experts" in the Form S-1.
KPMG Peat Marwick LLP
Boulder, Colorado
April 2, 1998
